Hicks v. Guinness

Background

An American firm doing business in New York sued the Alien Property Custodian to recover a debt owed by a German firm. The account was stated on December 31, 1916, for 1,079.35 marks, subject to a $35.35 setoff. The debt was unpaid when the United States entered the war on April 6, 1917, and the Custodian had taken property of the German firm with value greater than the debt. The suit was brought under the Trading with the Enemy Act.

Reasoning

The Court considered two questions: when should the mark be converted into dollars to fix the amount owed, and whether interest is due for the wartime period from April 6, 1917, to July 14, 1919. The Court said the proper measure is the dollar value of the mark when the account was stated, because the American creditor’s loss was fixed at that moment and the creditor could demand dollars instead of marks. The Court disagreed with the view that interest should be suspended during the war, explaining that once liability was fixed before the war, interest is an ordinary incident of that liability and inability to pay during war does not excuse it.

Real world impact

The decision affirms that creditors holding foreign-currency claims may convert at the prewar exchange value and recover interest that accrued while the United States was at war. The ruling affects recoveries from property seized as enemy property and clarifies that wartime inability to pay does not automatically stop interest from running.