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Home Building & Loan Association vs. Blaisdell [1934]

 

HUGHES, C. J. Appellant contests the validity of Chapter 339 of the Laws of Minnesota of 1933, p 514, approved April 18, 1933, called the Minnesota Mortgage Moratorium Law, as being repugnant to the contract clause of the Fourteenth Amendment, of.the Federal Constitution. The statute was sustained by the Supreme Court of Minnesota (249 N. W. 334, 893) and the case comes here on appeal.
The Act provides that, during the emergency declared to exist, relief may be had through authorized judicial proceedings with respect to foreclosures of mortgages, and execution sales, of real estates; that sales may be postponed and periods of redemption may be extended....

The state court upheld the statute as an emergency measure. Although conceding that the obligations of the mortgage contract were impaired the court decided that what it thus described as an impairment was, notwithstanding the contract clause of the Fed eral Constitution, within the police power of the State as that power was called into exercise by the public economy emergency which the legislature had found to exist. Attention is thus directed to the preamble and first section of the statute which described the existing emergency in terms that were deemed to justify the temporary relief which the statute affords....

. . . Aside from the extension of time, the other conditions of redemption are unaltered. While the mortgagor remains in possession he must pay the rental value as that value has been determined, upon notice and hearing, by the court. The rental value so paid is devoted to the carrying of the property by the application of the required payments to taxes, insurance, and interest on the mortgage indebtedness. While the mortgagee purchaser is debarred from actual possession he has, so far as rental value is concerned, the equivalent of possession during the extended period.

In determining whether the provision for this temporary and conditional relief exceeds the power of the State by reason of the clause in the Federal Constitution prohibiting impairment of the obligations of contracts we must consider the relation of emergency to constitutional power, the historical setting of the contract clause, the development of the jurisprudence of this court in the con struction of that clause, and the principles of construction which we may consider to be established.

Emergency does not create power. Emergency does not increase granted power or remove or diminish the restrictions imposed upon power granted or reserved. The Constitution was adopted in a period of grave emergency. Its grants of power to the Federal government and its limitations of the power of the States were determined in the light of emergency and they are not altered by emergency. What power was thus granted and what limitations were thus imposed are questions which have always been, and always will be, the subject of close examination under our constitutional system.

While emergency does not create power, emergency may furnish the occasion for the exercise of power....

But full recognition of the occasion and general purpose of the clause does not suffice to fix its precise scope. Nor does an examination of the details of prior legislation prior States yield criteria which can be considered controlling. To ascertain the scope of the constitutional prohibition we examine the course of judicial decisions in its application. These put it beyond question that the
prohibition is not an absolute one and is not to be read with literal exactness like a mathematical formula....

Not only is the constitutional provision qualified by the measure of control which the Sate rehires over remedial processes, but the State also continues to possess authority to safeguard the vital interests of its people. It does not matter that legislation appropriate to that end "has the result of modifying or ating contracts already in effect." Stephenson v. Binford, 287 U.S. 251 , 276. Not only are existing laws read into contracts in order to fix obligations as between the parties, the reservation of essential attributes of foreign power is also read into contracts " a postulate of the legal order. The policy If protecting contracts against impairment presupposes the maintenance of a government is virtue of which contractual relations are worth while a government which retains adequate authority to secure the peace and good order of society. This principle of harmonizing the constitutional prohibition with the necessary residuum of state power has had progressive recognition in the decision of this Court.

Undoubtedly, whatever is reserved of state must be consistent with the fair intent of the constitutional limitation of that power. The reserved power cannot be construed so as to destroy the limitation, nor is the limitation to be construed to destroy reserved power in its essential aspects. They must be construed in harmony with each other. This principle precludes a conbuction which would permit the State to adopt as its policy the repudiation of debts or the destruction of contracts or the denial of means to enforce them. But it does not follow that conditions may not arise in which temporary restraint of enforcement may not be consistent with the spirit and purpose of the constitutional provision and thus found to be within the range of the reserved power of the State to protect the vital interests of the community. It cannot be maintained that the constitutional prohibition should be so construed as to prevent limited and temporary interpositions with respect to the enforcement of contracts if made necessary by a great public calamity such as fire, flood, or earthquake. See American Land Co. v. Zeiss, 219 U. S 47. The reservation of state power appropriate to such extraordinary conditions may be deemed to be as much a part of all contracts as is the reservation of state power to protect the public interest in the other situations to which we have referred. And if state power exists to give temporary relief from the enforcement of contracts in the presence of disasters due to physical causes such as fire, flood, or earthquake, that power cannot be said to be non-existent when the urgent public need demanding such relief is produced by other and economic causes.

It is manifest from this review of our decisions that there has been a growing appreciation of public needs and of the necessity of finding ground for a rational compromise between individual rights and public welfare. The settlement and consequent contraction of the public domain, the pressure of a constantly increasing density of population, the interrelation of the activities of our people and the complexity of our economic interests, have inevitably led to an increased use of the organization of society in order to protect the very bases of individual opportunity. Where, in earlier days, it was thought that only the concerns of individuals or of classes were involved, and that those of the State itself were touched only remotely, it has later been found that the fundamental interests of the State are directly affected; and that the question is no longer merely that of one party to a contract as against another, but of the use of reasonable means to safeguard the economic structure upon which the good of all depends.

It is no answer to say that this public need was not apprehended a century ago, or to insist that what the provision of the Constitution meant to the vision of that day it must mean to the vision of our time. If by the statement that what the Constitution meant at the time of its adoption it means today. it is intended to say that the great clauses of the Constitution must be confined to the
interpretation which the framers, with the conditions and outlook of their time would have placed upon them, the statement carries its own refutation. It was to guard against such a narrow conception that chief Justice Marshall uttered the memorable warning— "We must never forget it is a constitution we are expounding" (Mc Culloch v. Maryland, 4 Wheat, 316, 407) "a constitution intended to endure for ages to come, and, consequently, to be adapted to the various crises of human affairs." . . .

Nor is it helpful to attempt to draw a fine distinction between the intended meaning of the words of the Constitution and their intended application. When we consider the contract clause and the decisions which have expounded it in harmony with the essential reserve power of the States to protect the security of their peoples, we find no warrant for the conclusion that the clause has been warped by these decisions from its proper significance or that the founders of our Government would have interpreted the clause differently had they had occasion to assume that responsibility in the conditions of the later day. The vast body of law which has been developed was unknown to the fathers but it is believed to have preserved the essential content and the spirit of the l Constitution. With a growing recognition of the public needs and the relation of individual right to public security, the court has sought to prevent the perversion of the clause through its use as an instrument to throttle the capacity of the States to protect their fundamental interests. This development is a growth from the seeds which the fathers planted....

We are of the opinion that the Minnesota statute as here applied does not violate the contract clause of the Federal Constitution. Whether the legislation is wise or unwise as a matter of policy is a question with which we are not concerned.

SUTHERLAND, J., with whom concurred VAN DEVANTER, J., MCREYNOLDS, J., and BUTLER, J., delivered a dissenting opinion.