Facts: In order to prevent foreclosures, the Minnesota legislature enacted the Minnesota Moratorium Act of 1934, which gave the states courts the power to postpone the mortgage payments of farmers and homeowners. When John Blaisdell applied for a postponement of his payments to the Home Building & Loan Association, a trial court dismissed his case. When the Minnesota Supreme Court overturned the trial court’s decision and approved his extension, the Home Building & Loan Association appealed to the Supreme Court, arguing that the law violated the Constitution.

Decision: 5 – 4 Blaisdell wins. Chief Justice Hughes delivers the Opinion of the Court.

Doctrine: State legislatures have the power to allow temporary and limited restraints on the enforcement of contracts in order to secure “the vital interests of the community.”

Reasoning: Article 1, Section 10 of the Constitution states that no state shall make any “law impairing the Obligation of Contracts.” However, the Court ruled that both the limitation of the state Legislature’s power and the power reserved to the Legislature must “be construed in harmony with each other.” In other words, neither can “be construed so as to destroy” the other. They ruled, “The question is not whether the legislative action affects contracts incidentally, or directly, or indirectly.” Rather, the question is “whether the legislation is addressed to a legitimate end and the measures taken are reasonable and appropriate to that end.”

While the Court ruled that in normal economic conditions, the state legislature would not possess the power to postpone the debts of homeowners, the Court also held that a state legislature possesses the power “to safeguard the vital interests of its people.” “While emergency does not create power,” the Court ruled, “emergency may furnish the occasion for the exercise of power.”

In fact, the Court wrote that “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” in times of emergency. “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 goods of all depends,” wrote the Court. It would be unreasonable to hold that “the constitutional prohibition [on the Obligation of Contracts] 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 a fire, flood, or earthquake.”

The Court ruled that such an interpretation of the Constitution is reasonable. To limit the Constitution “to the interpretation which the framers, with the conditions and outlook of their time, would have placed upon” it, would be to prevent the Constitution from adapting “to the various crises of human affairs,” wrote the Court. The Court found “no warrant for the conclusion that the clause has been warped by” this interpretation.

Since “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 Minnesota law was ruled constitutional. Therefore, the Supreme Court upheld the decision of the Minnesota Supreme Court.