1. A contract for the payment of Confederate States Treasury
notes, made between parties residing within the so-called
Confederate States, can be enforced in the courts of the United
States, the contract having been made on a sale of property in the
usual course of business, and not for the purpose of giving
currency to the notes or otherwise aiding the rebellion.
2. Evidence may be received that a contract payable in those
states during the rebellion in "dollars" was in fact made for the
payment in Confederate dollars.
3. The party entitled to be paid in these Confederate dollars
can only receive their actual value at the time and place of the
contract in lawful money of the United States.
In November, 1864, Thorington, being the owner of a piece of
land adjoining the City of Montgomery, Alabama, sold it to Smith
and Hartley, all parties being then resident of Montgomery. At the
time of this sale, the late rebellion was still in active operation
and had been so for more than three years. Alabama, or this part of
it, was at the time in the occupation of the military and civil
authorities of the rebel states, and the federal government
exercised no authority there. There was no gold or silver coin in
use nor any notes of the United States such as made the
circulation
Page 75 U. S. 2
of the loyal portion of the country. The only currency in any
ordinary use or in which current daily business could be at all
carried on were Treasury notes of the Confederate States, notes in
form and general aspect like bank bills, and by which the
Confederate States of America promised to pay the bearer the sum
named in them, "two years after the ratification of a treaty of
peace between the Confederate States and the United States of
America."
"The whole State of Alabama," said the testimony in the
case,
"was in a revolutionary condition, politically and financially.
The value of all kinds and species of property was changing from
week to week and from day to day, and there was no standard of
value for property. A large advance frequently took place in the
price of property of different kinds within a day or two, say one
hundred to two hundred percent. Speculation pervaded the whole
community, and individuals asked whatever they thought proper for
any and everything they had to sell. There was no standard value or
regular price for real estate at the time mentioned. Prices changed
with the fortunes of war. As the prospects grew dark, the prices
advanced. While, however, the Confederate States Treasury notes
were the general and really the only currency used in the common
transactions of business, there were occasional instances where
sales of property were made on the basis of gold and of notes of
the United States."
The Confederate notes, though in fact imposed upon the people of
the Confederate States by its government, were never declared by it
to be a legal tender.
The price agreed to be paid by Smith and Hartley for the land
which they purchased was $45,000. Of this sum, $35,000 were paid at
the execution of the deed in Confederate States Treasury notes, and
for the residue a note was executed thus:
"MONTGOMERY, November 28, 1864"
"$10,000"
One day after date, we or either of us promise to pay Jack
Thorington or bearer ten thousand dollars for value received
Page 75 U. S. 3
in real estate sold and delivered by said Thorington to us this
day, as per his deed to us of this date; this note, part of the
same transaction, is hereby declared as a lien or mortgage on said
real estate situate and adjoining the City of Montgomery.
"W. D. SMITH"
"J. H. HARTLEY"
The rebellion being suppressed in 1865, the Confederate States
Treasury notes became, of course, worthless, and Thorington, in
1867 filed a bill in the court below against his purchasers, who
were still in possession, for the enforcement of the vendor's lien,
claiming the $10,000 in the only money now current, to-wit, lawful
money of the United States.
The answer set up by way of defense that the negotiation for the
purchase of the land took place and that the note in controversy
was made at Montgomery, in the State of Alabama, where all the
parties resided, in November, 1864, at which time the authority of
the United States was excluded from that portion of the state and
the only currency in use consisted of Confederate Treasury notes,
issued and put in circulation by the persons exercising the ruling
power of the states in rebellion, known as the Confederate
government.
It was also insisted that the land purchased was worth no more
than $3,000 in lawful money; that the contract price was $45,000,
that this price, by the agreement of the parties, was to be paid in
Confederate notes, that $35,000 were actually paid in those notes,
and that the note given for the remaining $10,000 was to be
discharged in the same manner, and it was asserted on this state of
facts, that the vendor was entitled to no relief in a court of the
United States.
On the hearing below, a witness who negotiated the sale of the
land was offered to show that it was agreed and understood that the
note should be paid in Confederate States Treasury notes, as the
$35,000 had been. This witness described the note, however, as one
payable at thirty days.
The court below, admitting the evidence to prove that the
Page 75 U. S. 4
note was in fact made for payment in Confederate States Treasury
notes, and sustaining, apparently, the view of the purchasers that
the contract was illegal because to be paid in such notes,
dismissed the bill.
The questions before this Court upon the appeal were these:
1. Can a contract for the payment of Confederate notes, made
during the late rebellion between parties residing within the
so-called Confederate States, be enforced at all in the courts of
the United States?
2. Can evidence be received to prove that a promise expressed to
be for the payment of dollars was in fact made for the payment of
any other than lawful dollars of the United States?
3. Did the evidence establish the fact that the note for ten
thousand dollars was to be paid, by agreement of the parties, in
Confederate notes?
A point as to the measure of damages was also raised at the
bar.
The case was twice argued.
Page 75 U. S. 6
THE CHIEF JUSTICE delivered the opinion of the Court.
The questions before us upon this appeal are these:
(1) Can a contract for the payment of Confederate notes, made
during the late rebellion, between parties residing within the
so-called Confederate States, be enforced at all in the courts of
the United States?
(2) Can evidence be received to prove that a promise expressed
to be for the payment of dollars was, in fact, made
Page 75 U. S. 7
for the payment of any other than lawful dollars of the United
States?
(3) Does the evidence in the record establish the fact that the
note for ten thousand dollars was to be paid, by agreement of the
parties, in Confederate notes?
The first question is by no means free from difficulty. It
cannot be questioned that the Confederate notes were issued in
furtherance of an unlawful attempt to overthrow the government of
the United States by insurrectionary force. Nor is it a doubtful
principle of law that no contracts made in aid of such an attempt
can be enforced through the courts of the country whose government
is thus assailed. But was the contract of the parties to this suit
a contract of that character? Can it be fairly described as a
contract in aid of the rebellion?
In examining this question, the state of that part of the
country in which it was made must be considered. It is familiar
history that early in 1861, the authorities of seven states,
supported, as was alleged, by popular majorities, combined for the
overthrow of the national Union, and for the establishment within
its boundaries of a separate and independent confederation. A
governmental organization representing these states was established
at Montgomery in Alabama, first under a provisional constitution
and afterwards under a constitution intended to be permanent. In
the course of a few months, four other states acceded to this
confederation, and the seat of the central authority was
transferred to Richmond, in Virginia. It was by the central
authority thus organized and under its direction that civil war was
carried on upon a vast scale against the government of the United
States for more than four years. Its power was recognized as
supreme in nearly the whole of the territory of the states
confederated in insurrection. It was the actual government of all
the insurgent states except those portions of them protected from
its control by the presence of the armed forces of the national
government.
What was the precise character of this government in
contemplation of law?
Page 75 U. S. 8
It is difficult to define it with exactness. Any definition that
may be given may not improbably be found to require limitation and
qualification. But the general principles of law relating to
de
facto government will, we think, conduct us to a conclusion
sufficiently accurate.
There are several degrees of what is called
de facto
government.
Such a government, in its highest degree, assumes a character
very closely resembling that of a lawful government. This is when
the usurping government expels the regular authorities from their
customary seats and functions and establishes itself in their
place, and so becomes the actual government of a country. The
distinguishing characteristic of such a government is that
adherents to it in war against the government
de jure do
not incur the penalties of treason, and under certain limitations,
obligations assumed by it in behalf of the country or otherwise
will in general be respected by the government
de jure
when restored.
Examples of this description of government
de facto are
found in English history. The statute 11 Henry VII, c. 1, [
Footnote 1] relieves from penalties for
treason all persons who, in defense of the King, for the time being
wage war against those who endeavor to subvert his authority by
force of arms, though warranted in so doing by the lawful monarch.
[
Footnote 2]
But this is where the usurper obtains actual possession of the
royal authority of the Kingdom, not when he has succeeded only in
establishing his power over particular localities. Being in
possession, allegiance is due to him as King
de facto.
Another example may be found in the government of England under
the Commonwealth, first by Parliament and afterwards by Cromwell as
Protector. It was not, in the contemplation of law, a government
de jure, but it was a government
de facto in the
most absolute sense. It incurred obligations and made conquests
which remained the obligations and conquests of England after the
restoration.
Page 75 U. S. 9
The better opinion doubtless is that acts done in obedience to
this government could not be justly regarded as treasonable though
in hostility to the King
de jure. Such acts were protected
from criminal prosecution by the spirit, if not by the letter, of
the statute of Henry the Seventh. It was held otherwise by the
judges by whom Sir Henry Vane was tried for treason [
Footnote 3] in the year following the
restoration. But such a judgment, in such a time, has little
authority.
It is very certain that the Confederate government was never
acknowledged by the United States as a
de facto government
in this sense. Nor was it acknowledged as such by other powers. No
treaty was made by it with any civilized state. No obligations of a
national character were created by it binding after its dissolution
on the states which it represented or on the national government.
From a very early period of the civil war to its close, it was
regarded as simply the military representative of the insurrection
against the authority of the United States.
But there is another description of government, called also by
publicists a government
de facto, but which might perhaps
be more aptly denominated a government of paramount force. Its
distinguishing characteristics are (1) that its existence is
maintained by active military power, within the territories and
against the rightful authority of an established and lawful
government, and (2) that while it exists, it must necessarily be
obeyed in civil matters by private citizens who, by acts of
obedience rendered in submission to such force, do not become
responsible as wrongdoers, for those acts though not warranted by
the laws of the rightful government. Actual governments of this
sort are established over districts differing greatly in extent and
conditions. They are usually administered directly by military
authority, but they may be administered also by civil authority,
supported more or less directly by military force.
One example of this sort of government is found in the case of
Castine, in Maine, reduced to British possession during
Page 75 U. S. 10
the war of 1812. From the 1st of September, 1814, to the
ratification of the treaty of peace in 1815, according to the
judgment of this Court in
United States v. Rice, [
Footnote 4] "the British government
exercised all civil and military authority over the place."
"The authority of the United States over the territory was
suspended, and the laws of the United States could no longer be
rightfully enforced there or be obligatory upon the inhabitants who
remained and submitted to the conqueror. By the surrender, the
inhabitants passed under a temporary allegiance to the British
government, and were bound by such laws, and such only, as it chose
to recognize and impose."
It is not to be inferred from this that the obligations of the
people of Castine as citizens of the United States were abrogated.
They were suspended merely by the presence, and only during the
presence, of the paramount force. A like example is found in the
case of Tampico, occupied during the war with Mexico by the troops
of the United States. It was determined by this Court in
Fleming v. Page [
Footnote
5] that although Tampico did not become a port of the United
States in consequence of that occupation, still, having come,
together with the whole State of Tamaulipas, of which it was part,
into the exclusive possession of the national forces, it must be
regarded and respected by other nations as the territory of the
United States. These were cases of temporary possession of
territory by lawful and regular governments at war with the country
of which the territory so possessed was part.
The central government established for the insurgent states
differed from the temporary governments at Castine and Tampico in
the circumstance that its authority did not originate in lawful
acts of regular war, but it was not, on that account, less actual
or less supreme. And we think that it must be classed among the
governments of which these are examples. It is to be observed that
the rights and obligations of a belligerent were conceded to it, in
its military character, very soon after the war began, from
motives
Page 75 U. S. 11
of humanity and expediency by the United States. The whole
territory controlled by it was thereafter held to be enemies'
territory, and the inhabitants of that territory were held in most
respects for enemies. To the extent, then, of actual supremacy,
however unlawfully gained, in all matters of government within its
military lines, the power of the insurgent government cannot be
questioned. That supremacy did not justify acts of hostility to the
United States. How far it should excuse them must be left to the
lawful government upon the reestablishment of its authority. But it
made obedience to its authority, in civil and local matters, not
only a necessity but a duty. Without such obedience, civil order
was impossible.
It was by this government's exercising its power throughout an
immense territory that the Confederate notes were issued early in
the war, and these notes in a short time became almost exclusively
the currency of the insurgent states. As contracts in themselves,
except in the contingency of successful revolution, these notes
were nullities, for except in that event there could be no payer.
They bore, indeed, this character upon their face, for they were
made payable only "after the ratification of a treaty of peace
between the Confederate States and the United States of America."
While the war lasted, however, they had a certain contingent value,
and were used as money in nearly all the business transactions of
many millions of people. They must be regarded, therefore, as a
currency imposed on the community by irresistible force.
It seems to follow as a necessary consequence from this actual
supremacy of the insurgent government as a belligerent within the
territory where it circulated, and from the necessity of civil
obedience on the part of all who remained in it, that this currency
must be considered in courts of law in the same light as if it had
been issued by a foreign government, temporarily occupying a part
of the territory of the United States. Contracts stipulating for
payments in this currency, cannot be regarded for that reason only
as made in aid of the foreign invasion in the one case, or of
the
Page 75 U. S. 12
domestic insurrection in the other. They have no necessary
relations to the hostile government, whether invading or insurgent.
They are transactions in the ordinary course of civil society, and
though they may indirectly and remotely promote the ends of the
unlawful government, are without blame except when proved to have
been entered into with actual intent to further invasion or
insurrection. We cannot doubt that such contracts should be
enforced in the courts of the United States after the restoration
of peace to the extent of their just obligation. The first question
therefore must receive an affirmative answer.
The second question, whether evidence can be received to prove
that a promise, made in one of the insurgent states and expressed
to be for the payment of dollars without qualifying words, was in
fact made for the payment of any other than lawful dollars of the
United States, is next to be considered.
It is quite clear that a contract to pay dollars made between
citizens of any state of the Union while maintaining its
constitutional relations with the national government is a contract
to pay lawful money of the United States, and cannot be modified or
explained by parol evidence. But it is equally clear if in any
other country coins or notes denominated dollars should be
authorized of different value from the coins or notes which are
current here under that name, that in a suit upon a contract to pay
dollars made in that country, evidence would be admitted to prove
what kind of dollars were intended, and if it should turn out that
foreign dollars were meant, to prove their equivalent value in
lawful money of the United States. Such evidence does not modify or
alter the contract. It simply explains an ambiguity which, under
the general rules of evidence, may be removed by parol
evidence.
We have already seen that the people of the insurgent states,
under the Confederate government were, in legal contemplation,
substantially in the same condition as inhabitants of districts of
a country occupied and controlled by an
Page 75 U. S. 13
invading belligerent. The rules which would apply in the former
case would apply in the latter, and as in the former case the
people must be regarded as subjects of a foreign power, and
contracts among them be interpreted and enforced with reference to
the conditions imposed by the conqueror, so in the latter case the
inhabitants must be regarded as under the authority of the
insurgent belligerent power actually established as the government
of the country, and contracts made with them must be interpreted
and enforced with reference to the condition of things created by
the acts of the governing power.
It is said, indeed, that under the insurgent government, the
word "dollar" had the same meaning as under the government of the
United States; that the Confederate notes were never made a legal
tender, and therefore that no evidence can be received to show any
other meaning of the word when used in a contract. But it must be
remembered that the whole condition of things in the insurgent
states was matter of fact, rather than matter of law, and as matter
of fact, these notes, payable at a future and contingent day which
has not arrived and can never arrive, were forced into circulation
as dollars, if not directly by the legislation, yet indirectly and
quite as effectually by the acts of the insurgent government.
Considered in themselves and in the light of subsequent events,
these notes had no real value, but they were made current as
dollars by irresistible force. They were the only measure of value
which the people had, and their use was a matter of almost absolute
necessity. And this use gave them a sort of value, insignificant
and precarious enough, it is true, but always having a sufficiently
definite relation to gold and silver, the universal measures of
value, so that it was always easy to ascertain how much gold and
silver was the real equivalent of a sum expressed in this currency.
In the light of these facts, it seems hardly less than absurd to
say that these dollars must be regarded as identical in kind and
value with the dollars which constitute the money of the United
States. We cannot shut our eyes to the fact that they were
essentially
Page 75 U. S. 14
different in both respects, and it seems to us that no rule of
evidence properly understood requires us to refuse, under the
circumstances, to admit proof of the sense in which the word dollar
is used in the contract before us. Our answer to the second
question is therefore also in the affirmative. We are clearly of
opinion that such evidence must be received in respect to such
contracts in order that justice may be done between the parties and
that the party entitled to be paid in these Confederate dollars can
recover their actual value at the time and place of the contract in
lawful money of the United States.
We do think it necessary to go into a detailed examination of
the evidence in the record in order to vindicate our answer to the
third question. It is enough to say that it has left no doubt in
our minds that the note for ten thousand dollars, to enforce
payment of which suit was brought in the circuit court, was to be
paid, by agreement of the parties, in Confederate notes.
It follows that the decree of the circuit court must be
Reversed and the cause remanded for further hearing and
decree in conformity with this opinion.
[
Footnote 1]
2 British Stat. at Large 82.
[
Footnote 2]
4 Commentaries 77.
[
Footnote 3]
6 State Trials 119.
[
Footnote 4]
17 U. S. 4
Wheat. 253.
[
Footnote 5]
50 U. S. 9 How.
614.
NOTE
At the same time with the foregoing case was decided another, as
to its chief point like it, an appeal from the Circuit Court for
the Northern District of Georgia. It was the case of
DEAN v. YOUNELL'S ADMINISTRATOR.
A bill had been filed below to set aside a deed of land for
fraud and inadequate consideration. The allegations of fraud were
founded wholly upon the circumstance, that the land was sold for
Confederate notes. The bill set up also a lien in favor of the
vendor of the complainant. The vendor, whose lien was set up, was
not made a party, nor was there any allegation of notice to the
grantor of the complainant of the alleged lien for purchase money;
nor was there any averment that the complainant was induced to take
the Confederate notes by fraudulent misrepresentations of the
decedent. A demurrer was interposed in the court below (Erskine,
J., presiding), and being sustained, the bill was dismissed.
THE CHIEF JUSTICE delivered the opinion of this Court to the
effect that the vendor whose lien was set up not having been made a
party, and there not being any allegations of notice to the grantor
of the complainant of the alleged lien for purchase money, no
ground of relief was shown by the bill as to this lien.
And that upon the principles of
Thorington v. Smith,
just preceding, the fact that the land was sold for Confederate
notes did not, in the absence of all averment that the complainant
was induced to take them by fraudulent misrepresentations of the
decedent, afford ground for the interposition of a court of equity.
The decree was accordingly
Affirmed.
