Opinion ID: 1405642
Heading Depth: 1
Heading Rank: 24

Heading: The Proper Measure Of Damages In Connection With GBC's Conversion Claim Was The Value Of The Golden Buddha And The Seventeen Gold Bars Within A Reasonable Time After Roxas Learned Of The Conversion.

Text: The plaintiffs-appellees argue that the circuit court erred in instructing the jury that the correct measure of damages in connection with GBC's claim for relief arising out of the conversion of Roxas's gold was the value of the gold on the date of conversion. They assert, instead, that the proper measure should have been the highest value of the gold between the time of its taking and the entry of the circuit court's amended judgment. Like most of the issues on appeal in this matter, it would be appropriate to apply Philippine law to the measure of damages. Unfortunately, once again, none of the parties have cited any Philippine authority. Accordingly, this court will apply Hawai`i law. See supra note 16. Imelda cites to this court's opinion in Tsuru v. Bayer, 25 Haw. 693, 699-700 (1920), for the proposition that the measure of damages for conversion is the fair reasonable value of the property at the time of the conversion. However, in that case, the conversion at issue was of the personal effects of the lessee of a building, which were taken and sold by the building's owner. Id. at 694. Accordingly, the Tsuru court was not concerned with the valuation of a commodity of fluctuating value, such as the gold involved in the instant case. Indeed, it appears that the issue has never been directly addressed by the Hawai`i appellate courts. In Brougham v. Swarva, 34 Wash.App. 68, 661 P.2d 138, 143-44 (Wash.Ct.App.1983), a case involving the conversion of silver coins, the Washington Court of Appeals summarized the approaches adopted by the various jurisdictions toward the valuation of fluctuating commodities as follows: Prior [Washington state] cases have applied the standard measure of damages for conversion of stock, i.e., the fair market value at the date of conversion, Rogich v. Dressel, 45 Wash.2d 829, 278 P.2d 367 (1954)[;] Elliott v. Seattle Co., 178 Wash. 94, 34 P.2d 442 (1934)[;] Hetrick v. Smith, 67 Wash. 664, 122 P. 363 (1912) [40] , but recent decisions in other jurisdictions have held otherwise. Some decisions have awarded damages based on the highest value reached by the stock or personal property between the time of conversion and trial. Ott v. Fox, 362 So.2d 836 (Ala.1978); Chattanooga Discount Corp. v. West, 219 F.Supp. 140, 146 (N.D.Ala.1963) (security conversion); Royal-Liverpool Ins. Group v. McCarthy, 229 S.C. 72, 91 S.E.2d 881 (1956) (automobile conversion). [41] Other jurisdictions have awarded the highest price between the date of conversion and a reasonable time after learning thereof. Fletcher v. Cobuzzi, 510 F.Supp. 263 (W.D.Pa.1981) (stock conversion); Reed v. White, Weld & Co., 571 S.W.2d 395 (Tex.Civ.App.1978) (conversion of securities). [42] Still other courts have applied the New York rule[,] which awards the highest price within a reasonable time after learning of the conversion[,] disregarding the period between conversion and learning thereof. Klein v. Newburger Loeb & Co., 151 So.2d 879 (Fla. App.1963) (stock conversion); [43] Schug v. Michael, 310 Minn. 22, 245 N.W.2d 587 (1976) (stock conversion); Hoffman v. Dorner, 86 A.D.2d 651, 447 N.Y.S.2d 20 (1982) (conversion of gold and silver coins). [44] Finally, some courts have awarded damages based on their highest value between the time of conversion and judgment. Kaplan v. Cavicchia, 107 N.J.Super. 201, 257 A.2d 739 (1969) (conversion of securities); U.S. Cities Corp. v. Sautbine, 126 Okl. 172, 259 P. 253 (1927) (stock conversion). [45] (Emphasis added.) In line with the first approach described by the Brougham court, Imelda cites Charles Selon & Assocs., Inc. v. Aisenberg, 103 Ill. App.3d 797, 59 Ill.Dec. 457, 431 N.E.2d 1214 (Ill.Ct.App.1981). In Aisenberg, the Illinois Court of Appeals declined to adopt an exception to the general rule that damages are set at the date of conversion for converted gold. The Aisenberg court noted that the Illinois Supreme Court had similarly declined to make an exception for converted stock, arguing that such an exception was based on the premises that the plaintiff originally obtained the stock for a permanent investment and would have kept it until the time of trial and that such premises were arbitrary and speculative. Id., 59 Ill.Dec. 457, 431 N.E.2d at 1217 (citing Sturges v. Keith, 57 Ill. 451 (1870)). See also Gerstle v. Gamble-Skogmo, Inc., 478 F.2d 1281, 1305 (2d Cir. 1973) (holding that the assumption that the plaintiffs would have sold stocks at their highest value was too untenable and speculative to support an award of damages (citation and internal quotation marks omitted)). We agree that some subjectivity inheres in any measure of damages that assumes that the victim of a conversion would have sold the commodity at the highest price during a particular period of time. However, [t]he hallmark of conversion cases is the interference with the plaintiff's ability to transfer [commodities] he owns or to which he is entitled. The injury that the plaintiff suffers is the deprivation of his range of elective action, and by applying the conversion measure of damages a court endeavors to restore that range of elective action. To require the plaintiff to show that he would have sold his securities, had he been able, is to require him to prove that he would have taken the very steps that defendant's wrongful act ... precluded him from taking.... The defendant's acts prevent a court from determining with any degree of certainty what the plaintiff would have done with his [commodities] had they been freely alienable. Because it is the defendant who creates this uncertainty, fundamental justice requires that, as between [the plaintiff] and [the defendant], the perils of such uncertainty should be laid at defendant's door. American Gen. Corp. v. Continental Airlines Corp., 622 A.2d 1, 10 (Del.Ch.), aff'd, 620 A.2d 856 (Del.1992) (citations and internal quotation signals omitted) (some brackets added and some in original). On the other hand, we believe that the approach advocated by GBC and adopted in some jurisdictions i.e., that the measure of damages must be the highest value of the converted property between the time of the conversion and the time of judgment or the filing of the complainttips the balance too far to the other side. There is no persuasive punitive or compensatory rationale for penalizing the defendant (absent bad faith delay) or rewarding the plaintiff for the time required for the plaintiff to file a complaint or obtain a judgment. [T]o adopt the highest value between the time of actual conversion and the trial would be to encourage the owner to delay and speculate upon the chances of higher markets, without assuming the chances of lower markets. Newburger Cotton Co. v. Stevens, 167 Ark. 257, 267 S.W. 777, 778 (Ark.1925). However readily ascertainable the relevant time period might be pursuant to this rule, we deem the rule's unfairness to outweigh its predictability. On balance, we agree with the resolution at which the Brougham court arrived. After considering the options available to it, the Brougham court adopted the New York rule, holding that the measure of damages is the highest value of the property wrongfully and knowingly converted between the time of conversion and a reasonable time after the person learns of such conversion. Id. at 144. Such a rule, declared the Brougham court, protects the victim who has invested in property for speculative purposes when the market either rises or falls subsequent to the conversion. The innocent victim should not suffer a loss because of a wrongful taking and withholding of his property. Neither should he be granted the windfall of complete umbrella protection by being awarded the highest possible valuation of the property from the time of its taking to the entry of judgment or its return. Id. at 144 (citation omitted). [46] The New York rule errs on the side of granting the unforeseen benefit of a fluctuating commodity's increase in value to the innocent victim of conversion rather than to the converter, but it does not do so to the extent of conferring an unreasonable windfall. It also avoids the foreseeable possibility that, because of a sudden and infelicitous dip in the market for a particular commodity on the date of conversion, the victim of conversion would be inadequately compensated for his or her loss by operation of the general rule. Moreover, the New York rule tempers the speculative nature of such a measurement of damages by disregarding the market prices of the converted commodity between the time of conversion and the time the plaintiff discovers the conversion. We can be relatively certain that the plaintiff would not have sold the commodity during that time period absent the defendant's wrongdoing because `if he had desired to dispose of [his property] in that interval, he would have learned of the conversion.' Schultz v. Commodity Futures Trading Comm'n, 716 F.2d 136, 141 (2d Cir.1983) (quoting In re Salmon Weed & Co., 53 F.2d 335, 341 (2d Cir.1931)) (brackets in original). We therefore expressly adopt the New York rule with respect to the valuation of fluctuating commodities. With regard to how the trier of fact is to arrive at its determination of a reasonable time, the courts applying the New York rule have described the object of that inquiry as the time necessary to replace the converted commodity. See Schultz, 716 F.2d at 140 (The `true and just measure of damages in these cases' is `the highest intermediate value of the [commodity] between the time of its conversion and a reasonable time after the owner has received notice of it to enable him to replace the [commodity].' (Quoting Galigher v. Jones, 129 U.S. 193, 201, 9 S.Ct. 335, 32 L.Ed. 658 (1889).); Mayer v. Monzo, 221 N.Y. 442, 117 N.E. 948, 950 (N.Y.1917) (the value of the converted commodity is the highest value within a reasonable time after notice of the conversion within which to determine whether he will purchase other [commodities] in the place thereof); Gelb v. Zimet Brothers, Inc., 34 Misc.2d 401, 228 N.Y.S.2d 111, 113 (N.Y.Sup.Ct.1962), aff'd, 18 A.D.2d 967, 237 N.Y.S.2d 989 (N.Y.1963) (following Mayer ); American General Corp., 622 A.2d at 13 ([T]he date should be established by resort to a `constructive replacement' purchase by the plaintiff, i.e., how long it would have taken the plaintiff to replace the [commodity] on the open market.); Hornblower & Weeks-Hemphill Noyes v. Lazere, 301 Minn. 462, 222 N.W.2d 799, 807 (Minn.1974) (following Gelb ). In other words, the rule sets as an outside boundary for the determination of the value of the converted commodity the latest date upon which a reasonable investor with adequate funds would have reentered the market by purchasing a replacement for his or her converted commodity to cover the damages from the conversion. See Mitchell v. Texas Gulf Sulphur Co., 446 F.2d 90, 105 (10th Cir.1971), cert. denied, 404 U.S. 1004, 92 S.Ct. 564, 30 L.Ed.2d 558 (1972). The rule's underlying premise is that any increase in value of the commodity after that cut-off date would have been enjoyed by the reasonable investor and should therefore not be awarded to the plaintiff who (presumably) missed his or her chance to be exposed to the market. Thus, applying the New York rule to the present case, the date of close of the evidence at trial would, as a matter of law, be the absolute end-point beyond which the reasonable time cannot extend, inasmuch as the market values of the converted Buddha statue and gold bars beyond that date would be unknowable to the trier of fact. Accordingly, the circuit court's jury instruction regarding the valuation of the converted gold was erroneous. Likewise, the special verdict form erroneously required the jury to value the gold as of the date of conversion. Because we have already held that there was insufficient evidence to support an award of damages for such gold bullion as may have been contained in the unopened boxes allegedly found by Roxas, inasmuch as the record was speculative regarding the gold's quantity and purity, see supra section III.I, there is no need to remand for a recalculation of the value of that gold. However, with respect to the golden buddha statue and the seventeen gold bars taken from Roxas's home, a new trial on the issue of value is necessary, and we therefore vacate that portion of the circuit court's judgment regarding the damages attributable to the golden buddha statue and the seventeen golden bars and remand for further proceedings. On retrial, the circuit court should instruct the jury that the measure of damages for the conversion of the golden buddha and the seventeen gold bars is the highest value of the gold betweenand including the date of conversion and a reasonable time thereafter. [47] The reasonable time is bounded by the latest date on which a reasonable investor with adequate funds would have replaced the converted gold. The reasonable time cannot extend beyond the date of the close of evidence at trial. Moreover, the circuit court should require the jury to make special finding of the date corresponding to the highest value of the gold within the reasonable time for purposes of calculating an award of prejudgment interest. See infra section III.M.2.