Here’s a hard truth in life: sometimes the bad guys win. Sometimes, they have to. That’s a big part of what the case of Fletcher v. Peck (1810) 10 U.S. (6 Cranch) 87 teaches us.
The Treaty of Paris resolved the American Revolution, ceding all British holdings in continental North America along its modern northern border up to the Great Lakes, and between the Atlantic Ocean and the Mississippi River. Part of those lands were the area to the west of Georgia, which are now the states of Alabama and Mississippi. In the decades of the 1790’s and 1800’s, that territory was known as the Yazoo Lands. They were inhabited mostly by Indians, but were ripe for eventual development into housing and agriculture. Which meant that there was money to be made.
The state of Georgia claimed that the Yazoo Lands were part of Georgia’s sovereign territory. In 1795, the Georgia legislature, influenced by massive bribery from land speculators, divided the Yazoo Lands into four tracts and sold all four of them for five hundred thousand dollars. According to one website $500,000 in 1800 would be a little bit less than $6,500,000 today; that’s practically every square inch of the states of Alabama and Mississippi for less than a decent NFL player’s annual salary, or the modern-day equivalent of roughly $0.22 per acre. (This is the point at which you emit a low whistle of astonishment.) The speculators turned around and began doing what speculators do, which was to subdivide the real property and churn the titles, selling the subdivided land for substantially more than the Georgia sale price of about a cent and a half per acre. That’s one of the things about real governmental corruption — it’s rarely as subtle as we see in the movies.
The voters, disgusted at their Legislature’s behavior, turned nearly all of the scoundrels out of office in the next election. The successor Legislature passed a law purporting to repeal the Yazoo Lands sale, and to void all transactions following from the sale. But the equivalent (if not the uninflated reality) of hundreds of millions of dollars had changed hands in the less than a year between the sale and the repeal. So a tremendous amount of money was at stake.
John Peck was one of the successor speculators – he had bought some of the land from someone who had bought the land from Georgia. He sold the land to Robert Fletcher at a profit. Peck still held title to other property in the Yazoo Lands. The last thing that either Peck or Fletcher wanted was for the repeal of the Yazoo Lands Act to be valid, because both of them, and a lot of other speculators, would have been left holding empty title and with little effective financial recourse. So, Fletcher contended that Peck did not have clear title when he sold the land.
If that looks like Fletcher wanted to lose, well, he did. This was a collusive lawsuit. Fletcher didn’t try very hard to show that Peck lacked valid title. Fletcher, who held the nominally disputed real property and other real property in the Yazoo Lands, really wanted all of those titled to be confirmed. There were two real challenges to proving Peck’s case that the titled granted in the Yazoo Land sale were valid – the first was that the state of Georgia had repealed the Yazoo Land sale, and the second was that the Indians, who after all had been here before the Europeans, were the valid holders of title to those lands.
The Supreme Court ruled that the repeal of the Yazoo Land Act was unconstitutional under Article I, Section 10, of the Constitution, which contains the “Contracts Clause:”
No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.
Condensed to the applicable part, the Contracts clause provides that “No State shall… pass any … Law impairing the Obligation of Contracts.” The Yazoo Lands Act and the sales transacted under the Act were contracts, which could not subsequently be “impaired.”
The part of this case that I can’t quite square in my own mind is how the collusive nature of the lawsuit was either not detected or deliberately ignored. If there were ever going to be a “standing” suit, this would be it – there was no true “case or controversy” before the Court because both parties wanted the same result. Fletcher wanted to lose and did not offer a full-throated defense of the Georgia law reversing the Yazoo Land Act. But we’d have to wait until 1923 before we got a definitive statement of what it takes to literally “make a Federal case” out of something. (Stay tuned, law fans, that one’s on the agenda.)
But, really, how could the result be otherwise? If it were the case that Georgia could sell land in January, and then claw back the sale in June, then no one would ever buy land from Georgia at all. And since all title to land ultimately derives from the state* a result allowing that a state could claw back land sales would place the ownership of every piece of land in the United States in doubt. This was one of the reasons that the Contracts Clause was put in place – under the Articles of Confederation, “private relief” was granted to particular persons by the Congress, typically relieving them of the obligation to pay debts but also allocating land, often to the detriment of private individuals who had been Loyalists during the Revolution. This was thought (particularly by Alexander Hamilton) to be a drag on commerce and an impediment to the expansion of the fledgling economy of the United States. Thus, the Contracts Clause.
As to private contracts, in 1934 we find a shift in the winds as a Depression-era law restricting the ability of a mortgagor to foreclose on a defaulted loan upheld by the Supreme Court, but that’s a subject to deal with in the future. For now, rest assured that modern jurisprudence has derived a test for determining whether a law impairs a contract or is a permissible regulation. Back in 1810, however, the Court simply proclaimed the repeal of the Yazoo Lands Act an impairment of contract, and that was that.
The remarkable thing of the Fletcher v. Peck opinion was not so much the result; because when you think about it, it had to be that way even though the corrupt bastards won. The remarkable thing was that the Supreme Court, having previously carved out for itself the role of Constitutional arbiter against Congress, in this case also carves out for itself the role of Constitutional arbiter against the various States. It was for the Federal Supreme Court to find a violation of the Federal Constitution in a State law. This despite the passage of the Ninth, Tenth, and Eleventh Amendments, which all could have been read to find that Georgia was immune from this suit, or the “cases and controversies” clause of Article III, which could have been read to indicate that a collusive lawsuit is not justiciable by a federal court.
Instead, the Supremacy Clause and the Contracts Clause were selected from the text of the Constitution, the bad guys in this case won, and the Supreme Court successfully asserted its own power to review state laws for violation of the Federal Constitution. This, in turn, laid the political and legal groundwork for the doctrine of incorporation which followed enactment of the Fourteenth Amendment later in our history. An individual State may not violate the Federal Constitution – that is the right result, and it’s just too bad the corrupt bastards who sold all of Alabama and Mississippi had to win in order to get there.
* Yes, my libertarian friends, it really does. More about that in an upcoming installment of this series.