3.6.6 Old South (1920-1965): Struggling with the Depression

Mortgage Moratorium Laws

Bolich v. Prudential Ins Co. of America – North Carolina, 1932 (164 S.E. 335); Woltz v. Asheville Safe Deposit Co. – North Carolina, 1934 (173 S.E. 587); Williams v. Jones – Virginia, 1935 (182  S.E. 280)

  • During the Depression, many Americans were unable to make their mortgage payments due to lost jobs and plummeting crop prices, and they soon faced loss of their homes and farms through foreclosure.  State legislatures reacted quickly to the crisis by enacting “mortgage moratorium” laws.  The laws varied in their details, but all of them delayed foreclosure for periods of several years – enough time, lawmakers hoped, for debtors to ride out the Depression.
  • The U.S. Supreme Court quickly upheld moratorium laws in Blaisdell v. Home Building & Loan Association (1933).  Nevertheless, Old South lawmakers took a more conservative approach than other regions.  Virginia and North Carolina did not enact broad moratorium laws:  they merely authorized courts to refuse confirmation of foreclosure sales where the winning bid was below the fair market value of the property.  Both states’ supreme courts upheld the laws and concluded they did not deprive foreclosing banks of their right to sell the properties, but both warned that they would not be receptive to broader laws.    


Fair Competition Codes

Reynolds v. Milk Commission – Virginia, 1934-35 (179 S.E. 507); Becker v. State – Delaware, 1936 (185 A. 92); Goldsmith v. Mead Johnson & Co. – Maryland, 1939 (7 A.2d 176)

  • It was an article of faith among New Deal-era economists that falling prices and rising unemployment were largely due to predatory competitive practices and that those problems could be solved by enacting fair trade practice codes for major industries, including statutory price restrictions.   Franklin Roosevelt implemented the theory in the National Industrial Recovery Act, and after the U.S. Supreme Court upheld a milk dealer fair-competition code, including price restrictions, in Nebbia v. New York (1934), many states followed suit.  
  • The fair-competition and price-fixing laws were unsuccessful, and during their heyday they generated much legal controversy.  Relatively few such laws were enacted in the Old South, and the region’s courts eyed the laws critically.  In Reynolds, Virginia’s supreme court upheld a law regulating production and pricing of milk only by a narrow margin, even though the U.S. Supreme Court had recently approved such laws in Nebbia; and in Becker, Delaware’s supreme court rejected a similar law regulating dry cleaners, suggesting that any kind of systematic price control by government was unconstitutional.  Maryland’s court was more liberal, upholding a minimum-price law in Goldsmith on the ground that it was meant to preserve business good will, not create monopolies. 

“Perhaps no court is wise enough to declare with absolute finality that no economic or financial stringency or distress would warrant the intervention of equitable principles in retraining the power of sale … , but certainly the mer allegations of general depression before the property has been sold and an unconscionable purchase price established has not heretofore been deemed adequate to invoke equitable power.” – Justice W.J. Brogden, in Bolich












“If the legislative policy be to curb unrestrained and harmful competition by measures which are not arbitrary or discriminatory it does not lie with the courts to determine that the rule is unwise.” – Justice Herbert Gregory, in Reynolds


“Emergencies or fancied emergencies constantly arise and for the time absorb our attention and we are  prone to view them with alarm. … Years of plenty and lean years come down in long procession.  Problems that today seem portentous are by the next generation as forgotten as Pharaoh’s famine. … [The law] but gives an odor of sanctity to an act whose plain purpose was to make the production of milk profitable.” – Justice Henry Holt (dissenting), in Reynolds 


“There must be a limit to legislative power to regulate and control ordinary occupations and common callings if the constitutional safeguards are to be something more than empty phrases.  … Common occupations or employments, harmless and lawful in themselves, not calling for the exercise of any special skill and having no substantial relation to the public health or safety, may be followed without regulation or interference as a matter of common right, for such right constitutes property.”  - Justice _, in Becker