Introduction
In our daily lives all of us come into contact with hundreds of other people:
loved ones, fellow workers, casual acquaintances, total strangers. Some of these many contacts—e.g., being hit by a car, or mugged—are involuntary. But most relationships between people in the United States—with spouses, landlords, employers, lawyers, physicians—are voluntarily chosen.
To the extent that voluntarily chosen relationships create important obligations—which later may have to be clearly recalled, and perhaps even legally enforced—it is necessary to create contracts. Contracts are the cement that binds together the voluntary assent of free individuals. Without contracts, little or nothing would ever be accomplished, from “buying” dinner at McDonalds (what would you receive, or pay?) or “renting” an apartment (which one, for how long, at what cost?) to “building” a home (the many terms in a project even as relatively simple as this boggle the mind). .
Because enforceable private choices are a cornerstone of a free country,
and because contracts are indispensable to those choices, the Founding Fathers specifically provided in the Constitution’s Article I, Section 10, that state governments could enact no “law impairing the obligation of contracts.
In other words, the Constitution forbade government—expressly the states; by implication, the federal government as well— from stepping between contracting parties and rewriting their agreement, either for the government's own purposes, or for anyone else’s benefit.
Unfortunately, however, even explicit Constitutional safeguards have not been able to protect the sanctity of voluntary private choice from government’s designs.
Five famous Supreme Court cases, involving money, employment, mortgages, restrictive land covenants, and refusal to contract, eloquently answer the question of whether, in America, a contract is really worth the paper it is written on.
Legal Tender Cases[i]
From Greenbacks to Greenspan
As I begin with Part II of this book, examining thirty-five of the worst Supreme Court cases and their adverse impact on individual rights, with the category of “Contracts,” I’m going to focus on a topic not usually thought of as involving contracts, let alone individual rights: money.
Among the worst anti-contact, anti-individual rights cases in American history are three that are about small pieces of paper each of us carries every day: “greenbacks”—which are not only “money,” but, much more important, government-ordained “legal tender for all debts, public and private.” (Take a look at the fine print on any denomination bill in your wallet.)
The belief that government should have a monopoly on the creation, supply, and debasement of money was not an invention of FDR’s New Deal. As long ago as five-hundred years B.C., the Greek king Solon used his sovereign power to control and devalue his country’s coinage in order to redistribute wealth from creditors to debtors, and support his military adventures—motives, as we shall see, that animated American political leaders centuries later.
Similarly, a long succession of later Roman emperors steadily debased the coinage as an alternative to raising taxes, again to support military adventures.
Eventually, a landmark 1604 English case—the Case of Mixed Money—offered an unambiguous statement of the relationship of government to money:
And so it is manifest, that the kings of England have always had and exercised this prerogative of coining and changing the form, and when they found it expedient of enhancing and abasing the value of money within their dominion: and this prerogative is allowed and approved not only by the common law, but also by the rules of the imperial law.
In 1787, however, the people of the United States, in Article I, Section 8, Clause 5, of the Constitution, gave Congress only the power to “borrow money on the credit of the United States” and to “coin Money [and] regulate the Value thereof.”
The road from “borrow,” “coin,” and “regulate the value” of money, to the Fed’s hand on the money spigot with all that implies for the American economic and political system, is too long and torturous to travel here.[ii] Indeed, in Part I, Republican Institutions, I have written critically of Chief Justice Marshall’s indefensible decisions in M’Culloch v. Maryland and Gibbons v. Ogden and the toll those decisions have taken on federalism.
So I’ll now skip a half-century to the Civil War.
Hard as it may be to believe in this day of paper currency, prior to the Civil War the only lawful money in the United States was gold and silver coin. When coin was loaned, repayment by the debtor was expected in kind.
Early in 1862, in order to finance the Civil War, which was proving costly not only in lives but also in treasure, Congress created paper money. By law, the “greenbacks”—essentially ink-stained paper, colored green on the back side—were made “legal tender, for all debts public and private.” That meant that the ink-stained paper had to be accepted by creditors in payment of the debts owed them, regardless of whether the creditor wanted them and regardless of how much the paper was then worth.
Although loan contracts (in the form of promissory notes or mortgages) had been expressed by the parties in terms of gold and/or silver coin, by means of the Legal Tender Act the government had rewritten private debt contracts, forcing paper money of dubious value on creditors to the very great advantage of debtors.
However, as usual, reality intervened. The more ink-stained paper the government printed, the less the existing supply was worth. Simple arithmetic illustrates the point: If the government printed and put into circulation $1,000,000 of ink-stained paper, it was worth whatever it was worth at that time. If a week later the government printed and put into circulation another $1,000,000 of ink-stained paper, the total $2,000,000 would be worth half of the week-earlier value because there was twice as much of it. And so on.
This exercise in Economics 101 was not lost on creditors, who had loaned full-value dollars but were now forced by law to accept depreciated ink-stained paper in payment of notes and mortgages instead of gold and/or silver.
Enter the Supreme Court of the United States.
The first Legal Tender Case, Hepburn v. Griswold,[iii] involved a promissory note given in 1860, payable in 1862. At both times, the only lawful money in the United States was gold and silver coin. Five days after maturity in February 1862, the Legal Tender Act became law.
Two years later, the creditor of the still-unpaid note sued to collect it. The debtor tried to pay in greenbacks. Why? Because by then war-time inflation had caused the paper money to depreciate to roughly half its face value. A good deal for the debtor, but a very bad deal for the creditor who in good faith had loaned coin at a fixed value.
So the obvious legal question was whether the creditor had to accept the greenbacks as “legal tender for all debts, public and private” as Congress had ordained. The underlying question, of course, was whether the Legal Tender Act was constitutional.
A narrowly divided Court dodged the latter question, ruling only that the Legal Tender Act could not be applied to the debt contract which had been made prior to its enactment.
As to the Act’s constitutionality—which, though discussed, was not expressly ruled on by the Court— the majority believed the legal tender law to be unconstitutional; the minority thought otherwise.
Significantly, however, the Justices' disagreement was only on the facts. Each side agreed that John Marshall’s decision in M'Culloch v. Maryland established the test to be applied: Was the Legal Tender Act “necessary and proper”? The justices’ only disagreement concerned how “necessary” legal tender was to the war effort. Unfortunately, but predictably, there was no concern over whether, in constitutional terms, the Act was “proper.”
The ink was hardly dry on the Hepburn opinion when, slightly more than a year later, the Supreme Court took another look at the constitutionality of the Legal Tender Act. This time, in Knox v. Lee,[iv] two of the Hepburn Justices had been replaced by two new members of the Court. They teamed up with the three Hepburn dissenters and reversed the earlier decision. The Legal Tender Act, they held, did apply to contracts made prior to its passage, as well as to those made afterwards. In other words, the Legal Tender Act was constitutional.
Basically, the new majority asserted, and the new minority denied, that the Legal Tender Act was indeed necessary for fighting the war, and thus violated no one's rights. In addition, the majority drew on the notion that since every other nation in the so-called civilized world had the power to create legal tender, so must the United States—especially, the majority found, since the American Constitution did not prohibit the power. If Justice Strong's elaboration of this “not prohibited” theme for the Court's majority sounds familiar, no one should be surprised. Think M’Culloch and Gibbons.
Justice Bradley's concurring opinion and the three dissents (by Justices Chase, Clifford, and Field) similarly elaborated earlier themes.
More than any other modern case, Knox is the linchpin of the federal government's contemporary monetary powers. After M'Cullvch v. Maryland, Knox is the most important monetary powers case in Supreme Court history—and one of the worst examples of government power running roughshod over individual rights, in this case the creditors who had loaned money in good faith only to repaid with depreciated paper currency.
Justice Field had fought bravely against legal tender in both Hepburn and Knox, but his battle against it did not end with his comprehensive and eloquent dissent in Knox. Thirteen years later, in Julliard v. Greenman,[v] Justice Field was back at the barricades, all alone this time, in his continuing but futile dissent against legal tender.
In 1878 a statute had been enacted which, in effect, amounted to a peacetime issuance of legal tender. A creditor sued and the question eventually to be decided by the Supreme Court was: “. . . whether notes of the United States, issued in time of war, under acts of Congress declaring them to be a legal tender in payment of private debts, and afterwards in time of peace redeemed and paid in gold coin at the treasury, and then reissued under the act of 1878, can, under the Constitution of the United, States, be a legal tender in payment of such debts.”
Although the answer to this question was a foregone conclusion, how the Court reached that conclusion, and what it was based on, was somewhat surprising.
A strong emphasis of the Court in Hepburn was the emergency nature of the legal tender issuance. The war, the Court stressed, made the legal tender “necessary” in the Gibbons v. Ogden sense. In Knox v. Lee, certainly the war had not been far from the minds of the majority Justices. Indeed, conceding the principle of legal tender in Juilliard the plaintiff himself agreed that during time of war Congress could create legal tender currency. Having thus conceded the principle that Congress did, after all, possess the legal tender power, the plaintiff was very nearly inviting the Court to apply that principle to peacetime, thereby erasing the always tenuous war-peace distinction. The Court accepted the invitation, and did so with ease.
With Juilliard, legal tender had become a permanent feature of the American monetary system. The Supreme Court had effectively rewritten the constitutional monetary powers of Congress, and simultaneously rewritten the creditor-debtor contract—to the everlasting shame of the Court and to the detriment of a core individual right, that of free contract.
[i] There were three “Legal Tender Cases,” which are discussed in this chapter under the one title: Hepburn v. Griswold , 75 U.S. (8 Wall.) 603 (1870), Knox v. Lee, 79 U. S. (12 Wall.) 457 (1871), and Julliard v. Greenman, 110 U.S. 421 (1884).
[ii] For an extended chronological examination of the subject—beginning with monetary debasement in early times and ending with President Franklin Delano Roosevelt’s theft of private gold and his illegalization of the contractual gold clause device—see Henry Mark Holzer, Government’s Money Monopoly, available at www.amazon.com.
[iii] 75 U.S. 8 Wall.) 603 (1870).
[iv] 79 U.S. (12 Wall.) 457 (1871).
[v] 110 U.S. 421 (1884).
Muller v. Oregon[i]
Ladies, Laundries, and The Third Reich
In today’s nanny culture, where individuals are deemed incapable of looking out for their own interests and government is supposedly looking our for everyone’s welfare, wage and hour legislation is an accepted commonplace. But this was not always so.
Back in 1903, the enlightened State of Oregon enacted a law regulating the working hours of women, a supposedly noble endeavor designed to protect the “weaker sex” from exploitation.
The statute provided that “. . . no female [shall] be employed in any mechanical establishment, or factory, or laundry in this state more than ten hours during any one day.”
One September day in 1905, Mrs. E. Gotcher (yes, that was really her name) did the unthinkable: in one day she worked more than ten hours at the Grand Laundry. The laundry’s owner was charged with violation of the statute, a misdemeanor, and convicted.
Not surprisingly, his conviction was upheld by the Oregon courts, which made short shrift of his argument that the law was unconstitutional. Next stop, the Supreme Court of the United States.
There, the question for the justices was whether an adult woman in the Twentieth Century United States could freely choose to work more than ten hours a day at the proscribed activities, whatever her reasons (e.g., money, learning, advancement, satisfaction) or whether the State of Oregon knew better what was good for Mrs. Gotcher and could impose its values on her and the laundry’s owner.
The Court upheld the Oregon statute, to the loud cheers of liberals who applauded that body’s enlightened concern for working women who apparently either did not know or could not protect their own interests.
But if the decision’s partisans (especially women) had paid attention to the Court’s reasons for its decision in Muller v. Oregon, they probably would not have cheered so loudly, if at all. Indeed, if they really understood the decision, they should have been appalled.
Muller v. Oregon was a unanimous decision—one that today’s feminists should take no comfort from. To quote the Court:
That woman’s physical structure and the performance of material functions places her at a disadvantage in the struggle for subsistence is obvious. This is especially true when the burdens of motherhood are upon her. Even when they are not . . . continuance for a long time on her feet at work . . . tends to injurious effects upon the body, and, as healthy mothers are essential to vigorous offspring, the physical wellbeing of women becomes an object of public interest and care in order to preserve the strength of the race. (My emphasis.)
This patronizing, collectivist view of American working women was not all the Court had to say about the weakness of women and their relationship to a paternalistic state.
Still again, history discloses the fact that woman has always been dependent upon man. He established his control at the outset by superior physical strength, and this control in various forms . . . has continued to the present. * * * It is still true that in the struggle for subsistence she is not an equal competitor with her brother [meaning, any man]. Though limitations upon personal and contractual rights may be removed by legislation there is that in her disposition and habits of life which will operate against a full assertion of those rights. (My emphasis.)
It was bad enough that in upholding the statute the Court, allegedly worried about subsistence, was limiting the working hours of those trying to subsist. Much worse was the Court’s view of working women as weak, timid, and dependent—even cowardly, in being unable or unwilling to assert their “rights.” Lest there be any doubt that that’s what the unanimous Court was saying:
[Woman] is so constituted that she will rest upon and look to [man] for protection; that her physical structure and a proper discharge of her maternal functions—having in view not merely her own health, but the well-being of the race—justify legislation to protect her from the greed as well as the passion of man. The limitations which this statute places upon her contractual powers, upon her right to agree with her employer as to the time she shall labor, are not imposed solely for her benefit, but for the benefit of all. (My emphasis.)
This is nothing short of collectivism squared, and is the same rationale that underlay the monstrous program that would come later in Nazi Germany: “Hitler’s Children.”
On March 20, 2000, Joshua Hammer, an experienced journalist, wrote an article for Newsweek International entitled “Hitler’s Children,” whose subtitled read: “They were the offspring of a Nazi program to create a racially pure ‘Master Race’.”
He wrote of a woman named Helga Kahrau:
Her parents barely knew one another. An ardent Nazi, her mother met Helga's father, a German Army officer, in Berlin at a party celebrating Hitler's conquest of France in June 1940. They had a one-night stand, and nine months later Mathilde gave birth in a “Lebensborn,” or “Source of Life,” home outside Munich. The home was one of several set up by Heinrich Himmler's dreaded SS [chief] to care for unmarried pregnant women whose racial characteristics, blond hair, blue eyes, no Jewish ancestry, fit the Nazis’ Aryan ideal. At birth, Helga was anointed as one of the Fuhrer's elect, part of a generation of “racially pure” children who would populate the German Empire as it ruled a conquered Europe for the life of the 1,000-year Reich. (My emphasis.)
No doubt some will say that the connection between the Supreme Court’s rationale in Muller v. Oregon and the Nazi “master race” program is, at best, tenuous.
They are mistaken.
To hold women’s “physical well-being” and their production of “vigorous offspring” to be matters of “public interest” so as to “preserve the strength and vigor of the race” is to consider women, as did the Nazis, as a mere state resource—important to the state for their procreational capacity, to be nurtured much like livestock, and for the same reason.
The rationale underlying the Supreme Court’s decision in Muller v. Oregon transcends mere collectivism and even statism, “isms” that deny and negate any possibility of individual rights. In Muller the Supreme Court, perhaps knowingly, perhaps not, gave voice to a doctrine evil in its intent and murderous in its application: the belief that human beings, in that case women, were mere resources to be used, abused, and ultimately disposed of by those holding political power.
Muller v. Oregon was decided by the Supreme Court of the United States in 1908. Less than three decades later, the case’s rationale was on display in Hitler’s Nazi Germany.
Blaisdell v. Home Building & Loan Association
_______Mortgages in Name Only____________
Recent months have seen both sides of the federal aisle, and their candidates for the presidency, trying to outdo each other in providing relief for the “victims” of “predatory” lending practices by banks and other lenders.
We’ll put aside for the time being the several fascinating issues that arise from the tulip craze real estate buying binge of the past several years—e.g., fraudulent applications, blind-eye lending decisions, indefensible leverage, the true definitions of “victim” and “predatory”—and focus instead on what may come next, after the government’s jawboning and arm-twisting of mortgage holders proves unavailing and foreclosures continue unabated.
That focus takes us to August 1, 1928.
Mr. and Mrs. John H. Blaisdell sat down with the Home Building & Loan Association and mortgaged a two-story residential building in Minneapolis, Minnesota.
A mortgage is simply another name for a certain kind of contract. The owner (or would-be) owner of real property (the “mortgagor”) pledges it to a lender (the “mortgagee”) as security for a loan. Usually, the proceeds of the loan are used to purchase the property. A common example is the financing arrangement for the purchase of a home. (There can be “chattel” mortgages in personal property, as with financed purchases of automobiles.)
The Blaisdell’s mortgage (i.e., contract) with their lender contained customary, rather simple terms.
In return for putting up their property as collateral, the lender loaned the Blaisdells money. The Blaisdells agreed to repay it in regular monthly installments of principal and interest.
If the Blaisdells didn’t make the payments—if they defaulted on the contractual loan—the lender could protect its creditor position by foreclosing on the property and selling it at auction.
This is exactly what’s happening today across the country: loan contracts are being breached because of non-payment, and lenders are availing themselves of the legal remedy of foreclosure in order to protect, at least to some extent, the money they loaned.
If the foreclosure sale netted more than the amount Home Building & Loan Association was owed, the excess proceeds would go to the Blaisdells. If it netted less, the borrowing Blaisdells would owe the lender the difference (a “deficiency”).
Another provision of the mortgage contract—inserted there by operation of Minnesota law—was a one-year redemption period following a foreclosure sale, during which the Blaisdells could reacquire the property for the price at which it had been sold.
The buyer at the foreclosure sale could get good title only if the one-year redemption period had expired without the Blaisdells having exercised their statutory right of redemption. (Let’s also put aside for now a consideration of by what right the Minnesota legislature had a right to enact a law requiring private contracts to include a right of redemption—a power whose source is far from clear or defensible.)
For a few years the Blaisdells made their regular mortgage payments. Then they stopped.
A foreclosure sale followed, and the lender “bought” the property for exactly the amount then owed on the mortgage. The sale yielded no excess proceeds for the Blaisdells, and no deficiency was owed by them to Home Building & Loan Association which now owned the property subject to the Blaisdell’s one-year statutory right of redemption.
Because the foreclosure sale had occurred on May 2, 1932 the Blaisdells would have had until May 2, 1933 to redeem the property.
But then, a few weeks before that date, providence, in the guise of the State of Minnesota Legislature, intervened. On April 18, 1933, a mere fourteen days before the one-year redemption period was set to expire, the state enacted the “Minnesota Mortgage Moratorium Law”.
The state—not the parties, the Blaisdells and Home Building & Loan Association—had rewritten their mortgage contract.
Why?
As the Minnesota legislature explained,
Whereas, the severe financial and economic depression existing for several years past has resulted in extremely low prices for the products of the farms and the factories, a great amount of unemployment, an almost complete lack of credit for farmers, business men and property owners and a general and extreme stagnation of business, agriculture and industry, and
Whereas, many owners of real property, by reason of said conditions, are unable, and it is believed, will for some time be unable to meet all payments as they come due of taxes, interest and principal of mortgages on their properties and are, therefore, threatened with loss of such properties through mortgage foreclosure and judicial sales thereof, and
Whereas, many such properties have been and are being bid in at mortgage foreclosure . . . sales for prices much below what is believed to be their real values and often for much less than the mortgage or . . . indebtedness, thus entailing deficienc[ies] . . . against the mortgage[es] . . . and
Whereas, it is believed, and the Legislature of Minnesota hereby declares its belief, that the conditions existing as hereinbefore set forth has created an emergency of such nature that justifies and validates legislation for the extension of the time of redemption from mortgage foreclosure and execution sales and other relief of a like character; and
Whereas, The State of Minnesota possesses the right under its police power to declare a state of emergency to exist, and
Whereas, the inherent and fundamental purposes of our government is to safeguard the public and promote the general welfare of the people; and
Whereas, Under existing conditions the foreclosure of many real estate mortgages by advertisement would prevent fair, open and competitive bidding . . . and
Whereas, it is believed, and the Legislature of Minnesota hereby declares its belief, that the conditions existing as hereinbefore set forth have created an emergency of such a nature that justifies and validates changes in legislation providing for the temporary manner, method, terms and conditions upon which mortgage foreclosure sales may be had or postponed and jurisdiction to administer equitable relief in connection therewith may be conferred upon the District Court, and
* * *
Section 1. Emergency Declared to Exist.-In view of the situation . . . the Legislature of the State of Minnesota hereby declares that a public economic emergency does exist in the State of Minnesota.
Sound familiar? Just substitute for the Minnesota legislature the Congress (and President) of the United States, and these words could have been written today.
In order to implement the state’s newly declared mortgagor/debtor-relief policy, the Minnesota Mortgage Moratorium Law mandated that foreclosure sales could be postponed, and the redemption period extended until May 1, 1935—two years after the Blaisdells could have redeemed under the law that existed when they made their contract with the lender.
Taking advantage of the Moratorium Act, the Blaisdells asked a Minnesota court to enter an order extending their redemption period.
The court—apparently recognizing that Article I, Section 10, of the federal Constitution expressly prohibits a state from enacting any law “impairing the obligation of contracts,” and realizing that the Moratorium Act did just that—refused to grant the extension.
So the Blaisdells appealed.
The Minnesota Supreme Court reversed the lower court and granted the two year extension (conditioned on the Blaisdells paying $40.00 “rent” each month).
Consider what had happened. The Blaisdells had put up their real estate as security for a loan from Home Building & Loan Association. The loan had been defaulted. The lender had to repurchase the property, and then wait almost a year while the statutory redemption period ran out before it could have clear title. Near the end of that period, the Minnesota Legislature rewrote the mortgage contract, the net result being that the lender would have to wait a minimum of another two years before obtaining the property—all the while receiving “rent” instead of the contractually-agreed mortgage payments.
We know why the legislature enacted the Moratorium Act.
What was the Supreme Court of Minnesota’s rationale for upholding it? According to the Supreme Court of the United States, which we will get to in a moment, it was upheld because the act was
. . . an emergency measure. Although conceding that the obligations of the mortgage contract were impaired [despite the prohibition of Article 1, Section 10], the [Minnesota Supreme 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 execution by the public economic emergency which the Legislature had found to exist.”
Actually, the Supreme Court of Minnesota had been even more explicit, and arrogant, about what had motivated its decision:
In addition to the weight to be given the determination of the Legislature that an economic emergency exists which demands relief, the court must take notice of other considerations. The members of the Legislature come from every community of the state and from all the walks of life. They are familiar with conditions generally in every calling, occupation, profession, and business in the state. Not only they, but the courts must be guided by what is common knowledge. It is common knowledge that in the last few years land values have shrunk enormously. Loans made a few years ago upon the basis of the then going values cannot possibly be replaced on the basis of present values.
Justice Olsen of the Minnesota Supreme Court, in a concurring opinion, added the following:
The present nation wide and world wide business and financial crisis has the same results as if it were caused by flood, earthquake, or disturbance in nature. It has deprived millions of persons in this nation of their employment and means of earning a living for themselves and their families; it has destroyed the value of and the income from all property on which thousands of people depended for a living; it actually has resulted in the loss of their homes by a number of our people, and threatens to result in the loss of their homes by many other people in this state; it has resulted in such widespread want and suffering among our people that private, state and municipal agencies are unable to adequately relieve the want and suffering, and Congress has found it necessary to step in and attempt to remedy the situation by federal aid. Millions of the people’s money were and are yet tied up in closed banks and in business enterprises.
In other words, by “common knowledge” things were rough for mortgagors—just as they are today for some, especially those who tried to game the system by purchasing homes without adequate means to pay for them in the expectation that the bubble would everlastingly get bigger and bigger and never burst.
But times were tough for Home Building & Loan Association (and other lenders) too, so it took the case to the Supreme Court of the United States to protect itself and its depositors.
There, Chief Justice Charles Evans Hughes authored the Court’s majority opinion upholding the constitutionality of the Minnesota Mortgage Moratorium Law.
A signification portion of his opinion consists of a survey of some of the Court’s previous cases, on the basis of which Hughes enunciated a startlingly candid conclusion:
It is manifest from this review of our decisions that there has been a growing appreciation of public needs and of the necessity of finding ground for a rational compromise between individual rights and public welfare. The settlement and consequent contraction of the public domain, the pressure of a constantly increasing density of population, the interrelation of the activities of our people and the complexity of our economic interests, have inevitably led to an increased use of the organization of society in order to protect the very bases of individual opportunity. Where, in earlier days, it was thought that only the concerns of individuals or of classes were involved, and that those of the state itself were touched only remotely, it has later been found that the fundamental interests of the state are directly affected; and that the question is no longer merely that of one party to a contract as against another, but of the use of reasonable means to safeguard the economic structure upon which the good of all depends.
What Chief Justice Hughes was saying couldn’t be clearer. Postulating an ever-increasingly complicated social environment in which “the good of all” was the standard of value, Hughes held that “public needs,” “public welfare” and “fundamental interests of the state” trumped, and had to be protected from, something perniciously antithetical: “individual rights.” Necessary, according to Hughes and the Court’s majority, was a “rational compromise between individual rights and public welfare.”
Since the nature of a compromise is “a settlement in which each side gives up some demands or makes concessions,” the concept can have no application to individual rights, which are either absolute or nonexistent.
Indeed the majority’s idea of a compromise—between the sanctity of contracts supposedly guaranteed against government impairment by the Constitution, and the “public welfare” that allegedly required a two-year mortgage moratorium—was to allow Minnesota to rewrite the central provision of the Blaisdells’s contract with their lender (repayment of the loan).
So much for compromise—and contracts, and individual rights.
Shelley v. Kraemer[i]
Private Property, Liberty Of Contract, And Racially Restrictive Covenants
In 1963, the United States Supreme Court decided a group of civil rights cases, causing some newspapers to headline that desegregation “sit-ins” had been legalized.
The Court’s ruling came as a shock to those who naively believed that Americans still retained the private right to discriminate racially regarding the use of their own property. But there should have been no surprise about the sit-in decisions. They added nothing new. That right had been destroyed by the United States Supreme Court fifteen years earlier, in 1948.
The principle of equality under the law is expressed in the Fourteenth Amendment to the Constitution : “No State shall . . . deny to any person . . . the equal protection of the laws.” (My emphasis.)
The Constitution’s Equal Protection Clause was designed to prevent (1) the enactment of government legislation that discriminated between persons in similar circumstances, and (2) the discriminatory application by government of otherwise neutral legislation. In other words, each individual was to be equal before the law both as it was written, and as it was applied.
For example, held unconstitutional as violations of the Equal Protection Clause have been the denial of equal access to the courts, inequality of treatment in the courts, systematic exclusion of Negroes from jury lists, suppression of a prisoner’s appeal papers, “separate but equal” public school systems, sterilization of persons convicted of larceny but not those convicted of embezzlement, withholding permission from two hundred Chinese to operate laundries while granting it to eighty non-Chinese.
Unfortunately, however, the Equal Protection Clause has been used by the Supreme Court not only to do justice, but to perpetrate injustice.
One example is the seminal 1948 case of Shelly v. Kraemer, which involved a racially restrictive covenant.
A “covenant” is simply a contractual agreement between two or more individuals or entities to do, or refrain from doing, a given thing. A racially restrictive covenant was a property deed provision prohibiting all subsequent owners from selling to specified classes of persons, or a contract between adjoining property owners agreeing not to sell to members of an excluded class. The prohibitions generally extended to Negroes, Chinese, Indians, Mexicans and Jews.
The purpose of racially restrictive covenants was to regulate the racial, ethnic, or religious composition of a neighborhood by excluding those whom the covenantors regarded as undesirable.
That some Americans discriminated in this manner was morally reprehensible, but if the principles of private property and liberty of contract meant anything the covenantors should have had a constitutional right to withhold their property from anyone they wanted, for whatever reason or no reason at all.
The Shelley case involved some thirty landowners in a St. Louis, Missouri, neighborhood who in 1911 voluntarily entered into a restrictive covenant with each other concerning their own property. They mutually and voluntarily agreed that for fifty years their property could be owned and occupied only by Caucasians.
The covenant was duly recorded, just like a deed, so it would “run with the land,” providing record notice to, and being effective against, future purchasers of any of the property. They would buy subject to, and be bound by, the covenant their predecessors-in-interest had consented to.
Putting aside the unacceptable racist motive for the covenant, it was simply a real estate transaction not unlike, for example, an easement given by one property owner to another providing access to a beach.
Thirty-five years later, Negroes were sold one of the properties, in prima facie violation of the covenant. A court battle followed, in which non-selling covenantors sought an injunction to prevent the Negro purchasers from taking possession of the property and to divest them of title.
Historically, it had not been long after the adoption of the Fourteenth Amendment in 1868 that legal questions arose for the first time about the constitutionality of private racially restrictive covenants, like the one in Shelley v. Kraemer. The constitutional question in the post-Fourteenth Amendment 1800swas whether they violated the newly-enacted Fourteenth Amendment’s Equal Protection Clause.
A plain reading of that clause, with its clear prohibition of state denial of equal protection, made such an interpretation absurd. Indeed, in 1884 the Civil Rights Cases would rule that the entire Fourteenth Amendment (including the Due Process and Equal Protection Clauses, and more) proscribed only state action. As intended and written, the Fourteenth Amendment had no application to the conduct of private citizens.
The first reported case dealing specifically with racially restrictive covenants came before a lower federal court in 1892. The ruling was that judicial enforcement of a private racially restrictive covenant would constitute denial by the state of equal protection of the laws. However, the case never reached the Supreme Court for a definitive constitutional ruling (the losing party never appealed), nor was that lower court decision followed by any other court. The lower federal court decision was totally ignored by other courts because it was inconsistent with established interpretations of the Equal Protection Clause. Worse, the lower court decision stood for the untenable proposition that the courts must abdicate their duty to enforce valid contracts pertaining to private property.
For that reason, state court enforcement of restrictive covenants was upheld constitutionally by every court that considered them in the eighty years between approval of the Fourteenth Amendment in 1868 and the Supreme Court’s Shelly v. Kraemer decision in 1948.
During those years, courts concentrated on the proper application of the Equal Protection Clause, confining it to instances where the state, acting through a legislative, executive or judicial agent, officially perpetrated a discriminatory act.
One example is the 1917 case of Buchanan v. Warley. There, the Supreme Court struck down a city ordinance that reglated the character of neighborhoods on the basis of race. This was an appropriate application of the Equal Protection Clause, because the “state action” resulting in racial discrimination emanated from the city council itself in the exercise of its legislative function.
Some thirty years later, the Supreme Court finally agreed in Shelley v. Kraemer to examine the constitutionality of a racially restrictive covenant against a challenge based on the Equal Protection Clause of the Fourteenth Amendment.
The Supreme Court of Missouri had enforced the restrictive covenant, finding no violation of equal protection because the discrimination had been by private individuals, not the state.
In the Supreme Court of the United States, the argument was that while the racially restrictive covenant might be legal and even constitutional by themselves, judicial enforcement of the covenants was unconstitutional.
Before turning to the Shelly decision itself, it’s important to note who lined up on each side for the ensuing battle. Thurgood Marshall of the NAACP appeared for petitioner McGhee. By special leave of the Court, both the Solicitor General and the Attorney General of the United States appeared as “Friends of the Court” and filed a joint brief in support of the Negro purchasers. Other “Friend of the Court” briefs were filed in support of them by the Grand Lodge of Elks; Protestant Council of New York City; Non-Sectarian Anti-Nazi League to Champion Human Rights, Inc.; General Council of Congregational Christian Churches; National Lawyers Guild; A.F.L.; C.I.O. ; American Veterans Committee; American Jewish Congress; American Jewish Committee; American Indians Citizens League of California, Inc.; American Civil Liberties Union; National Bar Association; American Unitarian Association; and even the American Association for the United Nations.
Against this array of legal and organizational talent, the property seller’s side was supported by only three “Friend of the Court” briefs: National Association of Real Estate Boards, the Arlington Heights Property Owners Association, and the Mount Royal Protective Association, Inc.
Why did self-appointed guardians of civil liberties—e.g., NAACP, National Lawyers Guild, ACLU, National Bar Association—support those who sought to achieve “equality” at the expense of someone else’s supposedly unalienable right to judicial protection of property and contract rights?
Why did none of the purchasers “friends” realize that pitted against an actual property/contract right was a mere desire—the latter deserving of understandable sympathy, but a goal to be achieved through education or economic boycott rather than by the violation of legitimate rights and corruption of the patently clear meaning of the Equal Protection Clause?
One reason why so few paid any attention to the civil liberties of the covenantors was doubtless rooted in the belief that the coercive power of the state should be used in support of those perceived as weak. Indeed, the Supreme Court briefs and oral argument of the Negro purchaser laid great stress on such emotional concerns as “destruction of human and economic values” and the housing plight of Negroes in large cities. A related explanation is that the NAACP and their allies simply refused to accept the difference between private rights and constitutional restraints on government.
Only six Justices (Vinson, Frankfurter, Murphy, Burton, Black and Douglas) participated in the decision. Chief Justice Vinson delivered the unanimous opinion of the Court.
First, Vinson clearly framed the issue. The Supreme Court had never before decided if the Equal Protection Clause of the Fourteenth Amendment prohibited judicial enforcement of a racially restrictive covenant. It was writing on a clean slate.
Next, the Chief Justice laid the groundwork for the first part of the Court's ruling. He acknowledged that although the state was prohibited under the Fourteenth Amendment from discriminating against one who sought to acquire, enjoy or dispose of property, in Shelly the discriminatory restriction stemmed “in the first instance” from a contract between private persons. Thus the Court concluded that the restrictive covenant, “standing alone cannot be regarded as a violation of any rights guaranteed by the Constitution.” (My emphasis.)
Vinson continued:
So long as the purposes of those agreements are effectuated by voluntary adherence to their terms, it would appear clear that there has been no action by the State and the provisions of the [Fourteenth] Amendment have not been violated.
This was a foursquare ruling that a private racially restrictive covenant was valid and not unconstitutional per se. Given the proper function of courts, that should have been the end of the case.
But it wasn’t. The Court was heading somewhere else.
The tip-off was Vinson’s pointed qualification that the restrictive covenant was constitutional “standing alone.” In other words, since the Fourteenth Amendment prohibited only states from racially discriminating, and since Missouri had no any part in creating the restrictive covenant, no Constitutional rights of the Negro purchaser had been violated—up to that point.
But it was not difficult to anticipate what was coming next. Vinson’s opinion for the Court continued: “. . . we are called upon to consider whether enforcement by state courts of the restrictive agreements . . . may be deemed to be the acts of [the] States . . . .” (My emphasis.)
So even though Missouri had no hand in creating the noxious restrictive covenant, and thus “standing alone” the contract was unquestionably valid and constitutional, the Court saw the question before it as: Would judicial enforcement of the covenant constitute sufficient “state action” to make the concededly private racial discrimination that of the State of Missouri itself?
To answer that question, Vinson tried to show that as soon as a court gave life to a private restrictive covenant by enforcing it, the judicial imprimatur constituted the kind of “state action” prohibited by the Equal Protection Clause. In support of this thesis, he set forth what was to be the underlying premise upon which the entire decision in Shelly rested:
That the action of state courts and judicial officers in their official capacities is to be regarded as action of the State within the meaning of the Fourteenth Amendment, is a proposition which has long been established by decisions of this Court.
Oh?
In his attempt to validate this premise, Vinson propounded a lengthy list of prior cases. While those cases supported the principle that judges were indeed agents of the state, they did not support the proposition that every time a judge enforced the rights and liabilities of litigants, he was engaging in the kind of “state action” proscribed by the Equal Protection Clause.
Vinson conveniently ignored the distinction between a judge who personally perpetrated a discriminatory act, like refusing to seat a juror because of his race, and a judge who merely enforced a private contract in which the discrimination, “in the first instance” (to use Vinson’s own words) originated entirely with private parties.
Also, the Court resorted to the dishonest tactic of trying to pass off as governing legal principles statements irrelevant to the issue before it, gratuitously inserted by Vinson to make it appear that the Court was on solid constitutional ground.
This “dicta” was mere transparent window dressing because, as Vinson and his colleagues knew very well, only the actual issue a court resolves, based on the facts of the case actually before it, can have legal significance and constitute “precedent.”
By invoking such equivocal terminology as “the principle was given expression,” and “further examples of such declarations” (my emphasis), Vinson quoted favorable language from lower courts that had “observed,” “stated” or “pointed out”—but never once ruled—that enforcing a valid private covenant could constitute prohibited “state action.”
Not one case was cited by Vinson as having actually upheld this spurious proposition as a principle of law. Not one!
Besides relying on dicta, Vinson tried to squeeze support from at least four earlier cases which were not even remotely applicable to the question before the Court in Shelley.
He took further liberties by offering as “precedent” cases where the state itself, as an official instrumentality, had engaged in discriminatory affirmative conduct: a city council, a state Board of Equalization, a state legislature, and a state Board in charge of condemnation proceedings.
The remaining cases upon which Vinson based his opinion in Shelly did pertain, in one way or another, to “state action” by courts. They fell into three categories.
The first dealt with judges who, from the bench, personally performed an unarguably discriminatory act—e.g., systematically excluding Negroes from juries, thus patently denying them equal protection of the laws.
The second category of cases employed by Vinson involved, not equal protection, but judicial proceedings which were in some manner procedurally unfair. In those cases, the lower courts had sanctioned such violations of Fourteenth Amendment due process of law (not equal protection) as inadequate notice, no opportunity to be heard, use by a state prosecutor of coerced confessions and knowingly perjured testimony, the absence of effective counsel, and allowing trials to be held in a mob-dominated atmosphere.
Up to this point, knowledgeable observers could see that even Vinson was not happy with his spurious “precedent,” and his final comments on these examples of obviously inapplicable “state action” implicitly revealed his dissatisfaction.
Even with all his smoke and mirrors, Vinson had not yet bridged the gap between an equal protection-denying judge who overtly discriminates as a matter of state policy, and one who makes private discrimination possible by upholding valid contracts.
Which brings us to Vinson’s third, and last, group of cases.
With them, Vinson made a final attempt to justify the Court’s ultimate position that unconstitutional “state action” included merely enforcing valid private contracts.
On the surface, his attempt looked plausible. But it didn’t hold up under scrutiny..
In an effort to show that “state action” existed even in the absence of a legislative enactment or an equal protection deprivation coming directly from the bench, Vinson proffered seven cases where the Supreme Court had found “state action” violative of freedom of speech, press or religion.
This was a good try, but no more useful than all the other cases Vinson offered in trying unsuccessfully to validate his unsupportable conclusion. In all seven of those cases none of those courts had been asked to enforce concededly legal private contracts.
Notwithstanding the fact that all of Vinson's arguments were so easily discredited, the effect of Shelly v. Kraemer was that court enforcement of a private restrictive covenant was now deemed an act of the state, which denied the Negro purchasers equal protection of the laws under the Fourteenth Amendment.
Vinson wrote:
We have no doubt there has been state action in these cases in the full and complete sense of the phrase. The undisputed facts disclose that [the Negroes] were willing purchasers of properties upon which they desired to establish homes. The owners of the properties were willing sellers; and contracts of sale were accordingly consummated. It is clear that but for the active intervention of the state courts, supported by the full panoply of state power [the Negroes] would have been free to occupy the properties . . . without restraint.
Vinson conveniently ignored the supposedly covenant-secured wishes of the “willing sellers’” predecessors in title who had encumbered their property with the restrictive covenant, in the mistaken belief that their wishes would be respected for fifty years.
Accordingly, Shelley stands for several propositions:
- A certain kind of private contract right rested on the naïve hope that the parties would voluntarily comply with the terms—in which case no court would be needed to referee a dispute.
-
The courts were closed to anyone seeking to use his private property with anything less than the same scrupulous regard for equality that the Fourteenth Amendment rightly demands of government.
-
Although individuals may possess valid legal property and contract rights, they can become unconstitutional merely through judicial enforcement.
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Whenever a court enforces a legitimate property or contract right, the government is considered to be affirmatively sanctioning the particular outcome, even when the state had no part in the underlying transaction.
-
Even if a property owner’s right to sell to a defined class of person is prohibited by a restrictive covenant, the would-be purchaser possesses a “right” to purchase the property, ironically giving him more of a right in it than the previous covenant-restricted owner had himself.
-
The state had officially reneged on its duty to protect contract and property rights, and thus converted these rights into meaningless privileges that could be, and were, withdrawn by judicial fiat.
All of this means that once judicial enforcement of valid private rights is construed a s unconstitutional state action as in Shelley, the principle has been established for withholding enforcement of every type of private discrimination that might ever require judicial enforcement.
Thus, if two of the most fundament private rights possessed by individuals in a free country—property and contract—are unenforceable, they are in no sense rights.
Jones v. Alfred H. Mayer Co.[i]
Another Nail In Contract’s Coffin
Following the Civil War, Congress enacted the Civil Rights Act of 1866. One of its provisions evolved into the following federal statute:
All citizens of the United States shall have the same right, in every State and Territory, as is enjoyed by white citizens thereof to inherit, purchase, lease, sell, hold and convey real and personal property.[ii]
It needs to be emphasized that prior to the enactment of this statute, even “white citizens” did not “enjoy” the “right”:
- To “inherit” money from a father who chose to disinherit his worthless son.
- To “purchase” from Donald Trump a skyscraper the mogul wanted to retain in his holdings.
- To “lease” an apartment from a landlord who did not want tenants with large dogs.
- To “sell” real estate to a stock-only mutual fund.
- To “hold” a borrowed automobile that the owner wanted back.
- To “convey” a dilapidated house to someone who didn’t want it.
In other words, before enactment of Section 1982 no white citizen (or anybody, for that matter) had the right to anyone else’s real or personal property unless the latter consented to the inheritance, lease, sale, holding or conveying.
The sanctity of private property was, and should have remained, a core principle of American liberty and constitutionalism. But it hasn’t.
Although the principle had been undermined for many years before the Warren Court, in 1968 it was dealt a blow from which it has never recovered.
In the mid-1960s a white developer in St. Louis refused to sell a house to a Negro named Jones. He sued under Section 1982. To repeat: “All citizens of the United States shall have the same right, in every State and Territory, as is enjoyed by white citizens thereof to inherit, purchase, lease, sell, hold and convey real and personal property.”(My emphasis.)
Although by 1968 it had been the law for a hundred years—rightly, of course—that constitutionally government was not allowed to discriminatorily deny any American the right to acquire or sell personal and real property because of race or color, neither Section 1982 nor any other provision of law had ever been held applicable to purely private, racial discrimination in housing. So the question that the Supreme Court eventually had to decide in Jones v. Alfred H. Mayer, Co. was obviously an important one constitutionally, politically and culturally.
In a 7-2 opinion written by Justice Stewart, the Supreme Court of the United States ruled that Section 1982 prohibited “all discrimination against Negroes in the sale or rental of property—discrimination by private owners as well as discrimination by public authorities.”[iii]
Focusing on the Thirteenth Amendment, which had abolished slavery, Stewart wrote:
Negro citizens, North and South, who saw in the Thirteenth Amendment a promise of freedom—freedom to “go and come at pleasure” [footnote omitted] and to “buy and sell when they please” [footnote omitted]—would be left with “a mere paper guarantee” [footnote omitted] if Congress were powerless to assure that a dollar in the hands of a Negro will purchase the same thing as a dollar in the hands of a white man. At the very least, the freedom that Congress is empowered to secure under the Thirteenth Amendment includes the freedom to buy whatever a white man can buy, the right to live wherever a white man can live.
These empty platitudes are worthless as statements of constitutional law. We are supposed to believe, because Stewart, Warren, Black, Douglas, Brennan, Fortas and Marshall said so, that Negroes in 1966 analyzed the Thirteen Amendment and found “a promise of freedom . . . to go and come at pleasure,” whatever that was supposed to mean. More important, any promise of the Thirteenth Amendment is a far cry from what it actually says, what it meant to the people who authored it, and to those who ratified it. More important, still, is that the Court was asked to interpret not the Thirteenth Amendment, actually a red herring in the Jones case, but the Civil Rights Act of 1866.
This point highlights the two major flaws in Stewart’s majority opinion.
One, ably dealt with in Justice Harlan' s dissent (joined by Justice White) was that neither the language of Section 1982, nor the supposed Congressional intent on which the majority had predicated its interpretation of the statute, was as supportive of the majority’s conclusion as Justice Stewart made it appear. Justice Harlan put the point nicely when he noted that:
[My] analysis of the language, structure, and legislative history of the 1866 Civil Rights Act shows, I believe, that the Court's thesis that the Act was meant to extend to purely private action is open to the most serious doubt, if indeed it does not render that thesis wholly untenable. Another, albeit less tangible, consideration points in the same direction. Many of the legislators who took part in the congressional debates inevitably must have shared the individualistic ethic of their time, which emphasized personal freedom [footnote omitted] and embodied a distaste for governmental interference which was soon to culminate in the era of laissez-faire [footnote omitted]. It seems to me that most of these men would have regarded it as a great intrusion on individual liberty for the government to take from a man the power to refuse for personal reasons to enter into a purely private transaction involving the disposition of property, albeit those personal reasons might reflect racial bias.[iv]
In his dissent, Harlan was using an analytic approach that has come to be called “Originalism,” of which today’s leading proponents are Justices Thomas and Scalia. Simply put, Originalism interprets a Constitutional provision first on the basis of what it actually says, and then, if the meaning needs clarification, according to what it meant to the people who wrote it.
The other major flaw in Stewart’s majority opinion was what we have seen too often before, for example, in Shelley v. Kraemer—a failure adequately to distinguish between the nature and significance of private versus government action, and the inability to defensibly equate the two.
A concurring opinion by Justice Douglas inadvertently highlighted that failure. As usual, he was eloquent but overbroad, speaking in broad generalities and glossing over the crucial distinction on which the case, and the private-public principle behind it, rested.
Douglas correctly observed that: "Some badges of slavery remain today. While the institution has been outlawed, it has remained in the minds and hearts of many white men. Cases which have come to this Court depict a spectacle of slavery unwilling to die.”
He then, disingenuously, provided what he claimed were legitimate examples.
Without distinguishing between private and government conduct, Douglas threw into the same undifferentiated pot racially segregated public schools and racially discriminatory private restaurants; state laws against racial intermarriage and personal racial preferences in renting motel rooms; municipal ordinances establishing residential districts according to race, and individual refusals to sell real estate because of racial prejudice.
Douglas’s knowing failure to distinguish between private and government discrimination; the majority’s mistaken willingness to believe that the 1866 Congress intended to prohibit even private racial discrimination in the transfer of real property; Harlan's disagreement only with the interpretation of the legislative history, but not with the principle that government can bar private racial discrimination in housing; and, finally, enactment of the Civil Rights Act of 1968 with its “fair housing” provisions compel the conclusion that since a property owner cannot refuse to sell because of racially discriminatory motives, the line between properly prohibited government racial discrimination and improperly prohibited private racial discrimination ceased to be meaningful after Jones v. Alfred H. Mayer Co.
Which brings us to the aftermath of that case.
As if to dispel any lingering doubt about its view that federal statutes could bar private racial discrimination, the Supreme Court soon reiterated the point.
Certain Virginia private schools discriminated racially among applicants—i.e., children who had not yet been admitted, with whom the schools did not yet have contractual relationship—by declining to accept Negroes.
Children who were excluded, sued. Initially, they invoked both the public accommodations sections of the Civil Rights Act of 1964 which had been upheld in Heart of Atlanta and Katzenbach a decade earlier, and an older federal civil rights statute, an analog to Section 1982 which had been before the Court in the Jones case. (Apparently realizing that the local private schools were measurably different from a motel and a restaurant, the children's attorneys withdrew their public accommodations claim before trial.) They relied solely on the older statute, Title 42 U.S.C. Section 1981, which provides that:
All persons within the jurisdiction of the United States shall have the same right in every State and Territory to make and enforce contracts, to sue, be parties, give evidence, and to the full and equal benefit of all laws and proceedings for the security of persons and property as is enjoyed by white citizens . . . . (My emphasis.)
An obvious question jumps out from the words of this statute: What contracts could white citizens make and enforce? The equally obvious answer was any contracts a willing other party was willing to make.
Let me remind the reader of what I wrote in the Introduction to this section on contracts:
In our daily lives all of us come into contact with hundreds of other people: loved ones, fellow workers, casual acquaintances, total strangers. Some of these many contacts—e.g., being hit by a car, or mugged—are involuntary. But most relationships between people in the United States—with spouses, landlords, employers, lawyers, physicians—are voluntarily chosen.
To the extent that voluntarily chosen relationships create important obligations—which later may have to be clearly recalled, and perhaps even legally enforced—it is necessary to create contracts. Contracts are the cement that binds together the voluntary assent of free individuals. * * *
It is an utter contradiction in terms even to conceive of, let alone attempt to create, an “involuntary” contract.
Until, that is, the Warren Court got its hands on the case of Runyon v. McCrary.[v]
Based on Section 1981, the unsuccessful Negro applicants argued that the private schools could not refuse to make contracts with them solely because of their race.
The Supreme Court agreed, ruling that Section 1981 did reach private racial discrimination, and that it prohibited all racially motivated contract decisions. Understand this: no one could not enter into a contract if they were racially motivated. The corollary, of course, is that if that was the motivation, they were required to enter into the contract.
The Runyon decision was so patently indefensible that two of the majority justices actually admitted that what they were deciding was wrong, and then tried to explain why they were going along with the majority anyhow.
Justice Powell frankly admitted that “[if] the slate were clean I might well be inclined to agree with [the dissent] that Section 1981 was not intended [by the Congress that enacted it in the post-Civil War period] to restrict private contractual choices.”
Why the slate was not clean was explained by the other separately concurring justice, John Paul Stevens: Not long before, the Court had ruled on some cases which, though perhaps wrongly decided, compelled the result that the majority had reached in Runyon. Obviously, Stevens was thinking about the Jones case.
Although Stevens cogently stated why the majority was dead wrong, he went along with it anyhow. In a burst of hypocritical candor he explained his moral and intellectual sellout quite straightforwardly: Even if a century earlier Section 1981 had not been intended by its authors to mean what the Runyon majority now interpreted it to mean (and it was undeniably not what they intended), no matter. Because “it surely accords with the prevailing sense of justice today.”
Justice Stevens was making two fascinating admissions: on the one hand, he entertained grave reservations about allowing federal civil rights legislation to control the myriad contractual aspects of an individual's private, business relations. On the other hand, he was willing to go along because the country’s mood (and/or his own) was less concerned with the right of private individuals to run their own lives and businesses their own way, than with the aspirations of Negroes to enter the American mainstream, whatever the cost to others and even if doing so meant that the government would have to prohibit certain traditional and, until, sacrosanct private choices.
Stevens’s callous disregard for the essence of contract, which had prevailed for hundreds of years beginning with the English common law, was yet another example of the Living Constitution triumphant. No matter how long the essence of contract had been voluntary, bargained for mutual consideration; no matter that Section 1981 could not be legitimately read as forcing unwilling persons to enter into contracts they didn’t want to make; no matter that the section’s authors did not intend to force contracts on the unwilling; no matter that everyone knew that the majority opinion in Runyon could not be defended constitutionally; no matter that Stevens admitted all this; and no matter the consequences—none of this made any difference.
Now, at least if an unwillingness to make a contract was base on race—something for a jury to decide—one could be forced into making one.
In the Introduction to this section on contracts introducing the five famous Supreme Court cases— involving money (Legal Tender Cases), employment (Muller v. Oregon), mortgages (Home Building & Loan Association v. Blaisdell) , restrictive covenants (Shelley v. Kraemer), and refusal to contract Jones v. Alfred H. Mayer Co.)— I wrote that they eloquently answer the question of whether, in America, a contract is really worth the paper it is written on.
Having examined those cases, it’s clear that the answer is that it is not—either because government can destroy private contracts, as in the first four cases, or because, as in the fifth, having been forced into a contract he did not want to make the victim will try everything he can to obviate it.
[i] 392. U.S. 409 (1968).
[ii] 42 U.S.C Section 1982.
[iii] Emphasis in original.
[iv] It is interesting that although Harlan’s “Originalist” analysis led him to disagree with the majority's conclusion, he did not disagree with the majority's basic premise that purely private racial discrimination could be prohibited by the exercise of government power. Indeed, between the time of the April 1968 oral argument in Jones and the case’s decision in June 1968, Congress enacted the Civil Rights Act of 1968, containing comprehensive “fair housing” provisions dealing with the refusal to sell real property for racial reasons. Harlan considered the entire new Civil Rights Act “presumptively constitutional.”
