The lawsuit originated when one Mrs. Hepburn attempted to pay a debt to Henry Griswold on a promissory note, which was made five days prior to the issuance of United States Notes that the case questioned. Griswold sued Hepburn in the LouisvilleChancery Court on the note and refused Hepburn's tender of United States Notes to satisfy his claim. She then tendered the notes into the Chancery Court, which declared her debt satisfied.
The Court of Errors of Kentucky reversed the chancery court's judgment, and Hepburn appealed to the Supreme Court, which affirmed the judgment of the Court of Errors.
The Supreme Court found that the US federal government was authorized to coin money, but that power was distinct from the power to make paper legal tender, which was not authorized under the US Constitution. It also found that the treatment of notes as legal tender represented an impairment to enforcing the obligations of contracts. The Constitution prohibits the several states from impairing the obligations of contracts. The Court found no similar constraint upon the federal government, but it held that such an impairment would violate the spirit of the Constitution.
The dissenting opinion argued that the government was threatened by the war and that making the notes legal tender provided the government with the necessary supplies to continue to fight the war.
The majority opinion affirmed that the government holds the power to wage war but that making notes legal tender was not a necessary consequence of that power. It continued that making United States Notes legal tender was unnecessary to fighting a war. All that the federal government needed to do was to make them "receivable for government dues". That argument is similar to the theory of chartalism.
West v. Barnes: an early Supreme Court case on banknotes
Further reading
Dietz, James A. (1993). "Personal Policy and Judicial Reasoning: Salmon P. Chase and Hepburn v. Griswold". Northern Kentucky Law Review. 21: 235.
Smith, Bryant (1929). "Neglected Evidence on an Old Controversy—Bronson v. Rodes as a Forecast of Hepburn v. Griswold". The American Historical Review. The American Historical Review, Vol. 34, No. 3. 34 (3): 532–535. doi:10.2307/1836281. JSTOR1836281.
The Virginia and Kentucky Resolutions were political statements drafted in 1798 and 1799 in which the Kentucky and Virginia legislatures took the position that the federal Alien and Sedition Acts were unconstitutional. The resolutions argued that the states had the right and the duty to declare unconstitutional those acts of Congress that the Constitution did not authorize. In doing so, they argued for states' rights and strict construction of the Constitution. The Kentucky and Virginia Resolutions of 1798 were written secretly by Vice President Thomas Jefferson and James Madison, respectively.
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