market. Cattle raised on the interior farms were sent abroad in such numbers that the foreign trade complained that British graziers were being forced out of the British market. By a rather remarkable coincidence the famous tide-water pipe-line from the Pennsylvania oil-wells was completed in 1879, and the year's export of this product rose nearly two million barrels over the highest previous record. By another coincidence, equally independent of any events already noticed, the cotton crop of India fell off 30 per cent from the autumn stock of 1878 and 50 per cent from 1877, and with the consequent heavy purchases by foreign spinners, the season's export of American cotton was the largest ever yet recorded.

The first result of this sudden change in the situation was a fall in the foreign exchanges, and consequent dissipation of all fears that the resumption fund would be impaired. With this menace removed from the financial outlook, the country's torpid enterprise awoke. The trade revival which ensued was without question the most remarkable in this country's commercial history.

IIO.

CONSTITUTIONALITY OF THE LEGAL-TENDER NOTES.1

BY DAVIS R. DEWEY

For some time after the issue of the greenbacks there was uncertainty as to the legal-tender attribute of the treasury notes, and questions quickly arose which required settlement in the State and federal courts. The trend of the decisions of the Supreme Court from the first was toward a limitation of the notes: In Lane County v. Oregon (1868) it was held that the notes were not legal tender for State taxes; in The Bank v. Supervisors (1868) that they were obligations or securities, and consequently exempt from taxation; and in Bronson v. Rodes (1868) that they were not legal tender in the settlement of contracts specifically calling for the payment of specie. Finally the more direct question of constitutionality was passed upon by the Supreme Court in 1869 in the case of Hepburn v. Griswold. In 1860 a Mrs. Hepburn in a promissory note agreed to pay Griswold on February 20, 1862, $11,250. At each of the above dates the only lawful money was gold and silver coin. Mrs. Hepburn failed to pay the note at maturity, and upon a suit brought in Kentucky, in March, 1864, tendered payment in United States notes which had been issued

Adapted from Financial History of the United States, pp. 362–67. (Longmans, Green, & Co., 1903.)

February 25, 1862, that is, five days after the maturity of the note. The tender was refused. An appeal was carried to the United States Supreme Court, and a decision rendered in December, 1869. The opinion by a fateful stroke of fortune was delivered by Chief Justice Chase, in whose administration as secretary of the treasury the notes had been first issued. The legal-tender quality was denied; yet the whole question was not covered, because the case involved only the tender of notes in settlement of contracts entered on previous to the first legal-tender act; and Chase, in the declaratory portions of the opinion, was careful to limit the application of the decision to such contracts. Nevertheless the court clearly indicated its conviction on the question of the constitutionality of notes tendered in the settlement of current contracts, for it practically asserted that the legaltender clause was not only improper, but unnecessary. "Amid the tumult of the late Civil War, the time was not favorable to considerate reflection upon the constitutional limits of legislative or executive authority. If power was assumed from patriotic motives, the assumption found ready justification in patriotic hearts. Many who doubted yielded their doubts; many who did not doubt were silent. Some who were strongly averse to making government notes a legal tender felt themselves constrained to acquiesce in the views of the advocates of the measure. Not a few who then insisted upon its necessity, or acquiesced in that view, have, since the return of peace, and under the influence of the calmer time, reconsidered their conclusions, and now concur in those which we have just announced." Three justices concurred with Chase in the majority opinion, while a dissenting opinion was rendered by Justice Miller in which two of his associates joined, thus dividing the court, four to three.

The decision was unpopular. The close division of the court, when it was not complete, was an irritating factor, to say nothing of the disturbance to business if gold payments were to be enforced. A second case, Knox v. Lee, subsequently came before the court, but before the decision was rendered in May, 1871, the membership of the court was changed by the addition of two members, one to fill a vacancy, and the other through a statute enlarging the court from seven to eight. Inasmuch as on this occasion the decision of 1869 was reversed, there have been charges that the court was packed in order to bring about the reversal. The evidence on this point has been carefully examined by Professor Hart in his biography of Chase, and the charges of collusion clearly shown to be unfounded. That the

new justices would be in general accord with the administration was to be expected; there was, however, no previous understanding of their views on the particular question of legal tenders, and no instructions to bring about a reversal of the earlier decision. Nevertheless, it must be admitted that there was a strong popular expectation that as soon as the court was reorganized, a reversal of the opinion would be made. This is seen in the fact that the first decision did not lead to a reduction in the premium on gold, and the exceptional methods adopted by the court in order to bring another case quickly before it for adjudgment showed unusual feeling and pressure.

In the opinion on the case of 1871 (filed in 1872), the court held that a broad interpretation must be given to the Constitution, for it could not be expected that this document would completely enumerate all the powers of government with details and specifications; the powers of Congress must be regarded as related to each other, and means for a common end. Among the non-enumerated powers, there certainly must be included the power of self-preservation, and no reasonable construction of the Constitution could deny to a government the right to employ freely every means not prohibited, or necessary for its preservation. And in carrying out its purpose Congress is entitled to a choice of means which are in fact conducive to the exercise of a power granted by the Constitution. Marshall's words in the decision on McCulloch v. Maryland are cited as convincing and conclusive. "Let the end be legitimate, 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 are consistent with the letter and spirit of the Constitution, are constitutional."

There were two main questions for the court to consider: Were the legal-tender acts inappropriate means for the execution of any or all of the powers of the government? And were they prohibited by the Constitution? As to the first question, the emergency was great when the legal-tender acts were passed; the endurance of the government had been tried to the utmost. "Something revived the drooping faith of the people; something brought immediately to the government's aid the resources of the nation, and something enabled the successful prosecution of the war and the preservation of the national life. What was it, if not the legal-tender enactments ?" As to whether other means might not have been effective, that was not

for the courts to decide; the degree of appropriateness of given laws is for the legislature and not for the judiciary to determine.

On the second point the court held that the making of the treasury notes a legal tender was not forbidden either by the letter or by the spirit of the Constitution. Although certain express powers are given to Congress in regard to money, it cannot be inferred, as the Constitution has been in general construed, that all other powers are by implication forbidden. Since the States are expressly prohibited from declaring what shall be money, or from regulating its value, whatever power exists over the currency is vested in Congress. Considering that there is no express prohibition upon Congress in this matter, and that paper money was almost exclusively in use in the States as the medium of exchange, it must be presumed that the framers of the Constitution did realize that emergencies might arise when the precious metals would prove inadequate to the necessities of the government.

Nor could it be argued that the legal-tender acts are unconstitutional because they directly impaired the obligation of contracts, that is, of contracts made previous to the passage of the act. In contracts for payment of money, it did not mean money at the time when the contract was made, nor gold or silver, nor money of equal intrinsic value in the market; the obligation was to pay that which is recognized as money when the payment is to be made. "Every contract for the payment of money simply, is necessarily subject to the constitutional power of the government over the currency, whatever that power may be, and the obligation of the parties is therefore assumed with reference to that power." More than this, Congress does have the power to impair contracts indirectly by rendering them fruitless or partly fruitless, as in bankrupt laws, declaration of war, and embargoes. No obligation of a contract can extend to the defeat of legitimate government authority.

In conclusion, it was observed that the legal-tender acts did not attempt to make paper a standard of value; their validity does not rest upon the assertion that this emission is coinage, or any regulation of the value of money; or that Congress may make money out of anything which has no value. "What we do assert is, that Congress has power to enact that the government's promises to pay money shall be, for the time being, equivalent in value to the representation of value determined by the coinage acts or to multiples thereof."

This decision settled the question of constitutionality of legaltender issues in times of war, but it left uncertainty as to the powers of government over currency during peace. The judicial decision on this point was made by the Supreme Court in 1884 in the case of Juilliard v. Greenman; the question before it was the constitutionality of that provision of the law of 1878 which required that all legal-tender notes redeemed at the treasury be reissued, kept in circulation, and continue to retain their legal-tender quality. The court decided in favor of the constitutionality of such reissues, by a generous interpretation of the doctrine of implied powers, in support of which the reasoning of Marshall, in the case of McCulloch v. Maryland, is again reviewed at length. As preliminary to the main conclusion, it is shown that Congress has the power to pay the debts of the United States; that in pursuance of this, all means which are appropriate, and not prohibited, are constitutional; that not too much weight should be given to the debates and votes of the Constitutional Convention of 1787, for there is no proof of any general consensus of opinion in the convention upon this subject; that the power to borrow money includes the power to issue obligations in any appropriate form, and, if desired, in a form adapted to circulation from hand to hand in the ordinary transactions of commerce and trade; that the issue of legal-tender notes is incident to the right of coinage; and finally, that Congress has power to provide a currency for the whole country. As a consequence, Congress "may issue the obligations in such form and impose upon them such qualities as currency for the purchase of merchandise and the payment of debts as accord with the usage of sovereign governments"; and it is for Congress, the legislature of a sovereign nation, to declare whether, because of an inadequacy of the supply of gold and silver coin, it is wise to resort to legal-tender paper issues.

The decision reopened the controversy; this was largely academic; Bancroft, the historian, made a passionate protest in a pamphlet entitled, A Plea for the Constitution of the United States of America, Wounded in the House of Its Guardians; but popular judgment on the whole was favorable. Lawyers and consitutional commentators were slowly coming to the conclusion that the interpretation of the Constitution must rest upon a broader basis than that of the debates of 1787; and the people at large were satisfied that there was to be no disturbance in the conditions to which they had been long accustomed.