Norman v. Baltimore Co United States v. Bankers Trust Co
| Decision Date | 18 February 1935 |
| Docket Number | Nos. 270,472,471,s. 270 |
| Parties | NORMAN v. BALTIMORE & O.R. CO. UNITED STATES et al. v. BANKERS' TRUST CO. et al. (two cases) |
| Court | U.S. Supreme Court |
[Syllabus from pages 240-242 intentionally omitted] Messrs. Emanuel Redfield and Dalton Dwyer, both of New York City, for petitioner Norman.
[Argument of Counsel from pages 243-248 intentionally omitted] Mr. Frederick H. Wood, of New York City, for respondent Baltimore & O.R. co.
[Argument of Counsel from pages 248-250 intentionally omitted] Mr. Homer S. Cummings, Atty. Gen., for the United States.
[Argument of Counsel from pages 251-272 intentionally omitted]
Mr. Stanley Reed, of Washington, D.C., for petitioner Reconstruction Finance Corporation.
[Argument of Counsel from pages 272-278 intentionally omitted]
Mr. Edward J. White, of St. Louis, Mo., for petitioners Trustees of Missouri Pacific Railroad Co.
Messrs. James H. McIntosh and Edward W. Bourne, both of New York City, for respondents.
[Argument of Counsel from pages 279-290 intentionally omitted]
These cases present the question of the validity of the Joint Resolution of the Congress, of June 5, 1933, with respect to the 'gold clauses' of private contracts for the payment of money. 48 Stat. 112 (31 USCA §§ 462, 463).
This resolution, the text of which is set forth in the margin,1 declares that '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 'against public policy.' Such provisions in obligations thereafter incurred are prohibited. The resolution provides that '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.'
'Approved, June 5, 1933, 4:40 p.m.'
In No. 270, the suit was brought upon a coupon of a bond made by the Baltimore & Ohio Railroad Company under date of February 1, 1930, for the payment of $1,000 on February 1, 1960, and interest from date at the rate
of 4 1/2 per cent. per annum, payable semiannually. The bond provided that the payment of principal and interest 'will be made * * * in gold coin of the United States of America of or equal to the standard of weight and fineness existing on February 1, 1930.' The coupon in suit, for $22.50, was payable on February 1, 1934. The complaint alleged that on February 1, 1930, the standard weight and fineness of a gold dollar of the United States as a unit of value 'was fixed to consist of twenty-five and eight-tenths grains of gold, nine-tenths fine,' pursuant to the Act of Congress of March 14, 1900 (31 Stat. 45, § 1, 31 USCA § 314), and that by the Act of Congress known as the Gold Reserve Act of 1934 (January 30, 1934, 48 Stat. 337), and by the order of the President under that act, the standard unit of value of a gold dollar of the United States 'was fixed to consist of fifteen and five-twenty-firsts grains of gold, nine-tenths fine,' from and after January 31, 1934. On presentation of the coupon, defendant refused to pay the amount in gold, or the equivalent of gold in legal tender of the United States which was alleged to be, on February 1, 1934, according to the standard of weight and fineness existing on February 1, 1930, the sum of $38.10, and plaintiff demanded judgment for that amount.
Defendant answered that by acts of Congress, and, in particular, by the Joint Resolution of June 5, 1933, defendant had been prevented from making payment in gold coin 'or otherwise than dollar for dollar, in coin or currency of the United States (other than gold coin and gold certificates),' which at the time of payment constituted legal tender. Plaintiff, challenging the validity of the Joint Resolution under the Fifth and Tenth Amendments, and article 1, § 1, of the Constitution of the United States, moved to strike the defense. The motion was denied. Judgment was entered for plaintiff for $22.50, the face of the coupon, and was affirmed upon appeal. The Court of Appeals of the state considered the federal question and
decided that the Joint Resolution was valid. 265 N.Y. 37, 191 N.E. 726, 62 A.L.R. 1523. This Court granted a writ of certiorari October 8, 1934, 293 U.S. 546, 55 S.Ct. 103, 79 L.Ed. —-.
In Nos. 471 and 472, the question arose with respect to an issue of bonds, dated May 1, 1903, of the St. Louis, Iron Mountain & Southern Railway Company, payable May 1, 1933. The bonds severally provided for the payment of 'One Thousand Dollars gold coin of the United States of the present standard of weight and fineness,' with interest from date at the rate of 4 per cent. per annum, payable 'in like gold coin semi-annually.' In 1917, Missouri Pacific Railroad Company acquired the property of the obligor subject to the mortgage securing the bonds. In March, 1933, the United States District Court, Eastern District of Missouri, approved a petition filed by the latter company under section 77 of the Bankruptcy Act (11 USCA § 205). In the following December, the trustees under the mortgage asked leave to intervene, seeking to have the income of the property applied against the mortgage debt, and alleging that the debt was payable 'in gold coin of the United States of the standard of weight and fineness prevailing on May 1, 1903.' Later, the Reconstruction Finance Corporation and the United States, as creditors of the debtor, filed a joint petition for leave to intervene, in which they denied the validity of the gold clause contained in the mortgage and bonds. Leave to intervene specially was granted to each applicant on April 5, 1934, and answers were filed. On the hearing, the District Court decided that the Joint Resolution of June 5, 1933, was constitutional and that the trustees were entitled, in payment of the principal of each bond, to $1,000 in money constituting legal tender. In re Missouri Pac. R. Co., 7 F.Supp. 1. Decree was entered accordingly, and the trustees (respondents here) took two appeals to the United States Circuit Court of Appeals.2
While these appeals were pending, this Court granted writs of certiorari November 5, 1934. U.S. v. Bankers' Trust Co., 293 U.S. 548, 55 S.Ct. 145, 79 L.Ed. —-.
The Joint Resolution of June 5, 1933, was one of a series of measures relating to the currency. These measures disclose not only the purposes of the Congress but also the situations which existed at the time the Joint Resolution was adopted and when the payments under the 'gold clauses' were sought. On March 6, 1933, the President, stating that there had been 'heavy and unwarranted withdrawals of gold and currency from our banking institutions for the purpose of hoarding' and 'extensive speculative activity abroad in foreign exchange' which had resulted 'in severe drains on the Nation's stocks of gold,' and reciting the authority conferred by section 5(b) of the Act of October 6, 1917 (40 Stat. 411 (50 USCA Appendix § 5 note)), declared 'a bank holiday' until March 9, 1933. On the same date, the Secretary of the Treasury, with the President's approval, issued instructions to the Treasurer of the United States to make payments in gold in any form only under license issued by the Secretary.
On March 9, 1933, the Congress passed the Emergency Banking Relief Act, 48 Stat. 1. All orders issued by the President or the Secretary of the Treasury since March 4, 1933, under the authority conferred by section 5(b) of the Act of October 6, 1917, were confirmed. That section was amended (12 USCA § 95a) so as to provide that, during any period of national emergency declared by the President, he might 'investigate, regulate, or prohibit,' by means of licenses or otherwise, 'any transactions in foreign exchange, transfers of credit between or payments by banking institutions as defined by the President, and export, hoarding, melting, or earmarking of gold or silver coin or bullion or currency, by any person within the United States or any place subject to the jurisdiction thereof.' The act also amended section 11 of the Federal Reserve Act (39 Stat. 752, 12 USCA § 248(n) so as to authorize the Secretary of the Treasury to
require all persons to deliver to the Treasurer of the United States 'any or all gold coin, gold bullion, and gold certificates' owned by them, and that the Secretary should pay therefor 'an equivalent amount of any other form of coin or currency coined or issued under the laws of the United States.' By Executive Order of March 10, 1933 (No. 6073), 12 USCA § 95 note, the President authorized banks to be reopened, as stated, but prohibited the removal from the United States, or any place subject to its jurisdiction, of 'any gold coin, gold bullion, or gold certificates, except in accordance with regulations prescribed by or under license issued by the Secretary of the Treasury.' By further Executive Order of April 5, 1933 (No. 6102), 12 USCA § 248 note, forbidding hoarding, all persons were required to deliver, on or before May 1, 1933, to stated banks, 'all gold coin, gold bullion, and gold certificates,' with certain exceptions, the holder to receive 'an equivalent amount of any other form of coin or currency coined or issued under the laws of the United States.' Another Order of April 20, 1933 (No. 6111), 12 USCA § 95 note, contained further requirements with respect to the acquisition and export of gold and to transactions in foreign exchange.
By section 43 of the Agricultural Adjustment Act of May 12, 1933 (48 Stat. 51 (31 USCA § 821)), it was provided that the President should have authority, upon the...
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