Source: https://www.law.cornell.edu/supremecourt/text/294/330/
Timestamp: 2016-02-06 01:09:11
Document Index: 138778447

Matched Legal Cases: ['§ 1', '§ 462', '§ 463', '§ 821', '§ 43', '§ 12', '§ 821', '§ 1', '§ 314', '§ 2', '§ 5', '§ 95', '§ 12', '§ 824', '§ 95']

PERRY v. UNITED STATES. | LII / Legal Information Institute
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294 U.S. 330 (55 S.Ct. 432, 79 L.Ed. 912)
Argued: Jan. 10, 11, 1935.
[HTML] Syllabus from pages 330-332 intentionally omitted
Argument of Counsel from pages 333-341 intentionally omitted
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 19331938.' 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 provided: 'The principal and interest hereof are payable in United States gold coin of the present standard of value.'
'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? '2. Is the United States, as obligor in a Fourth Liberty Loan 4 1/4% gold bond, Series of 19331938, 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?'
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.
Section 1(a), 31 USCA § 463(a).
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 contracts as are individuals. If they repudiate their obligations, it is as much repudiation, with all the wrong and reproach that term implies, as it would be if the repudiator had been a State or a municipality or a citizen.'
The argument in favor of the Joint Resolution, as applied to government bonds, is in substance that the government cannot by contract restrict the exercise of a sovereign power. But the right to make binding obligations is a competence attaching to sovereignty.
In the United States, sovereignty resides in the people who act through the organs established by the Constitution. Chisholm v. Georgia, 2 Dall. 419, 471, 1 L.Ed. 440; Penhallow v. Doane's Administrators, 3 Dall. 54, 93, 1 L.Ed. 507; McCulloch v. Maryland, 4 Wheat. 316, 404, 405, 4 L.Ed. 579; Yick Wo v. Hopkins, 118 U.S. 356, 370, 6 S.Ct. 1064, 30 L.Ed. 220. The Congress as the instrumentality of sovereignty is endowed with certain powers to be exerted on behalf of the people in the manner and with the effect the Constitution ordains. The Congress cannot invoke the sovereign power of the people to override their will as thus declared. The powers conferred upon the Congress are harmonious. The Constitution gives to the Congress the power to borrow money on the credit of the United States, an unqualified power, a power vital to the government, upon which in an extremity its very life may depend. The binding quality of the promise of the United States is of the essence of the credit which is so pledged. Having this power to authorize the issue of definite obligations for the payment of money borrowed, the Congress has not been vested with authority to alter or destroy those obligations. The fact that the United States may not be sued without its consent is a matter of procedure which does not affect the legal and binding character of its contracts. While the Congress is under no duty to provide remedies through the courts, the contractual obligation still exists, and, despite infirmities of procedure, remains binding upon the conscience of the sovereign. Lynch v. United States, supra, pages 580, 582, of 292 U.S. 54 S.Ct. 840.
Plaintiff computes his claim for $16,931.25 by taking the weight of the gold dollar as fixed by the President's proclamation of January 31, 1934 (No. 2072, 31 USCA § 821 note), under the Act of May 12, 1933, § 43(b)(2), 48 Stat. 52, 53, as amended by the Act of January 30, 1934, § 12, 48 Stat. 342, (31 USCA § 821), that is, at 15 5/21 grains nine-tenths fine, as compared with the weight fixed by the Act of March 14, 1900, § 1, 31 Stat. 46 (31 USCA § 314), or 25.8 grains nine-tenths fine. But the change in the weight of the gold dollar did not necessarily cause loss to the plaintiff of the amount claimed. The question of actual loss cannot fairly be determined without considering the economic situation at the time the government offered to pay him the $10,000, the face of his bond, in legal tender currency. The case is not the same as if gold coin had remained in circulation. That was the situation at the time of the decisions under the legal tender acts of 1862 and 1863. Bronson v. Rodes, 7 Wall. 229, 251, 19 L.Ed. 141; Trebilcock v. Wilson, 12 Wall. 687, 695, 20 L.Ed. 460; Thompson v. Butler, 95 U.S. 694, 696, 697, 24 L.Ed. 540. Before the change in the weight of the gold dollar in 1934, gold coin had been withdrawn from circulation.
The Congress had authorized the prohibition of the exportation of gold coin and the placing of restrictions upon transactions in foreign exchange. Acts of March 9, 1933, 48 Stat. 1 (Emergency Banking Relief Act, § 2, amending Trading with the Enemy Act, § 5(b), 12 USCA § 95a); January 30, 1934, 48 Stat. 337 (Gold Reserve Act of 1934, § 12, 31 USCA § 824). Such dealings could be had only for limited purposes and under license. Executive Orders of April 20, 1933 (No. 6111), August 28, 1933 (No. 6260), and January 15, 1934 (No. 6560), 12 USCA § 95 note; Regulations of the Secretary of the Treasury, January 30 and 31, 1934. That action the Congress was entitled to take by virtue of its authority to deal with gold coin as a medium of exchange. And the restraint thus imposed upon holders of gold coin was incident to the limitations which inhered in their ownership of that coin and gave them no right of action. Ling Su Fan v. United States, 218 U.S. 302, 310, 311, 31 S.Ct. 21, 23, 54 L.Ed. 1049, 30 L.R.A.(N.S.) 1176. The Court said in that case: 'Conceding the title of the owner of such coins, yet there is attached to such ownership those limitations which public policy may require by reason of their quality as a legal tender and as a medium of exchange. These limitations are due to the fact that public law gives to such coinage a value which does not attach as a mere consequence of intrinsic value. Their quality as a legal tender is an attribute of law aside from their bullion value. They bear, therefore, the impress of sovereign power which fixes value and authorizes their use in exchange. * * * However unwise a law may be, aimed at the exportation of such coins, in the face of the axioms against obstructing the free flow of commerce, there can be no serious doubt but that the power to coin money includes the power to prevent its outflow from the country of its origin.' The same reasoning is applicable to the imposition of restraints upon transactions in foreign exchange. We cannot say, in view of the conditions that existed, that the Congress having this power exercised it arbitrarily or capriciously. And the holder of an obligation, or bond, of the United States, payable in gold coin of the former standard, so far as the restraint upon the right to export gold coin or to engage in transactions in foreign exchange is concerned, was in no better case than the holder of gold coin itself.
I do not doubt that the gold clause in the government bonds, like that in the private contracts just considered, calls for the payment of value in money, measured by a stated number of gold dollars of the standard defined in the clause, Feist v. Socie te Intercommunale Belge d'Electricite , (1934) A.C. 161, 170173; Serbian and Brazilian Bond Cases, P.C.I.J., series A., Nos. 20, 21, pp. 3234, 109119. In the absence of any further exertion of governmental power, that obligation plainly could not be satisfied by payment of the same number of dollars, either specie or paper, measured by a gold dollar of lesser weight, regardless of their purchasing power or the state of our internal economy at the due date.