LI.

JUDICIAL DECISIONS.

SUPREME COURT OF THE UNITED STATES.

On the Validity of Contracts in Confederate

Thorington

vs. Smith.

Money.

DECEMBER TERM, 1868.

Appeal from the district court for the

middle district of Alabama.

The Chief Justice delivered the opinion of the

court.

The questions before us upon this appeal are these:

(1.) Can a contract for the payment of Confederate notes, made during the late rebellion, between parties residing within the so-called Confederate States, be enforced at all in the courts of the United States?

(2.) Can evidence be received to prove that a promise expressed to be for the payment of dollars was, in fact, made for the payment of any

other than lawful dollars of the United States?

(3.) Does the evidence in the record establish the fact that the note for the thousand dollars was to be paid, by agreement of the parties, in

Confederate notes?

The first question is by no means free from difficulty. It cannot be questioned that the Confederate notes were issued in furtherance of an unlawful attempt to overthrow the Government of the United States by insurrectionary force. Nor is it a doubtful principle of law that no contracts made in aid of such an attempt can be enforced through the courts of the country whose government is thus assailed. But was the contract of the parties to this suit a contract of that character? Can it be fairly described as a contract in aid of the rebellion?

tion. It was the actual government of all the insurgent States, except those portions of them protected from its control by the presence of the armed forces of the national Government.

What was the precise character of this government in contemplation of law?

It is difficult to define it with exactness. Any definition that may be given may not improbably be found to require limitation and qualifica tion. But the general principles of law relating to de facto government will, we think, conduct us to a conclusion sufficiently accurate.

There are several degrees of what is called de facto government.

Such a government, in its highest degree, assumes a character very closely resembling that of a lawful government. This is when the usurping government expels the regular authorities establishes itself in their place, and so becomes from their customary seats and functions, and the actual government of a country. The distinguishing characteristic of such a government is, that adherents to it in war against the government de jure do not incur the penalties of treason, and, under certain limitations, obligations assumed by it in behalf of the country, or otherwise, will, in general, be respected by the government de jure when restored." de facto are found in English history. The stat Examples of this description of government ute 11 Henry VII, c. 1, relieves from penalties for the time being, wage war against those who for treason all persons who, in defense of the king, endeavor to subvert his authority by force of arms, though warranted in so doing by the law. ful monarch. But this is where the usurper obtains actual possession of the royal autority of the kingdom, not when he has succeedee caly in establishing his power over particular ties. Being in possession, allegiance due to him as king de facto.

In examining this question, the state of that part of the country in which it was made must be considered. It is familiar history, that early in 1861 the authorities of seven States, supported, as was alleged, by popular majorities, combined for the overthrow of the national Union, and for the establishment within its boundaries of a separate and independent confederation. A governmental organization, representing these States, was established at Montgomery, in Alabama, first under a provisional constitution and after wards under a constitution intended to be permanent. In the course of a few months four other States acceded to this confederation, and the seat of the central authority was transferred to Richmond, in Virginia. It was by the cen-government could not testy regards a tral authority thus organized, and under its sonable, though in host direction, that civil war was carried on upon th acts were protected vast scale against the Government of the U the spirit fr States for more than four years. Its pow Henry V recognized as supreme in nearly the wh yes by whom territory of the States confederated i

Another example may be found in the go. first by Parliament, and afterward nowel ernment of England under the Commonwe as protector. It was not, in the UPL of law, a government de jure. buva & g ernment de facto in the most B180.IKE BEUSE remained the obligations and serene in incurred obligations and made Lubek V land after the restoration. The bener o doubtless is, that acts NE IL VALUE.

tried for treason,* in the year following the restoration. But such a judgment, in such a time, has little authority.

ers.

States. These were cases of temporary possession of territory by lawful and regular governments at war with the country of which the territory so possessed was part.

cumstance that its authority did not originate
in lawful acts of regular war, but it was not on
that account less actual or less supreme. And
we think that it must be classed among the gov-
ernments of which these are examples. It is to
be observed, that the rights and obligations of a
belligerent were conceded to it in its military
character very soon after the war began, from
motives of humanity and expediency, by the
United States. The whole territory controlled
by it was thereafter held to be enemies' territory,
and the inhabitants of that territory were held,
in most respects, for enemies.
To the extent,
then, of actual supremacy, however unlawfully
gained, in all matters of government within its
military lines, the power of the insurgent gov-
ernment cannot be questioned. That supremacy
did not justify acts of hostility to the United
States. How far it should excuse them must be
left to the lawful government upon the reëstab-
lishment of its authority. But it made obedience
to its authority, in civil and local matters, not
only a necessity, but a duty. Without such obe-
dience, civil order was impossible.

It is very certain that the Confederate government was never acknowledged by the United The central government established for the States as a de facto government in this sense, insurgent States differed from the temporary nor was it acknowledged as such by other pow-governments at Castine and Tampico, in the cirNo treaty was made by it with any civilized State. No obligations of a national character were created by it, binding after its dissolution on the States which it represented, or on the national Government. From a very early period of the civil war to its close it was regarded as simply the military representative of the insurrection against the authority of the United States. But there is another description of government called also by publicists a government de facto, but which might perhaps be more aptly denominated a government of paramount force. Its distinguishing characteristics are (1) that its existence is maintained by active military power within the territories and against the rightful authority of an established and lawful government; and (2) that while it exists it must necessarily be obeyed in civil matters by private citizens, who, by acts of obedience, rendered in submission to such force, do not become responsible as wrong-doers for those acts, though not warranted by the laws of the rightful government. Actual governments of this sort are established over districts differing greatly in extent and conditions. They are usually administered directly by military authority, but they may be administered also by civil authority, supported more or less directly by military force.

One example of this sort of government is found in the case of Castine, in Maine, reduced to British possession during the war of 1812. From the 1st of September, 1814, to the ratification of the treaty of peace in 1815, according to the judgment of this court in United States vs. Rice,t the British government exercised all civil and military authority over the place." "The authority of the United States over the territory was suspended, and the laws of the United States could no longer be rightfully enforced there, or be obligatory upon the inhabitants who remained and submitted to the conqueror. By the surrender the inhabitants passed under a temporary allegiance to the British government, and were bound by such laws, and such only, as it chose to recognize and impose." It is not to be inferred from this that the obligations of the people of Castine, as citizens of the United States, were abrogated. They were suspended merely by the presence, and only during the presence, of the paramount force. A like example is found in the case of Tampico, occupied during the war with Mexico by the troops of the United States. It was determined by this court, in Fleming vs. Page, that, although Tampico did not become a part of the United States in consequence of that occupation, still, having come, together with the whole State of Tamaulipas, of which it was part, into the exclusive possession of the national forces, it must be regarded and respected by other nations as the territory of the United

It was by this government exercising its power throughout an immense territory that the Confederate notes were issued early in the war, and these notes in a short time became almost exclusively the currency of the insurgent States. As contracts in themselves, except in the contingency of successful revolution, these notes were nullities; for, except in that event, there could be no payer. They bore, indeed, this character upon their face, for they were made payable only "after the ratification of a treaty of peace between the Confederate States and the United States of America." While the war lasted, however, they had a certain contingent value, and were used as money in nearly all the business transactions of many millions of people. They must be regarded, therefore, as a currency imposed on the community by irresistible force.

It seems to follow as a necessary consequence from this actual supremacy of the insurgent government, as a belligerent, within the territory where it circulated, and from the necessity of civil obedience on the part of all who remained in it, that this currency must be considered in courts of law in the same light as if it had been issued by a foreign government temporarily occupying a part of the territory of the United States. Contracts stipulating for payments in this currency cannot be regarded for that reason only as made in aid of the foreign invasion in the one case, or of the domestic insurrection in the other. They have no necessary relations to the hostile government, whether invading or insurgent. They are transactions in the ordinary course of civil society, and, though they may indirectly and remotely promote the ends of the unlawful government, are without blame, except when proved to have been entered into with actual intent to further invasion or insurrection.

The second question, whether evidence can be received to prove that a promise made in one of the insurgent States, and expressed to be for the payment of dollars, without qualifying words, was in fact made for the payment of any other than lawful dollars of the United States? is next to be considered.

We cannot doubt that such contracts should be | people had, and their use was a matter of almost enforced in the courts of the United States, after absolute necessity; and this use gave them a the restoration of peace, to the extent of their sort of value, insignificant and precarious enough just obligation. The first question, therefore, it is true, but always having a sufficiently definite must receive an affirmative answer. relation to gold and silver, the universal measures of value, so that it was always easy to ascertain how much gold and silver was the real equivalent of a sum expressed in this currency, In the light of these facts it seems hardly less than absurd to say that these dollars must be regarded as identical in kind and value with the dollars which constitute the money of the United It is quite clear that a contract to pay dollars, States. We cannot shut our eyes to the fact that made between citizens of any State of the Union, they were essentially different in both respects; while maintaining its constitutional relations and it seems to us that no rule of evidence propwith the national Government, is a contract to erly understood requires us to refuse, under the pay lawful money of the United States, and can- circumstances, to admit proof of the sense in not be modified or explained by parol evidence. which the word dollar is used in the contract But it is equally clear, if in any other country before us. Our answer to the second question is, coins or notes denominated dollars should be therefore, also in the affirmative. We are clearly authorized of different value from the coins or of opinion that such evidence must be received in notes which are current here under that name, respect to such contracts, in order that justice that, in a suit upon a contract to pay dollars, may be done between the parties, and that the made in that country, evidence would be admitted party entitled to be paid in threse Confederate to prove what kind of dollars were intended, and, dollars can recover their actual value at the time if it should turn out that foreign dollars were and place of the contract in lawful money of the meant, to prove their equivalent value in lawful United States. money of the United States. Such evidence does We do not think it necessary to go into a denot modify or alter the contract. It simply ex-tailed examination of the evidence in the record plains an ambiguity, which, under the general | in order to vindicate our answer to the third rules of evidence, may be removed by parol evi- question. It is enough to say that it has left no dence.

We have already seen that the people of the insurgent States, under the Confederate government, were, in legal contemplation, substantially in the same condition as inhabitants of districts of a country occupied and controlled by an invading belligerent. The rules which would apply in the former case would apply in the latter; and as in the former case the people must be regarded as subjects of a foreign power, and contracts among them be interpreted and enforced with reference to the conditions imposed by the conquerer, so in the latter case the inhabitants must be regarded as under the authority of the insurgent belligerent power actually established as the government of the country, and contracts made with them must be interpreted and enforced with reference to the condition of things created by the acts of the governing power.

It is said, indeed, that under the insurgent government the word dollar had the same meaning as under the Government of the United States; that the Confederate notes were never made a legal tender, and, therefore, that no evidence can be received to show any other meaning of the word when used in a contract.

But it must be remembered that the whole condition of things in the insurgent States was matter of fact, rather than matter of law, and, as matter of fact, these notes, payable at a future and contingent day, which has not arrived and can never arrive, were forced into circulation as dollars, if not directly by the legislation, yet indirectly and quite as effectually by the acts of the insurgent government. Considered in themselves, and in the light of subsequent events, these notes had no real value, but they were made current as dollars by irresistible force. They were the only measure of value which the

doubt in our minds that the note for $10,000, to enforce payment of which suit was brought in the circuit court, was to be paid, by agreement of the parties, in Confederate notes.

It follows that the decree of the circuit court must be reversed, and the cause remanded, for further hearing and decree, in conformity with this opinion.

In error to the court of appeals of the State of Kentucky.

Henry A. Griswold. (1.) Construed by the plain import of their terms and the manifest intent of the legislature, the statutes of 1862 and 1863, which make United States notes a legal tender in payment of debts, public and private, apply to debts contracted before as well as to debts contracted after enactment.

(2.) The cases of Lane County vs. Oregon, Bronson vs. Rodes, and Butler vs. Horwitz, in which it was held that, upon a sound construction of those statutes, neither taxes imposed by State legislation nor dues upon contracts for the payment or delivery of coin or bullion are included by legislative intent under the description of debts, public and private, are approved and reaffirmed.

(3.) When a case arises for judicial determination, and the decision depends on the alleged inconsistency of a legislative provision with the Constitution, it is the plain duty of the Supreme Court to compare the act with the fundamental

(4.) The words "all laws necessary and proper for carrying into execution" powers expressly This clause has already received much considgranted or vested have in the Constitution aeration here, and this court has held that, upon sense equivalent to that of the words: laws, not a sound construction, neither taxes imposed by absolutely necessary indeed, but appropriate, State legislation, † nor demands upon contracts plainly adapted to constitutional and legitimate which stipulate in terms for the payment or deends, which are not prohibited, but consistent livery of coin or bullion, ‡ are included by legiswith the letter and spirit of the Constitution; lative intention under the description of debts laws really calculated to effect objects intrusted public and private. to the Government.

(7.) The clause in the acts of 1862 and 1863 Applying the rule just stated to the act under which makes United States notes a legal tender consideration, there appears to be strong reason in payment of all debts, public and private, is, for construing the word debts as having referso far as it applies to debts contracted before the ence only to debts contracted subsequent to the passage of those acts, unwarranted by the Con-enactment of the law. For no one will question stitution.

But the Constitution is the fundamental law of the United States. By it the people have created In the case of Bronson vs. Rodes we thought a government, defined its powers, prescribed their ourselves warranted in holding that this word, limits, distributed them among the different deas used in the statute, does not include obliga-partments, and directed, in general, the manner tions created by express contracts for the pay- of their exercise. ment of gold and silver, whether coined or in bullion. This conclusion rested, however, mainly on the terms of the act, which not only allow, but require, payments in coin by or to the Gov