The opinion of the court was delivered by: Moran, District Judge.
Plaintiffs Cronel Watch and Enzo Watch (hereinafter
collectively referred to as "Cronel"), bring this action as
assignees of Max Jeker ("Jeker") to recover money owed on the
sale of Swiss watches and watch movements by Jeker to Mercantile
Products Co., Inc. ("Mercantile"), an Illinois corporation which
is now dissolved. The specific basis for this lawsuit was
discussed by the court in its Memorandum and Order dated November
19, 1981.*fn1 Briefly, the watches were received by defendant
J.E. Bernard & Co., Inc. ("Bernard"), an Illinois-licensed custom
broker. Bernard was then to forward the shipments to the Peterson
Bank, which would hold the goods for Mercantile pending payment
in Swiss francs to Jeker. The use of the bank as an intermediary
was insisted on by Jeker because he had previously encountered
difficulty in securing payment from Mercantile. As this court
determined in that earlier opinion, the evidence procured through
discovery revealed that Bernard, rather than delivering the
watches to Peterson, turned them over directly to Mercantile.
Mercantile failed to settle its account with Jeker, and this
Currently pending before the court is defendant Bernard's
pretrial motion to determine the measure of damages and to decide
whether Bernard is liable for any prejudgment interest.
I. Measurement of Damages
It is well settled that a money judgment by a court in the
United States must be expressed in terms of American currency.
Bronson v. Rodes, 74 U.S. 229, 7 Wall. 229, 19 L.Ed. 141 (1868);
Shaw, Savill, Albion & Co., Ltd. v. The Fredericksburg,
189 F.2d 952, 954-55 (2d Cir. 1951). The problem arises when the
ascertainment of damages requires a court to
take account of two or more media of exchange which
are fluctuating with respect to each other. . . . In
[such] cases it may become necessary to decide what
date should be adopted for the conversion of the
foreign money. Among the possible dates which have
been suggested are breach date, i.e., date when the
cause of action accrued, date of commencement of the
action, date of trial, date of verdict or judgment,
date at which the judgment is paid or execution
levied thereon, and that date within a reasonable
time after breach on which the rate was most
favorable to the plaintiff. The only two of these
alternatives that have been seriously considered by
the courts are the date of breach and the date of
judgment or verdict.
40 Harv.L.Rev. 619, 619-20 (1927) (footnotes omitted).
The choice of date for conversion of money — it is assumed for
the purposes of this motion that Bernard is liable for conversion
— can have profound effects on the amount awarded. In this case
the substantial decline in the dollar relative to the Swiss franc
since 1974 makes the question much more than of academic concern.
In part, that decline may be due to inflation, the inevitable
consequence of which is that any person called upon to pay a past
liability with current dollars is economically benefitted and the
creditor bears the loss from the decline in value. In part, that
decline may be due to international or foreign domestic monetary
factors, with the consequence that payment of a past liability
with current dollars does not benefit the debtor and may cause
harm to the creditor, although even that is uncertain in the
absence of any information respecting changes in the domestic
purchasing power of the Swiss franc. Since payment will, in any
event, be in current dollars, the economic impact depends when
the liability is valued. For obvious reasons, then, defendant
urges this court to convert the value of the watches from Swiss
francs to dollars, utilizing the exchange rate existing on the
date of the alleged conversion. Plaintiffs contend that only
application of the current exchange rate would restore Cronel to
the position it would have been in but for the wrongful conduct
Defendant lodges two arguments in support of its position.
First, Bernard maintains that since it was not a party to the
contract of sale between Jeker and Mercantile, there is no
obligation for Bernard to pay in Swiss francs. Accordingly,
Bernard's liability should be measured, like any other
tort-feasor who converts property in Illinois, as the dollar
value of the property at the time and place of conversion.
Assuming, however, that Bernard was connected with the
contractual obligation to pay in Swiss francs, then established
case law requires that the computation of foreign currency to
U.S. dollars be based on the exchange rate at the time the
conversion took place.
This is a diversity case. The claim against Bernard is one for
conversion in Illinois. Bernard is not a party to the contract to
pay in Swiss francs, and the mere existence of such an agreement
does not govern the proper determination of damages.*fn2 Cf.
First National Bank of Mount Prospect v. York, 27 Ill. App.3d 614,
327 N.E.2d 400, 402 (1st Dist. 1975). Rather, relief should be
determined in accordance with the general rule applied in
Illinois for trover and conversion actions. The measure of
damages is the market value of the property at the time and place
of conversion, plus legal interest. Jensen v. Chicago & Western
Indiana R. Co., 94 Ill. App.3d 915, 50 Ill.Dec. 470, 485,
419 N.E.2d 578, 593 (1st Dist. 1981); Henkel v. Pontiac Farmers Grain
Co., 55 Ill. App.3d 898, 13 Ill.Dec. 635, 371 N.E.2d 352 (4th
Dist. 1977). The mere fact that plaintiffs are Swiss citizens,
and that they hoped for a set payment in Swiss francs, does not
justify deviating from this general rule. Cf. Charles Selon &
Assoc. v. Aisenberg, 103 Ill. App.3d 797, 59 Ill.Dec. 457,
431 N.E.2d 1214, 1217 (1st Dist. 1981) (the fact that the property
converted was gold, whose value fluctuates significantly over
time, does not render inapplicable the rule in Illinois that
damages are determined as of the date of conversion).
Assuming arguendo that the contract price in Swiss francs was
conclusive as to damages, moreover, the result would not be
significantly changed. Determination of the judgment in terms of
United States currency would require using the exchange rate in
existence on the date of the alleged conversion.
Although the issue most often arises in the context of a breach
of contract, the principles governing recovery for tortious
conduct are analogous. See Shaw, Savill, Albion & Co., Ltd. v.
The Fredericksburg, 189 F.2d 952, 955 (2d Cir. 1951). When faced
with this question, the courts have responded in a virtually
unanimous fashion. Where a tort occurs in the forum state,*fn3
but damages must be assessed in terms of foreign money, the rate
of exchange existing on the date the cause of action arose should
prevail. 40 Harv.L.Rev. 619, 625 (1927), and cases cited therein.
See The Verdi, 268 F. 908 (S.D.N.Y. 1920). Cf. Hicks v. Guinness,
269 U.S. 71, 46 S.Ct. 46, 70 L.Ed. 168 (1925); Compania Engraw
Commercial E. Industrial S.A. v. Schenley Distillers, Corp.,
181 F.2d 876 (9th Cir. 1950); Simonoff v. Bank, 279 Ill. 248,
116 N.E. 636 (1917).
Cronell responds that it is merely "fortuitous" that courts
chose a breach-day rule, and that judges simply selected the date
which would ensure the injured party the higher dollar amount.
This contention is not supported by the decisions they cite.
While, in the past, the rate of exchange prevailing at the date
of breach did predominantly favor the plaintiff, this fact does
not appear to be a significant reason for the court's choice of
a breach-date rule. For example, in one case relied upon by
Cronel, the court held that the judgment in American dollars was
computable at ...