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March 16, 1977

RALPH FELDMAN and MARK LOREN, individually, and for the benefit of others similarly situated, Plaintiffs,

The opinion of the court was delivered by: MACMAHON

MacMAHON, District Judge.

These cross-motions for summary judgment on stipulated facts, under Rule 56, Fed.R.Civ.P., present the question of whether recent congressional enactments, *fn1" repealing the long-standing prohibition on private ownership of, and speculation in, gold, also repealed the "Gold Clause Resolution" *fn2" which prohibited enforcement of any contractual clause providing for payment of an obligation in gold or any amount of money measured by gold. We conclude that the Gold Clause Resolution has not been repealed and that it is still in full force and effect.


 Plaintiffs are the holders of Great Northern Railway Company General Mortgage 4-1/2% Gold Bonds, Series D ("the bonds"). The bonds were issued under a trust indenture, dated January 1, 1921, and provided for semi-annual interest payments until maturity on July 1, 1976, when the principal amount of $1,000 per bond would become payable. Both principal and interest were payable "in gold coin of the United States of America of or equal to the standard of weight and fineness as it existed on the first day of July, 1921...."

 Defendant, Burlington Northern Inc. (successor obligor of the bonds), *fn3" has offered to pay plaintiffs the $1,000 face amount of each bond, dollar for dollar, in currency of the United States. Plaintiffs have refused to accept the face amount of the bonds in dollars, contending that they are entitled to the market value, as of the maturity date, of the quantity of gold represented by the gold coin specified in the bonds as the medium of payment.

 The parties stipulate that due to inflation, $6,523.94 was the market value on July 1, 1976 of the quantity of gold represented by $1,000 in gold coin of the standard of weight and fineness specified in the bonds. Thus, if plaintiffs' contention is correct, holders of these bonds would be entitled to more than six and one-half times the face amounts.

 It appears that the subject bonds are the first "gold clause" bonds to mature since the lifting of restrictions on private gold ownership. Two other courts, however, have recently considered the application of the Gold Clause Resolution to lease obligations, and both share our conclusion that the Resolution is still in effect. See Equitable Life Assur. Soc. v. Grosvenor, Docket No. C-75-168 (W.D. Tenn., filed Oct. 27, 1976); Henderson v. Mann Theatres Corp., 65 Cal. App. 3d 397, 135 Cal. Rptr. 266 (1976).


 An initial problem is presented by the fact that the actual medium of payment specified in the bonds is no longer available. The bonds call for payment in gold coin of the United States, but the United States has not issued gold coin for more than forty years, all gold coin has been officially withdrawn from circulation and converted to bullion, and currency of the United States is no longer redeemable in gold. *fn4" Plaintiffs apparently assume that, since the specified gold coin is unavailable, they are entitled to an equivalent amount of any legal tender, calculated on the weight and relative value of the quantum of gold contained in 1921 gold coin. Another possibility not suggested by either party is that, if payment in gold were enforced literally according to the terms of the bonds, defendants would be entitled to gold coin, presumably available to some extent, and probably at great expense, in the numismatic market. In view of our conclusion that the Gold Clause Resolution is still in force, we need not pass on either of these possibilities.


 When Congress enacted the Gold Clause Resolution (set out in full in the margin), *fn5" it plainly intended to make gold clauses unenforceable. In the preamble to the Resolution, Congress found that such clauses requiring payment in gold or a particular kind of coin "obstruct the power of 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...." The Resolution declared any such provisions to be against public policy and provided:

 "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."

 In response to the expected constitutional challenge to the Resolution, the Supreme Court, in Norman v. Baltimore & O. R.R., 294 U.S. 240, 79 L. Ed. 885, 55 S. Ct. 407 (1935), discussed extensively the historical prelude to the Gold Clause Resolution and upheld the power of Congress, based on its constitutional authority over the monetary and currency system, to enact the Resolution and invalidate private contracts for payment in gold or any amount of money indexed to gold. The Court in Norman held invalid and unenforceable a gold clause with language identical to that here. *fn6"

 It is clear, therefore, that the gold clause contained in these Great Northern Bonds is invalid and unenforceable if the Gold Clause Resolution is still in effect. The saga, however, does not end there.


 Subsequent to the Gold Clause Resolution, along with numerous other Depression-era measures designed to reduce the monetary and speculative importance of gold, *fn7" Congress enacted the Gold Reserve Act of 1934. *fn8" Section 3 of the Gold Reserve Act, 31 U.S.C. § 442, directed the Secretary of the Treasury, with approval of the President, to promulgate regulations prescribing the conditions under which gold could be acquired and held, for certain permissible uses only, e.g., "industrial, professional, and artistic use." Purchasing, holding, selling or dealing in gold for investment or speculation was specifically forbidden by regulations issued pursuant to Section 3. See, e.g., 31 C.F.R.§§ 54.14(b), 54.15 (1974). Section 4 of the Gold Reserve Act, 31 U.S.C. § 443, provided for forfeiture ...

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