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Private Equity, Social Inequity: German Judges React to Inflation, 1914–24

Published online by Cambridge University Press:  16 December 2008

Michael L. Hughes
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Extract

Responding to a lawyer's impassioned plea for “justice” for his client, a great judge supposedly remarked, “We deal with the law here, not with justice.” This apocryphal comment sums up a fundamental dilemma: should courts simply apply the law as written or seek out “justice” in every case? Before World War I, German jurists chose the former approach. For them the Rechtsstaat (variously, the just state or state rooted in law) was to be secured by establishing a legal code covering all contingencies and then applying this code exactly to each case. Only thus could individuals and their rights be protected from caprice or arbitrariness. Yet between 1914 and 1924 the German judiciary jettisoned this concept and tacitly redefined the Rechtsstaat to make the judges' conception of equity, rather than statutes, the ultimate guarantee of justice.

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Articles
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Central European History , Volume 16 , Issue 1 , March 1983 , pp. 76 - 94
Copyright
Copyright © Conference Group for Central European History of the American Historical Association 1983

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References

1. Wieacker, Franz, Privatrechtsgeschichte der Neuzeit, 2d ed. (Göttingen, 1967)Google Scholar; Dawson, John, Oracles of the Law (Ann Arbor, 1968)Google Scholar; Reihe Alternativ Kommentare. Kommentar zum Bürgerliches Gesetzbuch, 2, Allgemeines Schuldrecht. Gunther Teubner §242 (hereafter, AK-BGB-Teubner §242) (Neuwied/Darmstadt, 1980), pp. 84, 85.Google Scholar

2. Revaluation was the forced repayment of obligations wholly or partially in gold currency equivalents. Debt in this paper refers to long-term debt, whose revaluation could have seriously damaged the economy (e.g., mortgages, government bonds, savings accounts). An extensive literature on revaluation has appeared in recent years. See Maier, Charles, Recasting Bourgeois Europe (Princeton, 1975), pp. 441, 483–84, 491–94, 508–11Google Scholar; Jones, Larry E., “Inflation, Revaluation, and the Crisis of Middle-Class Politics: A Study of the Dissolution of the German Party System, 1923–28,” Central European History 12 (1979): 143–68Google Scholar; Southern, David, “The Revaluation Question in the Weimar Republic,” Journal of Modern History 52 (1979)Google Scholar: D1029–D1053; Southern, David, “The Impact of Inflation: Inflation, the Courts, and Revaluation,” in Bessel, Richard and Feuchtwanger, E. J., eds., Social Change and Political Development in Weimar Germany (Totowa, N.J., 1981), pp. 55–76Google Scholar; Holtfrerich, Carl-Ludwig, Die Deutsche Inflation 1914–1923 (Berlin, 1980), pp. 315–27, 331.Google Scholar

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5. Wieacker, Privatrechtsgeschichte, pp. 430–36, 441–42, 457–61, 478–79; Dawson, Oracles, pp. 457–58.

6. Wieacker, Privatrechtsgeschichte, pp. 479–83, 448; Wieacker, Industriegesellschaft, pp. 16–21, 60.

7. See below.

8. DrSontag, Ernst, “Zur Polemik gegen die Ansprüche der Hypothekengläubiger,” Juristische Wochenschrift (hereafter, JW) 52 (1923): 907–8Google Scholar: Mügel, Oskar, “Die Frage der Hypothekenforderungen vom Standpunkt des geltenden Rechtes aus,” JW 52 (1923): 875Google Scholar; Bendix, E. [Ludwig], “Geldentwertung und Rechtsfindung,” JW 52 (1923): 916Google Scholar; Holtfrerich, Inflation, pp. 109–10.

9. Holtfrerich, Carl-Ludwig, “Reichsbankpolitik 1918–1924 zwischen Zahlungsbilanzund Quantitätstheorie,” Zeitschrift für Wirtschafts- und Sozialwissenschaft, 1977, no. 3:194, 207Google Scholar; Heck, Phillip, “Das Urteil des Reichsgerichts über die Aufwertung von Hypotheken und die Grenzen der Richtermacht,” Archiv für die civilistische Praxis 122 (1924): 210 and passimGoogle Scholar; “Die Rückzahlung von Hypotheken,” Frankfurter Zeitung, Mar. 12, 1923, no. 188.

10. Wieacker, Privatrechtsgeschichte, pp. 433–39, 459–60; Dawson, Oracles, pp. 461–65, 438–40, 478–81; Hedemann, Wilhelm, Reichsgericht und Wirtschaftsrecht (Jena, 1929), pp. 318, 322–25.Google Scholar

11. Entscheidungen des Reichsgerichts in Zivilsachen (hereafter, RGZ), 88:172–78; RGZ, 92:322–25; Dawson, John, “Effects of Inflation on Private Law Contracts: Germany, 1913–1924,” Michigan Law Review 33 (1933–34): 183.Google Scholar

12. Cf. Hattenhauer, Hierarchie, pp. 223–25; the discussion in NS-Recht in historischer Perspektiv (Munich, 1981), esp. pp. 114–23Google Scholar; Mommsen, Hans, “Beamtentum und Staat in der Spätphase der Weimarer Republik,” in Am Wendepunkt der Europäischen Geschichte (Göttingen, 1981), pp. 136–38.Google Scholar

13. RGZ, 100:129–34.

14. RGZ, 103:328–34; RGZ, 104:394–402.

15. RGZ, 100:129–34; RGZ, 104:222; “Rechtsprechung: Reichsgericht,” JW 51 (1922): 910.Google Scholar

16. RGZ, 104:402.

17. See Wieacker, Industriegesellschaft, p. 26; Bauer, Wolfram, Wertrelativismus und Wertbestimmtheit im Kampf um die Weimarer Demokratie (Berlin, 1968), passimGoogle Scholar; Wieacker, Privatrechtsgeschichte, pp. 520–22; Huber, Ernst, Verfassung (Hamburg, 1937), p. 127.Google Scholar

18. See Wieacker, Privatrechtsgeschichte, pp. 352–53; Hattenhauer, Hierarchie, pp. 170–71; AK-BGB-Teubner §242, passim.

19. “Oberlandesgerichte: Darmstadt,” JW 52 (1923): 459Google Scholar; see also RGZ, 100:132, and other rulings.

20. Hattenhauer, Hierarchie, pp. 229–30; Akten der Reichskanzlei: Kabinett Fehrenbach (Boppard am Rhein, 1975), p. 1384.Google Scholar

21. Titze, Heinrich, Richtermacht und Vertragsinhalt (Tübingen, 1921)Google Scholar; JW 50–52 (1921–1923)Google Scholar; Hattenhauer, Hierarchie, pp. 225–27, 230; Wieacker, Privatrechtsgeschichte, pp. 518–20.

22. See Wieacker, Industriegesellschaft, pp. 14–21. Most creditors were members of the lower-middle or middle classes, and debtors were either members of the middle classes or were businesses. Occasionally, one individual or business was both. Most individuals, however, were not debtors. See Hughes, Michael, “Equity and Good Faith: Inflation, Revaluation, and the Distribution of Wealth and Power in Weimar Germany” (Ph.D. diss., Univ. of California, Berkeley, 1981), pp. 5–14 and passim.Google Scholar

23. Hence, probably only about 3% of the electorate were vehemently pro-revaluation, and only about 10% more were strongly in favor of it. See Hughes, “Equity,” pp. 255–65, 5–7, 12–13.

24. See ibid., pp. 255–65, 279–91, and sources cited there.

25. “Aus dem Reichswirtschaftsrat,” Frankfurter Zeitung, May 5, 1923, no. 325; “Die Hypothekenrückzahlung,” ibid., July 4, 1923, no. 485.

26. “Oberlandesgerichte: Darmstadt,” JW 52 (1923): 459Google Scholar; and “Oberlandesgerichte: Darmstadt,” JW 52 (1923): 522.Google Scholar

27. Zeiler, Alois, Meine Mitarbeit (Brunschweig, 1938), p. 153Google Scholar; Dawson, “Effects,” p. 203. The paper mark remained legal tender.

28. RGZ, 107:78–94. The government was so obviously bankrupt in November 1923 that no one seriously proposed government bond revaluation at that time.

29. Lehmann, Heinrich, “Artikel 151, Absatz 1,” in Nipperdey, Hans, ed., Die Grundrechte und Grundpflege der Reichsverfassung (Berlin, 1930), 3:147.Google Scholar Southern characterizes this as “judicial rebellion against the law.” “Revaluation Question,” p. D1035. Dawson writes that the reference to legislative intent is a “passing salute,” and that the decision implies a broad power to invalidate legislation based on §242. Oracles, p. 470.

30. Hughes, “Equity,” pp. 87, 90, 123–27.

31. See above, n. 25; Reichsgericht, Richterverein beim, “Gesetzentwurf neben Begründung,” Deutsche Juristen Zeitung 28 (1923): 442.Google Scholar

32. Bendix “Geldentwertung,” 916 (his emphasis). Paul Oertmann provides an example of shifting attitudes. Cf. Dawson, Oracles, p. 420, n. 2 and Oertmann, Paul, “Der Einfluss von Herstellungsverteuerungen auf die Lieferpflicht,” JW 49 (1920): 477–78.Google Scholar

33. Wieacker, Privatrechtsgeschichte, pp. 438–39. My thanks to Dr. James Gordley for raising this issue.

34. Teilbericht über die 34. Sitzung des 18. Ausschusses, 27. Juni 1925, Historisches Stadtsarchiv Cologne, Nachlass Marx, no. 412.

35. See the evidence in Hughes, “Equity,” pp. 10–12 and in Southern, “Impact of Inflation,” pp. 64–65.

36. Dessauer, Friedrich, Recht, Richtertum, und Ministerialbürokratie (Mannheim, 1928), p. 89Google Scholar; Fraenkel, Ernst, Soziologie der Klassenjustiz (Berlin, 1927), pp. 15, 26Google Scholar; Rademacher to Westarp, n.d., Nachlass Westarp, 1925, Aufwertung. See Bauer, Wertrelativismus, pp. 237–38, and Southern, “Impact of Inflation,” pp. 64–65, who also suggest this without developing it.

37. For creditor attitude, see DrGrossmann, H. et al. , Im Kampf um eine gerechte Aufwertung (Stuttgart, 1924), p. 9 and passimGoogle Scholar. For a discussion of different bases for decision see AK-BGB-Teubner §242, pp. 37–40, 46. Southern identifies the conflicting perceptions of the issue, but does not develop their possible relationship to judicial motives. “Impact of Inflation,” p. 72.

38. Cf. Unger, Roberto, Law and Modern Society (Chicago, 1977), pp. 187–89.Google Scholar

39. For discussion of this in relation to courts in the United States see Murphy, Walter, Elements of Judicial Strategy (Chicago, 1964), p. 6 and passim.Google Scholar

40. See Fraenkel, Soziologie, passim; articles in Deutsche Richterzeitung, 1922–23; Hattenhauer, Hans, “Zur Lage der Justiz in der Weimarer Republik,” in Erdmann, Karl and Schulze, Hagen, eds., Selbstpreisgabe einer Demokratie (Düsseldorf, 1980), pp. 170–71.Google Scholar

41. E.g., Schutzverband der Hypotheken-, Pfandbrief- und Obligationengläubiger in Bayern, Ortsgruppe Steinbach, June 18, 1924, Bayerischer Hauptstaatsarchiv, Ministerium der Justiz, 15503; Oelenheinz, Theodor, ed., Spiegel der deutschen Inflation (Leipzig, 1927), pp. 62, 69.Google Scholar

42. Oberlandesgerichtspräsident (OLGpräsident) Düsseldorf to Prussian justice minister, Aug. 6, 1923, Geheimes Staatsarchiv Preussischer Kulturbesitz (hereafter GStA) Rep. 84a, no. 5904, p. 47; OLGpräsident Hamm to Prussian justice minister, Aug. 15, 1923, ibid., p. 96; OLGpräsident Kiel to Prussian justice minister, July 28, 1923, ibid., p. 126; OLGpräsident Cologne to Prussian justice minister, July 29, 1923, ibid., p. 145.

43. All the letters are ibid.

44. OLGpräsident Hamm (see n. 42).

45. OLGpräsident Kiel (see n. 42).

46. Richterverein beim Reichsgericht, “Gesetzentwurf,” p. 442.

47. For quotation see Reichsgerichtspräsident Simons to Reichskanzler, May 30, 1925, Bundesarchiv Koblenz, R43 I/1211, p. 315; see also Hattenhauer, “Lage,” pp. 169, 170; Dessauer, Recht, pp. 23–24.

48. For quotation see OLGpräsident Celle to Prussian justice minister, July 20, 1923, GStA, Rep. 84a, no. 5904, p. 37; see also Hughes, “Equity,” pp. 139–40, 172, 482–88; RGZ, 111:322–23Google Scholar; Dessauer, Recht, p. 11; Nussbaum, Arthur, Money in the Law (Brooklyn, 1950), p. 214.Google Scholar

49. Although Southern mentions the judges' creditor status and accusations by contemporaries that they were using revaluation to expand their power relative to parliament, he chooses to emphasize the failure of legal formalism and the obvious inequity of the inflation as causes of judicial activism. “Impact of Inflation,” pp. 64–65 and passim.

50. JW 53 (1924): 90.Google Scholar Apparently several Reichsgericht judges later wrote that they had not agreed with this letter (private communication from Prof. John P. Dawson).

51. Cf. Hedemann, Reichsgericht, p. 242; Eyck, Erich, History of the Weimar Republic (Cambridge, 1962), 1:287.Google Scholar

52. Cf. Hattenhauer, Hans, “Vom Reichsjustizamt zum Bundesministerium der Justiz,” in Hattenhauer, Hans, ed., Vom Reichsjustizamt zum Bundesministerium der Justiz (Cologne, 1977), pp. 49–51.Google Scholar

53. Schlegelberger, Franz and Harmening, Rudolf, Gesetz über die Aufwertung von Hypotheken und anderen Ansprüchen (Berlin, 1925), pp. 391–96.Google Scholar This decree was superseded by the two revaluation laws of 1925, ibid., pp. 42–77, 292–306. See also Hughes, “Equity,” pp. 457–70.

54. “Die Spitzenverbände von Handel und Industrie zur Aufwertungsfrage,” Vossische Zeitung, Feb. 26, 1924, no. 97.

55. RGZ, 107:370–77; Emminger, Erich, Die Aufwertungsfrage im aufgelösten Reichstag (Munich, 1924), p. 5.Google Scholar

56. Hughes, “Equity,” pp. 119–23, 174–79, and passim.

57. Cf. Thompson, Edward P., Whigs and Hunters (New York, 1975), pp. 258–66.Google Scholar

58. See, e.g., Pirlet, Otto, Der politische Kampf um die Aufwertungsgesetzgebung nach dem Ersten Weltkrieg (Cologne, 1959), p. 13 and passim.Google Scholar

59. Hughes, Michael, “Economic Interest, Social Attitudes, and Creditor Ideology: Popular Responses to Inflation,” in Feldman, Gerald et al. , eds., Die deutsche Inflation (Berlin, 1982), pp. 385–408Google Scholar; Thomas Childers, “Inflation, Stabilization, and Political Realignment in Germany 1924–1928,” ibid., pp. 411–12, 426–31.