LOUISVILLE JOINT STOCK LAND BANK v. RADFORD 295 U.S. 555 (1935)

During the Great Depression of the 1930s foreclosure or default on payments threatened to extinguish the small, independent farmer who owned his own property. Congress, exercising its bankruptcy power, came to his rescue by passing the frazierlemke (Farm Mortgage) act of 1934. The act provided that bankrupt farmers might require a federal bankruptcy court to stay farm mortgage payments for a period of five years, during which time the debtor retained possession of his property and paid his creditor a reasonable rental sum fixed by the court, and at the end of the five years the debtor could buy the property at its appraised value. Because the act operated retroactively it took away rights of the mortgagee, but the contract clause limits only the states, not Congress. In the face of that clause the Court had sustained a similar state act in home building & loan ass ' nv. blaisdell (1934). Nevertheless Justice louis d. brandeis, for a unanimous Court, ruled the act of Congress void. He distinguished Blaisdell as less drastic: the statute there had stayed proceedings for two, not five, years. In effect Brandeis read the contract clause into the Fifth Amendment's due process clause, holding that the bankruptcy power of Congress must be exercised subject to substantive due process. The statute deprived persons of property without due process by not allowing the mortgagee to retain a lien on mortgaged property. The oddest feature of this strained opinion is that it did not mention due process; Brandeis referred only to the clause that prohibited the taking of private property for a public purpose without just compensation, though the government took nothing and sought by the statute to preserve private property. The Court retreated from its position in wright v. vinton branch bank (1937).

Leonard W. Levy
(1986)