Home Building & Loan Assn. v. Blaisdell

No. 370

Argued November 8, 9, 1933

Decided January 8, 1934

290 U.S. 398

APPEAL FROM THE SUPREME COURT OF MINNESOTA

Syllabus



1. Emergency does not increase constitutional power, nor diminish

constitutional restrictions.



2. Emergency may, however, furnish occasion for exercise of power

possessed.



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. 426,

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.



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. 427, 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.



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 [290 U.S.

399] of the mortgagee purchaser by conditions imposed on the extension.



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.



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.



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.



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., 135. 

Pp. 434, 440.



12. Whether the emergency still exists upon which the continued

operation of the law depends is always open to judicial inquiry.



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.



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 [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 [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.



(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.



(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.



(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.



(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.



(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.



(7) The relief afforded by the statute has regard to the interest of

mortgagees as well as to the interest of mortgagors.



(8) The procedure and relief provided are cognate to the historic

exercise of equitable jurisdiction in cases of mortgage foreclosure.



(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.



(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.



(11) Whether the legislation is wise or unwise as a matter of policy

does not concern the Court.



(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.



(13) The statute does not deny the equal protection of the laws; its

classification is not arbitrary.



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. HUGHES, J., lead opinion



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, [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 [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.  The section also provides that the time for

redemption [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 [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 [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.  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 [290

U.S. 421] statute, which described the existing emergency in terms that

were deemed to justify the temporary relief which the statute affords. 

The state court, declaring that it [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,

[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. 189 Minn. 437, 249 N.W. 340.

[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 [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 [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, 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.  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

[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, 505; Atlantic Cleaners &

Dyers v. United States, 286 U.S. 427, 434.



In the construction of the contract clause, the debates in the

Constitutional Convention are of little aid.  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.  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 [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. 213, 354, 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.

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

[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?

 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, 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 [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, 550, 552.  See also Walker v. Whitehead, 16

Wall. 314, 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. 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. 553, 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, 775, added:  "In all such cases, the question

becomes, therefore, one of reasonableness, and of that the legislature

is primarily the judge." [290 U.S. 431]



The obligations of a contract are impaired by a law which renders them

invalid, or releases or extinguishes them (Sturges v. Crowninshield,

supra, pp. 197, 198) and impairment, as above noted, has been predicated

of laws which, without destroying contracts, derogate from substantial

contractual rights.{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{11} following the panic of 1837, and which provided that the

equitable estate of the mortgagor should not be extinguished [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 [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, 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, 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,{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, [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, 399.



Not only is the constitutional provision qualified by the measure of

control which the State retains over remedial processes,{13} but the

State also continues to possess authority to safeguard the vital

interests of its people.  It does [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, 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.{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, 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 [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, 819.  See also Douglas

v. Kentucky, 168 U.S. 488, 497-499; compare New Orleans v. Houston, 119

U.S. 265, 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, 32, 33; see Mugler v. Kansas, 123 U.S.

623, 664, 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, 667;

Butchers' Union Co. v. Crescent City Co., 111 U.S. 746, 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,

70, 74; Texas & N.O. R. Co. v. Miller, 221 US. 408, 414; Atlantic Coast

Line R. Co. v. Goldsboro, 232 U.S. 548, 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 [290 U.S. 437] interference with existing contract rights has been

without avail.  Sproles v. Binford, 286 U.S. 374, 390, 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.

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. 357): One whose rights, such

as they are, are subject to state restriction cannot remove them from

the power of the State by making [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, 325,

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, 232, and Sutter Butte Canal Co. v.

Railroad Comm'n, 279 U.S. 125, 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, 363; see also

St. Louis Poster Advertising Co. v. St. Louis, 249 U.S. 269, 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 [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 [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,{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 [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. 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 [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, 547, 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 [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,

407) -- "a constitution intended to endure for ages to come, and,

consequently, to be adapted to the various crises of human affairs." 

Id.,   When we are dealing with the words of the Constitution, said this

Court in Missouri v. Holland, 252 U.S. 416, 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 [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, 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 [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 [290 U.S. 446] insurance companies,

banks, and investment and mortgage companies.{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.{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, [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."{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 [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. SUTHERLAND, J., dissenting



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.  [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,  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 [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, 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, 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. [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.

 But their meaning is changeless; it is only their application which is

extensible.  See South Carolina v. United States, supra, pp. 448-449. 

Constitutional grants of [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. 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, [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, 770.  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, 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, 723; Craig v. Missouri, 4 Pet. 410, 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, 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,

602; Jarrolt v. Moberly, 103 U.S. 580, 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, [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,



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 [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.  Compare [290 U.S. 456] Edwards v. Kearzey, 96 U.S.

595, 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 [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. [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. [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 [290 U.S. 460] of the law in private

contracts."  The bill was lost by a single vote.  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."



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 [290

U.S. 461] interests of foreigners or the citizens of any other state may

be affected. And on July 13, 1787, Congress, in New York, acutely

conscious of the evils engendered by state laws interfering with

existing contracts, 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. 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.



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 [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."{10}



On the other hand, Sherman and Ellsworth defended the provision in a

letter to the Governor of Connecticut.{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.{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.{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."{14} [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: [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 [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, [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.{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.{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 [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, note 2), Vol. VII, pp. 44-48, is to the same effect.

[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 [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 [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.  [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;{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, [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. [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

[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. 316, and repeated in Edwards v.

Kearzey, supra, p. 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. 604) [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: [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. 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.  [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 [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 [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, 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

[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 [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 [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.  [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, 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. Footnotes

HUGHES, J., lead opinion (Footnotes)



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.



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



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.



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.



5. See Ex parte Milligan, 4 Wall. 2,  United States v. Russell, 13 Wall.

623, 627; Hamilton v. Kentucky Distilleries & Warehouse Co., 251 U.S.

146, 155; United States v. Cohen Grocery Co., 255 U.S. 81, 88.



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.



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.



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. 629; Maynard v. Hill, 125 U.S. 190, 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, 169. 

Nor does a general law, giving the consent of a State to be sued,

constitute a contract.  Beers v. Arkansas, 20 How. 527.



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, 151.



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.



11. See Warren, The Supreme Court in United States History, vol. 2, pp.

376-379.



12. See Sturges v. Crowninshield, 4 Wheat. 122, 200, 201; Mason v.

Haile, 12 Wheat. 370, 378; Beers v. Haughton, 9 Pet. 329, 359.



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, 270,

298, 299; Effinger v. Kenney, 115 U.S. 566; Fisk v. Jefferson Police

Jury, 116 U.S. 131; Bradley v. Lightcap, 195 U.S. l; Bank of Minden v.

Clement, 256 U.S. 126.



14. See also New Orleans Gas Co. v. Louisiana Light Co., 115 U.S. 650,

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, 23; Galveston Wharf Co. v. Galveston, 260

U.S. 473, 476; Georgia v. Chattanooga, 264 U.S. 472.



15. Law of 1920 (New York), chapter 942-947, 951.



16. Department of Agriculture, Technical Bulletin No. 288, February,

1932, pp. 22, 23; Year Book, Department of Agriculture, 1932, p. 913.



17. Graffman v. Burgess, 117 U.S. 180, 191, 192; Schroeder v. Young, 161

U.S. 334, 337; Ballentyne v. Smith, 205 U.S. 285, 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.



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.

SUTHERLAND, J., dissenting (Footnotes)



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.



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.



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, 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.



4. Bancroft, supra, note 3, Vol. I, p. 239.



5. Id., Vol. I, p. 241.



6. Id., Vol. II, p. 136.



7. See Curtis, supra, note 2, Vol. 2, pp. 366-367.



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.



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.



10. Elliot's Debates, Vol. I, pp. 344, 376-377.



11. Id. Vol. I, pp. 491 492.



12. Id., Vol. III, p. 478.



13. Id., Vol. IV, pp. 156, 191.



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, 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.



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, note 2, Vol. VI, pp. 389, et seq., 523, et seq., 623,

et seq.



16. See Dewey, supra, note 15, p. 243, et seq.; McMaster, supra, note 2,

Vol. VI, p. 627, et seq., Vol. VII, p. 19, et seq.; Centennial History

of Illinois, Vol. II, p. 231, et seq.



17. See Dewey, supra, note 15, p. 444, et seq.; Andrews, The Last

Quarter Century in the United States, Vol. II, p. 301, et seq.

