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llotted to the stronger group was adequate to avoid confiscation. 480 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. 481 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. 482 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. 483 Railroad companies were not denied due process of law by a statute forbidding them to transport in interstate commerce commodities which have been manufactured, mined or produced by them. 484 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 485 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 whereby the carrier bound itself to issue such passes annually for life, in settlement of a claim for personal injuries. 486 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 VerDate May<19>2004 12:55 May 20, 2004 Jkt 077500 PO 00000 Frm 00092 Fmt 8222 Sfmt 8222 C:\CONAN\CON030.SGM PRFM99 PsN: CON030 AMENDMENT 5—RIGHTS OF PERSONS 1453 487 Baltimore & Ohio R.R. v. United States, 345 U.S. 146 (1953). 488 Chicago, R.I. & P. Ry. v. United States, 284 U.S. 80 (1931). 489 Railroad Retirement Bd. v. Alton R.R., 295 U.S. 330 (1935). But cf. Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 19 (1976). 490 United States v. Bennett, 232 U.S. 299, 307 (1914). 491 Cook v. Tait, 265 U.S. 47 (1924). 492 Helvering v. Lerner Stores Co., 314 U.S. 463, 468 (1941). But see discussion of ‘‘Discrimination’’ supra. 493 Brushaber v. Union Pac. R.R., 240 U.S. 1, 24 (1916). 494 McCray v. United States, 195 U.S. 27, 61 (1904). 495 Treat v. White, 181 U.S. 264 (1901). 496 Flint v. Stone Tracy Co., 220 U.S. 107 (1911). long as the public interest thereby is served and the rates as a whole yield just compensation. 487 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. 488 A retirement act which 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 without any contribution therefor, and treated all carriers as a single employer and pooled their assets, without regard to their individual obligations, was held unconstitutional. 489 Taxation.—In laying taxes, the Federal Government is less narrowly 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, 490 and it may tax the income of a citizen resident abroad, which is derived from property located at his residence. 491 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. . . .’’ 492 It has sustained, over charges of unfair differentiation between persons, a graduated income tax, 493 a higher tax on oleomargarine than on butter, 494 an excise tax on ‘‘puts’’ but not on ‘‘call,’’ 495 a tax on the income of business operated by corporations but not on similar enterprises carried on by individuals, 496 an income tax on foreign corporations, based on their income from sources within the United States, while domestic corporations are VerDate May<19>2004 12:55 May 20, 2004 Jkt 077500 PO 00000 Frm 00093 Fmt 8222 Sfmt 8222 C:\CONAN\CON030.SGM PRFM99 PsN: CON030 1454 AMENDMENT 5—RIGHTS OF PERSONS 497 National Paper Co. v. Bowers, 266 U.S. 373 (1924). 498 Billings v. United States, 232 U.S. 261, 282 (1914). 499 Steward Machine Co. v. Davis, 301 U.S. 548 (1937); Helvering v. Davis, 301 U.S. 619 (1937). 500 Bromley v. McCaughn, 280 U.S. 124 (1929). 501 Haavik v. Alaska Packers’ Ass’n, 263 U.S. 510 (1924). 502 Alaska Fish Co. v. Smith, 255 U.S. 44 (1921). 503 LaBelle Iron Works v. United States, 256 U.S. 377 (1921). 504 Helvering v. Northwest Steel Mills, 311 U.S. 46 (1940). 505 Fernandez v. Wiener, 326 U.S. 340 (1945); cf. Coolidge v. Long, 282 U.S. 582 (1931). 506 United States v. Maryland Savings-Share Ins. Corp., 400 U.S. 4 (1970). 507 United States v. Darusmont, 449 U.S. 292, 296–97 (1981). 508 Stockdale v. Insurance Companies, 87 U.S. (20 Wall.) 323, 331, 332 (1874); Brushaber v. Union Pac. R.R., 240 U.S. 1, 20 (1916); Cooper v. United States, 280 U.S. 409, 411 (1930); Milliken v. United States, 283 U.S. 15, 21 (1931); Reinecke v. Smith, 289 U.S. 172, 175 (1933); United States v. Hudson, 299 U.S. 498, 500– 01 (1937); Welch v. Henry, 305 U.S. 134, 146, 148–50 (1938); Fernandez v. Wiener, 326 U.S. 340, 355 (1945); United States v. Darusmont, 449 U.S. 292, 297 (1981). taxed on income from all sources, 497 a tax on foreign-built but not upon domestic yachts, 498 a tax on employers of eight or more persons, with exemptions for agricultural labor and domestic service, 499 a gift tax law embodying a plan of graduations and exemptions under which donors of the same amount might be liable for different sums, 500 an Alaska statute imposing license taxes only on nonresident fisherman, 501 an act which taxed the manufacture of oil and fertilizer from herring at a higher rate than similar processing of other fish or fish offal, 502 an excess profits tax which defined ‘‘invested capital’’ with reference to the original cost of the property rather than to its present value, 503 an undistributed profits tax in the computation of which special credits were allowed to certain taxpayers, 504 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, 505 and a tax on nonprofit mutual insurers although such insurers organized before a certain date were exempt inasmuch as a continuing exemption for all insurers would have led to their multiplication to the detriment of other federal programs. 506 Retroactive Taxes.—It has been customary from the beginning 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. 507 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. 508 ‘‘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 gov- VerDate May<19>2004 12:55 May 20, 2004 Jkt 077500 PO 00000 Frm 00094 Fmt 8222 Sfmt 8222 C:\CONAN\CON030.SGM PRFM99 PsN: CON030 AMENDMENT 5—RIGHTS OF PERSONS 1455 509 Welch v. Henry, 305 U.S. 134, 146–47 (1938). 510 United States v. Hudson, 299 U.S. 498 (1937). See also Stockdale v. Insurance Companies, 87 U.S. (20 Wall.) 323, 331, 341 (1874); Brushaber v. Union Pac. R.R., 240 U.S. 1, 20 (1916); Lynch v. Hornby, 247 U.S. 339, 343 (1918). 511 Cooper v. United States, 280 U.S. 409 (1930); see also Reinecke v. Smith, 289 U.S. 172 (1933). 512 Helvering v. Mitchell, 303 U.S. 391 (1938). 513 Helvering v. National Grocery Co., 304 U.S. 282 (1938). 514 Patton v. Brady, 184 U.S. 608 (1902). 515 Tyler v. United States, 281 U.S. 497 (1930); United States v. Jacobs, 306 U.S. 363 (1939). 516 Reinecke v. Smith, 289 U.S. 172 (1933). 517 Untermyer v. Anderson, 276 U.S. 440 (1928); Blodgett v. Holden, 275 U.S. 142 (1927), modified, 276 U.S. 594 (1928); Nichols v. Coolidge, 274 U.S. 531 (1927). See also Heiner v. Donnan, 285 U.S. 312 (1932) (invalidating as arbitrary and capricious a conclusive presumption that gifts made within two years of death were made in contemplation of death). ernment 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.’’ 509 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. 510 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. 511 Retroactive assessment of penalties for fraud or negligence, 512 or of an additional tax on the income of a corporation used to avoid a surtax on its shareholder, 513 does not deprive the taxpayer 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. 514 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 spouse 515 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. 516 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, 517 those decisions have recently been distinguished, and their precedential VerDate May<19>2004 12:55 May 20, 2004 Jkt 077500 PO 00000 Frm 00095 Fmt 8222 Sfmt 8222 C:\CONAN\CON030.SGM PRFM99 PsN: CON030 1456 AMENDMENT 5—RIGHTS OF PERSONS 518 Untermyer was distinguished in United States v. Hemme, 476 U.S. 558, 568 (1986), upholding retroactive application of unified estate and gift taxation to a taxpayer as to whom the overall impact was minimal and not oppressive. All three cases were distinguished in United States v. Carlton, 512 U.S. 26, 30 (1994), as having been ‘‘decided during an era characterized by exacting review of economic legislation under an approach that ‘has long since been discarded.’’’ The Court noted further that Untermyer and Blodgett had been limited to situations involving creation of a wholly new tax, and that Nichols had involved a retroactivity period of 12 years. Id. 519 512 U.S. 26, 30 (1994) (quoting Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 16–17 (1976)). These principles apply to estate and gift taxes as well as to income taxes, the Court added. 512 U.S. at 34. 520 512 U.S. at 33. 521 Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 14–20 (1976). But see id. at 38 (Justice Powell concurring) (questioning application of retroactive cost-spreading). value limited. 518 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.’’’ 519 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’ 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.’’ 520 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. 521 Legislation readjusting rights and burdens is not unlawful solely because it upsets otherwise settled expectations, but it must VerDate May<19>2004 12:55 May 20, 2004 Jkt 077500 PO 00000 Frm 00096 Fmt 8222 Sfmt 8222 C:\CONAN\CON030.SGM PRFM99 PsN: CON030 AMENDMENT 5—RIGHTS OF PERSONS 1457 522 Pension Benefit Guaranty Corp. v. R.A. Gray & Co., 467 U.S. 717, 730 (1984). Accord, United States v. Sperry Corp., 493 U.S. 52, 65 (1989) (upholding imposition of user fee on claimants paid by Iran-United States Claims Tribunal prior to enactment of fee statute). Concrete Pipe & Products v. Construction Laborers Pension Trust, 508 U.S. 602, 636–41 (1993) (imposition of multiemployer pension plan withdrawal liability on an employer is not irrational, even though none of its employees had earned vested benefits by the time of withdrawal). In Eastern Enterprises v. Apfel, 524 U.S. 498 (1998), the challenge was to a statutory requirement that companies formerly engaged in mining pay miner retiree health benefits, as applied to a company that had placed its mining operations in a wholly owned subsidiary three decades earlier, before labor agreements included an express promise of lifetime benefits. In a fractured opinion, the justices ruled 5–4 that the scheme’s severe retroactive effect offended the Constitution, though differing on the governing clause. Four of the majority justices based the judgment solely on takings law, while opining that ‘‘there is a question’’ whether the statute violated due process as well. The remaining majority justice, and the four dissenters, viewed substantive due process as the sole appropriate framework for resolving the case, but disagreed on whether a violation had occurred. 523 Fleming v. Rhodes, 331 U.S. 100, 107 (1947). 524 FHA v. The Darlington, Inc., 358 U.S. 84, 89–91, 92–93 (1958). Dissenting, Justices Harlan, Frankfurter, and Whittaker maintained that under the due process clause the United States, in its contractual relations, is bound by the same rules as private individuals unless the action taken falls within the general federal regulatory power. 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.’’ 522 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. 523 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 which expressly excluded such use. 524 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 VerDate May<19>2004 12:55 May 20, 2004 Jkt 077500 PO 00000 Frm 00097 Fmt 8222 Sfmt 8222 C:\CONAN\CON030.SGM PRFM99 PsN: CON030 1458 AMENDMENT 5—RIGHTS OF PERSONS 525 Woods v. Stone, 333 U.S. 472 (1948). 526 Mulford v. Smith, 307 U.S. 38 (1939). An increase in the penalty for production of wheat in excess of quota was valid as applied retroactively to wheat already planted, where Congress concurrently authorized a substantial increase in the amount of the loan that might be made to cooperating farmers upon stored ‘‘farm marketing excess wheat.’’ Wickard v. Filburn, 317 U.S. 111 (1942). 527 Legal Tender Cases (Knox v. Lee ), 79 U.S. (12 Wall.) 457, 551 (1871). 528 Norman v. Baltimore & Ohio R.R., 294 U.S. 240 (1935). 529 Perry v. United States, 294 U.S. 330 (1935). 530 Lynch v. United States, 292 U.S. 571 (1934). See also De La Rama S.S. Co. v. United States, 344 U.S. 386 (1953). Notice that these kinds of cases are precisely the ones that would be condemned under the contract clause, even under the relaxed scrutiny now employed, if the action were taken by a State. E.g., United States Trust Co. v. New Jersey, 431 U.S. 1 (1977). ‘‘Less searching standards’’ are imposed by the Due Process Clauses than by the Contract Clause. Pension Benefit Guaranty Corp. v. R.A. Gray & Co., 467 U.S. 717, 733 (1984). Also, statutory reservation of the right to amend an agreement can defuse most such constitutional issues. Bowen v. Public Agencies Opposed to Social Security Entrapment, 477 U.S. 41 (1986) (amendment of Social Security Act to prevent termination by state when termination notice already filed). The Court has addressed similar issues under breach of contract theory. United States v. Winstar Corp., 518 U.S. 839 (1996). 531 Noble v. Union River Logging R.R., 147 U.S. 165 (1893). retroactivity which is condemned by law. 525 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 since it operated, not upon production, but upon the marketing of the product after the act was passed. 526 In the exercise of its comprehensive powers over revenue, finance, and currency, Congress may make Treasury notes legal tender in payment of debts previously contracted 527 and may invalidate provisions in private contracts calling for payment in gold coin, 528 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, 529 and a statute abrogating contracts of war risk insurance was held unconstitutional as applied to outstanding policies. 530 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. 531 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 VerDate May<19>2004 12:55 May 20, 2004 Jkt 077500 PO 00000 Frm 00098 Fmt 8222 Sfmt 8222 C:\CONAN\CON030.SGM PRFM99 PsN: CON030 AMENDMENT 5—RIGHTS OF PERSONS 1459 532 Danzer Co. v. Gulf R.R., 268 U.S. 633 (1925). 533 E.g., Hanover National Bank v. Moyses, 186 U.S. 181, 188 (1902); Continental Illinois Nat’l Bank & Trust Co. v. Chicago, R.I. & P. Ry., 294 U.S. 648, 673– 75 (1935). 534 Holt v. Henley, 232 U.S. 637, 639–40 (1914). See also Auffm’ordt v. Rasin, 102 U.S. 620, 622 (1881). 535 Louisville Joint Stock Land Bank v. Radford, 295 U.S. 555 (1935). 536 Wright v. Vinton Branch, 300 U.S. 440 (1937). The relatively small modifications that the Court accepted as making the difference in validity, and the fact that subsequently the Court interpreted the statute so as to make smaller the modifications, John Hancock Mut. Life Ins. Co. v. Bartels, 308 U.S. 180, 184 & n.3 (1939); Wright v. Union Central Ins. Co., 311 U.S. 273, 278–79 (1940), has created differences of opinion with respect to whether Radford remains sound law. Cf. Helvering v. Griffiths, 318 U.S. 371, 400–01 & n.52 (1943) (suggesting Radford might not have survived Vinton Branch). 537 Continental Illinois Nat’l Bank & Trust Co. v. Chicago, R.I. & P. Ry., 294 U.S. 648 (1935). part of the liability, not merely a matter of remedy, and would violate the Fifth Amendment if retroactive. 532 Bankruptcy Legislation.—In acting pursuant to its power to enact uniform bankruptcy legislation, Congress has regularly authorized retrospective impairment of contractual obligations, 533 but the due process clause (by itself or infused with takings principles) constitutes a limitation upon Congress’ 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, 534 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. 535 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. 536 Without violation of the due process clause, the sale of collateral under the terms of a contract may be enjoined, 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. 537 A provision that claims resulting from rejection of an unexpired lease should be treated as VerDate May<19>2004 12:55 May 20, 2004 Jkt 077500 PO 00000 Frm 00099 Fmt 8222 Sfmt 8222 C:\CONAN\CON030.SGM PRFM99 PsN: CON030 1460 AMENDMENT 5—RIGHTS OF PERSONS 538 Kuchner v. Irving Trust Co., 299 U.S. 445 (1937). 539 In re 620 Church Street Corp., 299 U.S. 24 (1936). In the context of Congress’ plan to save major railroad systems, see Regional Rail Reorganization Act Cases, 419 U.S. 102 (1974). 540 Lynch v. United States, 292 U.S. 571, 581 (1934). 541 Dodge v. Osborn, 240 U.S. 118 (1916). 542 Graham & Foster v. Goodcell, 282 U.S. 409 (1931). 543 Anniston Mfg. Co. v. Davis, 301 U.S. 337 (1937). 544 United States v. Heinszen & Co., 206 U.S. 370, 386 (1907). 545 Second Employers’ Liability Cases, 223 U.S. 1, 50 (1912). See also Silver v. Silver, 280 U.S. 117, 122 (1929) (a state case). 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. 538 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. 539 Right to Sue the Government.—A right to sue the Government on a contract is a privilege, not a property right protected by the Constitution. 540 The right to sue for recovery of taxes paid may be conditioned upon an appeal to the Commissioner and his refusal to refund. 541 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. 542 The denial to taxpayers of the right

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