Underwood received a
recess appointment from President
Abraham Lincoln on March 27, 1863, to a seat on the
United States District Court for the Eastern District of Virginia vacated by Judge
James Dandridge Halyburton. He was nominated to the same position by President Lincoln on January 5, 1864. Later, however, Underwood allowed Davis's
Northern supporters to post a $100,000 (~$ in ) bond, and released him from custody in May 1867. Underwood also presided over a grand jury in Norfolk that indicted Confederate General
Robert E. Lee on June 7, 1865, but General
Ulysses Grant and other federal government officials ignored the indictment as contrary to the surrender terms at Appomattox Courthouse. Salmon P. Chase, who by that time had become Chief Justice of the United States Supreme Court, reportedly worried that after Underwood had testified before Congress (the Joint Committee on Reconstruction) about being able to pack a jury, he was incapable of conducting politically sensitive trials of the former Confederate leaders. Other government officials apparently concurred, and failed to press the prosecutions. Early in the
American Civil War, Underwood affirmed the right of the United States government to confiscate wartime enemy property under the
Confiscation Act of 1862. His strong views on confiscation policy (what some called "retributive justice") put him at odds with the Supreme Court by 1869, and generated intense controversy in Virginia. Underwood's court confiscated more Confederate property than any other in the nation. Although Congress had stated its intention that confiscation only punish supporters of the rebellion and not their heirs, Underwood sought to eliminate the slaveholding class. rejecting Judge Underwood's interpretation that the law only required that the confiscation and sale be completed during the lifetime of the former rebel. In 1870, in
McVeigh v. United States, the same Supreme Court held that the federal legal proceeding had to prove that the owner supported the rebellion (the judge's declaration that such occurred was not enough) and that the contesting property owner could appear through counsel and a writ, although physically behind rebel lines in Richmond at the time the confiscation began. Then the
Virginia Court of Appeals in
Underwood v. McVeigh, overturned the transaction in which Underwood's wife Maria, through attorney Samuel F. Beach, had bought McVeigh's property. In 1865, Underwood was elected to replace retiring
United States Senator John S. Carlile by the
rump Virginia legislature in session at Alexandria, but was not admitted to his seat (nor was his colleague
Joseph Segar), since many senators did not want to set a precedent for allowing premature reentry of Confederate states into the Union. Because Underwood had not resigned from the bench in contemplation of that service, his lifetime federal judicial tenure continued. The
Virginia House of Delegates requested in February 1866 that Underwood relinquish that federal commission after his testimony against former Confederates before the federal Joint Committee on Reconstruction the previous month, but he refused. Underwood continued his highly critical and public remarks against former Confederates and their sympathizers, who had regained power in the state, and in favor of African American
suffrage. He published a letter that he wrote to
Thomas Bayne, a prominent African American politician in Norfolk, in October 1865, in which he endorsed full African American citizenship and suffrage. The previous year, Underwood had criticized Virginia laws that prohibited African Americans from testifying in court. In December 1866, the Union League of Norfolk petitioned Congress to replace Virginia's military governor
Francis H. Pierpont with Underwood. Davis' best defense was that he had renounced his United States citizenship and thus could not commit treason against the United States. Trial for major crimes such as treason at the time required two judges, both the United States District Judge for the geographic area (Davis was held at
Fort Monroe in Virginia) and the United States Supreme Court justice responsible for that circuit. Former abolitionist and United States Treasury secretary
Salmon P. Chase had become Chief Justice of the
United States Supreme Court in 1864, and thus responsible for the 4th Circuit, which included Virginia. In part because of his presidential ambitions (and movement toward the Democratic Party), Chase tried to avoid the trial, including by simply not showing up. When the
Fourteenth Amendment to the United States Constitution passed in 1868, Chase invited Davis' lawyer to a private conference and explained his theory that Section 3 of the new Amendment prohibited further punishment of former Confederates. When Davis' lawyer repeated this in open court, Chase dismissed the case against Davis, over Underwood's objection, and the government chose not to appeal the dismissal to the United States Supreme Court. Davis thus became a free man. ==Virginia Constitutional Convention==