Willard v. Tayloe, 75 U.S. (8 Wall.) 557 (1869), was a decision by the Supreme Court of the United States that courts of equity deciding issues of contract have discretion to determine the form of relief based on the circumstances of each individual case. The Court established a new rule to determine the form of relief: Relief should serve the ends of justice, and should be withheld if it appears likely to produce hardship or injustice to either party.
In the case, the Court held that plaintiff Henry Willard had not acted in bad faith by tendering United States Notes as down payment for the sale of property, even though the contract in question specified payment in gold or silver coin. Nonetheless, the contract specified payment in coin, and payment in coin must be made. The Court also held that fluctuations in the price of the property between the date on which the contract was agreed and the date the down payment was made do not create issues of equity.
Background
Colonel John Tayloe III built six two-story row houses facing Pennsylvania Avenue at 14th Street NW in the city of Washington, D.C., in 1816.Moeller and Weeks, AIA Guide to the Architecture of Washington, D.C., 2006, p. 133.Hogarth, Walking Tours of Old Washington and Alexandria, 1985, p. 28. Col. Tayloe leased them in 1817 to John Tennison, who turned them into a hotel under the name "Tennison's Hotel". The structures served as a hotel for the next three decades, the leaseholder and name changing several times: Williamson's Mansion Hotel, Fullers American House, and the City Hotel.
Col. Tayloe died on March 23, 1828,Hardy, Colonial Families of the Southern States of America, 1911, p. 502. and his son, Benjamin Ogle Tayloe, inherited the property.Watson, In Memoriam: Benjamin Ogle Tayloe, 1872, p. 29. Mr. Tayloe renovated the properties in 1843 and 1844. But by 1847 the structures were in disrepair and he was eager to find a tenant who would maintain them and run the enterprise profitably.Willard, "Henry Augustus Willard: His Life and Times," Records of the Columbia Historical Society, 1917, p. 244-245.Goode, Capital Losses: A Cultural History of Washington's Destroyed Buildings, 2003, p. 204.
A chance encounter led to a new lease and the eventual sale of the property. Tayloe had become engaged to Phoebe Warren, a wealthy young woman from Troy, New York. Miss Warren was traveling on the steamer Niagara (a vessel which traveled up and down the Hudson River) when she met Henry Willard, a Chief Steward aboard the vessel. Warren was so impressed with the way Willard handled the ship's and passengers' needs that she recommended him to her fiancé. Willard visited Washington, D.C., in October 1847 to meet with Tayloe, who subsequently leased the six buildings to him for use as a hotel. Willard combined the six structures into one building in 1850, added two additional stories, and called the new business the Willard Hotel.Tindall, Standard History of the City of Washington From a Study of the Original Sources, 1914, p. 353-354.Burlingame, With Lincoln in the White House, 2006, p. 197.
In 1854, Tayloe leased the property again to Willard, this time for 10 years at a rate of $1,200 per year.Willard v. Tayloe, 75 U.S. 557, 558. The lease contained a provision that Willard could purchase the entire property at any time during the life of the lease for $22,500—$2,000 in "cash" down payment and another $2,000 a year (plus interest) thereafter until the mortgage was paid.Willard v. Tayloe, 75 U.S. 557, 558-559.Goode, Capital Losses: A Cultural History of Washington's Destroyed Buildings, 2003, p. 205. During the lease, the American Civil War broke out and property values in Washington, D.C., skyrocketed.Willard v. Tayloe, 75 U.S. 557, 559. Nearly all Northern banks suspended the use of specie (money backed by gold deposits) due to bank runs, and the federal government followed suit shortly thereafter.Wilson, The Business of Civil War: Military Mobilization and the State, 1861-1865, 2006, p. 111; Johnson and Buel, Battles and Leaders of the Civil War, 1888, p. 484.McPherson, Battle Cry of Freedom: The Civil War Era, 1988, p. 444-447. In 1863, Congress passed the National Banking Act, which authorized the federal government to issue United States Notes (paper money) rather than coins made of gold or silver. The U.S. Notes were not convertible into gold, and quickly depreciated in value.Mitchell, A History of the Greenbacks, With Special Reference to the Economic Consequences of Their Issue: 1862-65, 1903, p. 82-99; Kregel, "The Rise of the Greenback - US Dollar - The Fortunes of Money," UNESCO Courier, January 1990; O'Leary, "Repeal of the Greenback Conversion Clause," American Journal of Economics and Sociology, October 1963.
On April 15, 1864, two weeks before the lease was due to expire, Willard tendered the down payment to Tayloe in paper money. Tayloe refused to issue the mortgage and turn over the deed, claiming that the hotel was now worth much more than $22,500 and that Willard had not paid in gold (the only form of cash available in 1854) as specified in the lease.Willard v. Tayloe, 75 U.S. 557, 559-562. Worse, due to inflation, the Notes were worth only about half what gold specie was worth.Harman, "Note: Alleviating Hardship Arising From Inflation and Court Congestion: Toward the Use of the Conditional Specific Performance Decree," Southern California Law Review, March 1983, p. 799. Willard sued for relief.Willard v. Tayloe, 75 U.S. 557, 561-562.
The Supreme Court of the District of Columbia held in favor of Tayloe.Willard v. Tayloe, 75 U.S. 557, 563. Willard appealed to the U.S. Supreme Court, which granted certiorari.
Decision
Majority opinion
Associate Justice Stephen Johnson Field delivered the unanimous opinion of the Court.Willard v. Tayloe, 75 U.S. 557, 564.
Justice Field concluded that contract law usually required courts to apply the terms of the contract as specified. But relief in cases of equity is a matter of discretion: "When a contract is of this character, it is the usual practice of courts of equity to enforce its specific execution upon the application of the party who has complied with its stipulations on his part or has seasonably and in good faith offered and continues ready to comply with them. But it is not the invariable practice. This form of relief is not a matter of absolute right to either party; it is a matter resting in the discretion of the court, to be exercised upon a consideration of all the circumstances of each particular case."Willard v. Tayloe, 75 U.S. 557, 565. That the initial contract was a fair one was not in dispute, Field noted: The sale price ($22,500) was much higher than the assessed value ($15,000), and no one could have foreseen that property values would more than double over the next 10 years.
The majority held that if "the contract [is] fair in its terms," discretion regarding relief may be exercised "if ... subsequent events, or even ... collateral circumstances... would work hardship or injustice to either of the parties."Willard v. Tayloe, 75 U.S. 557, 566. "[E]stablished doctrines and settled principles of equity" should be employed to determine the relief to be imposed, and the "specific relief will be granted when it is apparent from a view of all the circumstances of the particular case that it will subserve the ends of justice, and that it will be withheld when from a like view it appears that it will produce hardship or injustice to either of the parties."Willard v. Tayloe, 75 U.S. 557, 567.
Two issues now confronted the Court.
The first was the nature of the "cash" which the contract specified be used as the down payment in 1854. Justice Field concluded that "cash" meant gold coin, as no other form of legal tender existed in 1854.Willard v. Tayloe, 75 U.S. 557, 568. The creation of paper currency subsequent to the 1854 contract did not alleviate Willard of the requirement that the down payment be made in "cash" (e.g., gold coin), Field held. But the issue did not end there. Had Willard acted in good faith in offering the U.S. Notes? If not, then no relief was likely: The contract had expired, and Willard had not acted in a timely fashion to secure his rights under it by submitting a cash down-payment. But if he had acted in good faith, then Willard would be able to seek relief from courts of equity. The constitutionality of the National Banking Act was not at issue, the Court said, because the issue before the Court was not whether paper currency constituted "cash" but whether Willard acted in good faith (e.g., had assumed in good faith that U.S. Notes constitute cash, as Congress had said they did).Willard v. Tayloe, 75 U.S. 557, 568-569. Field laid out extensive reasons for why Willard had acted in good faith:Willard v. Tayloe, 75 U.S. 557, 569-570. Congress had declared the Notes to be legal tender for all debts, and the National Banking Act made no distinction between debts contracted before or after this change. Gold was no longer used for currency, and U.S. Notes constituted almost the entire currency. Almost every state court had upheld the constitutionality of the National Banking Act. Tayloe had left the city before the expiration of the contract, preventing Willard from discussing with him the nature of the "cash" to be used for the down payment. Willard had petitioned the courts in a timely matter, expressing his desire to fulfill the contract in good faith.
Since Willard had acted in good faith, the Court concluded, the contract was still in force.
The second issue confronting the Court was the effect which inflation had on the sale price of the property. The Court flatly refused to overturn the contract on grounds of equity simply because the assessed value had exceeded the anticipated rate of inflation.Willard v. Tayloe, 75 U.S. 557, 570. The parties had considered the effect inflation might have, and had agreed on the terms. No objection had been raised at any time by either party prior to agreement, and the contract was (as Field previously noted) fair.Willard v. Tayloe, 75 U.S. 557, 570-571. But the Court also recognized that forcing Tayloe to accept paper currency valued at one-half that of coin would also be unjust.
The Court also dispensed with a third issue, which Tayloe had raised. Willard had transferred a half-interest in the deed to the property to his brother. Tayloe argued this rendered the contract void because he had not agreed to make the brother a party to the agreement. But the majority rejected this argument: "[T]hat is a matter with which the defendant has no concern."Willard v. Tayloe, 75 U.S. 557, 572.
The majority remanded the case back to the district court with the instruction that Willard make the down payment, subsequent purchase price payments, interest payments, and yearly rent to Tayloe in gold and silver coin.Willard v. Tayloe, 75 U.S. 557, 574. Upon satisfaction of the down payment, Tayloe must convey the deed to Willard. The price of the property, however, was not adjusted.
Concurrence Chief Justice Salmon P. Chase and Associate Justice Samuel Nelson concurred in the decision regarding payment in gold and silver coin, but not the reasoning behind the holding.
Impact of the case
Henry Willard successfully purchased the property from Benjamin Ogle Tayloe, and the Willard Hotel became one of Washington, D.C.'s, landmark hotels.Denby, Grand Hotels: Reality & Illusion, 1998, p. 221. It still exists, although the name has changed to the Willard InterContinental Hotel, and it is one of the city's best-known luxury hotels.