CHAPTER XIV

LEGAL TENDER CASES IN THE SUPREME COURT

THE question of taxing certificates of indebtedness and legal tender notes came before the Supreme Court for review on writs of error and was decided in 1868. The first-named form of security was declared not subject to municipal taxation in the case of The Banks vs. The Mayor (7 Wall. 16) and the tax was declared unconstitutional. In another case, Bank of New York vs. Supervisors (7 Wall. 26), it was held that although the greenbacks circulated as money, they were also obligations of the United States, and hence not taxable.

Respecting legal tender, it was held in Lane County vs. Oregon (7 Wall. 71) that taxes laid by a state were not "debts" within the meaning of the legal tender act. In Bronson vs. Rodes (7 Wall. 229) it was held that an express contract to pay coin was not dischargeable with legal tender notes, one Justice (Miller) dissenting from the decision.

As to the validity of the act of Congress taxing state banknotes 10 per cent., it was held in Veazie Bank vs. Fenno (8 Wall. 533) that the act was constitutional, the federal government having the power to tax out of existence such form of currency in order to make room for another form if national in character. Two Justices, Nelson and Davis, dissented.

It was also held that the shares of stock in a national bank were subject to state tax even though the entire capital of the bank were invested in United States bonds. The tax was held to be in the nature of a franchise tax or license to do business, and hence within the power of the state to impose.

The main question, whether the legal tender acts themselves were constitutional, did not come before the Supreme Court until 1867, and the decision was not published until February 7, 1870. (Hepburn vs. Griswold, 8 Wall. 603.) Circumstances attending this decision and its subsequent reversal (Legal Tender Cases, 1871, 12 Wall. 457) caused so much comment at the time that they will be given place here.

The Court in 1867 consisted of eight members, as follows: Chief Justice Chase, formerly Secretary of the Treasury, whom Lincoln appointed in 1864 upon the death of Chief Justice Taney, and who had for some time been regarded as more of a Democrat than a Republican; Justices Grier, Nelson, Clifford, and Field, looked upon as Democrats; and Justices Miller, Davis, and Swayne, regarded as Republicans. An act of Congress of July 23, 1866, provided that the Court be reduced to seven members, the reduction to be effected by not filling the next vacancy caused either by death or retirement. While the first legal tender case was pending, a decision against the validity of the act was anticipated, and an act was passed in April, 1869, to take effect December 1, 1869, restoring to the Supreme Court the previous membership of nine. It was expected that Justice Grier would soon retire, thus enabling the appointment of two justices with Republican antecedents and favorable to the view of that party that the greenbacks were, and should remain, lawful money.1 The case, as stated, came before the Court in 1867, but owing to its importance was held for reargument until 1868, and was actually decided November, 1869, by the expected vote, 5 to 3. The form of the opinion was, as is the custom, submitted to conference and adopted January 29, 1870, and would have been published two days later, but a week was given to the dissenting Justices (Miller, Davis, and Swayne) to prepare their views.2 On February 1, 1870, Justice Grier retired, and on the 14th of that month William Strong of Pennsylvania was appointed in 1 1 Schuckers, Life of Chase. Chase in the dissent, 12 Wall.

his stead by President Grant. In March following Joseph P. Bradley of New Jersey was appointed to fill the place which the act of April, 1869, had "revived." Both of these appointees were known to favor the legal tender act, Justice Strong, when on the bench in his own state, having written an elaborate opinion declaring it constitutional.

The decision in Hepburn vs. Griswold was written by Chief Justice Chase, who thus passed upon the validity of his own acts as Secretary of the Treasury. The debt in this case had been contracted in 1860 and fell due February 20, 1862 (five days prior to the approval of the legal tender act). It was not paid, nor was payment tendered, until March, 1864.

The opinion held that the act by its terms was manifestly intended to apply to all debts, those contracted before as well as those incurred after the act (from this there was no dissent); that therefore the act impaired the obligation of contracts, compelling a creditor to receive $1000 in paper, in lieu of coin, when in fact $1000 in coin was at the time equal to $2000 or more in paper, and thus an arbitrary injustice would be done. The power to do this was not granted by the Constitution, either expressly or impliedly, and all power of Congress is limited by the fundamental law. Not only may specifically expressed powers be exercised, but it is within the power of Congress by implication to employ such means, not prohibited by nor repugnant to the Constitution, as were necessary and appropriate to execute any of the express powers. The power to determine what shall be legal tender is a governmental one, and in the United States vested in Congress so far as relates to coins; but this grant of power does not carry with it that of clothing paper with the same quality. The emission of Treasury notes was, as a form of borrowing, held to be valid, but this did not carry with it the power to make them legal tender. Manifestly, if Congress were clothed with power to adopt any and all means it saw fit in executing the express powers granted by the Constitu

tion, it had absolute power, which was not consistent with American ideas of government.

It was denied that giving the notes legal tender power was "appropriate" or "plainly adapted" to the purpose in view. It did not save them from depreciation but added to the long train of evils which irredeemable currency always brings, and since the result necessarily was an impairment of existing contracts and also the taking of private property (so large a portion of which consisted of contracts) without due process of law, the act was inconsistent with and prohibited by the Constitution.

In dissenting, Justice Miller urged that under the express power to declare war, support an army and navy, borrow money and pay national debts, provide for the common defence and general welfare, Congress had, in the emergency, no other recourse to save the government and the Constitution; the legal tender act furnished the means, the ordinary use of the government's credit having failed; it was passed reluctantly only after it had become imperative; that if, as the Court had just previously ruled (Veazie Bank case), in order to provide a national currency either by means of government notes or national banknotes, Congress could place a prohibitive tax on state bank-notes, how much more appropriate and effectual for the purpose it was to give the government notes legal tender power; undoubtedly contracts were impaired, but the states, not Congress, were prohibited by the Constitution from enacting laws impairing the validity of contracts; national bankruptcy laws are constitutional although they clearly impair contracts; as to taking property without due process of law, the legal tender act does so indirectly, but so do other acts for great national purposes the tariff laws, a declaration of war, additional bond issues depreciating those already out; moreover, by declaring the act void all business would be disturbed, millions of dollars sacrificed, and thus great injustice done. In conclusion, the choice of

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