ABRAHAM S MARRACHE Vs. HERMINIA ASHTON

JUDGEMENT

(1.) The question at issue between the parties to this appeal is as to the legal equivalent in sterling at Gibraltar on 25 May 1939, of certain amounts of Spanish pesetas. By a mortgage dated 28 October 1931, on freehold property in Gibraltar the appellant Marrache covenanted to pay to the respondent Onos on 31st October 1936, "the sum of 50,000 pesetas" in consideration of an advance of this amount. By a second mortgage on the same property dated 22 November, 1933, the appellant Marrache covenanted in similar terms to repay to the respondent Ashton on 31 October 1936, a loan of "the sum of 25,000 pesetas." And by a third mortgage also on the same property dated 28 March 1934 the appellant Marrache covenanted to repay to the respondent Ashton on 31 October 1936, "the sum of 35,000 pesetas," being the amount of a further loan. On 25 May 1939, the respondent Ashton took out a writ of summons in the Supreme Court of Gibraltar against the appellant Marrache claiming payment of the sum of ? 1483-10s. as the equivalent of 60,565.45 pesetas at 42.25 pesetas to the pound sterling, being the amount of the principal sums with interest then due under the second and third of the before-mentioned mortgages. On the same date, the respondent Onos took out a writ of summons against the appellant Marrache claiming payment of the sum of ?1200 as the equivalent of 50,712.50 pesetas at 42.25 pesetas to the pound sterling, being the amount of the principal sum with interest then due under the first of the before-mentioned mortgages. The actions were not preceded by any demand for payment. They were consolidated on 18 June 1939. The appellant Marrache in his defences alleged that at the date of the raising of the actions the market value of pesetas in Gibraltar was 132 to the pound sterling and on 3 July 1939, he tendered payment to the respondent Ashton of ?458 16s. 8d. and to the respondent Onos of ?384 3s. 9d., being the equivalents of the sums of pesetas due by him at the rate of 132 pesetas to the pound sterling. On the tenders being refused he paid these sums into Court on 3 July 1939.

(2.) The rate of 42.25 pesetas to the pound sterling adopted by the respondents in their original claims was admitted to be the official rate of exchange current in London under the Clearing Office (Spain) Order, 1936, but in the course of the proceedings the respondents departed from, their claim to apply this rate and maintained that the rate of 53 pesetas to the pound, which they justified as will appear in the sequel, should be applied. To this contention the learned Chief Justice gave effect and on 4 April 1940, he pronounced judgment in favour of the respondent Ashton for ?1181 14s. and in favour of the respondent Onos for ?992 8s. 11d. It is against this judgment that the present appeal is brought. All three parties were resident in Gibraltar,and their rights and obligations under the mortgages in question were admittedly governed by the law of Gibraltar, which was the place of payment of the sums in pesetas due by the appellant. The amount of these sums was admitted to be correctly stated in the writs of summons as at 25 May 1939, when the writs were issued and this date, it was agreed, was the date at which the appellant's liability should be ascertained. The contest was thus narrowed to the question whether for the purposes of the cases pesetas should be reckoned at 53 or at 132 to the pound. Evidence of legal and financial experts was adduced on both sides. From this it appeared that in October 1936, and until 20 January 1939, gold and silver coins were legal tender in Spain but that from 20 January 1939, and consequently on 25 May 1939, Bank of Spain peseta notes, popularly known as "Franco" notes, were, apart from gold, the only legal tender and currency in Spain. By a decree of the Spanish Government of 24 November 1938, it was declared to be "an offence of monetary contraband" to export from or import into Spain inter alia Bank of Spain peseta notes, unless under conditions immaterial for the present purpose. Nevertheless there was as the learned Chief Justice found, "a market for these notes both in Gibraltar and London and elsewhere." A partner in Galliano's Bank, Gibraltar, stated that there was a regular market for them in Gibraltar and London and that his bank bought and sold such notes in May 1939, the rate being about 132 pesetas to the pound. He instanced a sale on 6 May 1939, to a London house of 15,000 pesetas at 145 to the pound and produced a cable from the Midland Bank, London reporting the market rate ruling in London for "Franco" Bank of Spain peseta notes on 25 May 1939, to be 127 to 131 pesetas to the pound for denominations of 500 and 1000.

(3.) The respondents led evidence to the effect that at the Spanish frontier the official rate fixed in Spain at which tourists and labourers entering Spain from Gibraltar could exchange pounds for peseta notes at the Spanish custom house was 53 pesetas to the pound. This was the rate which the respondents, as above stated, claimed to apply, as being the rate legally recognised in Spain. In their printed case laid before the Board the respondents stated as a fact not in dispute that "at the material time there were dealings in Bank of Spain notes in Gibraltar and London, these notes being bought and sold at ptas. 132 to the ?," but added that "these notes would have to be smuggled into Spain." It was common ground before their Lordships that while Bank of Spain peseta notes were legal tender in Spain they were not currency in Gibraltar, though they circulated there in considerable numbers. Consequently these notes must be regarded in Gibraltar as commodities. It was also agreed that the appellant would have specifically performed his covenants if he had tendered to the respondents the appropriate amounts of Bank of Spain peseta notes. This was clearly so in view of the law as laid down in (1923) 2 Ch. 466.1There the Master of the Rolls (Lord Sterndale) said at p. 478: I think that a mortgage to secure a given number of reichsmarks is a mortgage to secure the repayment of whatever may be legal tender at the time of repayment in the country where the reichsmark circulates.