GUARANTY TRUST CO., TRUSTEE, v. HENWOOD, TRUSTEE, ET AL.
No. 384
Supreme Court of the United States
Argued February 8, 9, 1939. - Decided May 22, 1939.
307 U.S. 247
The decrees in Nos. 76 and 77 are affirmed; that in No. 661 is reversed.
Nos. 76 and 77, affirmed.
No. 661, reversed.
No. 384. Argued February 8, 9, 1939.—Decided May 22, 1939.*
* Together with No. 495, Chemical Bank & Trust Co., Trustee, v. Henwood, Trustee, also on writ of certiorari to the Circuit Court of Appeals for the Eighth Circuit.
Messrs. A. H. Kiskaddon and Carleton S. Hadley for Henwood, Trustee, and Mr. George L. Buland, with whom Mr. Ben C. Dey was on the brief, for the Southern Pacific Co., respondents in No. 384,—on the reargument and the original argument.
Mr. Alfred H. Phillips, on the reargument and on the original argument, for petitioner in No. 495.
Mr. Carleton S. Hadley, with whom Mr. A. H. Kiskaddon was on the briefs, on the reargument and on the original argument, for respondents in No. 495.
By leave of Court, briefs of amici curiae were filed by Solicitor General Jackson, Messrs. Paul A. Freund, Ed-
MR. JUSTICE BLACK delivered the opinion of the Court.
In the bankruptcy reorganization of the St. Louis Southwestern Railway Company, a Missouri Corporation, petitioners filed claims for bondholders. They asserted a right under the bonds to be paid in Dutch guilders, and asked that their claims—based upon guilder value—be allowed for $37,335,525.12. The trustee in bankruptcy contended, and the courts below held that the Joint Resolution of June 5, 1933,1 made the bonds dischargeable by payment of current legal tender United States money,2 and petitioners’ claims were accordingly allowed for $21,638,000.00, the face amount of their bonds in dollars.
These bonds, secured by a trust mortgage, were issued and sold in the United States in 1912. Purchasers paid and the railroad received United States dollars, and until 1936 interest was regularly paid in dollars.
The asserted right to guilder payment rests upon a provision of the bonds concededly granting holders an
“... the ... Bonds may be payable, at the option of the holder, both as to principal and interest, at some one or more of the following places in addition to the City of New York, аnd in the moneys current at such respective places of payment, at the following rates of exchange or equivalents of $1,000, viz.: In London, England, £205.15.2 Sterling, or in Amsterdam, Holland, 2490 guilders, or in Berlin, Germany, 4200 marks, D. R. W., or in Paris, France, 5180 francs; ...”
The bonds themselves provide:
“St. Louis Southwestern Railway Company, ... for value received, hereby promises to pay to the bearer, or, if registered, to the registered holder, of this bond, on the first day of January, 1952, at its office or agency in the Borough of Manhattan, City and State of New York, One Thousand Dollars in gold coin of the United States of America, of or equal to the standard of weight and fineness as it existed January 1, 1912, or in London, England, £205 15s 2d, or in Amsterdam, Holland, 2490 guilders, or in Berlin, Germany, marks 4200, D. R. W., or in Paris, France, 5180 francs, and to pay interest thereon, at the rate of five per cent. per annum, from the first day of January, 1912, in said respective currencies, semi-annually . . .”
Since the parties agree that the terms of the bonds granted holders an option to elect payment in guilders, we must determine whether, despite this option, the Joint Resolution operated to make the bonds dischargeable in current United States legal tender—a dollar of legal tender to be repaid for every dollar borrowed.
Having thus unmistakably stamped illegality upon both outstanding and future contractual provisions designed to require payment by debtors in a frozen money value rather than in a dollar of legal tender current at date of payment, Congress—apparently to obviate any possible misunderstanding as to the breadth of its objective—added, with studied precision, a catchall second sentence sweeping in “every obligation,” existing or future, “payable in money of the United States,” irrespec-
States, including Federal Reserve notes and circulating notes of Federal Reserve banks and national banking associations.
“Sec. 2. The last sentence of paragraph (1) of subsection (b) of section 43 of the Act entitled ‘An Act to relieve the existing national economic emergency by increasing agricultural purchasing power, to raise revenue for extraordinary expenses incurred by reason of such emergency, to provide emergency relief with respect to agricultural indebtedness, to provide for the orderly liquidation of joint-stock land banks, and for other purposes‘, approved May 12, 1933, is amended to read as follows:
“‘All coins and currencies of the United States (including Federal Reserve notes and circulating notes of Federal Reserve banks and national banking associations) heretofore or hereafter coined or issued, shall be legal tender for all debts, public and private, public charges, taxes, duties, and dues, except that gold coins, when below the standard weight and limit of tolerance provided by law for the single piece, shall be legal tender only at valuation in proportion to their actual weight.’
“Approved, June 5, 1933, 4.40 p. m.”
These bonds provide that, “For a description of the property and franchises mortgaged, the nature and extent of the security, the rights of the holders of said bonds under the same and the terms and conditions upon which such bonds are issued and secured, reference is made to the ... Mortgage.” In determining the nature of the railroad‘s obligation, we, accordingly, look both to the mortgage and the bonds.
It appears that—
The railroad executed the mortgage in 1912 to the Guaranty Trust Company of New York as trustee, to secure forty-year mortgage bonds “limited to an aggregate principal amount of One Hundred Million Dollars ($100,000,000.00) at any one time outstanding ... to be payable on the first day of January, 1952, with interest at the rate of five per cent per annum payable semi-annually . . .“; the bonds are payable optionally in foreign currencies as indicated above; registration in New York is required of bonds subjected to registration; to be valid all bonds must be authenticated by the Guaranty Trust Company in New York; non-coupon bonds and
The mortgaged property is located in the United States; the trustee was required to be a New York trust company; enforcement of the trust security, collection of bonds and interest, employment of attorneys, institution of legal proceedings and distribution of assembled assets, were all responsibilities placed upon the trustee located in New York, and obviously contemplated that any necessary judicial prоceedings would be had in this country under the governing law of the United States. Both the mortgage and bonds are domestic obligations, and the law of this country must determine their interpretation, their nature, and the obligations enforceable under them.4 The Joint Resolution thus must govern if the
bonds are, within its terms, “obligation[s] ... payable in money of the United States.”
In their construction of the bonds, petitioners urge that each of the alternative promises to pay in a foreign currency is a separate and independent “obligation” to pay. From this, they argue that the only “obligation” for which enforcement is here sought is one “payable” in guilders which must be treated as thоugh it were an entirely separate and independent promise of the railroad. But the railroad undertook only a single obligation to repay the money it borrowed. Repayment of that money might be called for in any one, but only one, of the five different types of money. This, however, did not divide the railroad‘s undertaking to repay into five separate and independent obligations to repay the same loan. Payment under the contract in any one of the currencies selected by the bondholder would discharge the entire single obligation of the debtor. Payment in guilders, after payment in guilders was elected, would nonetheless discharge an obligation which prior to such election and payment was an obligation also payable in United States dollars. The language of the Joint Resolution was intended to refer to a monetary obligation in its entirety. That which the Joint Resolution made dischargeable was the debt—the monetary obligation to pay. This debtor‘s obligation was a monetary obligation. The foreign currencies promised were not bartered for as commodities, but their function was that of money to be paid in countries in which they were legal tender and upon them interest was to be paid.5 Interest is not pаid on commodities but on monetary obligations. And these
The point is made, however, that this obligation of the railroad was never payable in United States money because the option to receive payment in dollars has never been exercised. Conceding that one meaning of “payable” is “capable of being paid,” petitioners nevertheless urge that the use of this meaning should not be attributed to Congress, but that instead we must narrow and restrict “payable” to mean an absolute and unconditional obligation. But the railroad, since the day its bonds were issued, was under obligation to hold itself prepared to pay United States money—or any one of the optional currencies. And, on the date the Resolution went into effect, no election had been made so that the railroad was, at that time, still under obligation to pay dollars. If prior to election by the holders the railroad was under no obligation to pay United States money, it was likewise under no obligation to pay any money, United States or otherwise, althоugh it then had outstanding a $100,000,000.00 mortgage on all of its properties. Neither in logic nor law can it be said that the railroad‘s promise, secured by a $100,000,000.00 mortgage, to pay in any one of five currencies was not an obligation payable in any currency until express election of payment in a particular currency was made. Legal rights and obligations came into existence when the contracts for purchase of the bonds were completed. Since the words “obligation[s] ... payable in money of the United States” are clearly broad enough to require inclusion of these multiple currency obligations, there is no justification here for restricting the meaning of these words of the Resolution. Consideration of the evils aimed at leaves no doubt but that such restriction would do violence to the intention of the Congress.
The report of the Senate Committee on the Resolution opens with words revealing its purpose. It is there stated
The mischief Congress intended to end will not end if the multiple currency provision of these bonds is held to
When the Joint Resolution was enacted the railroad had by its promise assumed obligations to pay its bonds in dollars; its obligations were therefore “payable in money of the United States” and so fall squarely within the letter, as well as the spirit of the Resolution making obligations dischargeable by payment of current United States legal tender money.
There remains the argument of petitioners that the Resolution, if construed to forbid enforcement of the option to demand payment in guilders, nullifies contractual rights in violation of the Fifth Amendment to the Constitution. But, as has alreаdy been pointed out, the contracts on which the claims for guilders rest are domestic obligations, controlled by and to be interpreted under the law of the United States. And contracts be-
Under these powers, Congress was authorized—as it did in the Resolution—to establish, regulate and control the national currency and to make that currency legal tender money for all purposes, including payment of domestic dollar obligations with options for payment in foreign currencies. Whether it was “wise and expedient” to do so was, under the Constitution, a determination to be made by the Congress.11 The Resolution that made these creditors’ bonds dischargeable in the same United States legal tender which other creditors in this country must acceрt, does not contravene the Fifth Amendment.
The judgments are
Affirmed.
MR. JUSTICE STONE, dissenting.
Without considering the question whether the bondholders in these cases have properly exercised their options, I cannot agree that the Joint Resolution of Congress of June 5, 1933, has set at naught the promise of the bonds to pay guilders to the holders at their election.
In each case the bonds contain alternative and mutually exclusive undertakings. The holder could if he wished demand payment in United States gоld dollars of a fixed standard or their equivalent in United States currency. The alternative promise is for payment abroad of specified amounts of any one of several foreign currencies, without reference to their gold value at the time of payment. Its performance is as independent of gold or gold value as if it had called for the delivery of a specified amount of wheat, sugar or coffee, or the performance of specified services.
Any construction of the gold clause resolution which would in the circumstances of the present case preclude payment in fоreign money would equally forbid performance of an alternative promise calling for the delivery of a commodity or the rendition of services. Hence the decisive question is whether the resolution admits of a construction which would compel one whose contract stipulates for delivery at his option of a cargo of sugar to accept instead payment of a specified amount in legal tender dollars, merely because by the terms of his contract he might have demanded, though he did not, an equal number of gold dollars.
We can find nothing in the legislative history of the Joint Resolution or its language to suggest any Congressional policy to relieve from the one form of obligation more than another, or to indicate that the resolution was aimed at anything other than provisions calling for payment in gold value or gold dollars or their equivalent, which Congress explicitly named and described as the evil to be remedied, both in the Joint Resolution itself and in the committee reports attending its adoption. See Sen. Rep. No. 99, 73d Cong., 1st Sess.; H. R. Rep. No. 169, 73d Cong., 1st Sess.
The Joint Resolution of Congress and the committee reports make no mention of obligations dischargeable in foreign currencies or by delivery of commodities or performance of services. If it was the purpose of Congress
The recitals of the Joint Resolution declare that it is aimed at “the holding of or dealing in gold” and the “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.” No other purpose is suggested. The enacting part of the resolution proscribes “every provision ... 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,” and declares “Every obligation, heretofore or hereafter incurred, whether or not any such provision is contained therein or made with resрect thereto, shall be
To arrive at the conclusion that thе resolution compels the present bondholders to accept dollars instead of the guilders for which they have contracted, it is necessary to say that “obligation,” which the Joint Resolution defines as obligation “payable in money of the United States” and requires to be discharged “dollar for dollar” in legal tender, includes the obligation payable in guilders. This difficulty is bridged by recourse to a major operation of statutory reconstruction. It is said that “obligation” means, not the obligation or promise which is defined by the resolution as that “payable in money of the United States” and in which the gold clause provision is “сontained” and “with respect” to which the provision is “made,” but includes all obligations, although not dischargeable in money of the United States or in gold, which may be written into the instrument or document containing alternative promises, one of which is to pay in dollars. The “obligation” of the resolution “with respect” to which the gold clause is “made” is thus treated as synonymous with the instrument containing the multiple obligations, and all the provisions in it (not alone the promise to pay dollars) are now held to be dischargeable in dollars merely because one of the alternative promises “contained” a provision payable in “money of the United States,” although the bondholder is entitled by his contract to demand performance of a promise to pay guild-
The argument is not persuasive, because it rests both upon a strained and unnatural construction of the resolution and upon an assumption that there was a Congressiоnal policy to strike down provisions for the alternative discharge of dollar obligations by payment in foreign currency not tied to gold, which finds no support in the language of the Joint Resolution or its legislative history. It seems fair to suppose that if Congress proposed to end all possibility of creating an international market for bonds payable in dollars or alternatively abroad in foreign currencies, both without gold value, it would have given some more explicit indication of that purpose than is exhibited by the Joint Resolution. Even if we assume that Congress would have struck down such alternative currency clauses hаd it considered the matter, we are not free to do what Congress might have done but did not, or what we may think it ought to have done to lessen the rigors of our own currency devaluation for those who had made contracts for payment abroad in foreign currency without gold value.
In any case it seems plain that if Congress had made the attempt it would not have chosen to do so in terms which, if the Court‘s construction of the Joint Resolution be accepted, are broad enough to strike down every conceivable provision for payment in foreign currency, delivery of commodities, or performance of services as an alternative for a promise to pay dollars, whether of gold standard or not.
The CHIEF JUSTICE, MR. JUSTICE MCREYNOLDS and MR. JUSTICE BUTLER concur in this opinion.
Notes
“JOINT RESOLUTION
“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 restriсtion; 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 Senatе 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. Any such provision contained in any law authorizing obligations to be issued by or under authority of the United States, is hereby repealed, but the repeal of any such provision shall not invalidate any other provision or authority contained in such law.
“(b) As used in this resolution, the term ‘obligation’ means an obligation (including every obligation of and to the United States, excepting currency) payable in money of the United States; and the term ‘coin or currency’ means coin or currency of the United