DAMAGE NOT SUFFERED

Taranaki Daily News, 20 February 1935, Page 5

DAMAGE NOT SUFFERED

NO CLAIM AGAINST STATE DOLLAR PURCHASE POWER EFFECT OF COURT’S VIEW Rec. 8 p.m. Washington, Feb. 18. Opinion on the case is generally interpreted as meaning that so long as the “new deal” dollar is worth as much in purchasing power as any dollar originally invested there is no damage and no action for recovery can be brought. Speculation turned to how that would apply if at some future time the purchasing power of the present dollar should sink below that of the dollar invested. There was no conclusive answer but the inference was plain;

In the majority opinion concerning the gold clause in Government securities, in which the minority concurred in substance, Mr. Justice Hughes declared: “We hold that the joint Congressional resolution of June 5, 1933, so far as it attempted to over-ride the obligation of the United States created by bond suit, is invalid. It went beyond the constitutional authority of Congress, but we hold that the action before the court for breach of contract failed to show a cause of action for actual damages.” The majority argument proceeded to state ’ that the claimant, when he received 10,000 dollars for a Liberty Bond in 1934 received dollars of superior purchasing power to those invested in 1917. Therefore he suffered no damages and the court had no authority to entertain a suit for “added compensation.” Payment in actual gold dollars would be of no value to the claimant because the Government regulations, which were perfectly valid, prevented their transfer abroad. LIKELY DIFFICULTY. The New York Times correspondent points out that this feature of the decision is the only one likely to cause the Administration any difficulty for, seemingly, the future revaluation or international stabilisation on a gold basis would allow the bond-holders to reinstitute suits for damages through abrogation- of contract. The court ruled that the Government’s gold obligations cannot be paid off on a dollar for dollar basis. The Chief Justice, Mr. C. E. Hughes, in a summary of the decisions, disclosed that the court’s ruling that the Government “gold clause” bonds miSst be paid off in gold or the equivalent amount of devalued currency meant that for every 1000 dollar gold bond the Government must pay 1690 dollars. A later interpretation showed that while the court held to be invalid the resolution of Congress saying that Government obligations need not be paid in gold, the decision also apparently closed the door to the recovery of damages by saying that bond-holders could not sue for redress.

■" The court completely sustained the Government with respect to private bonds, saying that they need not be paid in gold. It. also ruled that the holders of gold certificates did hot have legal cause for the Devaluation Act merely carried out the power of Congress to regulate the currency. MAJORITY VERDICT. The court reached its decision by five votes to four, thus upholding the monetary features of President’s Roosevelt’s “New Deal,” which it had been considering for oyer a month. The judgment stated that the calling in of all the gold and gold certificates by the Congress was perfectly legal under the Congress’ constitutional right to coin money and fix the value of it. On the important issue invalidating the gold clause in Government bonds the court held that Congress had no right to invalidate this “contract,” but denied the right of holders of them to sue the Goverriment through the so-called Court of Claims. In effect, therefore, the Government is under no mandate to pay the Government bondholders the premium unless Congress passes special legislation allowing them to sue in the ordinary courts, which the present Congress, at least, will certainly not do. Voting with Mr. Justice Hughes were Justices Stone, Brandeis, Roberts and Cardoza. A dissenting opinion written by Mr. Justice Mcßeynolds was concurred in by Justices Vandevanter, Sutherland and Butler. It rejected the Government thesis under the Imparing of Contracts clause of the Constitution. They state that the “United States Constitution has been swept away.”