DUE PROCESS

Scope of the Guaranty.

Standing by itself, the phrase “due process” would seem to refer solely and simply to procedure, to process in court, and therefore to be so limited that “due process of law” would be what the legislative branch enacted it to be. But that is not the interpretation which has been placed on the term. “It is manifest that it was not left to the legislative power to enact any process which might be devised. The article is a restraint on the legislative as well as on the executive and judicial powers of the government, and cannot be so construed as to leave Congress free to make any process ‘due process of law’ by its mere will.”429 All persons within the territory of the United States are entitled to its protection, including corporations,430 aliens,431 and presumptively citizens seeking readmission to the United States,432 but States as such are not so entitled.433 It is effective in the District of Columbia434 and in territories which are part of the United States,435 but it does not apply of its own force to unincorporated territories.436 Nor does it reach enemy alien belligerents tried by military tribunals outside the territorial jurisdiction of the United States.437

Early in our judicial history, a number of jurists attempted to formulate a theory of natural rights—natural justice, which would limit the power of government, especially with regard to the property rights of persons.438 State courts were the arenas in which this struggle was carried out prior to the Civil War. Opposing the “vested rights” theory of protection of property were jurists who argued first, that the written constitution was the supreme law of the State and that judicial review could look only to that document in scrutinizing legislation and not to the “unwritten law” of “natural rights,” and second, that the “police power” of government enabled legislatures to regulate the use and holding of property in the public interest, subject only to the specific prohibitions of the written constitution. The “vested rights” jurists thus found in the “law of the land” and the “due process” clauses of the state constitutions a restriction upon the substantive content of legislation, which prohibited, regardless of the matter of procedure, a certain kind or degree of exertion of legislative power altogether.439 Thus, Chief Justice Taney was not innovating when, in the Dred Scott case, he pronounced, without elaboration, that one of the reasons that the Missouri Compromise was unconstitutional was that an act of Congress that deprived “a citizen of the United States of his liberty or property, merely because he came himself or brought his property into a particular territory of the United States, and who had committed no offence against the laws, could hardly be dignified with the name of due process of law.”440 Following the war, with the ratification of the Fourteenth Amendment’s Due Process Clause, substantive due process interpretations were urged on the Supreme Court with regard to state legislation. First resisted, the arguments came in time to be accepted, and they imposed upon both federal and state legislation a firm judicial hand that was not to be removed until the crisis of the 1930s, and that today in non-economic legislation continues to be reasserted.

“It may prevent confusion, and relieve from repetition, if we point out that some of our cases arose under the provisions of the Fifth and others under those of the Fourteenth Amendment to the Constitution of the United States. Although the language of those Amendments is the same, yet as they were engrafted upon the Constitution at different times and in widely different circumstances of our national life, it may be that questions may arise in which different constructions and applications of their provisions may be proper.”441 The most obvious difference between the two Due Process Clauses is that the Fifth Amendment clause as it binds the Federal Government coexists with other express provisions in the Bill of Rights guaranteeing fair procedure and non-arbitrary action, such as jury trials, grand jury indictments, and nonexcessive bail and fines, as well as just compensation, whereas the Fourteenth Amendment clause as it binds the states has been held to contain implicitly not only the standards of fairness and justness found within the Fifth Amendment’s clause but also to contain many guarantees that are expressly set out in the Bill of Rights. In that sense, the two clauses are not the same thing, but, insofar as they impose such implicit requirements of fair trials, fair hearings, and the like, which exist separately from, though they are informed by, express constitutional guarantees, the interpretation of the two clauses is substantially, if not wholly, the same. Save for areas in which the particularly national character of the Federal Government requires separate treatment, this book’s discussion of the meaning of due process is largely reserved for the section on the Fourteenth Amendment. Finally, some Fourteenth Amendment interpretations have been carried back to broaden interpretations of the Fifth Amendment’s Due Process Clause, such as, for example, the development of equal protection standards as an aspect of Fifth Amendment due process.

Generally.

The phrase “due process of law” does not necessar-ily imply a proceeding in a court or a plenary suit and trial by jury in every case where personal or property rights are involved.445 “In all cases, that kind of procedure is due process of law which is suitable and proper to the nature of the case, and sanctioned by the established customs and usages of the courts.”446 What is unfair in one situation may be fair in another.447 “The precise nature of the interest that has been adversely affected, the manner in which this was done, the reasons for doing it, the available alternatives to the procedure that was followed, the protection implicit in the office of the functionary whose conduct is challenged, the balance of hurt complained of and good accomplished—these are some of the considerations that must enter into the judicial judgment.”448

Administrative Proceedings: A Fair Hearing.

With re-spect to action taken by administrative agencies, the Court has held that the demands of due process do not require a hearing at the initial stage, or at any particular point in the proceeding, so long as a hearing is held before the final order becomes effective.449 In Bowles v. Willingham,450 the Court sustained orders fixing maximum rents issued without a hearing at any stage, saying “where Congress has provided for judicial review after the regulations or orders have been made effective it has done all that due process under the war emergency requires.” But where, after consideration of charges brought against an employer by a complaining union, the National Labor Relations Board undertook to void an agreement between an employer and another independent union, the latter was entitled to notice and an opportunity to participate in the proceedings.451 Although a taxpayer must be afforded a fair opportunity for a hearing in connection with the collection of taxes,452 collection by distraint of personal property is lawful if the taxpayer is allowed a hearing thereafter.453

When the Constitution requires a hearing, it requires a fair one, held before a tribunal that meets currently prevailing standards of impartiality.454 A party must be given an opportunity not only to present evidence, but also to know the claims of the opposing party and to meet them. Those who are brought into contest with the government in a quasi-judicial proceeding aimed at control of their activities are entitled to be fairly advised of what the government proposes and to be heard upon the proposal before the final command is issued.455 But a variance between the charges and findings will not invalidate administrative proceedings where the record shows that at no time during the hearing was there any misunderstanding as to the basis of the complaint.456 The mere admission of evidence that would be inadmissible in judicial proceedings does not vitiate the order of an administrative agency.457 A provision that such a body shall not be controlled by rules of evidence does not, however, justify orders without a foundation in evidence having rational probative force. Hearsay may be received in an administrative hearing and may constitute by itself substantial evidence in support of an agency determination, provided that there are present factors which assure the underlying reliability and probative value of the evidence and, at least in the case at hand, where the claimant before the agency had the opportunity to subpoena the witnesses and cross-examine them with regard to the evidence.458 Although the Court has recognized that in some circumstances a “fair hearing” implies a right to oral argument,459 it has refused to lay down a general rule that would cover all cases.460

In the light of the historically unquestioned power of a commanding officer summarily to exclude civilians from the area of his command, and applicable Navy regulations that confirm this authority, together with a stipulation in the contract between a restaurant concessionaire and the Naval Gun Factory forbidding employment on the premises of any person not meeting security requirements, due process was not denied by the summary exclusion on security grounds of the concessionaire’s cook, without hearing or advice as to the basis for the exclusion. The Fifth Amendment does not require a trial-type hearing in every conceivable case of governmental impairment of private interest.461 Because the Civil Rights Commission acts solely as an investigative and fact-finding agency and makes no adjudications, the Court, in Hannah v. Larche,462 upheld supplementary rules of procedure adopted by the Commission, independently of statutory authorization, under which state electoral officials and others accused of discrimination and summoned to appear at its hearings, are not apprised of the identity of their accusers, and witnesses, including the former, are not accorded a right to confront and cross-examine witnesses or accusers testifying at such hearings. Such procedural rights, the Court maintained, have not been granted by grand juries, congressional committees, or administrative agencies conducting purely fact-finding investigations in no way determining private rights.

Aliens: Entry and Deportation.

The Court has frequently said that Congress exercises “sovereign” or “plenary” power over the substance of immigration law, and this power is at its greatest when it comes to exclusion of aliens.463 To aliens who have never been naturalized or acquired any domicile or residence in the United States, the decision of an executive or administrative officer, acting within powers expressly conferred by Congress, with regard to whether or not they shall be permitted to enter the country, is due process of law.

464 Because the status of a resident alien returning from abroad is equivalent to that of an entering alien, his exclusion by the Attorney General without a hearing, on the basis of secret, undisclosed information, also is deemed consistent with due process.465 The complete authority of Congress in the matter of admission of aliens justifies delegation of power to executive officers to enforce the exclusion of aliens afflicted with contagious diseases by imposing upon the owner of the vessel bringing any such alien into the country a money penalty, collectible before and as a condition of the grant of clearance.466 If the person seeking admission claims American citizenship, the decision of the Secretary of Labor may be made final, but it must be made after a fair hearing, however summary, and must find adequate support in the evidence. A decision based upon a record from which relevant and probative evidence has been omitted is not a fair hearing.467 Where the statute made the decision of an immigration inspector final unless an appeal was taken to the Secretary of the Treasury, a person who failed to take such an appeal did not, by an allegation of citizenship, acquire a right to a judicial hearing on habeas corpus.468

In certain cases, the exclusion of an alien has been seen to implicate the rights of U.S. citizens.469 These cases have often been decided by the lower courts and involve U.S. citizens’ First Amendment rights, which the Supreme Court appeared to recognize in its 1972 decision in Kleindienst v. Mandel.470 However, U.S. citizens have also asserted that the exclusion of an alien has impinged upon the citizen’s due process rights.471 In Kerry v. Din, five Justices agreed that denying an immigrant visa to the husband of a U.S. citizen on the grounds that he was inadmissible under a provision of federal immigration law (which pertains to “terrorist activities”), without further explanation, did not violate the due process rights of the U.S. citizen spouse.472 These Justices differed in their reasoning, though. A three-Justice plurality found that none of the various “interests” asserted by the U.S. citizen wife constituted a protected liberty interest for purposes of the Due Process Clause.473 For this reason, the plurality rejected the wife’s argument that, insofar as enforcement of the law affected her enjoyment of an “implied fundamental liberty,” the government must provide her “a full battery of procedural-due-process protections,” including stating the specific grounds on which her husband’s visa had been denied.474 A two-Justice concurrence did not reach the question of whether the U.S. citizen wife had asserted a protected liberty interest, but instead concluded that the consular officials’ citation of a particular statutory ground for inadmissibility as the basis for denying the visa application satisfied due process under Kleindienst, which requires only that the government state a “facially legitimate and bona fide reason” for the denial.475

Procedural due process rights are more in evidence when it comes to deportation or other proceedings brought against aliens already within the country. Deportation proceedings are not criminal prosecutions within the meaning of the Bill of Rights.476 The authority to deport is drawn from the power of Congress to regulate the entrance of aliens and impose conditions upon their continued liberty to reside within the United States. Findings of fact reached by executive officers after a fair, though summary, deportation hearing may be made conclusive.477 In Wong Yang Sung v. McGrath,478 however, the Court intimated that a hearing before a tribunal that did not meet the standards of impartiality embodied in the Administrative Procedure Act479 might not satisfy the requirements of due process of law. To avoid such constitutional doubts, the Court construed the law to disqualify immigration inspectors as presiding officers in deportation proceedings. Except in time of war, deportation without a fair hearing or on charges unsupported by any evidence is a denial of due process that may be corrected on habeas corpus.480 In contrast with the decision in United States v. Ju Toy481 that a person seeking entrance to the United States was not entitled to a judicial hearing on his claim of citizenship, a person arrested and held for deportation is entitled to his day in court if he denies that he is an alien.482 Because aliens within the United States are protected to some extent by due process, Congress must give “clear indication” of an intent to authorize indefinite detention of illegal aliens, and probably must also cite “special justification,” as, for example, for “suspected terrorists.”483 In Demore v. Kim,484 however, the Court indicated that its holding in Zadvydas was quite limited. Upholding detention of permanent resident aliens without bond pending a determination of removability, the Court reaffirmed Congress’s broad powers over aliens. “[W]hen the government deals with deportable aliens, the Due Process Clause does not require it to employ the least burdensome means to accomplish its goal.”485 A closely divided Court earlier ruled that, in time of war, the deportation of an enemy alien may be ordered summarily by executive action; due process of law does not require the courts to determine the sufficiency of any hearing that is gratuitously afforded to the alien.486

Judicial Review of Administrative or Military Proceedings.

To the extent that constitutional rights are involved, due pro-cess of law imports a judicial review of the action of administrative or executive officers. This proposition is undisputed so far as questions of law are concerned, but the extent to which the courts should and will go in reviewing determinations of fact has been a highly controversial issue. In St. Joseph Stock Yards Co. v. United States,487 the Court held that, upon review of an order of the Secretary of Agriculture establishing maximum rates for services rendered by a stockyard company, due process required that the court exercise its independent judgment upon the facts to determine whether the rates were confiscatory.488 Subsequent cases sustaining rate orders of the Federal Power Commission have not dealt explicitly with this point.489 The Court has said simply that a person assailing such an order “carries the heavy burden of making a convincing showing that it is invalid because it is unjust and unreasonable in its consequences.”490

There has been a division on the Court with regard to what extent, if at all, proceedings before military tribunals should be reviewed by the courts for the purpose of determining compliance with the Due Process Clause. In In re Yamashita,491 the majority denied a petition for certiorari and petitions for writs of habeas corpus to review the conviction of a Japanese war criminal by a military commission sitting in the Philippine Islands. It held that, because the military commission, in admitting evidence to which objection had been made, had not violated any act of Congress, a treaty, or a military command defining its authority, its ruling on evidence and on the mode of conducting the proceedings were not reviewable by the courts. And, in Johnson v. Eisentrager,492 the Court overruled a lower court decision that, in reliance upon the dissenting opinion in Yamashita, had held that the Due Process Clause required that the legality of the conviction of enemy alien belligerents by military tribunals should be tested by the writ of habeas corpus.

Failure of the Executive Branch to provide for any type of proceeding for prisoners alleged to be “enemy combatants,” whether in a military tribunal or a federal court, was at issue in Hamdi v. Rumsfeld.493 During a military action in Afghanistan,494 a United States citizen, Yaser Hamdi, was taken prisoner. The Executive Branch argued that it had authority to hold such an “enemy combatant” while providing him with limited recourse to the federal courts. The Court agreed that the President was authorized to detain a United States citizen seized in Afghanistan.495 However, the Court ruled that the government may not detain the petitioner indefinitely for purposes of interrogation, but must give him the opportunity to offer evidence that he is not an enemy combatant. At a minimum, the petitioner must be given notice of the asserted factual basis for holding him, must be given a fair chance to rebut that evidence before a neutral decision-maker, and must be allowed to consult an attorney.496

Without dissent, in Hiatt v. Brown,497 the Court reversed the judgment of a lower court that had discharged a prisoner serving a sentence imposed by a court-martial because of errors that had deprived the prisoner of due process of law. The Court held that the court below had erred in extending its review, for the purpose of determining compliance with the Due Process Clause, to such matters as the propositions of law set forth in the staff judge advocate’s report, the sufficiency of the evidence to sustain conviction, the adequacy of the pre-trial investigation, and the competence of the law member and defense counsel. In summary, Justice Clark wrote: “In this case the court-martial had jurisdiction of the person accused and the offense charged, and acted within its lawful powers. The correction of any errors it may have committed is for the military authorities which are alone authorized to review its decision.”498 Similarly, in Burns v. Wilson,499 the Court denied a petition for the writ to review a conviction by a military tribunal on the Island of Guam in which the petitioners asserted that their imprisonment resulted from proceedings that violated their constitutional rights. Four Justices, with whom Justice Minton concurred, maintained that judicial review is limited to determining whether the military tribunal, or court-martial, had given fair consideration to each of petitioners’ allegations, and does not embrace an opportunity “to prove de novo” what petitioners had “failed to prove in the military courts.” According to Justice Minton, however, if the military court had jurisdiction, its action is not reviewable.

Discrimination.

Literally speaking, the Fifth Amendment, unlike the Fourteenth Amendment, “contains no equal protection clause and it provides no guaranty against discriminatory legislation by Congress.”501 Nevertheless, “Equal protection analysis in the Fifth Amendment area is the same as that under the Fourteenth Amendment.”502 Even before the Court reached this position, it had assumed that “discrimination, if gross enough, is equivalent to confiscation and subject under the Fifth Amendment to challenge and annulment.”503 The theory that was to prevail seems first to have been enunciated by Chief Justice Taft, who observed that the Due Process and Equal Protection Clauses are “associated” and that “[i]t may be that they overlap, that a violation of one may involve at times the violation of the other, but the spheres of the protection they offer are not coterminous. . . . [Due process] tends to secure equality of law in the sense that it makes a required minimum of protection for every one’s right of life, liberty and property, which the Congress or the legislature may not withhold. Our whole system of law is predicated on the general, fundamental principle of equality of application of the law.”504 Thus, in Bolling v. Sharpe,505 a companion case to Brown v. Board of Education,506 the Court held that segregation of pupils in the public schools of the District of Columbia violated the Due Process Clause. “The Fifth Amendment, which is applicable in the District of Columbia, does not contain an equal protection clause as does the Fourteenth Amendment which applies only to the states. But the concepts of equal protection and due process, both stemming from our American ideal of fairness, are not mutually exclusive. The ‘equal protection of the laws’ is a more explicit safeguard of prohibited unfairness than ‘due process of law,’ and, therefore, we do not imply that the two are always interchangeable phrases. But, as this Court has recognized, discrimination may be so unjustifiable as to be violative of due process.”

“Although the Court has not assumed to define ‘liberty’ with any great precision, that term is not confined to mere freedom from bodily restraint. Liberty under law extends to the full range of conduct which the individual is free to pursue, and it cannot be restricted except for a proper governmental objective. Segregation in public education is not reasonably related to any proper governmental objective and thus it imposes on Negro children of the District of Columbia a burden that constitutes an arbitrary deprivation of their liberty in violation of the Due Process Clause.”

“In view of our decision that the Constitution prohibits the states from maintaining racially segregated public schools, it would be unthinkable that the same Constitution would impose a lesser duty on the Federal Government.”

In subsequent cases, the Court has applied its Fourteenth Amendment jurisprudence to federal legislation that contained classifications based on sex507 and illegitimacy,508 and that set standards of eligibility for food stamps.509 However, almost all legislation involves some degree of classification among particular categories of persons, things, or events, and, just as the Equal Protection Clause itself does not outlaw “reasonable” classifications, neither is the Due Process Clause any more intolerant of the great variety of social and economic legislation typically containing what must be arbitrary line-drawing.510 Thus, for example, the Court has sustained a law imposing greater punishment for an offense involving rights of property of the United States than for a like offense involving the rights of property of a private person.511 A veterans law that extended certain educational benefits to all veterans who had served “on active duty” and thereby excluded conscientious objectors from eligibility was held to be sustainable, its being rational for Congress to have determined that the disruption caused by military service was qualitatively and quantitatively different from that caused by alternative service, and for Congress to have so provided to make military service more attractive.512

“The federal sovereign, like the States, must govern impartially. . . . [B]ut . . . there may be overriding national interests which justify selective federal legislation that would be unacceptable for an individual State.”513 The paramount federal power over immigration and naturalization is the principal example, although there are undoubtedly others, of the national government’s being able to classify upon some grounds—alienage, naturally, but also other suspect and quasi-suspect categories as well—that would result in invalidation were a state to enact them. The instances may be relatively few, but they do exist.

Congressional Police Measures.

Numerous regulations of a police nature, imposed under powers specifically granted to the Federal Government, have been sustained over objections based on the Due Process Clause. Congress may require the owner of a vessel entering United States ports, and on which alien seamen are afflicted with specified diseases, to bear the expense of hospitalizing such persons.514 It may prohibit the transportation in interstate commerce of filled milk515 or the importation of convict-made goods into any state where their receipt, possession, or sale is a violation of local law.516 It may require employers to bargain collectively with representatives of their employees chosen in a manner prescribed by law, to reinstate employees discharged in violation of law, and to permit use of a company-owned hall for union meetings.517 Subject to First Amendment considerations, Congress may regulate the postal service to deny its facilities to persons who would use them for purposes contrary to public policy.518

Congressional Regulation of Public Utilities.

Inasmuch as Congress, in giving federal agencies jurisdiction over various public utilities, usually has prescribed standards substantially identical with those by which the Supreme Court has tested the validity of state action, the review of agency orders seldom has turned on constitutional issues. In two cases, however, maximum rates prescribed by the Secretary of Agriculture for stockyard companies were sustained only after detailed consideration of numerous items excluded from the rate base or from operating expenses, apparently on the assumption that error with respect to any such item would render the rates confiscatory and void.519 A few years later, in FPC v. Hope Natural Gas Co.,520 the Court adopted an entirely different approach. It held that the validity of the Commission’s order depended upon whether the impact or total effect of the order is just and reasonable, rather than upon the method of computing the rate base. Rates that enable a company to operate successfully, to maintain its financial integrity, to attract capital, and to compensate its investors for the risks assumed cannot be condemned as unjust and unreasonable even though they might produce only a meager return in a rate base computed by the “present fair value” method.

Orders prescribing the form and contents of accounts kept by public utility companies,521 and statutes requiring a private carrier to furnish the Interstate Commerce Commission with information for valuing its property,522 have been sustained against the objection that they were arbitrary and invalid. An order of the Secretary of Commerce directed to a single common carrier by water requiring it to file a summary of its books and records pertaining to its rates was also held not to violate the Fifth Amendment.523

Congressional Regulation of Railroads.

Legislation and ad-ministrative orders pertaining to railroads have been challenged repeatedly under the Due Process Clause, but seldom with success. Orders of the Interstate Commerce Commission establishing through routes and joint rates have been sustained,524 as has the Commission’s division of joint rates to give a weaker group of carriers a greater share of such rates where the proportion allotted to the stronger group was adequate to avoid confiscation.525 The recapture of one-half of the earnings of railroads in excess of a fair net operating income, such recaptured earnings to be available as a revolving fund for loans to weaker roads, was held valid on the ground that any carrier earning an excess held it as trustee.526 An order enjoining certain steam railroads from discriminating against an electric railroad by denying it reciprocal switching privileges did not violate the Fifth Amendment even through its practical effect was to admit the electric road to a part of the business being adequately handled by the steam roads.527 Similarly, the fact that a rule concerning the allotment of coal cars operated to restrict the use of private cars did not amount to a taking of property.528 Railroad companies were not denied due process of law by a statute forbidding them to transport in interstate commerce commodities that they manufactured, mined, or produced.529 An order approving a lease of one railroad by another, upon condition that displaced employees of the lessor should receive partial compensation for the loss suffered by reason of the lease,530 is consonant with due process of law. A law prohibiting the issuance of free passes was held constitutional even as applied to abolish rights created by a prior agreement by which the carrier bound itself to issue such passes annually for life, in settlement of a claim for personal injuries.531 A non-arbitrary Interstate Commerce Commission order establishing a non-compensatory rate for carriage of certain commodities does not violate the Due Process or Just Compensation Clauses as long as it serves the public interest and the rates as a whole yield just compensation.532

Occasionally, however, regulatory action has been held invalid under the Due Process Clause. An order issued by the Interstate Commerce Commission relieving short line railroads from the obligation to pay the usual fixed sum per day rental for cars used on foreign roads for a space of two days was held to be arbitrary and invalid.533 A retirement act that made eligible for pensions all persons who had been in the service of any railroad within one year prior to the adoption of the law, counted past unconnected service of an employee toward the requirement for a pension even if the employee had contributed nothing to the pension fund, and treated all carriers as a single employer and pooled their assets, without regard to their individual obligations, was held unconstitutional.534

Taxation.

In laying taxes, the Federal Government is less nar-rowly restricted by the Fifth Amendment than are the states by the Fourteenth. The Federal Government may tax property belonging to its citizens, even if such property is never situated within the jurisdiction of the United States,535 and it may tax the income of a citizen resident abroad, which is derived from property located at his residence.536 The difference is explained by the fact that protection of the Federal Government follows the citizen wherever he goes, whereas the benefits of state government accrue only to persons and property within the state’s borders. The Supreme Court has said that, in the absence of an equal protection clause, “a claim of unreasonable classification or inequality in the incidence or application of a tax raises no question under the Fifth Amendment. . . .”537 It has sustained, over charges of unfair differentiation between persons, a graduated income tax,538 a higher tax on oleomargarine than on butter,539 an excise tax on “puts” but not on “call,”540 a tax on the income of business operated by corporations but not on similar enterprises carried on by individuals,541 an income tax on foreign corporations, based on their income from sources within the United States, while domestic corporations were taxed on income from all sources,542 a tax on foreign-built but not upon domestic yachts,543 a tax on employers of eight or more persons, with exemptions for agricultural labor and domestic service,544 a gift tax law embodying a plan of graduations and exemptions under which donors of the same amount might be liable for different sums,545 an Alaska statute imposing license taxes only on nonresident fisherman,546 an act that taxed the manufacture of oil and fertilizer from herring at a higher rate than similar processing of other fish or fish offal,547 an excess profits tax that defined “invested capital” with reference to the original cost of the property rather than to its present value,548 an undistributed profits tax in the computation of which special credits were allowed to certain taxpayers,549 an estate tax upon the estate of a deceased spouse in respect of the moiety of the surviving spouse where the effect of the dissolution of the community is to enhance the value of the survivor’s moiety,550 and a tax on nonprofit mutual insurers, even though such insurers organized before a certain date were exempt, as there was a rational basis for the discrimination.551

Retroactive Taxes.

It has been customary from the begin-ning for Congress to give some retroactive effect to its tax laws, usually making them effective from the beginning of the tax year or from the date of introduction of the bill that became the law.552 Application of an income tax statute to the entire calendar year in which enactment took place has never, barring some peculiar circumstance, been deemed to deny due process.553 “Taxation is neither a penalty imposed on the taxpayer nor a liability which he assumes by contract. It is but a way of apportioning the cost of government among those who in some measure are privileged to enjoy its benefits and must bear its burdens. Since no citizen enjoys immunity from that burden, its retroactive imposition does not necessarily infringe due process, and to challenge the present tax it is not enough to point out that the taxable event, the receipt of income, antedated the statute.”554 A special income tax on profits realized by the sale of silver, retroactive for 35 days, which was approximately the period during which the silver purchase bill was before Congress, was held valid.555 An income tax law, made retroactive to the beginning of the calendar year in which it was adopted, was found constitutional as applied to the gain from the sale, shortly before its enactment, of property received as a gift during the year.556 Retroactive assessment of penalties for fraud or negligence,557 or of an additional tax on the income of a corporation used to avoid a surtax on its shareholder,558 does not deprive the tax-payer of property without due process of law.

An additional excise tax imposed upon property still held for sale, after one excise tax had been paid by a previous owner, does not violate the Due Process Clause.559 Similarly upheld were a transfer tax measured in part by the value of property held jointly by a husband and wife, including that which comes to the joint tenancy as a gift from the decedent spouse560 and the inclusion in the gross income of the settlor of income accruing to a revocable trust during any period when the settlor had power to revoke or modify it.561

Although the Court during the 1920s struck down gift taxes imposed retroactively upon gifts that were made and completely vested before the enactment of the taxing statute,562 those decisions have recently been distinguished, and their precedential value limited.563 In United States v. Carlton, the Court declared that “[t]he due process standard to be applied to tax statutes with retroactive effect . . . is the same as that generally applicable to retroactive economic legislation”—retroactive application of legislation must be shown to be “ ‘justified by a rational legislative purpose.’ ”564 Applying that principle, the Court upheld retroactive application of a 1987 amendment limiting application of a federal estate tax deduction originally enacted in 1986. Congress’s purpose was “neither illegitimate nor arbitrary,” the Court noted, since Congress had acted “to correct what it reasonably viewed as a mistake in the original 1986 provision that would have created a significant and unanticipated revenue loss.” Also, “Congress acted promptly and established only a modest period of retroactivity.” The fact that the taxpayer had transferred stock in reliance on the original enactment was not dispositive, since “[t]ax legislation is not a promise, and a taxpayer has no vested right in the Internal Revenue Code.”565

Deprivation of Property: Retroactive Legislation.

Federal regulation of future action, based upon rights previously acquired by the person regulated, is not prohibited by the Constitution. So long as the Constitution authorizes the subsequently enacted legislation, the fact that its provisions limit or interfere with previously acquired rights does not ordinarily condemn it. The imposition upon coal mine operators, and ultimately coal consumers, of the liability of compensating former employees, who had terminated work in the industry before passage of the law, for black lung disabilities contracted in the course of their work, was sustained by the Court as a rational measure to spread the costs of the employees’ disabilities to those who had profited from the fruits of their labor.566 Legislation readjusting rights and burdens is not unlawful solely because it upsets otherwise settled expectations, but it must take account of the realities previously existing, i.e., that the danger may not have been known or appreciated, or that actions might have been taken in reliance upon the current state of the law; therefore, legislation imposing liability on the basis of deterrence or of blameworthiness might not have passed muster. The Court has applied Turner Elkhorn in upholding retroactive application of pension plan termination provisions to cover the period of congressional consideration, declaring that the test for retroactive application of legislation adjusting economic burdens is merely whether “the retroactive application . . . is itself justified by a rational legislative purpose.”567

Rent regulations were sustained as applied to prevent execution of a judgment of eviction rendered by a state court before the enabling legislation was passed.568 For the reason that “those who do business in the regulated field cannot object if the legislative scheme is buttressed by subsequent amendments to achieve the legislative end,” no vested right to use housing, built with the aid of FHA mortgage insurance for transient purposes, was acquired by one obtaining insurance under an earlier section of the National Housing Act, which, though silent in this regard, was contemporaneously construed as barring rental to transients, and was later modified by an amendment that expressly excluded such use.569 An order by an Area Rent Director reducing an unapproved rental and requiring the landlord to refund the excess previously collected, was held, with one dissenting vote, not to be the type of retroactivity which is condemned by law.570 The application of a statute providing for tobacco marketing quotas, to a crop planted prior to its enactment, was held not to deprive the producers of property without due process of law, because it operated not upon production, but upon the marketing of the product after the act was passed.571

In the exercise of its comprehensive powers over revenue, finance, and currency, Congress may make Treasury notes legal tender in payment of debts previously contracted572 and may invalidate provisions in private contracts calling for payment in gold coin,573 but rights against the United States arising out of contract are more strongly protected by the Due Process Clause. Hence, a law purporting to abrogate a clause in government bonds calling for payment in gold coin was invalid,574 and a statute abrogating contracts of war risk insurance was held unconstitutional as applied to outstanding policies.575

The Due Process Clause has been successfully invoked to defeat retroactive invasion or destruction of property rights in a few cases. A revocation by the Secretary of the Interior of previous approval of plats and papers showing that a railroad was entitled to land under a grant was held void as an attempt to deprive the company of its property without due process of law.576 The exception of the period of federal control from the time limit set by law upon claims against carriers for damages caused by misrouting of goods, was read as prospective only because the limitation was an integral part of the liability, not merely a matter of remedy, and would violate the Fifth Amendment if retroactive.577

Bankruptcy Legislation.

In acting pursuant to its power to enact uniform bankruptcy legislation, Congress has regularly authorized retrospective impairment of contractual obligations,578 but the Due Process Clause (by itself or infused with takings principles) constitutes a limitation upon Congress’s power to deprive persons of more secure forms of property, such as the rights secured creditors have to obtain repayment of a debt. The Court had long followed a rule of construction favoring prospective-only application of bankruptcy laws, absent a clear showing of congressional intent,579 but it was not until 1935 that the Court actually held unconstitutional a retrospective law. Struck down by the Court was the Frazier-Lemke Act, which by its terms applied only retrospectively, and which authorized a court to stay proceedings for the foreclosure of a mortgage for five years, the debtor to remain in possession at a reasonable rental, with the option of purchasing the property at its appraised value at the end of the stay. The Act offended the Fifth Amendment, the Court held, because it deprived the creditor of substantial property rights acquired prior to the passage of the act.580 However, a modified law, under which the stay was subject to termination by the court and which continued the right of the creditor to have the property sold to pay the debt, was sustained.581

The sale of collateral under the terms of a contract may be enjoined without violating the Due Process Clause, if such sale would hinder the preparation or consummation of a proposed railroad reorganization, provided the injunction does no more than delay the enforcement of the contract.582 A provision that claims resulting from rejection of an unexpired lease should be treated as on a parity with provable debts, but limited to an amount equal to three years rent, was held not to amount to a taking of property without due process of law, since it provided a new and more certain remedy for a limited amount, in lieu of an existing remedy inefficient and uncertain in result.583 A right of redemption allowed by state law upon foreclosure of a mortgage was unavailing to defeat a plan for reorganization of a debtor corporation where the trial court found that the claims of junior lienholders had no value.584

Right to Sue the Government.

A right to sue the govern-ment on a contract is a privilege, not a property right protected by the Constitution.585 The right to sue for recovery of taxes paid may be conditioned upon an appeal to the Commissioner and his refusal to refund.586 There was no denial of due process when Congress took away the right to sue for recovery of taxes, where the claim for recovery was without substantial equity, having arisen from the mistake of administrative officials in allowing the statute of limitations to run before collecting a tax.587 The denial to taxpayers of the right to sue for refund of processing and floor stock taxes collected under a law subsequently held unconstitutional, and the substitution of a new administrative procedure for the recovery of such sums, was held valid.588 Congress may cut off the right to recover taxes illegally collected by ratifying their imposition and collection, where it could lawfully have authorized such exactions prior to their collection.589

Congressional Power to Abolish Common Law Judicial Actions.

Similarly, it is clearly settled that “[a] person has no prop-erty, no vested interest, in any rule of the common law.”590 It follows, therefore, that Congress in its discretion may abolish common-law actions, replacing them with other judicial actions or with administrative remedies at its discretion. There is slight intimation in some of the cases that if Congress does abolish a common law action it must either duplicate the recovery or provide a reasonable substitute remedy.591 Such a holding seems only remotely likely,592 but some difficulties may be experienced with respect to legislation that retrospectively affects rights to sue, such as shortening or lengthening statutes of limitation, and the like, although these have typically arisen in state contexts. In one decision, the Court sustained an award of additional compensation under the Longshoremen’s and Harbor Workers’ Compensation Act, made pursuant to a private act of Congress passed after expiration of the period for review of the original award, directing the Commission to review the case and issue a new order, the challenge being made by the employer and insurer.593

Deprivation of Liberty: Economic Legislation.

The proscrip-tion of deprivation of liberty without due process, insofar as substantive due process was involved, was long restricted to invocation against legislation deemed to abridge liberty of contract.594 The two leading cases invalidating federal legislation, however, have both been overruled, as the Court adopted a very restrained standard of review of economic legislation.595 The Court’s hands-off policy with regard to reviewing economic legislation is quite pronounced.596