This was a case that came up after the Civil War. The citation is: Keppel v. Petersburg R. Co., 14 Fed. Cas. 357, Case No. 7,722, [Chase, 167; 3 Am. Law Rev. 389; 20 Leg. Int. 36] Circuit Court, D. Virginia. May Term, 1868.
The facts of the case are as follows: “[Catharine C.] Keppel was the owner of stock in the Petersburg Railroad Company, to the amount of thirty thousand four hundred dollars, prior to the year 1861. The company was chartered by and running a railroad within the territory of Virginia. Keppel was a citizen and resident of [Philadelphia] Pennsylvania, and the company having declared dividends during the war, payable to its stockholders, they were not claimed by nor paid to her. The dividends were declared by resolution of the directors that a dividend of such a per cent in dollars would be paid on such a day to all stockholders, and the dividends earned by her stock amounted in the aggregate to thirty-three thousand one hundred and thirty-six dollars. While these dividends were being earned and declared, the congress of the Confederate States had passed two acts, one providing for the issue of what were known as Confederate treasury notes, and the other declaring the process by which the property of enemies to the Confederate States might be sequestrated and sold, and the proceeds of sale paid into the treasury of the Confederate States. The first law was executed by the issue of the currency provided for, which at once went into general use and was received in all transactions between man and man. The railroad continued in the transaction of its business as a common carrier receiving in pay for its services these notes which thus in course of time represented its entire earnings. the sequestration act was also enforced. The proper proceedings were had in the district court of the Confederate States for the district of Virginia, for the sequestration of Keppel’s stock, and it was condemned in due form of law, and sold by public auction. The proceeds of sale and the dividends earned, were paid into the treasury of the Confederate States. After the war was over, the railroad promptly ignored this sale and acknowledged Keppel as the true owner of the stock, but declined to account for the dividends on the ground that they had already been paid over to the Confederate States, a government de facto, or of paramount force, and claimed that they could not be made liable to pay them over again, whereupon, Keppel having died in the meantime, her administrators, the complainants, filed their bill in the circuit court of the United States for the district of Virginia against the company, claiming to be paid the dividend non obstante the sequestration, and that they having been declared in dollars, must be paid in the only dollars known to the laws of the United States. To this the defendant set up in defense the sequestration, and that the dollars meant Confederate currency dollars, which were greatly less in value than legal dollars of the United States. The cause came on on bill and answer.” [14 Fed. Cas. 357, 358]
Chief Justice Salmon P. Chase was the circuit justice who presided over the case. In his decision, he wrote, “It appears … that the company itself regarded the confiscation act as null and of no force, so far as the sales of the ninety shares were concerned. That sale was treated as a nullity, and the title of the purchasers under it as worthless. But the company claims–1st. That payments of dividends, made under the same act, to the receiver and the purchasers must be upheld as valid payments; and 2d. If this claim be disallowed, then that the liability of the company was only to pay, on demand, the dividends of Mrs. Keppel, in such currency as was necessarily received, and no demand having been made, except by the commencement of this suit after that currency had become wholly worthless, no decree can now be made against the company. The first of these propositions rests upon the premises that the Confederate organization was a government de facto, and that acts in obedience to its authority must be presumed to have been done under the compulsion of superior force, by reason of which the actors are discharged from all ulterior responsibility. Of this it may be observed, in the first place, that the term de facto, as descriptive of a government, has no fixed and definite sense. It is, perhaps, most correctly used as signifying a government completely, though only temporarily, established in place of the lawful or regular government, occupying its capital and exercising its power.” [14 Fed. Cas. 357, 370] He tells us, “In this sense certainly, the rebel government was never a de facto government. It never held the national capital. It never asserted any authority to represent the nation. It was only what it professed to be, a revolutionary organization seeking to establish a Confederacy of states, disconnected from the United States, and dependent wholly for success upon the success of the revolution. The term, however, is often used, and perhaps more frequently, in a sense less precise, as signifying any organized government established for the time over a considerable territory, in exclusion of the regular government. A de facto government of this sort is not distinguishable in principle from other unlawful combinations. It is distinguishable in fact mainly by power, and in territorial control, and by the policy usually adopted in relation to it by the national government.” [14 Fed. Cas. 357, 370-371]
He next discusses treason: “Treason in England is not committed against the lawful government by acts of hostility done in support of a de facto government, strictly so called. This is the rule established by the statute 11 Hen. VII, passed with reference to the frequent changes in the royal authority during the civil wars of York and Lancaster. And the reason of the rule, doubtless, extended to acts done under the parliament, and the protector, while in possession of the supreme authority in England; though the benefit of it was denied to may, and in a most conspicuous instance to Sir Henry Vane. And it may well be doubted whether in this country treason against the United States could be committed in obedience to a usurping president and congress, exercising unconstitutional and unlawful power at the seat of the national government. But it cannot be maintained that acts against the king committed in obedience to a usurper temporarily in possession of a part of the kingdom, would not be treason in England; or that levying war against the United States by persons, however combined and confederated, (even though successful in establishing their actual authority in several states) would not be treason here.” [14 Fed. Cas. 357, 371]
As to the effect of acts done under the authority of the confederate government, Chase tells us it’s very tough to apply a general rule that covers all circumstances. “But it may be safely said that transactions of the usurping authority, prejudicial to the interests of citizens of other states excluded by the insurrection and by the policy of the national government from the care and oversight of their own interests within the states in rebellion can not be upheld in the courts of that government.” [Ibid.]
When it comes to the case at hand, “Mrs. Keppel was the undoubted owner of three hundred and four shares of the stock of the Petersburg Railroad Company, and was clearly entitled to her just proportion of its earnings. But she was denounced as an alien enemy by the Confederate government. She was excluded from all control of her stock, and all receipt of dividends. And more than this, the stock was sequestrated, or rather confiscated, and partly sold, and the dividends paid to the purchasers, and to a person called a receiver, appointed under the rebel authority. Can it be maintained that her right to the dividends upon her stock was defeated by these transactions? We think not.” [Ibid.]
As to the confederate government itself, Chase ruled, “We can not regard the Confederate government as a de facto government in any such sense that its acts are entitled to judicial recognition as valid. On the contrary, we are obliged to regard it as a combination or unlawful confederacy organized for the overthrow of the national government, and its acts, for the confiscation or sequestration of the private property of the citizens of the United States, as null and of no effect.” [Ibid.]
The railroad was ordered to pay, in United States dollars, all the dividends owed plus interest.
This is one of the court decisions that ruled the confederacy to be an illegal organization. It could not be an illegal organization if unilateral secession was a legal act. Therefore, by inference from this particular ruling, unilateral secession is an illegal act, and any acts flowing from that illegal act are themselves null and void.