carries with it inherently the power to guard against the immediate
renewal of the conflict, and to remedy the evils which have arisen from
its rise and progress."[1285] Accordingly, the Supreme Court held in
1871 that it was within the competence of Congress to deduct from the
period limited by statute for the bringing of an action the time during
which plaintiff had been unable to prosecute his suit in consequence of
the Civil War. This principle was given a much broader application after
the first world war in Hamilton _v._ Kentucky Distilleries and Wine
Co.,[1286] where the War Time Prohibition Act adopted after the signing
of the Armistice was upheld as an appropriate measure for increasing war
efficiency. It was conceded that the measure was valid when enacted,
since the mere cessation of hostilities did not end the war or terminate
the war powers of Congress. The plaintiff contended however that in
October 1919, when the suit was brought, the war emergency had in fact
passed, and that the law was therefore obsolete. Inasmuch as the treaty
of peace had not yet been concluded and other war activities had not
been brought to a close, the Court said it was "unable to conclude" that
the act had ceased to be valid. But in 1924 it held upon the facts that
we judicially know that the rent control law for the District of
Columbia, which had previously been upheld,[1287] had ceased to operate
because the emergency which justified it had come to an end.[1288] A
similar issue was present after World War II in Woods _v._ Miller,[1289]
where the Supreme Court reversed a decision of a lower court to the
effect that the authority of Congress to regulate rents by virtue of the
war power ended with the Presidential proclamation terminating
hostilities on December 31, 1946. This decision was coupled with a
warning that: "We recognize the force of the argument that the effects
of war under modern conditions may be felt in the economy for years and
years, and that if the war power can be used in days of peace to treat
all the wounds which war inflicts on our society, it may not only
swallow up all other powers of Congress but largely obliterate the Ninth
and the Tenth Amendments as well. There are no such implications in
today's decision."[1290] In 1948, a sharply divided Court further ruled
that the power which Congress has conferred upon the President to deport
enemy aliens in time of a declared war was not exhausted when the
shooting war stopped. Speaking for the majority of five, Justice
Frankfurter declared: "It is not for us to question a belief by the
President that enemy aliens who were justifiably deemed fit subjects for
internment during active hostilites [sic] do not lose their potency for
mischief during the period of confusion and conflict which is
characteristic of a state of war even when the guns are silent but the
peace of Peace has not come."[1291]
Private Rights in Wartime
ENEMY COUNTRY
Although, broadly speaking, the constitutional provisions designed for
the protection of individual rights are operative in war as well as in
peace, the incidents of war repeatedly give rise to situations in which
judicially enforceable constitutional restraints are inapplicable. In
the first place persons in enemy territory are entirely beyond the reach
of constitutional limitations. They are subject, in relation to the war
powers of the National Government, to the laws of war as interpreted and
applied by Congress and by the President as Commander in Chief. To the
question: "What is the law which governs an army invading an enemy's
country?" the Court gave the following answer in Dow _v._ Johnson:[1292]
"It is not the civil law of the invaded country; it is not the civil law
of the conquering country: it is military law,--the law of war,--and its
supremacy for the protection of the officers and soldiers of the army,
when in service in the field in the enemy's country, is as essential to
the efficiency of the army as the supremacy of the civil law at home,
and, in time of peace, is essential to the preservation of
liberty."[1293]
THEATRE OF MILITARY OPERATIONS
That substantially the same rule, resting on the same considerations,
applies in the field of active military operations, was assumed by all
members of the Court in Ex parte Milligan.[1294] There the Court held
that the trial by a military commission of a civilian charged with acts
of disloyalty committed in a part of the country which was remote from
the theatre of military operations, and in which the civil courts were
open and functioning, was invalid under the Fifth and Sixth Amendments.
Although unanimous in holding that the military tribunal lacked
jurisdiction to try the case, the Court divided, five-to-four, as to the
grounds of the decision. The point on which the Justices differed was
which department of the Government had authority to say with finality
what regions lie within the theatre of military operation. Claiming this
as a function of the courts, the majority held that the theatre of war
did not embrace an area in which the civil courts were open and
functioning.[1295] The minority argued that this was a question to be
determined by Congress.[1296] All rejected the argument of the
government that the President's determination was conclusive in the
absence of restraining legislation. A similar result was reached in
Duncan _v._ Kahanamoku[1297] where, upon an examination of the
circumstances existing in Hawaii after Pearl Harbor, a divided Court
found that the authority which Congress had granted to the Territorial
Governor to declare martial law "in case of rebellion or invasion, or
imminent danger thereof," did not warrant the trial of civilians by
military tribunals.
ENEMY PROPERTY
The position of enemy property was dealt with by Chief Justice Marshall
in the early case of Brown _v._ United States.[1298] Here it was held
that the mere declaration of war by Congress does not effect a
confiscation of enemy property situated within the territorial
jurisdiction of the United States, but the right of Congress by further
enactment to subject such property to confiscation was asserted in the
most positive terms. Being an exercise of the war powers of the
Government, such confiscation is not affected by the restrictions of the
Fifth and Sixth Amendments. Since it has no relation to the personal
guilt of the owner, it is immaterial whether the property belongs to an
alien, a neutral, or even to a citizen of the United States. The whole
doctrine of confiscation is built upon the foundation that it is an
instrument of coercion, which, by depriving an enemy of property within
the reach of his power, whether within his territory or without it,
impairs his ability to resist the confiscating government, while at the
same time it furnishes to that government means for carrying on the war.
Any property which the enemy can use, either by actual appropriation, or
by the exercise of control over the owner, no matter what his
nationality, is a proper subject of confiscation. Congress may provide
for immediate seizure of property which the President or his agent
determines to be enemy property, leaving the question of enemy ownership
to be settled later at the suit of a claimant. For these reasons the
Confiscation Act of 1862,[1299] and the Trading with the Enemy Act of
1917 and amendments thereto, were held to be within the power of
Congress to "make rules concerning captures on land and water."[1300]
PRIZES OF WAR
The power of Congress with respect to prizes is plenary; no one can have
any interest in prizes captured except by permission of Congress.[1301]
Nevertheless, since International Law is a part of our law, the Court
will administer it so long as it has not been modified by treaty or by
legislative or executive action. Thus, during the Civil War, the Court
found that the Confiscation Act of 1861, and the Supplementary Act of
1863, which, in authorizing the condemnation of vessels, made provision
for the protection of interests of loyal citizens, merely created a
municipal forfeiture and did not override or displace the law of prize.
It decided, therefore, that when a vessel was liable to condemnation
under either law, the government was at liberty to proceed under the
more stringent rules of International Law, with the result that the
citizen would be deprived of the benefit of the protective provisions of
the statute.[1302] Similarly, when Cuban ports were blockaded during the
Spanish-American War, the Court held, over the vigorous dissent of three
of its members, that the rule of International Law exempting unarmed
fishing vessels from capture was applicable in the absence of any treaty
provision, or other public act of the Government in relation to the
subject.[1303]
POLICE REGULATIONS; RENT CONTROL
In enforcing the requirement of due process of law in its modern
expanded sense of "reasonable law" the Court has recognized that a war
emergency may justify legislation which would otherwise be an
unconstitutional invasion of private rights. Shortly after the first
world war, it sustained, by a narrow margin, a rent control law for the
District of Columbia, which not merely limited the rents which might be
charged but which also gave the existing tenants the right to continue
in occupancy of their dwellings at their own option, provided they paid
rent and performed other stipulated conditions. The Court, while
conceding that ordinarily such legislation would transcend
constitutional limitations, declared that "a public exigency will
justify the legislature in restricting property rights in land to a
certain extent without compensation. * * * A limit in time, to tide over
a passing trouble, well may justify a law that could not be upheld as a
permanent change."[1304] During World War II an apartment house owner
who complained that the rentals allowed by the Office of Price
Administration did not afford a "fair return" on the property was told
by the Court that, "a nation which can demand the lives of its men and
women in the waging of * * * war is under no constitutional necessity of
providing a system of price control * * * which will assure each
landlord a 'fair return' on his property."[1305] Moreover, such rentals
may be established without a prior hearing because "national security
might not be able to afford the luxuries of litigation and the long
delays which preliminary hearings traditionally have entailed. * * *
Where Congress has provided for judicial review after the regulations or
orders have been made effective it has done all that due process under
the war emergency requires."[1306] The more specific clauses of the Bill
of Rights yield less readily, however, to the impact of a war emergency.
In United States _v._ Cohen Grocery Company,[1307] the Court held that a
statute which penalized the making of "'any unjust or unreasonable rate
or charge in handling * * * any necessaries,'" was void on the ground
that it set up no "ascertainable standard of guilt" and so was
"repugnant to the Fifth and Sixth Amendments * * * which require due
process of law and that persons accused of crime shall be adequately
informed of the nature and cause of the accusation."[1308]
PERSONAL LIBERTY IN WARTIME
That the power of Congress to punish seditious utterances in time of war
is limited by the First Amendment was assumed by the Supreme Court in
the series of cases[1309] in which it affirmed convictions for violation
of the Espionage Act of 1917.[1310] But in the famous opinion of Justice
Holmes in Schenck _v._ United States,[1311] it held that: "When a nation
is at war many things that might be said in time of peace are such a
hindrance to its effort that their utterance will not be endured so long
as men fight and that no Court could regard them as protected by any
constitutional right."[1312] A State also has power to make it unlawful
to advocate that citizens of the State should not assist in prosecuting
a war against public enemies of the United States.[1313] The most
drastic restraint of personal liberty imposed during World War II was
the detention and relocation of the Japanese residents of the Western
States, including those who were native-born citizens of the United
States. When various phases of this program were challenged, the Court
held that in order to prevent espionage and sabotage, the freedom of
movement of such persons could be restricted by a curfew order,[1314]
even by a regulation excluding them from a defined area,[1315] but that
a citizen of Japanese ancestry whose loyalty was concerned could not be
detained against her will in a relocation camp.[1316]
ALIEN ENEMIES
The status of alien enemies was first considered in connection with the
passage of the Alien Act of 1798,[1317] whereby the President was
authorized to deport any alien or to license him to reside within the
United States at any place to be designated by the President. Critics of
the measure conceded its constitutionality so far as enemy aliens were
concerned, because, as Madison wrote, "The Constitution having expressly
delegated to Congress the power to declare war against any nation, and,
of course, to treat it and all its members as enemies."[1318] The
substance of this early law was reenacted during the first world war.
Under it the President is authorized, in time of war, to prescribe "the
manner and degree of the restraint to which [alien enemies] shall be
subject and in what cases, and upon what security their residence shall
be permitted," or to provide for their removal from the United
States.[1319] This measure was held valid in Ludecke _v._ Watkins.[1320]
EMINENT DOMAIN
An often-cited dictum uttered shortly after the Mexican War asserted the
right of an owner to compensation for property destroyed to prevent its
falling into the hands of the enemy, or for that taken for public
use.[1321] In United States _v._ Russell,[1322] decided following the
Civil War, a similar conclusion was based squarely on the Fifth
Amendment, although the case did not necessarily involve the point.
Finally, in United States _v._ Pacific Railroad,[1323] also a Civil War
case, the Court held that the United States was not responsible for the
injury or destruction of private property by military operations, but
added that it did not have in mind claims for property of loyal citizens
which was taken for the use of the national forces. "In such cases," the
Court said, "it has been the practice of the government to make
compensation for the property taken. * * *, although the seizure and
appropriation of private property under such circumstances by the
military authorities may not be within the terms of the constitutional
clauses."[1324] Meantime, however, in 1874, a committee of the House of
Representatives, in an elaborate report on war claims growing out of the
Civil War, had voiced the opinion that the Fifth Amendment embodied the
distinction between a taking of property in the course of military
operations or other urgent military necessity, and other takings for war
purposes, and required compensation of owners in the latter class of
cases.[1325] In determining what constitutes just compensation for
property requisitioned for war purposes during World War II, the Court
has assumed that the Fifth Amendment is applicable to such
takings.[1326]
Clause 15. _The Congress shall have Power_ * * * To provide for calling
forth the Militia to execute the Laws of the Union, suppress
Insurrections and repel Invasions.
Clause 16. _The Congress shall have Power_ * * * To provide for
organizing, arming, and disciplining, the Militia, and for governing
such Part of them as may be employed in the Service of the United
States, reserving to the States respectively, the Appointment of the
Officers, and the Authority of training the Militia according to the
discipline prescribed by Congress.
The Militia Clauses
CALLING OUT THE MILITIA
The States as well as Congress may prescribe penalties for failure to
obey the President's call of the militia. They also have a concurrent
power to aid the National Government by calls under their own authority,
and in emergencies may use the militia to put down armed
insurrection.[1327] The Federal Government may call out the militia in
case of civil war; its authority to suppress rebellion is found in the
power to suppress insurrection and to carry on war.[1328] The act of
February 28, 1795,[1329] which delegated to the President the power to
call out the militia, was held constitutional.[1330] A militiaman who
refused to obey such a call was not "employed in the service of the
United States so as to be subject to the article of war," but was liable
to be tried for disobedience of the act of 1795.[1331]
REGULATION OF THE MILITIA
The power of Congress over the militia "being unlimited, except in the
two particulars of officering and training them, * * *, it may be
exercised to any extent that may be deemed necessary by Congress. * * *
The power of the State government to legislate on the same subjects,
having existed prior to the formation of the Constitution, and not
having been prohibited by that instrument, it remains with the States,
subordinate nevertheless to the paramount law of the General Government,
* * *"[1332] Under the National Defense Act of 1916,[1333] the militia,
which hitherto had been an almost purely State institution, was brought
under the control of the National Government. The term "militia of the
United States" was defined to comprehend "all able-bodied male citizens
of the United States and all other able-bodied males who have * * *
declared their intention to become citizens of the United States,"
between the ages of eighteen and forty-five. The act reorganized the
National Guard, determined its size in proportion to the population of
the several States, required that all enlistments be for "three years in
service and three years in reserve," limited the appointment of officers
to those who "shall have successfully passed such tests as to * * *
physical, moral and professional fitness as the President shall
prescribe," and authorized the President in certain emergencies to
"draft into the military service of the United States to serve therein
for the period of the war unless sooner discharged, any and all members
of the National Guard and National Guard Reserve," who thereupon should
"stand discharged from the militia."
Clause 17. _Congress shall have power_ * * * To exercise exclusive
Legislation in all Cases whatsoever, over such District (not exceeding
ten Miles square) as may, by Cession of particular States, and the
Acceptance of Congress, become the Seat of the Government of the United
States, and to exercise like Authority over all Places purchased by the
Consent of the Legislature of the State in which the Same shall be, for
the Erection of Forts, Magazines, Arsenals, dock-Yards, and other
needful Buildings;--And
The Seat of Government
The jurisdiction of the United States over the District of Columbia
vested on the first Monday of December, 1800.[1334] By the act of
February 27, 1801,[1335] the District was divided into two counties and
in the following year the city of Washington was erected into a
municipality.[1336] The present form of government dates from 1876; all
legislative powers with respect to District affairs are retained by
Congress, while an executive board of three commissioners vested with
ordinance powers is appointed by the President.[1337] As a municipal
corporation, the District has the legal capacity to sue and be
sued.[1338] But the District Commissioners are merely administrative
officers, having only the ministerial powers given them by statute;
accordingly they were found to have no power to submit a claim against
the District to arbitration.[1339]
NATURE AND EXTENT OF RIGHTS CEDED TO UNITED STATES
In ceding the territory which became the District of Columbia, both
Maryland and Virginia provided that the United States should not acquire
any right of property in the soil except by transfer by the individual
owner. This proviso was held not to prevent the Federal Government from
exercising the power of eminent domain within the District.[1340] Under
the agreement made between the original proprietors of the land on which
the city of Washington was laid out, and the Commissioners appointed by
the President to survey, define and locate the district for the seat of
government, the United States became the owner in fee of the streets of
the city although the trustees never carried out their agreement to
convey them.[1341] Both the right of dominion and of property of
navigable waters and of the soil under them in the District, which
originally had been granted by Charles I, King of England to the Lord
Proprietary of Maryland, and to which Maryland succeeded upon the
American Revolution, became vested in the United States by the cession
from Maryland.[1342]
RETROCESSION OF ALEXANDRIA COUNTY
Originally the District of Columbia embraced the maximum area permitted
by the Constitution. In 1846, however, Congress authorized a referendum
on the question of retroceding Alexandria County to Virginia, and
declared that jurisdiction should be relinquished to that State if a
majority of the voters in the county voted in favor of the change. The
proposal was approved, whereupon, without any further action by
Congress, Virginia declared the county annexed and resumed full
jurisdiction over it. Thirty years later, in a suit to recover taxes
paid to the State, the Supreme Court called the retrocession "a
violation of the Constitution" but held that since Congress had
recognized the transfer as a settled fact, a resident of the county was
estopped from challenging it.[1343]
CONTINUANCE OF STATE LAWS
Under the act of July 16, 1790,[1344] which provided for the
establishment of the seat of government, State laws were continued in
operation until Congress created a government for the District. The
Supreme Court intimated that this was "perhaps, only declaratory of a
principle which would have been in full operation without such
declaration."[1345] In 1801 Congress declared that the laws of Virginia
and Maryland "as they now exist, shall be and continue in force" in the
respective portions of the District ceded by those States.[1346] The
only effect of the cession upon individuals was to terminate their State
citizenship and the jurisdiction of the State governments over
them;[1347] contract obligations were not affected,[1348] and liens on
property for debt were continued.[1349]
STATUS OF THE DISTRICT TODAY
Chief Justice Marshall ruled in the early case of Hepburn _v._
Ellzey[1350] that the District of Columbia is not a State within the
meaning of the diversity of citizenship clause of article III. This view
was consistently adhered to for nearly a century and a half in the
interpretation of later acts of Congress regulating the jurisdiction of
federal courts.[1351] In 1940, however, Congress expressly authorized
those courts to take jurisdiction of nonfederal controversies between
residents of the District of Columbia and citizens of a State. By a
five-to-four decision that statute was held constitutional, but the
Justices who voted to sustain it were not in agreement as to the grounds
of the decision.[1352] Three found it to be an appropriate exercise of
the power of Congress to legislate for the District of Columbia without
reference to article III.[1353] Six members of the Court rejected this
theory, but two of the six joined in upholding the act on another ground
which seven of their brethren considered untenable,--namely, that
Hepburn _v._ Ellzey was erroneously decided and that the District of
Columbia should be deemed to be a "State" within the meaning of article
III, section 2.[1354]
It is not disputed that the District is a part of "the United States,"
and that its residents are entitled to the privilege of trial by jury,
whether in civil or criminal cases,[1355] and of presentment by a grand
jury.[1356] Legislation which is restrictive of the rights of liberty
and property in the District must find justification in facts adequate
to support like legislation by a State in the exercise of its police
power.[1357]
LEGISLATIVE POWER OVER DISTRICT OF COLUMBIA
Congress possesses over the District of Columbia the blended powers of a
local and national legislature.[1358] Even when legislating for the
District, Congress remains the legislature of the Union, with the result
that it may give its enactments nation-wide operations so far as is
"necessary and proper" in order to make them locally effective. As was
pointed out in Cohens _v._ Virginia,[1359] if a felon escapes from the
State in which the crime was committed, the government of such State
cannot pursue him into another State and there apprehend him, "but must
demand him from the executive power of that other State." On the other
hand, a felon escaping from the District of Columbia or any other place
subject to the exclusive power of Congress, may be apprehended by the
National Government anywhere in the United States. "And the reason,"
declared Chief Justice Marshall, "is, that Congress is not a local
legislature, but exercises this particular power, [of exclusive
legislation], like all its other powers, in its high character, as the
legislature of the Union."[1360]
TAXATION IN THE DISTRICT
Persons and property within the District of Columbia are subject to
taxation by Congress under both the first and seventeenth clauses of
this section. A general tax levied throughout the United States may be
applied to the District of Columbia upon the same conditions as
elsewhere;--e.g., if a direct tax, it must be levied in proportion to
the census.[1361] But in laying taxes for District purposes only,
"Congress, like any State legislature unrestricted by constitutional
provisions, may its discretion wholly exempt certain classes of property
from taxation, or may tax them at a lower rate than other
property."[1362] It is no impediment to the exercise of either power
that residents of the District lack the suffrage and have politically no
voice in the expenditure of the money raised by taxation.[1363]
DELEGATION OF LEGISLATIVE POWER TO MUNICIPAL OFFICERS
Congress may delegate to municipal authorities legislative functions
which are strictly local in character.[1364] It may confer upon them the
power to improve or repair streets, to assess adjacent property
therefor,[1365] and to regulate public markets.[1366] It may confirm
assessments previously made by the District government without authority
of law.[1367] But in Stoutenburgh _v._ Hennick,[1368] the Court held
that Congress would not, and did not intend to, delegate to the District
the power to impose a license tax on commercial agents who offered
merchandise for sale by sample, since such a license amounted to a
regulation of interstate commerce.
COURTS OF THE DISTRICT
In its capacity as a local legislature Congress may create courts for
the District of Columbia and may confer upon them powers and duties
which lie outside the judicial power vested in "constitutional" courts.
On appeal from an order of the District Public Utilities Commission, a
court for the District of Columbia may be empowered to modify
valuations, rates and regulations established by the Commission and to
make such orders as in its judgment the Commission should have made. But
inasmuch as the issuance of such orders is a legislative as
distinguished from a judicial function, the provision for an appeal from
them to the Supreme Court was held unconstitutional.[1369]
Despite the fact that Congress, acting under this clause, imposed
nonjudicial duties upon the Supreme Court and the Court of Appeals for
the District of Columbia, those tribunals were held to be constitutional
courts, established under article III, with the result that the
compensation of the judges thereof may not be diminished during their
continuance in office.[1370] Since the courts established for the
District are courts of the United States, their judgments stand upon the
same footing, so far as concerns the obligations created by them, as
domestic judgments of the States, wherever rendered and wherever sought
to be enforced.[1371]
Authority Over Places Purchased
"PLACES"
This clause has been broadly construed to cover all structures necessary
for carrying on the business of the National Government.[1372] It
includes post offices,[1373] a hospital and a hotel located in a
national park,[1374] and locks and dams for the improvement of
navigation.[1375] But it does not cover lands acquired for forests,
parks, ranges, wild life sanctuaries or flood control.[1376]
Nevertheless the Supreme Court has held that a State may convey, and
that Congress may accept, either exclusive or qualified jurisdiction
over property acquired within the geographical limits of a State, for
purposes other than those enumerated in Clause 17.[1377]
After exclusive jurisdiction over lands within a State has been ceded to
the United States, Congress alone has the power to punish crimes
committed within the ceded territory.[1378] Private property located
thereon is not subject to taxation by the State,[1379] nor can State
statutes enacted subsequent to the transfer have any operation
therein.[1380] But the local laws in force at the date of cession which
are protective of private rights continue in force until abrogated by
Congress.[1381]
DURATION OF FEDERAL JURISDICTION
A State may qualify its cession of territory by a condition that
jurisdiction shall be retained by the United States only so long as the
place is used for specified purposes.[1382] Such a provision operates
prospectively and does not except from the grant that portion of a
described tract which is then used as a railroad right of way.[1383] In
1892, the Court upheld the jurisdiction of the United States to try a
person charged with murder on a military reservation, over the objection
that the State had ceded jurisdiction only over such portions of the
area as were used for military purposes, and that the particular place
on which the murder was committed was used solely for farming. The Court
held that the character and purpose of the occupation having been
officially established by the political department of the government, it
was not open to the Court to inquire into the actual uses to which any
portion of the area was temporarily put.[1384] A few years later,
however, it ruled that the lease to a city, for use as a market, of a
portion of an area which had been ceded to the United States for a
particular purpose, suspended the exclusive jurisdiction of the United
States.[1385]
Recently the question arose whether the United States retains
jurisdiction over a place which was ceded to it unconditionally after it
has abandoned the use of the property for governmental purposes and
entered into a contract for the sale thereof to private persons.
Minnesota asserted the right to tax the equitable interest of the
purchaser in such land, and the Supreme Court upheld its right to do so.
The majority assumed that "the Government's unrestricted transfer of
property to nonfederal hands is a relinquishment of the exclusive
legislative power."[1386] In separate concurring opinions Chief Justice
Stone and Justice Frankfurter reserved judgment on the question of
territorial jurisdiction.[1387]
RESERVATION OF JURISDICTION BY STATES
For more than a century the Supreme Court kept alive, by repeated
dicta,[1388] the doubt expressed by Justice Story "whether Congress are
by the terms of the Constitution, at liberty to purchase lands for
forts, dockyards, etc., with the consent of a State legislature, where
such consent is so qualified that it will not justify the 'exclusive
legislation' of Congress there. It may well be doubted if such consent
be not utterly void."[1389] But when the issue was squarely presented in
1937, the Court ruled that where the United States purchases property
within a State with the consent of the latter, it is valid for the State
to convey, and for the United States to accept, "concurrent
jurisdiction" over such land, the State reserving to itself the right to
execute process "and such other jurisdiction and authority over the same
as is not inconsistent with the jurisdiction ceded to the United
States."[1390] The holding logically renders the second half of Clause
17 superfluous. In a companion case, the Court ruled further that even
if a general State statute purports to cede exclusive jurisdiction, such
jurisdiction does not pass unless the United States accepts it.[1391]
Clause 18. _The Congress shall have Power_ * * * To make all Laws which
shall be necessary and proper for carrying into Execution the foregoing
Powers, and all other Powers vested by this Constitution in the
Government of the United States, or in any Department or Officer
thereof.
The Coefficient or Elastic Clause
SCOPE OF INCIDENTAL POWERS
That this clause is an enlargement, not a constriction, of the powers
expressly granted to Congress, that it enables the lawmakers to select
any means reasonably adapted to effectuate those powers, was established
by Marshall's classic opinion in McCulloch _v._ Maryland.[1392] "Let the
end be legitimate," he wrote, "let it be within the scope of the
Constitution, and all means which are appropriate, which are plainly
adapted to that end, which are not prohibited, but consist with the
letter and spirit of the Constitution, are constitutional."[1393]
Moreover, this provision gives Congress a share in the responsibilities
lodged in other departments, by virtue of its right to enact legislation
necessary to carry into execution all powers vested in the National
Government. Conversely, where necessary for the efficient execution of
its own powers, Congress may delegate some measure of legislative power
to other departments.[1394]
OPERATION OF COEFFICIENT CLAUSE
Practically every power of the National Government has been expanded in
some degree by the coefficient clause. Under its authority Congress has
adopted measures requisite to discharge the treaty obligations of the
nation;[1395] it has organized the federal judicial system and has
enacted a large body of law defining and punishing crimes. Effective
control of the national economy has been made possible by the authority
to regulate the internal commerce of a State to the extent necessary to
protect and promote interstate commerce.[1396] Likewise the right of
Congress to utilize all known and appropriate means for collecting the
revenue, including the distraint of property for Federal taxes,[1397]
and its power to acquire property needed for the operation of the
government by the exercise of the power of eminent domain,[1398] have
greatly extended the range of national power. But the widest application
of the necessary and proper clause has occurred in the field of monetary
and fiscal controls. Inasmuch as the various specific powers granted by
article I, section 8, do not add up to a general legislative power over
such matters, the Court has relied heavily upon this clause in
sustaining the comprehensive control which Congress has asserted over
this subject.[1399]
DEFINITION AND PUNISHMENT OF CRIMES
Although the only crimes which Congress is expressly authorized to
punish are piracies, felonies on the high seas, offenses against the law
of nations, treason and counterfeiting of the securities and current
coin of the United States, its power to create, define and punish crimes
and offenses whenever necessary to effectuate the objects of the Federal
Government is universally conceded.[1400] Illustrative of the offenses
which have been punished under this power are the alteration of
registered bonds;[1401] the bringing of counterfeit bonds into the
country;[1402] conspiracy to injure prisoners in custody of a United
States marshal;[1403] impersonation of a federal officer with intent to
defraud;[1404] conspiracy to injure a citizen in the free exercise or
enjoyment of any right or privilege secured by the Constitution or laws
of the United States;[1405] the receipt by government officials of
contributions from government employees for political purposes;[1406]
advocating, etc., the overthrow of the Government by force.[1407] Part I
of Title 18 of the United States Code comprises more than 500 sections
defining penal offenses against the United States.
CHARTERING OF BANKS
As an appropriate means for executing "the great powers, to lay and
collect taxes; to borrow money; to regulate commerce; to declare and
conduct a war; and to raise and support armies * * *" Congress may
incorporate banks and kindred institutions.[1408] Moreover, it may
confer upon them private powers which, standing alone, have no relation
to the functions of the Federal Government, if those privileges are
essential to the effective operation of such corporations.[1409] Where
necessary to meet the competition of State banks, Congress may authorize
national banks to perform fiduciary functions, even though, apart from
the competitive situation, federal instrumentalities might not be
permitted to engage in such business.[1410] The Court will not undertake
to assess the relative importance of the public and private functions of
a financial institution which Congress has seen fit to create. It
sustained the act setting up the Federal Farm Loan Banks to provide
funds for mortgage loans on agricultural land against the contention
that the right of the Secretary of the Treasury, which he had not
exercised, to use these banks as depositaries of public funds, was
merely a pretext for chartering these banks for private purposes.[1411]
CURRENCY REGULATIONS
Reinforced by the necessary and proper clause, the powers "'to lay and
collect taxes, to pay the debts and provide for the common defence and
general welfare of the United States,' and 'to borrow money on the
credit of the United States and to coin money and regulate the value
thereof * * *'";[1412] have been held to give Congress virtually
complete control over money and currency. A prohibitive tax on the
notes of State banks;[1413] the issuance of treasury notes impressed
with the quality of legal tender in payment of private debts[1414] and
the abrogation of clauses in private contracts which called for payment
in gold coin,[1415] were sustained as appropriate measures for carrying
into effect some or all of the foregoing powers.
POWER TO CHARTER CORPORATIONS
In addition to the creation of banks, Congress has been held to have
authority to charter a railroad corporation,[1416] or a corporation to
construct an interstate bridge,[1417] as instrumentalities for promoting
commerce among the States, and to create corporations to manufacture
aircraft[1418] or merchant vessels[1419] as incidental to the war power.
COURTS AND JUDICIAL PROCEEDINGS
Inasmuch as the Constitution "delineated only the great outlines of the
judicial power * * *, leaving the details to Congress, * * * The
distribution and appropriate exercise of the judicial power must * * *
be made by laws passed by Congress, * * *"[1420] As a necessary and
proper provision for the exercise of the jurisdiction conferred by
article III, section 2 Congress may direct the removal from a State to a
federal court of a criminal prosecution against a federal officer for
acts done under color of federal law,[1421] and may authorize the
removal before trial of civil cases arising under the laws of the United
States.[1422] It may prescribe the effect to be given to judicial
proceedings of the federal courts,[1423] and may make all laws necessary
for carrying into execution the judgments of federal courts.[1424] When
a territory is admitted as a State, Congress may designate the Court to
which the records of the territorial courts shall be transferred, and
may prescribe the mode for enforcement and review of judgments rendered
by those courts.[1425] In the exercise of other powers conferred by the
Constitution, apart from article III, Congress may create legislative
courts and "clothe them with functions deemed essential or helpful in
carrying those powers into execution."[1426]
SPECIAL ACTS CONCERNING CLAIMS
This clause enables Congress to pass special laws to require other
departments of the Government to prosecute or adjudicate particular
claims, whether asserted by the Government itself or by private persons.
In 1924,[1427] Congress adopted a Joint Resolution directing the
President to cause suit to be instituted for the cancellation of certain
oil leases alleged to have been obtained from the Government by fraud,
and to prosecute such other actions and proceedings, civil and criminal,
as were warranted by the facts. This resolution also authorized the
appointment of special counsel to have charge of such litigation.
Private acts providing for a review of an order for compensation under
the Longshoreman's and Harbor Workers' Compensation Act,[1428] or
conferring jurisdiction upon the Court of Claims to hear and determine
certain claims of a contractor against the Government, in conformity
with directions given by Congress, after that court had denied recovery
on such claims, have been held constitutional.[1429]
MARITIME LAW
Congress may implement the admiralty and maritime jurisdiction conferred
upon the federal courts by revising and amending the maritime law which
existed at the time the Constitution was adopted, but in so doing, it
cannot go beyond the reach of that jurisdiction.[1430] This power cannot
be delegated to the States; hence acts of Congress which purported to
make State Workmen's Compensation laws applicable to maritime cases were
held unconstitutional.[1431]
Section 9. Clause 1. The Migration or Importation of such
Persons as any of the States now existing shall think proper to admit,
shall not be prohibited by the Congress prior to the Year one thousand
eight hundred and eight, but a Tax or duty may be imposed on such
Importation, not exceeding ten dollars for each Person.
Powers Denied to Congress
GENERAL PURPOSE OF THE SECTION
This section of the Constitution (containing eight clauses restricting
or prohibiting legislation affecting the importation of slaves, the
suspension of the writ of _habeas corpus_, the enactment of bills of
attainder or _ex post facto_ laws, the levying of taxes on exports, the
granting of preference to ports of one State over another, the granting
of titles of nobility, etc.,) is devoted to restraints upon the power of
Congress and of the National Government,[1432] and in no respect affects
the States in the regulation of their domestic affairs.[1433]
The above clause, which sanctioned the importation of slaves by the
States for twenty years after the adoption of the Constitution, when
considered with the section requiring escaped slaves to be returned to
their masters (art. IV, Sec. 1, cl. 3), was held by Chief Justice Taney
in Scott _v._ Sanford,[1434] to show conclusively that such persons and
their descendants were not embraced within the term "citizen" as used in
the Constitution. Today is interesting only as an historical curiosity.
Clause 2. The Privilege of the Writ of Habeas Corpus shall not be
suspended, unless when in Cases of Rebellion or Invasion the public
Safety may require it.
HABEAS CORPUS
Purpose of the Writ
This section, which restricts only the Federal Government and not the
States,[1435] is the only place in the Constitution where the writ of
_habeas corpus_ is mentioned. The framers took for granted that the
courts of the United States would be given jurisdiction to issue this,
the greatest of the safeguards of personal liberty embodied in the
common law, and the Judiciary Act of 1789[1436] provided for the
issuance of the writ according to "the usages and principles of law." At
common law the purpose of such a proceeding was to obtain the
liberation of persons who were imprisoned without just cause.[1437]
While the Supreme Court conceded at an early date that the authority of
the federal courts to entertain petitions for _habeas corpus_ derived
solely from acts of Congress,[1438] a narrow majority recently asserted
the right to expand the scope of the writ by judicial interpretation and
to sanction its use for a purpose unknown to the common law, i.e., to
bring a prisoner into court to argue his own appeal. Speaking for the
majority Justice Murphy declared that: "However, we do not conceive that
a circuit court of appeals, in issuing a writ of _habeas corpus_ under
Sec. 262 of the Judicial Code, is necessarily confined to the precise
forms of that writ in vogue at the common law or in the English judicial
system. Section 262 says that the writ must be agreeable to the usages
and principles of 'law,' a term which is unlimited by the common law or
the English law. And since 'law' is not a static concept, but expands
and develops as new problems arise, we do not believe that the forms of
the _habeas corpus_ writ authorized by Sec. 262 are only those recognized
in this country in 1789, when the original Judiciary Act containing the
substance of this section came into existence."[1439]
Errors Which May Be Corrected on Habeas Corpus
The writ of _habeas corpus_ provides a remedy for jurisdictional and
constitutional errors at the trial without limit as to time.[1440] It
may be used to correct errors of that order made by military as well as
by civil courts.[1441] Under the common law and the Act 31 Car. II c. 2
(1679), where a person was detained pursuant to a conviction by a court
having jurisdiction of the subject matter, _habeas corpus_ was available
only if a want of jurisdiction appeared on the face of the record of the
Court which convicted him. A showing in a return to a writ that the
prisoner was held under final process based upon a judgment of a court
of competent jurisdiction closed the inquiry.[1442] Under the Judiciary
Act of 1789[1443] the same rule obtained.[1444] But by the act of
February 5, 1867,[1445] Congress extended the writ to all persons
restrained of their liberty in violation of the Constitution or a law or
treaty of the United States, and required the Court to ascertain the
facts and to "dispose of the party as law and justice require." This
gave the prisoner a right to have a judicial inquiry in a court of the
United States into the very truth and substance of the causes of his
detention. The Supreme Court has said that there is "no doubt of the
authority of the Congress to thus liberalize the common law procedure on
_habeas corpus_ * * *" .[1446]
Habeas Corpus Not a Substitute for Appeal
Since the writ of _habeas corpus_ is appellate in nature, Congress may
confer jurisdiction to issue it upon the Supreme Court as well as upon
the inferior federal courts.[1447] The proceeding may not, however, be
used as a substitute for an appeal or writ of error.[1448] But if
special circumstances make it advantageous to use this writ in aid of a
just disposition of a cause pending on appeal it may be used for that
purpose.[1449] Where facts dehors the record, which are not open to
consideration upon appeal, are alleged to show a denial of
constitutional rights, a judicial hearing must be granted to ascertain
the truth or falsity of the allegations.[1450]
Issuance of the Writ
On application for a writ of _habeas corpus_, the Court may either issue
the writ, and, on the return, dispose of the case, or it may waive the
issuing of the writ and consider whether, upon the facts presented in
the petition, the prisoner, if brought before it, could be
discharged.[1451] The proceeding may not be used to secure an
adjudication of a question which, if determined in the prisoner's favor,
could not result in his immediate release.[1452] A discharge of a
prisoner on _habeas corpus_ is granted only in the exercise of a sound
judicial discretion.[1453] While the strict doctrine of _res judicata_
does not apply to this proceeding,[1454] the Court may, in its
discretion, dismiss a petition for _habeas corpus_ where the ground on
which it is sought had been alleged in a prior application, but the
evidence to support it had been unjustifiably withheld for use on a
second attempt if the first failed.[1455] Where the Government did not
deny the allegation in a prisoner's fourth petition for _habeas corpus_,
but sought dismissal of the proceedings on the ground that the prisoner
had abused the writ, the prisoner was held to be entitled to a hearing
to determine whether the charge of abusive use of the writ was well
founded.[1456]
Suspension of the Privilege
A critical question under this section is who determines with finality
whether the circumstances warrant suspension of the privilege of the
writ. In England the writ may be suspended only by Act of
Parliament,[1457] and in an early case Chief Justice Marshall asserted
that the decision as to when public safety calls for this drastic action
depends "on political considerations, on which the legislature is to
decide."[1458] At the beginning of the Civil War Lincoln authorized the
Commanding General of the Army of the United States to suspend the writ
along any military line between Philadelphia and Washington.[1459] In Ex
parte Merryman,[1460] Chief Justice Taney strongly denounced the
President's action and reasserted the proposition that only Congress
could suspend the writ. Attorney General Bates promptly challenged
Taney's opinion. Noting that in Ex parte Bollman, Marshall did "not
speak of suspending the _privilege_ of the writ, but of suspending the
_powers vested in the Court_ by the act," he took the position that the
constitutional provision was itself the equivalent of an Act of
Parliament.[1461] Thereafter, by an express provision of the act of
March 3, 1863, Congress declared, "That, during the present rebellion,
the President of the United States, whenever, in his judgment, the
public safety may require it, is authorized to suspend the privilege of
the writ of _habeas corpus_ in any case throughout the United States, or
any part thereof."[1462] The validity of this statute was assumed in Ex
parte Milligan,[1463] but a narrow majority of the Court declared that
the suspension of the writ did not authorize the arrest of any one, but
simply denied to one arrested the privilege of the writ in order to
obtain his liberty.[1464]
Clause 3. No Bill of Attainder or ex post facto Law shall be passed.
BILLS OF ATTAINDER
Historically, the term "bills of attainder" was applied to "such special
acts of the legislature as inflict capital punishment upon persons
supposed to be guilty of high offences, such as treason and felony,
without any conviction in the ordinary course of judicial proceedings."
An act which inflicted a milder degree of punishment was called a bill
of pains and penalties.[1465] Within the meaning of the Constitution,
however, bills of attainder include bills of pains and penalties.[1466]
As interpreted by the Supreme Court, this clause prohibits all
legislative acts, "no matter what their form, that apply either to named
individuals or to easily ascertainable members of a group in such a way
as to inflict punishment on them without a judicial trial * * *"[1467]
Two acts of Congress--one which required attorneys practicing in the
federal courts to take an oath that they had never given aid to persons
engaged in hostility to the United States,[1468] and another which
prohibited the payment of compensation to certain named government
employees who have been charged with subversive activity,[1469]--have
been held unconstitutional on the ground that they amounted to bills of
attainder.
EX POST FACTO LAWS
Definition
At the time the Constitution was adopted, many persons understood the
terms _ex post facto_ laws, to "embrace all retrospective laws, or laws
governing or controlling past transactions, whether * * * of a civil or
a criminal nature."[1470] But in the early case of Calder _v._
Bull,[1471] the Supreme Court decided that the phrase, as used in the
Constitution, applies only to penal and criminal statutes. But although
it is inapplicable to retroactive legislation of any other kind,[1472]
the constitutional prohibition may not be evaded by giving a civil form
to a measure which is essentially criminal.[1473] Every law which makes
criminal an act which was innocent when done, or which inflicts a
greater punishment than the law annexed to the crime when committed, is
an _ex post facto_ law within the prohibition of the Constitution.[1474]
A prosecution under a temporary statute which was extended before the
date originally set for its expiration does not offend this provision
even though it is instituted subsequent to the extension of the
statute's duration for a violation committed prior thereto.[1475] Since
this provision has no application to crimes committed outside the
jurisdiction of the United States against the laws of a foreign country,
it is immaterial in extradition proceedings whether the foreign law is
_ex post facto_ or not.[1476]
What Constitutes Punishment
An act of Congress which prescribed as a qualification for practice
before the federal courts an oath that the attorney had not participated
in the Rebellion was found unconstitutional since it operated as a
punishment for past acts.[1477] But a statute which denied to
polygamists the right to vote in a territorial election, was upheld even
as applied to a person who had not practiced polygamy since the act was
passed, because the law did not operate as an additional penalty for the
offense of polygamy but merely defined it as a disqualification of a
voter.[1478] A deportation law authorizing the Secretary of Labor to
expel aliens for criminal acts committed before its passage is not _ex
post facto_ since deportation is not a punishment.[1479] Likewise an act
permitting the cancellation of naturalization certificates obtained by
fraud prior to the passage of the law was held not to impose a
punishment but simply to deprive the alien of his ill-gotten
privileges.[1480]
Change in Place or Mode of Trial
A change of the place of trial of an alleged offense after its
commission, is not an _ex post facto_ law. If no place of trial was
provided when the offense was committed, Congress may designate the
place of trial thereafter.[1481] A law which alters the rule of evidence
to permit a person to be convicted upon less or different evidence than
was required when the offense was committed is invalid,[1482] but a
statute which simply enlarges the class of persons who may be competent
to testify in criminal cases is not _ex post facto_ as applied to a
prosecution for a crime committed prior to its passage.[1483]
Clause 4. No Capitation, or other direct, Tax shall be laid, unless in
Proportion to the Census or Enumeration herein before directed to be
taken.
DIRECT TAXES
The Hylton Case
The crucial problem under this section is to distinguish "direct" from
other taxes. In its opinion in Pollock _v._ Farmers' Loan and Trust
Co., we find the Court declaring: "It is apparent * * * that the
distinction between direct and indirect taxation was well understood by
the framers of the Constitution and those who adopted it."[1484] Against
this confident dictum may be set the following brief excerpt from
Madison's Notes on the Convention: "Mr. King asked what was the precise
meaning of _direct_ taxation? No one answered."[1485] The first case to
come before the Court on this issue was Hylton _v._ United States,[1486]
which was decided early in 1796. Congress had levied, according to the
rule of uniformity, a specific tax upon all carriages, for the
conveyance of persons, which shall be kept by, or for any person, for
his own use, or to be let out for hire, or for the conveying of
passengers. In a fictitious statement of facts, it was stipulated that
the carriages involved in the case were kept exclusively for the
personal use of the owner and not for hire. The principal argument for
the constitutionality of the measure was made by Hamilton, who treated
it as an "excise tax,"[1487] while Madison both on the floors of
Congress and in correspondence attacked it as "direct" and so void,
inasmuch as it was levied without apportionment.[1488] The Court, taking
the position that the direct tax clause constituted in practical
operation an exception to the general taxing powers of Congress, held
that no tax ought to be classified as "direct" which could not be
conveniently apportioned, and on this basis sustained the tax on
carriages as one on their "use" and therefore an "excise." Moreover,
each of the judges advanced the opinion that the direct tax clause
should be restricted to capitation taxes and taxes on land, or that at
most, it might cover a general tax on the aggregate or mass of things
which generally pervade all the States, especially if an assessment
should intervene; while Justice Paterson, who had been a member of the
Federal Convention, testified to his recollection that the principal
purpose of the provision had been to allay the fear of the Southern
States lest their Negroes and lands should be subjected to a specific
tax.[1489]
From the Hylton to the Pollock Case
The result of the Hylton case was not challenged until after the Civil
War. A number of the taxes imposed to meet the demands of that war were
assailed during the postwar period as direct taxes, but without result.
The Court sustained successively as "excises" or "duties," a tax on an
insurance company's receipts for premiums and assessments;[1490] a tax
on the circulating notes of State banks,[1491] an inheritance tax on
real estate,[1492] and finally a general tax on incomes.[1493] In the
last case, the Court took pains to state that it regarded the term
"direct taxes" as having acquired a definite and fixed meaning-to-wit,
capitation taxes, and taxes on hand.[1494] Then, almost one hundred
years after the Hylton case, the famous case of Pollock _v._ Farmers'
Loan and Trust Company[1495] arose under the Income Tax Act of
1894.[1496] Undertaking to correct "a century of error" the Court held,
by a vote of five-to-four, that a tax on income from property was a
direct tax within the meaning of the Constitution and hence void because
not apportioned according to the census.
Restriction of the Pollock Decision
The Pollock decision encouraged taxpayers to challenge the right of
Congress to levy by the rule of uniformity numerous taxes which had
always been reckoned to be excises. But the Court evinced a strong
reluctance to extend the doctrine to such exactions. Purporting to
distinguish taxes levied "because of ownership" or "upon property as
such" from those laid upon "privileges,"[1497] it sustained as "excises"
a tax on sales on business exchanges;[1498] a succession tax which was
construed to fall on the recipients of the property transmitted, rather
than on the estate of the decedent,[1499] and a tax on manufactured
tobacco in the hands of a dealer, after an excise tax had been paid by
the manufacturer.[1500] Again, in Thomas _v._ United States,[1501] the
validity of a stamp tax on sales of stock certificates was sustained on
the basis of a definition of "duties, imposts and excises." These terms,
according to the Chief Justice, "were used comprehensively to cover
customs and excise duties imposed on importation, consumption,
manufacture and sale of certain commodities, privileges, particular
business transactions, vocations, occupations and the like."[1502] On
the same day it ruled, in Spreckels Sugar Refining Co. _v._
McClain,[1503] that an exaction denominated a special excise tax imposed
on the business of refining sugar and measured by the gross receipts
thereof, was in truth an excise and hence properly levied by the rule of
uniformity. The lesson of Flint _v._ Stone Tracy Co.[1504] is the same.
Here what was in form an income tax was sustained as a tax on the
privilege of doing business as a corporation, the value of the privilege
being measured by the income, including income from investments.
Similarly, in Stanton _v._ Baltic Mining Co.[1505] a tax on the annual
production of mines was held to be "independently of the effect of the
operation of the Sixteenth Amendment * * * not a tax upon property as
such because of its ownership, but a true excise levied on the results
of the business of carrying on mining operations."[1506]
A convincing demonstration of the extent to which the Pollock decision
had been whittled down by the time the Sixteenth Amendment was adopted
is found in Billings _v._ United States.[1507] In challenging an annual
tax assessed for the year 1909 on the use of foreign built yachts--a
levy not distinguishable in substance from the carriage tax involved in
the Hylton case as construed by the Supreme Court-counsel did not even
suggest that the tax should be classed as a direct tax. Instead, he
based his argument that the exaction constituted a taking of property
without due process of law upon the premise that it was an excise, and
the Supreme Court disposed of the case upon the same assumption.
In 1921 the Court cast aside the distinction drawn in Knowlton _v._
Moore between the right to transmit property on the one hand and the
privilege of receiving it on the other, and sustained an estate tax as
an excise. "Upon this point" wrote Justice Holmes for a unanimous court,
"a page of history is worth a volume of logic."[1508] This proposition
being established, the Court has had no difficulty in deciding that the
inclusion in the computation of the estate tax of property held as joint
tenants,[1509] or as tenants by the entirety,[1510] or the entire value
of community property owned by husband and wife,[1511] or the proceeds
of insurance upon the life of the decedent,[1512] did not amount to
direct taxation of such property. Similarly it upheld a graduated tax on
gifts as an excise, saying that it was "a tax laid only upon the
exercise of a single one of those powers incident to ownership, the
power to give the property owned to another."[1513] In vain did Justice
Sutherland, speaking for himself and two associates, urge that "the
right to give away one's property is as fundamental as the right to sell
it or, indeed, to possess it."[1514]
Miscellaneous
The power of Congress to levy direct taxes is not confined to the States
which are represented in that body. Such a tax may be levied in
proportion to population in the District of Columbia.[1515] A penalty
imposed for nonpayment of a direct tax is not a part of the tax itself
and hence is not subject to the rule of apportionment. Accordingly, the
Supreme Court sustained the penalty of fifty percent which Congress
exacted for default in the payment of the direct tax on land in the
aggregate amount of twenty million dollars which was levied and
apportioned among the States during the Civil War.[1516]
Clause 5. No Tax or Duty shall be laid on Articles exported from any
State.
TAXES ON EXPORTS
This prohibition applies only to the imposition of duties on goods by
reason of exportation.[1517] The word "export" signifies goods exported
to a foreign country, not to an unincorporated territory of the United
States.[1518] A general tax laid on all property alike, including that
intended for export, is not within the prohibition, if it is not levied
on goods in course of exportation nor because of their intended
exportation.[1519] Where the sale to a commission merchant for a foreign
consignee was consummated by delivery of the goods to an exporting
carrier, the sale was held to be a step in the exportation and hence
exempt from a general tax on sales of such commodity.[1520] The giving
of a bond for exportation of distilled liquor is not the commencement of
exportation so as to exempt from an excise tax spirits which were not
exported pursuant to such bond.[1521] A tax on the income of a
corporation derived from its export trade is not a tax on "articles
exported" within the meaning of the Constitution.[1522]
Stamp Taxes
A stamp tax imposed on foreign bills of lading,[1523] charter
parties,[1524] or marine insurance policies,[1525] is in effect a tax or
duty upon exports, and so void; but an act requiring the stamping of all
packages of tobacco intended for export in order to prevent fraud was
held not to be forbidden as a tax on exports.[1526]
Clause 6. No Preference shall be given by any Regulation of Commerce or
Revenue to the Ports of one State over those of another: nor shall
Vessels bound to, or from, one State, be obliged to enter, clear, or pay
duties in another.
THE "NO PREFERENCE" CLAUSE
The limitations imposed by this section were designed to prevent
preferences as between ports on account of their location in different
States. They do not forbid such discriminations as between individual
ports. Acting under the commerce clause, Congress may do many things
which benefit particular ports and which incidentally result to the
disadvantage of other ports in the same or neighboring States. It may
establish ports of entry, erect and operate lighthouses, improve rivers
and harbors, and provide structures for the convenient and economical
handling of traffic.[1527] A rate order of the Interstate Commerce
Commission which allowed an additional charge to be made for ferrying
traffic across the Mississippi to cities on the east bank of the river
was sustained over the objection that it gave an unconstitutional
preference to ports in Texas.[1528] Although there were a few early
intimations that this clause was applicable to the States as well as to
Congress,[1529] the Supreme Court declared emphatically in 1886 that
State legislation was unaffected by it.[1530] After more than a century
the Court confirmed, over the objection that this clause was offended,
the power which the First Congress had exercised[1531] in sanctioning
the continued supervision and regulation of pilots by the States.[1532]
Alaska is not deemed to be a State within the meaning of this
clause.[1533]
Clause 7. No Money shall be drawn from the Treasury, but in Consequence
of Appropriations made by Law; and a regular Statement and Account of
the Receipts and Expenditures of all public Money shall be published
from time to time.
APPROPRIATIONS
This clause is a limitation upon the power of the executive department
and does not restrict Congress in appropriating moneys in the
Treasury.[1534] That body may recognize and pay a claim of an equitable,
moral or honorary nature. Where it directs a specific sum to be paid to
a certain person, neither the Secretary of the Treasury nor any court
has discretion to determine whether the person is entitled to receive
it.[1535] In making appropriations to pay claims arising out of the
Civil War, the Court held that it was lawful to provide that certain
persons, i.e., those who had aided the rebellion, should not be paid out
of the funds made available by the general appropriation, but that such
persons should seek relief from Congress.[1536] The Court has also
recognized that Congress has a wide discretion as to the extent to which
it shall prescribe details of expenditures for which it appropriates
funds and has approved the frequent practice of making general
appropriations of large amounts to be allotted and expended as directed
by designated government agencies. Citing as an example the act of June
17, 1902[1537] where all moneys received from the sale and disposal of
public lands in a large number of States and territories were set aside
as a special fund to be expended under the direction of the Secretary of
the Interior upon such projects as he determined to be practicable and
advisable for the reclamation of arid and semi-arid lands within those
States and territories, the Court declared: "The constitutionality of
this delegation of authority has never been seriously questioned."[1538]
PAYMENT OF CLAIMS
No officer of the Federal Government is authorized to pay a debt due
from the United States, whether reduced to judgment or not, without an
appropriation for that purpose.[1539] After the Civil War, a number of
controversies arose out of attempts by Congress to restrict the payment
of the claims of persons who had aided the Rebellion, but had thereafter
received a pardon from the President. The Supreme Court held that
Congress could not prescribe the evidentiary effect of a pardon in a
proceeding in the Court of Claims for property confiscated during the
Civil War,[1540] but that where the confiscated property had been sold
and the proceeds paid into the Treasury, a pardon did not of its own
force authorize the restoration of such proceeds.[1541] It was within
the competence of Congress to declare that the amounts due to persons
thus pardoned should not be paid out of the Treasury and that no general
appropriation should extend to their claims.[1542]
Clause 8. No Title of Nobility shall be granted by the United States:
And no Person holding any Office of Profit or Trust under them, shall,
without the Consent of the Congress, accept of any present, Emolument,
Office, or Title, of any kind whatever, from any King, Prince, or
foreign State.
In 1871 the Attorney General of the United States ruled that: "A
minister of the United States abroad is not prohibited by the
Constitution from rendering a friendly service to a foreign power, even
that of negotiating a treaty for it, provided he does not become an
officer of that power, but the acceptance of a formal commission, as
minister plenipotentiary, creates an official relation between the
individual thus commissioned and the government which in this way
accredits him as its representative, which is prohibited by this clause
of the Constitution."[1543]
Section 10. No State Shall enter into any Treaty, Alliance, or
Confederation; grant Letters of Marque and Reprisal; coin Money; emit
Bills of Credit; make any Thing but gold and silver Coin a Tender in
Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law
impairing the Obligation of Contracts, or grant any Title of Nobility.
Powers Denied to the States
TREATIES, ALLIANCES OR CONFEDERATIONS
At the time of the Civil War this clause was one of the provisions upon
which the Court relied in holding that the Confederation formed by the
seceding States could not be recognized as having any legal
existence.[1544] Today, its practical significance lies in the
limitations which it implies upon the power of the States to deal with
matters having a bearing upon international relations. In the early case
of Holmes _v._ Jennison,[1545] Chief Justice Taney invoked it as a
reason for holding that a State had no power to deliver up a fugitive
from justice to a foreign State. Recently the kindred idea that the
responsibility for the conduct of foreign relations rests exclusively
with the Federal Government prompted the Court to hold that, since the
oil under the three mile marginal belt along the California coast might
well become the subject of international dispute and since the ocean,
including this three mile belt, is of vital consequence to the nation in
its desire to engage in commerce and to live in peace with the world,
the Federal Government has paramount rights in and power over that belt,
including full dominion over the resources of the soil under the water
area.[1546] In Skiriotes _v._ Florida,[1547] the Court, on the other
hand, ruled that this clause did not disable Florida from regulating the
manner in which its own citizens may engage in sponge fishing outside
its territorial waters. Speaking for a unanimous Court, Chief Justice
Hughes declared: "When its action does not conflict with federal
legislation, the sovereign authority of the State over the conduct of
its citizens upon the high seas is analogous to the sovereign authority
of the United States over its citizens in like circumstances."[1548]
BILLS OF CREDIT
Within the sense of the Constitution, bills of credit signify a paper
medium of exchange, intended to circulate between individuals; and
between the Government and individuals, for the ordinary purposes of
society. It is immaterial whether the quality of legal tender is
imparted to such paper. Interest bearing certificates, in denominations
not exceeding ten dollars, which were issued by loan offices established
by the State of Missouri, and made receivable in payment of taxes or
other moneys due to the State, and in payment of the fees and salaries
of State officers, were held to be bills of credit whose issuance was
banned by this section.[1549] The States are not forbidden, however, to
issue coupons receivable for taxes,[1550] nor to execute instruments
binding themselves to pay money at a future day for services rendered or
money borrowed.[1551] Bills issued by State banks are not bills of
credit;[1552] it is immaterial that the State is the sole stockholder of
the bank,[1553] that the officers of the bank were elected by the State
legislature,[1554] or that the capital of the bank was raised by the
sale of State bonds.[1555]
LEGAL TENDER
Relying on this clause, which applies only to the States and not to the
Federal Government,[1556] the Supreme Court has held that where the
marshal of a State court received State bank notes in payment and
discharge of an execution, the creditor was entitled to demand payment
in gold or silver.[1557] Since, however, there is nothing in the
Constitution which prohibits a bank depositor from consenting when he
draws a check, that payment may be made by draft, a State law which
provided that checks drawn on local banks should, at the option of the
bank, be payable in exchange drafts was held valid.[1558]
BILLS OF ATTAINDER
Statutes passed after the Civil War with the intent and result of
excluding persons who had aided the Confederacy from following certain
callings, by the device of requiring them to take an oath that they had
never given such aid, were held invalid as being bills of attainder, as
well as _ex post facto_ laws.[1559]
EX POST FACTO LAWS
Scope of Provision
This clause, like the cognate restriction imposed on the Federal
Government by section 9, relates only to penal and criminal legislation
and not to civil laws which affect private rights adversely.[1560] It is
directed only against legislative action and does not touch erroneous or
inconsistent decisions by the courts.[1561] Even though a law is _ex
post facto_ and invalid as to crimes committed prior to its enactment,
it is nonetheless valid as to subsequent offenses.[1562] If it mitigates
the rigor of the law in force at the time the crime was committed,[1563]
or if it merely penalizes the continuance of conduct which was lawfully
begun before its passage, the statute is not _ex post facto_. Thus
measures penalizing the failure of a railroad to cut drains through
existing embankments,[1564] or making illegal the continued possession
of intoxicating liquors which were lawfully acquired,[1565] have been
held valid.
Denial of Future Privileges to Past Offenders
The right to practice a profession may be denied to one who was
convicted of an offense before the statute was enacted if the offense
may reasonably be regarded as a continuing disqualification for the
profession. Without offending the Constitution, a statute making it a
misdemeanor to practice medicine after conviction of a felony may be
enforced against a person so convicted before the act was passed.[1566]
But the test oath prescribed after the Civil War, whereby office
holders, teachers, or preachers were required to swear that they had not
participated in the Rebellion, were held invalid on the ground that it
had no reasonable relation to fitness to perform official or
professional duties, but rather was a punishment for past
offenses.[1567] A similar oath required of suitors in the courts also
was held void.[1568]
Changes in Punishment
Statutes which changed an indeterminate sentence law to require a judge
to impose the maximum sentence, whereas formerly he could impose a
sentence between the minimum and maximum;[1569] abolished a rule which
prevented a subsequent conviction of first-degree murder after a jury
had found the accused guilty in the second-degree by a verdict which had
been set aside;[1570] required criminals sentenced to death to be kept
thereafter in solitary confinement,[1571] or allowed a warden to fix,
within limits of one week, and keep secret the time of execution,[1572]
were held to be _ex post facto_ as applied to offenses committed prior
to their enactment. But laws providing heavier penalties for new crimes
thereafter committed by habitual criminals;[1573] changing the
punishment from hanging to electrocution, fixing the place therefor in
the penitentiary, and permitting the presence of a greater number of
invited witnesses;[1574] or providing for close confinement of six to
nine months in the penitentiary, in lieu of three to six months in jail
prior to execution, and substituting the warden for the sheriff as
hangman, have been sustained.[1575]
Changes in Procedure
An accused person does not have a right to be tried in all respects in
accordance with the law in force when the crime charged was
committed.[1576] The mode of procedure may be changed so long as the
substantial rights of the accused are not curtailed.[1577] Laws shifting
the place of trial from one county to another,[1578] increasing the
number of appellate judges and dividing the appellate court into
divisions,[1579] granting a right of appeal to the State,[1580] changing
the method of selecting and summoning jurors,[1581] making separate
trials for persons jointly indicted a matter of discretion for the trial
court rather than a matter of right,[1582] and allowing a comparison of
handwriting experts[1583] have been sustained over the objection that
they were _ex post facto_. The contrary conclusion was reached with
respect to the application to felonies committed before a Territory was
admitted to the Union, of the provision in the State constitution which
permitted the trial of criminal cases by a jury of eight persons,
instead of the common law jury of twelve which was guaranteed by the
Sixth Amendment during the period of territorial government.[1584]
OBLIGATION OF CONTRACTS
Definition of Terms
"Law."--The term comprises statutes, constitutional
provisions,[1585] municipal ordinances,[1586] and administrative
regulations having the force and operation of statutes.[1587] How is it
as to judicial decisions? Not only does the abstract principle of the
separation of powers forbid the idea that the courts "make" law, but the
word "pass" in the above clause seems to confine it to the formal and
acknowledged methods of exercise of the law-making function.
Accordingly, the Court has frequently said that the clause does not
cover judicial decisions, however erroneous, or whatever their effect on
existing contract rights.[1588] Nevertheless, there are important
exceptions to this rule which are hereinafter set forth.
Status of Judicial Decisions.--Also, while the highest State
court usually has final authority in determining the construction as
well as the validity of contracts entered into under the laws of the
State, and the national courts will be bound by their decision of such
matters, nevertheless, for reasons which are fairly obvious, this rule
does not hold when the contract is one whose obligation is alleged to
have been impaired by State law.[1589] Otherwise, the challenged State
authority could be vindicated through the simple device of a
modification or outright nullification by the State court of the
contract rights in issue. Likewise, the highest State court usually has
final authority in construing State statutes and determining their
validity in relation to the State constitution. But this rule too has
had to bend to some extent to the Supreme Court's interpretation of the
obligation of contracts clause.[1590]
Suppose the following situation: (1) a municipality, acting under
authority conferred by a State statute, has issued bonds in aid of a
railway company; (2) the validity of this statute has been sustained by
the highest State court; (3) later the State legislature passes an act
to repeal certain taxes to meet the bonds; (4) it is sustained in doing
so by a decision of the highest State court holding that the statute
authorizing the bonds was unconstitutional _ab initio_. In such a case
the Supreme Court would take an appeal from the State court and would
reverse the latter's decision of unconstitutionally because of its
effect in rendering operative the act to repeal the tax.[1591]
Suppose further, however, that the State court has reversed itself on
the question of the constitutionality of the bonds in a suit by a
creditor for payment without there having been an act of repeal. In this
situation, as the cases stand today, the Supreme Court will still afford
relief if the case is one between citizens of different States, which
reaches it via a lower federal court.[1592] This is because in cases of
this nature the Court formerly felt free to determine questions of
fundamental justice for itself. Indeed, in such a case, the Court has
apparently in the past regarded itself as free to pass upon the
constitutionality of the State law authorizing the bonds even though
there has been no prior decision by the highest State court sustaining
them, the idea being that contracts entered into simply on the faith of
the _presumed_ constitutionality of a State statute are entitled to
this protection.[1593]
In other words, in cases of which it has jurisdiction because of
diversity of citizenship, the Court has held that the obligation of
contracts is capable of impairment by subsequent judicial decisions no
less than by subsequent statutes and that it is able to prevent such
impairment. In cases, on the other hand, of which it obtains
jurisdiction only on the constitutional ground, and by appeal from a
State court, it has always adhered in terms to the doctrine that the
word "laws" as used in article I, section 10, does not comprehend
judicial decisions. Yet even in these cases, it will intervene to
protect contracts entered into on the faith of existing decisions from
an impairment which is the direct result of a reversal of such
decisions, but there must be in the offing, as it were, a statute of
some kind--one possibly many years older than the contract rights
involved--on which to pin its decision.[1594]
In 1922 Congress, through an amendment to the Judicial Code, endeavored
to extend the reviewing power of the Supreme Court to suits involving
"'* * * the validity of a contract wherein it is claimed that a change
in the rule of law or construction of statutes by the highest court of a
State applicable to such contract would be repugnant to the Constitution
of the United States * * *'" This appeared to be an invitation to the
Court to say frankly that the obligation of a contract can be impaired
as well by a subsequent decision as by a subsequent statute. The Court,
however, declined the invitation in an opinion by Chief Justice Taft
which reviewed many of the cases covered in the preceding paragraphs.
Dealing with the Gelpcke and adherent decisions, Chief Justice Taft
said: "These cases were not writs of error to the Supreme Court of a
State. They were appeals or writs of error to federal courts where
recovery was sought upon municipal or county bonds or some other form of
contracts, the validity of which had been sustained by decisions of the
Supreme Court of a State prior to their execution, and had been denied
by the same court after their issue or making. In such cases the federal
courts exercising jurisdiction between citizens of different States held
themselves free to decide what the State law was, and to enforce it as
laid down by the State Supreme Court before the contracts were made
rather than in later decisions. They did not base this conclusion on
Article I, Sec. 10, of the Federal Constitution, but on the State law as
they determined it, which, in diverse citizenship cases, under the third
Article of the Federal Constitution they were empowered to do. Burgess
_v._ Seligman, 107 U.S. 20 (1883)."[1595] While doubtless this was an
available explanation in 1924, the decision in 1938 in Erie Railroad Co.
_v._ Tompkins, 304 U.S. 64, so cuts down the power of the federal courts
to decide diversity of citizenship cases according to their own notions
of "general principles of common law" as to raise the question whether
the Court will not be required eventually to put Gelpcke and its
companions and descendants squarely on the obligation of contracts
clause, or else abandon them.
"Obligation."--A contract is analyzable into two elements: the
_agreement_, which comes from the parties, and the _obligation_ which
comes from the law and makes the agreement binding on the parties. The
concept of obligation is an importation from the Civil Law and its
appearance in the contracts clause is supposed to have been due to James
Wilson, a graduate of Scottish universities and a Civilian. Actually the
term as used in the contracts clause has been rendered more or less
superfluous by the doctrine that the law in force when a contract is
made enters into and comprises a part of the contract itself.[1596]
Hence the Court sometimes recognizes the term in its decisions applying
the clause, sometimes ignores it. In Sturges _v._ Crowninshield,[1597]
decided in 1819, Marshall defines "obligation of contract" as "the law
which binds the parties to perform their agreement"; but a little later
the same year he sets forth the points presented for consideration in
Trustees of Dartmouth College _v._ Woodward[1598] to be: "1. Is this
contract protected by the Constitution of the United States? 2. Is it
impaired by the acts under which the defendant holds?"[1599] The word
"obligation" undoubtedly does carry the implication that the
Constitution was intended to protect only _executory_ contracts--i.e.,
contracts still awaiting performance; but as is indicated in a moment,
this implication was early rejected for a certain class of contracts,
with immensely important result for the clause.
"Impair."--"The obligations of a contract," says Chief Justice
Hughes for the Court in Home Building and Loan Association _v._
Blaisdell,[1600] "are impaired by a law which renders them invalid, or
releases or extinguishes them * * * and impairment, * * *, has been
predicated of laws which without destroying contracts derogate from
substantial contractual rights."[1601] But he straight-away adds: "Not
only are existing laws read into contracts in order to fix obligations
as between the parties, but the reservation of essential attributes of
sovereign power is also read into contracts as a postulate of the legal
order. The policy of protecting contracts against impairment presupposes
the maintenance of a government by virtue of which contractual relations
are worth while,--a government which retains adequate authority to
secure the peace and good order of society. This principle of
harmonizing the constitutional prohibition with the necessary residuum
of State power has had progressive recognition in the decisions of this
Court."[1602] In short, the law from which the obligation stems must be
understood to include Constitutional Law and, moreover, a "progressive"
Constitutional Law.[1603]
"Contracts," Extended to Cover Public Contracts.--Throughout
the first century of government under the Constitution, according to
Benjamin F. Wright, the contract clause had been considered in almost
forty per cent of all cases involving the validity of State legislation,
and of these the vast proportion involved legislative grants of one type
or other, the most important category being charters of
incorporation.[1604] Nor does this numerical prominence of such grants
in the cases overrate their relative importance from the point of view
of public interest. The question consequently arises whether the clause
was intended to be applied solely in protection of private contracts, or
in the protection also of public grants or, more broadly, in protection
of public contracts, in short, those to which a State is party?
Writing late in life, Madison explained the clause by allusion to what
had occurred "in the internal administration of the States," in the
years immediately preceding the Constitutional Convention, in regard to
private debts. "A violation of contracts," said he, "had become familiar
in the form of depreciated paper made a legal tender, of property
substituted for money, and installment laws, and the occlusions of the
courts of justice."[1605] He had, in fact, written to the same effect in
The Federalist, while the adoption of the Constitution was
pending.[1606]
The broader view of the intended purpose of the clause is,
nevertheless, not without considerable support. For one thing, the
clause departs from the comparable provision in the Northwest Ordinance
(1787) in two respects: First, in the _presence_ of the word
"obligation"; secondly, in the _absence_ of the word "private"; and
there is good reason for believing that Wilson may have been responsible
for both alterations, inasmuch as two years earlier he had denounced a
current proposal to repeal the Bank of North America's Pennsylvania
charter, in the following words: "If the act for incorporating the
subscribers to the Bank of North America shall be repealed in this
manner, a precedent will be established for repealing, in the same
manner, every other legislative charter in Pennsylvania. A pretence, as
specious as any that can be alleged on this occasion, will never be
wanting on any future occasion. Those acts of the State, which have
hitherto been considered as the sure anchors of privilege and of
property, will become the sport of every varying gust of politics, and
will float wildly backwards and forwards on the irregular and impetuous
tides of party and faction."[1607]
Furthermore, in its first important constitutional case, that of
Chisholm _v._ Georgia,[1608] the Court ruled that its original
jurisdiction extended to an action in assumpsit brought by a citizen of
South Carolina against the State of Georgia. This construction of the
federal judicial power was, to be sure, promptly repealed by the
Eleventh Amendment, but without affecting the implication that the
contracts protected by the Constitution included public contracts.
One important source of this diversity of opinion is to be found in that
ever welling spring of constitutional doctrine in early days, the
prevalence of Natural Law notions and the resulting vague significance
of the term "law." In Sturges _v._ Crowninshield, as we saw, Marshall
defined the _obligation of contracts_ as "the law which binds the
parties to perform their undertaking." Whence, however, comes this law?
If it comes from the State alone, which Marshall was later to deny even
as to private contracts,[1609] then it is hardly possible to hold that
the States' own contracts are covered by the clause, which manifestly
does not _create_ an obligation for contracts but only protects such
obligation as already exists. But if, on the other hand, the law
furnishing the obligation of contracts comprises Natural Law and kindred
principles, as well as law which springs from State authority, then,
inasmuch as the State itself is presumably bound by such principles, the
State's own obligations, so far as harmonious with them, are covered by
the clause.
Fletcher _v._ Peck
Fletcher _v._ Peck,[1610] which was decided in 1810, has the double
claim to fame that it was the first case in which the Supreme Court held
a State enactment to be in conflict with the Constitution,[1611] and
also the first case to hold that the contracts clause protected public
grants. By an act passed on January 7, 1795, the Georgia Legislature
directed the sale to four land companies of public lands comprising most
of what are now the States of Alabama and Mississippi. As soon became
known, the passage of the measure had been secured by open and wholesale
bribery. So when a new legislature took over in the winter of 1795-1796,
almost its first act was to revoke the sale made the previous year.
Meantime, however, the land companies had disposed of several millions
of acres of their holdings to speculators and prospective settlers, and
following the rescinding act some of these took counsel with Alexander
Hamilton as to their rights. In an opinion which was undoubtedly known
to the Court when it decided Fletcher _v._ Peck, Hamilton characterized
the repeal as contravening "the first principles of natural justice and
social policy," especially so far as it was made, "to the prejudice
* * * of third persons * * * innocent of the alleged fraud or
corruption; * * * [Moreover, he added,] the Constitution of the United
States, article first, section tenth, declares that no State shall pass
a law impairing the obligations of contract. This must be equivalent to
saying no State shall pass a law revoking, invalidating, or altering a
contract. Every grant from one to another, whether the grantor be a
State or an individual, is virtually a contract that the grantee shall
hold and enjoy the thing granted against the grantor, and his
representatives. It, therefore, appears to me that taking the terms of
the Constitution in their large sense, and giving them effect according
to the general spirit and policy of the provisions, the revocation of
the grant by the act of the legislature of Georgia may justly be
considered as contrary to the Constitution of the United States, and,
therefore null. And that the courts of the United States, in cases
within their jurisdiction, will be likely to pronounce it so."[1612] In
the debate to which the "Yazoo Land Frauds," as they were
contemporaneously known, gave rise in Congress, Hamilton's views were
quoted frequently.
So far as it invokes the obligation of contracts clause, Marshall's
opinion in Fletcher _v._ Peck performs two creative acts. He recognizes
that an obligatory contract is one still to be performed--in other
words, is an executory contract; also that a grant of land is an
executed contract--a conveyance. But, he asserts, every grant is
attended by "an implied contract" on the part of the grantor not to
claim again the thing granted. Thus, grants are brought within the
category of contracts having continuing obligation and so within article
I, Sec. 10. But the question still remained of the nature of this
obligation. Marshall's answer to this can only be inferred from his
statement at the end of his opinion. The State of Georgia, he says, "was
restrained" from the passing of the rescinding act "either by general
principles which are common to our free institutions, or by particular
provisions of the Constitution of the United States."[1613]
New Jersey _v._ Wilson
The protection thus thrown about land grants was presently extended, in
the case of New Jersey _v._ Wilson,[1614] to a grant of immunity from
taxation which the State of New Jersey had accorded certain Indian
lands; and several years after that, in the Dartmouth College
Case,[1615] to the charter privileges of an eleemosynary corporation.
Corporate Charters, Different Ways of Regarding
There are three ways in which the charter of a corporation may be
regarded. In the first place, it may be thought of simply as a license
terminable at will by the State, like a liquor-seller's license or an
auctioneer's license, but affording the incorporators, so long as it
remains in force, the privileges and advantages of doing business in the
form of a corporation. Nowadays, indeed, when corporate charters are
usually issued to all legally qualified applicants by an administrative
officer who acts under a general statute, this would probably seem to be
the natural way of regarding them were it not for the Dartmouth College
decision. But in 1819 charters were granted directly by the State
legislatures in the form of special acts, and there were very few
profit-taking corporations in the country.[1616] The later extension of
the benefits of the Dartmouth College decision to corporations organized
under general law took place without discussion.
Secondly, a corporate charter may be regarded as a franchise
constituting a vested or property interest in the hands of the holders,
and therefore as forfeitable only for abuse or in accordance with its
own terms. This is the way in which some of the early State courts did
regard them at the outset.[1617] It is also the way in which Blackstone
regards them in relation to the royal prerogative, although not in
relation to the sovereignty of Parliament; and the same point of view
finds expression in Story's concurring opinion in Dartmouth College _v._
Woodward, as it did also in Webster's argument in that case.[1618]
The Dartmouth College Case
The third view is the one formulated by Chief Justice Marshall in his
controlling opinion in Trustees of Dartmouth College _v._
Woodward.[1619] This is that the charter of Dartmouth College, a purely
private institution, was the outcome and partial record of a contract
between the donors of the college, on the one hand, and the British
Crown, on the other, which contract still continued in force between the
State of New Hampshire, as the successor to the Crown and Government of
Great Britain, and the trustees, as successors to the donors. The
charter, in other words, was not simply a grant--rather it was the
documentary record of a still existent agreement between still existent
parties.[1620] Taking this view, which he developed with great ingenuity
and persuasiveness, Marshall was able to appeal to the obligation of
contracts clause directly, and without further use of his fiction in
Fletcher _v._ Peck of an executory contract accompanying the grant.
A difficulty still remained, however, in the requirement that a contract
must, before it can have obligation, import consideration, that is to
say, must be shown not to have been entirely gratuitous on either side.
Nor was the consideration which induced the Crown to grant a charter to
Dartmouth College a merely speculative one. It consisted of the
donations of the donors to the important public interest of education.
Fortunately or unfortunately, in dealing with this phase of the case,
Marshall used more sweeping terms than were needful. "The objects for
which a corporation is created," he wrote, "are universally such as the
government wishes to promote. They are deemed beneficial to the country;
and this benefit constitutes the consideration, and in most cases, the
sole consideration of the grant." In other words, the simple fact of the
charter having been granted imports consideration from the point of view
of the State.[1621] With this doctrine before it, the Court in
Providence Bank _v._ Billings,[1622] and again in Charles River Bridge
Company _v._ Warren Bridge Company,[1623] admitted, without discussion
of the point, the applicability of the Dartmouth College decision to
purely business concerns.
Classes of Cases Under the Clause
The cases just reviewed produce two principal lines of decisions
stemming from the obligation of contracts clause: first, public grants;
second, private executory contracts. The chief category of the first
line of cases consists, in turn, of those involving corporate
privileges, both those granted directly by the States and those granted
by municipalities by virtue of authority conferred upon them by the
State;[1624] while private debts, inclusive of municipal debts, exhaust
for the most part the second line.
Public Grants
Municipal Corporations.--Not all grants by a State constitute
"contracts" within the sense of article I, section 10. In his Dartmouth
College decision Chief Justice Marshall conceded that "if the act of
incorporation be a grant of political power, if it creates a civil
institution, to be employed in the administration of the government,
* * *, the subject is one in which the legislature of the State may act
according to its own justment," unrestrained by the
Constitution[1625]--thereby drawing a line between "public" and
"private" corporations which remained undisturbed for more than half a
century.[1626] It has been subsequently held many times that municipal
corporations are mere instrumentalities of the State for the more
convenient administration of local governments, whose powers may be
enlarged, abridged, or entirely withdrawn at the pleasure of the
legislature.[1627] The same principle applies, moreover, to the property
rights which the municipality derives either directly or indirectly from
the State. This was first held as to the grant of a franchise to a
municipality to operate a ferry, and has since then been recognized as
the universal rule.[1628] As was stated in a case decided in 1923: "The
distinction between the municipality as an agent of the State for
governmental purposes and as an organization to care for local needs in
a private or proprietary capacity," while it limits the legal liability
of municipalities for the negligent acts or omissions of its officers or
agents, does not, on the other hand, furnish ground for the application
of constitutional restraints against the State in favor of its own
municipalities.[1629] Thus no contract rights are impaired by a statute
removing a county seat, even though the former location was by law to be
"permanent" when the citizens of the community had donated land and
furnished bonds for the erection of public buildings.[1630] Likewise a
statute changing the boundaries of a school district, giving to the new
district the property within its limits which had belonged to the former
district, and requiring the new district to assume the debts of the old
district, does not impair the obligation of contracts.[1631] Nor was the
contracts clause violated by State legislation authorizing State control
over insolvent communities through a Municipal Finance Commission.[1632]
Public Offices.--On the same ground of public agency, neither
appointment nor election to public office creates a contract in the
sense of article I, section 10, whether as to tenure, or salary, or
duties, all of which remain, so far as the Constitution of the United
States is concerned, subject to legislative modification or outright
repeal.[1633] Indeed there can be no such thing in this country as
property in office, although the common law sustained a different view
which sometimes found reflection in early cases.[1634] When, however,
services have once been rendered, there arises an implied contract that
they shall be compensated at the rate which was in force at the time
they were rendered.[1635] Also, an express contract between the State
and an individual for the performance of specific services falls within
the protection of the Constitution. Thus a contract made by the governor
pursuant to a statute authorizing the appointment of a commissioner to
conduct, over a period of years, a geological, mineralogical, and
agricultural survey of the State, for which a definite sum had been
authorized, was held to have been impaired by repeal of the
statute.[1636] But a resolution of a New Jersey local board of education
reducing teachers' salaries for the school year 1933-1934, pursuant to
an act of the legislature authorizing such action, was held not to
impair the contract of a teacher who, having served three years, was by
earlier legislation exempt from having his salary reduced except for
inefficiency or misconduct.[1637] Similarly, it was held that an
Illinois statute which reduced the annuity payable to retire teachers
under an earlier act did not violate the contracts clause, since it had
not been the intention of the earlier act to propose a contract but only
to put into effect a general policy.[1638] On the other hand, the right
of one, who had become a "permanent teacher" under the Indiana Teachers
Tenure Act of 1927, to continued employment was held to be contractual
and to have been impaired by the repeal in 1933 of the earlier
act.[1639]
Revocable Privileges Versus "Contracts": Tax Exemptions.--From
a different point of view, the Court has sought to distinguish between
grants of privileges, whether to individuals or to corporations, which
are contracts and those which are mere revocable licenses, although on
account of the doctrine of presumed consideration mentioned earlier,
this has not always been easy to do. In pursuance of the precedent set
in New Jersey _v._ Wilson,[1640] the legislature of a State "may exempt
particular parcels of property or the property of particular persons or
corporations from taxation, either for a specified period or
perpetually, or may limit the amount or rate of taxation, to which such
property shall be subjected," and such an exemption is frequently a
contract within the sense of the Constitution. Indeed this is always so
when the immunity is conferred upon a corporation by the clear terms of
its charter.[1641] When, on the other hand, an immunity of this sort
springs from general law, its precise nature is more open to doubt, as a
comparison of decisions will serve to illustrate.
In Piqua Branch of the State Bank _v._ Knoop,[1642] a closely divided
Court held that a general banking law of the State of Ohio which
provided that companies complying therewith and their stockholders
should be exempt from all but certain taxes, was, as to a bank organized
under it and its stockholders, a contract within the meaning of article
I, section 10. "The provision was not," the Court said, "a legislative
command nor a rule of taxation until changed, but a contract stipulating
against any change, from the nature of the language used and the
circumstances under which it was adopted."[1643] When, however, the
State of Michigan pledged itself, by a general legislative act, not to
tax any corporation, company, or individual undertaking to manufacture
salt in the State from water there obtained by boring on property used
for this purpose and, furthermore, to pay a bounty on the salt so
manufactured, it was held not to have engaged itself within the
constitutional sense. "General encouragements," said the Court, "held
out to all persons indiscriminately, to engage in a particular trade or
manufacture, whether such encouragement be in the shape of bounties or
drawbacks, or other advantage, are always under the legislative control,
and may be discontinued at any time."[1644] So far as exemption from
taxation is concerned the difference between these two cases is
obviously slight; but the later one is unquestionable authority for the
proposition that legislative bounties are repealable at will.
Furthermore, exemptions from taxation have in certain cases been treated
as gratuities repealable at will, even when conferred by specific
legislative enactments. This would seem always to be the case when the
beneficiaries were already in existence when the exemption was created
and did nothing of a more positive nature to qualify for it than to
continue in existence.[1645] Yet the cases are not always easy to
explain in relation to each other, except in light of the fact that the
Court's wider point of view has altered from time to time.[1646]
Vested Rights.--Lastly, the term "contracts" is used in the
contracts clause in its popular sense of an agreement of minds. The
clause therefore does not protect vested rights that are not referable
to such an agreement between the State and an individual, such as the
right to recovery under a judgment. The individual in question may have
a case under the Fourteenth Amendment, but not one under article I,
section 10.[1647]
Reservation of the Right to Alter and Repeal
So much for the meaning of the word "contract" when public grants are
meant. It is next in order to consider four principles or doctrines
whereby the Court has itself broken down the force of the Dartmouth
College decision in great measure in favor of State legislative power.
By the logic of the Dartmouth College decision itself the State may
reserve in a corporate charter the right to "amend, alter, and repeal"
the same, and such reservation becomes a part of the contract between
the State and the incorporators, the obligation of which is accordingly
not impaired by the exercise of the right.[1648] Later decisions
recognize that the State may reserve the right to amend, alter, and
repeal by general law, with the result of incorporating the reservation
in all charters of subsequent date.[1649] There is, however, a
difference between a reservation by a statute and one by constitutional
provision. While the former may be repealed as to a subsequent charter
by the specific terms thereof, the latter may not.[1650]
The Right to Reserve: When Limited.--Is the right which is
reserved by a State to "amend" or "alter" a charter without restriction?
When it is accompanied, as it generally is, by the right to "repeal,"
one would suppose that the answer to this question was self-evident.
None the less, there are a number of judicial dicta to the effect that
this power is not without limit, that it must be exercised reasonably
and in good faith, and that the alterations made must be consistent with
the scope and object of the grant, etc.[1651] Such utterances amount,
apparently, to little more than an anchor to windward, for while some of
the State courts have applied tests of this nature to the disallowance
of legislation, it does not appear that the Supreme Court of the United
States has ever done so.[1652]
Quite different is it with the distinction pointed out in the cases
between the franchises and privileges which a corporation derives from
its charter and the rights of property and contract which accrue to it
in the course of its existence. Even the outright repeal of the former
does not wipe out the latter or cause them to escheat to the State. The
primary heirs of the defunct organization are its creditors; but
whatever of value remains after their valid claims are met goes to the
former shareholders.[1653] By the earlier weight of authority, on the
other hand, persons who contract with companies whose charters are
subject to legislative amendment or repeal do so at their own risk: any
"such contracts made between individuals and the corporation do not vary
or in any manner change or modify the relation between the State and the
corporation in respect to the right of the State to alter, modify, or
amend such a charter, * * *"[1654] But later holdings becloud this
rule.[1655]
Corporations As Persons Subject To The Law.--But suppose the
State neglects to reserve the right to amend, alter, or repeal--is it,
then, without power to control its corporate creatures? By no means.
Private corporations, like other private persons, are always presumed to
be subject to the legislative power of the State; from which it follows
that immunities conferred by charter are to be treated as exceptions to
an otherwise controlling rule. This principle was recognized by Chief
Justice Marshall in the case of Providence Bank _v._ Billings,[1656] in
which he held that in the absence of express stipulation or reasonable
implication to the contrary in its charter, the bank was subject to the
taxing power of the State, notwithstanding that the power to tax is the
power to destroy.
Corporations and the Police Power.--And of course the same
principle is equally applicable to the exercise by the State of its
police powers. Thus, in what was perhaps the leading case before the
Civil War, the Supreme Court of Vermont held that the legislature of
that State had the right, in furtherance of the public safety, to
require chartered companies operating railways to fence in their tracks
and provide cattle yards. In a matter of this nature, said the Court,
corporations are on a level with individuals engaged in the same
business, unless, from their charter, they can prove the contrary.[1657]
Since then the rule has been applied many times in justification of
State regulation of railroads,[1658] and even of the application of a
State prohibition law to a company which had been chartered expressly to
manufacture beer.[1659]
The Strict Construction of Public Grants
Long, however, before the cases last cited were decided, the principle
which they illustrate had come to be powerfully reinforced by two
others, the first of which is that all charter privileges and immunities
are to be strictly construed as against the claims of the State; or as
it is otherwise often phrased, "nothing passes by implication in a
public grant."
The Charles River Bridge Case.--The leading case is that of the
Charles River Bridge Company _v._ Warren Bridge Company,[1660] which was
decided shortly after Chief Justice Marshall's death by a substantially
new Court. The question at issue was whether the charter of the
complaining company, which authorized it to operate a toll bridge, stood
in the way of the State's permitting another company of later date to
operate a free bridge in the immediate vicinity. Inasmuch as the first
company could point to no clause in its charter which specifically
vested it with an exclusive right, the Court held the charter of the
second company to be valid on the principle just stated. Justice Story,
who remained from the old Bench, presented a vigorous dissent, in which
he argued cogently, but unavailingly, that the monopoly claimed by the
Charles River Bridge Company was fully as reasonable an implication from
the terms of its charter and the circumstances surrounding its
concession as perpetuity had been from the terms of the Dartmouth
College charter and the environing transaction.
The Court was in fact making new law, because it was looking at things
from a new point of view. This was the period when judicial recognition
of the Police Power began to take on a doctrinal character. It was also
the period when the railroad business was just beginning. Chief Justice
Taney's opinion evinces the influence of both these developments. The
power of the State to provide for its own internal happiness and
prosperity was not, he asserted, to be pared away by mere legal
intendments; nor was its ability to avail itself of the lights of modern
science to be frustrated by obsolete interests such as those of the old
turnpike companies, the charter privileges of which, he apprehended,
might easily become a bar to the development of transportation along new
lines.[1661]
Applications of the Strict Construction Rule.--The rule of
strict construction has been reiterated by the Court many times. A good
illustration is afforded by the following passage from its opinion in
Blair _v._ Chicago,[1662] decided nearly seventy years after the Charles
River Bridge Case: "Legislative grants of this character should be in
such unequivocal form of expression that the legislative mind may be
distinctly impressed with their character and import, in order that the
privileges may be intelligently granted or purposely withheld. It is a
matter of common knowledge that grants of this character are usually
prepared by those interested in them, and submitted to the legislature
with a view to obtain from such bodies the most liberal grant of
privileges which they are willing to give. This is one among many
reasons why they are to be strictly construed. * * * 'The principle is
this, that all rights which are asserted against the State must be
clearly defined, and not raised by inference or presumption; and if the
charter is silent about a power, it does not exist. If, on a fair
reading of the instrument, reasonable doubts arise as to the proper
interpretation to be given to it, those doubts are to be solved in favor
of the State; and where it is susceptible of two meanings, the one
restricting and the other extending the powers of the corporation, that
construction is to be adopted which works the least harm to the
State.'"[1663]
Strict Construction of Tax Exemptions.--An excellent
illustration of the operation of the rule in relation to tax exemptions
is furnished by the derivative doctrine that an immunity of this
character must be deemed as intended solely for the benefit of the
corporation receiving it and hence may not, in the absence of express
permission by the State, be passed on to a successor.[1664] Thus, where
two companies, each exempt from taxation, were permitted by the
legislature to consolidate the new corporation was held to be subject to
taxation.[1665] Again, a statute which granted a corporation all "the
rights and privileges" of an earlier corporation was held not to confer
the latter's "immunity" from taxation.[1666] Yet again, a legislative
authorization of the transfer by one corporation to another of the
former's "estate, property, right, privileges, and franchises" was held
not to clothe the later company with the earlier one's exemption from
taxation.[1667]
Furthermore, an exemption from taxation is to be strictly construed
even in the hands of one clearly entitled to it. So the exemption
conferred by its charter on a railway company was held not to extend to
branch roads constructed by it under a later statute.[1668] Also, a
general exemption of the property of a corporation from taxation was
held to refer only to the property actually employed in its
business.[1669] Also, the charter exemption of the capital stock of a
railroad from taxation "for ten years after completion of the said road"
was held not to become operative until the completion of the road.[1670]
So also the exemption of the campus and endowment fund of a college was
held to leave other lands of the college, though a part of its
endowment, subject to taxation.[1671] Likewise, provisions in a statute
that bonds of the State and its political subdivisions are not to be
taxed and shall not be taxed were held not to exempt interest on them
from taxation as income of the owners.[1672]
Strict Construction and the Police Power.--The police power,
too, has frequently benefited from the doctrine of strict construction,
although, for a reason pointed out below, this recourse is today seldom,
if ever, necessary in this connection. Some of the more striking cases
may be briefly summarized. The provision in the charter of a railway
company permitting it to set reasonable charges still left the
legislature free to determine what charges were reasonable.[1673] On the
other hand, when a railway agreed to accept certain rates for a
specified period, it thereby foreclosed the question of the
reasonableness of such rates.[1674] The grant to a company of the right
to supply a city with water for twenty-five years was held not to
prevent a similar concession to another company by the same city.[1675]
The promise by a city in the charter of a water company not to make a
similar grant to any other person or corporation was held not to prevent
the city itself from engaging in the business.[1676] A municipal
concession to a water company which was to run for thirty years and
which was accompanied by the provision that the "said company shall
charge the following rates," was held not to prevent the city from
reducing such rates.[1677] But more broadly, the grant to a municipality
of the power to regulate the charges of public service companies was
held not to bestow the right to contract away this power.[1678] Indeed,
any claim by a private corporation that it received the rate-making
power from a municipality must survive a two-fold challenge: first, as
to the right of the municipality under its charter to make such a grant;
secondly, as to whether it has actually done so; and in both respects
an affirmative answer must be based on express words and not on
implication.[1679]
The Doctrine of Inalienable State Powers
The second of the doctrines mentioned above whereby the principle of the
subordination of all persons, corporate and individual alike, to the
legislative power of the State has been fortified, is the doctrine that
certain of the State's powers are inalienable, and that any attempt by a
State to alienate them, upon any consideration whatsoever, is _ipso
facto_ void, and hence incapable of producing a "contract" within the
meaning of article I, section 10. One of the earliest cases to assert
this principle occurred in New York in 1826. The corporation of the City
of New York, having conveyed certain lands for the purposes of a church
and cemetery together with a covenant for quiet enjoyment, later passed
a by-law forbidding their use as a cemetery. In denying an action
against the city for breach of covenant, the State court said the
defendants "had no power as a party, [to the covenant] to make a
contract which should control or embarrass their legislative powers and
duties."[1680]
The Eminent Domain Power Inalienable.--The Supreme Court first
applied similar doctrine in 1848 in a case involving a grant of
exclusive right to construct a bridge at a specified locality.
Sustaining the right of the State of Vermont to make a new grant to a
competing company, the Court held that the obligation of the earlier
exclusive grant was sufficiently recognized in making just compensation
for it; and that corporate franchises, like all other forms of
property, are subject to the overruling power of eminent domain.[1681]
This reasoning was reinforced by an appeal to the theory of State
sovereignty, which was held to involve the corollary of the
inalienability of all the principal powers of a State.
The subordination of all charter rights and privileges to the power of
eminent domain has been maintained by the Court ever since; not even an
explicit agreement by the State to forego the exercise of the power will
avail against it.[1682] Conversely, the State may revoke an improvident
grant of the public petitionary without recourse to the power of eminent
domain, such a grant being inherently beyond the power of the State to
make. So when the legislature of Illinois in 1869 devised to the
Illinois Central Railroad Company, its successors and assigns, the
State's right and title to nearly a thousand acres of submerged land
under Lake Michigan along the harbor front of Chicago, and four years
later sought to repeal the grant, the Court, in a four-to-three
decision, sustained an action by the State to recover the lands in
question. Said Justice Field, speaking for the majority: "Such
abdication is not consistent with the exercise of that trust which
requires the government of the State to preserve such waters for the use
of public. The trust devolving upon the State for the public, and which
can only be discharged by the management and control of property in
which the public has an interest, cannot be relinquished by a transfer
of the property. * * * Any grant of the kind is necessarily revocable,
and the exercise of the trust by which the property was held by the
State can be resumed at any time."[1683] The case affords an interesting
commentary on Fletcher _v._ Peck.[1684]
The Taxing Power Not Inalienable.--On the other hand, repeated
endeavors to subject tax exemptions to the doctrine of inalienability
though at times supported by powerful minorities on the Bench, have
always failed.[1685] As recently as January, 1952, the Court ruled that
the Georgia Railway Company was entitled to seek an injunction in the
federal courts against an attempt by Georgia's Revenue Commission to
compel it to pay _ad valorem_ taxes contrary to the terms of its special
charter issued in 1833. To the argument that this was a suit contrary to
the Eleventh Amendment it returned the answer that the immunity from
Federal jurisdiction created by the Amendment "does not extend to
individuals who act as officers without constitutional authority."[1686]
The Police Power; When Inalienable.--The leading case involving
the police power is Stone _v._ Mississippi, 101 U.S. 814, decided in
1880. In 1867 the legislature of Mississippi chartered a company to
which it expressly granted the power to conduct a lottery. Two years
later the State adopted a new Constitution which contained a provision
forbidding lotteries; and a year later the legislature passed an act to
put this provision into effect. In upholding this act and the
constitutional provision on which it was based, the Court said: "The
power of governing is a trust committed by the people to the government,
no part of which can be granted away. The people, in their sovereign
capacity, have established their agencies for the preservation of the
public health and the public morals, and the protection of public and
private rights," and these agencies can neither give away nor sell their
discretion. All that one can get by a charter permitting the business of
conducting a lottery "is suspension of certain governmental rights in
his favor, subject to withdrawal at will."[1687]
The Court shortly afterward applied the same reasoning in a case in
which was challenged the right of Louisiana to invade the exclusive
privilege of a corporation engaged in the slaughter of cattle in New
Orleans by granting another company the right to engage in the same
business. Although the State did not offer to compensate the older
company for the lost monopoly, its action was sustained on the ground
that it had been taken in the interest of the public health.[1688] When,
however, the City of New Orleans, in reliance on this precedent, sought
to repeal an exclusive franchise which it had granted a company for
fifty years to supply gas to its inhabitants, the Court interposed its
veto, explaining that in this instance neither the public health, the
public morals, nor the public safety was involved.[1689]
Later decisions, nonetheless, apply the principle of inalienability
broadly. To quote from one: "It is settled that neither the 'contract'
clause nor the 'due process' clause has the effect of overriding the
power to the State to establish all regulations that are reasonably
necessary to secure the health, safety, good order, comfort, or general
welfare of the community; that this power can neither be abdicated nor
bargained away, and is inalienable even by express grant; and all
contract and property rights are held subject to its fair
exercise."[1690] Today, indeed, it scarcely pays a company to rely upon
its charter privileges or upon special concessions from a State in
resisting the application to it of measures claiming to have been
enacted by the police power thereof. For if this claim is sustained by
the Court, the obligation of the contract clause will not avail; while
if it is not, the due process of law clause of the Fourteenth Amendment
will furnish a sufficient reliance. That is to say, the discrepancy
which once existed between the Court's theory of an overriding police
power in these two adjoining fields of Constitutional Law is today
apparently at an end. Indeed, there is usually no sound reason why
rights based on public grant should be regarded as more sacrosanct than
rights which involve the same subject matter but are of different
provenience.
Private Contracts
Scope of the Term.--The term "private contracts" is, naturally,
not all-inclusive. A judgment, though granted in favor of a creditor, is
not a contract in the sense of the Constitution;[1691] nor is
marriage.[1692] And whether a particular agreement is a valid contract
is a question for the courts, and finally for the Supreme Court, when
the protection of the contract clause is invoked.[1693]
Source of the Obligation.--The question of the nature and
source of the obligation of a contract, which went by default in
Fletcher _v._ Peck and the Dartmouth College case, with such vastly
important consequences, had eventually to be met and answered by the
Court in connection with private contracts. The first case involving
such a contract to reach the Supreme Court was Sturges _v._
Crowninshield[1694] in which a debtor sought escape behind a State
insolvency act of later date than his note. The act was held
inoperative; but whether this was because of its retroaction in this
particular case or for the broader reason that it assumed to excuse
debtors from their promises, was not at the time made clear. As noted
earlier, Chief Justice Marshall's definition on this occasion of the
obligation of a contract as the law which binds the parties to perform
their undertakings was not free from ambiguity, owing to the uncertain
connotation of the term _law_.
Ogden _v._ Saunders.--These obscurities were finally
cleared up for most cases in Ogden _v._ Saunders,[1695] in which the
temporal relation of the statute and the contract involved was exactly
reversed--the former antedating the latter. Marshall contended, but
unsuccessfully, that the statute was void, inasmuch as it purported to
release the debtor from that original, intrinsic obligation which always
attaches under natural law to the acts of free agents. "When," he wrote,
"we advert to the course of reading generally pursued by American
statesmen in early life, we must suppose that the framers of our
Constitution were intimately acquainted with the writings of those wise
and learned men whose treatises on the laws of nature and nations have
guided public opinion on the subjects of obligation and contract," and
that they took their views on these subjects from those sources. He also
posed the question of what would happen to the obligation of contracts
clause if States might pass acts declaring that all contracts made
subsequently thereto should be subject to legislative control.[1696]
For the first and only time majority of the Court abandoned the Chief
Justice's leadership. Speaking by Justice Washington it held that the
obligation of private contracts is derived from the municipal law--State
statutes and judicial decisions--and that the inhibition of article I,
section 10, is confined to legislative acts made after the contracts
affected by them, with one exception. For by a curiously complicated
line of reasoning it was also held in this same case that when the
creditor is a nonresident, then a State may not by an insolvent law
rights under a contract, albeit one of later date.
With the proposition established that the obligation of a private
contract comes from the _municipal_ law in existence when the contract
is made, a further question presents itself, namely, what part of the
municipal law is referred to? No doubt, the law which determines the
validity of the contract itself is a part of such law. Also, the law
which interprets the terms used in the contract, or which supplies
certain terms when others are used; as for instance, constitutional
provisions or statutes which determine what is "legal tender" for the
payment of debts; or judicial decisions which construe the term "for
value received" as used in a promissory note, and so on. In short, any
law which at the time of the making of a contract goes to measure the
rights and duties of the parties to it in relation to each other enters
into its obligation.
Remedy a Part of the Obligation
Suppose, however, that one of the parties to a contract fails to live up
to his obligation as thus determined. The contract itself may now be
regarded as at an end; but the injured party, nevertheless, has a new
set of rights in its stead, those which are furnished him by the
remedial law, including the law of procedure. In the case of a mortgage,
he may foreclose; in the case of a promissory note, he may sue; in
certain cases, he may demand specific performance. Hence the further
question arises, whether this remedial law is to be considered a part of
the law supplying the obligation of contracts. Originally, the
predominating opinion was negative, since as we have just seen, this law
does not really come into operation until the contract has been broken.
Yet it is obvious that the sanction which this law lends to contracts is
extremely important--indeed, indispensable. In due course it became the
accepted doctrine that that part of the law which supplies one party to
a contract with a remedy if the other party does not live up to his
agreement, as authoritatively interpreted, entered into the "obligation
of contracts" in the constitutional sense of this term, and so might not
be altered to the material weakening of existing contracts. In the
court's own words, "Nothing can be more material to the obligation than
the means of enforcement. Without the remedy the contract may, indeed,
in the sense of the law, be said not to exist, and its obligation to
fall within the class of those moral and social duties which depend for
their fulfillment wholly upon the will of the individual. The ideas of
validity and remedy are inseparable, * * *"[1697]
Establishment Of The Rules.--This rule was first definitely
announced in 1843 in the case of Bronson _v._ Kinzie.[1698] Here an
Illinois mortgage giving the mortgagee an unrestricted power of sale in
case of the mortgagor's fault was involved, along with a later act of
the legislature which required mortgaged premises to be sold for not
less than two-thirds of the appraised value, and allowed the mortgagor a
year after the sale to redeem them. It was held that the statute, in
altering the preexisting remedies to such an extent, violated the
constitutional prohibition, and hence was void. The year following a
like ruling was made in the case of McCracken _v._ Hayward[1699] as to a
statutory provision that personal property should not be sold under
execution for less than two-thirds of its appraised value.
Qualifications Of The Rule.--But the rule illustrated by these
cases does not signify that a State may make no changes in its remedial
or procedural law which affect existing contracts. "Provided," the Court
has said, "a substantial or efficacious remedy remains or is given, by
means of which a party can enforce his rights under the contract, the
Legislature may modify or change existing remedies or prescribe new
modes of procedure."[1700] Thus States are constantly remodelling their
judicial systems and modes of practice unembarrassed by the obligation
of contracts clause.[1701] The right of a State to abolish imprisonment
for debt was early asserted.[1702] Again the right of a State to shorten
the time for the bringing of actions has been affirmed even as to
existing causes of action, but with the proviso added that a reasonable
time must be left for the bringing of such actions.[1703] On the other
hand, a statute which withdrew the judicial power to enforce
satisfaction of a certain class of judgments by mandamus was held
invalid.[1704] In the words of the Court: "Every case must be determined
upon its own circumstances;"[1705] and it later added: "In all such
cases the question becomes, * * *, one of reasonableness, and of that
the legislature is primarily the judge."[1706]
The Municipal Bond Cases.--There is one class of cases
resulting from the doctrine that the law of remedy constitutes a part of
the obligation of a contract to which a special word is due. This
comprises cases in which the contracts involved were municipal bonds.
While a city is from one point of view but an emanation from the
government's sovereignty and an agent thereof, when it borrows money it
is held to be acting in a corporate or private capacity, and so to be
suable on its contracts. Furthermore, as was held in the leading case of
Von Hoffman _v._ Quincy,[1707] "where a State has authorized a municipal
corporation to contract and to exercise the power of local taxation to
the extent necessary to meet its engagements, the power thus given
cannot be withdrawn until the contract is satisfied." In this case the
Court issued a mandamus compelling the city officials to levy taxes for
the satisfaction of a judgment on its bonds in accordance with the law
as it stood when the bonds were issued.[1708] Nor may a State by
dividing an indebted municipality among others enable it to escape its
obligations. In such a case the debt follows the territory, and the duty
of assessing and collecting taxes to satisfy it devolves upon the
succeeding corporations and their officers.[1709] But where a municipal
organization has ceased practically to exist through the vacation of its
offices, and the government's function is exercised once more by the
State directly, the Court has thus far found itself powerless to
frustrate a program of repudiation.[1710] However, there is no reason
why the State should enact the role of _particeps criminis_ in an
attempt to relieve its municipalities of the obligation to meet their
honest debts. Thus in 1931, during the Great Depression, New Jersey
created a Municipal Finance Commission with power to assume control over
its insolvent municipalities. To the complaint of certain bondholders
that this legislation impaired the contract obligations of their
debtors, the Court, speaking by Justice Frankfurter, pointed out that
the practical value of an unsecured claim against a city is "the
effectiveness of the city's taxing power," which the legislation under
review was designed to conserve.[1711]
Private Contracts and the Police Power
The increasing subjection of public grants to the State's police power
has been previously pointed out. That purely private contracts should be
in any stronger situation in this respect would obviously be anomalous
in the extreme. In point of fact, the ability of private parties to
curtail governmental authority by the easy devise of contracting with
one another is, with an exception to be noted, even less than that of
the State to tie its own hands by contracting away its own powers. So,
when it was contended in an early Pennsylvania case, than an act
prohibiting the issuance of notes by unincorporated banking associations
was violative of the obligation of contracts clause because of its
effect upon certain existing contracts of members of such associations,
the State Supreme Court answered: "But it is said, that the members had
formed a contract _between themselves_, which would be dissolved by the
stoppage of their business; and what then? Is that such a violation of
contracts as is prohibited by the Constitution of the United States?
Consider to what such a construction would lead. Let us suppose, that in
one of the States there is no law against gaming, cock-fighting,
horse-racing or public masquerades, and that companies should be formed
for the purpose of carrying on these practices; * * *" Would the
legislature then be powerless to prohibit them? The answer returned, of
course, was no.[1712]
The prevailing doctrine is stated by the Supreme Court of the United
States in the following words: "It is the settled law of this court that
the interdiction of statutes impairing the obligation of contracts does
not prevent the State from exercising such powers as are vested in it
for the promotion of the common weal, or are necessary for the general
good of the public, though contracts previously entered into between
individuals may thereby be affected. * * * In other words, that parties
by entering into contracts may not estop the legislature from enacting
laws intended for the public good."[1713]