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Hepburn v. Griswold

Supreme Court of the United States · 1870 · Civil Procedure

Civil ProcedureConstitutional LawLegal TenderImplied PowersDue ProcessContractslegal tenderUnited States notes

Facts

The case involved a promissory note made before the Act of February 25, 1862, which authorized United States notes and declared them legal tender in payment of debts. The defendants tendered United States notes in nominally the amount due, rather than gold and silver coin. The holder of the note insisted that, because the contract predated the act, he was entitled to payment in the coin money contemplated when the contract was made. The dispute therefore turned on whether Congress could constitutionally make such notes legal tender for pre-existing debts.

Issue

May Congress constitutionally make United States notes a legal tender in payment of debts contracted before the Legal Tender Act of February 25, 1862, where those debts were payable in gold and silver coin under the law existing when the contracts were made? If Congress intended the act to cover pre-existing debts, is that application constitutional?

Rule

Congress has no express power to make notes or promises to pay money a legal tender in payment of pre-existing debts, and such a power cannot be implied unless it is an appropriate, plainly adapted, and really calculated means of carrying into execution an enumerated power, while also remaining consistent with the letter and spirit of the Constitution. A law that directly and necessarily impairs the obligation of prior money contracts by compelling creditors to accept inferior paper in place of coin is inconsistent with the spirit of the Constitution and prohibited by the Fifth Amendment's protection against deprivation of property without due process of law.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In 1864, Owen Mercer of Louisville sues Dana Pike on a promissory note Dana signed in 1861 for "$900," with no mention of coin. Dana tenders newly authorized federal paper notes in the nominal amount due, and the notes are worth substantially less in the market than gold coin.

Under the majority's reasoning, must Owen accept the paper notes as full satisfaction of the 1861 debt?

Explanation. The majority treated pre-Act money contracts as, in legal effect, contracts payable in coin, even if they did not expressly say so. It held that Congress lacked constitutional authority to make United States notes legal tender for debts contracted before the statute, because that directly and necessarily compelled creditors to accept inferior paper in place of the coin contemplated by the contract.