gold commission report annex c

8/8/2019 Gold Commission Report Annex C

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ANNEX C

Some I m p l i c a t i o n s of Legal TenderS t a t u s of U . S . C u r r e n c y


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Some Im pl ic a ti on s of Legal Tender S t a t u s of U.S. Currency

Q u es t i o n s have been r a i s ed a s t o t h e i m p l i ca t i o n s o f t h el e g a l t e n d er s t a t u s of c u r r e nc y i n t h e U ni te d S t a t e s undere x i s t i n g law. Th is memorandum examines t h a t i ss ue i n the con te x tof (1) d eb t s owed by one p r i v a t e p a r t y t o an o t h e r ; ( 2 ) debts owedby a p r i va te pa r t y t o the Federa l governmen t; and ( 3 ) T r ea s u r y ' so b l i g a t i o n s t o c o n ve r t U.S. cur ren cy f rom one form t o ano th er .

A. BackgroundThe Cons t i t u t i on g ra n t s t o Congress power "T? coin Money,re gu la te the Value the reo f , and o f fo re ign Coin." In ad d i t i ont o t h i s s p e c i f i c gr a n t of a u t h o r i t y , t h e C o ns t i t u t i o n g r a n t s

Congress th e power " t o make a l l Laws which s h a l l be nec ess qry andproper f o r ca r r y in g i n t o Execu t ionw t h e enumerated powers .These p r o v i s i o n s , t o g e t h e r w i t h t h e powers t o l ay and co l l e c tta xe s, t o borrow money, and t o r e g u l a t e commerce, g i ve Congresscomprehens ive au th or i t y over t he cur renc y and th e monetary sys temof th e Uni ted S t a t es . 3 Only Congress , and no t t he St at gs , mayd e c l a r e what s h a l l be money and may r eg ula he i t s va lue .Pu rsuan t t o t h i s a u t ho r i ty , Congress may t ak e such measu resa s i t deems neces sar y and proper tog pro vid e a uniform curren cywith an equ al va lu e i n evEry s t a t e . Congress may de f i ne what

c o n s t i t u t e s l e g a l t e nd er , and may,make c e r t a i n th in gs l e g a lt ender on ly fo r s pe c i f i c pu rposes . The ex er c i se o f the se powershas been upheld on s e v e r a l occ as io ns by t he Supreme Court:Congress may i s su e paper money not redeemable i n gold or s i l v e r 8 ;may p roh ib ih t he mu t i l a t in g , mel t ing , o r expo r t ing of go ld o rs i l v e r l e o i n ; may p r oh ib i t c l au se s r eq u i r ing payment i n go ld o rs i l v e r ; and may, i n ex er c i s i ng th es e powers, suspend theo p e r a t i o n of p r o v is i o n s of c o n t r a c t s between p r i v a t e p a r t i e s l le n te r ed i n t o e i t h e r b e fo re o r a f t e r t h e d a t e of l e g i s l a t i o n .Thus , Congress has p lenar y powers t o e s t ab l i s h , r e gu la te , andc o n t r o l t h e n a t i o n a l cu r re n cy ; j u d i c i a l r ev ie w e x te n ds on l y t owhether t h e measures t a l p have a r e a so n ab l e r e l a t i o n t o ac o n s t i t u t i o n a l p u r p o s e .B. C o n t r a c t s Between P r i v a t e P a r t i e s

P r i v a t e p a r t i e s may a t t e m p t t o c o n t r a c t t o r e c e i v e paymentf o r d e b t s (1 ) i n n d o l l a r s w ; ( 2 ) i n a p a r t i c u l a r form of U.S.cu r r en cy ; o r ( 3 ) i n f or ei gn cu rr en cy o r some medium ot he r tha nc u rr e nc y . T hi s s e c t i o n c o n s i d e r s whether o f f e r s of a l t e r n a t i v epayment w i l l s a t i s f y su ch o b l i g a t i o n s , and w he the r s u chob l i ga t i on s may be e nforced .


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31 USCA s e c t i o n 392 p r ov i de s t h a t " a l l c o in s and c u r r e n c i e sof t h e United S ta t e s . . . . s h a l l be l e g a l t e n d er f o r a l l d e b t s ,pub l i c and p r iva t e . " If a c on t r ac t does no t s p ec i f y t he mediumof payment r equ i r ed , t h e ob l i ga t i on may be f u l f i l l e d by t ende r ingpayment of th e req uir ed sum i n any "co in and cu rre nc y of th eUni ted S ta tes . " A t l e a s t i n one i n s t an c e , where th e re was al e g i t i m a t e b u s i n e s s r eason f o r do ing SO, a c o u r t ha s h el d t h a t ac r e d i t o r may r e s t r i c t payment t o c e r t a i n f orm s of l e g a l t e n de r i fp r i o r n o t i c e i s g iven . That cou r t he ld t h a t a r a i l r o ad companyc ou ld r e q u i r e p as se ng er s t o pay f a r e s i n n i c k e l s , r a t h e f j t h a npennies , where i t s f a r e machines accep ted on ly n ic ke l s . On t h eo t he r hand , a c re d i t o r need no t ac ce p t payment i n a medium o t he rthan l e ga l t ende r . Th i s outcome does no t change i f a co n t r a c ts p e c i f i e s on ly t h a t payment be made i n " d o l l a r s " ; a c r e d i t o r mayn o t s u b s e q u e n t l y i 3 q u i r e t h a t payment b e made i n a ny p a r t i c u l a rc o i n o r c u r r e n c y .

A c l a u s e i n a c o n t r a c t , r e q u i r i n g payment i n a p a r t i c u l a rc o i n o r c u r re n c y , o r i n g o l d o r s i l v e r , may be e n f o r c e a bl e , b u to n l y i f t h e u n d er l yi n g o b l i g a t i o n was c r e a t e d on o r a f t e r Oc to be r28, 1977. Congress de te rmined i n 1933 t h a t such c l au se s werea g a i n s t p u b l ic p o l ic y , and c ou ld b ~ ~ d i s c h a r g e dy payment of aneq ui va le n t amount i n l e g a l t end er . In 1977, however, Congressmade t h i s p r o h i b i t i o n i n a p p l i c a b l e t o o b i j g a t i o n s i s s u e d on o ra f t e r t h e e f f e c t i v e da t e of P.L. 95-147.

P r i v a t e p a r t i e s may v o l u n t a r i l y c o n t r a c t t o make o r r e c e i v epayment l&n a medium of exchange oth er tha n Uni ted S t a t e s le g a lt e n d e r . I t a p pe a rs t h a t t h e c p s e s which p e r m it a c r e d i t o r t odemand payment i n a sp e c i f i e d form of l e g a l te nd er woulda u t h o r i z e a c r e d i t o r t o r e f u s e payment i n l e g a i g t e n d e r where aco nt ra c t s p e c i f i e s some o th er fo rm of payment. Such co nt ra c t sa r e n o t n e c e s s a r i l y e n f o r c e a b l e , however; c o u r t s h av e d i s c r e t i o nt o r e q u i r e s p e c i f i c pe rfo rm an ce of t h e c o n t r a c t o b l i g a t i o n , o r t oaward payment of an eq ui va le nt amount i n damages, S p e c i f i cperformance w i l l be awarded on ly i n ex t r a o r d ina r y c i r cums tances,where do l l a r damages 26e no t an adequa t e s u b s t i t u t e f o r t h epromised performance . Fu rt he r , wh2ie damages a r e awarded,they mus t be denominated i n do l la r s .C . O b l ig a t io n s of P r i v a t e P a r t i e s t o t h e U.S. Government

The U,S. Government i s no t r equ i r ed by s t a t u t e t o demandt h a t a l l o b l i g a t i o n s owed t o it be pa id w i th l ega l t ende r .Th ere for e, th e U.S. Government may e n t e r i n t o c o n t r a c t s whichpr ov ide t h a t payment be made i n f o r e i gn cu r r ency , go ld o r s i l v e r ,o r some o t h e r medium of excha nge which i s n o t l e g a l t e n d e r.Where a c o n t r a c t does n ot p ro vi de how payment must be made, o rprov ides t h a t payment be made i n d o l l a r s , any form of l e g a ltend er must be acce pted . This is because, a s noted above, 31USCA se c t i o n 392 pro vid es t h a t c oi ns and cu rr en ci es of th e UnitedS t a t e s " s h a l l be l e g a l t en de r f o r a l l d e b ts , p u b l i c and p r i v a t e ,p u b l i c c h a rg e s , t a x e s , d u t i e s , and d u es ,"


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Where a co n t r a c t pr ov id es t h a t paynent be made i n somethingo t h e r t h an d o l l a r s , h owever, s e c t i o n 392 d o e s n o t r e q u i r e t h a tth e U.S. Government ac cep t on ly l e g a l te nd er . Se ct io n 392a p p l i e s t o o n ly t h o s e d e b t s which may be p a i d i n l e g a l t e n d e r ; i tre q u i re s on ly t h a t where t he U.S. Government doe s no t sp ec i f yot he rw is e, payment i n any U.S. c o i n o r c u r r e n c y w i l l s a t i s f y t h ed e b t . I n a d d i t i o n , t h i s s e c t i o n h a s been h e ld t o a u t h o ri z e t h eU.S. Government t o r e f ~ s 2 ~ t occ ep t payment of ta xe s i n a mediumot he r tha n l e g a l t en der . Thus, fo r t h e purpos es o f 31 USCAs e c t i o n 392, t h e U.S. Government h a s t h e same s t a t u s a s a p r i v a t ep a r t y .

31 USCA s e c t i o n 371 pr ov id es t h a t t h e money of ac co un t oft h e U nit ed S t a t e s s h a l l be e x p re s se d i n d o l l a r s and d ec im alp o r t i o n s t h e r e o f , and a l s o p r ov i de s g e n e r a l l y t h a t " a l l a cc ou nt si n t h e p u b li c o f f i c e s and a l l p ro ce ed in gs i n t h e c o u r t s s h a l l bekep t and had in con fo rmi ty t o t h i s r eg u la t i on . " Acco rdingly ,judgments i n Uni ted S ta te s2 3 0u r t s , f o r t h e payment of damages ,must be s t a t e d i n d o l l a r s . I n a d d i t i o n , it r e q u i r e s t h a t t h $ 4IRS m a i n t a i n r e c o r d s and m ea su re t r a n s a c t i o n s i n d o l l a r terms.However, t h e r e a r e no ca s e s add re s s ing t he que s t io n whe ther t h i ss e c t i o n l i m i t s i n any way th e a u th or i t y o f t h e Execu t ive Brancht o e n t e r i n t o o b l i g a t i o n s n o t denominated i n d o l l a r s . I n anyev en t, t h e U.S. Government i n many in s t a n c e s ha s been au th or iz edby s t a t u t e t o e nt e r i n t o such c o n t r a c t s (e.g., h e CommodityC r e d i t C o r p o ra t i o n may a g r e e t o b a r t e r a g r i c u l t u r a l c om mo ditie sf o r o t h e r s p e c i f i e d c om mo ditie s ; th e United S t a t e s Treasury maybor row for3fgn c ur re nc ie s and purchase and s e l l f o r e i g nex change). The U.S. Government, however, would be s i t u a t e ds i m i l a r l y t o a p r i v a t e l i t i g a n t s e ek in g t o e nf or ce s uch anagreement i n cou r t .D. Convers ian of Various Forms of United S t a t e s Currencyby Treasury

T r ea s ur y h a s a v e r y l i m i t e d o b l i g a t i o n under e x i s t i n g l aw t ocon ver t co ins and cu r r en c i es of th e Uni ted S t a t e s when reques tedt o d o s o by l a w f u l h o l d e r s t h e r e o f . T ha t o b l i g a t i o n i s s e t f o r t hi n 31 USCA s e c t i o n 773a:The l aw f u l h o l d e r s of t h e c o i n s o r c u r r e n c i e s o ft h e U nit ed S t a t e s s h a l l be e n t i t l e d t o exc han ge them,d o l l a r f o r d o l l a r , f o r o t h e r c o i n s o r c u r r e n c i e s whichmay be l aw fu l l y acqu i r ed and a r e l e ga l t ende r fo rp u b l i c and p r i v a t e d e b t s . The S e c r e t a r y o f t h eTreasu ry i s au thor iz ed and d i r ec te d t o make suchexchanges and payments upon p r e s e n t a t i o n hereunder i nth e manner p rov ided i n r e gu la t i o ns p re sc r ibed by him.

N e i t he r t h i s nor any o t h e r p r o v i s i o n of law r e q u i r e sTreasu ry t o redeem any pa r t i c u l a r cu r r enc y o r c o in f o r any o t he r .F u r t h e r , any exchanges under s e c t i o n 773a must be made on ad o l l a r f o r d o l l a r b a s i s , r a t h e r on t h e b a s i s of t h e b u l l i o n v a lu eor th e numismatic va lue of co in s o r cu r re ncy rece ived .


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NOTES

A r t i c l e 1, S e c t i o n 8 , C l a u s e 5.Azticle 1, S e c t i o n 8 , C l a u s e 18.Norman v. B al ti mo re 6 Ohio Ra ilwa y Co., 294 US 240 ( 1 9 3 5 ) ,c i t i n s J u i l l i a r d v. Greenman, 110 US 421, 440 (1884).Art ic le 1, S e c t i o n 1 0 .Knor v. Lee , 1 2 W a l l . 457 (1871) .

6 J u i l l i a r d v. Greenman, supra.7-ee , e .g . 31 USCA s e c t i o n 452, w hi ch o r i g i n a l l y made

U nite d S t a t e s n o t e s l e g a l t e n d e r e x c e p t f o r i m p or t d u t i e sand i n t e r e s t on the p u b l i c d e b t .J u i l l i a r d v. Greenman, supra.Lin g Su Fan , 218 US 302 ( 1 9 1 0 ) .

loGua rant y T r u s t v. Benwood, 307 US 247 ( 1 9 3 9 ) ; Norman v .B a l t i m o r e , s u p r a .l1-d . Such a c t i o n do es n o t c o n s t i t u t e a t a k i n g w i th o utc om pe ns at io n i n v i o l a t i o n o f d u e p r o c e s s , n or d o es i t

c o n s t i t u t e a n im p e r mi s s ib l e im pa ir me nt of c o n t r a c tr i g h t s .l2Norman 9. Bal t imore , , a t 211.l3Ma rt in v. Rhode Is l an d Co., 78 A. 548 ( R e . 1911) .l4C a l a f u t v. CIR, 277 F. Supp. 266 (D.C.Pa. 1 9 6 7 ) .l5 J u i l l i a r d r. Greenman, supra.l6 J o i n t R e s o l u t i o n o f t h e C o n g re s s o f J u n e 5 , 1 9 3 3 ( 3 1 USCA

s e c t i o n 4 63 ).l7 P. L. 95-147, s e c t i o n 4 ( c ), October 28, 1977( 9 1 S t a t . 1 22 9) .l8 C o n s o l i d a t e d F r e i g h t w a y s v . I n d u s t r i a l Co mm iss io n,264 NE2d 291, 293 ( I l l . 1 9 7 1 ) .


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l9 Bronson v . Rodes, 7 4 U S 229 (1868).CI I\LU F i r s t N a t i o n al S t a t e Bank of New J e r s e y v . CommonwealthFe de ra l Sav in gs and Loan Assn. o f No r r i s tow n, Pa .,455 F. Supp 464 (D.N.J . 1 9 7 8 ) ; a f f ' d 6 10 F.2d 1 6 4

3 1 U.S.C.A. s e c t i o n 371. Se e a l s o I n t e r n a t i o n a l S i l kG u i l d v. Rog ers , 262 F.2d 219 (D.C. C i r . 1 9 5 8 ) .22 c a l a f u t r. CIR , s u p r a .23 54 Am Ju rZ d Money, Se c. 31. --e e a l s o Deutsche BankF i l i a l e Nurnberq v . Humphrey, 272 U.S. 5 1 7 ( 1 9 2 6 ) .2 4 Du rov ic v . CIR, 1975, 65 !iC 480.25 7 USCA s e c t i o n 1692 ; 3 1 U.S.C.A. s e c t i o n s 766 and 822a.

D e p ar t me n t o f t h e T r e a s u r yO f f i c e o f t h e G e n er a l Co u ns e lJ a n u a r y 4, 1 9 8 1

gold commission report annex c

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