The Contracts Clause

The Taney Court through the New Deal

Proprietors of Charles River Bridge v. Proprietors of Warren Bridge (1837)

36 U.S. 420 (1837)

Decision: 5-2
Vote: Affirmed
Opinion: Taney, joined by McLean, Baldwin, Wayne, and Barbour
Concur: McLean, joined by Barbour, Baldwin and Wayne
Dissent: Story, joined by Thompson

Proprietors of Charles River Bridge v. Proprietors of Warren Bridge (1837)

TANEY, Ch. J., delivered the opinion of the court.

The questions involved in this case are of the gravest character, and the court have given to them the most anxious and deliberate consideration. The value of the right claimed by the plaintiffs is large in amount; and many persons may, no doubt, be seriously affected in their pecuniary interests, by any decision which the court may pronounce; and the questions which have been raised as to the power of the several states, in relation to the corporations they have chartered, are pregnant with important consequences; not only to the individuals who are concerned in the corporate franchises, but to the communities in which they exist. The court are fully sensible, that it is their duty, in exercising the high powers conferred on them by the constitution of the United States, to deal with these great and extensive interests, with the utmost caution; guarding, so far as they have the power to do so, the rights of property, and at the same time, carefully abstaining from any encroachment on the rights reserved to the states …

In the last-mentioned year, a petition was presented to the legislature, by Thomas Russell and others, stating the inconvenience of the transportation by ferries, over Charles river, and the public advantages that would result from a bridge; and praying to be incorporated, for the purpose of erecting a bridge in the place where the ferry between Boston and Charlestown was then kept. Pursuant to this petition, the legislature, on the 9th of March 1785, passed an act incorporating a company, by the name of ‘The Proprietors of the Charles River Bridge,’ for the purposes mentioned in the petition …

The bridge was accordingly built, and was opened for passengers on the 17th of June 1786. In 1792, the charter was extended to seventy years from the opening of the bridge; and at the expiration of that time, it was to belong to the commonwealth. The corporation have regularly paid to the college the annual sum of two hundred pounds and have performed all of the duties imposed on them by the terms of their charter.

In 1828, the legislature of Massachusetts incorporated a company by the name of ‘The Proprietors of the Warren Bridge,’ for the purpose of erecting another bridge over Charles river …

The Warren bridge, by the terms of its charter, was to be surrendered to the state, as soon as the expenses of the proprietors in building and supporting it should be reimbursed; but this period was not, in any event, to exceed six years from the time the company commenced receiving toll.

When the original bill in this case was filed, the Warren Bridge had not been built, and the bill was filed, after the passage of the law, in order to obtain an injunction to prevent its erection, and for general relief. The bill, among other things, charged as a ground for relief that the act for the erection of the Warren Bridge impaired the obligation of the contract between the State of Massachusetts and the proprietors of the Charles River Bridge, and was therefore repugnant to the Constitution of the United States …

The plaintiffs in error insist, mainly, upon two grounds: … 2d. That independently of the ferry-right, the acts of the legislature of Massachusetts, of 1785 and 1792, by their true construction, necessarily implied, that the legislature would not authorize another bridge, and especially, a free one, by the side of this, and placed in the same line of travel, whereby the franchise granted to the ‘Proprietors of the Charles River Bridge’ should be rendered of no value; and the plaintiffs in error contend, that the grant of the ferry to the college, and of the charter to the proprietors of the bridge, are both contracts on the part of the state; and that the law authorizing the erection of the Warren bridge in 1828, impairs the obligation of one or both of these contracts.

It is very clear, that in the form in which this case comes before us (being a writ of error to a state court), the plaintiffs, in claiming under either of these rights, must place themselves on the ground of contract, and cannot support themselves upon the principle, that the law divests vested rights. It is well settled … that a state law may be retrospective in its character, and may divest vested rights, and yet not violate the constitution of the United States, unless it also impairs the obligation of a contract. [I]n the late case of Watson and others v. Mercer, decided in 1834: ‘As to the first point (say the court), it is clear, that this court has no right to pronounce an act of the state legislature void, as contrary to the constitution of the United States, from the mere fact, that it divests antecedent vested rights of property. The constitution of the United States does not prohibit the states from passing retrospective laws, generally, but only ex post facto laws.’ …

In other words, they must show, that the state had entered into a contract with them, or those under whom they claim, not to establish a free bridge at the place where the Warren bridge is erected. Such, and such only, are the principles upon which the plaintiffs in error can claim relief in this case …

The legislature, in granting the charter, show, by the language of the law, that they acted on the principles assumed by the petitioners. The preamble recites, that the bridge ‘will be of great public utility;’ and that is the only reason they assign, for passing the law which incorporates this company. The validity of the character is not made to depend on the consent of the college, nor of any assignment or surrender on their part …

[I]t is not pretended, that the erection of the Warren bridge would have done them any injury, or in any degree affected their right of property, if it had not diminished the amount of their tolls. In order, then, to entitle themselves to relief, it is necessary to show, that the legislature contracted not to do the act of which they complain; and that they impaired, or in other words, violated, that contract, by the erection of the Warren bridge.

The inquiry, then, is, does the charter contain such a contract on the part of the state? Is there any such stipulation to be found in that instrument? It must be admitted on all hands, that there is none; no words that even relate to another bridge, or to the diminution of their tolls, or to the line of travel. If a contract on that subject can be gathered from the charter, it must be by implication; and cannot be found in the words used. Can such an agreement be implied? …

The Charles River bridge was completed in 1786; the time limited for the duration of the corporation, by their original charter, expired in 1826. When, therefore, the law passed authorizing the erection of the Warren bridge, the proprietors of Charles River bridge held their corporate existence under the law of 1792, which extended their charter for thirty years; and the rights, privileges and franchises of the company, must depend upon the construction of the last-mentioned law, taken in connection with the act of 1785 …

It is not necessary, for the decision of this case, to express our opinion upon them; and the court deem it proper to avoid volunteering an opinion on any question, involving the construction of the constitution, where the case itself does not bring the question directly before them, and make it their duty to decide upon it. Some questions, also, of a purely technical character, have been made and argued, as to the form of proceeding and the right to relief. But enough appears on the record, to bring out the great question in contest; and it is the interest of all parties concerned, that the real controversy should be settled, without further delay: and as the opinion of the court is pronounced on the main question in dispute here, and disposes of the whole case, it is altogether unnecessary to enter upon the examination of the forms of proceeding, in which the parties have brought it before the court.

The judgment of the supreme judicial court of the commonwealth of Massachusetts, dismissing the plaintiffs’ bill, must, therefore, be affirmed, with costs.


Allgeyer v. Louisiana (1898)

165 U.S. 578 (1898)

Decision: Reversed
Vote: 9-0
Opinion: Peckham, joined by Fuller, Field, Harlan, Gray, Brewer, Brown, Shiras, and White

MR. JUSTICE PECKHAM, after stating the facts, delivered the opinion of the Court.

There is no doubt of the power of the state to prohibit foreign insurance companies from doing business within its limits. The state can impose such conditions as it pleases upon the doing of any business by those companies within its borders, and unless the conditions be complied with, the prohibition may be absolute …

A conditional prohibition in regard to foreign insurance companies doing business within the State of Louisiana is to be found in article 236 of the Constitution of that state, which reads as follows:

“No foreign corporation shall do any business in this state without having one or more known places of business and an authorized agent or agents in the state upon whom process may be served.”

In Louisiana v. Williams, (1894), the Supreme Court of that state held that an open policy of marine insurance, similar in all respects to the one herein described and made by a foreign insurance company not doing business within the state and having no agent therein, must be considered as made at the domicile of the company issuing the open policy, and that where in such case the insurance company had no agent in Louisiana, it could not be considered as doing an insurance business within the state …

The general contract contained in the open policy, as well as the special insurance upon each shipment of goods of which notice is given to the insurance company, being contracts made in New York and valid there, the State of Louisiana claims notwithstanding such facts that the defendants have violated the act of 1894 by doing an act in that state to effect for themselves insurance on their property then in that state in a marine insurance company which had not complied in all respects with the laws of that state, and that such violation consisted in the act of mailing a letter or sending a telegram to the insurance company in New York describing the cotton upon which the defendants desired the insurance under the open marine policy to attach …

It is said by the supreme court that the validity of such a statute has been decided in principle in this Court in the case of Hooper v. California, (1895) …

We think the distinction between that case and the one at bar is plain and material … In the case before us, the contract was made beyond the territory of the State of Louisiana, and the only thing that the facts show was done within that state was the mailing of a letter of notification, as above mentioned, which was done after the principal contract had been made …

We have, then, a contract which it is conceded was made outside and beyond the limits of the jurisdiction of the State of Louisiana, being made and to be performed within the State of New York, where the premiums were to be paid, and losses, if any, adjusted. The letter of notification did not constitute a contract made or entered into within the State of Louisiana … It was a mere notification that the contract already in existence would attach to that particular property. In any event, the contract was made in New York, outside of the jurisdiction of Louisiana, even though the policy was not to attach to the particular property until the notification was sent …

Such interference is not only apparent, but it is real, and we do not think that it is justified for the purpose of upholding what the state says is its policy with regard to foreign insurance companies which had not complied with the laws of the state for doing business within its limits. In this case, the company did no business within the state, and the contracts were not therein made …

As so construed, we think the statute is a violation of the Fourteenth Amendment of the federal Constitution in that it deprives the defendants of their liberty without due process of law. The statute which forbids such act does not become due process of law, because it is inconsistent with the provisions of the Constitution of the Union. The “liberty” mentioned in that amendment means not only the right of the citizen to be free from the mere physical restraint of his person, as by incarceration, but the term is deemed to embrace the right of the citizen to [be] free in the enjoyment of all his faculties, to be free to use them in all lawful ways … and for that purpose to enter into all contracts which may be proper, necessary, and essential to his carrying out to a successful conclusion the purposes above mentioned …

When we speak of the liberty to contract for insurance or to do an act to effectuate such a contract already existing, we refer to and have in mind the facts of this case, where the contract was made outside the state, and as such was a valid and proper contract. The act done within the limits of the state, under the circumstances of this case and for the purpose therein mentioned, we hold a proper act — one which the defendants were at liberty to perform and which the state legislature had no right to prevent at least with reference to the federal Constitution …

The Atlantic Mutual Insurance Company of New York has done no business of insurance within the State of Louisiana, and has not subjected itself to any provisions of the statute in question. It had the right to enter into a contract in New York with citizens of Louisiana for the purpose of insuring the property of its citizens, even if that property were in the State of Louisiana, and correlatively the citizens of Louisiana had the right without the State of entering into contract with an insurance company for the same purpose …

In such a case as the facts here present, the policy of the state in forbidding insurance companies which had not complied with the laws of the state from doing business within its limits cannot be so carried out as to prevent the citizen from writing such a letter of notification as was written by the plaintiffs in error in the State of Louisiana, when it is written pursuant to a valid contract made outside the state and with reference to a company which is not doing business within its limits.

For these reasons, we think the statute in question, No. 66 of the Laws of Louisiana of 1894, was a violation of the federal Constitution, and afforded no justification for the judgment awarded by that court against the plaintiffs in error. That judgment must therefore be

Reversed, and the case remanded to the Supreme Court of Louisiana for further proceedings not inconsistent with his opinion.


Coppage v. Kansas (1915)

236 U.S. 1 (1915)

Decision: Reversed
Vote: 6-3
Opinion: Pitney, joined by White, McKenna, Van Devanter, Lamar, and McReynolds
Dissent: Holmes
Dissent: Day, joined by Hughes

MR. JUSTICE PITNEY delivered the opinion of the Court.

In a local court in one of the counties of Kansas, plaintiff in error was found guilty and adjudged to pay a fine, with imprisonment as the alternative, upon an information charging him with a violation of an act of the legislature of that state … §§ 4674 and 4675. … The act reads as follows:

“An Act to Provide a Penalty for Coercing or Influencing or Making Demands upon or Requirements of Employees, Servants, Laborers, and Persons Seeking Employment.” …

“SECTION 1. That it shall be unlawful for any individual … or employee of any company or corporation to coerce … any person or persons to enter into any agreement, either written or verbal, not to join or become or remain a member of any labor organization or association as a condition of such person or persons securing employment or continuing in the employment of such … corporation.”

“SEC 2. Any … employee of any company or corporation violating the provisions of this act shall be deemed guilty of a misdemeanor, and upon conviction thereof shall be fined in a sum not less than fifty dollars or imprisoned in the county jail not less than thirty days.”

The judgment was affirmed by the supreme court of the state, two justices dissenting, and the case is brought here upon the ground that the statute, as construed and applied in this case, is in conflict with that provision of the Fourteenth Amendment of the Constitution of the United States which declares that no state shall deprive any person of liberty or property without due process of law.

The facts, as recited in the opinion of the supreme court, are as follows: about July 1, 1911, one Hedges was employed as a switchman by the St. Louis & San Francisco Railway Company, and was a member of a labor organization called the Switchmen’s Union of North America. Plaintiff in error was employed by the railway company as superintendent, and as such he requested Hedges to sign an agreement, which he presented to him in writing at the same time informing him that, if he did not sign it he could not remain in the employ of the company. The following is a copy of the paper thus presented:

“Fort Scott, Kansas, _____, 1911”

“Mr. T. B. Coppage, Superintendent Frisco Lines, Fort Scott:”

“We, the undersigned, have agreed to abide by your request, that is, to withdraw from the Switchmen’s Union, while in the service of the Frisco Company.”

“(Signed) ____________”

Hedges refused to sign this, and refused to withdraw from the labor organization. Thereupon plaintiff in error, as such superintendent, discharged him from the service of the company …

The evidence shows that it would have been to the advantage of Hedges, from a pecuniary point of view and otherwise, to have been permitted to retain his membership in the union and at the same time to remain in the employ of the railway company …

We have to deal, therefore, with a statute that, as construed and applied, makes it a criminal offense, punishable with fine or imprisonment, for an employer or his agent to merely prescribe, as a condition upon which one may secure certain employment or remain in such employment (the employment being terminable at will), that the employee shall enter into an agreement not to become or remain a member of any labor organization while so employed; the employee being subject to no incapacity or disability, but, on the contrary, free to exercise a voluntary choice.

In Adair v. United States (1898), this Court had to deal with a question not distinguishable in principle from the one now presented …

Unless it is to be overruled, this decision is controlling upon the present controversy, for if Congress is prevented from arbitrary interference with the liberty of contract because of the “due process” provision of the Fifth Amendment, it is too clear for argument that the states are prevented from the like interference by virtue of the corresponding clause of the Fourteenth Amendment, and hence, if it be unconstitutional for Congress to deprive an employer of liberty or property for threatening an employee with loss of employment, or discriminating against him because of his membership in a labor organization, it is unconstitutional for a state to similarly punish an employer for requiring his employee, as a condition of securing or retaining employment, to agree not to become or remain a member of such an organization while so employed …

In the present case, the Kansas Supreme Court sought to distinguish the Adair decision upon this ground. The distinction, if any there be, has not previously been recognized as substantial, so far as we have been able to find. The opinion in the Adair case, while carefully restricting the decision to the precise matter involved … as the first in order of a number of decisions supporting the conclusion of the court, a case (People v. Marcus, (1905)) in which the statute denounced as unconstitutional was in substance the counterpart of the one with which we are now dealing …

Approaching the matter from a somewhat different standpoint, is the employee’s right to be free to join a labor union any more sacred, or more securely founded upon the Constitution, than his right to work for whom he will, or to be idle if he will? And does not the ordinary contract of employment include an insistence by the employer that the employee shall agree, as a condition of the employment, that he will not be idle and will not work for whom he pleases, but will serve his present employer, and him only, so long as the relation between them shall continue? …

Neither the doctrine nor this application of it is novel; we will endeavor to restate some of the grounds upon which it rests. The principle is fundamental and vital. Included in the right of personal liberty and the right of private property — partaking of the nature of each — is the right to make contracts for the acquisition of property. Chief among such contracts is that of personal employment, by which labor and other services are exchanged for money or other forms of property …

The right is … essential … for the vast majority of persons have no other honest way to begin to acquire property save by working for money.

An interference with this liberty so serious as that now under consideration, and so disturbing of equality of right, must be deemed to be arbitrary unless it be supportable as a reasonable exercise of the police power of the state …

To avoid possible misunderstanding, we should here emphasize what has been said before — that, so far as its title or enacting clause expresses a purpose to deal with coercion, compulsion, duress, or other undue influence, we have no present concern with it, because nothing of that sort is involved in this case …

No doubt, wherever the right of private property exists, there must and will be inequalities of fortune, and thus it naturally happens that parties negotiating about a contract are not equally unhampered by circumstances. This applies to all contracts, and not merely to that between employer and employee. Indeed, a little reflection will show that wherever the right of private property and the right of free contract coexist, each party when contracting is inevitably more or less influenced by the question whether he has much property, or little, or none, for the contract is made to the very end that each may gain something that he needs or desires more urgently than that which he proposes to give in exchange …

The police power is broad and not easily defined, but it cannot be given the wide scope that is here asserted for it without in effect nullifying the constitutional guaranty …

… in our opinion, the Fourteenth Amendment debars the states from striking down personal liberty or property rights, or materially restricting their normal exercise, excepting so far as may be incidentally necessary for the accomplishment of some other and paramount object, and one that concerns the public welfare. The mere restriction of liberty or of property rights cannot of itself be denominated “public welfare” and treated as a legitimate object of the police power, for such restriction is the very thing that is inhibited by the Amendment …

A like result was reached in State ex Rel. Smith v. Daniels (1912), with respect to an act that, like the Kansas statute, forbade an employer to require an employee or person seeking employment, as a condition of such employment, to make an agreement that the employee would not become or remain a member or a labor organization. This was held invalid upon the authority of the Adair case.

Upon both principle and authority, therefore, we are constrained to hold that the Kansas Act of March 13, 1903, as construed and applied so as to punish with fine or imprisonment an employer or his agent for merely prescribing, as a condition upon which one may secure employment under or remain in the service of such employer, that the employee shall enter into an agreement not to become or remain a member of any labor organization while so employed, is repugnant to the “due process” clause of the Fourteenth Amendment, and therefore void.

Judgment reversed, and the cause remanded for further proceedings not inconsistent with this opinion.


Home Building & Loan Association v. Blaisdell (1934)

290 U.S. 398 (1934)

Decision: Affirmed
Vote: 5-4
Majority: Hughes, joined by Brandeis, Stone, Roberts, and Cardozo
Dissent: Sutherland, joined by Van Devanter, McReynolds, and Butler

MR. CHIEF JUSTICE HUGHES delivered the opinion of the Court.

Appellant contests the validity of … the Minnesota Mortgage Moratorium Law, as being repugnant to the contract clause (Art. I, § 10) and the due process and equal protection clauses of the Fourteenth Amendment, of the Federal Constitution.

The Act provides that, during the emergency declared to exist, relief may be had through authorized judicial proceedings with respect to foreclosures of mortgages, and execution sales, of real estate; that sales may be postponed and periods of redemption may be extended …

The Act is to remain in effect “only during the continuance of the emergency and in no event beyond May 1, 1935.” No extension of the period for redemption and no postponement of sale is to be allowed which would have the effect of extending the period of redemption beyond that date …

We are here concerned with the provisions of Part One, § 4, authorizing the District Court of the county to extend the period of redemption from foreclosure sales “for such additional time as the court may deem just and equitable,” subject to the above described limitation …

Prior to the expiration of the extended period of redemption, the court may revise or alter the terms of the extension as changed circumstances may require. Part One, § 5.

Invoking the relevant provision of the statute, appellees applied to the District Court of Hennepin County for an order extending the period of redemption from a foreclosure sale. Their petition stated that they owned a lot in Minneapolis which they had mortgaged to appellant; that the mortgage contained a valid power of sale by advertisement and that, by reason of their default, the mortgage had been foreclosed and sold to appellant on May 2, 1932, for $3,700.98; that appellant was the holder of the sheriff’s certificate of sale; that, because of the economic depression appellees had been unable to obtain a new loan or to redeem, and that, unless the period of redemption were extended, the property would be irretrievably lost, and that the reasonable value of the property greatly exceeded the amount due on the mortgage …

The state court upheld the statute as an emergency measure. Although conceding that the obligations of the mortgage contract were impaired, the court decided that what it thus described as an impairment was, notwithstanding the contract clause of the Federal Constitution, within the police power of the State as that power was called into exercise by the public economic emergency which the legislature had found to exist …

In determining whether the provision for this temporary and conditional relief exceeds the power of the State by reason of the clause in the Federal Constitution prohibiting impairment of the obligations of contracts, we must consider the relation of emergency to constitutional power, the historical setting of the contract clause, the development of the jurisprudence of this Court in the construction of that clause, and the principles of construction which we may consider to be established.

Emergency does not create power. Emergency does not increase granted power or remove or diminish the restrictions imposed upon power granted or reserved. The Constitution was adopted in a period of grave emergency. Its grants of power to the Federal Government and its limitations of the power of the States were determined in the light of emergency, and they are not altered by emergency. …

The constitutional question presented in the light of an emergency is whether the power possessed embraces the particular exercise of it in response to particular conditions …

The obligation of a contract is “the law which binds the parties to perform their agreement.” Sturges v. Crowninshield. …

The legislature cannot “bargain away the public health or the public morals.” Thus, the constitutional provision against the impairment of contracts was held not to be violated by an amendment of the state constitution which put an end to a lottery theretofore authorized by the legislature. Stone v. Mississippi

The economic interests of the State may justify the exercise of its continuing and dominant protective power notwithstanding interference with contracts …

“It is the settled law of this court that the interdiction of statutes impairing the obligation of contracts does not prevent the State from exercising such powers as are vested in it for the promotion of the common weal, or are necessary for the general good of the public, though contracts previously entered into between individuals may thereby be affected. This power, which in its various ramifications is known as the police power, is an exercise of the sovereign right of the Government to protect the lives, health, morals, comfort and general welfare of the people, and is paramount to any rights under contracts between individuals … ” [Manigault v. Springs (1905)] …

The question is not whether the legislative action affects contracts incidentally, or directly, or indirectly, but whether the legislation is addressed to a legitimate end and the measures taken are reasonable and appropriate to that end. …

The vast body of law which has been developed was unknown to the fathers, but it is believed to have preserved the essential content and the spirit of the Constitution. With a growing recognition of public needs and the relation of individual right to public security, the court has sought to prevent the perversion of the clause through its use as an instrument to throttle the capacity of the States to protect their fundamental interests. …

The principle of this development is, as we have seen, that the reservation of the reasonable exercise of the protective power of the State is read into all contracts, and there is no greater reason for refusing to apply this principle to Minnesota mortgages than to New York leases.

Applying the criteria established by our decisions we conclude:

  1. An emergency existed in Minnesota which furnished a proper occasion for the exercise of the reserved power of the State to protect the vital interests of the community. … The particular facts differ, but that there were in Minnesota conditions urgently demanding relief, if power existed to give it, is beyond cavil. As the Supreme Court of Minnesota said, the economic emergency which threatened “the loss of homes and lands which furnish those in possession the necessary shelter and means of subsistence” was a “potent cause” for the enactment of the statute.
  2. The legislation was addressed to a legitimate end, that is, the legislation was not for the mere advantage of particular individuals, but for the protection of a basic interest of society.
  3. In view of the nature of the contracts in question — mortgages of unquestionable validity — the relief afforded and justified by the emergency, in order not to contravene the constitutional provision, could only be of a character appropriate to that emergency, and could be granted only upon reasonable conditions.
  4. The conditions upon which the period of redemption is extended do not appear to be unreasonable. … Although the courts would have no authority to alter a statutory period of redemption, the legislation in question permits the courts to extend that period, within limits and upon equitable terms, thus providing a procedure and relief which are cognate to the historic exercise of the equitable jurisdiction. If it be determined, as it must be, that the contract clause is not an absolute and utterly unqualified restriction of the State’s protective power, this legislation is clearly so reasonable as to be within the legislative competency.
  5. The legislation is temporary in operation. It is limited to the exigency which called it forth. While the postponement of the period of redemption from the foreclosure sale is to May 1, 1935, that period may be reduced by the order of the court under the statute, in case of a change in circumstances, and the operation of the statute itself could not validly outlast the emergency or be so extended as virtually to destroy the contracts.

We are of the opinion that the Minnesota statute, as here applied, does not violate the contract clause of the Federal Constitution. Whether the legislation is wise or unwise as a matter of policy is a question with which we are not concerned …

Nor do we think that the statute denies to the appellant the equal protection of the laws. The classification which the statute makes cannot be said to be an arbitrary one.

The judgment of the Supreme Court of Minnesota is affirmed.

Judgment affirmed.


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