Signposts: New Directions in Southern Legal History

Homestead Exemption and Southern Legal Culture

289 Scholars have long examined whether and to what extent southern legal culture had unique dimensions. Understandably, much attention has been focused on race and caste as a dominant theme in fashioning law in the southern states. Yet this emphasis may obscure another characteristic—chronic indebtedness—that profoundly shaped the evolution of legal norms in the South. It is easy to forget today that until the post–World War II era, the South was a debtor region. The credit needs of an agricultural society and the capital-intensive nature of slavery fastened indebtedness on many in the region before the Civil War. Wartime destruction and the abolition of slave property further magnified the South’s debtor position. Consequently, from the postrevolutionary era to the early twentieth century, sympathy for the plight of debtors strongly colored lawmaking in the southern states. Debt-relief measures found a consistently receptive climate in the region and often triggered sectional tensions. For example, during the Revolutionary War, Virginia legislators enacted laws that effectively barred the collection of debts owed to English creditors. The continued refusal of Virginia planters to pay these debts following the revolution, in violation of the Treaty of Paris, caused a major diplomatic and constitutional controversy. Similarly, the late nineteenth century saw bitter battles over the repudiation of bonded debt as southern states and cities sought to scale down their obligations and reduce interest payments. Since much of this repudiated debt was held by northern investors, the sectional implications were obvious. The widespread debt repudiation set the stage for protracted litigation. Moreover, during periods of economic distress, southern lawmakers enacted a variety of stay laws to bar the collection of debts as well as measures to delay the foreclosure of mortgages. Homestead Exemption and Southern Legal Culture James W. Ely Jr. 290 James W. Ely Jr. Debtor-relief policy remained state-centered until the late nineteenth century. Although the Constitution gave Congress the authority “to establish uniform laws on the Subject of Bankruptcy throughout the United States,” lawmakers did not effectively exercise this power until 1898. Over the course of the nineteenth century, Congress enacted several temporary bankruptcy measures that were soon repealed. Many southern members of Congress strongly opposed the imposition of national bankruptcy norms, seeing a national system as favorable to eastern financial interests. They preferred to rely on local relief measures. As a consequence of this failure of Congress to act, the regulation of debtor-creditor relations stayed largely in state hands, and lawmakers continued the time-honored practice of passing debt-relief laws. Still, state authority was confined by the constitutional provision that “No state shall . . . pass any . . . Law impairing the Obligation of Contracts.” Under Chief Justice John Marshall, the Supreme Court fashioned the Contract Clause into a powerful bulwark against state legislative abridgement with public as well as private agreements. The Court invoked the clause to uphold land grants, tax-exemption agreements, corporate charters, and private contracts. The most important of these decisions was Sturgis v. Crowninshield (1819), in which the Supreme Court ruled that state bankruptcy laws, as applied to debts contracted before the measures were passed, ran afoul of the Contract Clause. Yet in Sturgis, Marshall recognized a somewhat cloudy distinction between contractual rights and the remedies available to enforce such rights. States therefore could not retroactively interfere with existing contracts but retained considerable discretion to modify the remedies for breaches of contracts as long as the changes did not materially alter the parties’ ability to enforce the underlying obligation. This right-remedy distinction was a fertile source of litigation, as legislators frequently asserted that they were only modifying the remedy even if one party was seriously disadvantaged. The Emergence of Homestead Laws The regional receptivity to debtor relief found significant expression in the adoption of homestead exemption laws throughout the South. Such legislation should not be confused with grants of western land under the Homestead Act of 1862. That law was designed to encourage settlement of the western territories. In contrast, the homestead exemption was grounded on homestead exemption & legal culture 291 the notion that a family home should be protected from creditors. Essentially American in origin, the concept of a homestead can be traced to earlier laws exempting certain chattels, such as clothing, household furniture, farm animals, and trade tools, from debt collection. These laws began in the colonial era and gradually expanded to include a wide range of items. Such relief...