4.5.3 Mountain South (1920-1965): Struggling with the Depression

Mortgage moratorium and unemployment compensation laws

Reiman v. Rawls – Arkansas, 1934 (68 S.W.2d 470); State ex rel. Wagner v. Farm and Home Savings & Loan Ass’n – Missouri, 1936 (90 S.W.2d 93)

  • During the Depression, many mountain South residents 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.  Legislatures across all regions of the nation 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), and as a result mountain South courts did not have to deal with challenges to moratorium laws. 
  • The handful of challenges to debtor-relief laws that did make their way to mountain South supreme courts were quickly rejected:  in Reiman, Arkansas’s supreme court summarily upheld a debtor relief law extending the time for debtors to respond to foreclosure lawsuit and in Wagner the Missouri supreme court upheld the state’s reorganization law, rejecting complaints that it did not allow depositors to get their money back immediately.     
“Governments are created for the purpose of securing the rights of the citizens, and, if a government during a period of such depression as we now have could not protect its citizens, there would be no reason for its existence.” – Justice __, in Reiman 

nemployment compensation and fair competition codes

State v. Greeson – Tennessee, 1939 (124 S.W.2d 253); Buckstaff Bath House Co. v. McKinley – Arkansas, 1939 (127 S.W.2d 802), affirmed, ___ U.S. ___ (____); Noble v. Davis – Arkansas, 1942 (161 S.W.2d 189)

  • Unemployment compensation laws, first proposed in the United States in 1920, gained traction during the Depression.  In some regions employers challenged unemployment fund assessments, arguing that the assessments deprived them of property without due process of law, but most challenges faded away after the U.S. Supreme Court upheld Alabama’s law in Carmichael v. Southern Coke & Coal Co. (1936) and in Buckstaff, decided three years later, Arkansas’s supreme court held that such laws were well within the state’s police power.
  • 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 laws were unsuccessful, and during their heyday they generated much legal controversy.  Relatively few such laws were enacted in the mountain South, and the region’s courts eyed the laws critically.  In Greeson and Noble, the Tennessee and Arkansas supreme courts struck down laws fixing the prices barbers could charge; they reasoned that the price-fixing provisions did not promote public health or safety and were not justified under the police power. 

Up from poverty:   industrial development laws

Azbill v. Lexington Manufacturing Co. – Tennessee, 1949 (221 S.W.2d 522); Faulconer v. City of Danville – Kentucky, 1950 (232 S.W.2d 80); Halbert v. Helena-West Helena Industrial Development Corp. – Arkansas, 1956 (291 S.W.2d 802)

  • During the Depression, Mississippi devised a “Balance Agriculture with Industry” (BAWI) law, which helped provide a short-term boost to its economy and soon caught on in other Southern states.  BAWI laws created local agencies to build plants for use by industry and give financial incentives for companies to use the new facilities, thus creating a new local industry and new jobs.
  • BAWI laws were challenged as impermissible state intrusions into private enterprise, laws that interfered with market forces and were not sufficiently related to public welfare to come within the police power.  Mississippi’s supreme court upheld its state’s BAWI law in strong terms (§ ___), reasoning that desperate economic times required a broad view of the scope of state’s police power and a tolerant view of experimental laws.  Courts in the mountain South divided.  In 1949, Tennessee’s supreme court took a narrower view of public purpose and struck down a law permitting ___ to build and lease a new factory, but in the 1950s, in Faulconer and Halbert, Kentucky’s and Arkansas’s supreme courts sided with Mississippi’s liberal view of public purpose noting that such laws were now becoming common throughout the United States.  

“The promotion of the interests of individuals, … although it may result incidentally in the advancement of the public welfare, is, in its essential character, a private and not a public object.  However certain and great the resulting good to the general public, it does not, by reason of its comparative importance, cease to be incidental.” – Ferrell v. Doak -  Tennessee, 1925 (275 S.W. 79), relied on by the court in Azbill 

“The consensus of modern legislative and judicial thinking is to broaden the scope of activities which may be classed as involving a public purpose.  (cite) It reaches perhaps its broadest extent under the view that econ welfare is one of the main concerns of the city, state and the fed governments.  This is manifested by the great bulk of recent social security programs of the nation and the state.” – Justice __, in Faulconer

Day labor recruitment point, Memphis, Tennessee (1939) - courtesy Farm Security Administration and New York Public Library

Gully control in Coalins [i.e. Coraline] Forest and Game Reservation, between Tennessee and Cumberland river, in Kentucky.
Federal erosion control project, Princeton, Kentucky (1936) - courtesy Farm Security Administration and New York Public Library

“If the [unfair competition code’s price restriction] is valid, then the Legis can directly, or through a board, fix … fees … ad infinitum until the liberty of the individual and the right to contract is destroyed.”  - Justice __, in Greeson

“Individuals, firms, and corps engaged in business are privileged to do so because of the protection extended by govt.  Enforcement of contracts generally is a matter of constant judicial address.  The State’s welfare is best served when those of its citizens who must labor are able to find employment at profitable wages and in healthful surroundings. … [The worker’s] misfortune is not one affecting the individual alone.  It extends to the entire community.  If unemployment cannot be avoided, at least its tragic consequences can be ameliorated.” – Justice Frank Smith, in Buckstaff

File:Institute-plant-tanks-wv1.jpgChemical storage plant, Institute, West Virginia (1943) - courtesy Farm Security Administration and New York Public Library