Home Building v. Loan Association v. Blaisdell

Brief Fact Summary.

The judicial order extending the period of redemption from a foreclosure sale granted to the appellee was rejected under the newly adopted Act by Minnesota. The appellee, a mortgagee, was unable to obtain possession as it would have been able to do before the enactment of the statute.

Synopsis of Rule of Law.

Any reserved state power must be consistent with the fair intent of the constitutional limitation of that power and that power cannot be construed so as to destroy the limitation, nor is the limitation to be construed to destroy the reserved power in its essential aspects.

Facts.

Appellant contests the validity of the Minnesota Mortgage Moratorium Law, as being repugnant to the contract clause. 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 estate; that sales may be postponed and periods of redemption may be extended. The act is to remain in effect only during the continuance of the emergency and in no event beyond 1935. The appellees stated that they owned a lot in Minneapolis which they had mortgaged to appellant; that the mortgage contained a valid power of sale by advertisement, and that by reason of their default the mortgage had been foreclosed and sold to appellant in 1932.

Issue.

Does the Minnesota Act for temporary and conditional relief exceed the power of the State by the constitutional clause prohibiting impairment of the obligations of contracts?

Held.

No, an emergency existed in Minnesota which furnished a proper occasion for the exercise of the reserved power of the state to protect the vital interests of the community. The conditions upon which the period of redemption is extended to not appear to be unreasonable. Also, mortgagees are predominantly corporations, such as insurance companies, banks, and investment companies. These, and such individual mortgagees as are small investors, are not seeking homes or the opportunity to engage in farming. Their chief concern is the reasonable protection of their investment security. Congress was entitled to deal with the general or typical situation. The relief afforded by the statute has regard to the interest of mortgagees as well a to the interest of mortgagors. The legislation seeks to prevent the impending ruin of both by a considerate measure of relief. Moreover, the legislation is temporary in operation. It is limited to the exigency which called it forth. 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 the Court is not concerned.

Discussion.

While the charters of private corporations constitute contracts, a grant of exclusive privilege is not to be implied as against the state. And all contracts are subject to the right of eminent domain. The reservation of this necessary authority of the state is deemed to be a part of the contract. The legislature cannot bargain away the public health or the public morals. The states retain adequate power to protect the public health against the maintenance of nuisances despite insistence upon existing contracts. However, the statute at issue does not impair the integrity of the mortgage indebtedness. The obligation for interest remains. The statute does not affect the validity of the sale or the right of a mortgagee-purchaser to title in fee, or his right to obtain a deficiency judgment, if the mortgagor fails to redeem within the prescribed period. Other than the extension of time, other conditions of redemption are unchanged. Further, the legislation was not for the mere advantage of particular individuals but for the protection of a basic interest of society. In view of the nature of the contracts in question, the relief afforded and justified by the emergency, in order not to contravene the constitutional provision, could only be of a character appropriate to that emergency and could be granted only upon reasonable conditions as here.