The late nineteenth and early twentieth century has generally been regarded as the Lochner era
of the Supreme Court, as the case Lochner v. New York 198 U.S. 45 (1905) exemplifies a marked tendency to defend the right of contract against government regulation by invoking the Fourteenth Amendment, especially the Due Process Clause. The consensus of later generations of jurists has condemned this jurisprudence as an unjustified overreach in defense of laissez faire capitalist ideology, and many have accused the justices of acting in bad faith to defend business interests. The supposed guiding light of this era of jurisprudence was later named substantive due process,
which indicates that the Due Process Clause contains not only procedural guarantees, but also asserts substantive rights that cannot be infringed by state action no matter how legally proper the police and judicial processes may be. This made the Fourteenth Amendment the basis for reviewing the propriety of state exercises of the police power, challenging whether a regulation really did serve the public interest in a way that would justify abridging the liberty or property rights of a person or business. This enabled the Court to review and overturn hundreds of state laws, which would have been considered beyond the scope of judicial review by the traditional Court, most recently in the Slaughter-House Cases.
For our purposes, we should question whether this Lochner era
Court (1897-1937), and in particular the Fuller Court (1888-1910), really did practice judicial activism
in the narrow sense we have defined, prescinding from all norms of interpretation, i.e., appeals to text, legislative intent and history, or controlling precedents, of if it at least practiced a type of result-oriented judging selectively to defend big business interests. Another accusation to be examined is that the Court in this period was activist
in the sense of aggressive overuse of judicial review to strike down state legislation which ought to have been given the benefit of the doubt. This is contrary to that form of judicial self-restraint that had been first articulated by Justice Samuel Chase:
As I do not think the tax on carriages is a direct tax, it is unnecessary, at this time, for me to determine, whether this court, constitutionally possesses the power to declare an act of Congress void, on the ground of its being made contrary to, and in violation of, the Constitution; but if the court have such power, I am free to declare, that I will never exercise it, but in a very clear case. [Hylton v. United States, 3 U.S. 171 (1796)]
These criticisms cannot be dismissed as mere revisionism, nor as tu quoque arguments from judicial liberals defending their own activism, for the Court itself had some famous dissenters who opposed some of its major decisions on principled grounds of traditional interpretation. The most illustrious of these dissenters in the early part of that period were John Marshall Harlan and Oliver Wendell Holmes.
In fairness, we must counter that Justices Harlan and Holmes, for all their scruples, often sided with the majority in these supposedly activist or unprincipled decisions, and even said some words in favor of what we now call substantive due process.
A comprehensive look at this jurisprudence should seriously consider its possible merits. The defense of fundamental substantive rights against state encroachment indeed has an extensive legal history long before Lochner, though we may question whether the Court situated those rights in the correct clause of the Fourteenth Amendment.
The Lochner era Court’s treatment of racial civil rights was often in apparent tension with its economic jurisprudence. When it came to racial civil rights, the Court often, though not always, gave the state the benefit of the doubt. It upheld various forms of segregation, even to the point of preventing a private college from integrating, and appearing to countenance non-mixing of races as a state interest. It also upheld racially discriminatory legislation against immigrants, especially the Chinese, and even appeared to indicate that birthright citizenship for children of immigrants could be abridged by treaty or statute. Here we must take care to distinguish between the morally noxious result and the jurisprudential basis of the argument, for it is only in the latter that we may rightly identify judicial activism. The former might arise from no fault of the jurists, but from an omission in constitutional protections or from the limits of judicial power. Nonetheless, given the Court’s evident eagerness to exercise broad interpretive power in economic cases, one may regard its apparent restraint in civil rights cases with some skepticism.
The Lochner era need not be characterized as utterly conservative or restrained in asserting judicial review in civil rights cases, for this Court introduced the doctrine that the Bill of Rights, or at least some of them, ought to apply to the states. This doctrine of incorporation
had been rejected twice previously by the Court in Barron v. Baltimore and the Slaughter-House Cases. In Near v. Minnesota 283 U.S. 697 (1931), the Due Process Clause was enlisted into service once more as establishing a substantive right, this time the freedom of the press, against state action. This effective incorporation of federal constitutional rights through the Fourteenth Amendment would be a lasting doctrine of the Lochner era, extended to other articles of the Bill of Rights. In Near, however, the exponents of substantive due process in economic matters were a dissenting minority, though ironically their very doctrine was now invoked for socially liberal ends.
It would seem that the conservatives were the first to practice something akin to judicial activism consistently over an extended period of time, and in this breach they invited later breaches by their liberal peers, with far fewer qualms about judicial self-restraint. Whether this conventional narrative about the Lochner era is entirely correct requires closer scrutiny. Indeed, we may even challenge whether there is a monolithic Lochner Court over the conventional period of 1897 to 1937, as we have seen that this faction was already in the minority by 1931, and arguably as early as 1925. They were not outnumbered by liberals, but by the combination of liberals and traditional conservatives who did not subscribe to much of the new jurisprudence.
The most distinctly Lochnerian jurisprudence used the power of judicial review to restrict the states’ exercise of the police power in the regulation of contracts and property, on the grounds that they were an unwarranted intrusion into the private rights of property and liberty to pursue a trade. There was indeed a well established tradition, going back to the Founding, establishing firm rights of contract and property against arbitrary state interference, as essential to a free society. Nonetheless, this conviction did not generally translate into restrictions on the exercise of the police power by the states, except when this came in conflict with an explicit constitutional provision.
Before the Civil War, the exercise of the police power to regulate contracts and property was restricted by the courts in only three domains: 1) municipal police power, where the municipality lacks delegation of state authority; 2) interference with interstate commerce or another federal power, 3) impairing the obligations of existing contracts (per the Contract Clause). The Due Process and Takings Clauses of the Fifth Amendment applied only to the federal government, not the states. The only constitutional provisions that explicitly restricted the states’ police power were the Contract Clause and the Commerce Clause.
None of the antebellum doctrines called for judicial evaluation of state police power for reasonableness or exceeding the limit of this power. There could be such review of municipal police power, by state or federal courts, since municipalities and municipal corporations had only delegated police powers, which were strictly construed. Federal courts did review whether legislation was a genuine use of the police power, in both Commerce Clause and Contract Clause cases. State legislation could not interview with interstate commerce unless it was for a genuine police power purpose, such as health inspections of imports. (Gibbons v. Ogden Likewise, a state may modify the privileges of a corporation or impair the obligations of existing contracts without falling afoul of the Contract Clause, only if it is a genuine use of police power. These doctrines involved no evaluation of the reasonableness of the state’s regulatory policy, nor of the police power’s limits with respect to private rights. They only required determination that the state legislation was in fact a genuine exercise of the police power, and not a mere pretext for interference in matters prohibited by the Constitution. No limits were defined for the police power as such, unless its exercise violated some provision in the state constitution.
The antebellum courts, by declining to rule on the reasonableness of exercises of the police power, did not thereby fully avoid involvement in policy judgments. Whenever questions about the scope of established rights require answering questions about what is the public good, the courts are necessarily involved in policy judgments. Judicial self-restraint is exercised only by giving deference to the state’s own judgment that its legislation is related to a public good (regardless of whether it is a reasonable or preferable means of attaining that good). When a federal constitutional restriction is at stake, however, the courts cannot avoid determining at least that the legislation does indeed fall within the scope of what is broadly known as its police power.
Having already discussed Commerce Clause cases at some length, we turn to the Contract Clause, which was strangely under-utilized by the Lochner era Court in support of its freedom of contract doctrine. This is attributable to the background and interpretive history of that clause.
As the original Constitution was designed to define the powers of the federal government and the limits of these powers, we should not be surprised to find that there were relatively few provisions explicitly restricting the exercise of power by the states. These are all contained in Article I, Section 10, and most of them merely prevent the States from exercising powers that are now the prerogative of Congress. Some provisions, however, are unrelated to federal prerogatives, in particular the Contract Clause: No state shall… pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts…
The first two items are prohibited to Congress no less than the States. (Art. I, Sec. 9)
The obligation
of a contract is a term from civil law jurisprudence, which refers to the fact that it is the existing law of a polity which makes a contract binding. Thus the Contract Clause, on its face, prohibits passing any laws that would make contracts generally non-binding or less than binding. This does not mean that a law may not prospectively prohibit specific kinds of contracts, for practically all regulatory laws effectively do that. Indeed, in the American legal tradition, a contract is understood to implicitly incorporate the laws in effect at the time of its execution, which is why many contracts specify the jurisdiction whose laws shall prevail. The laws which exist at the time and place of the making of a contract, and where it is to be performed, enter into and form a part of it.
[Walker v. Whitehead, 83 U.S. (16 Wall.) 314, 317 (1872)] This view of the law as part of the contract seems to render the notion of the obligation
of the contract somewhat superfluous, since the law’s binding power is part of the contract itself. Nonetheless, insofar as it is conceivable that a state would pass laws that make contracts non-binding, the notion of an obligation, abstracted from the contract, is still substantive.
While we have acknowledged that regulatory laws may prevent the execution of new contracts which contradict them, a question arises regarding contracts that are already executed and were legal at the time of execution. These may be distinguished into two categories: those contracts which have been signed and are in operation, and those that have been signed, yet are still awaiting performance. The constitutional prohibition against ex post facto laws is relevant here, and indeed it was argued at the Constitutional Convention that a prohibition of impairing already executed contracts was already covered by the ex post facto prohibition.
Interpreting the relationship between the ex post facto and Obligation of Contracts
prohibitions is complicated by the dubious manner in which the latter was entered into the Constitution. On August 28, 1787 a committee voted to amend the Section that read: No State shall coin money; nor grant letters of marque and reprisals; nor enter into any treaty, alliance, or confederation; nor grant any title of Nobility
, adding the following terms after Money
: nor emit bills of credit,
nor make anything but gold and silver coin a tender in payment of debts,
nor pass any bill of attainder or ex post facto laws.
[Max Farrand, ed. The Records of the Federal Convention of 1787, Vol. II (New Haven: Yale Univ. Press, 1911), p. 435.] The first two terms prevent the states from effectively increasing the money supply, keeping monetary policy strictly federal. Bills of attainder allowed punishment of a crime without trial, so the ex post facto prohibition joined to this term might likewise be limited to criminal law.
Before the full Convention that same day, motions passed to add the words nor emit bills of credit, nor make anything but gold & silver coin a tender in payment of debts
and to add nor emit bills of credit.
Rufus King then moved to add in the words used in the Ordinance of Congs establishing new States, a prohibition on the State to interfere in private contracts.
[Farrand, Vol. II, p.439.] The Northwest Ordinance of 1787, referenced by King, used this language:
…no law ought ever to be made, or have force in the said territory, that shall, in any manner whatever, interfere with or affect private contracts or engagements, bona fide and without fraud, previously formed.
Gouverneur Morris objected, noting that thousands of laws affect contracts. George Mason added that it was impossible to foresee cases where an interference might be proper and essential, as in legal actions on open account,
i.e., an agreement to hold open a line of credit over many transactions. Surely states should not be prohibited from imposing a statute of limitations on such claims.
James Wilson of Pennsylvania, who supported King’s motion, countered that retrospective interferences only are to be prohibited.
James Madison replied: Is not that already done by the prohibition on ex post facto laws, which will oblige the Judges to declare such interferences null & void.
Thus it was moved, instead of King’s proposal, to add nor pass bills of attainder nor retrospective laws.
It seems that the ex post facto prohibition was intended to cover non-criminal law that would retroactively alter or annul private contracts, regardless of whether that was traditional common law understanding. As John Dickinson of Delaware mentioned the next day (28 August), Blackstone had described ex post facto solely in terms of criminal law, so some further provision was needed for civil cases. No action was taken. Others at the Convention seemed to have a broader, more literal understanding of the prohibition of retroactive law. Whether the penalty is criminal or civil, it is hardly less contrary to justice to penalize an act that was legal when it was committed. Moreover, property rights cannot be adequately protected if the legality of a contract at the time of its execution is no guarantee of its enforcement.
The Constitution was passed to a Committee of Style in September, consisting of Morris, King, Madison, Hamilton and its chair William Samuel Johnson. Although Farrand presents this as a single coherent document, he notes that it was Compiled by the editor of the proceedings of the Convention.
In all likelihood, the Committee of Style received the earlier draft by the Committee of Detail and a stack of records from the motions passed amending various articles and clauses. Thus their commissioned work was necessarily constructive, and not merely fine-tuning an existing draft. There is no evidence that the Committee of Style was barred from proposing substantive changes, in the process of clarifying textual ambiguities or difficulties. Like all committee work, theirs was subject to a vote of the full Convention, and at any rate committees at the Convention frequently departed from their original assignment, since procedural formality was not strict and they all met in full assembly frequently. [David S. Schwartz, The Committee of Style and the Federalist Constitution.
Buffalo Law Review (April 2022) 70(2):781-857]
The Committee of Style’s final draft added: or Law altering or impairing the Obligation of Contracts
after the ex post facto prohibition. This is not quite the same as King’s motion, which would have prevented any interference whatsoever, and it can be considered a non-substantive change only on the assumption that it refers to contracts already executed or operative before a law was passed. This might then be considered a stylistic change, defining the term of art ex post facto as restricted to criminal law, with civil law now being covered by a distinct obligation of contracts
provision. If we were to take a broader view of the Contract Clause, as prohibiting any interference in contracts, even if it is not retroactive, then it would seem that the committee of style exceeded its authority. Yet their principal scrivener, Gouverneur Morris, had been an opponent of the King amendment, so it is hardly probable that King’s interpretation was intended. Madison and Johnson considered the clause to be a redundancy, and this is more in keeping with it being a response to Dickinson’s concern, so that there was no doubt that retrospective laws on contracts were likewise prohibited. The reference to obligation of contracts confined the prohibition to contracts already executed, though perhaps awaiting performance.
The Committee of Style’s final draft was approved, with minor alterations, by the full Convention, and the prohibition of state laws impairing the Obligation of Contracts
made it into the final Constitution. The irregular manner of its introduction makes it difficult to discern its intended meaning, but it cannot be doubted that it is a substantive part of the Constitution. Nor should we be surprised by such irregularity, for the proceedings were not public, and the final product of the Convention as a whole, having exceeded the original commission of the delegates to amend the Articles of Confederation, was merely a draught of a plan,
as Madison said, subject to ratification by the states.
The origin of the Contract Clause suggests that it was intended to apply only to retrospective legislation, leaving the police power of the states otherwise unfettered in the prospective regulation of private contracts. A state may, for some public good, illegalize some types of contracts, even if this causes a loss of property to some. The Takings Clause of the Fifth Amendment applies only to the federal government, and refers to outright seizure of private property, rather than a loss of income incident to some general regulation. A state may not, however, fail to recognize a claim related to performance on a contract that was legal at the time of execution.
In practice, the antebellum Court did not construct the Contract Clause as limiting the exercise of the police power. It prohibited only interferences in private contracts that were unrelated to that exercise. Moreover, it was applied only to signed (executory) contracts awaiting performance at the time the interfering statute was enacted, not contracts signed after enactment. Such restraint was followed not only by the federal courts, but also by many state courts. Thus the New Jersey courts held that state legislators could not repeal charters at their pleasure.
Indeed, it was a state court that made an early attempt to define impairing the obligation of contracts.
In P. Grimball v. F. Ross, Georgia Superior Courts 180-181 (1808), Judge Thomas Charlton defined this as any measure… that gives them a diminished value, takes from them any of the essential properties of contracts, or which divests them of that priority of lien, obligation or recovery.
These forms of impairment, though apparently broad, does not encompass suspended enforcement (from May to December) of contracts, Charlton held, ruling in favor of the state in that case.
In Jones v. Crittenden, 4 N.C. 55 (1814), the North Carolina Supreme Court struck down a debt-relief law that suspended executions of judgments against debtors in private contracts. This was an unconstitutional impairment of the obligation of contracts. Whatever law releases one party from any article of a stipulation voluntarily and legally entered into by him with another, without the direct assent of the latter, impairs its obligation; because the rights of the creditor are thereby destroyed, and these are ever correspondent to and coextensive with the duty of the debtor.
This obligation extends to terms specifying the time of payment, so the enforcement of these terms cannot be suspended, contrary to what Judge Charlton held in the Georgia case. It should be noted, however, that it is impractical for courts to prevent short-term relief to debtors, for they receive that already in the time it takes to bring the case to trial.
An early Supreme Court case involving the Contract Clause was Fletcher v. Peck 10 U.S. 87 (1810), where the Georgia legislature in 1800 revoked a land grant to private companies it had passed in 1795. The fact that the state was a party to this contract, which was also a law, did not constitute an exception to the Contracts Clause. The grant is a type of contract, and it has obligations once it is signed and binding, even before performance occurs.
A contract is a compact between two or more persons, and is either executory or executed. An executory contract is one in which a party binds himself to do or not to do a particular thing. A contract executed is one in which the object of the contract is performed, and this, says Blackstone, differs in nothing from a grant. A contract executed, as well as one that is executory, contains obligations binding on the parties. A grant, in its own nature, amounts to an extinguishment of the right of the grantor, and implies a contract not to reassert that right. A party is always estopped by his own grant.
The absolute rights already vested under a contract cannot be divested by repeal of the law. On the contrary, if anything such a revocation of one’s own word was even less excusable. In his concurrence, Justice Johnson appealed to natural law, rather than the Contract Clause: A state does not possess the power of revoking its own grants. But I do it on a general principle, on the reason and nature of things: a principle which will impose laws even on the deity.
Notwithstanding this strong view, Justice Johnson did not think statutes of limitations were covered by the notion of an impairment of obligation, admitting the same exception the Convention had discussed.
In New Jersey v. Wilson, 11 U.S. 164 (1812) the Court held that a tax exemption, once granted, could not be revoked by the state. The exemption affected the value of the land, so it was an essential part of the contract. It did not matter that the exemption was intended for the Indians for whom the lands were originally purchased by the state, and that the Indians later left New Jersey. The contract attached the exemption to the land, not to their persons. The value added by the exemption was relevant to the contract, for the Indians relinquished other lands in exchange for it. While the logic of the ruling seems sound, it has the seeming implication that the state would be bound to recognize this exemption in perpetuity, which hardly seems compatible with the taxation power of a sovereign.
Later, the Marshall Court would clarify that the taxation power is never implicitly relinquished, but must be made explicit in a charter or contract. [Providence Bank v. Billings, 29 U.S. 514 (1830)] Under Chief Justice Taney, the Court went so far as to deny that a franchise carried an implicit guarantee of exclusivity. [Proprietors of Charles River Bridge v. Proprietors of Warren Bridge, 36 U.S. 420 (1837)] Although this latter ruling was against the corporate plaintiffs, it nonetheless recognized that even municipal corporations had private property rights. These rulings followed the general principle that public grants cannot be implied.
A famous case about charters was Trustees of Dartmouth College v. Woodward, 17 U.S. 518 (1819), where the state of New Hampshire tried to alter Dartmouth’s charter and make it a state school. The Court ruled that this corporate charter was a contract protected by the Contract Clause (following Fletcher v. Peck), and could not be materially changed without the consent of the corporation. The Court considered Dartmouth a private, charitable corporation, finding an implied contract between the Crown and benefactors that the established college would be a charity protected by an unalterable charter. (This finding of an implied contract is in tension with the later rulings mentioned above.) Had it been originally chartered as a public corporation serving government functions, like a municipal corporation, it may be subject to legislative control, though even this is not absolute. Thus it had ruled previously in Terrett v. Taylor, 13 U.S. 43 (1815) that the state of Virginia could not divest the Episcopal Church of any of its lands, notwithstanding that it had previously been a state established church.
The state and federal courts’ insistence that a state should honor its own contracts and grants no less than those of private parties was motivated not only by the Contract Clause itself, but by that clause’s underlying principle that states should be prevented from the economically ruinous mischief they had indulged in when they created paper money. If this were to be permitted again, no private property or prosperity could ever be secure. This accounts for their general reluctance to permit even those interferences that would seem to provide a public benefit, as in the case of debt relief. The Contract Clause made no such exception, and notwithstanding the general reticence courts had about using judicial review to void legislation, they felt duty-bound to do this when there was a clear and overt contradiction of a federal constitutional provision.
Such sentiments were expressed by Justice Henry Brockholst Livingston while riding circuit in New York to decide Adams v. Storey, 1 Fed. Cas. 141, no. 66 C.C.D.N.Y. (1817):
…although no court can entertain any doubt of its right to pronounce it invalid, yet it is no more than becoming to proceed with caution, and with more than ordinary deliberation. Presumptions will ever exist in favour of the law, for it will not readily be supposed that any state legislature, who are as much bound by the constitution, and are under the same solemn sanctions as the judges of those courts, to regard it, have either mistaken its meaning, or knowingly transcended their own powers. If, then, by any fair and reasonable interpretation, where the case is at all doubtful, the law can be reconciled with the constitution, it ought to be done…
We have commented previously on the difficulty of applying such a strong presumption of constitutionality consistently without rendering much of the Constitution ineffective, as practically any position is arguable by at least some interpretation. In particular, after the Civil War, such good faith could not be presumed for legislation on matters affecting race in the South.
The states were admitted to have the power to pass laws concerning bankruptcies (where a debtor loses his property and it is administered for the benefit of his creditors) and insolvencies (where the debtor continues to administer his own estate) before the federal Constitution was ratified. Although the Constitution gives Congress the power to create uniform bankruptcy laws, in fact Congress had not currently done so (apart from the 1800 Bankruptcy Act, repealed in 1803), and it would not be overtly contrary to the Constitution for the states to continue to legislate in such matters, as the Constitution includes no explicit prohibition against the states doing so. Thus New York’s insolvency law was constitutional.
The Supreme Court took up the constitutionality of New York’s insolvency law in Sturges v. Crowninshield, 17 U.S. 122 (1819). The mere absence of an explicit constitutional prohibition against states exercising a federal power concurrently did not suffice, for otherwise there would be endless confusion. Whenever the terms in which a power is granted to Congress or the nature of the power require that it should be exercised exclusively by Congress, the subject is as completely taken from the state legislatures, as if they had been expressly forbidden to act on it.
Even by this standard, the states retained the power to pass bankruptcy laws, so the insolvency law would not be unconstitutional for being a kind of bankruptcy law. The question remains whether that law impairs the obligation of contracts in the sense of the Contract Clause.
States were free to provide relief for insolvent debtors, as long as this relief did not take the form of discharging him from his obligation under contracts entered before the insolvency law was passed. Chief Justice Marshall writes: The law binds him to perform his undertaking, and this is, of course, the obligation of his contract…
In a literal sense, the obligation is impaired if the debtor is discharged from his debt. Nonetheless: Without impairing the obligation of the contract, the remedy [to enforce that obligation] may certainly be modified as the wisdom of the nation shall direct.
For example, the state could abolish imprisonment for debt, and this would not fall afoul of the Contracts Clause, as such penalty is not intrinsic to the contract. On the other hand, we may note, if enforcement were abandoned altogether, the law is no longer backing the contract, and thereby impairing the obligation.
Justice Marshall recognizes the background of the Contract Clause, but does not consider this intent or spirit to be as determinative of construction as the written text of the clause.
…although the spirit of an instrument, especially of a constitution, is to be respected not less than its letter, yet the spirit is to be collected chiefly from its words. It would be dangerous in the extreme to infer from extrinsic circumstances that a case for which the words of an instrument expressly provide shall be exempted from its operation. Where words conflict with each other, where the different clauses of an instrument bear upon each other and would be inconsistent unless the natural and common import of words be varied, construction becomes necessary, and a departure from the obvious meaning of words is justifiable. But if in any case the plain meaning of a provision, not contradicted by any other provision in the same instrument, is to be disregarded, because we believe the framers of that instrument could not intend what they say, it must be one in which the absurdity and injustice of applying the provision to the case would be so monstrous that all mankind would without hesitation unite in rejecting the application.
Apart from such rare exceptions, we should not disregard the plain meaning of a text. While the injunction against impairing the obligation of contracts may have been motivated by the abuses of state paper money, this cannot have been its only purpose, for these are already covered by prohibiting the states from coining money, emitting bills of credit, and creating any alternative tender in payment of debts. There is no reason to limit the impairment of obligation of contracts, then, only to these kinds of contracts, and since no enumeration of kinds is given, it is to be assumed that all contracts are intended. Bankruptcy and insolvency laws are not excepted, though it might be thought this implies that all such laws, insofar as they discharge debtors from their obligation, would be unconstitutional. On the contrary: The insolvent laws of many, indeed of by far the greater number of the states, do not contain this principle. They discharge the person of the debtor, but leave his obligation to pay in full force. To this the Constitution is not opposed.
Statutes of limitations can be constitutional, as they relate to remedies to be pursued in courts. Laws against usury can void future contracts (for exceeding the statutory limit on interest), but not those already entered. The insolvency act of the state of New York is unconstitutional insofar as it tries to discharge the defendant from his debt incurred under an existing contract. The law was passed on April 3, 1811, but the two promissory notes in questions were dated March 22, 1811, and payable in August that year. This was therefore what Blackstone would call an executory contract, which already has an obligation though not yet executed (i.e., performed). (In modern usage, executed
means a contract that has been signed and becomes effective, i.e., executory
in older usage.)
It may seem, under the principles of Sturges, that it would be constitutional for an insolvency law to discharge debts from contracts entered after that law was passed, and this was immediately tested in McMillan v McNeill 17 U.S. 209 (1819). Remarkably, the Court struck down a Louisiana insolvency law for discharging a debtor from liability for his debt, even though the debt was incurred after the law was passed. The published summary of the Court’s opinion, delivered orally by Justice Marshall, was stunningly simple:
that this case was not distinguishable in principle from the preceding case of Sturges v. Crowninshield. That the circumstance of the state law under which the debt was attempted to be discharged, having been passed before the debt was contracted, made no difference in the application of the principle.
Although Justice Marshall himself certainly believed that any discharge of debt by law was unconstitutional, the court reporter’s summary is misleading. This is explained by Justice Johnson in his opinion on Ogden v. Saunders, 25 U.S. 213 (1827):
But by comparing the note of the reporter with the facts of the case, it will be found that there is a generality of expression admitted into the former which the case itself does not justify. The principle recognized and affirmed in McMillan v. McNeal is one of universal law, and so obvious and incontestable that it need be only understood to be assented to. It is nothing more than this,That insolvent laws have no extraterritorial operation upon the contracts of other states; that the principle is applicable as well to the discharges given under the laws of the states as of foreign countries; and that the anterior or posterior character of the law under which the discharge is given with reference to the date of the contract makes no discrimination in the application of that principle.
The principle
applied in McMillan, according to Justice Johnson, was merely that state insolvency laws could not forgive debts from contracts under other jurisdictions (which is why the Constitution gave Congress the power to establish uniform bankruptcy laws for the nation). This understanding of the McMillan ruling is confirmed by Justice Trimble and by Chief Justice Marshall himself, in remarks on that case in their opinions on Ogden. So the question had not been decided for discharging debts on prospective contracts within a state’s jurisdiction.
The doctrine of Sturges v. Crowininsheld, Justice Johnson adds in his Ogden opinion, was actually the result of a compromise.
The Court was, in that case, greatly divided in its views of the doctrine, and the judgment partakes as much of a compromise as of a legal adjudication. The minority thought it better to yield something than risk the whole. And, its course of reasoning led it to the general maintenance of the state power over the subject, controlled and limited alone by the oath administered to all their public functionaries to maintain the Constitution of the United States, yet, as denying the power to act upon anterior contracts could do no harm, but in fact imposed a restriction conceived in the true spirit of the Constitution, it was satisfied to acquiesce in it, provided the decision were so guarded as to secure the power over posterior contracts, as well from the positive terms of the adjudication as from inferences deducible from the reasoning of the Court.
In short, the minority wished to defend state power over bankruptcy and insolvency, so long as they did not contradict any act of Congress on the subject (which did not then exist). They were willing to strike down a law’s power to act on anterior contracts, in exchange for protecting this power’s applicability to posterior contracts. The court reporter’s summary of McMillan v. McNeill, taken at face value, would be a betrayal of that compromise.
These issues would be sorted out in Ogden v. Saunders, 25 U.S. 213 (1827), a complicated ruling with multiple opinions, and Chief Justice Marshall in the unusual role of dissenter. Although Justice Johnson wrote the opinion for the majority ruling, not every doctrine in that opinion was supported by a majority. We may express in a table the doctrines that were held by each of the opinion writers.
| Doctrine: | 1 | 2 | 3 | 4 | 5 | 6 | 7 |
|---|---|---|---|---|---|---|---|
| Johnson | Y | Y | Y | Y | N | Y | Y |
| Washington | Y | Y | Y | ? | Y | Y | Y |
| Thompson | Y | Y | Y | N | Y | Y | Y |
| Trimble | Y | Y | Y | N | ? | Y | Y |
| Marshall | N | Y | N | N | N | Y | N |
| Story | |||||||
| Duvall |
The Court’s first ruling, in favor of the plaintiff, had a majority only on doctrines 1, 2, 3, 6, and 7. Doctrine 5, rejected by Johnson in his majority opinion, was addressed only because the plaintiff’s counsel had raised it. Justices Story and Duvall did not write opinions or sign on to any opinion, though they agreed with Marshall that the case should be decided for the defendant.
The opinions of Justices Washington, Thompson and Trimble were written as concurrences, and Justice Marshall wrote in dissent, but these roles were reversed when Justice Johnson, after reargument of the case, joined Marshall, Story and Duvall in ruling for the defendant on other grounds. Although the debtor was a legal resident of New York, the creditor had no business with the state of New York aside from the contract in question, thus his contractual rights could not be regulated by that state. This was effectively another case of jurisdiction, similar to McNeill, except in that case the contract was entirely outside of New York.
Although the first ruling was reversed on other grounds, it has been regarded as precedential by the original justices themselves and their successors. (Oddly, if a federal ruling is vacated on other grounds, then it is never considered precedential.) Thus the first Ogden majority’s opinions on the constitutional issues were a lasting settlement of Contract Clause jurisprudence. Most importantly, this constitutional restraint on the states was construed to apply only to retroactive regulation of contracts, not prospective regulation.
The justices had varying opinions on what exactly was the obligation of a contract. Justice Johnson held that this was a combination of moral law, universal law (i.e., natural law), and civil law. Even at this late date, Justice Johnson would sometimes evoke natural law in an argument regarding contracts, as in this desert island example.
Two men, A. and B., having no previous connection with each other (we may suppose them even of hostile nations), are thrown upon a desert island. The first, having had the good fortune to procure food, bestows a part of it upon the other, and he contracts to return an equivalent in kind. It is obvious here that B. subjects himself to something more than the moral obligation of his contract, and that the law of nature and the sense of mankind, would justify A. in resorting to any means in his power to compel a compliance with this contract. But if it should appear that B., by sickness, by accident, or circumstances beyond human control, however superinduced, could not possibly comply with his contract, the decision would be otherwise, and the exercise of compulsory power over B. would be followed with the indignation of mankind. He has carried the power conferred on him over the will or actions of another beyond their legitimate extent, and done injustice in his turn. Summum jus est summa injuria.
Moral law requires a man to keep his word or agreement, and by natural law, one party may compel the party to comply with their agreement. Yet the natural law also recognizes that this right of compulsion should be limited by circumstances where one is rendered unable to comply. An overzealous insistence on one’s rights would itself be an injustice.
Under civil law, the same principles hold, except that the drafting of contracts are controlled by the laws of society, and the interpretation and enforcement of contracts is performed by government officials. They can enter into no contract which the laws of that community forbid, and the validity and effect of their contracts is what the existing laws give to them. The remedy is no longer retained in their own hands, but surrendered to the community…
Thus it falls to the state to determine the means of compulsion, thus preserving the rights of the creditor, yet also recognizing limits to this pursuit, as under natural law.
The debtor may plead the visitations of providence, and the society has an interest in preserving every member of the community from despondency—in relieving him from a hopeless state of prostration in which he would be useless to himself, his family, and the community. When that state of things has arrived in which the community has fairly and fully discharged its duties to the creditor and in which pursuing the debtor any longer would destroy the one without benefiting the other must always be a question to be determined by the common guardian of the rights of both, and in this originates the power exercised by governments in favor of insolvents.
Contractual rights are not absolute, even under natural law, so there can be no expectation that they should be absolute when regulated by civil law. The administration of justice may sometimes require discharging a debt that cannot be paid without ruining a man and his family.
Although the civil law controls or regulates contracts, Justice Johnson denies the doctrine advanced by the plaintiffs that the law becomes part of the contract. If this were really so, then legislatures would be powerless to reform such regulatory laws without thereby retroactively altering contracts. Justice Johnson holds that ex post facto applies to civil as well as criminal acts.
Justice Johnson argues that the constitutionality of statutes of limitation, admitted by all politicians as necessary, implies the constitutionality of insolvency laws that discharge debts. After all, the statute of limitation effectively releases the debtor from any compulsion to pay, since the claim is no longer enforceable in court, and this release, unlike insolvency laws, comes without any inquiry into his ability to pay. The distinction that acts of limitation apply only to remedy and do not release one from a contractual obligation ignores the practical consequences that follow when a creditor loses recourse to the courts. Indeed, following a common opinion, the plaintiffs maintained that the legal obligation of a contract was merely the remedy in law to enforce an agreement.
Justice Bushrod Washington attributed the diversity of opinions to the subtlety of the case, and to not distinguishing accurately between a law which impairs a contract and one which impairs its obligation.
He uses the example of a statute of frauds, which impair a contract without impairing the obligation. He addresses an argument by Chief Justice Marshall: It will not do to answer that in the particular case put and in others of the same nature, there is no contract to impair, since the preexisting law denies all remedy for its enforcement, or forbids the making of it, since it is impossible to deny that the parties have expressed their will in the form of a contract notwithstanding the law denies to it any valid obligation.
What is the obligation? Washington quotes Justice Marshall in Sturges: it is the law which binds the parties to perform their agreement.
The law, then governs and controls its validity, construction or discharge.
Justice Washington does not admit exactly the same role of natural law in the obligation of contracts that Justice Johnson found. The universal law of all civilized nations which declares that men shall perform that to which they have agreed has been supposed by the counsel who have argued this cause for the defendant in error to be the law which is alluded to, and I have no objection to acknowledging its obligation, whilst I must deny that it is that which exclusively governs the contract.
So far, this is not different from Johnson’s opinion that natural law is a part of the obligation. Yet Washington, unlike Johnson, holds that the natural law obligation is unqualified:
What is the language of this universal law? It is simply that all men are bound to perform their contracts. The injunction is as absolute as the contracts to which it applies. It admits of no qualification and no restraint, either as to its validity, construction, or discharge, further than may be necessary to develop the intention of the parties to the contract. And if it be true that this is exclusively the law to which the Constitution refers us, it is very apparent that the sphere of state legislation upon subjects connected with the contracts of individuals would be abridged beyond what it can for a moment be believed the sovereign states of this Union would have consented to…
This is perhaps the strongest argument that the Contract Clause did not prohibit all contractual regulation, as that would require too great a relinquishing of power for the states to have agreed to it. The idea that contractual rights are absolute and unconditional, whether grounded in natural law or not, cannot be what is intended by the prohibition against impairment of obligation of contracts.
Washington holds that state law is indeed a part of the contract, and responds to objections. First, he says, it is unproven that incorporation of the law into a contract thereby impairs its obligation, for a contract would be considered performed if the contingency of insolvency were explicitly stipulated. Second, there is no obstacle to amending or repealing such laws, for such changes only affect future contracts, i.e., preventing the repealed law from being incorporated into them. Laws of insolvency, in this regard, are no more problematic than laws governing the validity, construction, or duration
of contracts.
The Court had already ruled in Sturges that, in the absence of action by Congress, the states are not forbidden to pass a bankrupt law…
if it did not violate Article I, Section 10. The New York insolvency law had been ruled unconstitutional on the ground that impaired the obligation of a contract, which in that case had preceded the passage of the law. And if it be true that the states cannot pass a similar law to operate upon contracts subsequently entered into, it follows inevitably either that they cannot pass such laws at all, contrary to the express declaration of the Court as before quoted, or that such laws do not impair the obligation of contracts subsequently entered into.
If we cannot apply a bankruptcy or insolvency law to contracts before or after a law’s passage, the states’ power to pass bankruptcy laws, affirmed in Sturges, would be a nullity, so we must acknowledge that prospective action does not impair the obligation of contracts.
Even though Justice Washington personally believed that power of bankruptcy legislation was vested exclusively in Congress, he assented to the Court’s binding decision in Sturges admitting this power was still retained by the states, and even used this precedent as a premise in his argument.
Justice Washington laments the disunity of the Court in Ogden, but does not doubt that all his peers believe in the same principle of judicial restraint:
It is but a decent respect due to the wisdom, the integrity, and the patriotism of the legislative body by which any law is passed to presume in favor of its validity until its violation of the Constitution is proved beyond all reasonable doubt. This has always been the language of this Court when that subject has called for its decision, and I know that it expresses the honest sentiments of each and every member of this bench. I am perfectly satisfied that it is entertained by those of them from whom it is the misfortune of the majority of the Court to differ on the present occasion, and that they feel no reasonable doubt of the correctness of the conclusion to which their best judgment has conducted them.
For this reasonable doubt
standard to be workable, it cannot mean that which no reasonable man may doubt,
lest one justice should accuse his peers of being beyond reason. Rather, as Justice Washington holds, it means that each justice feels no reasonable doubt in his own correctness, provided the premises and principles of construction he has chosen to follow. It is the variety of these premises and principles, or the relative weight given to each by different justices, that accounts for reasonable men being equally certain of opposite conclusions.
Justice Thompson expressed his presumption of constitutionality somewhat differently, but effectually the same.
But it is not on slight implication and vague conjecture that the legislature is to be pronounced to have transcended its powers, and its acts to be considered void. The opposition between the Constitution and the law should be such that the judge feels a clear and strong conviction of their incompatibility with each other.
Again, legislation should be voided only if its contradiction with the Constitution is clear, but it is each individual judge who makes this assessment.
For Justice Thompson, the obligation
of a contract refers only to civil or legal, not moral obligation. Thus he distances himself from the natural law arguments favored by Johnson and Washington. Contracts are regulated by law, and the law is effectively incorporated into them. Any contract not sanctioned by law has no civil obligation.
All admit that the impairment clause does not prevent states from altering the remedy for future contracts. It is possible that changing remedies for already existing contracts, might also impair the rights in those contracts. Yet it is not necessary in this case, Thompson notes, to distinguish between right and remedy, for the insolvency law in question certainly takes away both.
If a constitutional provision is textually unambiguous, we are bound to apply it literally, regardless of the expediency of the consequences. The disagreement among the justices shows that the impairment of contracts provision is ambiguous in meaning, so we may look toward the Framers’ intentions to construct it. By parallelism, Thompson argues that the Framers intended for this provision the same rule of construction as the ex post facto prohibition. He quotes Federalist 44 in support of this view: Bills of attainder, ex post facto laws, and laws impairing the obligation of contracts are contrary to the first principles of the social compact and to every principle of sound legislation.
Thus the impairment of contract was something that no sound government should do, much like ex post facto legislation, if rights are to be secure. Yet all politicians recognize that there must be a power to regulate civil contracts, and if this is not granted to the federal government, it is reserved to the states.
Why would the Framers enjoin Congress to pass bankruptcy laws, if they thought these violate a great principle of every social compacts and sound legislation? Clearly, the Framers must not have considered such laws as intrinsically violating the obligation of contracts. If it is admitted that bankruptcy and insolvency laws can be passed without violating the Contract Clause, and such laws are not to be ineffectual, they must be allowed to act at least on future contracts.
There can be no natural right growing out of the relation of debtor and creditor that will give the latter an unlimited claim upon the property of the former. It is a matter entirely for the regulation of civil society; nor is there any fundamental principle of justice, growing out of such relation, that calls upon government to enforce the payment of debts to the uttermost farthing which the debtor may possess…
The non-recognition of this supposed absolute right is proved by statutes which protect certain personal or real property from creditors’ claims.
It is no satisfactory answer to say that such laws relate to the remedy. The principle asserted is that the creditor has a right to his debtor’s property by virtue of the obligation of the contract, to the full satisfaction of the debt, and if so, a law, which in any shape exempts any portion of it, must impair the obligation of the contract.
Thus Justice Thompson directly attacks the contractual absolutism advanced by the defendants (and by Justice Marshall in his dissent), and finds no quarter for it behind any right vs. remedy
distinction.
Justice Robert Trimble was not on the Court at the time of Sturges, but he agreed with its ruling. For him, the obligation
is the power and efficacy of law applied to the power of contracts. Even if the moral law attaches to contracts, this cannot be impaired by any human law, so the obligation
in the impairment of contracts provision cannot refer to moral law. As for natural law, this confers only the most general rights (as we saw in our discussion of state constitutions): I admit that men have, by the laws of nature, the right of acquiring and possessing property and the right of contracting engagements.… But when men form a social compact and organize a civil government, they necessarily surrender the regulation and control of these natural rights and obligations into the hands of the government.
If civil law releases a debtor, the moral obligation remains, but natural obligation would be gone, because the laws forbid the party to enforce performance by his own power.
Since the state assumes the power to regulate the rights of natural law, the obligation of the contract is to be found only in the civil law. The state would impair the obligation of contracts only if it made changes in civil laws regulating contracts to affect existing contracts. Trimble does not consider the law to be part of the contract. The distinction made by the defendants between laws that prevent contracts from being obligatory in the first place and those that alter existing contracts is immaterial, for the greater power, which the defendants admit, must contain the lesser power. Whether the law affects the validity or substance of the contract or alters the remedy for non-performance, all that matters in all cases is that the law only affects contracts enacted after the passage of the law.
Chief Justice Marshall, writing his only dissent on a major constitutional question, feels obligated to summarize his principles of construction.
To say that the intention of the instrument must prevail; that this intention must be collected from its words; that its words are to be understood in that sense in which they are generally used by those for whom the instrument was intended; that its provisions are neither to be restricted into insignificance nor extended to objects not comprehended in them, nor contemplated by its framers is to repeat what has been already said more at large and is all that can be necessary.
This version of originalism situates intent first in the words of the Constitution, for it is to be presumed that the Framers were capable of expressing their intentions thus. Moreover, the words are to be understood in the sense generally used by the people and their representatives who would review and ratify the constitution. Again, we presume the competence of the Framers to express their intentions in a manner comprehensible to others. The scope of each provision is to be coextensive with that intention, neither more nor less. We are justified in characterizing this position, by no means unique to Marshall, as originalism, insofar as it presumes that construction is confined to the discovery of the original meaning intended by the Framers and understood by the ratifiers. Any expansion or contraction of the scope of a provision beyond this originally intended understanding is an impermissible construction. This meaning does not change over time, though a provision may be applied to unforeseen cases. Whatever philosophical objections one may raise to such a theory of interpretation or construction, the alternative of disregarding original intention would not be a construction of the text at all, but an invention of a new meaning.
Although the Chief Justice does not here mention any presumption of constitutionality, his Court was generally restrained in overturning legislation, though not hesitant to do so when there was a clear violation of the Constitution. Justice Marshall does not claim a beyond all reasonable doubt standard,
so he need not accuse his peers of unreasonableness. He states his principles of construction as applicable to his own opinion only.
The Chief Justice holds that only legal, not moral obligation, is referenced by the Constitution. The question then arises: What is original obligation of a contract that is signed after the passage of an insolvency law? First, he rejects the plaintiff’s doctrine that the law is incorporated into a contract.
The principle is that laws act upon a contract, not that they enter into it and become a stipulation of the parties. Society affords a remedy for breaches of contract. If that remedy has been applied, the claim to it is extinguished. The external action of law upon contracts by administering the remedy for their breach or otherwise is the usual exercise of legislative power. The interference with those contracts by introducing conditions into them not agreed to by the parties would be a very unusual and a very extraordinary exercise of the legislative power which ought not to be gratuitously attributed to laws that do not profess to claim it.
In Marshall’s view, the role of legislation is to provide remedy for breaches of contract, not to introduce conditions foreign to the agreement between parties. One would never enter a contract with the expectation that the other party will become insolvent, so this cannot be considered a stipulation or part of the contract. The eventuality of insolvency results in a breach of contract, and the necessity of law to supply a remedy for this breach.
Contract, it is said, being the creature of society, derives its obligation from the law, and although the law may not enter into the agreement so as to form a constituent part of it, still it acts externally upon the contract and determines how far the principle of coercion shall be applied to it, and this being universally understood, no individual can complain justly of its application to himself in a case where it was known when the contract was formed.
Marshall characterizes the non-absolutism of his peers, which make contractual rights subject to legislative limitation, as effectively making the contract a creature of society.
He rejects this subjection of contracts to the state, taking up the defendants’s argument.
The defendants maintain that an error lies at the very foundation of this argument. It assumes that contract is the mere creature of society, and derives all its obligation from human legislation. That it is not the stipulation an individual makes which binds him, but some declaration of the supreme power of a state to which he belongs that he shall perform what he has undertaken to perform. That though this original declaration may be lost in remote antiquity, it must be presumed as the origin of the obligation of contracts. This postulate the defendants deny, and we think with great reason.
Reviewing judicial history, we find no allusion, from the earliest time, to any supposed act of the governing power giving obligation to contracts. On the contrary, the proceedings respecting them of which we know anything evince the idea of a preexisting intrinsic obligation which human law enforces.
Individuals never surrendered their right of contract to the government. They only surrendered their right of coercion to enforce contracts.
Supposing the obligation of the contract to be derived from the agreement of the parties, we will inquire how far law acts externally on it, and may control that obligation. That law may have, on future contracts, all the effect which the counsel for the plaintiff in error claim will not be denied. That it is capable of discharging the debtor under the circumstances, and on the conditions prescribed in the statute which has been pleaded in this case, will not be controverted. But as this is an operation which was not intended by the parties nor contemplated by them, the particular act can be entitled to this operation only when it has the full force of law. A law may determine the obligation of a contract on the happening of a contingency, because it is the law. If it be not the law, it cannot have this effect. When its existence as law is denied, that existence cannot be proved by showing what are the qualities of a law.
A law could do all this if it were constitutional, but if it is not constitutional, it is not a law in the first place. The Constitution prohibits states from legislating to impair the obligation of contracts, and if this obligation indeed derives from the agreement of the parties, rather than the state, then no state law which introduces stipulations that nullify or impair the substance of the agreement can be constitutional.
It is permissible for states to make laws defining conditions for the validity of a contract, because no obligation exists until the contract is validly enacted. The statutes of frauds, therefore, which have been enacted in the several states and which are acknowledged to flow from the proper exercise of state sovereignty, prescribe regulations which must precede the obligation of the contract, and, consequently cannot impair that obligation.
Likewise, usury laws are permissible because they declare a usurious contract void from beginning, thereby denying it all original obligation.
Acts of limitation relate only to the remedy, not to the performance of a contract. It is not that the obligation to perform a contract expires after the period of limitation, but only that no remedy for a breach may be sought in court after that period. The remedy is not the same as the obligation of a contract. The obligation to perform originates with the contract. A remedy acts on a broken contract to enforce a pre-existing obligation.
The individual party’s natural right of coercion has been surrendered to government, but the right to contract is not thereby surrendered. The obligation of contract is a necessary consequence of this right. Laws regulate this right, but, where not regulated, it is retained in its original extent. Obligation and remedy, then, are not identical; they originate at different times and are derived from different sources.
State regulation of the right of contract may limit who can enter a contract (age requirement) or conditions for its validity, but apart from such regulation, the natural right of contract remains. Without saying so explicitly, Justice Marshall is making a kind of natural law or natural rights argument, holding that the natural right of contract, which is anterior to, and independent of society,
imposes an obligation that the states, under the Constitution, are bound to respect. This is consistent with a more general sense that rights are not granted by government, but are a prior reality that governments of free people must respect.
On the other hand, even if the obligation and remedy are non-identical, it may be urged that they are precisely commensurate with each other,
so that any action of the law upon the remedy also affects the obligation. Justice Marshall denies this implication. For example, one state may decline to provide a remedy for breach of contract after some period of time, but it does not impair the obligation, for that same contract might be brought to another state to seek remedy. The obligation of the agreement does not thereby come back into existence; it never ceased to exist. The Constitution does not compel states to provide any remedies for breaches of contract; it trusts in their own wisdom and sanity to do so.
But the Constitution has not undertaken to enforce its performance. That instrument treats the states with the respect which is due to intelligent beings understanding their duties and willing to perform them; not as insane beings who must be compelled to act for self-preservation. Its language is the language of restraint, not of coercion. It prohibits the states from passing any law impairing the obligation of contracts; it does not enjoin them to enforce contracts. Should a state be sufficiently insane to shut up or abolish its courts, and thereby withhold all remedy, would this annihilation of remedy annihilate the obligation also of contracts? We know it would not.
In this understanding, a state is perfectly free under the Constitution to modify or withhold a remedy, and is prevented only by its own prudence. If a state should apply a remedy in such manner as to extinguish the obligation without performance, it would be an abuse of power which could scarcely be misunderstood, but which would not prove that remedy could not be regulated without regulating obligation.
If Justice Marshall would grant such abuses to be constitutional, one may wonder what the difficulty is with the insolvency law. For Justice Marshall, it is that it would nullify the obligation by declaring that the debtor no longer has to pay his debt, rather than simply declining to offer the creditor a legal remedy. In the latter case, the obligation would always remain, and a future court or another jurisdiction would be free to take up the case if the recourse to remedy is restored. Yet we can see how this would render all insolvency laws worthless, if one had to keep track of all forgiven
debts in perpetuity.
At last, the Chief Justice turns to expounding the intent of the Contract Clause, starting with the Convention’s aim to prevent the states from repeating their mischief in reversing the roles of creditor and debtor, and destroying all confidence in agreements between men. If they had intended the impairment clause to prohibit only retrospective laws, they could have said so easily. We have seen, however, that the introduction of that provision had murky origins, and it was defended in part by claiming it to be innocuous, even a redundancy. In the late eighteenth and early nineteenth centuries, most contracts were of short duration (a few months or years), so Justice Marshall found that the impairment of anterior contracts only would make the Constitution’s provision almost useless, which surely the Framers could not have intended, given the gravity of the abuse they sought to prevent.
Justice Marshall’s opinion did not carry the day, notwithstanding the reversal of Justice Johnson in favor of the defendants on state jurisdictional grounds. Consequently, the
Contract Clause would not be a promising avenue for the freedom of contract
doctrine espoused by the Lochner court. Those later justices would instead have to find a less likely support in the Due Process Clause.
In our discussion of the Due Process Clause, we noted that due process
was understood to mean the proceedings of courts of justice, not acts of the legislature. Such processes were understood to guarantee the rights of life, liberty and property against arbitrary violence, imprisonment or confiscation by the state. In Justice Bradley’s dissent to the Slaughter-House Cases, he argued that this liberty
includes not just freedom from imprisonment, but all the freedoms due to a citizen, including the freedom to pursue a lawful employment of his choice, and no one can be deprived of such liberty or property (one’s occupation), not even by legislation that denies a type of lawful employment to a large class of citizens. While this was a novel view at the federal level, there were some important state appeals court cases that anticipated the development of what would eventually be called substantive due process.
In Trustees of the University of North Carolina v. Foy, 5 N.C. 57 (1805), the Supreme Court of North Carolina reviewed the constitutionality of an act that repealed a grant to the University of North Carolina and required any unsold property of that grant to be reverted to the state. This law was found to be unconstitutional and void, for violating section 10 of the state’s Bill of Rights: that no freeman ought to be taken, imprisoned or disseized of his freehold, liberties or privileges, or outlawed or in any manner destroyed or deprived of his life, liberty or property, but by the law of the land.
In this ruling, the Court rejected the argument that this provision imposed no restrictions on the legislature, since they create the law of the land.
It is evident the framers of the Constitution intended the provision as a restraint upon some branch of the Government, either the executive, legislative, or judicial. To suppose it applicable to the executive would be absurd on account of the limited powers conferred on that officer; and from the subjects enumerated in that clause, no danger could be apprehended from the Executive Department, that being entrusted with the exercise of no powers by which the principles thereby intended to be secured could be affected. To apply to the judiciary would, if possible, be still more idle, if the Legislature can make thelaw of the land.For the judiciary are only to expound and enforce the law, and have no discretionary powers enabling them to judge of the propriety or impropriety of laws.
By process of elimination, the Court infers that the clause was intended to restrain legislatures, and this intention would be thwarted if they were allowed to pass laws that authorize the seizure of property without a trial.
That this clause was intended to secure to corporations as well as to individuals the rights therein enumerated, seems clear from the wordliberties,which peculiarly signifies those privileges and rights which corporations have by virtue of the instruments which incorporate them, and is certainly used in this clause in contradistinction to the wordliberty,which refers to the personal liberty of the citizen.
Given the applicability to corporations:
It seems to us to warrant a belief that members of a corporation as well as individuals shall not be so deprived of their liberties or properties, unless by a trial by jury in a court of justice, according to the known and established rules of decision derived from the common law and such acts of the Legislature as are consistent with the Constitution.
It did not matter that the corporation had a public purpose, as all corporations did at that time:
Although the trustees are a corporation established for public purposes, yet their property is as completely beyond the control of the Legislature as the property of individuals or that of any other corporation. Indeed, it seems difficult to conceive of a corporation established for merely private purposes. In every institution of that kind the ground of the establishment is some public good or purpose intended to be promoted; but in many the members thereof have a private interest, coupled with the public object. In this case the trustees have no private interest beyond the general good; yet we conceive that circumstances will not make the property of the trustees subject to the arbitrary will of the Legislature. The property vested in the trustees must remain for the uses intended for the university, until the judiciary of the country in the usual and common form pronounce them guilty of such acts as will, in law, amount to a forfeiture of their rights or a dissolution of their body.
This may be considered an early form of substantive due process, insofar as it is grounded in the state’s version of the due process clause, which uses the phrase by the law of the land
to signify due process. The Court interprets this right as restraining legislatures from any denial of life, liberty or property without recourse to a trial under common law principles. This interpretation, though applying a restraint to legislatures, situates the fault in a denial of procedural rights. The security of life, liberty and property, in North Carolina, is guaranteed by a right to trial by jury in accordance with the principles of common law, where one may demonstrate injury and the right of compensation.
Several other North Carolina cases voided legislation that would confiscate property, and the principle justifying this was further elaborated in Hoke v. Henderson, 15 N.C. 1 (1833). In that case, the state had deprived a county court clerk of his office, originally a lifetime appointment, by holding an election for that office under a new law. Chief Justice Thomas Ruffin opened by articulating his principles of construction. First:
In construing an instrument, the cardinal point is to ascertain the meaning of those who speak in it, from the words used by them and the objects apparently to be affected. This is the rule for the construction of statutes, as well as other instruments;
When a statute admits more than one interpretation, one of which is consistent with natural equity and a sound public property,
another that is repugnant to the natural sense of justice, subversive of the principles of sound legislation… and above all, if they transcend the limits of the legislative authority as defined by the Constitution,
a judge should always assume the more favorable interpretation. This would seem to make judges arbiters of the justice or reasonableness of a law, but on the contrary the Chief Justice says:
To a Court, the impolicy, the injustice, the unreasonableness, the severity, the cruelty of a statute by themselves merely, are and ought to be urged in vain. The judicial function is not adequate to the application of those principles, and is not conferred for that purpose. It consists in expounding the rules of action prescribed by the Legislature; and when they are plainly expressed, or as plainly to be collected, in applying them honestly to controversies arising under them, between parties, without regard to the parties or the consequences.
Here he disavows results-oriented judging or any other form of activism that would make the Court arbitrate the wisdom of a policy. The earlier references to natural justice and sound legislation were in the context of presuming that a legislature intends to conform with such principles. The criterion of constitutionality, however, is within the judicial competence to evaluate.
The act transfers the office of clerk from one of these parties to the other, without any default of the former, or any judicial sentence of removal. The question is, whether this legislative intention, as ascertained, is valid and efficacious, as being within the powers of the Legislature in the constitutions of the country; or is null, as being contrary to and inconsistent with the provisions of those instruments. To the determination of this question, the judicial function is competent. It involves no collateral considerations of abstract justice or political expediency. It depends upon the comparison of the intentions and will of the people as expressed in the Constitution, as the fundamental law, unalterable except by the people themselves, with the intentions and will of the agents chosen under that instrument.
In making this determination, the judge may ignore legislative histories of both the statute and the constitution, and consider only the meaning contained in the resulting instruments.
Neither the reasons which determined the will of the people on the one hand, nor the will of the representatives on the other, can be permitted to influence the mind of the Judge upon the question, when reduced to that simple point. His task is the humbler and easier one of instituting a naked comparison between what the representatives of the people have done, with what the people themselves have said they might do, or should not do;
Any finding that legislation is unconstitutional should be made sparingly: Nor ought it to be, nor is it ever exercised, unless upon such deliberation, the repugnance between the legislative and the constitutional enactments be clear to the Court, and susceptible of being clearly understood by all.
In general, the state legislature has been scrupulous about obeying the constitution, having passed only a half dozen unconstitutional acts in sixty years.
The law in question is unconstitutional because the legislature has assumed a judicial function, essentially passing a judgment against the old claim of right.
The legislature cannot pass such judgment itself, much less can it compel the courts to deprive the officers without further inquiry before a jury, into the fact or legal sufficiency of any cause of forfeiture or removal.
Establishing elections falls within legislative authority, as does prescribing the duties of officers, their qualifications, their fees, their powers, and the consequences of a breach of duty, including punishment and removal….
But to inflict those punishments, after finding the default, is to adjudge; and to do it, without default, is equally so and still more indefensible. The Legislature cannot act in that character; and therefore, although their act has the forms of law, it is not one of those laws of the land, by which alone a freeman can be deprived of his property.
Here the appeal is to constitutional separation of powers rather than some theory of natural rights. The Court finds that the act, insofar as it is a judgment of forfeiture against a class of persons, is not a valid law, and thus not part of the law of the land
that can deprive someone of property. The argument appears to prove too much, for it would seem that any act that deprives someone of property, however general (as this applied to all counties, not a particular person), thereby loses the character of law and becomes a judgment.
This is materially the same as prohibiting state confiscation of property by any legislation.
Chief Justice Ruffin does not regard deprivation of property per se to be the problem, but doing so without trial and without adjudicating this right under principles of common law.
In reference to the infliction of punishment and diverting of the rights of property, it has been repeatedly held in this State, and it is believed, in every other of the Union, that there are limitations upon the legislative power, notwithstanding those words; and that the clause itself means that such legislative acts, as profess in themselves directly to punish persons or to deprive the citizen of his property, without trial before the judicial tribunals, and a decision upon the matter of right, as determined by the laws under which it vested, according to the course, mode and usages of the common law as derived from our forefathers, are not effectuallylaws of the land,for those purposes.
As in University v. Foy, an appeal is made to the absence of procedural rights. The only laws to be applied are those under which the property was originally vested, not the new act that would presume to forfeit it without trial.
Still, the Chief Justice acknowledges that people may be deprived of their property incidentally by legislation aimed for the common good. Thus the legislature could abolish the office of county clerk altogether if it was not needed any more. It is not obligated to continue to pay for a useless office in perpetuity. Yet there is no question of the public good in the actual case: But while the office remains, it is not possible that the public interest can be concerned in the question, who performs the services incident to it. The sole concern of the community is, that they should be performed, and well performed, by somebody.
Without any public good at stake, there is no justification for depriving the clerk of his private interest (employment and salary), even though he is a public servant.
The finding appears to depend on judgments as to whether any public good is involved in legislation, and one could easily argue that it is in the public interest to have elected officials instead of lifetime appointees. The legal argument of this ruling was not followed by any other state as applied to public offices, yet many elements of its reasoning would be taken up in a series of New York cases where substantive due process as we know it would be more clearly defined.
The state constitution of New York had a more explicit due process clause: that no person shall be deprived of life, liberty or property without due process of law; nor shall private property be taken for public use without just compensation.
[Art. I, Sec. 6] Similar wording would be used for the Due Process and Takings Clauses of the Fifth Amendment to the U.S. Constitution. In Wynehamer v. the People, 13 N.Y. 378 (1856), the Court of Appeals of the State of New York (its highest court) considered both this clause and a rights and privileges
clause to be restraints on the legislature. The other clause read: no member of this state shall be disfranchised or deprived of any of the rights or privileges secured to any citizen thereof, unless by the law of the land or the judgment of his peers.
[Art. I, Sec. 1]
A temperance law prohibited the sale or possession of liquor, even providing for its destruction, so that anyone who possessed liquor (which was sometimes used as a store of value) was despoiled of their property. This law was found by the Court to be contrary to the mentioned provisions of the written constitution. Although a majority may subscribe to a theory of public good or public necessity, even if it be true, there are some absolute private rights beyond their reach, and among these the constitution places the right of property.
In addition to being against the state constitution, this law transgresses the inherent limit of legislative power in a free republic. Here the Court cites Justice Chase’s majority opinion in Calder v. Bull, 3 U.S. 386 (1798), which found that the ex post facto provision applied only to criminal law, not to contract law. In that opinion, Justice Chase offers examples of laws that are contrary to the great first principles of the social compact.
…a law that punishes a citizen for an innocent action, or in other words, for an act which, when done, was in violation of no existing law—a law which destroys or impairs the lawful private contracts of citizens—a law that makes a man a judge in his own case—a law that takes property from A and gives it to B. It is against all reason and justice for a people to entrust a legislature with such powers, and therefore it cannot be presumed that they have done it. The legislature cannot change innocence into guilt, or punish innocence as a crime, or violate the right of antecedent lawful private contract, or the right of private property.
Though recognizing these unwritten limitations on legislatures in free republics, the New York Court of Appeals declines to follow North Carolina in attempting to define legislative versus judicial functions, as such definitions could inadvertently wreak mischief. Instead, it focuses on constructing the written constitution.
To say, as has been suggested, thatthe law of the land,ordue process of law,may mean the very act of legislation which deprives the citizen of his rights, privileges or property, leads to a simple absurdity. The constitution would then mean, that no person shall be deprived of his property or rights, unless the legislature shall pass a law to effectuate the wrong, and this would be throwing the restraint entirely away. The true interpretation of these constitutional phrases is, that where rights are acquired by the citizen under the existing law, there is no power in any branch of the government to take them away; but where they are held contrary to the existing law, or are forfeited by its violation, then they may be taken from him—not by an act of the legislature, but in the due administration of the law itself, before the judicial tribunals of the state. The cause or occasion for depriving the citizen of his supposed rights must be found in the law as it is, or, at least it cannot be created by a legislative act which aims at their destruction. Where rights of property are admitted to exist, the legislature cannot say they shall exist no longer; nor will it make any difference, although a process and a tribunal are appointed to execute the sentence. If this is thelaw of the land,anddue process of law,within the meaning of the constitution, then the legislature is omnipotent. It may, under the same interpretation, pass a law to take away liberty or life without a preëxisting cause, appointing judicial and executive agencies to execute its will. Property is placed by the constitution in the same category with liberty and life.
In this interpretation, it seems the objection is to retroactive deprivation of rights, or repeal of rights established by previous laws. This is consistent with the views in Contract Clause cases that a state must abide by its charters and not repeal its grants. Citizens may be deprived of a species of property if its acquisition was illegal at the time, but rights in legally acquired property cannot be nullified by law, as this would be contrary to the principles of a free republic and would make the protections of the written constitution useless. Moreover, legislation cannot be a means for circumventing the requirement of judicial process to deprive someone of their rights.
It is plain, therefore, both upon principle and authority, that these constitutional safeguards, in all cases, require a judicial investigation, not to be governed by a law specially enacted to take away and destroy existing rights, but confined to the question whether, under the preëxisting rule of conduct, the right in controversy has been lawfully acquired and is lawfully possessed.
Again, this is framed as though it is to prevent only retroactive denials of property. It would not seem to prevent legislation banning future acquisition of a species of property, though even this might be objectionable since it renders worthless the existing property of some.
The Wynehamer case seems to be a stunning departure from generally accepted doctrine on the police power. Notably, in the liquor law case Fisher v. McGirr, 67 Mass. 1 (1854), Chief Justice Lemuel Shaw affirmed:
We have no doubt that it is competent for the legislature to declare the possession of certain articles of property, either absolutely, or when held in particular places, and under particular circumstances, to be unlawful, because they would be injurious, dangerous or noxious; and by due process of law, by proceeding in rem, to provide both for the abatement of the nuisance and the punishment of the offender, by the seizure and confiscation of the property, by the removal, sale, or destruction of the noxious articles.
Here the Court defers to the legislature’s judgment that alcohol is harmful when possessed with intent to sell. While laws regulating the sale of alcohol had long existed throughout the country, only lately had several states passed hard prohibition laws with powers of confiscation. The Massachusetts law in Fisher v. McGirr was ruled partly unconstitutional for its unreasonable searches and seizures. The New York Court of Appeals went much further, arguing that any law depriving someone of legally acquired property was thereby void, and any judicial proceedings that merely enforce that law would not constitute due process.
In the Fisher case, Chief Justice Shaw offered the example that a legislature may prohibit possession of gunpowder in a building where it is likely to cause a fire. A roughly similar law would appear in the city of New York in 1884, which prohibited the manufacture of cigars and preparation of tobacco in tenement houses. The test case In re Jacobs, 98 N.Y. 98 (1885) would explicitly raise the police power question. After citing the conventional authorities on the police power and its limits, the Court avers that an exercise of the police power must have some relation to the ends of public health and safety. If such an act interferes with the liberty or destroys the property of a citizen, then it is for the courts to scrutinize the act and see whether it really relates to and is convenient and appropriate to promote the public health.
This does not mean making a judgment as to whether there really is a public health need for this law, but only judging whether the law does pertain to public health as its subject. The Court found in this case that no relation to public health was established.
It has never been said, so far as we can learn, and it was not affirmed even on the argument before us, that its preparation and manufacture into cigars were dangerous to the public health. We are not aware, and are not able to learn, that tobacco is even injurious to the health of those who deal in it, or are engaged in its production or manufacture. We certainly know enough about it to be sure that its manipulation in one room can produce no harm to the health of the occupants of other rooms in the same house.
The basis of the decision was not a commitment to laissez-faire capitalism, but the absence of any evidence of a relation to public health or safety, which alone could justify an infringement of the right of property or the right to pursue one’s trade. Indeed, the legislation was motivated by other considerations of the perceived evils of cigarmaking in tenements. Owners of the tenements would fill them with Bohemian immigrants, charged high rents and given tobacco to make cigars for low wages, while the owner reaped the profits. Entire families worked at this trade, it was said, in unsanitary conditions, though the latter was not substantiated. [Jacob A. Riis, How the Other Half Lives (New York: Scribner, 1890), ch. xii]
The Court admitted that the power to strike down a law should be exercised with great caution and even with reluctance.
Nonetheless, when a health law is challenged on the ground that it arbitrarily interferes with personal liberty and private property without due process of law, the courts must be able to see that it has at least in fact some relation to the public health….
The law in question failed to meet even this standard.
Critics of the decision, then and now, have contended that the Court sought to review the police power substantively and make judgments as to whether the law really did promote public health, quoting from earlier in the opinion: it is for the courts to scrutinize the act and see whether it really relates to and is convenient and appropriate to promote the public health.
Yet it is clear from the opinion’s argument that the Court found this was not a health law at all, i.e., it did not have health as its aim or subject, notwithstanding its title. That is different from judging it to be an ineffective health law, which would be a substantive review of the police power.
Nonetheless, the Court in In re Jacobs did assert property rights in practically absolute terms against state confiscation or even devaluation.
The constitutional guaranty that no person shall be deprived of his property without due process of law may be violated without the physical taking of property for public or private use. Property may be destroyed, or its value may be annihilated; it is owned and kept for some useful purpose and it has no value unless it can be used. Its capability for enjoyment and adaptability to some use are essential characteristics and attributes without which property cannot be conceived; and hence any law which destroys it or its value, or takes away any of its essential attributes, deprives the owner of his property.
The constitutional guaranty would be of little worth, if the legislature could, without compensation, destroy property or its value, deprive the owner of its use, deny him the right to live in his own house, or to work at any lawful trade therein.
Citing Blackstone:
Further, the Court found a broad application of the due process mention of liberty, meaning more than mere freedom from incarceration.
Nonetheless, notwithstanding this apparent absolutism, the Court recognized that exercises of the police power may interfere with liberty and property, though courts have the right to review whether these are indeed valid exercises of the power, having at least some relation to public health or safety.
Thus In re Jacobs was still within the bounds of traditional police power jurisprudence, though it presented arguments that would soon be employed to transcend this.
In The People v. Marx, 99 N.Y. 377 (1885), the Court reviewed a law that banned the sale of any non-dairy product designed to replace butter or cheese, with penalties of fine or imprisonment. The law was framed as to prevent sales of fraudulent products, which was within the admitted police power of the state. The defendant, however, argued that his oleomargarine product was never represented to be butter, so no fraud was committed. Moreover, two professors testified that oleomargarine had the same elements as dairy butter, except for a lower proportion of butterine, which affected only flavor, not wholesomeness, and this testimony was not controverted by the district attorney.
The Court noted that the statute broadly proscribed the sale of any compound to be used as a substitute for butter, so the particular merits of oleomargarine were not relevant. It was not mere fraudulent imitation that was prohibited, but any functional substitution of dairy butter or cheese.
The plaintiff contended that even if this were the sole intent of the law, it would be within the legislative power to pass. The Court again cites the two sections of the state constitution protecting the
This liberty encompasses a right to pursue one’s livelihood by any lawful means. A law restricting this right must be necessary for the common welfare, but this law
It would be a mistake to characterize the New York Court of Appeals as
As Felice Batlan discusses at length, the New York Court of Appeals upheld several state regulations when they did pertain to public health, even though they imposed expenses on tenement owners or restricted the kind of labor children may perform. The Court did not take an absolutist view that property is inviolable. [Felice Batlan.
Indeed, this oft-maligned court, though skewing more Republican by 1904, actually upheld the statute that was challenged in Lochner v. New York, granting deference to any plausible claim of a relation to public health or safety. Ironically, it is at the time that the New York Court of Appeals had brought itself in line with the traditional rule of police power review that the United States Supreme Court would abandon it, invoking the very notion of substantive due process that the New York Court had created.
In the 1870s and 1880s, substantive due process claims reached the U.S. Supreme Court, but such arguments were at first rejected. In Davidson v. New Orleans 96 U.S. 97 (1878), the plaintiff claimed that a law imposing a charge for mandatory swamp-draining deprived her of property without due process. As noted previously, the Court in Davidson upheld the narrow view of due process followed in the Slaughter-House Cases. Nonetheless, though ruling against the plaintiff, the Court acknowledged that the ancient notion of
This example is the same as that given in Calder v. Bull, 3 U.S. 386 (1798) and quoted by the New York Court of Appeals in Wynehamer v. People (1856).
An interesting test arose in Butcher’s Union Co. v Crescent City Co., 11 U.S. 746 (1884). In 1879, Louisiana amended its constitution to prohibit state monopolies and abolish the monopolistic privileges previously granted, which had been contested but upheld as constitutional in the Slaughter-House Cases. Now, the Crescent City Co. sued under the Contract Clause, as the state had revoked its exclusive rights, thereby impairing the obligation of an existing contract. The counterargument was that this repeal of monopolies was a valid exercise of the police power, which cannot be bargained away by contract. The Supreme Court agreed with this argument, citing precedents. An exclusive right was not implied to be irrepealable, but endured only as long as it was sanctioned by law, and a legislature was duty-bound to follow the people in exercising the police power for the good of public health and morals, rather than to consider itself forever prohibited from acting accordingly.
Justice Bradley, who had agreed in this and previous cases that the police power cannot be bargained away by contract, nonetheless raised Fourteenth Amendment considerations in his concurring opinion, joined by Justices Harlan and Woods. The monopoly privileges that were previously granted to the Crescent Co. were contrary to all three provisions of the first section. It denied people the liberty of pursuit of a trade, one of the privileges of a citizen of the United States. Further, since this pursuit is part of the liberty of a citizen, and arguably his property, many
The facts of Mugler v Kansas, 123 U.S. 623 (1887) were fairly similar to those of Wynehamer v. People, N.Y. (1856). Here too a state liquor law was faulted by the plaintiff for destroying his property. Yet the U.S. Supreme Court, unlike the New York Court of Appeals, held that the police power may extend to the destruction of property, following the antebellum License Cases, 46 U.S. 504 (1847), where the Court upheld similar liquor laws in Massachusetts, though disagreeing on the grounds. As such laws clearly dealt with public health and morals, they were within the police power, and courts had no authority to question their policy. There is no inherent constitutional right to manufacture liquors, Justice Harlan wrote in the majority opinion of Mugler.
Nonetheless, Justice Harlan, writing for the majority, notes that deference to state exercise of the police power does not bind the courts to accept claims of such exercise at face value.
If a law has no real relation to public health, morals, or safety,
Justice Field, dissenting in part to Mugler, conceded the regulatory rights of the state, but found that some aspects of the law crossed the line from regulation to confiscation, namely its requirement of the destruction of liquor already manufactured, and the destruction of glasses and other implements which might be put to lawful purposes. Worst of all was the requirement to shut up breweries by declaring them to be common nuisances by statute, without determining in fact whether they are nuisances, thus depriving the brewers of their property without due process, as there is no discretion granted to the judge or officer, and there is no conviction upon any offense. Here Justice Field is still making a procedural due process argument.
In Powell v. Pennsylvania, 127 U.S. 678 (1888), a Pennsylvania law banning the sale (or manufacture or possession with intent to sell) of oleomargarine as a food product was upheld, citing Mugler v. Kansas in refutation of the defendant’s Fourteenth Amendment claim of denial of property. An equal protection claim was similarly rebuffed, since the same penalties were applied to all manufacturers or sellers of oleomargarine. The Court was unmoved by testimony that the particular oleomargarine sold, made from animal fat, had the same nutritional qualities as natural butter.
The Court applied a presumption of validity, giving the state the benefit of the doubt that it was making a valid exercise of its police power, i.e., that the legislation had some real or substantial relation to the object of public health.
Justice Field, in his dissent to Powell, introduced substantive due process arguments for the first time, borrowing from New York case law discussed.
This is a direct quotation from the New York Court of Appeals in People v Marx 99 NY 377, 386 (1885), an earlier oleomargarine case. Justice Field also cited In re Jacobs, which we have already discussed. As in those cases, Justice Field finds that the law in question is not a good faith exercise of the police power, but an arbitrary economic prohibition under the guise of a public health law.
Since the product in question had no harm to public health, the state was not justified in calling for its material destruction or in destroying its value by forbidding its sale. Yet Justice Fields goes further, advancing the doctrine that even genuine exercises of the police power can only regulate property, and never destroy it, even if the property is harmful as in the case of liquor. In this, he seems to go beyond even the New York Court of Appeals, quoting his own concurring opinion in the liquor case Bartemeyer v. Iowa, 85 U.S. 129 (1873). (In that case, the Court could not rule on the question of deprivation of property without due process, as the plea did not establish if the defendant owned the liquor before the law was passed.)
Even the Court majority in Bartemeyer had conceded that a grave question of depriving property without due process would arise if it were established that the defendant owned the liquor in question at the time the state first prohibited such liquors. No such claim was made, as the law had existed since 1851, and the defendant only claimed to own the liquor at the time of the 1860 revision. The concession, nonetheless, is significant, as it suggests that the Court may have ruled in line with Wynehamer v. People, which it mentions, if similar facts had obtained.
We can arrive at a better sense of where this pre-Lochner era court drew the line between legitimate and illegitimate intrusions of the police power on private property by comparing three similar cases on the regulation of public laundries in San Francisco. In Barbier v. Connolly, 113 U.S. 27 (1885), the Court unanimously upheld a San Francisco ordinance requiring health certificates and safety inspections of public laundries, and prohibiting these from operating between 10 p.m. and 6 a.m. This was clearly related to public safety, especially for a city constructed of wooden buildings, and that there was
A case against a similar ordinance, differing only in the geographic limits of enforcement, was brought to the Court in Soon Hing v. Crowley, 113 U.S. 703 (1885). Here the petitioner claimed that the law discriminated against incidental laundry-related occupations that posed no fire safety hazard, and that it discriminated against Chinese nationals. A unanimous Court ruled against the petitioner, noting that all people engaged in the same business were treated alike. Laws on public welfare may regulate the hours during which an occupation may be practice, or how many hours constitute a day’s work in the absence of contract. Laws setting Sunday as a day of rest come from the government’s
As to the supposed racially discriminatory intent of the ordinance, the Court found nothing in the language of the ordinance or the record of its enactment indicating such intent.
In Yick Wo v. Hopkins, 118 U.S. 356 (1886), the petitioner claimed discrimination in the operation of enforcing a public laundry ordinance. 240 of 320 public laundries in San Francisco were owned and operated by Chinese nationals, yet the 150 who were arrested under the ordinance were all Chinese nationals, even though 310 of the laundries were in wooden buildings. This successful petition, accepted by a unanimous U.S. Supreme Court, was founded on a denial of procedural due process, as it was impossible to appeal the judgment of the county supervisors. Strikingly, this petition had been denied by the California Supreme Court, citing Barbier and Soon Hing. The California Supreme Court saw nothing unusual in vesting discretion in a board of supervisors. The U.S. Supreme Court disagreed, finding of the ordinances:
Purely arbitrary power is inconsistent with procedural due process, and when exercised to discriminate against persons, especially on the basis of race, it is a denial of equal protection in the sense of the Fourteenth Amendment.
This is consistent with the traditional legal principle, upheld in Soon Hing, that courts should not question the motives of legislatures except from the face of the acts or their operation. Here evidence was presented of discriminatory operation of the ordinances, so the lack of discriminatory intent in their language was insufficient defense.
The exercise of sovereignty often requires agents of the government to make authoritative and final decisions. Yet such decisions are to be made within the confines of law, which in turn must respect fundamental rights.
An ordinance which grants an individual arbitrary power to shut down the business of one person and not another, without any rules for impartial execution,
The Court does not deny its earlier rulings that a state may regulate the manner of exercising fundamental rights, as in deciding the hours of operation of a business, but, as Chief Justice Lemuel Shaw had said,
Although the Court in this period entertained some doctrines for reviewing exercise of the police power in protection of fundamental rights, it generally did so in a way that appealed only to procedural due process and respected a presumption of good intent on the part of the state legislature. Nonetheless, we have seen mentions of substantive due process doctrines in its opinions, though none of these really decided a case, except to the extent of recognizing that the Due Process clause really did impose some restraints on legislatures.
Part V Coming Soon
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The third absolute right inherent in every Englishman is that of property which consists in the free use, enjoyment and disposal of all his acquisitions without any control or diminution, save only by the law of the land.
So too one may be deprived of his liberty, and his constitutional right thereto violated, without the actual restraint of his person. Liberty in its broad sense, as understood in this country, means the right not only of freedom from servitude, imprisonment, or restraint, but the right of one to use his faculties in all lawful ways, to live and work where he will, to earn his livelihood in any lawful calling, and to pursue any lawful trade or avocation.
When a health law is challenged in the courts as unconstitutional on the ground that it arbitrarily interferes with personal liberty and private property without due process of law, the courts must be able to see that it has at least in fact some relation to the public health, that the public health is the end actually aimed at, and that it is appropriate and adapted to that end.
It appears to us quite clear that the object and effect of the enactment under consideration were not to supplement the existing provisions against fraud and deception by means of imitations of dairy butter, but to take a further and bolder step, and by absolutely prohibiting the manufacture or sale of any article which could be used as a substitute for it, however openly and fairly the character of the substitute might be avowed and published, to drive the substituted article from the market, and protect those engaged in the manufacture of dairy products, against the competition of cheaper substances, capable of being applied to the same uses, as articles of food.
rights and privileges
of citizens being deprived unless by the law of the land
and that no person shall be deprived of life, liberty or property, without due process of law. It also cites the Fourteenth Amendment of the U.S. Constitution, namely the Privileges or Immunities, Due Process, and Equal Protection Clauses.
The term
liberty,
as protected by the Constitution, is not cramped into a mere freedom from physical restraint of the person of the citizen, as by incarceration, but is deemed to embrace the right of man to be free in the enjoyment of the faculties with which he has been endowed by his Creator, subject only to such restraints as are necessary for the common welfare.
absolutely prohibits an important branch of industry for the sole reason that it competes with another, and may reduce the price of an article of food for the human race.
This dangerous power, if admitted, could as easily be applied to prohibit the sale of dairy butter to favor oleomargarine.
Illustrations might be indefinitely multiplied of the evils which would result from legislation which should exclude one class of citizens from industries, lawful in other respects, in order to protect another class against competition. We cannot doubt that such legislation is violative of the letter, as well as of the spirit of the constitutional provisions before referred to…
pro-business,
as here in fact they were opposing legislation designed to protect the dairy industry. The principles they articulated showed some deference to the police power, though not an absolute deference. Economic regulations that involved the outright suppression of a class of labor or product could only be justified by having public health or safety as their subject. Rather than situate this right against legislative absolutism in some unwritten principle of republican government, the Court instead found it in the written Due Process provisions of both the state and federal constitutions. The novel interpretation of the Due Process language protecting substantive rights was justified by the American repudiation of the unlimited sovereignty held by the English Parliament.
A Reevaluation of the New York Court of Appeals: The Home, the Market, and Labor, 1885-1905.
Law & Social Inquiry (2002), 27(3): 489-528.]
7.4 Substantive Due Process Claims before the U.S. Supreme Court
due process
must include some restraint on state legislatures in the context of the Fourteenth Amendment.
…can a State make anything due process of law which, by its own legislation, it chooses to declare such? To affirm this is to hold that the prohibition to the States is of no avail… It seems to us that a statute which declares in terms, and without more, that the full and exclusive title of a described piece of land which is now in A. shall be and is hereby vested in B. would, if effectual, deprive A. of his property without due process of law within the meaning of the constitutional provision.
were deprived by the law in question of their property as well as their liberty without due process of law.
No explanation is given as to how due process is denied, though the implication is that the clause acts as a restraint on legislatures. Lastly, the monopoly privilege, because it is not open to all, denies equal protection of the laws.
No one may rightfully do that which the lawmaking power, upon reasonable grounds, declares to be prejudicial to the general welfare. This conclusion is unavoidable unless the Fourteenth Amendment of the Constitution takes from the States of the Union those powers of police that were reserved at the time the original Constitution was adopted.
Yet the latter interpretation is inadmissible. It cannot be supposed that the States intended, by adopting that amendment, to impose restraints upon the exercise of their powers for the protection of the safety, health, or morals of the community.
Following the Slaughter-House Cases, the Fourteenth Amendment was not a basis for abridging or reviewing the police power.
or is a palpable invasion of rights secured by the fundamental law, it is a duty of the courts to so adjudge…
The quoted clause, linked disjunctively, seems to indicate that the police power may not invade such fundamental rights even if the law is related to valid objects of the police power. If these fundamental rights include deprivation of liberty and property without due process, Justice Harlan may here be implying a substantive due process doctrine, or perhaps just indicating that due process restrains the legislature in the way described in Davidson.
It is entirely consistent with that offer that many—indeed that most—kinds of oleomargarine butter in the market contain ingredients that are or may become injurious to health. The Court cannot say from anything of which it may take judicial cognizance that such is not the fact. Under the circumstances disclosed in the record, and in obedience to settled rules of constitutional construction, it must be assumed that such is the fact.
The term
liberty,
as protected by the Constitution, is not cramped into a mere freedom from physical restraint of the person of the citizen, as by incarceration, but is deemed to embrace the right of man to be free in the enjoyment of the faculties with which he has been endowed by his Creator, subject only to such restraints as are necessary for the common welfare.
Undoubtedly this power of a state extends to all regulations affecting not only the health, but the good order, morals, and safety of society; but a law does not necessarily fall under the class of police regulations because it is passed under the pretense of such regulation, as in this case, by a false title, purporting to protect the health, and prevent the adulteration of dairy products, and fraud in the sale thereof. It must have in its provisions some relation to the end to be accomplished. If that which is forbidden is not injurious to the health or morals of the people, if it does not disturb their peace or menace their safety, it derives no validity by calling it a police or health law.
I have no doubt of the power of the state to regulate its sale when such regulation does not amount to the destruction of the right of property in it.
The right of property in an article involves the right to sell and dispose of such article, as well as to use and enjoy it. Any act which declares that the owner shall neither sell it nor dispose of it nor use and enjoy it confiscates it, depriving him of his property without due process of law. Against such arbitrary legislation by any state the Fourteenth Amendment affords protection. But the prohibition of sale in any way or for any use is quite a different thing from a regulation of the sale or use so as to protect the health and morals of the community.
[Bartemeyer v. Iowa]
The fault which I find with the opinion of the Court on this head is that it ignores the distinction between regulation and prohibition.
no invidious discrimination against anyone…
.
right to protect all persons from the physical and moral debasement which comes from uninterrupted labor.
The Court’ opinion was written by Justice Field, then the most strenuous advocate of substantive due process, yet even he recognized principles that would be contradicted in Lochner.
And the rule is general, with reference to the enactments of all legislative bodies, that the courts cannot inquire into the motives of the legislators in passing them except as they may be disclosed on the face of the acts or inferable from their operation….
They seem intended to confer, and actually do confer, not a discretion to be exercised upon a consideration of the circumstances of each case, but a naked and arbitrary power to give or withhold consent not only as to places, but as to persons…. The power given to them is not confided to their discretion in the legal sense of that term, but is granted
to their mere will.
Though the law itself be fair on its face and impartial in appearance, yet, if it is applied and administered by public authority with an evil eye and an unequal hand, so as practically to make unjust and illegal discriminations between persons in similar circumstances, material to their rights, the denial of equal justice is still within the prohibition of the Constitution.
But the fundamental rights to life, liberty, and the pursuit of happiness, considered as individual possessions, are secured by those maxims of constitutional law which are the monuments showing the victorious progress of the race in securing to men the blessings of civilization under the reign of just and equal laws, so that, in the famous language of the Massachusetts Bill of Rights, the government of the commonwealth
may be a government of laws, and not of men.
For the very idea that one man may be compelled to hold his life, or the means of living, or any material right essential to the enjoyment of life at the mere will of another seems to be intolerable in any country where freedom prevails, as being the essence of slavery itself.
hardly falls within the domain of law, and we are constrained to pronounce it inoperative and void.
such a construction would afford no warrant for such an exercise of legislative power as, under the pretence and color of regulating, should subvert or injuriously restrain the right itself.
[Capen v. Foster, 29 Mass. (12 Pick.) 485, 489 (1832).]
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