Newman v. Moyers

Mr. Justice Van Ojisdel

delivered the opinion of the court:

The validity of plaintiffs’ contract is not questioned. Indeed, such contracts have the express sanction of law. U. S. Pev. Stat. sec. 823, Comp. Stat. 1916, sec. 1315. Similar contracts have been upheld frequently hy the courts. Wylie v. Coxe, 15 How. 415, 14 L. ed. 753; Taylor v. Bemiss, 110 U. S. 42, 28 L. ed. 64, 3 Sup. Ct. Rep. 441; Nult v. Knut, 200 U. S. 12, 50 L. ed. 348, 26 Sup. Ct. Rep. 216; McGowan v. Parish, 237 U. S. 285, 59 L. ed. 955, 35 Sup. Ct. Rep. 543; Roberts v. Consaul, 24 App. D. C. 551. In the latter case this court said: “Persons having claims against the United States that must be collected through proceedings in the court of claims are practically compelled, in the majority of cases, to employ attorneys and contract with them for fees contingent upon success. Such contracts are not. unlawful, and. may be enforced according to their terms where fair and reasonable. Taylor v. Bemiss, 110 U. S. 42, 45, 28 L. ed. 64, 65, 3 Sup. Ct. Rep. 441.”

The claim of Mrs. Erskine was for the value of property taken by the United States military forces during the Civil War. It therefore constituted a valid, subsisting debt of the government. While it is true that the Sovereign cannot be sued except by its consent, such consent was given in this instance, and a tribunal was designated to which the claimant could resort to have her rights adjudicated. Suit was brought in the court of claims under what is known as the. Tucker Act (24 Stat. at L. 505, chap. 359). The case was there prosecuted by plaintiffs pursuant to their contract, and the amount due from the government, to claimant was duly found and certi*109lied to Congress for payment by appropriation. It was not, therefore, a mere bounty or gratuity, in respect of tbe payment of wliieli no obligation whatever is imposed upon the government. Congress, in respect of this claim, as well as of other claims embraced in the War Claims Act of .March 4, 1915, was called upon to discharge a debt of the United States, — a duty imposed by the Constitution, which, in express terms, forbids the talcing of private property for public use without just compensation.

But does the provision of the War Claims Act under consideration abridge the liberty of contract granted the citizen by the Constitution? The word “contract” does not appear in the 5th Amendment, but the word “liberty” therein used has a much broader meaning than the mere absence of physical duress. “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; to live and work where he will; to earn his livelihood by any lawful calling; to pursue any livelihood or avocation, 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.” Allgeyer v. Louisiana, 165 U. S. 578, 589, 41 L. ed. 832, 835, 17 Sup. Ct. Rep. 427. To the same effect are the decisions in Williams v. Fears, 179 U. S. 270, 274, 45 L. ed. 186, 188, 21 Sup. Ct. Rep. 128; United States v. Joint Traffic Asso. 171 U. S. 505, 572, 43 L. ed. 259, 288, 19 Sup. Ct. Rep. 25; Addyston Pipe & Steel Co. v. United States, 175 U. S. 211, 44 L. ed. 136, 20 Sup. Ct. Rep. 96.

The terms “liberty” and “property” as used in the Constitution are of similar import. It is difficult to define “liberty of action” without invading the domain of property rights. The right to contract is both a liberty and a property right. Freedom of action involves the right to make and enforce contracts, and included in this right is the right to acquire and dispose of property'. The claim of Mrs. Frskine before the passage of *110the War Claims Act was property of a character which she could have disposed of by will. With the approval of the bill appropriating for its payment the proceeds, were property the payment of which could be enforced by mandamus. United States ex rel. Parish v. MacVeagh, 214 U. S. 124, 53 L. ed. 936, 29 Sup. Ct. Rep. 556. Likewise was the contract plaintiffs’ property. This is trite whether the act be construed, as we have held, as prohibiting the receipt by plaintiffs, irrespective of the source from which it is paid, of the portion of the fee contracted for in excess of 20 per cent of the amount appropriated, or merely as depriving them of their lien on the particular fund, leaving unaffected their right to subject other property of defendant to the payment of such fee. The provision of the contract for a lien creates a valid right, and, as such, is entitled to the same protection as any other legal right created thereby. It may well be that, in many of these war claims cases, the claimants have no property other than the fund recovered; and to deprive counsel of the right to enforce their contracts for compensation out of those funds would, in effect, render them valueless. The contract here had been executed so far as plaintiffs were concerned. As this court said in Roberts v. Consaul, 24 App. D. C. 560, where a similar contract was involved: “The services of the attorney, as contracted for, were performed and the consideration therefor earned when 1he judgment was recovered. All that remained for him to do, if permitted, was to receive the draft for the appropriation made by Congress for the payment of the judgment.” The Supreme Court went further in McGowan v. Parish, 237 U. S. 285, 59 L. ed. 955, 35 Sup. Ct. Rep. 543. McGowan had been employed under a contingent fee contract to prosecute the claim of Parish. Before completion of the case Parish employed other counsel and attempted to dispense with McGowan’s services. The court upheld the right of the executrix of McGowan to recover on the contract. Such a contract must be property, for an executor takes nothing' by virtue of his appointment but property belonging to the testator. In Williams v. Heard, 140 U. S. 529, 35 L. ed. 550, 11 Sup. Ct. Rep. 885, the court, speaking of the validity of a claim for a portion of the fund *111paid by Great Britain to tbe United States as tbe result of tlie settlement of the Alabama claims, said: “Tbe claims in this case differ very materially from a claim for a disability pension, to which they are sought to be likened. They are descendible; are a part of the estate of the original claimants which, in case of their death, would pass to their personal representatives and be distributable as assets; or might have been devised by will; while a claim for a pension is personal, and not susceptible of passing- by will, or by operation of law, as personalty.”

But it is insisted that the inhibition of the 34th Amendment to the Constitution against the 'impairment of contracts is a limitation upon the legislatures of the States, and not upon Congress. Unquestionably, Congress may indirectly and incidentally impair the obligations of a contract. The power of Congress, however, to impair or modify contracts is confined to those instances where Congress has been vested with the power to control or regulate out of considerations of public policy the matters to which the contract relates. “As a result of the complete power of Congress over foreign commerce, it necessarily follows that no individual has a vested right to trade with foreign nations, which is so broad in character as to limit and restrict the power of Congress to determine what articles of merchandise may be imported into this country and the term's upon which a right to import may be exercised. This being true, it results that a statute which restrains the introduction of particular goods into the United States from considerations of public policy does not violate tbe due process clause of the Constitution.” Buttfield v. Stranahan, 192 U. S. 470, 48 L. ed. 525, 24 Sup. Ct. Rep. 349.

This brings us to the authorities relied upon by defendants in this case. Sinking-Fund Cases, 99 U. S. 700, 727, 25 L. ed. 496, 504, involved the power of Congress to require the railroad companies to create a sinking fund for redemption of their bonds upon which the government had loaned its credit and was liable. The majority opinion of the court upheld the enactment on the ground that Congress had retained tlie right to alter or amend the charter under which the companies acquired their rights from the Federal government. The court, *112bowoyer, confined the right of Congress by legislation to interfere with private rights, to cases involving governmental purposes. Defining this power the court said: “The United States cannot any more than a ¡State interfere with private rights, except for legitimate governmental purposes. They are not included within the constitutional prohibition which prevents States from passing laws impairing the obligation of contracts, hut equally with the States they are prohibited from depriving persons or corporations of property without due process of law. * * * That this power has a limit, no one can doubt. All agree that it cannot be used to" take away property already acquired under the operation of the charter. * * * Giving full effect to the principles which have thus been authoritatively stated, we think it safe to say that whatever rules Congress might have prescribed in the original charter for the government of the corporation in the administration of its affairs, it ■retained the power to establish by amendment. In so doing it cannot undo what has already been done, and it cannot unmake contracts that have already been made, but it may provide for what shall be done in the future, and may direct what preparation shall be made for the due performance of contracts already entered into. It might originally have prohibited the borrowing of money on mortgage, or it might have said that no bonded debt should be created without ample provision by sinking fund to meet it at maturity. Not having done so at first, it cannot now by direct legislation vacate mortgages already made under the powers originally granted, nor release debts already contracted. A prohibition now against contracting debts will not avoid debts already incurred. An amendment making it unlawful to issue bonds payable at a distant day, without at the same time establishing a fund for their ultimate redemption, will not invalidate a bond already out. All such legislation’ will be confined in its operation to the future.” What Congress attempted in the present act is just what the court said in the Bvnking-Fxmd Cases could not be done, — “release debts already contracted” or “avoid debts already incurred.”

The Legal Tender Cases, 12 Wall. 457, 20 L. ed. 287, relied upon by counsel for defendants, involved the power of Congress *113to make United States Treasury notes a legal tender in payment of debts between individuals. The decision turned largely upon the power of Congress to coin money and regulate its value, borrow money and emit bills of credit. This being an express constitutional power delegated to Congress, the court will not attempt to define or limit Congress in the means employed to carry out the constitutional object. The court, however, held that the act did not impair contracts; since, when persons enter into contracts, they are presumed to do so with full knowledge of the power of Congress to regulate coinage, and will be presumed to agree for payment in legal money at the date of payment. Speaking of the limitations upon Congress the court said: “We have been asked whether Congress can declare that a contract to deliver a quantity of grain may be satisfied by the tender of a less quantity. Undoubtedly not. I>ut, this is a false analogy. There, is a wide distinction between a tender of quantities, or of specific: articles, and a tender of legal values. * * * It cannot, therefore, be maintained that the legal tender acts impaired the obligation of contracts.”

That the Legal Tender Act was not regarded by the Supreme Court as impairing the obligations of contracts is (dear from the ruling in Trebilcock v. Wilson, 12 Wall. 687, 20 L. ed. 460. Then' the contract, made before the passage of the act, called for the payment of a certain amount “in specie;” and the court held that payment could not he enforced in treasury notes, as could be done -where the contract called merely for the payment of a certain sum of money without specifying “specie.” It was also held in the earlier case of Bronson v. Rodes, 7 Wall. 229, 19 L. ed. 141, that, where a contract called for payment “in gold and silver coin, lawful money of the United Stab's,” it must be paid in coin.

Counsel for defendants also rely upon the ease of Atlantic Coast Line R. Co. v. Riverside Mills, 219 U. S. 186, 55 L. ed. 167, 31 L.R.A. (N.S.) 7, 31 Sup. Ct. Rep. 164, involving the constitutionality of the Carmack Amendment to the Interstate Commerce Act (34 that, at L. 581, 595, chap. 3591, Comp. Stub 1916, secs. 8508, 8604a, 8004aa), whereby the initial carrier was made liable for loss or damage of goods shipped over *114its line and tbe lines of connecting carriers. The decision turned upon the constitutional power expressly conferred upon Congress to regulate interstate commerce. But this act was prospective and prohibited only future contracts; and the contract under consideration, having been made after the enactment of the law, came clearly within its provisions. Stress was laid upon the expression of the court to the effect “that there is no such thing as absolute freedom of contract.” But the context discloses that the statement was addressed to “contracts which contravene public policy” or -which “injuriously affect public interests.” Had the contract there involved been made prior to the passage of the Carmack Amendment, it is safe to assume from the.language of the opinion that the com elusion reached by the court would have been different.

This brings us to the specific cases wherein Congress has limited counsel fees. The limitation as to pension cases is found in the Act of Congress of June 20, 1878 (20 Stat. at L. 243, chap. 3G7), which provides: “It shall he unlawful for any attorney, agent or other person to demand or receive for his services in a pension case a greater sum than $10. Ho fee contract shall hereafter be filed with the Commissioner of Pensions in any case. In pending cases in which a fee contract has heretofore been filed, if the pension shall be allowed, the Commissioner of Pensions shall approve the sanie as to the amount of the fee to be paid at the amount specified in the contract.”

Interpreting this act the court, in Frisbie v. United States, 157 U. S. 160, 39 L. ed. 657, 15 Sup. Ct. Rep. 586, said: “The pension granted by the government is a matter of bounty. ‘No pensioner has a vested legal right to his pension. Pensions are' the bounties of the government, which Congress has the right to give, -withhold, distribute, or recall, at its discretion. Walton v. Cotton, 19 How. 355, 15 L. ed. 658.’ United States v. Teller, 107 U. S. 64, 68, 27 L. ed. 352, 354, 2 Sup. Ct. Rep. 39. Congress, being at liberty to give or -withhold a pension, may prescribe who shall receive it, and determine all the circumstances and conditions under which any application therefor shall be prosecuted. No man has a legal right to a pension, and *115no man lias a legal right to interfere in the matter of obtaining pensions for himself or others. The whole control of that matter is within the domain of Congressional power. United States v. Hall, 98 U. S. 343, 25 L. ed. 180. Having power, to legislate on this whole matter, to prescribe tlie conditions under which parties may assist in procuring pensions, it has the equal power to enforce by penal provisions compliance -with its requirements.”

In two important particulars are pension cases distinguishable from the one at bar. A pension is a gratuity, while the claim here is a valid debt of the government. Hie Pension Act, limiting counsel fees, is prospective, and all contracts filed at the date of the act with the Commissioner of Pensions hi accordance with section 4786, Hcv. Stat. Comp, fitat. 1916. see. 9115, were preserved, with direction to the Commissioner to give them effect according to their terms; while here existing contracts are stricken down, and an attempt to carry them into effect is made a misdemeanor. The court in the Frisbie Vase distinguishes a pension claim as not constituting a legal claim or demand against the government. “No man lias a legal right to a pension, and no man has a legal right to interfere in the matter of obtaining pensions for himself or others,” implying clearly that in a claim for private property taken for public use a claimant would have a legal claim and tlie untrammeled right to'contract with a lawyer to represent him in securing its recovery.

To the same effect is the Act of December 22, 1911 (37 Stat. at L. 47, 4S), chap. 0), relating to claims of soldiers for back pay and bounty, whicli provided that no attorney should demand or receive any fee in, connection with any claim “filed after the passage of this act.” These, like pensions, are not legal obligations of the government, but mere gratuities; and Congress again limits tlie exercise of its power to the future, preserving the integrity of existing contracts.

The last (hiss of cases in whicli limitations of this sort arc' found is Indian depredation claims. (26 Btat. at L. 851, chap. 538). These claims are not legal demands against the United States. The government provided a tribunal in which persons *116who had lost property at the hands of any of the Indian tribes at a time when the Indians were in amity with the United States might present their claims and have them adjudicated. True, the judgments are against the United States, but they are chargeable against the funds of the Indians in the Treasury. But, as in the other bounty or gratuity cases cited, the limitation applied to the future, in that it was part of the act authorizing claimants to present their claims in the court of claims for adjudication. It was part of the act permitting the government •to be sued in this class of cases. What effect such a limitation ■would have had if it had been embraced in the Tucker Act, to apply to all cases prosecuted thereunder, it is unnecessary to decide, since no such provision exists. But that situation is essential before any analogy can be drawn between the present act and the Indian Depredation Act.

This brings us to the case of Ball v. Halsell, 161. U. S. 72, 40 L. ed. 622, 16 Sup. Ct. Rep. 554, strongly relied upon by defendants. Ball sued Ilalsell on the following contract:

We, the undersigned parties of the first part, do hereby constitute and appoint Thomas Ball our lawful attorney to receive, and to make,' sign, and give all necessary acquittances and receipts for, one half of all money which may be received by him as our attorney at law, for prosecuting claims against the United States government, on account of the depredations of the Gomnlanche and- Kiowa Indians on our property of horses, mules, and cattle in the State of Texas. Said one half being the amount agreed by us to pay him of all that he may recover of said government for said depredations.

Given under our hands this 22d day of May, a. n., 1874. '

' J. G. Ilalsell.

Ball presented in 1875 a claim of Ilalsell’s to the Department of thó Interior, and prosecuted it before the ’Department, securing a recommendation for the payment of $19,625 to llalsoll for the depredations alleged in the contract. No appropriation was ever made to pay the sum awarded. After the passage of the Indian Depredation Act, Ball brought suit in the court of *117claims and secured judgment for llalsoll in the amount of $17,-720, the court awarding .Ball an attorney’s fee of $1,500. lienee, .Ball sued to recover the balance of one half of the amount for which judgment was awarded.

The Indian Depredations Act must be construed either as taking away the former remedy before the Interior Department or as granting an additional remedy, either of which Congress had power to do. If it took away the former remedy, then Ball’s contract fell; if it only created an additional remedy, Ball had the option of pursuing the old remedy, upon which there was no limitation as to the amount of fees that might be charged, or he had the option of accepting the new remedy subject to all the terms which it imposed. He did the latter, and the court held that he was subject to the limitations of the act.

But the discussion, so far, is on the assumption that Ball had, but for the provisions of the act, a valid, enforceable contract. But his contract could not have been enforced if no limitation as 1o attorneys’ fees had been placed in the Depredation Act. The contract amounted to an assignment of one half of the claim, which is especially forbidden by statute. Disposing of the case the court said: “But in the present case, as has been seen, the original agreement was contrary to the express terms of the Act of Congress of 1853. 'That agreement cannot, as it appears to us, be construed as a promise of the principal to pay to the attorney any sum whatever, except out of money recovered and received by the attorney from the United States. The Act of Congress of 1891 expressly declared void ‘all contracts heretofore made for fees and allowances to claimants’ attorneys.’ This act was passed before the attorney had either recovered or received any money upon the principal’s claim against the United States. The act did not recognize either the lawfulness or the amount of the claim, or make any appropriation for its jjayment. But it provided for its ascertainment and adjudication by judicial proceedings, and for the allowance, by the judgment in those proceedings, of a reasonable compensation to the attorney. The restriction of the compensation of attorneys to the amounts so allowed by the court was one of the terms and conditions upon which the United States consented to be sued.”

*118Tims, it will be observed that Rail bad an invalid contract upon which he could not have recovered if there had boon no limitation in the Indian Depredation Act. The claim he recovered was not a legal demand against the government. Ilcnce, Congress could place any limitation upon the right of recovery it saw fit. In other words, Ilalsell’s claim was not property until the appropriation was made for its payment, while Mrs. Erskine’s claim ivas property from the date her property ivas taken by the military forces of the United States. The one was a gratuity, concerning the payment of which no legal duty was imposed upon Congress; the other was a debt of the government which Congress could not legally refuse to pay. Plaintiff’s contract was a chose in action, and, therefore, property from its date. The act here in question was passed after the fee had been earned and when Congress was preparing to pay the judgment. In this respect it is distinguishable from the Ball Case, wherein the court said: “This act was passed before the attorney had either recovered or received any money upon the principal’s claim against the United States. The act did not recognize either the lawfulness of the amount of the claim, or make any appropriation for its payment.”

The act in question is retroactive, in that, instead of forbidding future contracts, it reaches back and strikes down existing legal contracts between private individuals, — contracts which at. the date of the act had been fully executed by the attorneys. It also discriminates against attorneys who happen to represent claimants whose claims were embraced within this particular TTar Claims Act. Reference to the statutes discloses that war claims acts have been passed in several instances since the. enactment of the Thicker Act, as well as acts for the payment of individual claims, yet in no other instance has any attempt been made to limit the amount of attorneys’ fees which might bo charged. “A statute would not be constitutional * “ * which should select particular individuals from a class or locality, and subject them to peculiar rules, or impose upon them special obligations or burdens from which others in the same locality or class are exempt. * * * Everyone has a right to demand that he bo governed by general rules; and a special *119statute which, without his consent, singles his case out as one to be regulated by a different law from that which is applied to all similar cases, would not be legitimate legislation, but would !>(' such an arbitrary mandate as is not within the province of free governments.” Cooley, Const. Lim. 6th ed. 481, 483, quoted with approval in Mathews v. People, 202 Ill. 389, 63 L.R.A. 73, 95 Am. St. Rep. 241, 67 N. E. 28. Concretely speaking, wliat was done lawfully by counsel in war claims cases from the enactment of the Tucker Act became a misdemeanor if done by counsel representing claims in the present act.

Rut more serious than all other defects, the act under consideration is an attempt by Congress to deprive plaintiffs of their property without due process of law. An act of Congress does not constitute due process of law, unless it be to lay and collect taxes, duties, imposts, and excise's. The powers of Congress are purely legislative. They are neither administrative nor judicial. This constitutional limitation is a restriction upon both legislative and executive power. Due process of law means the regular course of administration through the courts. The refusal of Congress, in the exercise of vested power, to pay a just debt of the government, or to pay a less amount than, is due, is not due process of law. In such a case Congress is without lawful discretion, and any action short of full justice is the exercise of arbitrary power. The government has no more right to repudiate a just debt than has the citizen. It logically follows that any attempt on the part of Congress in the payment of a just debt of the government, ascertained by a regularly appointed judicial tribunal, to limit the creditor in the full enjoyment of the money appropriated, or io exempt the fund in the hands of the creditor from just claims to the payment of which it might bo otherwise lawfully stibjeded, would not he due process of law, but the mere exercise of arbitrary power, unwarranted either in law or principle. Such, we think, was the action in this case. The rights of plaintiffs under their contract had become vested, and nothing is clearer than that Congress is without power by direct legislation to destroy or modify the obligations of a contract between private individuals, except it bo by a uniform bankruptcy law, which power Congress expressly derives from *120the Constitution. Congress may, in the exercise of vested power, indirectly affect existing contracts; but it has no power, by direct enactment, otherwise than by a bankruptcy law, to change the terms of a private contract whereby cither party thereto is released in whole or in part, from his obligations.

When Congress attempted to reduce the fee called for by plaintiffs’ contract, it amounted to taking their property, due them under a private valid contract, and handing it over to another. If this is not deprivation of liberty and property without due process of law, it would be difficult to conceive of a case where the inhibition of the Constitution would apply. If this were held to be a valid exercise of vested power by Congress, the liberty and property rights of the citizen would be subject to the legislative will. It is difficult to conceive of a more dangerous or tyrannical system of government than that which would logically spring into existence if the legislative flat were held to bo supreme. “That government can scarcely be deemed to be free, where the rights of property arc left solely dependent upon the will of a legislative body, without any restraint. The fundamental maxims of a free government seem to require that the rights of personal liberty and private property should be held sacred. At least, no court of justice in this country would be warranted in assuming that the power to violate and disregard them — a power so repugnant to the common principles of justice and civil liberty — lurked under any general grant of legislative authority, or ought to be ¡implied from any general expressions of the will of the people.” Wilkinson v. Leland, 2 Pet. 627, 657, 7 L. ed. 542, 553.

It follows that the act in question is in conflict with the limitations of the Constitution in the particulars above mentioned, and, therefore, void.

The decree is affirmed, with costs. 'Affirmed.