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Competex, S.A. v. Labow

February 12, 1986

COMPETEX, S.A. (IN LIQUIDATION), PLAINTIFF-APPELLEE,
v.
RONALD LABOW, DEFENDANT-APPELLANT



Appeal from an order of the District Court for the Southern District of New York (John E. Sprizzo, Judge) denying a motion under Fed. R. Civ. P. 60(b) for relief from an American judgment entered to enforce an English judgment. Appellant contends that payment of the English judgment satisfies the American judgment, which was converted into dollars at the exchange rate prevailing on the date of the English judgment. Affirmed.

Author: Newman

Before: KAUFMAN, NEWMAN, and KEARSE, Circuit Judges.

JON O. NEWMAN, Circuit Judge :

This appeal presents issues concerning currency conversion in the context of enforcing a foreign judgment. Specifically, the question is whether a judgment debtor may satisfy an American judgment that was based on an English judgment by paying the amount of the English judgment in pounds. Plaintiff-appellant Ronald LaBow appeals from an order of the District Court for the Southern District of New York (John E. Sprizzo, Judge) denying his motion under Fed. R. Civ., P. 60(b) for relief from the American judgment, previously entered by the late Judge Henry F. Werker in favor of defendant-appellee Competex, S.A. For reasons that follow, we affirm.

Background

LaBow, a New Yorker, lost a substantial sum of money through speculation in copper on the London Metal Exchange. His broker, Competex, a Swiss corporation, satisfied these debts. Competex sued LaBow for breach of contract in the English High Court of Justice, Queen's Bench Division, and obtained a default judgment for L187,929.82, which included principal, interest, and costs.

Competex then brought this diversity action to enforce the English judgment. Following a bench trial, Judge Werker held that the English judgment was entitled to recognition and enforcement. Because determination of the date on which to convert a foreign currency debt into dollars is a substantive question, see Vishipco Line v. Chase Manhattan Bank, N.A., 660 F.2d 854, 865-67 (2d Cir. 1981), cert. denied, 459 U.S. 976, 74 L. Ed. 2d 291, 103 S. Ct. 313 (1982), Judge Werker was compelled to apply New York law. New York uses the breach-day conversion rule, see Dougherty v. Equitable Life Assurance Society, 266 N.Y. 71, 193 N.E. 897 (1934); Parker v. Hoppe, 257 N.Y. 333, 178 N.E. 550 (1931); Richard v. American Union Bank, 241 N.Y. 163, 149 N.E. 338 (1925); Hoppe v. Russo-Asiatic Bank, 235 N.Y. 37, 138 N.E. 497 (1923); Brill v. Chase Manhattan Bank, 14 A.D.2d 852, 220 N.Y.S.2d 903 (1st Dep't 1961); Librairie Hachette, S.A. v. Paris Book Center, Inc., 62 Misc. 2d 873, 309 N.Y.S.2d 701 (Sup. Ct. N.Y. Co. 1970). But see John S. Metcalf Co. v. Mayer, 213 A.D. 607, 211 N.Y.S. 53 (1st Dep't 1925) (applying the judgment-day rule); Sirie v. Godfrey, 196 A.D. 529, 188 N.Y.S. 52 (1st Dep't 1921) (same).

In applying the breach-day rule, Judge Werker reasoned that Competex's American claim was based on the English judgment rather than on the underlying contract. Competex's American claim had therefore accrued upon the date of entry of the English judgment, and Judge Werker applied the conversion rate prevailing on that date: L1 = $2.20. He entered judgment for $583.201.78, which included interest and a fee award pursuant to Fed. R. Civ. P. 56(g).*fn1 LaBow noticed an appeal, which we dismissed sua sponte for failure to perfect. The appeal was never reinstated.

The pound depreciated substantially relative to the dollar between the dates of the English and American judgments. On the date of the American judgment, the conversion rate was: L1 = $1.50. The pound continued to depreciate. As a result, LaBow moved, pursuant to Fed. R. Civ. P. 60(b), for a clarification of the American judgment and a declaration that he could satisfy the American judgment by paying the underlying English judgment in pounds. While this motion was pending, LaBow borrowed the necessary funds and paid the English judgment, with interest, in pounds. Judge Sprizzo denied LaBow's Rule 60(b) motion and held that the American judgment could be satisfied only by paying the dollar amount specified in that judgment. He credited LaBow's payment against the American judgment at the conversion rate prevailing on the date of payment: L1 = $1.20. This calculation left a balance owing on the American judgment of approximately $236,000.*fn2 LaBow appeals the denial of his Rule 60(b) motion.

Discussion

Because of the procedural posture of this case, we are faced with a narrow issue: whether Judge Sprizzo's denial of LaBow's Rule 60(b) motion was proper. Rule 60(b) is not a substitute for appeal. LaBow may not relitigate the bases for the judgment entered by Judge Werker. See Donovan v. Sovereign Security, Ltd., 726 F.2d 55, 60 (2d Cir. 1984); Daily Mirror, Inc. v. New York News, Inc., 533 F.2d 53, 56 (2d Cir.), cert. denied, 429 U.S. 862, 97 S. Ct. 166, 50 L. Ed. 2d 140 (1976). Specifically, LaBow may not challenge Judge Werker's application of the breach-day conversion rule. However, review of the Rule 60(b) denial requires some exploration of the currency conversion problem because determination of a state's rule of deeming foreign judgments satisfied turns on the rationale for the state's currency conversion rule.

For illustrative purposes, the following example will be helpful.*fn3 Defendant defaults on a contractual obligation to pay plaintiff L1. Plaintiff brings suit in an English court and receives judgment for that amount, at which time the prevailing conversion rate is: L1 = $1. For simplicity and to keep the discussion focused no the pertinent points, we assume that the value of the dollar remains constant (i.e., constant against gold and all currencies except the pound) but that fluctuation in the value of the pound causes a change in the exchange rate for the dollar. Initially, we consider what would happen if the pound depreciates relative to the dollar, so that L1 = $.60. Plaintiff then brings an action on the English judgment in an American state court. We will further assume that defendant has sufficient property in both jurisdictions to satisfy any judgments against it.

If the English judgment is entitled to enforcement, a state court applying New York's breach-day rule would enter judgment for $1, in accordance with the conversion rate prevailing on the date the English judgment debt became due. The asserted purpose of this rule is to assure that plaintiff will be made whole by protecting him against fluctuation in relative currency values. See Vishipco Line v. Chase Manhattan Bank, N.A., supra, 660 F.2d at 866 n.7. Thus, had defendant paid plaintiff L1 on the date of the English judgment and had plaintiff converted this amount into dollars on that date, plaintiff would be in possession of $1 on the date of the American judgment. On the surface, the breach-day rule appears to do no more than regard as done that which ought to have been done.

However, the breach-day rule does ore than make plaintiff whole. It generously allows him to reap the benefit of appreciation in the value of the pound without risking loss as a result of the pound's depreciation. In our example, plaintiff was insulated from any loss as a result of the pound's depreciation. His right to receive $1 was completely unaffected by the pound's depreciation. However, had the pound appreciated relative to the dollar, so that L1 - $1.30, plaintiff would simply have executed on the English judgment. He would receive L1, the ...


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