Legal Tender Cases

Summary

In Hepburn v. Griswold (February 1870) a divided Court had held that the Legal Tender Act of 1862 could not make paper United States notes a legal tender for debts incurred before the act. Within weeks two new justices, William Strong and Joseph P. Bradley, took their seats, and the Court agreed to consider the question again in two cases. In Parker v. Davis, a Massachusetts buyer had tendered greenbacks to complete a land purchase contracted before 1862. In Knox v. Lee, a Pennsylvania owner sued over sheep in Texas that Confederate authorities had seized and sold, and the trial judge told the jury it might consider that the notes were legal tender in fixing damages. Two questions were presented: whether the legal tender acts were valid as applied to debts contracted before their passage, and whether they were valid as to debts contracted afterward. Defenders of the acts argued that a sovereign nation must have means of self-preservation in war, that the power came from the combined grants over war, borrowing and the currency, and that every contract is made subject to the government's lawful authority. Opponents repeated the Hepburn reasoning: the Constitution grants no such power, the framers deliberately withheld it, and forced acceptance of depreciated paper takes the creditor's property. On 1 May 1871 the Court upheld the acts on both questions, five to four. Justice Strong, writing for the majority, held that the Constitution created a government with the power of self-preservation, that implied powers may arise from several express powers taken together, that the tender clause was an appropriate means to carry on the war, and that contracts are made subject to such lawful exercises of power. He expressly overruled Hepburn as to earlier debts, noting that it had been decided by a short-handed and divided court. Justice Bradley, concurring, stressed the national character of the government and the long practice of governments, including the Continental Congress, of issuing bills of credit in emergencies. Chief Justice Chase, dissenting for the former majority, protested that the reversal came from a change in personnel rather than in anyone's opinion and restated his reasoning. Justice Field, dissenting, argued that borrowing means obtaining money on a promise, not compelling acceptance of the promise as payment. The library text gives Strong's full opinion with excerpts of the Bradley concurrence and the Chase and Field dissents, without the reporter's notes. Justice Clifford's separate dissent is not included. In Juilliard v. Greenman (1884) the Court, with only Field dissenting, upheld the issue of legal tender notes in peacetime, and the federal monetary power has since been treated as settled.

Plot or Argument

• The stakes stated

  Strong opens by observing that the decision will affect the entire business of the country, since nearly all debts of the past decade had been contracted and paid in greenbacks, and that a ruling against the acts would leave the government without a means of self-preservation possessed by every other sovereign.

• Powers from the aggregate of grants

  Relying on McCulloch, Strong argues that some powers arise not from a single express grant but from several taken together, and that the means Congress chooses need only be appropriate to a legitimate end.

• No prohibition in the Constitution

  The ban on bills of credit and tender laws binds only the states, Strong reasons; the framers did not extend it to Congress, and the power over money is an ordinary attribute of sovereignty.

• Contracts and the takings objection

  Contracts are made subject to the government's rightful authority, and the Fifth Amendment reaches direct appropriations, not consequential losses from the lawful exercise of a power such as war or the regulation of the currency.

• Overruling Hepburn

  Strong holds the acts valid as to debts before and after their passage, overrules Hepburn on the first point, and defends correcting a constitutional error decided by a divided and incomplete bench.

• Bradley's concurrence (excerpt)

  Bradley describes the United States as the only government in the country with the character of nationality and recounts the use, by Massachusetts before independence and by the Continental Congress during the Revolution, of bills of credit as legal tender.

• Chase's and Field's dissents (excerpts)

  Chase objects that the reversal reflects only a change in the Court's membership and adheres to Hepburn; Field argues that the power to borrow money does not include the power to force a lender to accept the government's promise as payment of a private debt.

Characters

• Justice William Strong, author of the opinion of the Court

  Former justice of the Pennsylvania Supreme Court, seated in 1870, who wrote that the acts were valid as to all debts.

• Justice Joseph P. Bradley, concurring

  New Jersey lawyer, seated in 1870, who added a concurrence on national sovereignty and the history of bills of credit.

• Chief Justice Salmon P. Chase, dissenter

  Author of Hepburn, who protested the reversal and adhered to his earlier opinion.

• Justice Stephen J. Field, dissenter

  Californian who wrote that borrowing does not include a power to compel acceptance of paper promises.

• Phoebe G. Lee, plaintiff below in Knox v. Lee

  Pennsylvania owner whose Texas sheep had been seized and sold under Confederate authority.

Lessons

• Sovereignty and self-preservation

  Strong and Bradley read the Constitution as creating a full national government equipped to survive emergencies, with powers comparable to those of other sovereign nations. Their dissenting colleagues read it as a grant of enumerated powers that stops where the text and the framers' choices stop.

  • Why does Strong mention that every other independent sovereignty had the power to make paper a legal tender?
  • What does Bradley mean by calling the United States the only government with the character of nationality?
  • Should the Constitution be read to give the national government every power a sovereign nation ordinarily has?

• Powers drawn from many grants together

  Strong argues that some implied powers flow from the aggregate of express powers rather than from one clause. This reasoning made it unnecessary to tie the tender clause to a single grant, but critics asked where such reasoning would stop.

  • Which express powers does Strong combine to support the legal tender acts?
  • How might a critic object to locating a power in the aggregate of several grants?

• Precedent and a changed Court

  The Court reversed itself within fifteen months after two new justices joined. Strong defends correcting a serious constitutional error decided by an incomplete bench; Chase replies that the reversal was produced by no change in anyone's opinion. The episode remains a classic study in the authority of precedent.

  • What reasons does Strong give for overruling Hepburn so quickly?
  • Why does Chase emphasize that none of the former majority changed their minds?
  • When, if ever, should a court overrule a recent decision of its own?

• What a lender agrees to

  Strong holds that contracts are made subject to the government's lawful powers, so a creditor bears the risk of legislation affecting the currency. Field answers that the Constitution was ordained to establish justice and that a promise to pay should be fulfilled in substance, not in name.

  • How does Strong answer the argument that the acts take creditors' property?
  • What does Field mean by nominal instead of actual fulfilment?
  • Does a person who lends money accept the risk that the government will change what counts as money?

Context

The greenbacks issued during the Civil War remained in circulation after 1865, and by 1870 most debts in the country had been contracted in them. Postwar politics divided between those who wanted to retire the notes and resume gold payments and those, often debtors and farmers, who favored keeping or expanding them. Hepburn had threatened to unsettle prewar contracts and raised fears that postwar contracts might be challenged next.

Composition

President Grant nominated Strong and Bradley on 7 February 1870, the day Hepburn was announced, and both were confirmed and seated by March. The Court soon agreed, over Chase's objection, to hear argument again on the question in other pending cases; those were withdrawn, and Knox v. Lee and Parker v. Davis were argued instead. The decision was announced on 1 May 1871, with Strong's opinion delivered then and the dissents and Bradley's concurrence filed later.

Reception

Critics at the time charged that Grant had packed the Court to secure the reversal, a claim historians have weighed for more than a century; Grant's defenders noted that he made the nominations without any promise from the nominees. The decision settled the validity of the war notes, and Juilliard v. Greenman (1884) extended the power to peacetime. Commentators continue to debate both the constitutional basis of federal paper money and the propriety of so swift a reversal.

Comparisons

• hepburn-v-griswold

  The decision overruled here; its dissent, written by Miller, supplied much of what became Strong's majority reasoning.

• mcculloch-v-maryland

  Strong builds on Marshall's broad view of implied powers and adds the idea that powers may arise from several grants considered together.

• norman-v-baltimore-and-ohio-railroad

  In the Gold Clause Cases of 1935 the Court relied on the Legal Tender Cases in upholding Congress's power to override gold clauses in private contracts.

• hamiltons-reports-and-opinion-on-the-bank

  Hamilton's argument that a government has powers resulting from the whole mass of its grants anticipates Strong's aggregate-of-powers reasoning.

• the-federalist-papers

  Federalist No. 44 explains the ban on state paper money, which Strong reads as confined to the states and Field reads as evidence of the framers' broader intent.

Quotes

For Students

A reading companion for classical Christian high school students. See the student guide.

Reading Guide

Watch for

• Strong's warning that a ruling against the acts would affect the entire business of the country.
• The idea that some powers come from the aggregate of several express grants.
• Strong's argument that contracts are made subject to the government's lawful authority.
• Bradley's history of bills of credit in the colonies and the Revolution.
• Chase's complaint that the reversal followed only a change in membership.

Key terms and names

Overrule

To declare that an earlier decision of the same or a lower court is no longer good law.

Stare decisis

Latin for to stand by things decided: the principle that courts should follow their own precedents.

Implied powers

Powers not listed in the Constitution but held to follow from those that are.

Resulting powers

Powers that arise from several express grants taken together rather than from any single one.

Tender

An offer of payment that, if made in lawful money, the creditor cannot refuse without losing certain rights.

Seminar Questions

1. Comprehension What two questions does Strong say control these cases, and how does he answer each?
2. Comprehension What changes in the Court's membership took place between Hepburn and the Legal Tender Cases?
3. Comprehension According to Bradley, how had governments before 1787 used bills of credit?
4. Interpretation How does Strong's reading of the prohibition on state bills of credit differ from the reading in Hepburn?
5. Interpretation Why does Field appeal to the Preamble's phrase to establish justice?
6. Big Question Does a court's authority depend on the stability of its decisions, and if so, how should it treat a decision it believes mistaken?

Faith Connections

• Leviticus 19:35-36 (Scripture)

  Israel is commanded to use just balances, just weights and a just measure, a standard relevant to Field's demand for actual rather than nominal payment.

• Romans 13:6-7 (Scripture)

  Paul tells believers to render to authorities what is due, tribute and custom, a text bearing on the government's claim to set the terms of payment.

• John Locke, Further Considerations Concerning Raising the Value of Money (1695) (Great Conversation)

  Locke argued that changing the legal value of coin defrauds creditors, an argument that runs beneath the dissents.

Logic and Rhetoric

Central argument: Strong argues that the Constitution established a sovereign government with the power of self-preservation, that implied powers may rest on the combined force of several grants, that nothing in the text forbids Congress to make its notes legal tender, and that contracts are always subject to lawful governmental power; the dissenters answer that no grant supports the power and that compelled acceptance of depreciated paper defeats justice to creditors.

Rhetorical device: appeal to consequences. Strong opens by stressing that a contrary ruling would affect the entire business of the country and leave the government without means of self-preservation (quote 0).

Debate: Resolved: that the Supreme Court acted properly in overruling Hepburn v. Griswold in 1871.

Memory Work

And it is no unprecedented thing in courts of last resort, both in this country and in England, to overrule decisions previously made.

It was hoped that it had settled forever that under a Constitution ordained, among other things, 'to establish justice,' legislation giving to one person the right to discharge his obligations to another by nominal instead of actual fulfilment, could never be justified.

Writing Prompts

Essay: Explain Strong's argument that the legal tender acts were a necessary and proper means of carrying on the war, and weigh it against Field's view of the borrowing power.

Comparison with Hepburn v. Griswold: Compare the treatment of McCulloch v. Maryland in Chase's 1870 opinion and Strong's 1871 opinion, and explain how two readings of the same precedent led to opposite results.

Medical Lens

The opinions concern war finance, paper money and the authority of precedent and say nothing about health, medicine or the mind.

Creative Prompts

• Classroom

  Hold a reargument of the legal tender question before a nine-member student bench in April 1871, with counsel for Mrs. Lee and for Knox, and record how the two newest justices vote and why.

• Essay

  Write a short opinion explaining whether a court should overrule a constitutional decision only fifteen months old, citing Strong's and Chase's arguments.

• Dialogue

  Compose an exchange of letters between a Massachusetts landowner paid in greenbacks and the buyer who tendered them, each explaining why the payment was or was not fair.

• Essay

  Trace the history of bills of credit from the Massachusetts colony through the Continental Congress, using Bradley's concurrence as a guide, and explain how that history bears on the framers' intent.

Further Reading

• Reconstruction and Reunion, 1864-88, Part One, Charles Fairman

  Volume of the Holmes Devise history of the Court with a detailed account of the legal tender litigation and the appointments of 1870.

• The Greenback Era: A Social and Political History of American Finance, 1865-1879, Irwin Unger

  Places the legal tender decisions within the postwar contest over paper money and resumption.

• Salmon P. Chase: A Biography, John Niven

  Covers Chase's role in issuing the greenbacks and his later dissent from their validation.