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Shaw, Savill, Albion & Co. v. Fredericksburg.T He Tamaroa.

decided.: May 28, 1951.


Author: Frank

Before SWAN, CHASE and FRANK, Circuit Judges.

FRANK, Circuit Judge.

The collision occurred in British territorial waters between British and American vessels. The British vessel is owned by libellant, a British corporation which has its office and place of business in London, England. The parties have stipulated that the claimant-appellee, owner of the American vessel, is liable for 75% of the damages of libellant, owner of the English vessel. The dispute centers around one item consisting of the amount paid for the repairs, to libellant's ship, made in this country by Todd Shipyards. The other items in issue here represent expenses and losses incurred in pounds by libellant before devaluation. If the view we take of the rule applicable to Item 36 is correct, our reasoning applies a fortiori to those items, and we shall therefore center our discussion on Item 36.

The bill for those repairs, $118,840.03, was not paid to Todd by libellant but was paid to Todd in dollars by the United States War Shipping Administration. This amount was debited by the United States against the credit of the British Government (a credit apparently established under the Lend-Lease agreement). Libellant reimbursed the British Government by paying it 29,525.9.6. At the time of each of those payments, those pounds had an exchange value of $118,840.03. At the date of the decree, due to the intervening devaluation of the pound, 29,525.9.6 had an exchange value of $82,671.33. The district court awarded libellant that sum for that item. Libellant argues that the award should have been $118,840.03.

The type of problem here, because of the time element, has been said to involve a consideration of a "fourth dimension - namely that of time."*fn1 Since it also apparently involves an attempt to coordinate the currencies of two different national systems, a mathematical-minded legal philospher might suggest the application of the general theory of relatively,*fn2 which seeks to formulate "laws" for all coordinate physical systems and thus to attain uniformity.*fn3 Happily, this court is spared any such Einsteinian effort,*fn4 for the Supreme Court has worked out a solution which we must accept.

It is well settled that a money judgment by an American court must be in American currency.*fn5 The question therefore arises, in a case like this, as to the proper date for conversion of the foreign currency into our own. The controlling authorities in the federal courts are Hicks v. Guiness, 269 U.S. 71, 46 S. Ct. 46, 70 L. Ed. 168, and Die Deutsche Bank Fialiale Nurnberg v. Humphrey, 272 U.S. 517,*fn6 47 S. Ct. 166, 71 L. Ed. 383. They have been summarized by Williston as follows.*fn7 The Supreme Court "has held that the exchange value of damages for breach of an obligation performable in foreign currency in the United States is taken at the time of the breach, * * *; but where the obligation is performable in a foreign country in the money of that country, the judgment day rule has been held applicable, on the ground that 'an obligation in terms of the currency of that country takes the risk of currency fluctuation * * * If the debt had been due here and the value of dollars had dropped before suit was brought, the plaintiff could recover no more dollars on that account.'"*fn8 This court has held that the so-called judgment-day rule applies to unliquidated damages where the cause of action was of foreign origin.*fn9

The same rules are applicable to tort obligations. See Restatement of Conflict of Laws, ยง 424. In 40 Harvard L.Rev. (1927) 619, 625 it is said: "Upon the commission of a tort a right arises to damages, expressed in units of the money of the country in which the tort occurred.*fn10 These damages, primarily expressed in the money of the foreign country, should be translated into money of the forum as of the date when the right is merged in a forum judgment.*fn11 Conversely, where a tort occurs in the forum, but where damages must be reckoned in terms of foreign money, the right to reparation is expressed in the money of the forum at the date the cause of action arises, and hence the rate of exchange existing on such date should prevail." With that statement we agree.

Here we have a foreign tort, a collision in British territorial waters.*fn12 Accordingly, cases relating to collisions in our waters*fn13 or on the high seas*fn14 are inapposite. The English courts seem to have adopted the breach-day rule.*fn15 But we may not consider those English decisions, since the conversion date of foreign currency is to be determined by the law of the forum.*fn16 The New York courts have perhaps adopted the breach-day rule in most circumstances,*fn17 although a dictum in a recent decision is contra.*fn18 Whether, in some circumstances, we should, in obedience to Erie Railroad v. Tompkins, 304 U.S. 64, 58 S. Ct. 817, 82 L. Ed. 1188, apply the state rule, we need not here consider, since we have here a question of general maritime law.

The judgment-day rule yields a just result in this case:*fn19 As libellant has its place of business in England, to award it pounds translated into dollars at the rate of exchange existing in 1944 or 1945, merely because of the happen-stance that it libelled claimant's vessel in the United States, would be to give it a windfall of some $36,000. or over 10,000.*fn20 For, if this suit had been brought in England, the judgment would have been for 29,525.9.6, and not for 29,525.9.6 translated - as of 1944 or 1945 - into dollars and then retranslated into pounds, so as to become approximately 42,442.17.6.*fn21 In each of the English cases in which the breach-day rule has been used, there were facts which compelled consideration of a foreign currency;*fn22 here, had the suit been in England, there would have been none: The tort occurred in British waters, and the libellant, a British corporation doing business in England, paid the American repair bill in pounds.*fn23 Libellant should not gain some $36,000 or over 10,000 merely by bringing suit in this ocuntry. The "obligation is not enlarged by the fact that the creditor happens to be able to catch his debtor here."*fn24 Insofar as libellant may suffer because of the shrinkage in the internal purchasing power of the pound,*fn25 libellant would have had no redress in England,*fn26 and therefore should have none here.

If libellant had paid the repair bill in dollars, or were still obligated to do so, it might perhaps be arguable that libellant would be entitled to be reimbursed in that precise amount of dollars, i.e., $118,840.03; but we need not consider that problem, since it is not before us here. Because of libellant's payment of the bill in pounds, the payment to Todd in dollars drops out of the equation, so to speak.

The United States, in a brief filed as amicus, suggests that the result here is peculiarly fair because the devaluation of the pound was part of a "managed currency" plan, so that the decreased foreign exchange rate bore no relation to, and did not affect, the domestic purchasing power of the pound.*fn27 But although that fact conceivably may be relevant in some other kinds of cases where conversion of foreign currency is necessary, we have not considered it in deciding this case.

Libellant argues that both parties intended conversion into American currency to be at the exchange rate existing at the date of the payment to Todd because, had that not been the intention, the claimant would not have been willing to make payment on account, on March 7, 1949, in so large a sum as $100,000. The argument, at best not too persuasive, omits an important fact: "The amount fixed in the decree, before crediting claimant with the $100,000 payment on account, was in excess of that amount, i.e., $101,750.02 for principal and interest to the date of that payment.

The decree was therefore properly for the difference, i.e., $1,750.02, plus interest from March 7, ...

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