Petition — Brubrad Co. v. United States Postal Service

JUN 29

55-1888

SUPREME COURT OF THE UNITED STATES

BRUBRAD COMPANY,

Petitioner

-against-

UNITED STATES POSTAL SERVICE,

Respondent.

PETITION FOR WRIT OF CERTIORARI

BRADLEY B. DAVIS

Attorney for Petitioner

Office & P.O. Address

1235 Park Avenue

New York City 10028

212-876-1609

TABLE OF CONTENTS

Opiniuns Below------------------------ 1

Judgment Reviewed--------------------- 1

Jurisdiction-------------------------- 2

Questions Presented for Review-------- 2

Statutes Involved--------------------- 2

Statement of the Case----------------- 2

Jurisdiction Below-----------~--------- 5

Reasons Why the Writ Should be Granted-5

Conc lusion-<-<-<--<------------------------ 14

Opinions Below------------------------ A-1

Circuit Court of Appeals------------ A-1

District Court---------------------- A-2

Statutes Involved--------------------- A-11

TABLE OF CASES

Brubrad v. United States Postal Service,

404 F.Supp.691 (D.C.E.D.N.Y.1975) ----- 1

Columbus Ry. v. City of Columbus, 249

U.S. 399 (1918) ------------------- 10,13

Jones v. Lynn, 477 F.2d 885 (5th Cir.

5) Lo —————— 5

Jenkins v. U.S., 86 F.2d 123 (5th Cir.

1936) --------=-=----------------------- 8

Lynch v. United States, 292 U.S. 571

TOES a 5,8

Norman v. B & O. Railroad, 294 U.S. 340

T1994) sccccccceeteneereceeceececcncoes 6

Nortz v. U.S., 294 U.S. 317 (1934)----9

Perry v. United States, 294 U.S. 330

—_—

(1994) qwoeceeccowee 5,6,7,8,10,11,12,13,14

Sinking Fund Cases, 99 U.S. 1 (1868)--5,7

ii

Statutes Cited

28 United States Code 1254 (1) --------- 2

31 United States Code 31l----------- 3,9

31 United States Code 408 (b) --------- 12

31 United States Code 411]1------------- 3

31 United States Code 463--------- 5,6,11

39 United States Code 409------------- 5

Public Law 92-26§-cooooooooeoooosesec= 4

Public Law 93-110Q-coooeececeeeceess= 4,10

Public Law 93-3] 3-coooceooooeoooooe=<- 4

Other References

2 Congressional News 1971 --<-<------- 12

Galbreath, Money (Houghton Mifflin

OT ee ———— a 10

1974 Statistical Abstract of the United

States e999 nn r= T3

tk hat 0 hietett

SUPREME COURT OF THE UNITED STATES

]--------------------------------

BRUBRAD COMPANY,

Petitioner,

-against-

UNITED STATES POSTAL SERVICE,

Respondent.

PETITION FOR WRIT OF CERTIORARI

Opinions Below

The opinion of the Court of

Appeals for the Second Circuit was

delivered from the bench on April 2, 1976.

It has not been officially reported, and

is appended hereto. The opinion of the

District Court for the Eastern District

of New York was entered on November 6,

1975. It is officially reported at

404 F.Supp. 691, and is appended hereto.

Judgment Reviewed

The judgment sought to be

reviewed was entered in the office of the

Clerk of the Second Circuit Court of

Appeals on April 2, 1976. No order

respecting a rehearing or extending the

time to file the within petition has

been entered.

Jurisdiction

Certiorari jurisdiction from the

Second Circuit Court of Appeals is

conferred upon this Court pursuant to

28 United States Code 1254(1).

Questions Presented for Review

(1) Whether the United States of America,

by devaluing the dollar, can legally and

constitutionally alter the value of its

own obligations under contracts.

(2) Whether 31 United States Code 463

is constitutional with respect to

government obligations entered into

after its date of enactment.

Statutes Involved

(The foregoing statutes are set forth in

pertinent part in the appendix):

SP dae hae 20e3 Bdadszht0? 93-373

31 United States Code 405

31 United States Code 408 (b)

31 United States Code 411

31 United States Code 463(a)

39 United States Code 409

28 United States Code 1339

Statement of the Case

In 1964, plaintiff's and

defendant's predecessors in interest

entered into a lease for a store in

Brooklyn, New York to be used as a post

l. Plaintiff's predecessor was Brubrad

Corporation. Defendant's predecessor

was the United States of America.

1

—

loffice. The initial rent was $6,120 per ,

year for ten years, with four five-year

renewal periods, at the option of the

post office, at rents of $5,700, $6,000,

$6,300 and $6,600 per year respectively.

The rents in the lease were set

forth in terms of "$" or "dollars"

without further definition. At the time

the lease was entered into, “dollars”

either were silver certificates or

federal reserve notes readily convertible

into silver certificates. These silver

certificates in turn were redeemable for

specie silver dollars at a rate of $1.29

per ounce, as had been the case in 1964

for over thirty years.@

In 198%, Congress adopted 31

United States Code 405a-3 outlawing

silver certificates as of June, 1968.

Between that time and 1975 there was

free circulation of silver but not gold

31 United States Code 411. The value of

the dollar began declining with regard to

silver, but ke tojts value with regard to

> Our currency has been officially

bi-metallic since early this century.

31 United States Code 31l. Therefore, it

also was valued in terms of gold (in 1964

at $35.00 per ounce). However, since 1934,

Americans had been forbidden to own gold

except for very limited industrial

purposes.

2A. Until 1975, the gold value of the

dollar was theoretic for domestic purposes

since Americans could not own it.

Beginning in 1971, the United

States enacted several devaluations of

the dollar. See, e.g., Public Laws 92-268

and 93-110 appended hereto. In 1974,

Congress enacted Public Law 93-373 which,

as of January 1, 1975, allowed unlimited

ownership of gold, and allowed the

value of the dollar to float in relation

to both gold and silver.

The effect of these acts was the

drastic devaluation of the dollar. In

1975, it cost about $168.00 to buy an

ounce of gold (This since has declined

to about $130.00) rather than the $35.00

official value in effect until 1971, and

$4.20 to buy an ounce of silver, rather

than the $1.29 it cost in 1964 and for

the four-year period thereafter when

silver could actually be obtained from the

Treasury at that rate.

In 1974, the postal service

exercised its first option to renew. At

the beginning of 1975, petitioner asked

that respondent agree to an increase in

rent to compensate for the loss caused

through the aforesaid devaluations. When

this was refused, the within action was

commenced.

The complaint seeks reformation

of the lease so that the term "dollars"

be read to refer to dollars as they weie

valued at the time the contract was

entered into. The District Court agreed

to give alternative consideration to the

case as a declaratory judgment to

determine whether the United States

legally could, and effectively did, lower

its rent payments by these devaluations.

After joinder of issue, both

parties moved for summary judgment. In

November of 1975, the District Court for

the Eastern District of New York rendered

a decision in favor of respondent dismiss-

ing the complaint. This was duly appealed

to the Second Circuit Court of Appeals,

which affirmed in April, 1976. The basis

of both decisions is that 3l United States

Code 463, which allows payment of obligat-

ions after devaluation on a "dollar for

dollar" basis, applies to government

obligations entered into after the date

of enactment of that statute.

Jurisdiction Below

Federal Jurisdiction in the court

of first instance was invoked under 39

United States Code 409.

Reasons Why the Writ Should be Granted

This Court should grant petition-

er's application for a writ of certiorari

because the decisions of the courts below,

unless reversed, effectively nullify

Perry v. United States, 294 U.S. 330

T1534) and the entire line of cases from

Sinking Fund Cases, 99 U.S. 1 (1868)

to Lynch v. United States, 292 U.S. 571

(1934) to Jones v. Lynn, 477 F.2d 885

(5th Cir. 1973) holding that the United

States is held to its contractual

obligations much as is any private party.

; The circumstances of Perry, i

supra, are crucial to the case at bar.

In 1933, a series of laws were enacted

which (a) barred the ownership of gold

or payment in gold; (b) devalued the

dollar; (c) required debts to be discharged

~ . +8 :

"dollar for dollar, in any coin or currency

which at the time of payment is legal

tender." 31 United States Code 463.

At the time these laws were enact-

ed, there were a number of obligations

both of private companies and of the :

United States government outstanding that °

called for payment in gold dollars of a

ppecific weight. One Mr. Norman held such |

& bond issued by the B & O Railroad, and

Mr. Perry held such a bond issued by the

United States. When these became due,

both men demanded payment in the sum of

gold that the bond called for rather than

on a “dollar for dollar" basis. Both the

railroad and the federal government

refused to pay on the basis demanded, and

so the lawsuits were commenced.

Both of these cases reached the

United States Supreme Court in 1934. In

Norman v. B. & O, Railroad, 294 U.S. 340,

the Court held 31 United States Code 463

constitutional insofar as private debts

were concerned, and therefore that those

debts could be discharged on a “dollar for

dollar" basis. It reasoned that neither

party-was in ary way responsible for the

devaluation, and both had taken equal risks

with respect to future enactments of the

soverign.

However, the Court found the case

to be quite different where obligations of

the soverign were concerned, and therefore

where one party to the obligation was the

same party who had enacted the devaluation.

It held, in Perry, supra, that 31 United

States Code 463 was unconstitutional as

far as governmental obligations were

concerned:

-

obligation of private parties, or

of States or municipalities, whose |

contracts are necessarily made in

subjection to the dominant power of ,

Congress (p.348)

There is a clear distinction between.

the power of the Congress to control

of interdict the contracts of private

parties when they interfere with the

exercise of its constitutional

authority, and the power of the

Congress to alter or repudiate the

substance of its own engagements

when it has borrowed money under the

authority which the Constitution

confers (pp. 350-351)

The question is necessarily presented

whether the Joint Resolution of

June 5, 1933 (48 Stat.113) isa

valid enactment so far as it applies

to the obligations of the United

States....We conclude that the j

Joint Resolution of June 5, 1933

insofar as it attempted to override

the obligation created by the bond

in suit, went beyond the congress-

ional power (p.349)

In effect the Supreme Court held that

private citizens do not have to roll dice

with the manufacturer. Its basis, going

back to the Sinking Fund Cases of 1868,

was that when the government enters into

an obligation, it is bound to that

obligation much as is any private party:

Punctilious fulfillment of contract-

ual obligations is essential to the

maintenance of the credit of public

as well as private debtors. No doubt

there was in March, 1933 great need

of economy. In the administration

of all government business, economy

has become urgent because of lessened

revenues and the heavy obligations

to be issued in the hope of relieving

widespread distress. Congress was

free to reduce gratuities deemed

excessive. But Congress was without

power to reduce expenditures by

abrogating contractual obligations

of the United States. To abrogate

contracts, in the attempt to lessen ,

government expenditure, would not be

the practice of economy but an act

of repudiation (pp. 352-3)

This directly correlates with the Court's

holding in Lynch v. United States, supra,

the same year

Rights against the United States

arising out of a contract with it

are protected by the Fifth Amendment.

...-When the United States enters

into contract relations, its rights

and duties therein are governed by

the law applicable to contracts

between private individuals (p.579).

Although the Supreme Court thus

distinguished between private and federal

contractual obligations, nonetheless it

did not actually give relief to Mr. Perry?

It denied him recovery on two bases:

3. This distinction between right of action

and right to remedy was another important

holding in Perry. See, e.g., Jenkins v.

U.S., 86 F. 3 (5th Cir. 1936). This

was ignored by the District Court in the

within matter when it said that petitioner

was seeking relief because of inflation.

As is discussed below, inflation is crucial ®

to the remedy, but not to the right of action.

(1) it upheld the government's right to

bar specie circulat’on. Therefore, Mr.

Perry could not demand payment in gold

coin, and any provision referring to gold

coin as a measure of payment was invalid

because of impossibility of performance.

Nortz v. U.S., 294 U.S. 317 (1934).

(2) because of the Depression, despite

devaluation the actual value of the

dollars paid to Mr. Perry in 1934 was

greater than the actual value of the

dollars he had loaned in 1919. Therefore,

according to a 5-4 majority of the Court,

_ Perry had not suffered any actual

oss.

If either of the above findings are

deemed relevant to the within action,

they should be reversed because (1) there

could have been payment in non-specie

legal tender other than on a do)lar for

dollar basis; (2) the 1934 majority

confused the value of the dollar with

regard to gold with the value of the

dollar in terms of the economy as a whole.

Mr. Perry suffered a loss in terms of

his bargain whether or not he could buy

more groceries with the lesser sum.

However, neither of these matters

are in fact relevant to the within case.

‘To begin with, petitioner is not asking

for payment in specie, but rather in

currency as measyred by a particular

amount of specie*. Moreover, even were

petitioner deemed to be demanding pay-

ment in specie or its equivalent, Perr

still would not be relevant on this point

4. Since the beginning of this century,

our currency has constantly been valued

in terms of gold or silver as is virtually

every currency in the world. 31 United

States Code 31l.

~

10

as since January 1, 1975, there has been

free circulation of both gold and silver.

Public Law 93-110.

This case is not the same as if

gold coin had remained in circulation

Perry, supra, p. 355

Moreover, unlike the Depression in

which Perry arose, there has been contin-

uous inflation since 1964. Therefore,

unlike Mr. Perry, petitioner has suffered

actual as well as theoretic loss. Of

¢ourse, currency devaluation has_not been

the only cause of this inflation? However ;

any 75% devaluation necessarily is a major

contributing force. For example, the oil

price increases are generally considered

to be a significant cause of our current

inflationary trend. See District Court

opinion appended hereto, A-10-. However,

while oil prices may have risen by some

400 percent since 1964 in terms of dollars,

they have scarcely altered at all in terms

of specie since current dollars buy only

one-quarter the specie they bought in 1964.

Regardless of the cause, there in

fact has been a continuous inflation since

1964, so that the rent being received is

lower not only in terms of specie but in

terms of actual purchasing power. The

dollar has not declined in terms of gold

and silver only: it buys less in terms of

roof repairs, janitorial services and

electric bulbs. Since municipal costs also

5. In Columbus Ry. v. City of Columbus,

249 U.S. 399 (1918), the Supreme Court

held that no contract is entitled to

readjustment purely because of inflation.

It is questionable whether this doctrine

still pertains as the government has

become the major cause of economic fluct-

uation. Galbreath, Money (Houghton Mifflin

1975.) (later chapters)

11

have increased to reflect the devalued

dollar, real estate taxes have skyrocketed.

All of these increased costs are actually

being borne by the within petitioner,

unlike Mr. Perry whose costs had declined

in the Depression. Petitioner set its

rents on what it calculated would permit a

reasonable return after expenses on its

investment. As these expenses have

increased dramatically, the return in

actuality, as well as in theory, no longer

is reasonable.

The Perry decision contains no dis-

cussion about 31 United States Code 463 as

ex post facto. Its finding of unconstution-

ality was based upon the Fifth Amendment

obligation of contract. However, both

courts below read the Perry doctrine to

apply only to contracts entered into prior

to the enactment of 31 United States Code

463. Such a finding, if upheld, would

mean that while the Constitution bars the

United States from altering its contractual

obligations, by simple legislative fiat,

it could adopt a statute giving it such a

fight at some indefinite future time and

in some indefinite future manner.® If such

an interpretation is allowed to stand, not

only does Perry become meaningless (as

there are virtually no government contracts

more than forty years old) but the entire

obligation of contract doctrine sinks into

oblivion.

If the United States may enact a

statute allowing it to alter the value of

its own payments at will, it may adopt a

6. There was no way that petitioner in

1964 could have known that Congress would

enact a statute three years later deval-

uing the dollar, not to mention the subse-

quent devaluations.

12

statute allowing it to alter any other

provision of its obligations at some

unspecified future time and in some

unspecified future manner. Apart from

wreaking havoc in the law of contracts,

this would exacerbate the already-dimin-

ished confidence in our government who !

then would be a manufacturer of dice who

is allowed to load them when and as it

deems fit and with whom we are forced to

gamble. As Alexander Hamilton stated,

"It is in theory impossible to reconcile

the idea of a promise which obliges with

a power to make a law which can vary the

effect of it” Perry, p. 380.

The briefs of the government below,

as well as the opinion of the District

Court, make much ado of the alleged

enormous expense to which it would be put

if plaintiff (and presumably others

similarly situated, although such relief

is not requested herein) is given relief.

Of course, the cost of doing something

constitutionally can never serve as an

excuse for doing it another way. Moreover,

the most that could happen would be that

the United States would have to pay to

the injured parties and show as a Treasury

expense the amount it showed as a miscell-

‘aneous receipt pursuant to 31 United

States Code 408(b) when it devalued the |

dollar. The 1971 approximate ten percent

devaluation resulted in such a receipt of

approximately two billion dollars. 2

Cong. News 1971, p. 2215. Thus the maximum

possible cost, given the approximate 70

percent devaluation, would be under

fifteen billion dollars. While not an

insignificant sum, even were it all paid

in one year, it would amount to less than

four percent of the annual budget.

14

measured by a specific quantity of specie,

it cannot at some later date »by it own

fiat alter that contract to be paid in

the same amount of "dollars" measured by

a lesser quantity of specie. This is

what Per says, and nothing in law or

morality permits a different finding.

This matter should be reviewed by

the Supreme Court not only because the

decisions of the courts below conflict

with Per but also because those

decisions, if allowed to stand, attack

the integrity of the government of the

United States of America.

BRADLEY B. DAVIS

Attorney for Petitioner

Office & P.O. Address

1235 Park Avenue

New York City 10028

Dated: New York, N.Y.

June 21, 1976

8. Contrary to the Circuit Court's

finding, petitioner is not seeking pay-

ment in 1964 Silver Certificates which

are, of course, no longer printed. He

is seeking payment in current currency

but at the same value that silver

certificates had in 1964.

13

In fact, however, the cost would not

be near this sum. Many government contracts

are cost-plus or have cost-of-living

increases built in, and in those contracts

most and in many instances all of the

devaluation loss has already been compen-

sated. According to the 1974 Statistical

Abstract of the United States, the

average outstanding government debt lasts

3.2 years, and a good portion of that

debt is between government agencies. See

pages 234 et seq. No debt incurred since

January 1, 1975 when we officially adopted

a floating currency, would be affected,

and any debt incurred since 1971 when the

first devaluation occurred would be

affected only to a lesser extent.

Moreover, if the Court adheres to

Perry and bases damages’ upon inflation

rather than devaluation, the effect of

granting relief would be no more than

giving cost-of-living increases to those

‘government contractors who have not

already received them.

Plaintiff is not arguing that the

United States government cannot revalue

its currency or bar the ownership of

specie. Nor at this point is plaintiff

arguing for revergal of the Columbus

Railway doctrine. Its sole contention

is that when the United States becomes a

party to a contract in which payment is

set forth in dollars which then were

7. All that is before this Court is

whether petitioner has a cause of action.

While this Court if it wishes can offer

guidance as to how damages upon remand

should be calculated, all it need do at

this time, even if it adheres to Perry,

is find that the petitioner has in fact

been damaged.

A-1

OPINION OF THE SECOND CIRCUIT COURT OF

APPEALS

(Caption) New York, N.Y.

April 2, 1976

oe ee eee —

Chief Judge Kaufman: We will affirm

We find that the appellant's claims

are precluded by 31 U.S.C. 463(a). That

section forbids contracts which "give

the obligee a right to require payment in

gold or a particular kind of coin or

currency." The appellant's claim falls

within the purview of this section. He

‘is seeking a “particular kind of ... ’

currency"--that is, 1964 silver

certificates, pegged to the value of

gold and silver.

The holding in Perry v. United States,

294 U.S. 330 (1935), does not alter this

conclusion. Perry forbade the application

of §463(a) to government obligations

issued before that section was enacted.

The appellant's lease was made 30 years

after 463(a) was passed.

A-2

OPINION OF THE DISTRICT COURT FOR THE

EASTERN DISTRICT OF NEW. YORK

(Caption) November 6,1975

JUDD, J.

MEMORANDUM AND ORDER

Cross motions have been made for

summary judgment by the plaintiff and to

dismiss by the defendant.

Facts

On November 4, 1964, plaintiff's

predecessor, Brubrad Corporation, and the

United States of America entered into a

lease agreement for a store at 2934-6

Avenue X, Brooklyn, New York to be used

by the then Post Office Department. The

lease was for an initial period of ten

years at a rate of $510 per month, with

four five-year renewals at the option of

the defendant-tenant, at the rates of

$475, $500, $525, and $550 per month,

respectively. Plaintiff is a partnership.

The terms of the lease were reached .

after a process of public bidding and

negotiation. The original bid submitted

by Brubrad Corporation was for $545 per

month, the lowest of three bids, but

was accepted only after further negotiat-

ions which reduced the rent to $510.

Plaintiff's complaint asserts that

since 1964 "the enormous rates of inflat-

ion and consequent declining value of

the dollar" have been both unprecedented

and uncontemplated by the parties.

Plaintiff maintains that these economic

developments have caused an "unfair

hardship upon plaintiff" while unjustly

te ne Sets BAL,

Ee EO MN Leet a

A-3

enriching the defendant.

In affidavits supporting its motion

for summary judgment, plaintiff asserts

that the inflation and declining value of

the dollar have been caused, at least in

part, by the affirmative acts of the

federal government in pursuing its fiscal

and monetary policies.

The complaint asks for judgment

reforming the terms of the lease so that

the rentals shall "be demeed to read as

being in terms of 1964 dollars to be

adjusted at the 1974 renewal period and

each subsequent renewal period in accord-

ance with the alteration in the value of

the dollar from base year 1964...." In

its briefs and oral argument, however,

plaintiff retreats from the claim of

reformation of the lease and asserts

instead a right to have the lease

interpreted so as to make an adjustment

for inflation.

. Plaintiff suggests various standards:

by which the court may make such an

adjustment. Plaintiff first points out

that the redemption of silver certificates

for silver bullion was terminated on

June 24, 1968, 31 U.S.C. §405a-3, and

that the value of silver has increased

from $1.29 per ounce to $4.58 per ounce

since the lease was executed. In its

memorandum of law, it includes tables to

show that $510 a month is worth only

about $120 in terms of gold, and that

wholesale prices have risen more than

50% and construction costs more than 90%

since 1967. On oral argument, counsel

said that plaintiff was asking for damages

from the date of the complaint at a rate

of not more than $800 per month, but gave

no explanation of how the $800 was computed,

In its supplemental brief, plaintiff

claims the right to damages based on the

decrease in buying power of the dollar. .

In the motion papers, plaintiff asked

simply “that a hearing be conducted to

determine the precise method of adjustment?

Discussion

Defendant's motion to dismiss under

F.R.C.P. 12(c) may be granted only if

the complaint fails to state a claim

upon which relief could be granted under

any legal theory. Mitchell v. Hart,

41 F.R.D.138 (S.D.N.Y. 1966).

The court concludes that the compl-

aint must be dismissed, whether viewed as

an action for reformation of the contract

or as a suit for a declaratory judgment

construing the contract.

Reformation

The law of contracts permits the

reformation of the express terms of a

contract when the agreement between the

parties is not accurately reflected in

the express language of the contract,

either through mutual mistake of the

parties or fraud by one and mistake by

the other. A.L.Z, 2 Restatement, Contracts

§504; 3 Corbin, Contracts §§608, 614

(1960); 13 Williston, Contracts, 3d ec.,

§§ 1547-49. Reformation is intended

only to enforce the objectives of the

parties “according to their original

agreement." Mutual of Omaha Ins. Co. Vv.

‘Russell, 402 F. , th Cir.

1968), cert. denied, 394 U.S. 973, 89

S.Ct. 1456 (1969)

ciuntmadiei

Avene etme,

A-5

Such is not the case here. Plaintiff

-has not suggested that the parties

.intended the words of the contract to be

‘other than what they are. Nor does

‘plaintiff's theory of the case rest on

‘the notion that the parties reached an

.express agreement other than that

reflected in the written contract.

The Supreme Court has held, more-

‘over, that inflation is not a ground for

,escape from contract terms. Columbus Ry.

‘Power & Light Co. v. City of Columbus,

‘349 U.S. 399, 39 S.Ct. 349, 354 (1518).

‘Change of Rent by Interpretation

: Plaintiffs attempt to change its

‘complaint from one for reformation to one

| for change of rent by interpretation of

‘the contract is equally lacking in merit.

While plaintiff does not contend

‘that the parties entered into an agree-

ment on terms other than those in the

‘lease, it argues that the meaning of

those terms is different from the constr-

uction urged by the defendant. Plaintiff

urges that the meaning of the phrase

"annual rental of Six thousand one

‘hundred twenty ... Dollars” in the 1964

ten-year lease meant that the rent

‘should have a value each year (or at

least in each renewal term) equivalent

_to the value of $6,120 in 1964. On the

‘basis of plaintiff's contention at one

point that the value of the dollar has

declined by 74 percent or more since

' 1964, its construction of the lease

would mean that the 1974 rental would

exceed $24,000, or $2,000 per month,

far in excess of the claim it made on

*the oral argument. °

Plaintiff's contention might be

disposed of summarily by simply stating

that the meaning of the words used in

the ten-year lease is so plain as to

preclude any other interpretation. Such

an approach is often adopted by courts

in interpreting statutes as well as

contracts. See, e.g., Western Union Tel.

Co. v. American Communications Ass'n,

299 N.Y. ); Bethlehem Steel Co.

v. Turner Construction Co., 2 N.¥.od 456,

161 N.Y.S. ; Caminetti v.

United States, 242 U.S. 470, 485, 37

S.Ct. , 194 (1917).

There are occasions, however, where

it is appropriate to go beyond the plain

meaning of words in order to determine

the underlying purpose of a statute or a

contract. 3 Corbin, Contracts, §542 (1960);

9 Wigmore, Evidence, § d ed.);

Massachusetts Bonding Ins. Co. v. United

States, 352 U.S. ’ ’ S.ct. 186,

191 (1956) (Frankfurter, J., dissenting) ;

Guiseppi v. Walling, 144 F.2d 608, 624

(2d ae 1944) (L.Hand, J., concurring).

The court in egonstruing a provision |

of a contract should look to the contract

in its entirety. In this regard, it is

significant that the parties varied the |

rentals for the four five-year option

periods following the initial ten-year |

lease. Presumably, these negotiated

rentals looking to the future included

the parties’ estimation of the value of

the lease, and of the dollar at those

‘times. Given the conventional meaning of

the term "dollar" as our basic unit of

currency, it would seem fair to assume

that, had the parties meant to set the

rent in terms of "1964 dollars," they

would have used words other than those

they chose.

a ee ees —"~

Oe

A-7

When construing a contract, the

court may properly consider the circum-

stances of the parties at the time of

negotiation and entering into the contract.

Here there is no indication that the

predecessors of plaintiff and defendant

dealt in any fashion other than the

proverbial "arm's length," While subse-

quent developments both in this country

and abroad may have proved plaintiff's

contract to be an unwise one, such

misjudgment of the future, standing alone,

does not justify altering the terms of

the contract.This court does not under-

stand plaintiff to contend, nor could it

find, that this contract was unconscion-

able when made. Cf., U.C.C. §2-302;

Jones v. Star Credit Corp., 59 Misc.2d

189, 298 N.Y.S.2d 264 (S.Ct.Nassau County,

1969).

Plaintiff cites 31 U.S.C. §31l,

which states the policy of the United

States, "to continue the use of both gold

and silver as standard money...." This

section, however, has not been in force

as to gold since 1934, when gold coins

were withdrawn from circulation, 31 U.S.C.

§315b, and ail inconsistent statutes were

repealed. 31 U.S.C. §446. As to silver

coins, Section 31l has had no validity

since the redemption of silver certif-

icates was terminated in 1968. 31 U.S.C.

§405a-3.

The applicatton.:of Section 31l to

satisfaction of contract obligations is

inconsistent in any event with 31 U.S.C.

§463, enacted in 1933, forty years after

Section 3ll.

A-8

Section 463 reads: f

'

"(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

of 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. Ever

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 an

coin or currency which at the time o

payment is legal tender for public and

private debts. Any such provision

contained in any law authorizing

bbligations to be issued by or under

authority of the United States, is

repealed, but the repeal of any such

provision shall not invalidate any other

provision or authority contained in such

law." (Emphasis added).

Should this court accept plaintiff's

proferred construction, it would in

effect be giving the plaintiff the

"right to require payment in... a

particular kind or coin or currency, or

in an amount of money of the United

States measured thereby,...." To adopt

such a construction would violate public

policy as declared by Congress.

Section 463 was applied in Avery v.

J.L.Hudson Co., 17 Mich.App.491, 169

N.¥.2d 666 (Ct.of Apps. 1969). In that

case, the landlord sued for the adjusted

. rent on a 99-year lease.

— ee

Plaintiff's reliance upon Perry v. 1

United States, 294 U.S. 330, 55 S-Ota a2:

(1935), is unavailing. In Perry, the

'Court recognized that Congress could not

after the fact repudiate a binding

‘Obligation previously entered into by it,

‘to pay principal and interest on govern-

ment bonds "in United States gold coin

of the present standard of value." In

the present case, the statute invalidat-

ing provisions such as that advanced by

plaintiff was on the books long before

the lease was signed. Plaintiff would

distinguish the Perry case because in

that case there had Boon no decrease in

the dollar's purchasing power, and

therefore no damages; but the loss in

purchasing power since 1964 in this case

creates no rights in plaintiff, in the

light of the policy set forth in 31

U.S.C. §463. Even if policies of the

federal government have caused the

current inflationary increase in prices,

the policies were the result of Congress"

exercise of its legislative powers under

Article I, Section VIII of the Constit-

ution, and give rise to no private rights.

It is also proper to consider the

impact which acceptance of plaintiff's

contentions would have on many other

long-term government obligations. The |

New York Times of November 4, 1975 lists

eleven series of United States govern-

ment bonds with maturities from 1980 to

1998 and coupons from 3 percent to 4-1/4

percent. Their holders might make the

same argument as plaintiff, that they

did not contemplate the present inflation

when the bonds were issued. Plaintiff,

like bondholders and other creditors of

the government, is entitled under 31l

U.S.C. §463 only to “payment, dollar for,

dollar, in... legal tender."

ee a et tee

A-10

Cases cited by plaintiff about

‘consideration of inflation in fixing

damages for torts have no bearing on the

‘amount of defendant's lease obligations.

The burdens of inflation do not rest

‘alone on holders of long-term government

obligations. Inflation has the effect of

a capital levy on owners of many forms of

property, and of an ungraduated income

tax on all persons living on fixed incomes.

Sorting out how much of inflation is

attributable to deficit budgets to

finance essential federal programs, how

much results from oil price increases by

OPEC countries, how much from uncontrolled

collective bargaining agreements, and how

much from other domestic and international

causes, would be a fearsome task. A court

should not, without Congressional guidance,

single out a particular landlord or other

victim of inflation to be compensated at

the expense of all the other taxpayers in

the United States.

For all of the foregoing reasons,

it is

ORDERED that the plaintiff's motion

for summary judgment be denied, the

defendant's motion to dismiss the

complaint be granted, and the Clerk of

Court enter judgment for the defendant.

— 34

U.S.D.J.

i

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A-11

*- — ———--

31 United States Code: Coins and Coinage |

§311. Policy of the United States as to

Bimetallism.

It is declared to be the policy of

the United States to continue the use of

both gold and silver as standard money

.-.e-And it is further declared that the

efforts of the Government should be

steadily directed to the establishment

of such a safe system of bimetallism as

will maintain at all time the equal

power of every dollar coined or issued

by the United States, in the markets and

in the payment of debts.

November 1, 1893.

§405. Silver certificates; issuance for

silver dollars

Any holder of silver dollars...may

deposit the same with the Treasurer or

any depositary of the United States

designated for that purpose in sums not

less than $10, and receive therefor

certificates....The coin deposited for

or representing certificates shall be

retained in the Treasury for the payment

of the same on demand....

§405a-1. Disposition of United States

silver by coinage or sale; minimum sale

price; stockpiled silver.

The Secretary of the Treasury is

authorized to use for coinage, or to sell

on such terms and conditions as he may

deem appropriate, any silver of the

United States...at a price not less than

the monetary value of $1.29292929292 per

fine troy ounce

A-12

a el

405a-3. Limitation on exchange of silver

certificates for silver; redemption from

moneys in Treasury.

Silver certificates shall be exchangeable

for silver bullion for one year following

June 24, 1967. Thereafter, they shall no

longer be redeemable in silver but shall |

be redeemable from any moneys in the

general fund of the Treasury not otherwide

appropriated.

405b. Gold certificates; issuance

authorized.

The Secretary of the Treasury is

authorized to issue gold certificates in |

such form and in such denominations as |

as he may determine, against any gold

held by the Treasurer of the United States.

The amount of gold certificates issued and

outstanding shall at no time exceed the |

value, at the legal standard, of the gold

so held against gold certificates.

408b. Increase or decrease in weight of

gold dollar; adjustment of reserve.

In the event that the weight of the

gold dollar shall at any time be reduced,

the resulting increase in the value of

the gold held by the United States...

shall be covered into the Treasury as a

miscellaneous receipt....

§411. Cancellation of Treasury notes on

coinage of silver dollars and issue of

silver certificates (Repealed March 18,

1968)

Treasury notes whenever received

into the Treasury ...shall be retired

and cancelled with standard silver_dollars

:

‘

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4

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;

‘

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A-13

——

...and upon the cancellation of Treasury

notes silver certificates shall be issued

against the silver dollars so coined.

463.

(See A-8 for text) ;

Jurisdictional Statutes

39 United States Code: Postal Service

409. Suits by and against the Postal

Service.

(a) Except as provided in section 3628

of this title, the United States district

courts shall have original but not

exclusive jurisdiction over all actions

brought by or against the Postal Service.

28 United States Code: Jurisdiction

§1339. Postal matters.

The district court shall have original

jurisdiction of any civil action arising

under any Act of Congress relating to

the postal service.

Public Laws

| Public Law 92-268

{

‘Section 1. This Act may be cited as the

"Par Value Modification Act"

Sec.2. The Secretary of the Treasury is

‘hereby authorized and directed to take

the steps necessary to establish a new

par value of the dollar of $1 equals one

thirty-eight of a fine troy ounce of gold.

——_—

A-14

i + ee =

When established such par value shall be

the legal standard for defining the

relationship of the dollar to gold for

the purpose of issuing gold certificates

pursuant to §14(c) of the Gold Reserve

Act of 1934 (31 U.S.C. 405(b))....

SEC.4. The increase in the value of gold

held by the United States...resulting

from the change in the par value of the

dollar authorized by seetion 2 of this

. Act shall be covered into the Treasury

as a miscellaneous receipt.

Approved March 31, 1972.

Public Law 93-110

Be it enacted by the Senate and House of

Representatives of the United States of

America in Congress assembled, That the

first sentence of section 2 of the Par

Value Modification Act is amended by

striking out the words "one thirty-

eighth of a fine troy ounce of gold" !

and inserting in lieu thereof the fo

following: "0.828948 Special Drawing

Right, or, the equivalent in terms of

gold, of forty-two and nine-tenths d

dollars per fine troy ounce of gold".

| SEC.3(a) Sections 3 and 4 of the Gold

Reserve Act of 1934 (31 U.S.C. 442 and

443) are repealed.

(b)No provision of any law in effect on

the date of enactment of this Act, and

no rule, regulation or order under

authority of such law, may be construed

to prohibit any person from purchasing,

holding, selling, or otherwise dealing

with gold.

Approved September 21, 1973.

A-15

jPublic Law 93-373

\Section 2. Subsections 3(b) and (c) of

‘Public Law 93-110 (87 Stat. 352) are

‘repealed and in lieu thereof add the

following:

‘"“(b) No provision of any law in effect

ion the date of enactment of this Act,

jand no rule, regulation, or order in

effect on the date subsections (a) and

‘(b) become effective may be construed to

jprohibit any person from purchasing,

holding, selling or otherwise dealing

with gold in the United States or

abroad.

“(c) The provisions of subsections (a)

——_—-

land (b) of this section shall take effect

jon December 31, 1974 or at any —_ime

iprior to such date that the President

'finds...."

‘Approved August 14, 1974.

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