1. An order of the President, under the Lever Act, fixing a
maximum price on coal during the late war, when the railroads were
under government control and when there was need of such price
regulation in the interest of national safety, was a valid exercise
of the power of the government, and not a violation of the Fifth
Amendment as applied to one selling coal to a manufacturer of
railroad snow-plows, the coal being liable in the circumstances to
expropriation by the government, and the price fixed being such as
to afford the just compensation safeguarded by that amendment. Pp.
279 U. S. 258,
279 U.S. 262.
2. Congress may regulate the making and performance of private
contracts when reasonably necessary to effect any of the great
purposes for which the national government was created. P.
279 U. S.
261.
3. Congress and the President, in the exercise of the war power,
have wide discretion as to the means to be employed, and the
measures here challenged are supported by a strong presumption of
validity, and may not be set aside unless clearly shown to be
arbitrary and repugnant to the Constitution. P.
279 U. S.
261.
288 Pa. 230 affirmed.
Certiorari, 274 U.S. 731, to review a judgment of the Supreme
Court of Pennsylvania sustaining a judgment for the defendant --
the present respondent in petitioner's action for a balance alleged
to be due on sales of coal. The judgment of the trial court was
affirmed by the Superior Court, 87 Pa.Superior Ct. 237, which was
affirmed, in turn, by the court below.
Page 279 U. S. 257
MR. JUSTICE BUTLER delivered the opinion of the Court.
Petitioner sued respondent in the Court of Common Pleas of
Clearfield County, Pennsylvania, to recover a balance of $830.80
alleged to be due on account of coal sold between October 17, 1917,
and February 15, 1918.
The complaint shows the following facts: October 2, 1917,
plaintiff wrote defendant that he had purchased the output of
certain mines and offered coal at $3.60 per ton. Defendant answered
that it wanted a carload per week until further notice. Plaintiff
replied that he had entered defendant's order for that amount.
November 14, after plaintiff had shipped some of the coal, he wrote
defendant that, owing to a recent wage agreement made between the
miners and operators, the cost of mining had been increased 45
cents per ton; that plaintiff was obliged to pay the additional
cost to the producer, and that he was making a price until further
notice of $4.05 per ton. He added: "Unless I hear from you to the
contrary, I shall take if for granted that you wish me to continue
shipments on your order at this new price." The amount sued for was
based on $3.60 per ton for coal shipped in October and $4.05 per
ton for that delivered later. Defendant had paid $1,531.84.
The affidavit of defense admitted the sale and delivery of the
coal, denied any agreement as to price, and, among
Page 279 U. S. 258
other averments not here material, alleged that the United
States had fixed the prices of the coal, and that its value on that
basis was $1,322.74.
The trial court held that the plaintiff was bound by the prices
fixed by the government, and, notwithstanding a verdict for the
plaintiff, gave defendant judgment, which was affirmed by the
Superior Court and also in the supreme court of the state.
The prices so held applicable were fixed by the President
pursuant to ยง 25 of the Lever Act, approved August 10, 1917, c. 53,
40 Stat. 276, 284. An executive order of August 21 specified $2 per
ton on board cars at the mine, and an order made October 27 added
45 cents per ton.
Plaintiff here insists, as he maintained in the state courts,
that Congress had no power to establish or to authorize the
President to prescribe prices for coal without providing just
compensation for those who, in the absence of such regulation,
might have sold their coal for more. And he contends that, in
violation of the due process clause of the Fifth Amendment, the Act
and orders operate to deprive him of liberty of contract. His coal
was not requisitioned for public use. He does not claim that the
amount paid by defendant was not compensatory, or that it did not
give him a reasonable profit, or that the value of the coal was
greater than the prices fixed by the President. The sole question
is whether plaintiff's constitutional rights were infringed by the
enforcement of the Act and orders to prevent him from selling his
coal for prices in excess of the just compensation he would have
been entitled to receive if it had been taken under the sovereign
power of eminent domain.
Long before this country became involved in the war, Congress
adopted measures for the national defense, and, promptly after it
entered the conflict, there were developed
Page 279 U. S. 259
comprehensive plans for immediate and effective use of military
force. An Act of June 3, 1916, 39 Stat. 166, authorized the
enlargement, equipment, and training of the army. An Act of August
29 following, 39 Stat. 619, 645, empowered the President, in time
of war, to take and utilize systems of transportation for the
movement of troops, war material, and other purposes, and, December
26, 1917, the President did take over the railroads of the country.
40 Stat. 1733. The Joint Resolution of April 6, 1917, 40 Stat. 1,
declaring war with Germany, directed the President to employ the
entire naval and military forces and pledged all the resources of
the country to bring the conflict to a successful termination. An
Act of June 15, 1917, 40 Stat. 182, authorized the President
extensively to exert the power of eminent domain in aid of
construction and acquisition of ships.
The Lever Act was broader than its predecessors. It was passed
to encourage production, conserve supply, and control distribution
of foods, fuel, and many other things deemed necessary to carry on
the war. Hoarding, waste, and manipulations for the enhancement of
prices were condemned. The President was empowered to license and
regulate production, prices, and sales, to requisition coal and
other necessaries, to purchase and sell wheat, flour, and other
staple articles of food, and to take over and operate factories and
mines. Section 25 empowered the President to fix the price of coal,
to regulate distribution among dealers and consumers, domestic or
foreign, and to require producers to sell only to the United States
through a designated agency empowered to regulate resale prices.
The basis prescribed for the determination of prices to be charged
by producers of coal was the cost of production, including the
expense of operation, maintenance, depreciation, and depletion,
plus a just and reasonable profit. And prices to be charged by
dealers were
Page 279 U. S. 260
to be made by adding to their cost a just and reasonable sum for
profit. The Act did not require producers or dealers to sell their
coal. It provided for the ascertainment and contemplated the
payment of just compensation for all property that it authorized
the President to take.
During 1916 and the early months of 1917, the mining and
distribution of coal had been greatly disturbed by conditions
resulting from the war abroad and the preparations for national
defense being made in this country. There was panic among
consumers, and, in order to secure adequate supply, they offered
prices higher than any theretofore prevailing. The prices of coal
for immediate delivery, which previously had been from $1.50 to $2,
were bid up to $5, $6, and in exceptional cases as high as $7.50
per ton. In April, contracts for the year's delivery could be made
only at prices ranging from $3 up to $5 or $6 per ton. In May of
that year, the Council of National Defense created a committee to
deal with the situation. After prolonged negotiation with producers
throughout the country, an agreement was reached by which a
tentative maximum price was fixed at $3 per ton at the mines, to
which was added 25 cents for selling commission to wholesalers. The
purpose was to fix a price high enough to stimulate production, so
that, by the operation of the law of supply and demand, fair and
just prices would result. Final Report of United States Fuel
Administrator, p. 20; Report of Engineers Committee, 1918, 1919, p.
1.
But this arrangement having failed to give assurance of an
adequate supply, Congress and the President found it necessary to
take the steps here involved. Defendant was engaged in
manufacturing snowplows for railroads. Unquestionably, the
production of such equipment was, in the state of war then
prevailing, a public use for which coal and other private property
might have been taken by exertion of the power of eminent domain.
When regard
Page 279 U. S. 261
is had to the condition of the coal industry, plaintiff's
control of the product of the mines referred to in his letters and
the tone of his price quotations support the view that, in the
interest of national safety, there was need of regulation in order
to prevent manipulations to enhance prices by those having coal for
sale and to lessen apprehension on the part of consumers in respect
of their supply and the prices liable to be exacted.
It is everywhere recognized that the freedom of the people to
enter into and carry out contracts in respect of their property and
private affairs is a matter of great public concern, and that such
liberty may not lightly be impaired.
Steele v. Drummond,
275 U. S. 199,
275 U. S. 205.
Generally speaking, that right is protected by the due process
clauses of the Fifth and Fourteenth Amendments.
Allgeyer v.
Louisiana, 165 U. S. 578,
165 U. S. 591;
Adair v. United States, 208 U. S. 161,
208 U. S. 174;
Coppage v. Kansas, 236 U. S. 1,
236 U. S. 14;
Adkins v. Children's Hospital, 261 U.
S. 525,
261 U. S. 546.
It is also well established by the decisions of this Court that
such liberty is not absolute or universal, and that Congress may
regulate the making and performance of such contracts whenever
reasonably necessary to effect any of the great purposes for which
the national government was created.
Frisbie v. United
States, 157 U. S. 160,
157 U. S. 165;
Addyston Pipe & Steel Co. v. United States,
175 U. S. 211,
175 U. S. 228
et seq.; Ellis v. United States, 206 U.
S. 246;
Atlantic Coast Line v. Riverside Mills,
219 U. S. 186,
219 U. S. 202;
Louisville & Nashville R. Co. v. Mottley, 219 U.
S. 467,
219 U. S. 482;
Baltimore & Ohio v. Interstate Commerce Commission,
221 U. S. 612,
221 U. S. 618;
Second Employers' Liability Cases, 223 U. S.
1,
223 U. S. 52;
Gt. Northern Ry. v. Sutherland, 273 U.
S. 182,
273 U. S.
193.
Under the Constitution and subject to the safeguards there set
for the protection of life, liberty, and property (
Ex parte
Milligan, 4 Wall. 2,
71 U. S. 121;
Hamilton v. Kentucky Distilleries Co., 251 U.
S. 146, 151 [argument of counsel -- omitted];
United
States
Page 279 U. S. 262
v. L. Cohen Grocery Co., 255 U. S.
81,
255 U. S. 88),
the Congress and the President exert the war power of the nation,
and they have wide discretion as to the means to be employed
successfully to carry on.
Miller v. Robertson,
266 U. S. 243,
266 U. S. 248.
United States v. Chemical Foundation, 272 U. S.
1,
272 U. S. 10. The
measures here challenged are supported by a strong presumption of
validity, and they may not be set aside unless clearly shown to be
arbitrary and repugnant to the Constitution.
Adkins v.
Childrens Hospital, supra, 261 U. S. 544.
The principal purpose of the Lever Act was to enable the President
to provide food, fuel, and other things necessary to prosecute the
war without exposing the government to unreasonable exactions. The
authorization of the President to prescribe prices and also to
requisition mines and their output made it manifest that, if
adequate supplies of coal at just prices could not be obtained by
negotiation and price regulation, expropriation would follow.
Plaintiff was free to keep his coal, but it would have been liable
to seizure by the government. The fixing of just prices was
calculated to serve the convenience of producers and dealers, as
well as of consumers of coal needed to carry on the war. As it does
not appear that plaintiff would have been entitled to more if his
coal had been requisitioned, the Act and orders will be deemed to
have deprived his only of the right or opportunity by negotiation
to obtain more than his coal was worth. Such an exaction would have
increased the cost of the snowplows and other railroad equipment
being manufactured by the defendant, and therefore would have been
directly opposed to the interest of the government. As applied to
the coal in question, the statute and executive orders were not so
clearly unreasonable and arbitrary as to require them to be held
repugnant to the due process clause of the Fifth Amendment.
Judgment affirmed.