Part 17 (1/2)

The act thus designated as the legal tender act is the act of congress of February 25th, 1862, authorizing the issue of United States notes, and providing for their redemption or funding, and for funding the floating debt of the United States; and the questions, as stated, would seem to draw into discussion the validity of the entire act; whereas, the only questions intended for argument, and actually argued and decided, relate--1st, to the validity of that provision of the act which declares that these notes shall be a legal tender in payment of debts, as applied to private debts and debts of the government contracted previous to the pa.s.sage of the act; and 2d, to the validity of the provision as applied to similar contracts subsequently made. The case of _Parker_ v. _Davis_ involves the consideration of the first question; and the case of _Knox_ v. _Lee_ is supposed by a majority of the court to present the second question.

No question was raised as to the validity of the provisions of the act authorizing the issue of the notes, and making them receivable for dues to the United States; nor do I perceive that any objection could justly be made at this day to these provisions. The issue of the notes was a proper exercise of the power to borrow money, which is granted to congress without limitation. The extent to which the power may be exercised depends, in all cases, upon the judgment of that body as to the necessities of the government. The power to borrow includes the power to give evidences of indebtedness and obligations of repayment.

Instruments of this character are among the securities of the United States mentioned in the const.i.tution. These securities are sometimes in the form of certificates of indebtedness, but they may be issued in any other form, and in such form and in such amounts as will fit them for general circulation, and to that end may be made payable to the bearer and transferable by delivery. The form of notes, varying in amounts to suit the convenience or ability of the lender, has been found by experience a convenient form, and the one best calculated to secure the readiest acceptance and the largest loan. It has been the practice of the government to use notes of this character in raising loans and obtaining supplies from an early period in its history, their receipt by third parties being in all cases optional.

In June, 1812, congress pa.s.sed an act which provided for the issue of treasury notes, and authorized the secretary of the treasury, with the approbation of the president, ”to borrow from time to time, not under par, such sums” as the president might think expedient, ”on the credit of such notes.”

In February, 1813, congress pa.s.sed another act for the issue of treasury notes, declaring ”that the amount of money borrowed or obtained by virtue of the notes” issued under its second section should be a part of the money authorized to be borrowed under a previous act of the same session. There are numerous other acts of a similar character on our statute books. More than twenty, I believe, were pa.s.sed previous to the legal tender act.

In all of them the issue of the notes was authorized as a means of borrowing money, or obtaining supplies, or paying the debts of the United States, and in all of them the receipt of the notes by third parties was purely voluntary. Thus, in the first act, of June, 1812, the secretary of the treasury was authorized not only to borrow on the notes, but to issue such notes as the president might think expedient ”in payment of supplies or debts due by the United States to such public creditors or other persons” as might ”_choose to receive such notes in payment at par_.” Similar provisions are found in all the acts except where the notes are authorized simply to take up previous loans.

The issue of the notes for supplies purchased or services rendered at the request of the United States is only giving their obligations for an indebtedness thus incurred; and the same power which authorizes the issue of notes for money must also authorize their issue for whatever is received as an equivalent for money. The result to the United States is the same as if the money were actually received for the notes and then paid out for the supplies or services.

The notes issued under the act of congress of February 25th, 1862, differ from the treasury notes authorized by the previous acts to which I have referred in the fact that they do not bear interest and do not designate on their face a period at which they shall be paid, features which may affect their value in the market but do not change their essential character. There cannot be, therefore, as already stated, any just objection at this day to the issue of the notes, nor to their adaptation in form for general circulation.

Nor can there be any objection to their being made receivable for dues to the United States. Their receivability in this respect is only the application to the demands of the government, and demands against it, of the just principle which is applied to the demands of individuals against each other, that cross-demands shall offset and satisfy each other to the extent of their respective amounts. No rights of third parties are in any respect affected by the application of the rule here, and the purchasing and borrowing power of the notes are greatly increased by making them thus receivable for the public dues. The objection to the act does not lie in these features; it lies in the provision which declares that the notes shall be ”a legal tender in payment of all debts, public and private,” so far as that provision applies to private debts, and debts owing by the United States.

In considering the validity and const.i.tutionality of this provision, I shall in the first place confine myself to the provision in its application to private debts. Afterwards I shall have something to say of the provision in its application to debts owing by the government.

In the discussions upon the subject of legal tender the advocates of the measure do not agree as to the power in the const.i.tution to which it shall be referred; some placing it upon the power to borrow money, some on the coining power, and some on what is termed a resulting power from the general purposes of the government; and these discussions have been accompanied by statements as to the effect of the measure, and the consequences which must have followed had it been rejected, and which will now occur if its validity be not sustained, which rest upon no solid foundation, and are not calculated to aid the judgment in coming to a just conclusion.

In what I have to say I shall endeavor to avoid any such general and loose statements, and shall direct myself to an inquiry into the nature of these powers to which the measure is referred, and the relation of the measure to them.

Now if congress can, by its legislative declaration, make the notes of the United States a legal tender in payment of private debts--that is, can make them receivable against the will of the creditor in satisfaction of debts due to him by third parties--its power in this respect is not derived from its power to borrow money, under which the notes were issued. That power is not different in its nature or essential incidents from the power to borrow possessed by individuals, and is not to receive a larger definition. Nor is it different from the power often granted to public and private corporations. The grant, it is true, is usually accompanied in these latter cases with limitations as to the amount to be borrowed, and a designation of the objects to which the money shall be applied--limitations which in no respect affect the nature of the power. The terms ”power to borrow money” have the same meaning in all these cases, and not one meaning when used by individuals, another when granted to corporations, and still a different one when possessed by congress. They mean only a power to contract for a loan of money upon considerations to be agreed between the parties. The amount of the loan, the time of repayment, the interest it shall bear, and the form in which the obligation shall be expressed are simply matters of arrangement between the parties. They concern no one else. It is no part or incident of a contract of this character that the rights or interests of third parties, strangers to the matter, shall be in any respect affected. The transaction is completed when the lender has parted with his money, and the borrower has given his promise of repayment at the time, and in the manner, and with the securities stipulated between them.

As an inducement to the loan, and security for its repayment, the borrower may of course pledge such property or revenues, and annex to his promises such rights and privileges as he may possess. His stipulations in this respect are necessarily limited to his own property, rights, and privileges, and cannot extend to those of other persons.

Now, whether a borrower--be the borrower an individual, a corporation, or the government--can annex to the bonds, notes, or other evidences of debt given for the money borrowed, any quality by which they will serve as a means of satisfying the contracts of other parties, must necessarily depend upon the question whether the borrower possesses any right to interfere with such contracts, and determine how they shall be satisfied. The right of the borrower in this respect rests upon no different foundation than the right to interfere with any other property of third parties. And if it will not be contended, as I think I may a.s.sume it will not be, that the borrower possesses any right, in order to make a loan, to interfere with the tangible and visible property of third parties, I do not perceive how it can be contended that he has any right to interfere with their property when it exists in the form of contracts. A large part of the property of every commercial people exists in that form, and the principle which excludes a stranger from meddling with another's property which is visible and tangible, equally excludes him from meddling with it when existing in the form of contracts.

That an individual or corporation borrowing possesses no power to annex to his evidences of indebtedness any quality by which the holder will be enabled to change his contracts with third parties, strangers to the loan, is admitted; but it is contended that congress possesses such power because, in addition to the express power to borrow money, there is a clause in the const.i.tution which authorizes congress to make all laws ”necessary and proper” for the execution of the powers enumerated.

This clause neither augments nor diminishes the expressly designated powers. It only states in terms what congress would equally have had the right to do without its insertion in the const.i.tution. It is a general principle that a power to do a particular act includes the power to adopt all the ordinary and appropriate means for its execution. ”Had the const.i.tution,” says Hamilton, in the Federalist, speaking of this clause, ”been silent on this head, there can be no doubt that all the particular powers requisite as a means of executing the general powers would have resulted to the government by unavoidable implication.” No axiom is more clearly established in law or in reason, that whenever the end is required the means are authorized; whenever a general power to do a thing is given, every particular power necessary for doing it is included.

The subsidiary power existing without the clause in question, its insertion in the const.i.tution was no doubt intended, as observed by Mr.

Hamilton, to prevent ”all cavilling refinements” in those who might thereafter feel a disposition to curtail and evade the legitimate authorities of the Union; and also, I may add, to indicate the true sphere and limits of the implied powers.

But though the subsidiary power would have existed without this clause, there would have been the same perpetually recurring question as now, as to what laws are necessary and proper for the execution of the expressly enumerated powers.

The particular clause in question has at different times undergone elaborate discussions in congress, in cabinets, and in the courts. Its meaning was much debated in the first congress upon the proposition to incorporate a national bank, and afterwards in the cabinet of Was.h.i.+ngton, when that measure was presented for his approval. Mr.

Jefferson, then secretary of state, and Mr. Hamilton, then secretary of the treasury, differed widely in their construction of the clause, and each gave his views in an elaborate opinion. Mr. Jefferson held that the word ”necessary” restricted the power of congress to the use of those means, without which the grant would be nugatory, thus making necessary equivalent to indispensable.

Mr. Hamilton favored a more liberal, and in my judgment, a more just interpretation, and contended that the terms ”necessary and proper”

meant no more than that the measures adopted must have an obvious relation as a means to the end intended. ”If the end,” he said, ”be clearly comprehended within any of the specified powers, and if the measure have an obvious relation to that end, and is not forbidden by any particular provision of the const.i.tution, it may safely be deemed to come within the compa.s.s of the national authority.” ”There is also,” he added, ”this further criterion which may materially a.s.sist the decision: Does the proposed measure abridge a pre-existing right of any state, or of any individual? If it does not, there is a strong presumption in favor of its const.i.tutionality; and slighter relations to any declared object may be permitted to turn the scale.” From the criterion thus indicated it would seem that the distinguished statesman was of opinion that a measure which did interfere with a pre-existing right of a state or an individual would not be const.i.tutional.

The interpretation given by Mr. Hamilton was substantially followed by Chief Justice Marshall, in _McCulloch_ v. _the State of Maryland_, when, speaking for the court, he said that if the end to be accomplished by the legislation of congress be legitimate, and within the scope of the const.i.tution, ”all the means which are appropriate, which are plainly adapted to that end, and which are not prohibited, but are consistent with the letter and spirit of the const.i.tution, are const.i.tutional.” The chief justice did not, it is true, in terms declare that legislation which is not thus appropriate, and plainly adapted to a lawful end, is unconst.i.tutional, but such is the plain import of the argument advanced by him; and that conclusion must also follow from the principle that, when legislation of a particular character is specially authorized, the opposite of such legislation is inhibited.

Tested by the rule given by Mr. Hamilton, or by the rule thus laid down by this court through Mr. Chief Justice Marshall, the annexing of a quality to the promises of the government for money borrowed, which will enable the holder to use them as a means of satisfying the demands of third parties, cannot be sustained as the exercise of an appropriate means of borrowing. That is only appropriate which has some relation of fitness to an end. Borrowing, as already stated, is a transaction by which, on one side, the lender parts with his money, and on the other the borrower agrees to repay it in such form and at such time as may be stipulated. Though not a necessary part of the contract of borrowing, it is usual for the borrower to offer securities for the repayment of the loan. The fitness which would render a means appropriate to this transaction thus considered must have respect to the terms which are essential to the contract, or to the securities which the borrower may furnish as an inducement to the loan. The quality of legal tender does not touch the terms of the contract of borrowing, nor does it stand as a security for the loan. A security supposes some right or interest in the thing pledged, which is subject to the disposition of the borrower.

There has been much confusion on this subject from a failure to distinguish between the adaptation of particular means to an end and the effect, or supposed effect, of those means in producing results desired by the government. The argument is stated thus: the object of borrowing is to raise funds; the annexing of the quality of legal tender to the notes of the government induces parties the more readily to loan upon them; the result desired by the government--the acquisition of funds--is thus accomplished; therefore, the annexing of the quality of legal tender is an appropriate means to the execution of the power to borrow.

But it is evident that the same reasoning would justify, as appropriate means to the execution of this power, any measures which would result in obtaining the required funds. The annexing of a provision by which the notes of the government should serve as a free ticket in the public conveyances of the country, or for ingress into places of public amus.e.m.e.nt, or which would ent.i.tle the holder to a percentage out of the revenues of private corporations, or exempt his entire property, as well as the notes themselves, from state and munic.i.p.al taxation, would produce a ready acceptance of the notes. But the advocate of the most liberal construction would hardly pretend that these measures, or similar measures touching the property of third parties, would be appropriate as a means to the execution of the power to borrow. Indeed, there is no invasion by government of the rights of third parties which might not thus be sanctioned upon the pretence that its allowance to the holder of the notes would lead to their ready acceptance and produce the desired loan.