Home Building and Loan Assn. v. Blaisdell
290 U.S. 398 (1934)

  • Minnesota passed the Minnesota Mortgage Moratorium Law, which prevented mortgage holders for foreclosing on mortgages for two years.
    • This was right in the middle of the Great Depression, and a lot of people were losing their homes.
  • Blaisdell defaulted on his mortgage, and the lender (HB&LA) tried to foreclose, but were prevent from doing so by the new law.
    • HB&LA argued that the law was a violation of their freedom of contract, and therefore a violation of the Contracts Clause of the Constitution.
      • Article I §10 says, “No State shall pass any law impairing the obligation of contracts.”
  • The US Supreme Court upheld the law.
    • The US Supreme Court found that under their police powers, a State has the power to protect its citizens. Under normal conditions, the State’s police powers are limited by the Contracts Clause, but there is a balancing test that must be taken into account to satisfy the Due Process Clause.
      • The Court found that in extraordinary conditions, such as the Great Depression, the balance tips towards the State’s obligations to protect citizens, and away from private individuals’ rights to contract.
  • In a dissent, it was argued that the Constitution must be read literally. If States were allowed to create laws that interfered with existing contracts between individuals during an emergency, soon other excuses would be found for violating contractual relationships.
    • The majority noted that the law was temporary and was set to expire soon, but that didn’t convince the dissent that this was a slippery slope away from the laissez-faire policies of the 1920s.
  • This case marked the beginning of the change from courts looking at cases not from a Contracts Clause perspective, but from the Due Process Clause of the 14th Amendment perspective.
    • The Contracts Clause is very inflexible, and the courts had to really bend over backwards to hold good laws constitutional.
    • On the other hand, Due Process is a broader concept, but is also more flexible. So when looking at things from a due process perspective, the courts are allowed to do a balancing test.
      • See Justice Cardozo’s concurrence in this case.