Perry v. United States

Decision Date18 February 1935
Docket NumberNo. 532,532
PartiesPERRY v. UNITED STATES
CourtU.S. Supreme Court

[Syllabus from pages 330-332 intentionally omitted] Mr. John M. Perry, of New York City, for Perry.

[Argument of Counsel from pages 333-341 intentionally omitted]

Page 341

Messrs. Homer S. Cummings, Atty. Gen., and Angus D. MacLean, Asst. Sol. Gen., of Washington, D.C., for the United States.

[Argument of Counsel from pages 341-346 intentionally omitted]

Page 346

Mr. Chief Justice HUGHES delivered the opinion of the Court.

The certificate from the Court of Claims shows the following facts:

Plaintiff brought suit as the owner of an obligation of the United States for $10,000, known as 'Fourth Liberty Loan 4 1/4% Gold Bond of 19331938.' This bond was issued pursuant to the Act of September 24, 1917, § 1 et seq. (40 Stat. 288), as amended, and Treasury Department circular No. 121 dated September 28, 1918. The bond

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provided: 'The principal and interest hereof are payable in United States gold coin of the present standard of value.'

Plaintiff alleged in his petition that at the time the bond was issued, and when he acquired it, 'a dollar in gold consisted of 25.8 grains of gold .9 fine'; that the bond was called for redemption on April 15, 1934, and, on May 24, 1934, was presented for payment; that plaintiff demanded its redemption 'by the payment of 10,000 gold dollars each containing 25.8 grains of gold .9 fine'; that defendant refused to comply with that demand; and that plaintiff then demanded '258,000 grains of gold .9 fine, or gold of equivalent value of any fineness, or 16,931.25 gold dollars each containing 15 5/21 grains of gold .9 fine, or 16,931.25 dollars in legal tender currency'; that defendant refused to redeem the bond 'except by the payment of 10,000 dollars in legal tender currency'; that these refusals were based on the Joint Resolution of the Congress of June 5, 1933, 48 Stat. 113 (31 USCA §§ 462, 463), but that this enactment was unconstitutional, as it operated to deprive plaintiff of his property without due process of law; and that, by this action of defendant, he was damaged 'in the sum of $16,931.25, the value of defendant's obligation,' for which, with interest, plaintiff demanded judgment.

Defendant demurred upon the ground that the petition did not state a cause of action against the United States.

The Court of Claims has certified the following questions:

'1. Is the claimant, being the holder and owner of a Fourth Liberty Loan 4 1/4 bond of the United States, of the principal amount of $10,000, issued in 1918, which was payable on and after April 15, 1934, and which bond contained a clause that the principal is 'payable in United States gold coin of the present standard of value', entitled to receive from the United States an amount in legal tender currency in excess of the face amount of the bond?

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'2. Is the United States, as obligor in a Fourth Liberty Loan 4 1/4% gold bond, Series of 19331938, as stated in Question One liable to respond in damages in a suit in the Court of Claims on such bond as an express contract, by reason of the change in or impossibility of performance in accordance with the tenor thereof, due to the provisions of Public Resolution No. 10, 73rd Congress, abrogating the gold clause in all obligations?'

First. The Import of the Obligation. The bond in suit differs from an obligation of private parties, or of states or municipalities, whose contracts are necessarily made in subjection to the dominant power of the Congress. Norman v. Baltimore & Ohio R. Co., 294 U.S. 240, 55 S.Ct. 407, 79 L.Ed. 885, decided this day. The bond now before us is an obligation of the United States. The terms of the bond are explicit. They were not only expressed in the bond itself, but they were definitely prescribed by the Congress. The Act of September 24, 1917, both in its original and amended form, authorized the moneys to be borrowed, and the bonds to be issued, 'on the credit of the United States,' in order to meet expenditures needed 'for the national security and defense and other public purposes authorized by law.' Section 1, 40 Stat. 288, as amended by Act April 4, 1918, § 1, 40 Stat. 503, 31 USCA § 752. The circular of the Treasury Department of September 28, 1918, to which the bond refers 'for a statement of the further rights of the holders of bonds of said series,' also provided that the principal and interest 'are payable in United States gold coin of the present standard of value.'

This obligation must be fairly construed. The 'present standard of value' stood in contradistinction to a lower standard of value. The promise obviously was intended to afford protection against loss. That protection was sought to be secured by setting up a standard or measure of the government's obligation. We think that the reasonable import of the promise is that it was intended

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to assure one who lent his money to the government and took its bond that he would not suffer loss through depreciation in the medium of payment.

The government states in its brief that the total unmatured interest-bearing obligations of the United States outstanding on May 31, 1933 (which it is understood contained a 'gold clause' substantially the same as that of the bond in suit), amounted to about twenty-one billions of dollars. From statements at the bar, it appears that this amount has been reduced to approximately twelve billions at the present time, and that during the intervening period the public debt of the United States has risen some seven billions (making a total of approximately twenty-eight billions five hundred millions) by the issue of some sixteen billions five hundred millions of dollars 'of non-gold-clause obligations.'

Second. The Binding Quality of the Obligation. The question is necessarily presented whether the Joint Resolution of June 5, 1933, 48 Stat. 113 (31 USCA §§ 462, 463), is a valid enactment so far as it applies to the obligations of the United States. The resolution declared that provisions requiring 'payment in gold or a particular kind of coin or currency' were 'against public policy,' and provided that 'every obligation, heretofore or hereafter incurred, whether or not any such provision is contained therein,' shall be discharged 'upon payment, dollar for dollar, in any coin or currency which at the time of payment is legal tender for public and private debts.' This enactment was expressly extended to obligations of the United States and provisions for payment in gold, 'contained in any law authorizing obligations to be issued by or under authority of the United States,' were repealed.1 Section 1(a), 31 USCA § 463(a).

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There is no question as to the power of the Congress to regulate the value of money: that is, to establish a monetary system and thus to determine the currency of the country. The question is whether the Congress can use that power so as to invalidate the terms of the obligations which the government has theretofore issued in the exercise of the power to borrow money on the credit of the United States. In attempted justification of the Joint Resolution in relation to the outstanding bonds of the United States, the government argues that 'earlier Congresses could not validly restrict the 73rd Congress from exercising its constitutional powers to regulate the value of money, borrow money, or regulate foreign and interstate commerce'; and, from this premise, the government seems to deduce the proposition that when, with adequate authority, the government borrows money and pledges the credit of the United States, it is free to ignore that pledge and alter the terms of its obligations in case a later Congress finds their fulfillment inconvenient. The government's contention thus raises a question of far greater importance than the particular claim of the plaintiff. On that reasoning, if the terms of the government's bond as to the standard of payment can be repudiated, it inevitably follows that the obligation as to the amount to be paid may also be repudiated. The contention necessarily imports that the Congress can disregard the obligations of the government at its discretion, and that, when the government borrows money, the credit of the United States is an illusory pledge.

We do not so read the Constitution. There is a clear distinction between the power of the Congress to control or interdict the contracts of private parties when they interfere with the exercise of its constitutional authority

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and the power of the Congress to alter or repudiate the substance of its own engagements when it has borrowed money under the authority which the Constitution confers. In authorizing the Congress to borrow money, the Constitution empowers the Congress to fix the amount to be borrowed and the terms of payment. By virtue of the power to borrow money 'on the credit of the United States,' the Congress is authorized to pledge that credit as an assurance of payment as stipulated, as the highest assurance the government can give, its plighted faith. To say that the Congress may withdraw or ignore that pledge is to assume that the Constitution contemplates a vain promise; a pledge having no other sanction than the pleasure and convenience of the pledgor. This Court has given no sanction to such a conception of the obligations of our government.

The binding quality of the obligations of the government was considered in the Sinking Fund Cases, 99 U.S. 700, 718, 719, 25 L.Ed. 496. The question before the Court in those cases was whether certain action was warranted by a reservation to the Congress of the right to amend the charter of a railroad company. While the particular action was sustained under this right of amendment, the Court took occasion to state emphatically the obligatory character of the contracts of the United States. The Court said: 'The United States are as much bound by their...

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