Vested Rights

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VESTED RIGHTS

"Vested rights" are claims enforceable under law. Early in the history of the Republic, an assertive concept of vested rights became the core of a highly refined legal and constitutional doctrine that was invoked as a shield for private property against regulation by government. In edward s. corwin's phrase, this became "the basic doctrine of American constitutional law."

An early expression of the doctrine was Justice william paterson's opinion in van horne ' s lessee v. dorrance (1795), stating that preservation of private property is "a primary object of the social compact, " so that any law taking one person's freehold and vesting it in another without compensation must be seen as "inconsistent with the principles of reason, justice and moral rectitude… [and] contrary to the principle of social alliance in every free government." In expounding this doctrine, judges and treatise writers cited general principles of justice fromnatural law, civil law, and common law. In pre-1860 contract and property law, the doctrine served in tandem with the contract clause and was regularly invoked by those opposing the expansion of state interventions under the taxation, eminent domain, and police powers.

There is a difference between "vested interests" and "vested rights." The former are claims and expectations based on private contractual relationships and upon a property owner's understanding of the privileges, immunities, and responsibilities associated by law with the property in question. Interests become "rights" when courts agree to enforce such contractual relationships and understandings concerning property. This difference was recognized by Justice robert h. jackson, in his opinion in United States v. Willow Run Power Company (1945), declaring: "Not all economic interests are "property rights'; only those economic advantages are "rights' which have the law back of them.…" A claim to a right (or "advantage"), Jackson stated, "is really a question to be answered" in judicial proceedings and decisions; it is not something to be taken a priori, even when ancient maxims and rules can be adduced in favor of the claim.

Justice Jackson's robust legal realism was not the view that prevailed in legal and constitutional discourse during the nineteenth century. On occasion, individual judges or courts did defend legislative prerogatives against claims of vested rights in terms that foreshadowed Jackson's formulation. For example, a New York judge in 1835 denounced vested rights as an "indefinite" term that was "resorted to when no better argument exists." Any governmental action, he contended, imposed "burthens and duties" that redefined rights. Much more commonly found, however, were views founded on the notion that it was "manifest injustice by positive law" when legislation took away what Justice samuel chase described in calder v. bull (1798) as "that security for personal liberty, or private property, for the protection whereof the government was established."

State judges regularly invoked the vested rights doctrine, often explicitly merged with due process declarations, to review and sometimes invalidate legislation. Many judges applied natural-law principles associated with the Fifth Amendment, contending that they were a check upon the abuse of legislative power no less important than explicit state constitutional provisions or than the contract clause. Much relied upon, in such decisions, was Justice joseph story's opinion in Wilkinson v. Leland (1829), contending that "the fundamental maxims of a free government seem to require that the rights of personal liberty and private property should be held sacred."

During john marshall's tenure as Chief Justice, the court introduced "vested rights" doctrine into contract clause rulings, as in Marshall's opinions in fletcher v. peck (1810) and dartmouth college v. woodward (1819). When conservative, property-minded state and federal judges applied Marshall's doctrines in broad terms in the 1830s and 1840s, the debate over vested rights began to center on whether or not corporate privileges, broadly construed, should be given the same protection as property held by individuals and quasi-public institutions. To conservatives such as daniel webster and Justice Story, a corporation's privileges and property rights under a franchise were merely a variant of an individual's rights in fee simple to a house or a tract of farmland. Webster, for example, viewed the action of Massachusetts in charles river bridge company v. warren bridge company (1837) as part of a "revolution against the foundations on which property rests." He raised the alarm again in his argument in west river bridge v. dix (1848), denouncing broad use of the power of eminent domain as a dangerous kind of agrarian radicalism. There was a pragmatic side, as well, to the arguments of conservatives; both Story and Webster warned on many occasions that to allow legislatures unrestrained use of the police power or eminent domain, in derogation of vested property rights whether personal or corporate, would risk bringing all new investment (and material progress) to a halt.

Beginning with the decision in the Charles River Bridge case, the antebellum Supreme Court softened its stand on vested rights; state judges, however, kept the doctrine before the bar and the public. The high-sounding rhetoric of vested rights doctrine can easily obscure one of the important facts of the pre-Civil War period—the irony that in practice the antebellum state courts, as James Willard Hurst has shown, "tended to uphold vested rights only so long as they were felt to yield substantial or present returns in social function." Seldom did the courts support claims of vested rights that were invoked to protect "static" economic interests, attempting to block technological innovation or new forms of investment. Judges favored instead claims of "dynamic" rights that could be seen as forces for change and growth.

The adoption of the fourteenth amendment opened the way to revival of vested rights doctrine in federal constitutional law. If anything, "vested rights" were now championed in enlarged forms. Leading conservative lawyers such as william m. evarts, former Justice john a. campbell, and John N. Jewett seized on the Fourteenth Amendment to forge the new, broader doctrine. Citing the concept of property as an "established expectation," they denied that government could deprive property owners of any expectation unless it paid compensation. They expanded the notion of property to include the right to engage in occupations; and they contended broadly that the rights of ownership included the right to compete freely in the quest for profits. Taking up arguments presented earlier by Campbell, Justice stephen j. field even attempted in his dissenting opinion in the slaughterhouse cases (1873) to fuse the Fourteenth Amendment with the declaration of independence—and thereby to throw the mantle of vested rights over economic interests and activities that he viewed as embraced by the phrase "pursuit of happiness." As he believed, such rights were beyond the legitimate reach of state regulation. Some conservative jurists and lawyers also found in the amendment's privileges and immunities clause another prop for vested rights doctrine.

The newly expanded version of vested rights soon found its way into constitutional law, as Justice Field's views came to prevail with those of his colleagues. The traditional rhetoric of vested rights was harnessed to the freedom of contract doctrine, which became standard fare in the Court's decisions concerning the validity of laws regulating labor and business practices. In giving content to the doctrine of substantive due process in the field of economic and social regulation, the Supreme Court marked out a meandering, uncertain, often absurd boundary between what it found to be legitimate police power and the "sacred" rights of property. The view, as Laurence Tribe has phrased it, "that certain settled expectations of a focused and crystallized sort should be secure against governmental disruption, at least without appropriate compensation" became a powerful weapon in the hands of the new industrial corporate interests—and at the same time became the center of political storms in the Populist and Progressive eras. Only with abandonment of economic due process in the late 1930s, together with the ascendancy of views such as Justice Jackson's harshly realist version of vested rights, did the concept recede in importance in constitutional law and in political strife.

In home building & loan association v. blaisdell (1934), the Court gave notice that it was ready to uphold even so dramatic a state abridgment of private rights as a mortgage moratorium law. The Court would not, the majority declared, "throttle the capacity of the States to protect their fundamental interests." The common good, or the public interest, must also be honored in any system allocating constitutional powers and immunities. Thus the career of vested rights in the Webster-Story-Field tradition clearly had run its course. Nor for more than thirty years did debates in legislatures and courts return to the concerns of the conservative era; and even then the notion of "settled expectations" and related vested rights ideas were exhumed for application only in a fairly narrow context, relating to land use regulation and inverse condemnation. To that degree, at least, echoes of a doctrine rooted in natural law do continue to be heard in our own day.

Harry N. Scheiber
(1986)