HOME BUILDING & LOAN ASSOC. v. BLAISDELL
In 1933, Minnesota enacted the Mortgage Moratorium Law in an effort to combat the economic emergency posed by the Great Depression. The law extended the time period in which borrowers could pay back their debts on property to lenders. The state argued that this was a legitimate use of its police powers since Minnesota faced massive economic difficulties.
Did the Minnesota law violate both Article I, Section 10 of the Constitution which prevents a state from "impairing the Obligation of Contracts" and the due process and equal protection clauses of the Fourteenth Amendment?
Legal provision: US Const. Art 1, Section 10; Minnesota Mortgage Moratorium Law
The Court held that the law did not violate the Constitution. In his opinion, Chief Justice Hughes explored the relationship of emergency to constitutional power, the historical setting in which the Contract Clause was adopted, and its judicial development. Hughes argued that the sanctity of contracts in the United States and the Contract Clause, while important, had never been absolute or meant to be interpreted literally. Thus, in an attempt to "safeguard the vital interests of its people" a state could adopt legislation which had the effect of "modifying or abrogating contracts already in effect." Since the demands of the Great Depression were vital to all of the state's citizens, the law was a legitimate use of Minnesota's police power.