1. Lecture 40 The Contract Clause
Part 2: Decline: Taney Court to the New Deal

2. This lecture The decline of the Contract Clause
For the Taney Court to the New Deal
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3. Proprietors of the Charles River Bridge v
Proprietors of the Charles River Bridge v. Proprietors of Warren Bridge (1837)
Proprietors of the Charles River Bridge v. Proprietors of Warren Bridge (1837)
Background
One moves for the Marshall Court to one dominated by Jackson appointees
The case lasted from 1831 to 1837
Jackson favored policies to help ordinary persons not the moneyed classes
Massachusetts created the Charles River Bridge Company to build a bridge connecting Boston and Charlestown, and they could collect the toll money it was profitable
A lot of growth mean traffic congestion they decided to build a bridge right next to the other tolled for six years, then transferred to the state and be free
The Charles River Bridge Company opposed the construction and said they had an exclusive right to operate a bridge here a free neighboring bridge would hurt profits
A second bridge would violate the Contract Clause

4. Proprietors of the Charles River Bridge v
Proprietors of the Charles River Bridge v. Proprietors of Warren Bridge- II
Question:
Did the granting of the charter to build the second bridge interfere with the charter originally granted to the owners of the Charles River Bridge?
Arguments
For the Charles River Bridge
The charter was a contract that prohibited the state from creating injurious competition by construction of a new bridge that would take away profits
The law authorizing the new bridge violates the Contract Clause
When this bridge was built, Harvard received compensation for the loss of its ferry business and revenue
When in doubt, interpretation against the grant

5. Proprietors of the Charles River Bridge v
Proprietors of the Charles River Bridge v. Proprietors of Warren Bridge- III
Arguments
For Warren Bridge
Nothing guaranteed an exclusive right to provide transportation across the river
The state cannot contract away the authority to legislate for the security and well being of society
The Charles Bridge Company was given a right to build and operate that bridge and nothing more

6. Proprietors of the Charles River Bridge v
Proprietors of the Charles River Bridge v. Proprietors of Warren Bridge- IV
A 5-2 decision by Chief Justice Taney
“The object and end of all government is to promote the happiness and prosperity of the community by which it is established”
It would be wrong to assume the state gave up the right to any new improvements forever
While private property must be safeguarded, we must not forget the community also has right and the happiness and well being of every citizen depends on faithful preservation
There was no exclusivity for the company for the Charles River must be explicit
New roads, turnpikes and railroads are frequently displacing old ones
Improvements would be obliged to stand still to these contracts
A ruling in favor of Charles River Company would affect transportation negatively nationwide
There must be a balancing test

7. Proprietors of the Charles River Bridge v
Proprietors of the Charles River Bridge v. Proprietors of Warren Bridge- V
Story, J. dissenting
He says there was an implied agreement to no further bridges across this river
To allow another bridge would destroy this contract

8. Subsequent cases
The Court further weakens the Contract Clause, but not always
West River Bridge Company v. Dix (1848)
Court upholds eminent domain even when it conflicted with existing contracts
This was done for the public good
Bronson v. Kinzie (1843)
Invalidates Illinois laws to expend the right of debtors
Northwest Fertilizing Company v. Hyde Park (1878)
The company was created to convert dead animals into fertilizer
It was in a sparsely populated area, but it later grew rapidly and the town did not want it
They passed a public nuisance ordinance and it was upheld under local police powers
States could not contract away their inherent powers to regulate for their citizens’ health, safety and welfare

9. Stone v. Mississippi (1880) Stone v. Mississippi (1880) Background
The state issued a charter to a company to run a state lottery for 25 years
They paid an initial fee, annual payment and percentage of receipts
However, the state passed a constitutional amendment and law barring lotteries
The state sought to enforce the law saying the constitutional amendment stripped this contract of enforceability
Question
Did Mississippi violate the Contract Clause by stripping this grant to run a lottery?

10. Stone v. Mississippi- II
Arguments
For Stone (uphold the contract)
They had a valid contract to operate a lottery for 25 years
It is fully compliant with all parts of the contract
The Mississippi law violates the Contract Clause
For Mississippi (void the contract)
The state legislature cannot behind the will of the people by a contract
A state cannot contract away its police powers
One legislature cannot bind the next by contract with respect to public health or morals

11. Stone v. Mississippi- III
Chief Justice Waite rules for a unanimous Court
The State of Mississippi wins
The Legislature cannot contract away the police powers of a state
This extends to public health and public morals
Lotteries can be the subject of moral evils
They are subject to police powers
The contracts which the constitution protects are property rights not governmental

12. Home Building Association v. Blaisdell (1934)
This is a case involving the issue of a national emergency foreclosures
Minnesota passes a moratorium on foreclosures
They would pay a reasonable rental payment rather than their actual mortgage payment
This was during a period they could petition a state court for mortgage extensions
The maximum time on this was two years
The Blaisdells were nearing foreclosure and due to a Minnesota Supreme Court decision were given a two year moratorium and an order to pay $40 a month
The Minnesota Supreme Court acknowledged this impaired the contract but said these were within the police powers of the state due to the national emergency of the Great Depression

13. Home Building Association v. Blaisdell- II
Question
Did this state law violate the Contract Clause and the Due Process and Equal Protection clauses of the 14th Amendment?
Arguments
For Home Building and Loan Association (violates Contract Clause)
The moratoriums violate the Contract Clause
The law changes the contracts and deprives them of their remedies in the agreement
They are also deprived of property without due process of law
The current economic conditions do not constitute a sufficient emergency to suspend the Constitution

14. Home Building Association v. Blaisdell- III
Arguments
For the Blaisdells (uphold Minnesota law)
This would normally violate the Contract Clause but Minnesota is justified by national emergency to exercise its police powers
Every contract is subject to variation in a reasonable manner in times of emergency under the state’s police powers
There was due process because there were judicial hearings
The law assists both debtors and lenders and is reasonable, fair, and just
It goes no further than to cope with the Great Depression

15. Home Building Association v. Blaisdell- IV
Chief Justice Hughes rules for a 5-4 Court
This is a win for the more liberal side of the Court
An emergency does not create new powers, but it may affect the exercise of them
The Contract Clause was never meant to be read literally
An attempt to safeguard the well-being of the people can modify or abrogate provisions
The means were legitimate given the national emergency
The ends were not unreasonable
This would be limited to the national emergency

16. Home Building Association v. Blaisdell- V
Sutherland, J. dissenting
Joined by McReynolds, Butler and Van Devanter
He would uphold the contract
He sees this as an encroachment on public and private contracts
One cannot change the meaning of a constitutional provision based on the times
This could make the Contract Clause meaningless

17. Next Lecture
We finish Chapter 9
Modern Applications
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