1. Emergency does not increase constitutional power, nor
diminish constitutional restrictions. P.
290 U. S.
425.
2. Emergency may, however, furnish occasion for exercise of
power possessed. P.
290 U. S.
426.
3. The clause providing that no State shall pass any law
impairing the obligation of contracts is not to be applied with
literal exactness, like a mathematical formula, but is one of the
broad clauses of the Constitution which require construction to
fill out details. Pp.
290 U. S. 426,
290 U. S.
428.
4. The necessity of construction of the contract clause is not
obviated by its association in the same section with other and more
specific provisions which may not admit of construction. P.
290 U. S.
427.
5. The exact scope of the contract clause is not fixed by the
debates in the Constitutional Convention or by the plain historical
reasons, including the prior legislation in the States, which led
to the adoption of that clause and of other prohibitions in the
same section of the Constitution. Pp.
290 U. S. 427,
290 U. S.
428.
6. The obligation of a contract is not impaired by a law
modifying the remedy for its enforcement, but not so as to impair
substantial rights secured by the contract. P.
290 U. S.
430.
7. Decisions of this Court in which statutes extending the
period of redemption from foreclosure sales were held
unconstitutional do not control where the statute in question
safeguards the interests
Page 290 U. S. 399
of the mortgagee purchaser by conditions imposed on the
extension. P.
290 U. S.
431.
8. The contract clause must be construed in harmony with the
reserved power of the State to safeguard the vital interests of her
people. Reservation of such essential sovereign power is read into
contracts. P.
290 U. S.
434.
9. The legislation is to be tested not by whether its effect
upon contracts is direct or is merely incidental, but upon whether
the end is legitimate, and the means reasonable and appropriate to
the end. P.
290 U. S.
438.
10. The principle of harmonizing the contract clause and the
reserved power precludes a construction permitting the State to
repudiate debts, destroy contracts, or deny means to enforce them.
P.
290 U. S.
439.
11. Economic conditions may arise in which a temporary restraint
of enforcement of contracts will be consistent with the spirit and
purpose of the contract clause, and thus be within the range of the
reserved power of the State to protect the vital interests of the
community.
Marcus Brown Co. v. Feldman, 256 U.
S. 170;
Block v. Hirsh, id., 256 U. S. 135. Pp.
290 U. S. 434,
290 U. S.
440.
12. Whether the emergency still exists upon which the continued
operation of the law depends is always open to judicial inquiry. P.
290 U. S.
442.
13. The great clauses of the Constitution must be considered in
the light of our whole experience, and not merely as they would be
interpreted by its framers in the conditions and with the outlook
of their time. P.
290 U. S.
443.
14. A Minnesota statute, approved April 18, 1933, declares the
existence of an emergency demanding an exercise of the police power
for the protection of the public and to promote the general welfare
of the people, by temporarily extending the time allowed by
existing law for redeeming real property from foreclosure and sale
under existing mortgages. In support of this proposition, it
recites: that a severe financial and economic depression has
existed for several years, resulting in extremely low prices for
the products of farms and factories, in much unemployment, in
almost complete lack of credit for farmers, business men and
property owners, and in extreme stagnation of business, agriculture
and industry; that many owners of real property, by reason of these
conditions, are unable and, it is believed, for some time will be
unable, to meet all payments as they come due, of taxes,
interest
Page 290 U. S. 400
and principal of mortgages, and are, therefore, threatened with
the loss of their property through foreclosure sale; that much
property has been bid in on foreclosure for prices much below what
it is believed was its real value, and often for much less than the
mortgage indebtedness, resulting in deficiency judgments; that,
under the existing conditions, foreclosure of many real estate
mortgages by advertisement would prevent fair, open and competitive
bidding in the manner contemplated by law.
The Act then provides,
inter alia, as to foreclosure
sales, that, where the period for redemption has not already
expired, the mortgagor or owner in possession, by applying to a
state court before its expiration, may obtain an extension for such
time as the court may deem just and equitable, but in no case
beyond May 1, 1935. The application is to be made on notice to the
mortgagee. The court is to find the reasonable income or rental
value of the property, and, as a condition to any extension
allowed, is to order the applicant to pay all, or a reasonable
part, of that value, in or towards the payment of taxes, insurance,
interest and mortgage indebtedness, at such times and in such
manner as to the court, under all the circumstances, shall appear
just and equitable. If the applicant default in any payment so
ordered, his right to redeem shall terminate in 30 days. The court
is empowered to alter the terms of extensions as change of
conditions may require. The Act automatically extends, to 30 days
from its date, redemption periods which otherwise would expire
within that time. It is to remain in effect only during the
emergency, and in no event beyond May 1, 1935. Prior to that date,
no action shall be maintained for a deficiency judgment until the
period of redemption, as allowed by existing law or as extended
under the Act, shall have expired.
In a proceeding under the statute, it appeared that the
applicants, man and wife, owned a lot in a closely built section of
a large city on which were a house and garage; that they lived in
part of the house and offered the remainder for rent; that the
reasonable present market value of the property was $6,000, and the
reasonable value of the income and of the rental value, $40 per
month; that, on May 2, 1932, under a power of sale in a mortgage
held by a building and loan association, this property had been
sold for $3,700, the amount of the debt, and bid in by the
mortgagee, leaving no deficiency; that taxes and insurance since
paid by the mortgagee increased this amount to $4,056. The court
extended the period of redemption, which would have expired May 2,
1933, to May 1, 1935, upon condition that the mortgagor
Page 290 U. S. 401
pay $40 per month from date of sale throughout the extended
period, to be applied on taxes, insurance, interest and mortgage
indebtedness.
Held:
(1) An emergency existed furnishing proper occasion for exertion
of the reserved power of the State to protect the vital interests
of the community. P.
290 U. S.
444.
(2) The findings of emergency by legislature and state supreme
court cannot be regarded as subterfuge, or as lacking adequate
basis, but are, indeed, supported by facts of which this Court
takes judicial notice. P.
290 U. S.
444.
(3) The legislation was addressed to a legitimate end,
i.e., it was not for the advantage of particular
individuals, but for the protection of the basic interest of
society. P.
290 U. S.
445.
(4) In view of the nature of the contracts affected -- mortgages
of unquestionable validity -- the relief would not be justified by
the emergency, but would contravene the contract clause of the
Constitution, if it were not appropriate to the emergency and
granted only upon reasonable conditions. P.
290 U. S.
445.
(5) The conditions upon which the period of redemption was
extended do not appear to be unreasonable. The initial 30-day
extension is to give opportunity for the application to the court.
The integrity of the mortgage indebtedness is not impaired;
interest continues to run; the validity of the sale and the right
of the mortgagee-purchaser to title or to obtain a deficiency
judgment, if the mortgagor fails to redeem within the extended
period, are maintained, and the conditions of redemption, if
redemption there be, stand as under the prior law. The mortgagor in
possession must pay the rental value of the premises as ascertained
in judicial proceedings, and this amount is applied in the carrying
of the property and to interest upon the indebtedness. The
mortgagee-purchaser thus is not left without compensation for the
withholding of possession. P.
290 U. S.
445.
(6) Important to the question of reasonableness is the fact,
shown by official reports of which the Court takes judicial notice,
that mortgagees in Minnesota are, predominantly, not home owners or
farmers, but are corporations concerned chiefly with the reasonable
protection of their investment security. The legislature was
entitled to deal with this general or typical situation, though
there may be individual cases of another aspect. P.
290 U. S.
445.
(7) The relief afforded by the statute has regard to the
interest of mortgagees as well as to the interest of mortgagors. P.
290 U. S.
446.
(8) The procedure and relief provided are cognate to the
historic exercise of equitable jurisdiction in cases of mortgage
foreclosure. P.
290 U. S.
446.
(9) Since the contract clause is not an absolute and utterly
unqualified restriction of the States' protective power, the
legislation is clearly so reasonable as to be within the
legislative competency. P.
290 U. S. 447.
(10) The legislation is temporary in operation -- limited to the
emergency. The period of postponement to May, 1935, may be reduced
by order of the state court, under the statute, in case of change
of circumstances, and the operation of the statute itself could not
validly outlast the emergency or be so extended as virtually to
destroy contracts. P.
290 U. S.
447.
(11) Whether the legislation is wise or unwise as a matter of
policy does not concern the Court. P.
290 U. S.
447.
(12) For the same reasons that sustain it under the contract
clause, the legislation, as applied in this case, is consistent
with the due process clause of the Fourteenth Amendment. P.
290 U. S.
448.
(13) The statute does not deny the equal protection of the laws;
its classification is not arbitrary. P.
290 U. S.
448.
189 Minn. 422, 448; 249 N.W. 334, 893, affirmed.
APPEAL from a judgment which affirmed an order extending the
period of redemption from a foreclosure and sale of real property
under a power of sale mortgage. The statute through which this
relief was sought by the mortgagors was at first adjudged to be
unconstitutional by the trial court; but this was reversed by the
state supreme court. The present appeal, by the mortgagee, is from
the second decision of that court, sustaining the trial court's
final order.
MR. CHIEF JUSTICE HUGHES delivered the opinion of the Court.
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,
Page 290 U. S. 416
as being repugnant to the contract clause (Art. I, § 10) and the
due process and equal protection clauses of the Fourteenth
Amendment, of the Federal Constitution. The statute was sustained
by the Supreme Court of Minnesota, 189 Minn. 422, 448, 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
estate; that sales may be postponed and periods of redemption may
be extended. The Act does not apply to mortgages subsequently made,
nor to those made previously which shall be extended for a period
ending more than a year after the passage of the Act (Part One, §
8). There are separate provisions in Part Two relating to
homesteads, but these are to apply "only to cases not entitled to
relief under some valid provision of Part One." The Act is to
remain in effect "only during the continuance of the emergency and
in no event beyond May 1, 1935." No extension of the period for
redemption and no postponement of sale is to be allowed which would
have the effect of extending the period of redemption beyond that
date. Part Two, § 8.
The Act declares that the various provisions for relief are
severable; that each is to stand on its own footing with respect to
validity. Part One, § 9. We are here concerned with the provisions
of Part One, § 4, authorizing the District Court of the county to
extend the period of redemption from foreclosure sales "for such
additional time as the court may deem just and equitable," subject
to the above described limitation. The extension is to be made upon
application to the court, on notice, for an order determining the
reasonable value of the income on the property involved in the
sale, or, if it has no income, then the reasonable rental value of
the property, and directing the mortgagor
"to pay all or a reasonable part of such
Page 290 U. S. 417
income or rental value, in or toward the payment of taxes,
insurance, interest, mortgage . . . indebtedness at such times and
in such manner"
as shall be determined by the court. [
Footnote 1] The section also provides that the time for
redemption
Page 290 U. S. 418
from foreclosure sales theretofore made, which otherwise would
expire less than thirty days after the approval of the Act shall be
extended to a date thirty days after its approval, and application
may be made to the court within that time for a further extension
as provided in the section. By another provision of the Act, no
action, prior to May 1, 1935, may be maintained for a deficiency
judgment until the period of redemption as allowed by existing law
or as extended under the provisions of the Act has expired. Prior
to the expiration of the extended period of redemption, the court
may revise or alter the terms of the extension as changed
circumstances may require. Part One, § 5.
Invoking the relevant provision of the statute, appellees
applied to the District Court of Hennepin County for an order
extending the period of redemption from a foreclosure sale. Their
petition stated that they owned a lot
Page 290 U. S. 419
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 on May 2, 1932, for $3,700.98; that appellant was
the holder of the sheriff's certificate of sale; that, because of
the economic depression appellees had been unable to obtain a new
loan or to redeem, and that, unless the period of redemption were
extended, the property would be irretrievably lost, and that the
reasonable value of the property greatly exceeded the amount due on
the mortgage, including all liens, costs and expenses.
On the hearing, appellant objected to the introduction of
evidence upon the ground that the statute was invalid under the
federal and state constitutions, and moved that the petition be
dismissed. The motion was granted, and a motion for a new trial was
denied. On appeal, the Supreme Court of the State reversed the
decision of the District Court. 189 Minn. 422, 249 N.W. 334.
Evidence was then taken in the trial court, and appellant renewed
its constitutional objections without avail. The court made
findings of fact setting forth the mortgage made by the appellees
on August 1, 1928, the power of sale contained in the mortgage, the
default and foreclosure by advertisement, and the sale to appellant
on May 2, 1932, for $3,700.98. The court found that the time to
redeem would expire on May 2, 1933, under the laws of the State as
they were in effect when the mortgage was made and when it was
foreclosed; that the reasonable value of the income on the
property, and the reasonable rental value, was $40 a month; that
the bid made by appellant on the foreclosure sale, and the purchase
price, were the full amount of the mortgage indebtedness, and that
there was no deficiency after the sale; that the reason
Page 290 U. S. 420
total amount of the purchase price, with taxes and insurance
premiums subsequently paid by appellant, but exclusive of interest
from the date of sale, was $4,056.39. The court also found that the
property was situated in the closely built-up portions of
Minneapolis; that it had been improved by a two-car garage,
together with a building two stories in height which was divided
into fourteen rooms; that the appellees, husband and wife, occupied
the premises as their homestead, occupying three rooms and offering
the remaining rooms for rental to others.
The court entered its judgment extending the period of
redemption to May 1, 1935, subject to the condition that the
appellees should pay to the appellant $40 a month through the
extended period from May 2, 1933, that is, that, in each of the
months of August, September, and October, 1933, the payments should
be $80, in two instalments, and thereafter $40 a month, all these
amounts to go to the payment of taxes, insurance, interest, and
mortgage indebtedness. [
Footnote
2] It is this judgment, sustained by the Supreme Court of the
State on the authority of its former opinion, which is here under
review. 189 Minn. 448, 249 N.W. 893.
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 Federal
Constitution, within the police power of the State as that power
was called into exercise by the public economic emergency which the
legislature had found to exist. Attention is thus directed to the
preamble and first section of the
Page 290 U. S. 421
statute, which described the existing emergency in terms that
were deemed to justify the temporary relief which the statute
affords. [
Footnote 3] The state
court, declaring that it
Page 290 U. S. 422
could not say that this legislative finding was without basis,
supplemented that finding by it own statement of conditions of
which it took judicial notice. The court said:
"In addition to the weight to be given the determination of the
legislature that an economic emergency exists which demands relief,
the court must take notice of other considerations. The members of
the legislature come from every community of the state and from all
the walks of life. They are familiar with conditions generally in
every calling, occupation, profession, and business in the state.
Not only they but the courts must be guided by what is common
knowledge. It is common knowledge that, in the last few years, land
values have shrunk enormously. Loans made a few years ago upon the
basis of the then going values cannot possibly be replaced on the
basis of present values. We all know that, when this law was
enacted, the large financial companies which had made it their
business to invest in mortgages had ceased to do so. No bank would
directly or indirectly loan on real estate mortgages. Life
insurance companies, large investors in such mortgages, had even
declared a moratorium as to the loan provisions of their policy
contracts. The President had closed banks temporarily. The
Congress,
Page 290 U. S. 423
in addition to many extraordinary measures looking to the relief
of the economic emergency, had passed an act to supply funds
whereby mortgagors may be able within a reasonable time to
refinance their mortgages or redeem from sales where the redemption
has not expired. With this knowledge, the court cannot well hold
that the legislature had no basis in fact for the conclusion that
an economic emergency existed which called for the exercise of the
police power to grant relief."
189 Minn. 429, 249 N.W. 336.
Justice Olsen of the state court, in a concurring opinion, added
the following:
"The present nationwide and worldwide business and financial
crisis has the same results as if it were caused by flood,
earthquake, or disturbance in nature. It has deprived millions of
persons in this nation of their employment and means of earning a
living for themselves and their families; it has destroyed the
value of and the income from all property on which thousands of
people depended for a living; it actually has resulted in the loss
of their homes by a number of our people and threatens to result in
the loss of their homes by many other people, in this state; it has
resulted in such widespread want and suffering among our people
that private, state, and municipal agencies are unable to
adequately relieve the want and suffering, and congress has found
it necessary to step in and attempt to remedy the situation by
federal aid. Millions of the people's money were and are yet tied
up in closed banks and in business enterprises. [
Footnote 4]"
189 Minn. 437, 249 N.W. 340.
Page 290 U. S. 424
We approach the questions thus presented upon the assumption
made below, as required by the law of the State, that the mortgage
contained a valid power of sale to be exercised in case of default;
that this power was validly exercised; that, under the law then
applicable, the period of redemption from the sale was one year,
and that it has been extended by the judgment of the court over the
opposition of the mortgagee-purchaser, and that, during the period
thus extended, and unless the order for extension is modified, the
mortgagee-purchaser will be unable to obtain possession, or to
obtain or convey title in fee, as he would have been able to do had
the statute
Page 290 U. S. 425
not been enacted. The statute 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. 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 construction 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
Page 290 U. S. 426
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.
"Although an emergency may not call into life a power which has
never lived, nevertheless emergency may afford a reason for the
exertion of a living power already enjoyed."
Wilson v. New, 243 U. S. 332,
243 U. S. 348.
The constitutional question presented in the light of an emergency
is whether the power possessed embraces the particular exercise of
it in response to particular conditions. Thus, the war power of the
Federal Government is not created by the emergency of war, but it
is a power given to meet that emergency. It is a power to wage war
successfully, and thus it permits the harnessing of the entire
energies of the people in a supreme cooperative effort to preserve
the nation. But even the war power does not remove constitutional
limitations safeguarding essential liberties. [
Footnote 5] When the provisions of the
Constitution, in grant or restriction, are specific, so
particularized as not to admit of construction, no question is
presented. Thus, emergency would not permit a State to have more
than two Senators in the Congress, or permit the election of
President by a general popular vote without regard to the number of
electors to which the States are respectively entitled, or permit
the States to "coin money" or to "make anything but gold and silver
coin a tender in payment of debts." But where constitutional grants
and limitations of power are set forth in general clauses, which
afford a broad outline, the process of construction is essential to
fill in the details. That is true of the contract clause. The
necessity of construction is not obviated by
Page 290 U. S. 427
the fact that the contract clause is associated in the same
section with other and more specific prohibitions. Even the
grouping of subjects in the same clause may not require the same
application to each of the subjects, regardless of differences in
their nature.
See Groves v.
Slaughter, 15 Pet. 449,
40 U. S. 505;
Atlantic Cleaners & Dyers v. United States,
286 U. S. 427,
286 U. S.
434.
In the construction of the contract clause, the debates in the
Constitutional Convention are of little aid. [
Footnote 6] But the reasons which led to the
adoption of that clause, and of the other prohibitions of Section
10 of Article I, are not left in doubt, and have frequently been
described with eloquent emphasis. [
Footnote 7] The widespread distress following the
revolutionary period, and the plight of debtors, had called forth
in the States an ignoble array of legislative schemes for the
defeat of creditors and the invasion of contractual obligations.
Legislative interferences had been so numerous and extreme that the
confidence essential to prosperous trade had been undermined and
the utter destruction of credit was threatened. "The sober people
of America" were convinced that some "thorough reform" was needed
which would "inspire a general prudence and industry, and give a
regular course to the business of society." The Federalist, No. 44.
It was necessary to interpose the restraining power of a central
authority in order to secure the foundations even of "private
faith." The occasion and general purpose of
Page 290 U. S. 428
the contract clause are summed up in the terse statement of
Chief Justice Marshall in
Ogden v. Saunders, 12 Wheat. pp.
25 U. S. 213,
25 U. S. 354,
25 U. S.
355:
"The power of changing the relative situation of debtor and
creditor, of interfering with contracts, a power which comes home
to every man, touches the interest of all, and controls the conduct
of every individual in those things which he supposes to be proper
for his own exclusive management, had been used to such an excess
by the state legislatures, as to break in upon the ordinary
intercourse of society, and destroy all confidence between man and
man. This mischief had become so great, so alarming, as not only to
impair commercial intercourse and threaten the existence of credit,
but to sap the morals of the people and destroy the sanctity of
private faith. To guard against the continuance of the evil was an
object of deep interest with all the truly wise, as well as the
virtuous, of this great community, and was one of the important
benefits expected from a reform of the government."
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 in the 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. Justice
Johnson, in
Ogden v. Saunders, supra, p.
25 U. S. 286,
adverted to such a misdirected effort in these words:
"It appears to me that a great part of the difficulties of the
cause arise from not giving sufficient weight to the general intent
of this clause in the constitution and subjecting it to a severe
literal construction which would be better adapted to special
pleadings."
And after giving his view as to the purport of the clause --
"that the States shall pass no law
Page 290 U. S. 429
attaching to the acts of individuals other effects or
consequences than those attached to them by the laws existing at
their date, and all contracts thus construed shall be enforced
according to their just and reasonable purport"
-- Justice Johnson added:
"But to assign to contracts, universally, a literal purport, and
to exact for them a rigid literal fulfillment could not have been
the intent of the constitution. It is repelled by a hundred
examples. Societies exercise a positive control as well over the
inception, construction and fulfillment of contracts as over the
form and measure of the remedy to enforce them."
The inescapable problems of construction have been: what is a
contract? [
Footnote 8] What are
the obligations of contracts? What constitutes impairment of these
obligations? What residuum of power is there still in the States in
relation to the operation of contracts, to protect the vital
interests of the community? Questions of this character,
"of no small nicety and intricacy, have vexed the legislative
halls, as well as the judicial tribunals, with an uncounted variety
and frequency of litigation and speculation."
Story on the Constitution, § 1375.
The obligation of a contract is "the law which binds the parties
to perform their agreement."
Sturges v.
Crowninshield, 4 Wheat. 122,
17 U. S. 197;
Story,
op. cit., § 1378. This Court has said that
"the laws which subsist at the time and place of the making of a
contract, and where it
Page 290 U. S. 430
is to be performed, enter into and form a part of it, as if they
were expressly referred to or incorporated in its terms. This
principle embraces alike those which affect its validity,
construction, discharge and enforcement. . . . Nothing can be more
material to the obligation than the means of enforcement. . . . The
ideas of validity and remedy are inseparable, and both are parts of
the obligation, which is guaranteed by the Constitution against
invasion."
Von Hoffman v. City of
Quincy, 4 Wall. 535,
71 U. S. 550,
71 U. S. 552.
See also Walker v.
Whitehead, 16 Wall. 314,
83 U. S. 317.
But this broad language cannot be taken without qualification.
Chief Justice Marshall pointed out the distinction between
obligation and remedy.
Sturges v. Crowninshield, supra, p.
17 U. S. 200.
Said he:
"The distinction between the obligation of a contract and the
remedy given by the legislature to enforce that obligation has been
taken at the bar, and exists in the nature of things. Without
impairing the obligation of the contract, the remedy may certainly
be modified as the wisdom of the nation shall direct."
And in
Von Hoffman v. City of Quincy, supra, pp.
71 U. S. 553,
71 U. S. 554,
the general statement above quoted was limited by the further
observation that
"It is competent for the States to change the form of the
remedy, or to modify it otherwise, as they may see fit, provided no
substantial right secured by the contract is thereby impaired. No
attempt has been made to fix definitely the line between
alterations of the remedy, which are to be deemed legitimate, and
those which, under the form of modifying the remedy, impair
substantial rights. Every case must be determined upon its own
circumstances."
And Chief Justice Waite, quoting this language in
Antoni v.
Greenhow, 107 U. S. 769,
107 U. S. 775,
added: "In all such cases, the question becomes, therefore, one of
reasonableness, and of that the legislature is primarily the
judge."
Page 290 U. S. 431
The obligations of a contract are impaired by a law which
renders them invalid, or releases or extinguishes them [
Footnote 9] (
Sturges v.
Crowninshield, supra, pp.
17 U. S. 197,
17 U. S. 198)
and impairment, as above noted, has been predicated of laws which,
without destroying contracts, derogate from substantial contractual
rights. [
Footnote 10] In
Sturges v. Crowninshield, supra, a state insolvent law
which discharged the debtor from liability was held to be invalid
as applied to contracts in existence when the law was passed.
See Ogden v. Saunders, supra. In
Green v.
Biddle, 8 Wheat. 1, the legislative acts, which
were successfully assailed, exempted the occupant of land from the
payment of rents and profits to the rightful owner and were
"parts of a system the object of which was to compel the
rightful owner to relinquish his lands or pay for all lasting
improvements made upon them, without his consent or default."
In
Bronson v.
Kinzie, 1 How. 311, state legislation which had
been enacted for the relief of debtors in view of the seriously
depressed condition of business [
Footnote 11] following the panic of 1837, and which
provided that the equitable estate of the mortgagor should not be
extinguished
Page 290 U. S. 432
for twelve months after sale on foreclosure, and further
prevented any sale unless two-thirds of the appraised value of the
property should be bid therefor, was held to violate the
constitutional provision. It will be observed that, in the
Bronson case, aside from the requirement as to the amount
of the bid at the sale, the extension of the period of redemption
was unconditional, and there was no provision, as in the instant
case, to secure to the mortgagee the rental value of the property
during the extended period.
McCracken v.
Hayward, 2 How. 608,
Gantly's
Lessee v. Ewing, 3 How. 707, and
Howard v.
Bugbee, 24 How. 461, followed the decision in
Bronson v. Kinzie; that of
McCracken, condemning
a statute which provided that an execution sale should not be made
of property unless it would bring two-thirds of its value according
to the opinion of three householders; that of
Gantly's
Lessee, condemning a statute which required a sale for not
less than one-half the appraised value, and that of
Howard, making a similar ruling as to an unconditional
extension of two years for redemption from foreclosure sale. In
Planters' Bank v.
Sharp, 6 How. 301, a state law was found to be
invalid which prevented a bank from transferring notes and bills
receivable which it had been duly authorized to acquire. In
Von
Hoffman v. City of Quincy, supra., a statute which restricted
the power of taxation which had previously been given to provide
for the payment of municipal bonds was set aside.
Louisiana v.
Police Jury, 111 U. S. 716, and
Seibert v. Lewis, 122 U. S. 284 are
similar cases.
In
Walker v.
Whitehead, 16 Wall. 314, the statute, which was
held to be repugnant to the contract clause, was enacted in 1870,
and provided that, in all suits pending on any debt or contract
made before June 1, 1865, the plaintiff should not have a verdict
unless it appeared that all taxes chargeable by law on the same had
been
Page 290 U. S. 433
duly paid for each year since the contract was made, and
further, that in all cases of indebtedness of the described class,
the defendant might offset any losses he had suffered in
consequence of the late war either from destruction or depreciation
of property.
See Daniels v. Tearney, 102 U.
S. 415,
102 U. S. 419.
In
Gunn v. Barry,
15 Wall. 610, and
Edwards v. Kearzey, 96 U. S.
595, statutes applicable to prior contracts were
condemned because of increases in the amount of the property of
judgment debtors which were exempted from levy and sale on
execution. But, in
Penniman's Case, 103 U.
S. 714,
103 U. S. 720,
the Court decided that a statute abolishing imprisonment for debt
did not, within the meaning of the Constitution, impair the
obligation of contracts previously made, [
Footnote 12] and the Court said:
"The general doctrine of this court on this subject may be thus
stated: in modes of proceeding and forms to enforce the contract,
the legislature has the control, and may enlarge, limit, or alter
them, provided it does not deny a remedy or so embarrass it with
conditions or restrictions as seriously to impair the value of the
right."
In
Barnitz v. Beverly, 163 U.
S. 118, the Court held that a statute which authorized
the redemption of property sold on foreclosure, where no right of
redemption previously existed, or which extended the period of
redemption beyond the time formerly allowed, could not
constitutionally apply to a sale under a mortgage executed before
its passage. This ruling was to the same effect as that in
Bronson v. Kinzie, supra, and
Howard v. Bugbee,
supra. But in the
Barnitz case, the statute contained
a provision for the prevention of waste, and authorized the
appointment of a receiver of the premises sold. Otherwise, the
extension of the period for redemption was unconditional, and, in
case a receiver was appointed,
Page 290 U. S. 434
the income during the period allowed for redemption, except what
was necessary for repairs and to prevent waste, was still to go to
the mortgagor.
None of these case, and we have cited those upon which appellant
chiefly relies, is directly applicable to the question now before
us in view of the conditions with which the Minnesota statute seeks
to safeguard the interests of the mortgagee-purchaser during the
extended period. And broad expressions contained in some of these
opinions went beyond the requirements of the decision, and are not
controlling.
Cohens v.
Virginia, 6 Wheat. 264,
19 U. S.
399.
Not only is the constitutional provision qualified by the
measure of control which the State retains over remedial processes,
[
Footnote 13] but the State
also continues to possess authority to safeguard the vital
interests of its people. It does
Page 290 U. S. 435
not matter that legislation appropriate to that end "has the
result of modifying or abrogating contracts already in effect."
Stephenson v. Binford, 287 U. S. 251,
287 U. S. 276.
Not only are existing laws read into contracts in order to fix
obligations as between the parties, but the reservation of
essential attributes of sovereign power is also read into contracts
as a postulate of the legal order. The policy of protecting
contracts against impairment presupposes the maintenance of a
government by virtue of which contractual relations are worthwhile
-- 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 decisions of this
Court.
While the charters of private corporations constitute contracts,
a grant of exclusive privilege is not to be implied as against the
State.
Charles River Bridge v. Warren
Bridge, 11 Pet. 420. And all contracts are subject
to the right of eminent domain.
West River
Bridge v. Dix, 6 How. 507. [
Footnote 14] The reservation of this necessary
authority of the State is deemed to be a part of the contract. In
the case last cited, the Court answered the forcible challenge of
the State's power by the following statement of the controlling
principle -- a statement reiterated by this Court speaking through
Mr. Justice Brewer, nearly fifty years later, in
Long Island
Water Supply Co. v. Brooklyn, 166 U.
S. 685,
166 U. S.
692:
"But into all contracts, whether made between States and
individuals, or between individuals only, there enter conditions
which arise not out of the literal
Page 290 U. S. 436
terms of the contract itself; they are superinduced by the
preexisting and higher authority of the laws of nature, of nations
or of the community to which the parties belong; they are always
presumed, and must be presumed, to be known and recognized by all,
are binding upon all, and need never, therefore, be carried into
express stipulation, for this could add nothing to their force.
Every contract is made in subordination to them, and must yield to
their control, as conditions inherent and paramount, wherever a
necessity for their execution shall occur."
The legislature cannot "bargain away the public health or the
public morals." Thus, the constitutional provision against the
impairment of contracts was held not to be violated by an amendment
of the state constitution which put an end to a lottery theretofore
authorized by the legislature.
Stone v. Mississippi,
101 U. S. 814,
101 U. S. 819.
See also Douglas v. Kentucky, 168 U.
S. 488,
168 U. S.
497-499;
compare New Orleans v. Houston,
119 U. S. 265,
119 U. S. 275.
The lottery was a valid enterprise when established under express
state authority, but the legislature, in the public interest, could
put a stop to it. A similar rule has been applied to the control by
the State of the sale of intoxicating liquors.
Beer Co. v.
Massachusetts, 97 U. S. 25,
97 U. S. 32,
97 U. S. 33;
see Mugler v. Kansas, 123 U. S. 623,
123 U. S. 664,
123 U. S. 665.
The States retain adequate power to protect the public health
against the maintenance of nuisances despite insistence upon
existing contracts.
Fertilizing Co. v. Hyde Park,
97 U. S. 659,
97 U. S. 667;
Butchers' Union Co. v. Crescent City Co., 111 U.
S. 746,
111 U. S. 750.
Legislation to protect the public safety comes within the same
category of reserved power.
Chicago, B. & Q. R. Co. v.
Nebraska, 170 U. S. 57,
170 U. S. 70,
170 U. S. 74;
Texas & N.O. R. Co. v. Miller, 221 US. 408,
221 U. S. 414;
Atlantic Coast Line R. Co. v. Goldsboro, 232 U.
S. 548,
232 U. S. 558.
This principle has had recent and noteworthy application to the
regulation of the use of public highways by common carriers and
"contract carriers," where the assertion of
Page 290 U. S. 437
interference with existing contract rights has been without
avail.
Sproles v. Binford, 286 U.
S. 374,
286 U. S. 390,
286 U. S. 391;
Stephenson v. Binford, supra.
The economic interests of the State may justify the exercise of
its continuing and dominant protective power notwithstanding
interference with contracts. In
Manigault v. Springs,
199 U. S. 473,
riparian owners in South Carolina had made a contract for a clear
passage through a creek by the removal of existing obstructions.
Later, the legislature of the State, by virtue of its broad
authority to make public improvements, and in order to increase the
taxable value of the lowlands which would be drained, authorized
the construction of a dam across the creek. The Court sustained the
statute upon the ground that the private interests were subservient
to the public right. The Court said (
id., p.
199 U. S.
480):
"It is the settled law of this court that the interdiction of
statutes impairing the obligation of contracts does not prevent the
State from exercising such powers as are vested in it for the
promotion of the common weal, or are necessary for the general good
of the public, though contracts previously entered into between
individuals may thereby be affected. This power, which in its
various ramifications is known as the police power, is an exercise
of the sovereign right of the Government to protect the lives,
health, morals, comfort and general welfare of the people, and is
paramount to any rights under contracts between individuals."
A statute of New Jersey prohibiting the transportation of water
of the State into any other State was sustained against the
objection that the statute impaired the obligation of contracts
which had been made for furnishing such water to persons without
the State.
Hudson Water Co. v. McCarter, 209 U.
S. 349. Said the Court, by Mr. Justice Holmes
(
id., p.
209 U. S.
357):
"One whose rights, such as they are, are subject to state
restriction cannot remove them from the power of the State by
making
Page 290 U. S. 438
a contract about them. The contract will carry with it the
infirmity of the subject matter."
The general authority of the legislature to regulate, and thus
to modify, the rates charged by public service corporations affords
another illustration.
Stone v. Farmers Loan & Trust
Co., 116 U. S. 307,
116 U. S. 325,
116 U. S. 326.
In
Union Dry Goods Co. v. Georgia Public Service Corp.,
248 U. S. 372, a
statute fixing reasonable rates, to be charged by a corporation for
supplying electricity to the inhabitants of a city, superseded
lower rates which had been agreed upon by a contract previously
made for a definite term between the company and a consumer. The
validity of the statute was sustained. To the same effect are
Producers Transportation Co. v. Railroad Comm'n,
251 U. S. 228,
251 U. S. 232,
and
Sutter Butte Canal Co. v. Railroad Comm'n,
279 U. S. 125,
279 U. S. 138.
Similarly, where the protective power of the State is exercised in
a manner otherwise appropriate in the regulation of a business it
is no objection that the performance of existing contracts may be
frustrated by the prohibition of injurious practices.
Rast v.
Van Deman & Lewis Co., 240 U. S. 342,
240 U. S. 363;
see also St. Louis Poster Advertising Co. v. St. Louis,
249 U. S. 269,
249 U. S.
274.
The argument is pressed that, in the cases we have cited, the
obligation of contracts was affected only incidentally. This
argument proceeds upon a misconception. The question is not whether
the legislative action affects contracts incidentally, or directly,
or indirectly, but whether the legislation is addressed to a
legitimate end and the measures taken are reasonable and
appropriate to that end. Another argument, which comes more closely
to the point, is that the state power may be addressed directly to
the prevention of the enforcement of contracts only when these are
of a sort which the legislature in its discretion may denounce as
being in themselves hostile to public morals, or public health,
safety or welfare, or
Page 290 U. S. 439
where the prohibition is merely of injurious practices; that
interference with the enforcement of other and valid contracts
according to appropriate legal procedure, although the interference
is temporary and for a public purpose, is not permissible. This is
but to contend that, in the latter case, the end is not legitimate
in the view that it cannot be reconciled with a fair interpretation
of the constitutional provision.
Undoubtedly, whatever is reserved of state power 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
the reserved power in its essential aspects. They must be construed
in harmony with each other. This principle precludes a construction
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 a temporary restraint of enforcement may be consistent
with the spirit and purpose of the constitutional provision, and
thus be 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
Page 290 U. S. 440
power cannot be said to be nonexistent when the urgent public
need demanding such relief is produced by other and economic
causes.
Whatever doubt there may have been that the protective power of
the State, its police power, may be exercised -- without violating
the true intent of the provision of the Federal Constitution -- in
directly preventing the immediate and literal enforcement of
contractual obligations, by a temporary and conditional restraint,
where vital public interests would otherwise suffer, was removed by
our decisions relating to the enforcement of provisions of leases
during a period of scarcity of housing.
Block v. Hirsh,
256 U. S. 135;
Marcus Brown Holding Co. v. Feldman, 256 U.
S. 170;
Edgar A. Levy Leasing Co. v. Siegel,
258 U. S. 242. The
case of
Block v. Hirsh, supra, arose in the District of
Columbia, and involved the due process clause of the Fifth
Amendment. The cases of the
Marcus Brown Company and the
Levy Leasing Company arose under legislation of New York,
and the constitutional provision against the impairment of the
obligation of contracts was invoked. The statutes of New York,
[
Footnote 15] declaring that
a public emergency existed, directly interfered with the
enforcement of covenants for the surrender of the possession of
premises on the expiration of leases. Within the City of New York
and contiguous counties, the owners of dwellings, including
apartment and tenement houses (but excepting buildings under
construction in September, 1920, lodging houses for transients and
the larger hotels), were wholly deprived until November 1, 1922, of
all possessory remedies for the purpose of removing from their
premises the tenants or occupants in possession when the laws took
effect (save in certain specified instances), providing the tenants
or occupants were ready, able and willing to pay a reasonable rent
or price for their use and
Page 290 U. S. 441
occupation.
People v. La Fetra, 230 N.Y. 429, 438, 130
N.E. 601;
Levy Leasing Co. v. Siegel, id. 634, 130 N.E.
923. In the case of the
Marcus Brown Company, the facts
were thus stated by the District Court (269 Fed. 306, 312):
"the tenant defendants herein, by law older than the state of
New York, became at the landlord's option trespassers on October 1,
1920. Plaintiff had then found and made a contract with a tenant it
liked better, and had done so before these statutes were enacted.
By them plaintiff is, after defendants elected to remain in
possession, forbidden to carry out his bargain with the tenant he
chose, the obligation of the covenant for peaceable surrender by
defendants is impaired, and, for the next two years, Feldman
et
al. may, if they like, remain in plaintiff's apartment,
provided they make good month by month the allegation of their
answer,
i.e., pay what 'a court of competent jurisdiction'
regards as fair and reasonable compensation for such enforced use
and occupancy."
Answering the contention that the legislation, as thus applied,
contravened the constitutional prohibition, this Court, after
referring to its opinion in
Block v. Hirsh, supra,
said:
"In the present case, more emphasis is laid upon the impairment
of the obligation of the contract of the lessees to surrender
possession and of the new lease which was to have gone into effect
upon October 1, last year. But contracts are made subject to this
exercise of the power of the State when otherwise justified, as we
have held this to be."
256 U.S. p.
256 U. S. 198.
This decision was followed in the case of the
Levy Leasing
Company, supra.
In these cases of leases, it will be observed that the relief
afforded was temporary and conditional, that it was sustained
because of the emergency due to scarcity of housing, and that
provision was made for reasonable compensation to the landlord
during the period he was
Page 290 U. S. 442
prevented from regaining possession. The Court also decided
that, while the declaration by the legislature as to the existence
of the emergency was entitled to great respect, it was not
conclusive, and, further, that a law
"depending upon the existence of an emergency or other certain
state of facts to uphold it may cease to operate if the emergency
ceases or the facts change even though valid when passed."
It is always open to judicial inquiry whether the exigency still
exists upon which the continued operation of the law depends.
Chastleton Corp. v. Sinclair, 264 U.
S. 543,
264 U. S. 547,
264 U. S.
548.
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
Page 290 U. S. 443
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 that it is a
constitution
we are expounding" (
McCulloch v.
Maryland, 4 Wheat. 316,
17 U. S. 407)
-- "a constitution intended to endure for ages to come, and,
consequently, to be adapted to the various crises of human
affairs."
Id., p.
17 U. S. 415. When we are dealing with the words of the
Constitution, said this Court in
Missouri v. Holland,
252 U. S. 416,
252 U. S.
433,
"we must realize that they have called into life a being the
development of which could not have been foreseen completely by the
most gifted of its begetters. . . . The case before us must be
considered in the light of our whole experience, and not merely in
that of what was said a hundred years ago."
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
reserved 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 Constitution. With a growing recognition of public needs
Page 290 U. S. 444
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. It is a development
forecast by the prophetic words of Justice Johnson in
Ogden v.
Saunders, already quoted. And the germs of the later decisions
are found in the early cases of the
Charles River Bridge
and the
West River Bridge, supra, which upheld the public
right against strong insistence upon the contract clause. The
principle of this development is, as we have seen, that the
reservation of the reasonable exercise of the protective power of
the State is read into all contracts, and there is no greater
reason for refusing to apply this principle to Minnesota mortgages
than to New York leases.
Applying the criteria established by our decisions we
conclude:
1. 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 declarations of
the existence of this emergency by the legislature and by the
Supreme Court of Minnesota cannot be regarded as a subterfuge, or
as lacking in adequate basis.
Block v. Hirsh, supra. The
finding of the legislature and state court has support in the facts
of which we take judicial notice.
Atchison, T. & S.F. Ry.
Co. v. United States, 284 U. S. 248,
284 U. S. 260.
It is futile to attempt to make a comparative estimate of the
seriousness of the emergency shown in the leasing cases from New
York and of the emergency disclosed here. The particular facts
differ, but that there were in Minnesota conditions urgently
demanding relief, if power existed to give it, is beyond cavil. As
the Supreme Court of Minnesota said, the economic emergency which
threatened "the
Page 290 U. S. 445
loss of homes and lands which furnish those in possession the
necessary shelter and means of subsistence" was a "potent cause"
for the enactment of the statute.
2. The legislation was addressed to a legitimate end, that is,
the legislation was not for the mere advantage of particular
individuals, but for the protection of a basic interest of
society.
3. In view of the nature of the contracts in question --
mortgages of unquestionable validity -- 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.
4. The conditions upon which the period of redemption is
extended do not appear to be unreasonable. The initial extension of
the time of redemption for thirty days from the approval of the Act
was obviously to give a reasonable opportunity for the authorized
application to the court. As already noted, the integrity of the
mortgage indebtedness is not impaired; interest continues to run;
the validity of the sale and the right of a mortgagee-purchaser to
title or to obtain a deficiency judgment if the mortgagor fails to
redeem within the extended period are maintained, and the
conditions of redemption, if redemption there be, stand as they
were under the prior law. The mortgagor, during the extended
period, is not ousted from possession, but he must pay the rental
value of the premises as ascertained in judicial proceedings, and
this amount is applied to the carrying of the property and to
interest upon the indebtedness. The mortgagee-purchaser, during the
time that he cannot obtain possession, thus is not left without
compensation for the withholding of possession. Also important is
the fact that mortgagees, as is shown by official reports of which
we may take notice, are predominantly corporations, such as
Page 290 U. S. 446
insurance companies, banks, and investment and mortgage
companies. [
Footnote 16]
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. It does not matter that there are, or may be, individual
cases of another aspect. The legislature 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 as to the
interest of mortgagors. The legislation seeks to prevent the
impending ruin of both by a considerate measure of relief.
In the absence of legislation, courts of equity have exercised
jurisdiction in suits for the foreclosure of mortgages to fix the
time and terms of sale and to refuse to confirm sales upon
equitable grounds where they were found to be unfair or inadequacy
of price was so gross as to shock the conscience. [
Footnote 17] The "equity of redemption" is
the creature of equity. While courts of equity could not alter the
legal effect of the forfeiture of the estate at common law on
breach of condition, they succeeded, operating on the conscience of
the mortgagee, in maintaining that it was unreasonable that he
should retain for his own benefit what was intended as a mere
security; that the breach of condition was in the nature of a
penalty, which ought to be relieved against, and that the mortgagor
had an equity to redeem on payment of principal, interest and
costs,
Page 290 U. S. 447
notwithstanding the forfeiture at law. This principle of equity
was victorious against the strong opposition of the common law
judges, who thought that, by "the Growth of Equity on Equity, the
Heart of the Common Law is eaten out." The equitable principle
became firmly established, and its application could not be
frustrated even by the engagement of the debtor entered into at the
time of the mortgage, the courts applying the equitable maxim "once
a mortgage, always a mortgage, and nothing but a mortgage."
[
Footnote 18] Although the
courts would have no authority to alter a statutory period of
redemption, the legislation in question permits the courts to
extend that period, within limits and upon equitable terms, thus
providing a procedure and relief which are cognate to the historic
exercise of the equitable jurisdiction. If it be determined, as it
must be, that the contract clause is not an absolute and utterly
unqualified restriction of the State's protective power, this
legislation is clearly so reasonable as to be within the
legislative competency.
5. The legislation is temporary in operation. It is limited to
the exigency which called it forth. While the postponement of the
period of redemption from the foreclosure sale is to May 1, 1935,
that period may be reduced by the order of the court under the
statute, in case of a change in circumstances, and the operation of
the statute itself could not validly outlast the emergency or be so
extended as virtually to destroy the contracts.
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
Page 290 U. S. 448
unwise as a matter of policy is a question with which we are not
concerned.
What has been said on that point is also applicable to the
contention presented under the due process clause.
Block v.
Hirsh, supra.
Nor do we think that the statute denies to the appellant the
equal protection of the laws. The classification which the statute
makes cannot be said to be an arbitrary one.
Magoun v. Illinois
Trust & Savings Bank, 170 U. S. 283;
Clark v. Titusville, 184 U. S. 329;
Quong Wing v. Kirkendall, 223 U. S.
59;
Ohio Oil Co. v. Conway, 281 U.
S. 146;
Sproles v. Binford, 286 U.
S. 374.
The judgment of the Supreme Court of Minnesota is affirmed.
Judgment affirmed.
[
Footnote 1]
That section is as follows:
"Sec. 4.
Period of Redemption May be Extended. -- Where
any mortgage upon real property has been foreclosed and the period
of redemption has not yet expired, or where a sale is hereafter
had, in the case of real estate mortgage foreclosure proceedings,
now pending, or which may hereafter be instituted prior to the
expiration of two years from and after the passage of this Act, or
upon the sale of any real property under any judgment or execution
where the period of redemption has not yet expired, or where such
sale is made hereafter within two years from and after the passage
of this Act, the period of redemption may be extended for such
additional time as the court may deem just and equitable but in no
event beyond May 1st, 1935; provided that the mortgagor, or the
owner in possession of said property, in the case of mortgage
foreclosure proceedings, or the judgment debtor, in case of sale
under judgment, or execution, shall prior to the expiration of the
period of redemption, apply to the district court having
jurisdiction of the matter, on not less than 10 days' written
notice to the mortgagee or judgment creditor, or the attorney of
either, as the case may be, for an order determining the reasonable
value of the income on said property, or, if the property has no
income, then the reasonable rental value of the property involved
in such sale, and directing and requiring such mortgagor or
judgment debtor, to pay all or a reasonable part of such income or
rental value, in or toward the payment of taxes, insurance,
interest, mortgage or judgment indebtedness at such times and in
such manner as shall be fixed and determined and ordered by the
court, and the court shall thereupon hear said application and
after such hearing shall make and file its order directing the
payment by such mortgagor, or judgment debtor, of such an amount at
such times and in such manner as to the court shall, under all the
circumstances, appear just and equitable. Provided that, upon the
service of the notice or demand aforesaid that the running of the
period of redemption shall be tolled until the court shall make its
order upon such application. Provided, further, however, that, if
such mortgagor or judgment debtor, or personal representative,
shall default in the payments, or any of them, in such order
required, on his part to be done, or commits waste, his right to
redeem from said sale shall terminate 30 days after such default
and holders of subsequent liens may redeem in the order and manner
now provided by law beginning 30 days after the filing of notice of
such default with the clerk of such District Court, and his right
to possession shall cease and the party acquiring title to any such
real estate shall then be entitled to the immediate possession of
said premises. If default is claimed by allowance of waste, such 30
day period shall not begin to run until the filing of an order of
the court finding such waste. Provided, further, that the time of
redemption from any real estate mortgage foreclosure or judgment or
execution sale heretofore made, which otherwise would expire less
than 30 days after the passage and approval of this Act, shall be
and the same hereby is extended to a date 30 days after the passage
and approval of this Act, and in such case, the mortgagor, or
judgment debtor, or the assigns or personal representative of
either, as the case may be, or the owner in the possession of the
property, may, prior to said date, apply to said court for and the
court may thereupon grant the relief as hereinbefore and in this
section provided. Provided, further, that, prior to May 1, 1935, no
action shall be maintained in this state for a deficiency judgment
until the period of redemption as allowed by existing law or as
extended under the provisions of this Act, has expired."
[
Footnote 2]
A joint statement of the counsel for both parties, filed with
the court on the argument in this Court, shows that, after
providing for taxes, insurance, and interest, and crediting the
payments to be made by the mortgagor under the judgment, the amount
necessary to redeem May 1, 1935, would be $4,258.82
[
Footnote 3]
The preamble and the first section of the Act are as
follows:
"Whereas, the severe financial and economic depression existing
for several years past has resulted in extremely low prices for the
products of the farms and the factories, a great amount of
unemployment, an almost complete lack of credit for farmers,
business men and property owners and a general and extreme
stagnation of business, agriculture and industry, and"
"Whereas, many owners of real property, by reason of said
conditions, are unable, and it is believed, will for some time be
unable to meet all payments as they come due of taxes, interest and
principal of mortgages on their properties and are, therefore,
threatened with loss of such properties through mortgage
foreclosure and judicial sales thereof, and"
"Whereas, many such properties have been and are being bid in at
mortgage foreclosure and execution sales for prices much below what
is believed to be their real values and often for much less than
the mortgage or judgment indebtedness, thus entailing deficiency
judgments against the mortgage and judgment debtors, and"
"Whereas, it is believed, and the Legislature of Minnesota
hereby declares its belief, that the conditions existing as
hereinbefore set forth has created an emergency of such nature that
justifies and validates legislation for the extension of the time
of redemption from mortgage foreclosure and execution sales and
other relief of a like character; and"
"Whereas, The State of Minnesota possesses the right under its
police power to declare a state of emergency to exist, and"
"Whereas, the inherent and fundamental purpose of our government
is to safeguard the public and promote the general welfare of the
people; and"
"Whereas, Under existing conditions the foreclosure of many real
estate mortgages by advertisement would prevent fair, open and
competitive bidding at the time of sale in the manner now
contemplated by law, and"
"Whereas, It is believed, and the Legislature of Minnesota
hereby declares its belief, that the conditions existing as
hereinbefore set forth have created an emergency of such a nature
that justifies and validates changes in legislation providing for
the temporary manner, method, terms and conditions upon which
mortgage foreclosure sales may be had or postponed and jurisdiction
to administer equitable relief in connection therewith may be
conferred upon the District Court, and"
"Whereas, Mason's Minnesota Statutes of 1927, Section 9608,
which provides for the postponement of mortgage foreclosure sales,
has remained for more than thirty years a provision of the statutes
in contemplation of which provisions for foreclosure by
advertisement have been agreed upon;"
"
* * * *"
"Section 1.
Emergency Declared to Exist. -- In view of
the situation hereinbefore set forth, the Legislature of the State
of Minnesota hereby declares that a public economic emergency does
exist in the State of Minnesota."
[
Footnote 4]
The Attorney General of the State, in his argument before this
court, made the following statement of general conditions in
Minnesota:
"Minnesota is predominantly an agricultural state. A little more
than one half of its people live on farms. At the time this law was
passed, the prices of farm products had fallen to a point where
most of the persons engaged in farming could not realize enough
from their products to support their families, and pay taxes and
interest on the mortgages on their homes. In the fall and winter of
1932 in the villages and small cities where most of the farmers
must market their produce, corn was quoted as low as eight cents
per bushel, oats two cents and wheat twenty-nine cents per bushel,
eggs at seven cents per dozen, and butter at ten cents per pound.
The industry second in importance is mining. In normal times,
Minnesota produces about sixty percent of the iron of the United
States and nearly thirty percent of all the iron produced in the
world. In 1932, the production of iron fell to less than fifteen
percent of normal production. The families of idle miners soon
became destitute, and had to be supported by public funds. Other
industries of the state, such as lumbering and the manufacture of
wood products, the manufacture of farm machinery and various goods
of steel and iron have also been affected disastrously by the
depression. Because of the increased burden on the state and its
political subdivisions which resulted from the depression, taxes on
lands, which provide by far the major portion of the taxes in this
state, were increased to such an extent that, in many instances,
they became confiscatory. Tax delinquencies were alarmingly great,
rising as high as 78% in one county of the state. In seven counties
of the state, the tax delinquency was over 50%. Because of these
delinquencies, many towns, school districts, villages and cities
were practically bankrupt. In many of these political subdivisions
of the state, local government would have ceased to function, and
would have collapsed had it not been for loans from the state."
The Attorney General also stated that serious breaches of the
peace had occurred.
[
Footnote 5]
See Ex parte
Milligan, 4 Wall. 2,
71 U. S. 120-127;
United States v.
Russell, 13 Wall. 623,
80 U. S. 627;
Hamilton v. Kentucky Distilleries & Warehouse Co.,
251 U. S. 146,
251 U. S. 155;
United States v. Cohen Grocery Co., 255 U. S.
81,
255 U. S.
88.
[
Footnote 6]
Farrand, Records of the Federal Convention, vol. II, pp. 439,
440, 597, 610; Elliot's Debates, vol. V, pp. 485, 488, 545, 546;
Bancroft, History of the U.S. Constitution, vol. 2, pp. 137-139;
Warren, The Making of the Constitution, pp. 552-555.
Compare Ordinance for the Government of the Northwest
Territory, Art. 2.
[
Footnote 7]
The Federalist, No. 44 (Madison); Marshall, Life of Washington,
vol. 5, pp. 85-90, 112, 113; Bancroft, History of the U.S.
Constitution, vol. 1, pp. 228
et seq.; Black,
Constitutional Prohibitions, pp. 1-7; Fiske, The Critical Period of
American History, 8th ed., pp. 168
et seq.; Adams v.
Storey, 1 Paine's Rep. 79, 90-92.
[
Footnote 8]
Contracts, within the meaning of the clause, have been held to
embrace those that are executed, that is, grants, as well as those
that are executory.
Fletcher v.
Peck, 6 Cranch 87, 137;
Terrett v.
Taylor, 9 Cranch 43. They embrace the charters of
private corporations.
Dartmouth College v.
Woodward, 4 Wheat. 518. But not the marriage
contract, so as to limit the general right to legislate on the
subject of divorce.
Id., p.
17 U. S. 629;
Maynard v. Hill, 125 U. S. 190,
125 U. S. 210.
Nor are judgments, though rendered upon contracts, deemed to be
within the provision.
Morley v. Lake Shore & M. S. Ry.
Co., 146 U. S. 162,
146 U. S. 169.
Nor does a general law, giving the consent of a State to be sued,
constitute a contract.
Beers v.
Arkansas, 20 How. 527.
[
Footnote 9]
But there is held to be no impairment by a law which removes the
taint of illegality, and thus permits enforcement, as,
e.g., by the repeal of a statute making a contract void
for usury.
Ewell v. Daggs, 108 U.
S. 143,
108 U. S.
151.
[
Footnote 10]
See, in addition to cases cited in the text, the
following:
Farmers & Mechanics Bank
v. Smith, 6 Wheat. 131;
Piqua Bank
v. Knoop, 16 How. 369;
Dodge v.
Woolsey, 18 How. 331;
Jefferson
Branch Bank v. Skelly, 1 Black 436;
State Tax on Foreign-held
Bonds, 15 Wall. 300;
Farrington v.
Tennessee, 95 U. S. 679;
Murray v. Charleston, 96 U. S. 432;
Hartman v. Greenhow, 102 U. S. 672;
McGahey v. Virginia, 135 U. S. 662;
Bedford v. Eastern Bldg. & Loan Assn., 181 U.
S. 227;
Wright v. Central of Georgia Ry. Co.,
236 U. S. 674;
Central of Georgia Ry. Co. v. Wright, 248 U.
S. 525;
Ohio Public Service Co. v. Fritz,
274 U. S. 12.
[
Footnote 11]
See Warren, The Supreme Court in United States History,
vol. 2, pp. 376-379.
[
Footnote 12]
See Sturges v.
Crowninshield, 4 Wheat. 122,
17 U. S. 200,
17 U. S. 201;
Mason v.
Haile, 12 Wheat. 370,
25 U. S. 378;
Beers v.
Haughton, 9 Pet. 329,
34 U. S.
359.
[
Footnote 13]
Illustrations of changes in remedies, which have been sustained,
may be seen in the following cases:
Jackson v.
Lamphire, 3 Pet. 280;
Hawkins v.
Barney's Lessee, 5 Pet. 457;
Crawford
v. Branch Bank, 7 How. 279;
Curtis v.
Whitney, 13 Wall. 68;
Railroad Co. v.
Hecht, 95 U. S. 168;
Terry v. Anderson, 95 U. S. 628;
Tennessee v. Sneed, 96 U. S. 69;
South Carolina v. Gaillard, 101 U.
S. 433;
Louisiana v. New Orleans, 102 U.
S. 203;
Connecticut Mutual Life Ins. Co. v.
Cushman, 108 U. S. 51;
Vance v. Vance, 108 U. S. 514;
Gilfillan v. Union Canal Co., 109 U.
S. 401;
Hill v. Merchants' Ins. Co.,
134 U. S. 515;
New Orleans City & Lake R. Co. v. New Orleans,
157 U. S. 219;
Red River Valley Bank v. Craig, 181 U.
S. 548;
Wilson v. Standefer, 184 U.
S. 399;
Oshkosh Waterworks Co. v. Oshkosh,
187 U. S. 437;
Waggoner v. Flack, 188 U. S. 595;
Bernheimer v. Converse, 206 U. S. 516;
Henley v. Myers, 215 U. S. 373;
Selig v. Hamilton, 234 U. S. 652;
Security Savings Bank v. California, 263 U.
S. 282.
Compare the following illustrative cases, where changes
in remedies were deemed to be of such a character as to interfere
with substantial rights:
Wilmington & Weldon R. Co. v.
King, 91 U. S. 3;
Memphis v. United States, 97 U. S.
293;
Virginia Coupon Cases, 114 U.
S. 269,
114 U. S. 270,
114 U. S. 298,
114 U. S. 299;
Effinger v. Kenney, 115 U. S. 566;
Fisk v. Jefferson Police Jury, 116 U.
S. 131;
Bradley v. Lightcap, 195 U. S.
1;
Bank of Minden v. Clement, 256 U.
S. 126.
[
Footnote 14]
See also New Orleans Gas Co. v. Louisiana Light Co.,
115 U. S. 650,
115 U. S. 673;
Offield v. New York, N.H. & N. R. Co., 203 U.
S. 372;
Cincinnati v. Louisville & N. R.
Co., 223 U. S. 390;
Pennsylvania Hospital v. Philadelphia, 245 U. S.
20,
245 U. S. 23;
Galveston Wharf Co. v. Galveston, 260 U.
S. 473,
260 U. S. 476;
Georgia v. Chattanooga, 264 U. S. 472.
[
Footnote 15]
Law of 1920 (New York), chapter 942-947, 951.
[
Footnote 16]
Department of Agriculture, Technical Bulletin No. 288, February,
1932, pp. 22, 23; Year Book, Department of Agriculture, 1932, p.
913.
[
Footnote 17]
Graffman v. Burgess, 117 U. S. 180,
117 U. S. 191,
117 U. S. 192;
Schroeder v. Young, 161 U. S. 334,
161 U. S. 337;
Ballentyne v. Smith, 205 U. S. 285,
205 U. S. 290;
Howell v. Baker, 4 Johns.Ch. 118, 121;
Gilbert v.
Haire, 43 Mich. 283, 286, 5 N.W. 321;
Littell v.
Zuntz, 2 Ala. 256, 260, 262;
Farmer's Life Ins. Co. v.
Stegink, 106 Kans. 730, 189 Pac. 965;
Strong v.
Smith, 68 N.J.Eq. 650, 653, 58 Atl. 301, 64
id. 1135.
Compare Suring State Bank v. Giese, 210 Wis. 489, 246 N.W.
556.
[
Footnote 18]
See Coote's Law of Mortgages, 8th ed., vol. 1, pp. 11,
12; Jones on Mortgages, 8th ed., vol. 1, §§ 7, 8;
Langford v.
Barnard, Tothill, 134, temp. Eliz.;
Emmanuel College v.
Evans, 1 Rep. in Ch. 10, temp. Car. I;
Roscarrick v.
Barton, 1 Ca. in Ch. 217;
Noakes v. Rice, (1902) A.C.
24, per Lord Macnaghten;
Fairclough v. Swan Brewery, 81
L.J.P.C. 207.
MR. JUSTICE SUTHERLAND, dissenting.
Few questions of greater moment than that just decided have been
submitted for judicial inquiry during this generation. He simply
closes his eyes to the necessary implications of the decision who
fails to see in it the potentiality of future gradual but
ever-advancing encroachments upon the sanctity of private and
public contracts. The effect of the Minnesota legislation, though
serious enough in itself, is of trivial significance compared with
the far more serious and dangerous inroads upon the limitations of
the Constitution which are almost certain to ensue as a consequence
naturally following any step beyond the boundaries fixed by that
instrument. And those of us who are thus apprehensive of the effect
of this decision would, in a matter so important, be neglectful of
our duty should we fail to spread upon the permanent records of the
court the reasons which move us to the opposite view.
A provision of the Constitution, it is hardly necessary to say,
does not admit of two distinctly opposite interpretations.
Page 290 U. S. 449
It does not mean one thing at one time and an entirely different
thing at another time. If the contract impairment clause, when
framed and adopted, meant that the terms of a contract for the
payment of money could not be altered
in invitum by a
state statute enacted for the relief of hardly pressed debtors to
the end and with the effect of postponing payment or enforcement
during and because of an economic or financial emergency, it is but
to state the obvious to say that it means the same now. This view,
at once so rational in its application to the written word and so
necessary to the stability of constitutional principles, though
from time to time challenged, has never, unless recently, been put
within the realm of doubt by the decisions of this court. The true
rule was forcefully declared in
Ex parte
Milligan, 4 Wall. 2,
71 U. S. 120-121,
in the face of circumstances of national peril and public unrest
and disturbance far greater than any that exist today. In that
great case, this court said that the provisions of the Constitution
there under consideration had been expressed by our ancestors in
such plain English words that it would seem the ingenuity of man
could not evade them, but that, after the lapse of more than
seventy years, they were sought to be avoided. "Those great and
good men," the court said,
"foresaw that troublous times would arise when rulers and people
would become restive under restraint, and seek, by sharp and
decisive measures, to accomplish ends deemed just and proper, and
that the principles of constitutional liberty would be in peril
unless established by irrepealable law. The history of the world
had taught them that what was done in the past might be attempted
in the future."
And then, in words the power and truth of which have become
increasingly evident with the lapse of time, there was laid down
the rule without which the Constitution would cease to be the
"supreme law of the land," binding equally upon governments and
governed at all times
Page 290 U. S. 450
and under all circumstances, and become a mere collection of
political maxims to be adhered to or disregarded according to the
prevailing sentiment or the legislative and judicial opinion in
respect of the supposed necessities of the hour:
"The Constitution of the United States is a law for rulers and
people, equally in war and in peace, and covers with the shield of
its protection all classes of men, at all times, and under all
circumstances. No doctrine involving more pernicious consequences
was ever invented by the wit of man than that any of its provisions
can be suspended during any of the great exigencies of government.
Such a doctrine leads directly to anarchy or despotism. . . ."
Chief Justice Taney, in
Dred Scott v.
Sandford, 19 How. 393,
60 U. S. 426,
said that, while the Constitution remains unaltered, it must be
construed now as it was understood at the time of its adoption;
that it is not only the same in words, but the same in meaning,
"and as long as it continues to exist in its present form, it
speaks not only in the same words, but with the same meaning and
intent with which it spoke when it came from the hands of its
framers, and was voted on and adopted by the people of the United
States. Any other rule of construction would abrogate the judicial
character of this court, and make it the mere reflex of the popular
opinion or passion of the day."
And in
South Carolina v. United States, 199 U.
S. 437,
199 U. S.
448-449, in an opinion by Mr. Justice Brewer, this court
quoted these words with approval, and said:
"The Constitution is a written instrument. As such, its meaning
does not alter. That which it met when adopted, it means now. . . .
Those things which are within its grants of power, as those grants
were understood when made, are still within them, and those things
not within them remain still excluded. "
Page 290 U. S. 451
The words of Judge Campbell, speaking for the Supreme Court of
Michigan in
Twitchell v. Blodgett, 13 Mich. 127, 139-140,
are peculiarly apposite. "But it may easily happen," he said,
"that specific provisions may, in unforeseen emergencies, turn
out to have been inexpedient. This does not make these provisions
any less binding. Constitutions cannot be changed by events alone.
They remain binding as the acts of the people in their sovereign
capacity, as the framers of Government, until they are amended or
abrogated by the action prescribed by the authority which created
them. It is not competent for any department of the Government to
change a constitution, or declare it changed, simply because it
appears ill-adapted to a new state of things."
". . . Restrictions have, it is true, been found more likely
than grants to be unsuited to unforeseen circumstances. . . . But,
where evils arise from the application of such regulations, their
force cannot be denied or evaded, and the remedy consists in repeal
or amendment, and not in false constructions."
The provisions of the Federal Constitution, undoubtedly, are
pliable in the sense that, in appropriate cases, they have the
capacity of bringing within their grasp every new condition which
falls within their meaning. [
Footnote
2/1] But their
meaning is changeless; it is only their
application which is extensible.
See South Carolina v.
United States, supra, pp.
199 U. S.
448-449. Constitutional grants of
Page 290 U. S. 452
power and restrictions upon the exercise of power are not
flexible as the doctrines of the common law are flexible. These
doctrines, upon the principles of the common law itself, modify or
abrogate themselves whenever they are or whenever they become
plainly unsuited to different or changed conditions.
Funk v.
United States, ante p.
290 U. S. 371. The
distinction is clearly pointed out by Judge Cooley, 1
Constitutional Limitations, 8th ed., 124:
"A principal share of the benefit expected from written
constitutions would be lost if the rules they established were so
flexible as to bend to circumstances or be modified by public
opinion. It is with special reference to the varying moods of
public opinion, and with a view to putting the fundamentals of
government beyond their control, that these instruments are framed,
and there can be no such steady and imperceptible change in their
rules as inheres in the principles of the common law. Those
beneficent maxims of the common law which guard person and property
have grown and expanded until they mean vastly more to us than they
did to our ancestors, and are more minute, particular, and
pervading in their protections, and we may confidently look forward
in the future to still further modifications in the direction of
improvement. Public sentiment and action effect such changes, and
the courts recognize them; but a court or legislature which should
allow a change in public sentiment to influence it in giving to a
written constitution a construction not warranted by the intention
of its founders, would be justly chargeable with reckless disregard
of official oath and public duty, and if its course could become a
precedent, these instruments would be of little avail. . . . What a
court is to do, therefore, is
to declare the law as
written, leaving it to the people themselves to make such
changes as new circumstances may require. The meaning of the
constitution is fixed when it is adopted,
Page 290 U. S. 453
and it is not different at any subsequent time when a court has
occasion to pass upon it."
The whole aim of construction, as applied to a provision of the
Constitution, is to discover the meaning, to ascertain and give
effect to the intent, of its framers and the people who adopted it.
Lake County v. Rollins, 130 U. S. 662,
130 U. S. 670.
The necessities which gave rise to the provision, the controversies
which preceded, as well as the conflicts of opinion which were
settled by its adoption, are matters to be considered to enable us
to arrive at a correct result.
Knowlton v. Moore,
178 U. S. 41,
178 U. S. 95.
The history of the times, the state of things existing when the
provision was framed and adopted, should be looked to in order to
ascertain the mischief and the remedy.
Rhode
Island v. Massachusetts, 12 Pet. 657,
37 U. S. 723;
Craig v.
Missouri, 4 Pet. 410,
29 U. S.
431-432. As nearly as possible, we should place
ourselves in the condition of those who framed and adopted it.
Ex parte Bain, 121 U. S. 1,
121 U. S. 12. And
if the meaning be at all doubtful, the doubt should be resolved,
wherever reasonably possible to do so, in a way to forward the
evident purpose with which the provision was adopted.
Maxwell
v. Dow, 176 U. S. 581,
176 U. S. 602;
Jarrolt v. Moberly, 103 U. S. 580,
103 U. S.
586.
An application of these principles to the question under review
removes any doubt, if otherwise there would be any, that the
contract impairment clause denies to the several states the power
to mitigate hard consequences resulting to debtors from financial
or economic exigencies by an impairment of the obligation of
contracts of indebtedness. A candid consideration of the history
and circumstances which led up to and accompanied the framing and
adoption of this clause will demonstrate conclusively that it was
framed and adopted with the specific and studied purpose of
preventing legislation designed to relieve debtors especially in
time of financial distress. Indeed,
Page 290 U. S. 454
it is not probable that any other purpose was definitely in the
minds of those who composed the framers' convention or the
ratifying state conventions which followed, although the
restriction has been given a wider application upon principles
clearly stated by Chief Justice Marshall in the
Dartmouth
College Case, 4 Wheat. 518,
17 U. S.
644-645.
Following the Revolution, and prior to the adoption of the
Constitution, the American people found themselves in a greatly
impoverished condition. Their commerce had been well nigh
annihilated. They were not only without luxuries, but in great
degree were destitute of the ordinary comforts and necessities of
life. In these circumstances, they incurred indebtedness, in the
purchase of imported goods and otherwise, far beyond their capacity
to pay. From this situation there arose a divided sentiment. On the
one hand, an exact observance of public and private engagements was
insistently urged. A violation of the faith of the nation or the
pledges of the private individual, it was insisted, was equally
forbidden by the principles of moral justice and of sound policy.
Individual distress, it was urged, should be alleviated only by
industry and frugality, not by relaxation of law or by a sacrifice
of the rights of others. Indiscretion or imprudence was not to be
relieved by legislation, but restrained by the conviction that a
full compliance with contracts would be exacted. On the other hand,
it was insisted that the case of the debtor should be viewed with
tenderness, and efforts were constantly directed toward relieving
him from an exact compliance with his contract. As a result of the
latter view, state laws were passed suspending the collection of
debts, remitting or suspending the collection of taxes, providing
for the emission of paper money, delaying legal proceedings, etc.
There followed, as there must always follow from such a course, a
long trail of ills, one of the direct
Page 290 U. S. 455
consequences being a loss of confidence in the government and in
the good faith of the people. Bonds of men whose ability to pay
their debts was unquestionable could not be negotiated except at a
discount of thirty, forty, or fifty percent. Real property could be
sold only at a ruinous loss. Debtors, instead of seeking to meet
their obligations by painful effort, by industry and economy, began
to rest their hopes entirely upon legislative interference. The
impossibility of payment of public or private debts was widely
asserted, and, in some instances, threats were made of suspending
the administration of justice by violence. The circulation of
depreciated currency became common. Resentment against lawyers and
courts was freely manifested, and, in many instances, the course of
the law was arrested and judges restrained from proceeding in the
execution of their duty by popular and tumultuous assemblages. This
state of things alarmed all thoughtful men, and led them to seek
some effective remedy. Marshall, Life of Washington (1807), Vol. 5,
pp. 88-131.
That this brief outline of the situation is entirely accurate is
borne out by all contemporaneous history, as well as by writers of
distinction of a later period. [
Footnote 2/2]
Compare
Page 290 U. S. 456
Edwards v. Kearzey, 96 U. S. 595,
96 U. S.
604-607. The appended note might be extended for many
pages by the addition of similar quotations from the same and other
writers, but enough appears to establish beyond all question
Page 290 U. S. 457
the extreme gravity of the emergency, the great difficulty and
frequent impossibility which confronted debtors generally in any
effort to discharge their obligations.
Page 290 U. S. 458
In an attempt to meet the situation, recourse was had to the
legislatures of the several states under the Confederation, and
these bodies passed, among other acts, the following: laws
providing for the emission of bills of credit and making them legal
tender for the payment of debts, and providing also for such
payment by the delivery of specific property at a fixed valuation;
instalment laws, authorizing payment of overdue obligations at
future intervals of time; stay laws and laws temporarily closing
access to the courts, and laws discriminating against British
creditors. I have selected, out of a vast number, a few historical
comments upon the character and effect of these legislative
devices. [
Footnote 2/3]
Page 290 U. S. 459
In the midst of this confused, gloomy, and seriously exigent
condition of affairs, the Constitutional Convention of 1787 met at
Philadelphia. The defect's of the Articles of Confederation were so
great as to be beyond all hope of amendment, and the Convention,
acting in technical excess of its authority, proceeded to frame for
submission to the people of the several states an entirely new
Constitution. Shortly prior to the meeting of the convention,
Madison had assailed a bill, pending in the Virginia Assembly,
proposing the payment of private debts in three annual instalments,
on the ground that "no legislative principle could vindicate such
an interposition
Page 290 U. S. 460
of the law in private contracts." The bill was lost by a single
vote. [
Footnote 2/4] Pelatiah
Webster had likewise assailed similar laws as altering the value of
contracts, and William Paterson, of New Jersey, had insisted that
"the legislature should leave the parties to the law under which
they contracted." [
Footnote
2/5]
In the plan of government especially urged by Sherman and
Ellsworth, there was an article proposing that the legislatures of
the individual states ought not to possess a right to emit bills of
credit, etc.,
"or in any manner to obstruct or impede the recovery of debts,
whereby the
Page 290 U. S. 461
interests of foreigners or the citizens of any other state may
be affected. [
Footnote 2/6]"
And on July 13, 1787, Congress, in New York, acutely conscious
of the evils engendered by state laws interfering with existing
contracts, [
Footnote 2/7] passed
the Northwest Territory Ordinance, which contained the clause:
"And, in the just preservation of rights and property, it is
understood and declared that no law ought ever to be made or have
force in the said territory that shall, in any manner whatever,
interfere with or affect private contracts, or engagements
bona
fide and without fraud previously formed. [
Footnote 2/8]"
It is not surprising, therefore, that, after the Convention had
adopted the clauses, no state shall "emit bills of credit," or
"make anything but gold and silver coin a tender in payment of
debts," Mr. King moved to add a "prohibition on the states to
interfere in private contracts." This was opposed by Gouverneur
Morris and Colonel Mason. Colonel Mason thought that this would be
carrying the restraint too far; that cases would happen that could
not be foreseen where some kind of interference would be essential.
This was on August 28. But Mason's view did not prevail, for, on
September 14 following, the first clause of Art. I, § 10, was
altered so as to include the provision, "No state shall . . . pass
any . . . law impairing the obligation of contracts," and in that
form it was adopted. [
Footnote
2/9]
Luther Martin, in an address to the Maryland House of Delegates,
declared his reasons for voting against the provision. He said that
he considered there might be times of such great public calamity
and distress as should render
Page 290 U. S. 462
it the duty of a government in some measure to interfere by
passing laws totally or partially stopping courts of justice, or
authorizing the debtor to pay by instalments; that such regulations
had been found necessary in most or all of the states
"to prevent the wealthy creditor and the moneyed man from
totally destroying the poor, though industrious, debtor. Such times
may again arrive."
And he was apprehensive of any proposal which took from the
respective states the power to give their debtor citizens "a
moment's indulgence, however necessary it might be, and however
desirous to grant them aid." [
Footnote 2/10]
On the other hand, Sherman and Ellsworth defended the provision
in a letter to the Governor of Connecticut. [
Footnote 2/11] In the course of the Virginia debates,
Randolph declared that the prohibition would be promotive of virtue
and justice, and preventive of injustice and fraud, and he pointed
out that the reputation of the people had suffered because of
frequent interferences by the state legislatures with private
contracts. [
Footnote 2/12] In the
North Carolina debates, Mr. Davie declared that the prohibition
against impairing the obligation of contracts and other
restrictions ought to supersede the laws of particular states. He
thought the constitutional provisions were founded on the strongest
principles of justice. [
Footnote
2/13] Pinckney, in the South Carolina debates, said that he
considered the section including the clause in question as "the
soul of the Constitution," teaching the states "to cultivate those
principles of public honor and private honesty which are the sure
road to national character and happiness." [
Footnote 2/14]
Page 290 U. S. 463
The provision was strongly defended in The Federalist, both by
Hamilton in No. 7 and Madison in No. 44. Madison concluded his
defense of the clause by saying:
Page 290 U. S. 464
". . . one legislative interference is but the first link of a
long chain of repetitions, every subsequent interference being
naturally produced by the effects of the preceding. They very
rightly infer, therefore, that some thorough reform is wanting
which will banish speculations on public measures, inspire a
general prudence and industry, and give a regular course to the
business of society."
Contemporaneous history is replete with evidence of the sharp
conflict of opinion with respect to the advisability of adopting
the clause. Dr. Ramsay (The History of South Carolina (1809), Vol.
II, pp. 431-433), already referred to, writing of the action of
South Carolina and especially referring to the contract impairment
clause, says that this Constitution was accepted and ratified on
behalf of the state, and speaks of it as an act of great
self-denial:
"The power thus given up by South Carolina was one she thought
essential to her welfare, and had freely exercised for several
preceding years. Such a relinquishment she would not have made at
any period of the last five years, for in them, she had passed no
less than six acts interfering between debtor and creditor, with
the view of obtaining a respite for the former under particular
circumstances of public distress. To tie up the hands of future
legislatures so as to deprive them of a power of repeating similar
acts on any emergency was a display both of wisdom and magnanimity.
It would seem as if experience had convinced the state of its
political errors, and induced a willingness to retrace its steps
and relinquish a power which had been improperly used."
There is an old case,
Glaze v. Drayton, 1 Desaus.Eq.
(S.C.) 109, decided in 1784, where the South Carolina court of
chancery entered a decree for the specific performance of a
contract for the purchase of land, but providing for the payment of
the balance due under the contract
Page 290 U. S. 465
"by instalments, at the times mentioned in the acts of assembly
respecting the recovery of old debts." In reporting that case soon
after the adoption of the Constitution, Chancellor Desaussure added
the following explanatory and illuminating note [p. 110]:
"The legislature, in consideration of the distressed state of
the country after the war, had passed an act preventing the
immediate recovery of debts and fixing certain periods for the
payment of debts far beyond the periods fixed by the contract of
the parties. These interferences with private contracts became very
common with most of the state legislatures, even after the
distresses arising from the war had ceased in a great degree. They
produced distrust and irritation throughout the community to such
an extent that new troubles were apprehended, and nothing
contributed more to prepare the public mind for giving up a portion
of the state sovereignty and adopting an efficient national
government than these abuses of power by the state
legislatures."
If it be possible by resort to the testimony of history to put
any question of constitutional intent beyond the domain of
uncertainty, the foregoing leaves no reasonable ground upon which
to base a denial that the clause of the Constitution now under
consideration was meant to foreclose state action impairing the
obligation of contracts
primarily and especially in
respect of such action aimed at giving relief to debtors
in
time of emergency. And if further proof be required to
strengthen what already is inexpungable, such proof will be found
in the previous decisions of this court. There are many such
decisions; but it is necessary to refer to a few only which bear
directly upon the question, namely:
Bronson v.
Kinzie, 1 How. 311;
McCracken
v. Hayward, 2 How. 608;
Gantly's
Lessee v. Ewing, 3 How. 707;
Howard v.
Bugbee, 24 How. 461;
Gunn v.
Barry, 15 Wall. 610;
Walker v.
Whitehead,
Page 290 U. S. 466
16 Wall. 314;
Edwards v. Kearzey, 96 U. S.
595;
Barntz v. Beverly, 163 U.
S. 118, and
Bradley v. Lightcap, 195 U. S.
1.
Bronson v. Kinzie was decided at the January Term,
1843. The case involved an Illinois statute extending the period of
redemption for a period of twelve months after a sale under a
decree in chancery, and another statute preventing a sale unless
two-thirds of the amount at which the property had been valued by
appraisers should be bid therefor. This court held both statutes
invalid, when applied to an existing mortgage, as infringing the
contract impairment clause. No more need now be said as to the
points decided. The opinion of the court says nothing about an
emergency; but it is clear that the statute was passed for the
purpose of meeting the panic and depression which began in 1837 and
continued for some years thereafter. [
Footnote 2/15] And in the light of what is now to be
said, it is evident that the question of that emergency as a basis
for the legislation was so definitely involved that it must have
been considered by the court. The emergency was quite as serious as
that which the country has faced during the past three years.
Indeed, it was so great that, in one instance, at least, a state
repudiated a portion of its public debt, and others were strongly
tempted to do so. [
Footnote 2/16]
Mr. Warren, in his book, "The Supreme Court in United States
History," Vol. 2, pp. 376-379, gives a vivid picture of the
situation. After referring to
Bronson v. Kinzie and the
statute extending the period of redemption therein dealt with, he
points to the prevailing state of business and finance
Page 290 U. S. 467
which had called the statute into existence; to the bank
failures, state debt repudiations, scarcity of hard money, the
inability to pay debts except by disposing of property at ruinous
prices; to the enactment of statutes for the relief of debtors,
stay laws postponing collection of debts, etc., which had been
passed by state after state, and to the action of this court in
striking down the state statute in the face of these
conditions.
"Unquestionably," he continues,
"the country owes much of its prosperity to the unflinching
courage with which, in the face of attack, the Court has maintained
its firm stand in behalf of high standards of business morale,
requiring honest payment of debts and strict performance of
contracts, and its rigid construction of the Constitution to this
end has been one of the glories of the Judiciary. That its
decisions should, at times, have met with disfavor among the debtor
class was, however, entirely natural, and while, ultimately, these
debtor relief laws have always proved to be injurious to the very
class they were designed to relieve, and to increase the financial
distress, fraud and extortion temporarily, debtors have always
believed such laws to be their salvation, and have resented
judicial decisions holding them invalid. Consequently, this opinion
of the Court in the
Bronson Case aroused great antagonism
in the Western States. In Illinois, a mass meeting was held which
resolved that the decision ought not to be heeded. . . . Later,
deference to the antagonism aroused against the Court by this
decision was made when the Senator from Illinois, James Semple,
introduced in the Senate, in 1846, a joint resolution proposing a
Constitutional Amendment to prohibit the Supreme Court from
declaring void 'any Act of Congress or any State regulation on the
ground that it is contrary to the Constitution of the United
States. . . .'"
McMaster (
supra, 290
U.S. 398fn2/2|>note 2), Vol. VII, pp. 44-48, is to the same
effect.
Page 290 U. S. 468
McCracken v. Hayward, decided at the January Term,
1844, dealt with the same Illinois statute, but involved a sale on
execution after judgment, whereas
Bronson v. Kinzie
involved a mortgage. The decision simply followed the
Bronson case. What has been said in respect of the
background and setting of that case is equally applicable, and need
not be repeated.
Gantly's Lessee v. Ewing was decided at the January
Term, 1845. It held unconstitutional, as applied to a preexisting
mortgage, an act of Indiana providing that no real property should
be sold on execution for less than half its appraised value. The
statute, like those of Illinois, was enacted for the benefit of
hard-pressed debtors as a result of the same emergency. It is
referred to by McMaster,
supra, as one of the "marks on
the statute books" which the "evil times through which the people
were passing" had left.
Howard v. Bugbee, decided at the December Term, 1860,
dealt with an Alabama statute authorizing a redemption of mortgaged
property in two years after the sale under a decree. The statute
was declared unconstitutional principally upon the authority of
Bronson v. Kinzie. The opinion is very short, and does not
refer to the question of emergency. The statute was passed,
however, in 1842 (the mortgage having been executed prior thereto),
and was, therefore, one of the emergency statutes of that period.
The Alabama Supreme Court, whose decision was under review here, so
treated it, and justified the statute upon that ground. 32 Ala.
713, 716-717. It is worthy of note that, after the decision of this
court in the
Bugbee case, Judge Walker, who delivered the
opinion therein for the Alabama court, filed a dissenting opinion
in
Ex parte Pollard, Ex parte Woods, 40 Ala. 77, 110, in
the course of which he said that his former opinion had been
overruled by this court, and he could no longer perceive
Page 290 U. S. 469
any ground upon which the convictions of a legislature as to the
welfare of the people could enlarge the authority to interfere,
through the manipulation of the remedy, with the obligation of
contracts. The basis of the legislation was, and is shown by the
decision of the Alabama Supreme Court sustaining it to be, the
existence of the great emergency beginning in 1837, and that
question, since the Alabama decision was reviewed, was quite
plainly before this court for consideration.
Walker v. Whitehead, decided at the December Term,
1872, held unconstitutional a Georgia statute requiring the
plaintiff, suing on a debt or contract, to prove as a condition
precedent to the entry of judgment in his favor that all legal
taxes chargeable by law thereon had been duly paid for each year
since the making of the debt or contract. The Georgia Supreme
Court, 43 Ga. 538, 544-546, had sustained the act as a measure made
necessary by the desperate financial and economic conditions in
that state due to the Civil War. This court, making no response to
the somewhat fervid presentation of this view of the matter by the
state court, simply said that the degree of impairment was
immaterial; that any impairment of the obligation of a contract is
within the prohibition of the Constitution; that "[a] clearer case
of a law impairing the obligation of a contract, within the meaning
of the Constitution, can hardly occur."
Edwards v. Kearzey, decided at the October Term, 1877,
held invalid, as applied to a preexisting debt, the provision of
the North Carolina constitution of 1868 increasing the exemptions
to which a debtor was entitled. The North Carolina Supreme Court,
in a series of decisions, had sustained the state constitutional
provision, principally upon the ground (
Garrett v.
Chesire, 69 N.C. 396, 401-405) that it was adopted at a time
when "probably one-half of the debtor class are owing more
old debts than
Page 290 U. S. 470
they can pay", and that, "[i]f, under our circumstances, our
people are to be left without any exemptions, the policy of
christian civilization is lost sight of. . . ." In the brief of
defendant in error in this court (pp. 7-8), the view was strongly
urged that the provision was not so much for the benefit of the
debtor as for that of the state, to prevent the evils of almost
universal pauperism. Attention was called to the desperate
condition of the people of the state following the Civil War, and
it was said that one-third of the whole population were paupers,
all their property except lands having disappeared; that one-half
of the people did not own land enough to afford burial for that
proportion of the population, and, against those who did own land,
the ante-war debts were piled mountain-high. It was submitted that
the state, on being rehabilitated, was not bound to allow the
creditor to strip the few self-supporting landowners of their means
of existence, and thereby add them to the vast army of the
impoverished, but that it had the right to defer a portion of the
creditor's claim until the prostrated community had opportunity to
recoup some of its losses.
This court, in response, reviewed the history of the adoption of
the contract impairment clause, and held the state constitutional
provision invalid. "
Policy and humanity,'" it said,
"are dangerous guides in the discussion of a legal proposition.
He who follows them far is apt to bring back the means of error and
delusion.
The prohibition contains no qualification, and we
have no judicial authority to interpolate any. Our duty is
simply to execute it."
[Italics added.]
Barnitz v. Beverly was decided May 18, 1896. A law of
Kansas extended the period of redemption from a sale under a
mortgage for a period of eighteen months, during which time the
mortgagor was to remain in possession and receive rents and
profits, except as necessary for repairs.
Page 290 U. S. 471
The act was passed in 1893, in the midst of another panic, the
severity of which, still within the memory of the members of this
court, is a matter of common knowledge. The effects of that panic
extended into every form of industry; bank failures were on an
unprecedented scale; more than half the railroads of the country
were in the hands of receivers; securities fell to fifty percent,
often to twenty-five percent, of their former value; commercial
failures and unemployment became general; heavy inroads were made
upon public and private resources in caring for the hungry and
destitute; [
Footnote 2/17] great
bodies of idle men -- the so-called "industrial armies" -- marched
toward Washington, feeding like locusts upon the country through
which they passed.
These conditions were brought to the attention of this court. In
addition, the Supreme Court of Kansas, 55 Kans. 466, 484-485, 42
Pac. 725, 731, had relied upon them as a justification for the
legislation, and had inquired why the state legislature, in a time
of general depression, could not
"extend the indefinite estate impliedly reserved by the
mortgagor, as the federal courts of equity do in particular cases,
beyond the six months allowed by the general practice?"
In response to all of which, this court, after reviewing its
former decisions, held the statute invalid as applied to a sale
under a mortgage executed before its passage.
The present exigency is nothing new. From the beginning of our
existence as a nation, periods of depression, of industrial
failure, of financial distress, of unpaid and unpayable
indebtedness, have alternated with years of plenty. The vital
lesson that expenditure beyond income begets poverty, that public
or private extravagance,
Page 290 U. S. 472
financed by promises to pay, either must end in complete or
partial repudiation or the promises be fulfilled by self-denial and
painful effort, though constantly taught by bitter experience,
seems never to be learned, and the attempt by legislative devices
to shift the misfortune of the debtor to the shoulders of the
creditor without coming into conflict with the contract impairment
clause has been persistent and oft-repeated.
The defense of the Minnesota law is made upon grounds which were
discountenanced by the makers of the Constitution and have many
times been rejected by this court. That defense should not now
succeed, because it constitutes an effort to overthrow the
constitutional provision by an appeal to facts and circumstances
identical with those which brought it into existence. With due
regard for the processes of logical thinking, it legitimately
cannot be urged that conditions which produced the rule may now be
invoked to destroy it.
The lower court, and counsel for the appellees in their argument
here, frankly admitted that the statute does constitute a material
impairment of the contract, but contended that such legislation is
brought within the state power by the present emergency. If I
understand the opinion just delivered, this court is not wholly in
accord with that view. The opinion concedes that emergency does not
create power, or increase granted power, or remove or diminish
restrictions upon power granted or reserved. It then proceeds to
say, however, that, while emergency does not create power, it may
furnish the occasion for the exercise of power. I can only
interpret what is said on that subject as meaning that, while an
emergency does not diminish a restriction upon power, it furnishes
an occasion for diminishing it, and this, as it seems to me, is
merely to say the same thing by the use of another set of words,
with the effect of affirming that which has just been denied.
Page 290 U. S. 473
It is quite true that an emergency may supply the occasion for
the exercise of power, depending upon the nature of the power and
the intent of the Constitution with respect thereto. The emergency
of war furnishes an occasion for the exercise of certain of the war
powers. This the Constitution contemplates, since they cannot be
exercised upon any other occasion. The existence of another kind of
emergency authorizes the United States to protect each of the
states of the Union against domestic violence. Const. Art. IV, § 4.
But we are here dealing not with a power granted by the Federal
Constitution, but with the state police power, which exists in its
own right. Hence, the question is not whether an emergency
furnishes the occasion for the exercise of that state power, but
whether an emergency furnishes an occasion for the relaxation of
the restrictions upon the power imposed by the contract impairment
clause, and the difficulty is that the contract impairment clause
forbids state action under any circumstances, if it have the effect
of impairing the obligation of contracts. That clause restricts
every state power in the particular specified, no matter what may
be the occasion. It does not contemplate that an emergency shall
furnish an occasion for softening the restriction or making it any
the less a restriction upon state action in that contingency than
it is under strictly normal conditions.
The Minnesota statute either impairs the obligation of contracts
or it does not. If it does not, the occasion to which it relates
becomes immaterial, since then the passage of the statute is the
exercise of a normal, unrestricted, state power, and requires no
special occasion to render it effective. If it does, the emergency
no more furnishes a proper occasion for its exercise than if the
emergency were nonexistent. And so, while, in form, the suggested
distinction seems to put us forward in a straight line, in reality,
it simply carries us back in a
Page 290 U. S. 474
circle, like bewildered travelers lost in a wood, to the point
where we parted company with the view of the state court.
If what has now been said is sound, as I think it is, we come to
what really is the vital question in the case: does the Minnesota
statute constitute an impairment of the obligation of the contract
now under review?
In answering that question, we must first of all distinguish the
present legislation from those statutes which, although interfering
in some degree with the terms of contracts, or having the effect of
entirely destroying them, have nevertheless been sustained as not
impairing the obligation of contracts in the constitutional sense.
Among these statutes are such as affect the remedy merely, as to
which this court said in
Bronson v. Kinzie, supra, at p.
42 U. S. 316,
and repeated in
Edwards v. Kearzey, supra, p.
96 U. S.
604,
"Whatever belongs merely to the remedy may be altered according
to the will of the state, provided the alteration does not impair
the obligation of the contract. But if that effect is produced, it
is immaterial whether it is done by acting on the remedy or
directly on the contract itself. In either case, it is prohibited
by the Constitution."
Another class of statutes is illustrated by those exempting from
execution and sale certain classes of property like the tools of an
artisan. Chief Justice Taney, in
Bronson v. Kinzie, supra,
speaking
obiter, said that a state might properly exempt
necessary implements of agriculture, or the tools of a mechanic, or
articles of necessity in household furniture. But this court, in
Edwards v. Kearzey, supra, struck down a provision of the
North Carolina constitution which exempted every homestead, and the
dwelling and buildings used therewith, not exceeding in value
$1,000, on the ground of its unconstitutionality as applied to a
contract already in existence. Referring to the opinion in
Bronson v. Kinzie, the court said (p.
96 U. S.
604)
Page 290 U. S. 475
that the Chief Justice seems to have had in his mind the maxim
"
de minimis," etc. "Upon no other ground can any exemption
be justified."
It is quite true also that "the reservation of essential
attributes of sovereign power is also read into contracts", and
that the legislature cannot "bargain away the public health or the
public morals." General statutes to put an end to lotteries, the
sale or manufacture of intoxicating liquors, the maintenance of
nuisances, to protect the public safety, etc., although they have
the indirect effect of absolutely destroying private contracts
previously made in contemplation of a continuance of the state of
affairs then in existence but subsequently prohibited, have been
uniformly upheld as not violating the contract impairment clause.
The distinction between legislation of that character and the
Minnesota statute, however, is readily observable. It may be
demonstrated by an example. A, engaged in the business of
manufacturing intoxicating liquor within a state, makes a contract,
we will suppose, with B to manufacture and deliver, at a stipulated
price and at some date in the future, a quantity of whisky. Before
the day arrives for the performance of the contract, the state
passes a law prohibiting the manufacture and sale of intoxicating
liquor. The contract immediately falls, because its performance has
ceased to be lawful. This is so because the contract is made upon
the implied condition that a particular state of things shall
continue to exist, "and, when that state of things ceases to exist,
the bargain itself ceases to exist."
Marshall v. Glanvill,
[1917] 2 K.B. 87, 91. In that case, the plaintiff had been employed
by the defendants upon a contract of service. While the contract
was in force, the country became involved in the World War, and
plaintiff was called into the military service. The court held that
this rendered performance unlawful, and that the contract was at an
end. It said:
Page 290 U. S. 476
"Here, the parties clearly made their bargain on the footing
that it should continue lawful for the plaintiff to render and for
the defendants to accept his services. The rendering and acceptance
of these services ceased to be lawful in July, 1916, and thereupon
the bargain came to an end."
In
In re Shipton, Anderson & Co., [1915] 3 K.B.
676, a parcel of wheat then lying in a warehouse was sold for
future payment and delivery. The wheat was subsequently
requisitioned by the English government, and the sellers became
unable to deliver. The Court of King's Bench Division held that the
sellers were not liable. Darling, Justice, agreeing with the
opinion of Lord Reading, said (pp. 683-684):
"If one contracts to do what is then illegal, the contract
itself is altogether bad. If, after the contract has been made, it
cannot be performed without what is illegal being done, there is no
obligation to perform it. In the one case, the making of the
contract, in the other case the performance of it, is against
public policy. It must be here presumed that the Crown acted
legally, and there is no contention to the contrary. We are in a
state of war; that is notorious. The subject matter of this
contract has been seized by the State acting for the general good.
Salus populi suprema lex is a good maxim, and the
enforcement of that essential law gives no right of action to
whomsoever may be injured by it."
The general subject is discussed by this court in
Omnia Co.
v. United States, 261 U. S. 502, and
it is there pointed out (p.
261 U. S. 513)
that the effect of such a requisition is not to appropriate the
contract, but to frustrate it -- an essentially different
thing.
The same distinction properly may be made as to the contract
impairment clause, in respect of subsequent state legislation
rendering unlawful a state of things which was lawful when an
obligation relating thereto was contracted.
Page 290 U. S. 477
By such legislation, the obligation is not impaired in the
constitutional sense. The contract is frustrated -- it disappears
in virtue of an implied condition to that effect read into the
contract itself. Thus, in
F.A. Tamplin Steamship Co. v.
Anglo-Mexican Petroleum Products Co., [1916] 2 A.C. 397, the
House of Lords had before it a case where a steamer, then subject
to a charter party having nearly three years to run, had been
requisitioned by the Admiralty. The applicable rule was there
stated to be that the court should examine the contract and the
circumstances in which it was made in order to see whether or not,
from their nature, the parties must have made their bargain on the
footing that a particular state of things would continue to exist.
And if they must have done so, a term to that effect would be
implied, though not expressed in the contract. In
Metropolitan
Water Board v. Dick, Kerr & Co., [1918] A.C. 119, 127-128,
137, that rule was reaffirmed, with the additional statement that a
subsequent law might be the cause of an impossibility of
performance by taking away something from the control of the party
as to which thing he had contracted to do or not to do something
else, and that the court must determine whether this contingency is
of such a character that it can reasonably be implied to have been
in the contemplation of the parties when the contract was made.
Bearing in mind these aids toward determining whether such an
implied condition may be read into a particular contract, let us
revert to the example already given with respect to an agreement
for the manufacture and sale of intoxicating liquor. And let us
suppose that the state, instead of passing legislation prohibiting
the manufacture and sale of the commodity, in which event the
doctrine of implied conditions would be pertinent, continues to
recognize the general lawfulness of the business, but, because of
what it conceives to be a justifying emergency, provides that the
time for the performance of existing
Page 290 U. S. 478
contracts for future manufacture and sale shall be extended for
a specified period of time. It is perfectly admissible, in view of
the state power to prohibit the business, to read into the contract
an implied proviso to the effect that the business of manufacturing
and selling intoxicating liquors shall not, prior to the date when
performance is due, become unlawful; but in the case last put, to
read into the contract a pertinent provisional exception in the
event of intermeddling state action would be more than
unreasonable, it would be absurd, since we must assume that the
contract was made on the footing that, so long as the obligation
remained lawful, the impairment clause would effectively preclude a
law altering or nullifying it, however exigent the occasion might
be.
That, in principle, is precisely the case here. The contract is
to repay a loan within a fixed time, with the express condition
that, upon failure, the property given as security shall be sold,
and that, in the absence of a timely redemption, title shall be
vested absolutely in the purchaser. This contract was lawful when
made, and it has never been anything else. What the legislature has
done is to pass a statute which does not have the effect of
frustrating the contract by rendering its performance unlawful, but
one which, at the election of one of the parties, postpones for a
time the effective enforcement of the contractual obligation,
notwithstanding the obligation, under the exact terms of the
contract, remains lawful and possible of performance after the
passage of the statute as it was before.
The rent cases --
Block v. Hirsh, 256 U.
S. 135;
Marcus Brown Co. v. Feldman,
256 U. S. 170;
Levy Leasing Co. v. Siegel, 258 U.
S. 242 -- which are here relied upon dealt with an
exigent situation due to a period of scarcity of housing caused by
the war. I do not stop to consider the distinctions between them
and the present case, or to do more than point out that the
question of contract impairment
Page 290 U. S. 479
received little, if any, more than casual consideration. The
writer of the opinions in the first two cases, speaking for this
court in a later case,
Pennsylvania Coal Co. v. Mahon,
260 U. S. 393,
260 U. S. 416,
characterized all of them as having gone "to the verge of the law."
It therefore seems pertinent to say that decisions which
confessedly escape the limbo of unconstitutionality by the
exceedingly narrow margin suggested by this characterization should
be applied toward the solution of a doubtful question arising in a
different field with a very high degree of caution. Reasonably
considered, they do not foreclose the question here involved, and
it should be determined upon its merits, without regard to those
cases.
We come back, then, directly to the question of impairment. As
to that, the conclusion reached by the court here seems to be that
the relief afforded by the statute does not contravene the
constitutional provision because it is of a character appropriate
to the emergency and allowed upon what are said to be reasonable
conditions.
It is necessary, first of all, to describe the exact situation.
Appellees obtained from appellant a loan of $3,800, and, to secure
its payment, executed a mortgage upon real property consisting of
land and a fourteen-room house and garage. The mortgage contained
the conventional Minnesota provision for foreclosure by
advertisement. The mortgagors agreed to pay the debt, together with
interest and the taxes and insurance on the property. They
defaulted, and, in strict accordance with the bargain, appellant
foreclosed the mortgage by advertisement and caused the premises to
be sold. Appellant itself bought the property at the sale for a sum
equal to the amount of the mortgage debt. The period of redemption
from that sale was due to expire on May 2, 1933, and, assuming no
redemption at the end of that day, under the law in force
Page 290 U. S. 480
when the contract was made and when the property was sold, and
in accordance with the terms of the mortgage, appellant would at
once have become the owner in fee, and entitled to the immediate
possession of the property. The statute here under attack was
passed on April 18, 1933. It first recited and declared that an
economic emergency existed. As applied to the present case, it
arbitrarily extended the period of redemption expiring on May 2,
1933, to May 18, 1933 -- a period of sixteen days, and provided
that the mortgagor might apply for a further extension to the
district court of the county. That court was authorized to extend
the period to a date not later than May 1, 1935, on the condition
that the mortgagor should pay to the creditor all or a reasonable
part of the income or rental value, as to the court might appear
just and equitable, toward the payment of taxes, insurance,
interest and principal mortgage indebtedness, and at such times and
in such manner as should be fixed by the court. The court to whom
the application in this case was made extended the time until May
1, 1935, upon the condition that payment by the mortgagor of the
rental value, forty dollars per month, should be made.
It will be observed that, whether the statute operated directly
upon the contract or indirectly by modifying the remedy, its effect
was to extend the period of redemption absolutely for a period of
sixteen days, and conditionally for a period of two years. That
this brought about a substantial change in the terms of the
contract reasonably cannot be denied. If the statute was meant to
operate only upon the remedy, it nevertheless, as applied, had the
effect of destroying for two years the right of the creditor to
enjoy the ownership of the property, and consequently the
correlative power, for that period, to occupy, sell or otherwise
dispose of it as might seem fit. This postponement, if it had been
unconditional, undoubtedly would have constituted an
unconstitutional
Page 290 U. S. 481
impairment of the obligation. This court so decided in
Bronson v. Kinzie, supra, where the period of redemption
was extended for a period of only twelve months after a sale under
a decree; in
Howard v. Bugbee, supra, where the extension
was for two years, and in
Barnitz v. Beverly, supra, where
the period was extended for eighteen months. Those cases, we may
assume, still embody the law, since they are not overruled.
The only substantial difference between those cases and the
present one is that, here, the extension of the period of
redemption, and postponement of the creditor's ownership, is
accompanied by the condition that the rental value of the property
shall, in the meantime, be paid. Assuming, for the moment, that a
statute extending the period of redemption may be upheld if
something of commensurate value be given the creditor by way of
compensation, a conclusion that payment of the rental value during
the two years' period of postponement is even the approximate
equivalent of immediate ownership and possession is purely
gratuitous. How can such payment be regarded, in any sense, as
compensation for the postponement of the contract right? The
ownership of the property to which petitioner was entitled carried
with it not only the right to occupy or sell it, but, ownership
being retained, the right to the rental value as well. So that, in
the last analysis, petitioner simply is allowed to retain a part of
what is its own as compensation for surrendering the remainder.
Moreover, it cannot be foreseen what will happen to the property
during that long period of time. The buildings may deteriorate in
quality; the value of the property may fall to a sum far below the
purchase price; the financial needs of appellant may become so
pressing as to render it urgently necessary that the property shall
be sold for whatever it may bring.
However these or other supposable contingencies may be, the
statute denies appellant for a period of two years
Page 290 U. S. 482
the ownership and possession of the property -- an asset which,
in any event, is of substantial character, and which possibly may
turn out to be of great value. The statute, therefore, is not
merely a modification of the remedy; it effects a material and
injurious change in the obligation. The legally enforceable right
of the creditor when the statute was passed was, at once upon
default of redemption, to become the fee simple owner of the
property. Extension of the time for redemption for two years,
whatever compensation be given in its place, destroys that specific
right and the correlative obligation, and does so nonetheless
though it assume to create
in invitum another and
different right and obligation of equal value. Certainly, if A
should contract with B to deliver a specified quantity of wheat on
or before a given date, legislation, however much it might purport
to act upon the remedy, which had the effect of permitting the
contract to be discharged by the delivery of corn of equal value,
would subvert the constitutional restriction.
A statute which materially delays enforcement of the mortgagee's
contractual right of ownership and possession does not modify the
remedy merely; it destroys, for the period of delay,
all
remedy so far as the enforcement of that right is concerned. The
phrase, "obligation of a contract," in the constitutional sense,
imports a legal duty to perform the specified obligation of
that contract, not to substitute and perform, against the
will of one of the parties, a different, albeit equally valuable,
obligation. And a state, under the contract impairment clause, has
no more power to accomplish such a substitution than has one of the
parties to the contract against the will of the other. It cannot do
so either by acting directly upon the contract or by bringing about
the result under the guise of a statute in form acting only upon
the remedy. If it could, the efficacy of the constitutional
restriction would, in large measure, be made to disappear.
Page 290 U. S. 483
As this court has well said, whatever tends to postpone or
retard the enforcement of a contract, to that extent weakens the
obligation. According to one Latin proverb, "He who gives quickly
gives twice," and, according to another, "He who pays too late pays
less."
"Any authorization of the postponement of payment, or of means
by which such postponement may be effected, is in conflict with the
constitutional inhibition."
Louisiana v. New Orleans, 102 U.
S. 203,
102 U. S. 207.
I am not able to see any real distinction between a statute which
in substantive terms alters the obligation of a debtor-creditor
contract so as to extend the time of its performance for a period
of two years, and a statute which, though in terms acting upon the
remedy, is aimed at the obligation (as distinguished, for example,
from the judicial procedure incident to the enforcement thereof),
and which does, in fact, withhold from the creditor, for the same
period of time, the stipulated fruits of his contract.
I quite agree with the opinion of the court that whether the
legislation under review is wise or unwise is a matter with which
we have nothing to do. Whether it is likely to work well or work
ill presents a question entirely irrelevant to the issue. The only
legitimate inquiry we can make is whether it is constitutional. If
it is not, its virtues, if it have any, cannot save it; if it is,
its faults cannot be invoked to accomplish its destruction. If the
provisions of the Constitution be not upheld when they pinch, as
well as when they comfort, they may as well be abandoned. Being
unable to reach any other conclusion than that the Minnesota
statute infringes the constitutional restriction under review, I
have no choice but to say so.
I am authorized to say that MR. JUSTICE VAN DEVANTER, MR.
JUSTICE McREYNOLDS, and MR. JUSTICE BUTLER concur in this
opinion.
[
Footnote 2/1]
In such cases, it is no more necessary to modify constitutional
rules to govern new conditions than it is to create new words to
describe them. The commerce clause is a good example. When that was
adopted, its application was necessarily confined to the regulation
of the primitive methods of transportation then employed; but
railroads, automobiles and aircraft automatically were brought
within the scope and subject to the terms of the commerce clause
the moment these new means of transportation came into existence,
just as they were at once brought within the meaning of the word
"carrier" as defined by the dictionaries.
[
Footnote 2/2]
Thus, McMaster (History of the People of the United States, Vol.
1, p. 425) -- after referring to the conditions in Rhode Island,
where "the bonds of society were dissolved by paper money and
tender laws"; in New Jersey, where the people nailed up the doors
of their courthouses; in Virginia, where the debtors "set fire to
theirs in order to stop the course of justice" -- says:
"The newspapers were full of bankrupt notices. The farmers'
taxes amounted to near the rent of their farms. Mechanics wandered
up and down the streets of every city destitute of work. Ships,
shut out from every port of Europe, lay rotting in the
harbors."
Channing (History of the United States, Vol. III, pp. 410-411,
482-483) paints this graphic picture of the situation:
"Nowhere was the immediate prospect more gloomy than in South
Carolina. . . . In Massachusetts, at the other end of the line, the
case was as bad, if not worse . . . the resources of New England
were insufficient to pay even what was then owing. The case of New
York was even more desperate, and, for the moment, Philadelphia
alone seemed prosperous, for the wastage of the later years of the
war had been severely felt in Virginia. . . ."
". . . Virginia was honeycombed with debt. . . ."
"In South Carolina, the planters were even more heavily in debt.
. . . The case of Thomas Bee is to the point. His creditors had
secured executions against him; the sheriff had seized his property
and had sold it at one-thirteenth of what it would have brought at
private sale in ordinary times."
Nevins (The American States During and After the Revolution, p.
536) says:
"The town of Greenwich computed that, during each of the five
years preceding 1786, the farmers had paid in taxes the entire
rental value of their land."
John Fiske (The Critical Period of American History, 8th ed.,
pp. 175, 180) thus describes conditions:
". . . about the marketplaces, men spent their time angrily
discussing politics, and scarcely a day passed without street
fights, which at times grew into riots. In the country, too, no
less than in the cities, the goddess of discord reigned. The
farmers determined to starve the city people into submission, and
they entered into an agreement not to send any produce into the
cities until the merchants should open their shops and begin
selling their goods for paper [money] at its face value. . . .
[T]he farmers threw away their milk, used their corn for fuel, and
let their apples rot on the ground. . . ."
". . . the courts were broken up by armed mobs. At Concord, one
Job Shattuck brought several hundred armed men into the town and
surrounded the courthouse, while, in a fierce harangue, he declared
that the time had come for wiping out all debts."
Dr. David Ramsay (History of the United States,2d ed., 1818,
Vol. III, pp. 447), a member of the old Congress under the
Confederation, and who lived in the midst of the events of which he
speaks, says:
"The nonpayment of public debts sometimes inferred a necessity,
and always furnished an apology, for not discharging private
contracts. Confidence between man and man received a deadly wound.
Public faith being first violated, private engagements lost much of
their obligatory force. . . ."
"From the combined operation of these causes, trade languished;
credit expired; gold and silver vanished, and real property was
depreciated to an extent equal to that of the depreciation of
continental money. . . ."
And, finally, George Ticknor Curtis, in his History of the
Origin, Formation, and Adoption of the Constitution of the United
States, Vol. 1, pp. 332-333:
"All contemporary evidence assures us that this [1783 to 1787]
was a period of great pecuniary distress, arising from the
depreciation of the vast quantities of paper money issued by the
Federal and State governments; from rash speculations; from the
uncertain and fluctuating condition of trade, and from the great
amount of foreign goods forced into the country as soon as its
ports were opened. Naturally, in such a state of things, the
debtors were disposed to lean in favor of those systems of
government and legislation which would tend to relieve or postpone
the payment of their debts, and as such relief could come only from
their State governments, they were naturally the friends of State
rights and State authority, and were consequently not friendly to
any enlargement of the powers of the Federal Constitution. The same
causes which led individuals to look to legislation for irregular
relief from the burden of their private contracts led them also to
regard public obligations with similar impatience. Opposed to this
numerous class of persons were all those who felt the high
necessity of preserving inviolate every public and private
obligation; who saw that the separate power of the States could not
accomplish what was absolutely necessary to sustain both public and
private credit, and they were as naturally disposed to look to the
resources of the Union for these benefits, as the other class were
to look in an opposite direction. These tendencies produced, in
nearly every State, a struggle not as between two organized
parties, but one that was all along a contest for supremacy between
opposite opinions, in which it was at one time doubtful to which
side the scale would turn."
[
Footnote 2/3]
Charles Warren, The Making of the Constitution, pp. 6:
"The actual evils which led to the Federal Convention of 1787
are familiar to every reader of history, and need no detailed
description here. As is well known, they arose, in general, . . . ;
second, from State legislation unjust to citizens and productive of
dissensions with neighboring States -- the State laws particularly
complained of being those staying process of the Courts, making
property a tender in payment of debts, issuing paper money,
interfering with foreclosure of mortgages. . . ."
Fiske,
supra, 290
U.S. 398fn2/2|>note 2, p. 168:
"By 1786, under the universal depression and want of confidence,
all trade had well nigh stopped, and political quackery, with its
cheap and dirty remedies, had full control of the field. . . . [A]
craze for fictitious wealth in the shape of paper money ran like an
epidemic through the country. There was a Barmecide feast of
economic vagaries; . . . And when we have threaded the maze of this
rash legislation, we shall the better understand that clause in our
federal constitution which forbids the making of laws impairing the
obligation of contracts."
Beard, An Economic Interpretation of the Constitution of the
United States, pp. 31-32:
"Money capital was . . . being positively attacked by the makers
of paper money, stay laws, pine barren acts, and other devices for
depreciating the currency or delaying the collection of debts. In
addition, there was a widespread derangement of the monetary
system. . . ."
"Creditors, naturally enough, resisted all of these schemes in
the state legislatures, and . . . turned to the idea of a national
government so constructed as to prevent laws impairing the
obligation of contract, emitting paper money, and otherwise
benefiting debtors. It is idle to inquire whether the rapacity of
the creditors or the total depravity of the debtors . . . was
responsible for this deep and bitter antagonism. It is sufficient
for our purposes to discover its existence, and to find its
institutional reflex in the Constitution."
Fisher Ames, "Eulogy on Washington," The Life and Works of
Fisher Ames, Vol. II, p. 76:
"Accordingly, in some of the States, creditors were treated as
outlaws; bankrupts were armed with legal authority to be
persecutors, and, by the shock of all confidence and faith, society
was shaken to its foundations."
Illuminating comment upon some of this state legislation is to
be found in Chapter VI (Vol. I) of Bancroft's "History of the
Formation of the Constitution of the United States," under the
heading, "State Laws Impairing the Obligation of Contracts Prove
the Need of an Overruling Union," pp. 230-236:
"[In Massachusetts] Repeated temporary stay laws gave no real
relief; they flattered and deceived the hope of the debtor,
exasperating alike him and his creditor. . . ."
". . . [In Pennsylvania] in December, 1784, debts contracted
before 1777 were made payable in three annual instalments. . .
."
"Maryland, . . . In 1782, . . . enacted a stay law extending to
January, 1784, . . ."
"Georgia, in August, 1782, stayed execution for two years from
and after the passing of the act. . . ."
". . . [In South Carolina in 1782] the commencement of suits was
suspended till ten days after the sitting of the next general
assembly. . . . On the twenty-sixth day of March, 1784, came the
great ordinance for the payment of debts in four annual
instalments, . . ."
Ramsay,
supra, note 2, Vol. 3, 65-66, 106:
"The distrust which prevailed among the people respecting the
punctual fulfillment of contracts arose from the powers claimed
and, in too many instances, exercised by the state legislatures,
for impairing the obligation of contracts; . . . These prolific
sources of evil were completely done away by the new constitution.
. . ."
". . . State legislatures in too many instances yielded to the
necessities of their constituents and passed laws by which
creditors were compelled either to wait for payment of their just
demands, on the tender of security or to take property at a
valuation or paper money falsely purporting to be the
representative of specie. These laws were considered by the British
as inconsistent with . . . the treaty. . . . The Americans
palliated these measures by the plea of necessity. . . ."
Ramsay, The History of South Carolina (1809), Vol. II, pp.
429-430:
"The effects of these laws interfering between debtors and
creditors were extensive. They destroyed public credit and
confidence between man and man; injured the morals of the people,
and, in many instances, ensured and aggravated the final ruin of
the unfortunate debtors for whose temporary relief they were
brought forward."
[
Footnote 2/4]
Bancroft,
supra, 290
U.S. 398fn2/3|>note 3, Vol. I, p. 239.
[
Footnote 2/5]
Id., Vol. I, p. 241.
[
Footnote 2/6]
Id., Vol. II, p. 136.
[
Footnote 2/7]
See Curtis,
supra, 290
U.S. 398fn2/2|>note 2, Vol. 2, pp. 366-367.
[
Footnote 2/8]
Ordinance for the Government of the Territory of the United
States Northwest of the River Ohio, Art. II; Thorpe, American
Charters, Constitutions and Organic Laws, Vol. 2, pp. 957, 961.
[
Footnote 2/9]
Elliott's Debates, Vol. V, pp. 485, 488, 545-546;
id.
Vol. I pp. 271, 311; Farrand, The Records of the Federal
Convention, Vol. II, pp. 439-440, 596-597, 610.
[
Footnote 2/10]
Elliot's Debates, Vol. I, pp. 344, 376-377.
[
Footnote 2/11]
Id. Vol. I, pp. 491 492.
[
Footnote 2/12]
Id., Vol. III, p. 478.
[
Footnote 2/13]
Id., Vol. IV, pp. 156, 191.
[
Footnote 2/14]
Id., Vol. IV, p. 333.
Mr. Warren, in his book, "The Making of the Constitution," pp.
552-555, has an interesting resume of the proceedings in the
Convention and of the conflicting views which were before the state
conventions for consideration. He says in part:
"The Convention then was asked to perfect their action in favor
of honesty and morality by adding a prohibition on the States which
would put an end to statutes enacting laws for special individuals,
setting aside Court judgments, repealing vested rights, altering
corporate charters, staying the bringing or prosecution of suits,
preventing foreclosure of mortgages, altering the terms of
contracts, and allowing tender in payment of debts of something
other than that contracted for. The State Legislatures had hitherto
passed such laws in abundant measure, and the situation was
graphically described later by Chief Justice Marshall in one of his
most noted decisions [
Ogden v. Saunders, 12 Wheat.
213,
25 U. S. 354], as
follows:"
" The power of changing the relative situation of debtor and
creditor, of interfering with contracts, a power which comes home
to every man, touches the interest of all, and controls the conduct
of every individual in those things which he supposes to be proper
for his own exclusive management, had been used to such an excess
by the State Legislatures as to break in upon the ordinary
intercourse of society and destroy all confidence between man and
man. The mischief had become so great, so alarming, as not only to
impair commercial intercourse and threaten the existence of credit,
but to sap the morals of the people and destroy the sanctity of
private faith. To guard against the continuance of the evil was an
object of deep interest with all the truly wise as well as virtuous
of this great community, and was one of the important benefits
expected from a reform of the government."
"To obviate the conditions thus described, King of Massachusetts
proposed the insertion of a new restriction on the States. . . .
Wilson and Madison supported his motion. Mason and G. Morris,
however believed that it went too far in interfering with the
powers of the States. . . . There was also a genuine belief by some
delegates that, under some circumstances and in financial crises,
such stay and tender laws might be necessary to avert calamitous
loss to debtors. . . . The other delegates had been deeply
impressed by the disastrous social and economic effects of the stay
and tender laws which had been enacted by most of the States
between 1780 and 1786, and they decided to make similar legislation
impossible in the future."
[
Footnote 2/15]
See Dewey, Financial History of the United States, p.
229,
et seq.; Schouler, History of the United States, Vol.
IV, p. 276,
et seq.; McMaster,
supra, 290
U.S. 398fn2/2|>note 2, Vol. VI, pp. 389,
et seq.,
523,
et seq., 623,
et seq.
[
Footnote 2/16]
See Dewey,
supra, 290
U.S. 398fn2/15|>note 15, p. 243,
et seq.; McMaster,
supra, 290
U.S. 398fn2/2|>note 2, Vol. VI, p. 627,
et seq.,
Vol. VII, p. 19,
et seq.; Centennial History of Illinois,
Vol. II, p. 231,
et seq.
[
Footnote 2/17]
See Dewey,
supra, 290
U.S. 398fn2/15|>note 15, p. 444,
et seq.; Andrews,
The Last Quarter Century in the United States, Vol. II, p. 301,
et seq.