In the case of Juilliard v. Greenman, 110 U.S. 421 (1884), the United States Supreme Court ruled that Congress had the right to issue notes to be legal tender for the payment of public and private debt. Legal-tender notes are Treasury notes or bank notes that, in the eyes of the law, must be accepted in the payment of debts.
Under the Legal Tender Act of 25 February 1862 Congress authorized the issuance of United States notes as legal tender for all debts public and private, excepting custom duties and interest on the public debt, which were payable in coin. The United States Constitution had not explicitly conferred upon Congress the right to issue legal-tender notes, or other legal-tender paper money, and many doubted if legal-tender legislation was constitutional. The Constitution was framed while the memory of the hyperinflation episode of the Continental currency was still fresh.
Hepburn v. Griswold, 75 U.S. 603 (1870), was the first Supreme Court case to test the constitutionality of legal-tender notes. The Court found that the issuance of legal-tender notes amounted to an impairment of contracts without due process of law, which was forbidden by the Constitution and therefore unconstitutional. Contracts were abridged because a creditor had to accept depreciated notes rather than coin. Interestingly, Chief Justice Chase, who wrote the majority opinion, was secretary of the Treasury when the notes were issued at his strong urging. Some observers felt that Chase changed his mind to improve his chances for a presidential bid.
The Hepburn decision did not stand long. In Parker v. Davis, 79 U.S. 457 (1871), the Court—enlarged with two new appointees—ruled in favor of Congress’s power to issue legal-tender notes, but the decision drew heavily on the exigencies of war and left in doubt the constitutionality of the issuance of legal-tender notes in peacetime.
In 1878 Congress repealed an earlier act providing for the retirement of outstanding legal-tender notes (greenbacks) and provided for the reissuance of these notes. Because these notes were reissued in peacetime, the constitutional authority of Congress to maintain their legal-tender status remained in doubt.
When Juilliard v. Greenman came before the Supreme Court in 1884 the Court held that Congress had the authority to issue legal-tender notes even in peacetime. The majority opinion argued that Congress had the authority to issue legal-tender notes under its constitutional power “to raise money for the public use on a pledge of the public credit,” including the power “to issue, in return for the money borrowed, the obligation of the United States in any appropriate form of stock, bonds, bills, or notes adapted to circulation from hand to hand in the ordinary transactions of business” (110 U.S. at 432). The majority opinion also argued that the power to confer legal status on money derived from the rights of sovereignty as understood when the Constitution was framed.
The decision of Juilliard v. Greenman settled the question of the authority of Congress to provide a national currency for the United States.