Case Name: City Bank Farmers Trust Company, Respondent, v. Bethlehem Steel Company, Appellant
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1935-05-31
Citations: 244 A.D. 634
Docket Number: 
Parties: City Bank Farmers Trust Company, Respondent, v. Bethlehem Steel Company, Appellant.
Judges: 
Reporter: Appellate Division Reports
Volume: 244
Pages: 634–645

Head Matter:
City Bank Farmers Trust Company, Respondent, v. Bethlehem Steel Company, Appellant.
First Department,
May 31, 1935.
William D. Whitney of counsel [Hoyt A. Moore with Mm on the brief; Cravath, De Gersdorff, Swaine & Wood, attorneys], for the appellant.
C. Alexander Capron of counsel [Kendall M. Barnes with Mm on the brief; Mitchell, Taylor, Gapron & Marsh, attorneys], for the respondent.

Opinion:
Glennon, J.
TMs is an appeal from an order, entered at Special Term, wMch granted summary judgment to the plaintiff. In its answer the defendant set up the Federal statutes wMch were recently enacted and now m force, govermng the question of currency.
There is little, if any, dispute between the plamtiff and the defendant. as to the facts. We must determine on this appeal the effect of the gold clause resolution adopted on June 5, 1933, in so far as it pertams to tMs controversy.
The plaintiff was organized under the laws of the State of New York, and the defendant was created by and under the laws of the State of Pennsylvania. The action is at law and is based upon the refusal of defendant to pay to the plaintiff a sum in excess of $1,500 to cover sixty coupons wMch were detached from certain of the defendant's bonds issued in 1912. The defendant is engaged in business exclusively in the United States. It is paid for its output in the currency of this country. The plaintiff, as trustee, purchased in the United States the bonds from which the coupons were detached. The coupons provided: " Bethlehem Steel Company will pay to Bearer at its office or agency in the City of New York, U. S. • A., Twenty-five Dollars United States Gold Coin, or in London, England, Five Pounds, Two Shillings, Ten Pence, or in Amsterdam, Holland, Sixty-two Guilders, Twenty-five Cents, being six months' interest then due on its First Lien and Refunding Mortgage Five Per Cent. Thirty-Year Gold Bond, Series A, No......" The bonds contained similar provisions. The plaintiff, well knowing that, if it presented the coupons in New York for payment, it would receive the sum of $1,500 which the defendant was prepared to pay, tendered the coupons to defendant's agent in Amsterdam, Holland, and demanded the dollar equivalent of Dutch guilders, which amounted to the siirn of $2,437.09. The guilder is on the gold basis. Under the old parity a coupon of the value of $25 equaled 62| guilders, whereas, now the same coupon has a value of about 38| guilders. It is conceded that the defense is based on the several statutes and executive orders of the Federal government relating to the currency, and primarily upon Public Resolution No. 10 of the 73d Congress, approved June 5,1933. (31 U. S. C. A. § 463; 48 U. S. Stat. at Large, 113.)
We believe that the points made by the appellant are sound and that the judgment should be modified.
In stating our reasons we do not think it necessary to refer to the history leading up to the enactment of the various statutes and the executive orders of the Federal government, since they are so ably covered in the comprehensive and exhaustive opinions of Mr. Chief Justice Hughes in the gold clause cases {Norman v. Baltimore & Ohio Railroad Co., 294 U. S. 240; Nortz v. United States, Id. 317; Perry v. United States, Id. 330). Perhaps it might not be amiss, however, to quote from the opinion of the Chief Justice in order to understand the basis of our decision. In Norman v. Baltimore & Ohio Railroad Co. {supra, 315) he said, in part: " The devaluation of the dollar placed the domestic economy upon a new basis. In the currency as thus provided, States and municipalities must receive their taxes; railroads, their rates and fares; public utilities, their charges for services. The income out of which they must meet their obligations is determined by the new standard. Yet, according to the contentions before us, while that income is thus controlled by law, their indebtedness on their * gold bonds ' must be met by an amount of currency determined by the former gold standard. Their receipts in this view, would be fixed on one basis; their interest charges, and the principal of their obligations, on another. It is common knowledge that the bonds issued by these obligors have generally contained gold clauses, and presumably they account for a large part of the outstanding obligations of that sort. . It is also common knowledge that a similar situation exists with respect to numerous industrial corporations that have issued their ' gold bonds ' and must now receive payments for their products in the existing currency. It requires no acute analysis or profound economic inquiry to disclose the dislocation of the domestic economy which would be caused by such a disparity of conditions in wliich, it is insisted, those debtors under gold clauses should be required to pay one dollar and sixty-nine cents in currency while respectively receiving their taxes, rates, charges and prices on the basis of one dollar of that currency." That portion of the joint resolution which is particularly applicable to this case reads as follows: " 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."
The bonds and coupons which were issued by the appellant are obligations payable in the money of the United States. While they provide for payment in sterling or guilders, they are, nevertheless, within the spirit and intent of the joint resolution. It is not contended by the appellant that the holders of these coupons, who are subjects of England and Holland, respectively, are governed by the terms of the joint resolution. In fact, the affidavits show that all payments have been made to bona fide holders in foreign countries in accordance with the terms of the agreement. It is claimed, however, and rightfully so, that the citizens of our country are controlled by the terms of the joint resolution particularly where, as here, the bonds were purchased in the United States by citizens thereof, and the parties who purchased them expected to be paid in dollars, the value of which was not to be governed by the currency of any other country. It would be exceedingly unjust to compel the appellant to meet its obligations on the basis of the old standard, when the entire income from its business is received in the existing currency.
We do not believe that it should be the policy of our courts in a litigation bétween two of our citizens to. construe that part of the resolution which is applicable to this case in a manner which may tend to nullify and destroy the legislative intent. Equity and justice demand that all who live under and enjoy the benefits of our government and its laws should be placed upon an equal footing, at least in so far as our currency is concerned. Mindful of its underlying purposes, good citizenship requires that the resolution should be accepted in a spirit which will not permit an unfair advantage to the creditor at the expense of the debtor.
The judgment and order appealed from should be modified by reducing the amount of the judgment as entered to the sum of $1,500, and as so modified affirmed, with costs of this appeal to the appellant.
Martin, P. J., and Townley, J., concur; Merrell, J., dissents and votes for affirmance.