Phalen v. Virginia

THIS case was brought up by a writ of error to the General Court of Virginia. The plaintiff in error had been convicted in the Superior Court for the County of Henrico and City of Richmond, on an indictment for selling lottery-tickets contrary to the act of Assembly of Virginia, passed on the 25th of February, 1834. The case was removed by writ of error to the General Court of Virginia, where the judgment was affirmed. That being the highest court of criminal jurisdiction in Virginia, the plaintiff in error brought his case into this court by a writ of error under the twenty-fifth section of the Judiciary Act; and now alleged that the act of 25th February, 1834, under which he was convicted, is void, being contrary to the tenth section of the first article of the Constitution, which forbids a state to pass any 'law impairing the obligation of contracts.'

On the trial of the case below, the jury found a special verdict, setting forth at length the several acts of Assembly of Virginia, and the contract under which the defendant in the enactment claimed a right to sell lottery-tickets and to be exempted from the penalties of the act of February, 1834, under which he was indicted.

It appears that in December, 1828, the President and Directors of the Fauquier and Alexandria Turnpike Road presented a petition to the Legislature of Virginia, setting forth the importance and value of their road to the public; that by the exertions of the directors and a few of the stockholders, and on their responsibility, money had been raised, and the road put in excellent condition, except three miles, which required much repair; and asked a law authorizing a lottery to raise $30,000.

On the 30th of January, 1829, the Legislature passed an act appointing five commissioners, 'whose duty it shall be to raise, by way of lottery or lotteries, the sum of $30,000, for the purpose of improving the Fauquier and Alexandria Turnpike Road.' After directing the commissioners to contract with fit persons for managing the lotteries, and to take bonds for the faithful performance of their duties, they are ordered to 'pay over to the President and Directors of the said Fauquier and Alexandria Turnpike Road Company,' the money raised by said lotteries, 'to be by them appropriated in the improvement and repair of said road.'

Two of the commissioners appointed by this act declined acting under it, and nothing was done under the license or authority granted therein during the five years which intervened between that time and the passage of the act of the 25th of February, 1834, for the suppression of lotteries.

This act prohibits, under severe penalties, all lotteries and sale of lottery-tickets after the first day of January, 1837, with these provisos:-1st. 'That nothing herein contained shall be construed to extend to or interfere with contracts already made for the drawing of any lotteries, the drawing whereof, by the provisions of such contracts, shall extend to a period beyond said first day of January, 1837;' and 2d. 'That nothing herein contained shall be construed to extend to or interfere with any contract which may hereafter be made under or by virtue of any existing law authorizing the same, for the drawing of any lottery, the drawing whereof shall not extend beyond the first day of January, 1840.'

A few days after the passage of this act, on the 11th of March, 1834, an act was passed appointing two commissioners in place of those who had declined, 'to carry into effect the act of 30th of January, 1829.'

Nothing was done under these acts till the 19th of December, 1839, when the commissioners entered into a contract with the plaintiff in error and another, authorizing them to draw as many lotteries as they think proper, paying to the commissioners the sum of $1,500 a year, with covenants to increase the consideration, provided the Legislature of Virginia should pass an act exempting these lotteries from the penalties of the act of February, 1834, or if this court should pronounce the act of 1834 unconstitutional.

It is by virtue of this contract with the commissioners, that the plaintiff in error claims immunity; contending, 'that the act of 1829 confers a valuable right or franchise on an existing corporation, without limitation of time; that it is a contract; and that the act of 1834 has attempted to limit and curtail the previous grant, and injuriously to abridge it, and is therefore void, as impairing the obligation of a contract.'

The case was argued by Mr. Z. Collins Lee, for the plaintiff in error, no counsel appearing for the defendant.

The points made by him were the following:

That this court has jurisdiction on this writ of error, because the decision in the General Court involved the construction of a clause in the Constitution, and the decision was against the title or right specially set up or claimed under such clause of the Constitution.

That the act of 1829 (sec. 10) confers a valuable right or franchise on an existing corporation, to wit, the Fauquier and Alexandria Turnpike Company, duly incorporated by the act of Virginia.

This grant of the right to raise the sum of $30,000 is unconditional, and without limitation of time, requiring only the action of the commissioners; and the law contemplated on its face the raising of the money by lotteries, from time to time, and confers the power on the commissioners to make just such contracts as they think proper. The legislature, in its sovereignty, could do this. 4 Gill & J. (Md.), 150.

The state had no power to revoke this grant, because,--

1. It is presumed to be accepted by the turnpike company, without proof. 12 Wheat., 70-72; Angell & A. Corp., 89, &c.

2. Special verdict shows, that the law passed on petition of the president and directors; and, moreover, that, relying on the terms of this grant, the company did, prior to the 25th of February, 1834, enter into contracts, and incur debts, to be paid out of this lottery. This vested an interest in the corporation. 11 Gill & J. (Md.), 504.

3. The state is as much bound by her contracts, express or implied, as an individual. 4 Pet., 560; 4 Gill & J. (Md.), 128; 9 Id., 404, 405; 6 Cranch, 128. That this law of 1829 is a contract, see also 9 Cranch, 49; 2 Hayw. (N. C.), 310; 1 Murph. (N. C.), 58; 11 Pet.; 9 Gill & J. (Md.), 408.

4. The act of 25th February, 1834, impairs the rights vested under the previous contract.

The second proviso in this act excepts all contracts thereafter made, by virtue of any existing law for the drawing of lotteries, not extending beyond the 1st of January, 1840. See Green v. Biddle, 8 Wheat., 1; 3 Wash., 319.

Yet if the contract under which this lottery was drawn be duly authorized, in all its terms and duration, by the act of 1829, then the act of 1834 has attempted to limit and curtail the previous grant, and injuriously to abridge it.

But the act of 11th March, 1834, appointed two commissioners in place of those who had resigned, and therefore there could be no drawing until the vacancies were filled under the act of 1829.

Hence the law of 11th March, 1834, which is subsequent to the penal law of 25th February, 1834, appoints two commissioners to fill the vacancies and to carry the law of 1829 into effect; thus furnishing a legislative declaration, that the act of 1829 was to be carried into effect. But the law of February, 1834, only allows time to carry the act of 1829 into effect until the first day of January, 1837.

5. The contract was made in a reasonable time after the act of 11th March, 1834, and was duly authorized by law in all its terms and duration; and the penalty sought to be enforced under the act of February, 1834, (which directly prohibits all lotteries after the 1st of January, 1840,) is not to be enforced, because it would violate the antecedent contract, made by the state in 1829.

Mr. Justice GRIER delivered the opinion of the court.