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Legal Tender Cases

LEGAL TENDER CASES

LEGAL TENDER CASES involved the question of the constitutionality of the measures enacted by the U.S. Congress during the Civil War for the issue of treasury notes to circulate as money without provision for redemption. The constitutional question hinged not on the power of the government to issue the notes, but on its power to make them legal tender for the payment of debts, particularly debts contracted before the legislation. The Supreme Court first ruled on the question on 7 February 1870 in the case of Hepburn v. Griswold (8 Wallace 603). The majority held that Congress had no power to enact the legal-tender provisions. The vote of the Court members was five to three, with the obvious senility of Justice Robert C. Grier, one of the majority, casting doubt on the weight of his opinion. He retired before the Court announced the decision, which left the alignment four to three. Chief Justice Salmon P. Chase, who, as the secretary of the Treasury had shared responsibility for the original enactments, wrote the opinion against the constitutionality of the legislation.

Nominations of two new members of the Supreme Court arrived in the Senate on the day on which the Court announced the decision. At the ensuing term, the Court heard the reargument of the constitutional question in another case. On 1 May 1871, the Court reversed the Hepburn decision in Knox v. Lee and Parker v. Davis (12 Wallace 457). The question of whether President Ulysses S. Grant deliberately packed the Court to bring about a reversal of the original decision is still a matter of debate.

The Treasury withdrew some of the notes but reissued others under a later statute enacted without reference to wartime conditions. The Supreme Court upheld this statute on 3 March 1884, in Juilliard v. Greenman.

BIBLIOGRAPHY

Dunne, Gerald T. Monetary Decisions of the Supreme Court. New Brunswick, N.J.: Rutgers University Press, 1960.

Kutler, Stanley I. Judicial Power and Reconstruction Politics. Chicago: University of Chicago Press, 1968.

Niven, John. Salmon P. Chase: A Biography. New York: Oxford University Press, 1995.

Schwartz, Bernard. A History of the Supreme Court. New York: Oxford University Press, 1993.

Carl BrentSwisher/a. e.

See alsoLegal Tender Act ; Repudiation of Public Debt .

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Legal Tender cases

Legal Tender cases, lawsuits brought to the U.S. Supreme Court involving the constitutionality of the Legal Tender Act of 1862, which was passed to meet currency needs during the Civil War. The act had authorized the issue of $150 million in "United States notes" (see greenback) without any reserve or specie basis. Intended originally as only a temporary measure during wartime, about $450 million had been issued in greenbacks by the end of the war. The paper money depreciated in terms of gold and became the subject of controversy, particularly because debts contracted earlier could be paid in this cheaper currency. Many cases concerning the greenbacks were entered in the courts, but it was not until 1870 that the Supreme Court attacked the constitutionality of paper money. In Hepburn v. Griswold (1870), the Majority opinion, written by Chief Justice Samuel P. Chase, declared the act unconstitutional as a violation of Fifth Amendment protections against the taking of property without due process. President Ulysses Grant, angered by the decision, promptly nominated two Republican justices to the Court who reversed the decision in Knox v. Lee and Parker v. Davis (1871), ruling that the act was valid on the basis of the implied powers of Congress. The constitutionality of the act was more widely sustained in Juillard v. Greenman (1884).

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Legal Tender Cases

LEGAL TENDER CASES

The Legal Tender Cases include the decisions in Hepburn v. Griswold (1870), invalidating civil war legislation authorizing paper money, and Knox v. Lee (1871) and Parker v. Davis (1871), sustaining postwar legal tender legislation. The various decisions reflect important developments in the nation's economic history, as well as in the Supreme Court's history, concerning the judicial role in questions of political economy, the nature and scope of judicial power, and the relation of politics to judicial opinions.

The greenback legislation of 1862 was designed to facilitate the financing of the Civil War, authorizing payments in demand notes, redeemable not in gold or silver but in interest-bearing twenty-year bonds. The notes were made "lawful money and a legal tender in payment of all debts, public and private, within the United States." The Treasury issued over $400 million in paper money during the war. After 1865, as inflation grew and greenbacks depreciated, creditors demanded payment in specie or at least in paper money equivalent to the rising premium on specie.

Secretary of the Treasury salmon p. chase presided over the government's wartime greenback program. His outward support for paper money only masked his deep-seated hostility. In March 1864, he composed an epigram reflecting his true feelings: "When public exigencies require, Coin must become paper. When public exigencies allow, Paper must become coin." Six years later, as Chief Justice, he invalidated his previous policy.

Chase's role in the first legal tender case provoked intense partisan wrangling, both on and off the bench, and raised questions of the Chief Justice's behavior as the Court's administrative leader. The legal tender controversy had become entangled in partisan politics, as Republicans defended their greenback policy and the opposition Democrats attacked it as unconstitutional and improper. The Justices lined up on the same political grounds. (Chase and the Republicans by then were mutually alienated and the Chief Justice already was courting the Democrats in hopes of winning their presidential nomination.) In numerous state cases, judges similarly voted along party lines.

Chase apparently was determined to project the Court into the political maelstrom of monetary policy. But he did so with a precarious majority. Following the arguments in Hepburn v. Griswold in 1869, Republican Justices david davis, samuel f. miller, and noah swayne unhesitatingly endorsed the greenback policy. Chase, joined by Democrats nathan clifford, stephen j. field, robert c. grier, and samuel nelson voted to invalidate the 1862 law. Grier by then was so senile that his colleagues persuaded him to resign. Chase, however, included his vote in the majority.

Meanwhile, Congress had authorized increasing the number of Justices to nine, giving President ulysses s. grant two new appointments, including Grier's replacement. On February 7, 1870, he nominated william strong, who as a member of the Pennsylvania Supreme Court had supported the legal tender legislation, and joseph p. bradley, a railroad lawyer whose clients clearly favored the paper money scheme. On that same day, Chase defiantly announced the decision holding the law unconstitutional. The resulting charge of "court packing" against Grant and the Republicans misses the point: Presidents always seek judges who will support their political goals. In this case, Chase and his allies must bear the responsibility for the Court's embarrassment when it reversed itself a year later.

Chase's opinion invoked some of john marshall's best aphorisms. The Court, he insisted, must declare what the law is and not enforce any law inconsistent with the Constitution. To a point, Chase followed Marshall's mcculloch v. maryland (1819) discussions of implied powers, the necessary and proper clause, and the validity of laws consistent with the "letter and spirit of the Constitution." But where Marshall had appealed to the "spirit" of the Constitution to justify a broad construction of congressional powers, Chase turned the notion on its head, construed those powers narrowly, and used the spirit to discover a limitation nowhere mentioned in the Constitution.

The Constitution, Chase maintained, was designed to establish justice, and a fundamental principle of justice was that preexisting private contracts should not be impaired by governmental action. The contract clause of the Constitution, however, applied to state action; it said nothing regarding the federal government. But, Chase argued that the Constitution's Framers "intended that the spirit" of the contract clause would apply against all legislative bodies. His reliance on the Fifth Amendment was similarly strained. He found that the prohibition of contracts requiring specie payment in effect deprived people of their property without due process of law; indeed, he maintained that the property was "taken" for a public use without the required just compensation.

Justice Miller's dissent pleaded for judicial restraint. He rebuked Chase's "abstract and intangible" arguments about the "spirit" of the Constitution. Following Marshall's broad reading of the necessary and proper clause, Miller suggested that "the degree of that necessity is for the legislature and not for the court to determine."

Partisan reactions to the decision were predictable. But the focused concerns for the result obscured the majority's far-reaching notions of judicial authority. Chase's bold assertions of judicial superintendence provoked virtually no negative reaction. The political and public acceptance of that doctrine gave a new legitimacy to judicial power. The nation had come a great distance from the protests against judicial excesses following dred scott v. sandford (1857); indeed, Chase's opinion signaled a new chapter in judicial activism.

Significantly, the newly appointed Justice Strong, and not Miller, spoke for the majority in Knox v. Lee (1871) when the Court reversed itself. Strong largely followed Miller's interpretation of Congress's power and the necessity of congressional control over currency policy. But he responded only indirectly to Chase's presumptions of judicial power, contending that judges must assume the constitutionality of congressional acts and rely on congressional determination of what was "necessary and proper." He failed to rebuke Chase's reliance on the "spirit" of the Constitution. Finally, anticipating criticism for the dramatic reversal, Strong chided Chase for having forced the earlier decision when the Court was so divided and on the verge of receiving new appointees. The Chief Justice, joined by Nelson, Clifford, and Field dissented, with the latter two offering additional, separate opinions. The dissenting remarks largely reiterated the majority views of Hepburn v. Griswold.

Thirteen years later, in Juilliard v. Greenman, the Court, with only Field dissenting, sustained the peacetime use of greenbacks. Justice horace gray not only used the occasion to reaffirm the constitutionality of greenbacks but flatly declared that the policy involved "a political question, to be determined by Congress when the question of exigency arises, and not a judicial question, to be afterwards passed upon by the Court." A half century later, Chief Justice charles evans hughes invoked Juilliard as the Court, in the gold clause cases (1935), narrowly acquiesced in President franklin d. roosevelt's decision to abandon the gold standard. What had begun as one of the most politically conscious and aggrandizing decisions by the Supreme Court ended in self-abnegation and deference to the political branches of the government.

Stanley I. Kutler
(1986)

Bibliography

Dam, Kenneth W. 1982 The Legal Tender Cases. The Supreme Court Review 1982:367–412.

Fairman, Charles 1971 Reconstruction and Reunion, 1864–1888, Vol. XVI of the Oliver Wendell Holmes Devise History of the Supreme Court of the United States. New York: Macmillan.

Kutler, Stanley I. 1968 Judicial Power and Reconstruction Politics. Chicago: University of Chicago Press.

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