The Act of the Legislature of the Tennessee, passed March
17,
1899, Statutes of 1899, c. 11, p. 17, requiring the redemption
in cash of store orders or other evidences of indebtedness issued
by employers in payment of wages due to employs, does not conflict
with any provisions of the Constitution of the United States
relating to contracts.
In the Chancery Court of Knox County, Tennessee, Samuel
Harbison, a citizen of said state, on June 2, 1899, filed a bill of
complaint against the Knoxville Iron Company, a corporation
organized under the laws of the State of Tennessee, alleging
Page 183 U. S. 14
that he was the
bona fide holder by purchase in due
course of trade of certain specified accepted orders for coal that
had been issued by the defendant company in payment of wages due to
its employees; that he had made due demand for their redemption in
cash according to law, which demand had been refused, and that he
was entitled to a decree for the amount of said orders, with
interest. The company filed an answer denying that the complainant
was a
bona fide holder of the orders in question and
alleging an agreement between the company and its employees that
the latter would accept coal in payment of said orders, etc.
Proof was taken and the case heard by the chancellor, who
rendered a decree in favor of the complainant for $1,702.66 as
principal and interest of said orders, with costs. An appeal was
taken by the defendant company to the Court of Chancery Appeals of
Tennessee, an intermediate court of reference in equity causes,
where the decree of the Chancery Court of Knox County was
affirmed.
The facts as found by the Court of Chancery Appeals are as
follows:
"The defendant is a corporation chartered under chapter 57, Acts
of 1867-1868. The following powers are given by section 4:"
" To purchase, hold, and dispose of such real estate, not to
exceed seventy thousand acres, leases, minerals, iron, coal, oil,
salt, and personal property as they may desire, or as they may deem
necessary for the legitimate transaction of their business; to
mine, bore, forge, smelt, work, and manufacture, transport, refine,
and vend the same. The company to have and enjoy and exercise all
the rights, privileges, and powers belonging to or incidental to
corporations which may be convenient to carry out any business they
are in this act authorized to engage in."
"The defendant has its principal office at Knoxville, where it
is engaged in the manufacture of iron. As an incident to this
business, it also mines and sells coal. Its mines are located in
Anderson County. It works about 200 employees. It has now and has
had for many years a regular payday, being that Saturday in every
month which is nearest the 20th day of the month. Upon this payday,
each employee is paid
Page 183 U. S. 15
in cash the amount then due him, excepting what may be due him
from the first of the month up to said payday -- that is, the
company keeps in arrears with its employees all the time to the
extent of their wages for about twenty days' time so far as
concerns the matter of cash payments, but they may collect this sum
and all sums that may be due them in coal orders, as stated below.
It does not and will not pay cash to its employees for wages at any
other time than upon said regular paydays. Defendant, however,
nearly always has on hand in its Knoxville yard a large amount of
coal which it sells to all persons who are willing to purchase,
whether such persons are its laborers or the public generally. For
some time prior to the filing of the bill and at the time the bill
was filed, the defendant was and had been accustomed to accept from
its laborers, after work had been performed, orders for coal in the
following form:"
"Let bearer have _____ bushels of coal and charge to my
account."
"________ ________."
"The defendant's employees are accustomed to sign orders, and in
this form they are accepted by a stamp in these words:"
" Accepted _____ 1899."
"Knoxville Iron Company"
"Many of the defendant's employees have never drawn an order on
the defendant, and many others have used them only in the purchase
of coal for themselves, but the defendant in this way pays off
about seventy-five percent of the wages earned by its employees.
Many of the employees who draw these orders get small wages, ninety
cents to one dollar and twenty cents per day, and sell these orders
to get money to live on, but those who get the largest wages, $65
to $175 per month, draw more of such coal orders in proportion than
do those who get small wages. Defendant has never insisted upon any
of its laborers' giving any such orders, but has been willing to
accept such orders when any employee would draw them and ask their
acceptance. Defendant, however, sets apart every Saturday
afternoon, from one o'clock to five o'clock, for the acceptance of
such orders. It makes some profit in accepting said orders in that,
instead of paying the wages of its employees in cash, it
Page 183 U. S. 16
pays them in coal at 12 cents per bushel, and also, to some
extent, its coal business is increased thereby. On the other hand,
such orders are a convenience to the defendant's employees in the
way of enabling them to realize on their wages before the regular
monthly payday and up to that payday. When these orders are drawn
by defendant's employees and accepted, defendant credits itself
with said orders on its accounts with the persons so drawing them
at the rate of twelve cents per bushel for the amount of coal
called for by said orders. There is no proof of an express
agreement between the defendant and its employees that the orders
should be paid only in coal, unless the face of the order shall be
construed as setting forth such an agreement. The only proof of any
implied agreement to that effect is to be found in such inferences
as may be drawn from the face of the orders and from the custom of
the company to issue them and the employees to receive them on
other than the regular cash paydays and the fact that no employee
has ever presented one of such orders for redemption in anything
else than coal. There is no proof of any compulsion on the part of
the defendant upon its operatives except insofar as compulsion may
be implied from the fact that, unless defendant's operatives take
their wages in coal orders, they must always on each monthly payday
suffer the defendant to be in arrears about twenty days -- that is,
that on the regular payday on that Saturday which is the nearest
the 20th of the month, the defendant will not pay wages except up
to the last day of the preceding month, but will pay in coal orders
the whole wages due at the end of each week, and that such is the
course of business between the defendant and its employees. The
complainant purchased six hundred and fourteen of said accepted
orders from defendant's employees, and within thirty days from the
issuance of each of said orders, he presented each of them to the
Knoxville Iron Company, defendant hereto, and demanded that it
redeem them in cash, which was refused by defendant. Complainant is
a licensed dealer in securities, and sent his agents among the
employees of the defendant to buy these coal orders. They had
previously been selling at seventy-five cents on the dollar -- that
is, before the passage of chapter 11, act of 1899 -- but he
instructed
Page 183 U. S. 17
his agents to give eighty-five cents on the dollar, and the
orders now in suit were purchased at that price. They amount in
dollars and cents to $1,678. There is no evidence of bad faith on
the part of the complainant in the purchase of said orders."
The orders sued on in this case were issued after the passage of
the Act of March 17, 1899.
From the decree of the Chancery Court of Appeals an appeal was
taken by the company to the Supreme Court of Tennessee, by which
court the decrees of the courts below were affirmed. The case was
then brought to this Court by a writ of error allowed by the Chief
Justice of the Supreme Court of Tennessee.
MR. JUSTICE SHIRAS delivered the opinion of the Court.
This is a suit in equity brought to this Court by a writ of
error to the Supreme Court of the State of Tennessee involving the
validity, under the federal Constitution, of an Act of the
legislature of Tennessee passed March 17, 1899, requiring the
redemption in cash of store orders or other evidences of
indebtedness issued by employers in payment of wages due to
employees.
The caption and material portions of this act are as
follows:
"An Act Requiring All Persons, Firms, Corporations, and
Companies Using Coupons, Scrip, Punchouts, Store Orders or Other
Evidences of Indebtedness to Pay Laborers and Employees for Labor,
or Otherwise to Redeem the Same in Good and Lawful Money of the
United States in the Hands of Their Employees, Laborers, or a
Bona Fide Holder, and to Provide a Legal Remedy for
Collection of Same in Favor of Said Laborers, Employees, and Such
Bona Fide Holder. "
Page 183 U. S. 18
"SEC. 1. Be it enacted by the general assembly of the State of
Tennessee, That all persons, firms, corporations, and companies
using coupons, scrip, punchouts, store orders, or other evidences
of indebtedness to pay their or its laborers and employees, for
labor or otherwise, shall, if demanded, redeem the same in the
hands of such laborer, employee, or
bona fide holder, in
lawful money of the United States:
Provided, The same is
presented and redemption demanded of such person, firm, company, or
corporation using same as aforesaid at a regular payday of such
person, firm, company, or corporation to laborers or employees, or
if presented and redemption demanded as aforesaid by such laborers,
employees, or
bona fide holders at any time not less than
thirty days from the issuance or delivery of such coupon, scrip,
punchout, store order, or other evidence of indebtedness to such
employees, laborers, or
bona fide holder. Such redemption
to be at the face value of said scrip, punchout, coupon, store
order, or other evidence of indebtedness:
Provided,
further, Said face value shall be in cash the same as its
purchasing power in goods, wares, and merchandise at the
commissary, company store, or other repository of such company,
firm, person, or corporation aforesaid."
"SEC. 2. Be it further enacted, That any employee, laborer, or
bona fide holder referred to in section 1 of this act,
upon presentation and demand for redemption of such scrip, coupon,
punchout, store order, or other evidence of indebtedness aforesaid,
and upon refusal of such person, firm, corporation, or company to
redeem the same in good and lawful money of the United States, may
maintain in his, her, or their own name an action before any court
of competent jurisdiction against such person, firm, corporation,
or company, using same as aforesaid, for the recovery of the value
of such coupon, scrip, punchout, store order, or other evidence of
indebtedness, as defined in section 1 of this act."
The views of the Supreme Court of Tennessee sustaining the
validity of the enactment in question sufficiently appear in the
following extracts from its opinion, a copy of which is found in
the record:
"Confessedly the enactment now called in question is in all
Page 183 U. S. 19
respects a valid statute and free from objection as such, except
that it is challenged as an arbitrary interference with the right
of contract, on account of which it is said that it is
unconstitutional, and not the 'law of the land' or 'due process of
law.'"
"The act does undoubtedly abridge or qualify the right of
contract in that it requires that certain obligations payable in
the first instance in merchandise shall in certain contingencies be
paid in money; yet it is as certainly general in its terms,
embracing equally every employer and employee who is or may be in
like situation and circumstances, and it is enforceable in the
usual modes established in the administration of government with
respect to kindred matters. The exact and precise requirement is
that all employers, whether natural or artificial persons, paying
their employees in 'coupons, scrip, punchouts, store orders, or
other evidences of indebtedness,' shall redeem the same at face
value in money, if demanded by the employee or a
bona fide
holder on a regular payday or at any time not less than thirty days
from issuance (sec. 1), and that, if payment be not so made upon
such demand, the owner may maintain a suit on such evidence of
indebtedness, and have a money recovery for the face value thereof,
in any court of competent jurisdiction (sec. 2)."
"There is no prohibition against the issuance of any of the
obligations referred to, nor against payment in merchandise or
otherwise according to their terms, but only a provision that they
shall be paid in money at the election and upon a prescribed demand
of the owner. In other words, the effect of the act is to convert
into cash obligations such unpaid merchandise orders, etc., as may
be presented for money payment on a regular payday or as much as
thirty days after issuance."
"Under the act, the present defendant may issue weekly orders
for coal, as formerly, and may pay them in that commodity when
desired by the holder, but, instead of being able, as formerly, to
compel the holder to accept payment of such orders in coal, the
holder may, under the act, compel defendant to pay them in money.
In this way and to this extent, the defendant's right of contract
is affected."
"Under the act, as formerly, every employee of the defendant
Page 183 U. S. 20
may receive the whole or a part of his wages in coal orders, and
may collect the orders in coal, or transfer them to someone else
for other merchandise or for money. His condition is bettered by
the act in that it naturally enables him to get a better price for
his coal orders than formerly, and thereby gives him more for his
labor, and yet, although the defendant may not in that transaction
realize the expected profit on the amount of coal called for in the
orders, it in no event pays more in dollars and cents for the labor
than the contract price."
"The scope and purpose of the act are thus indicated. The
legislature evidently deemed the laborer at some disadvantage under
existing laws and customs, and by this act undertook to ameliorate
his condition in some measure by enabling him or his
bona
fide transferee, at his election and at a proper time, to
demand and receive his unpaid wages in money, rather than in
something less valuable. Its tendency, though slight it may be, is
to place the employer and employee upon equal ground in the matter
of wages, and, so far as calculated to accomplish that end, it
deserves commendation. Being general in its operation and
enforceable by ordinary suit, and being unimpeached and
unimpeachable upon other constitutional grounds, the act is
entitled to full recognition as the 'law of the land' and 'due
process of law' as to the matters embraced, without reference to
the state's police power, as was held of an act imposing far
greater restrictions upon the right of contract, in the case of
Dugger v. Insurance Company, 95 Tenn. 245, and as had been
previously decided in respect of other limiting statutes therein
mentioned.
Ib.. 253, 254."
"Furthermore, the passage of this act was a legitimate exercise
of police power, and upon that ground also the legislation is well
sustained. The first right of a state, as of a man, is
self-protection, and with the state that right involves the
universally acknowledged power and duty to enact and enforce all
such laws not in plain conflict with some provision of the state or
federal Constitution as may rightly be deemed necessary or
expedient for the safety, health, morals, comfort, and welfare of
its people. "
Page 183 U. S. 21
"The act before us is perhaps less stringent than any one
considered in any of the cases mentioned. It is neither prohibitory
nor penal; not special, but general; tending towards equality
between employer and employee in the matter of wages; intended and
well calculated to promote peace and good order, and to prevent
strife, violence, and bloodshed. Such being the character, purpose,
and tendency of the act, we have no hesitation in holding that it
is valid both as general legislation, without reference to the
state's reserved police power, and also as a wholesome regulation
adopted in the proper exercise of that power."
The Supreme Court of Tennessee justified its conclusions by so
full and satisfactory a reference to the decisions of this Court as
to render it unnecessary for us to travel over the same ground. It
will be sufficient to briefly notice two or three of the latest
cases.
In
Holden v. Hardy, 169 U. S. 366, the
validity of an act of the State of Utah regulating the employment
of working men in underground mines and fixing the period of
employment at eight hours per day was in question. There, as here,
it was contended that the legislation deprived the employers and
employees of the right to make contracts in a lawful way and for
lawful purposes; that it was class legislation, and not equal or
uniform in its provisions; that it deprived the parties of the
equal protection of the laws, abridged the privileges and
immunities of the defendant as a citizen of the United States, and
deprived him of his property and liberty without due process of
law. But it was held, after full review of the previous cases, that
the act in question was a valid exercise of the police power of the
state, and the judgment of the Supreme Court of Utah sustaining the
legislation was affirmed.
Where a contract of insurance provided that the insurance
company should not be liable beyond the actual cash value of the
property at the time of its loss, and where a statute of the State
of Missouri provided that, in all suits brought upon policies of
insurance against loss or damage by fire, the insurance company
should not be permitted to deny that the property insured was worth
at the time of issuing the policy the full
Page 183 U. S. 22
amount of the insurance, this Court held that it was competent
for the Legislature of Missouri to pass such a law even though it
places a limitation upon the right of contract.
Orient Ins. Co.
v. Daggs, 172 U. S. 557.
In
St. Louis, Iron Mountain &c. Railway v. Paul,
173 U. S. 404, a
judgment of the Supreme Court of Arkansas sustaining the validity
of an act of the legislature of that state which provided that,
whenever any corporation or person engaged in operating a railroad
should discharge, with or without cause, any employee or servant,
the unpaid wages of any such servant then earned should become due
and payable on the date of such discharge without abatement or
deduction was affirmed. It is true that stress was laid in the
opinion in that case on the fact that, in the constitution of the
state, the power to amend corporation charters was reserved to the
state, and it is asserted that no such power exists in the present
case. But it is also true that, inasmuch as the right to contract
is not absolute in respect to every matter, but may be subjected to
the restraints demanded by the safety and welfare of the state and
its inhabitants, the police power of the state may, within defined
limitations, extend over corporations outside of and regardless of
the power to amend charters.
Atchison, Topeka & Santa Fe
Railroad v. Matthews, 174 U. S. 96.
The judgment of the Supreme Court of Tennessee is
Affirmed.
MR. JUSTICE BREWER and MR. JUSTICE PECKHAM dissent.
