The Constitution of the United States of America: Analysis and Interpretation Part 33

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 a.n.a.logous to the sovereign authority of the United States over its citizens in like circ.u.mstances."[1548]

BILLS OF CREDIT

Within the sense of the Const.i.tution, 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 ent.i.tled to demand payment in gold or silver.[1557] Since, however, there is nothing in the Const.i.tution 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 pa.s.sed 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 pa.s.sage, 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 Const.i.tution, 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 pa.s.sed.[1566]

But the test oath prescribed after the Civil War, whereby office holders, teachers, or preachers were required to swear that they had not partic.i.p.ated 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 subst.i.tuting 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 const.i.tution 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, const.i.tutional provisions,[1585] munic.i.p.al 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 "pa.s.s" 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 const.i.tution. 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 munic.i.p.ality, 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 pa.s.ses 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 unconst.i.tutional _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 unconst.i.tutionally 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 const.i.tutionality 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 pa.s.s upon the const.i.tutionality 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_ const.i.tutionality of a State statute are ent.i.tled 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 const.i.tutional 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 Const.i.tution 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 munic.i.p.al 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, -- 10, of the Federal Const.i.tution, but on the State law as they determined it, which, in diverse citizenship cases, under the third Article of the Federal Const.i.tution 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 a.n.a.lyzable 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 Const.i.tution 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 Const.i.tution 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 cla.s.s 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 a.s.sociation _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 const.i.tutional 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 Const.i.tutional Law and, moreover, a "progressive"

Const.i.tutional Law.[1603]

"Contracts," Extended to Cover Public Contracts.--Throughout the first century of government under the Const.i.tution, 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 Const.i.tutional 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 subst.i.tuted 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 Const.i.tution 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 const.i.tutional case, that of Chisholm _v._ Georgia,[1608] the Court ruled that its original jurisdiction extended to an action in a.s.sumpsit 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 Const.i.tution included public contracts.

One important source of this diversity of opinion is to be found in that ever welling spring of const.i.tutional 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 Const.i.tution,[1611] and also the first case to hold that the contracts clause protected public grants. By an act pa.s.sed 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 pa.s.sage 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 Const.i.tution of the United States, article first, section tenth, declares that no State shall pa.s.s a law impairing the obligations of contract. This must be equivalent to saying no State shall pa.s.s 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 Const.i.tution 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 Const.i.tution of the United States, and, therefore null. And that the courts of the United States, in cases within their jurisdiction, will be likely to p.r.o.nounce 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 a.s.serts, 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, -- 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 pa.s.sing of the rescinding act "either by general principles which are common to our free inst.i.tutions, or by particular provisions of the Const.i.tution 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