Compania De Inversiones Internacionales v. Indus. Mortg. Bank of Finland

• Decision Date: 19 November 1935
• Citation: 198 N.E. 617,269 N.Y. 22
• Parties: COMPANIA DE INVERSIONES INTERNACIONALES v. INDUSTRIAL MORTGAGE BANK OF FINLAND.
• Court: New York Court of Appeals Court of Appeals

269 N.Y. 22

198 N.E. 617

COMPANIA DE INVERSIONES INTERNACIONALES

v.INDUSTRIAL MORTGAGE BANK OF FINLAND. ^*

Court of Appeals of New York.

Nov. 19, 1935.

Action by Compania De Inversiones Internacionaies against the Industrial Mortgage Bank of Finland (Suomen Teollisuus Hypoteekkipankki O. Y. Industri Hypoteksbanken I Finland A. B.). From a judgment of the Appellate Division in the First Judical Department affirming a judgment of the Special Term entered upon an order denying the motion of the plaintiff for judgment on the pleadings for the sum of $5,307.99, awarding to plaintiff only $3,135, and awarding costs and disbursements to the defendant, and an order granting the defendant's motion for the sum of $157.50 as part of its disbursements (244 App. Div. 778, 280 N. Y. S. 774), plaintiff appeals.

Affirmed.

Appeal from Supreme Court, Appellate Division, First department.

Phanor J. Eder and Frank Rashap, both of New York City, for appellant.

John J. Scott, Albridge C. Smith, Prescott R. Andrews, and William G. Botzow, all of New York City, for respondent.

FINCH, Judge.

The plaintiff appeals from a judgment of the Appellate Division, unanimously affirming a judgment denying the motion of the plaintiff for judgment on the pleadings in the sum of $5,307.99, with interest, and instead awarding judgment to the plaintiff for the sum of $3,135, without interest. The amount of the judgment had been tendered to the plaintiff by the defendant prior to the commencement of this action, but the plaintiff refused to surrender its bearer bonds on its part for this amount, and for this reason the judgment granted costs and disbursements to the defendant.

This appeal involves the question whether the joint resolution of the Congress (48 U. S. Stat. 112, 31 USCA §§ 462, 463), which in broad terms nullifies clauses in contracts requiring payment in gold of a certain standard of weight and fineness applies to an action on a foreign bond requiring such payment, issued and payable in dollars in the United States, where both plaintiff creditor and defendant debtor are nonresidents of the United States.

The plaintiff, a foreign corporation domiciled in South America, brought this action to recover the sum of $5,307.99, with interest, by reason of its ownership and possession of three $1,000 first mortgage collateral 7 per cent. sinking fund gold bonds of the Industrial Mortgage Bank of Finland, a foreign corporation domiciled in Finland, the defendant herein. The bonds are bearer bonds and payment is promised ‘in gold coin of the United States of America of the standard of weight and fineness as it existed on July 1, 1924.’ These bonds were issued in New York by the defendant and first became valid obligations in the hands of Lee, Higginson & Co., a domestic copartnership, paying agents of the defendant, pursuant to a trust agreement made between the defendant and the New York Trust Company, in the borough of Manhattan, city and State of New York. Both the principal and interest of these bonds are payable at the office of Lee, Higginson & Co., in the borough of Manhattan, city of New York, or at other specified places in the United States. The defendant has exercised its option to redeem these bonds at 101 on an interest day, namely, July 1, 1934. The bonds are guaranteed by the government of Finland, but this action is not against the guarantor.

The contract was made in New York, and the bonds are payable and the entire performance of the contract is to take place in the United States. If no other intention is revealed, it must be taken that it was intended by the parties that United States law should be applicable to this contract. The intention of the parties, express or implied, generally determines the law that governs a contract. Wilson v. Lewiston Mill Co., 150 N. Y. 314, 44 N. E. 959,55 Am. St. Rep. 680;Vander Horst v. Kittredge, 229 App. Div. 126, 132, 241 N. Y. S. 302. Cf. Sokoloff v. National City bank of New York, 239 N. Y. 158, 171, 145 N. E. 917, 37 A. L. R. 712. Moreover, in the absence of a revealed intention, if a contract is made and is to be performed in the same place, it is held that the law of that place governs. Benton v. Safe Deposit Bank, 255 N. Y. 260, 174 N. E. 648;Hutchinson v. Ward, 192 N. Y. 375, 85 N. E. 390,127 Am. St. Rep. 909. See Curtis v. Leavitt, 15 N. Y. 9, 227. True it is that the applicable substantive law is that existing at the time the contract is entered into, but, where a constitutional law has been enacted subsequently, such law, if announcing a public policy and intended to apply by the Congress, is also applicable to the contract.

Although we find that New York or United States law is applicable generally to this contract, we must consider the effect of the provision of the contract fixing a definite standard or measure of value in an attempt to prevent a depreciation in payment as a result of any national law devaluing the dollar.

We are thus brought directly to the question of the applicability of the joint resolution of the Congress to this controversy. In passing, it is to be noted that this action is not concerned with sovereigns, but with individuals. A foreign private corporation of Colombia is suing a foreign private corporation of Finland. The defendant bank is a private institution, and not a governmental agency. The fact that the government of Finland guarantees the bonds is immaterial here, since the suit is being brought against the defendant bank, the principal obligor, and not against the guarantor.

At the outset, when the obligation of the bonds in suit was created, it was then sanctioned by law, subject, however, to the power of the Congress to withdraw a part of that sanction pursuant to its power to regulate the monetary system. Norman v. Baltimore & O. R. R. Co., 294 U. S. 240, 55 S. Ct. 407, 79 L. Ed. 885, 95 A. L. R. 1352. If the claim of the plaintiff succeeds, the effect is to subject a citizen to such power of the Congress but to exempt a foreign debtor. The latter may disclaim the application of the joint resolution, but this right is denied to a domestic debtor. Also, to the extent that the plaintiff succeeds, it means to that extent there is here created a dual monetary system. If such result was within the power of the Congress to avoid, then its failure so to do appears unreasonable.

We are therefore only concerned with whether the Congress possessed the power to make and intended the joint resolution to bring within its terms the obligations at bar. Was the congressional intention to leave open for enforcement in our courts to foreign debtors the privilege of borrowing money and guaranteeing a fixed repayment against the dangers of inflation, while like privileges were denied domestic debtors? To what extent should there be inaugurated in the United States a dual monetary system, when the express purpose of the joint resolution was to have a single monetary system, where every dollar would be at parity in the payment of debts?

In considering more particularly the language of the joint resolution, we find the express wording sufficiently broad to apply to the obligations herein of this defendant. The text of the joint resolution, including the preamble, is, in part, as follows:

‘To assure uniform value to the coins and currencies of the United States.

‘Whereas the holding of or dealing in gold affect the public interest, and are therefore subject to proper regulation and restriction; and

‘Whereas the existing emergency has disclosed that provisions of obligations which purport to give the obligee a right to require payment in gold or a particular kind of coin or currency of the United States, or in an amount in money of the United States measured thereby, obstruct the power of the Congress to regulate the value of the money of the United States, and are inconsistent with the declared policy of the Congress to maintain at all times the equal power of every dollar, coined or issued by the United States, in the markets and in the payment of debts. Now, therefore, be it

‘Resolved by the Senate and House of Representatives of the United States of America in Congress assembled, That (a) every provision contained in or made with respect to any obligation which purports to give the obligee a right to require payment in gold or a particular kind of coin or currency, or in an amount in money of the United States measured thereby, is declared to be against public policy; and no such provision shall be contained in or made with respect to any obligation hereafter incurred. Every obligation, heretofore or hereafter incurred, whether or not any such provision is contained therein or made with respect thereto, 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.’ 31 USCA § 463.

The above so clearly and unambiguously covers the bonds in suit as to leave no occasion for construction. Such language shows...