In placing the obligation of contracts under the protection of the Constitution, its framers looked to the essentials of the contract more than to the forms and modes of proceeding by which it was to be carried out into execution; annulling State legislation which impaired the obligation, it was left to the States to prescribe and shape the remedy to enforce it. The obligation of a contract consists in its binding force on the party who makes it. This depends on the laws in existence when it is made; these are necessarily referred to in all contracts and forming a part of them as the measure of the obligation to perform them by the one party, and the right acquired by the other. There can be no other standard by which to ascertain the extent of either, than that which the terms of the contract indicate according to their settled legal meaning; when it becomes consummated, the law defines the duty and the right, compels one party to perform the thing contracted for, and gives the other a right to enforce the performance by the remedies then in force. If any subsequent law affect to diminish the duty, or to impair the right, it necessarily bears on the obligation of the contract, in favor of one party, to the injury of the other; hence, any law which, in its operation, amounts to a denial, or obstruction, of the rights accruing by a contract, though professing to act only on the remedy, is directly obnoxious to the prohibition of the Constitution.[200]
78. The prohibition of legislation impairing the obligation of contracts does not extend to the United States as it does to the States. Thus in the Legal Tender Cases[201] and in sundry bankruptcy cases.[202] the Supreme Court has decided that the exercise of the power of Congress “does not depend upon the incidental effect of its exercise on contracts, but on the existence of the power itself.” This means that the United States possesses a police power, salus populi suprema lex, in exercise of which at the discretion of Congress, the obligation of contracts must yield to the higher obligation of the general welfare.[203]
79. It is a fundamental of government in America that no person shall be deprived of life, liberty, or property without due process of law, nor shall private property be taken for public use without compensation.[204] The prohibition and protection as to due process of law extends both to the United States and to the States. The taking by a State of the private property of a person,—and a corporation is legally a person,—without the owner’s consent, for the private use of another is not due process of law,[205] and it violates the Fourteenth Amendment. A State possesses exclusive jurisdiction and sovereignty over persons and property within its territory and consequently may determine for itself the civil status and capacities of its inhabitants; may prescribe the subjects upon which they may contract, and regulate the manner and conditions upon which property situated within its territory—or jurisdiction—may be acquired, enjoyed, and transferred; but no State can exercise direct jurisdiction and authority over persons or property without its jurisdiction. The laws of a State have no operation outside its territory “except so far as is allowed by comity; any exertion of authority by a State beyond its territory is a nullity.” The sovereign power of the State over property within its jurisdiction, belonging to non-residents is exercisable as over the property of residents. But the property right of the non-resident cannot be invalidated save by due process of law, which means, inter alia, the right of the non-resident to appear personally, or by representative, in the courts of the State to protect his own interests. A State law under which a nonresident’s property should be taken without such notice would be unconstitutional by the Fourteenth Amendment.[206]
But the Fourteenth Amendment does not deprive the States of their police power over “subjects within their jurisdiction.”[207]
80. The right of eminent domain is essentially of the police power, and for State purposes is exclusively within the State. Each State in the Union regulates its domestic commerce, contracts, the transmission of estates,—real and personal—and acts upon all internal matters which relate to its moral and political welfare. Over these subjects the federal government has no power. The acknowledged police power of a State extends often to the destruction of property. A nuisance may be abated.[208] Thus a State constitution, or a statute under it, prohibiting the manufacture and sale of intoxicating liquors, except for medicinal, scientific, and mechanical purposes, does not conflict with the clause of the Fourteenth Amendment which provides that “no State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States, nor shall any State deprive any person of life, liberty, or property, without due process of law.” The so-called “right” to manufacture or sell such articles is not a right growing out of citizenship of the United States.[209] Such manufacture or sale, or its prohibition is wholly within the power of the State to control.[210]
Such control is of wholly internal affairs. The right to manufacture or sell such articles is not a right under a contract as the word contract is used in the Constitution.[211] Prohibition of the manufacture and sale of such articles, save as excepted, does not deprive the citizen of his constitutional rights. Such prohibition is the policy of the supreme power in the State and is an exercise of a function within its jurisdiction.
The exercise of the police power of the State by the destruction of property which is itself a public nuisance, or the prohibition of its use in a particular way whereby its value becomes depreciated, is very different from taking property for public use, or from depriving a person of his property without due process of law. In one case, a nuisance only is abated; in the other, unoffending property is taken away from an innocent owner.[212]
81. The provision of the Constitution that private property shall not be taken for public use without compensation is a limitation on the power of the federal government, and not on the States,[213] but the State constitutions usually include the limitation in their Bills of Rights: the principle is “essentially a part of American constitutional law.”[214]
82. For consequential injury resulting from the exercise of the power of eminent domain there is no redress,[215] but where such exercise of power works effectual destruction of land so as to impair its usefulness, it is a taking of property for public use and the owner is entitled to compensation.[216] The principle here is that,
If in such cases suitable and adequate provision is made by the Legislature for the compensation of those whose property or franchise is injured or taken away, there is no violation of public faith or private right.