818.51/1115
The Attorney General (Biddle) to the Secretary of State
My Dear Mr. Secretary: In accordance with your request, I am transmitting herewith a memorandum58 from Assistant Attorney [Page 133] General Shea,60 commenting upon the decision of the First Appellate Section of the Supreme Court of Justice, San José, Costa Rica, dated March 23, 1943, in the case of Irma Peralta Monge de Sosto v. United Fruit Co.
In 1929, the owners of two farms in Costa Rica contracted to sell their banana output for a ten-year period to United Fruit Co., a New Jersey corporation authorized to do business in Costa Rica. The United Fruit Co. agreed to pay, for each standard bunch of bananas, fifty “centavos oro americano …61 either in letters of exchange on New York or some accredited house in the United States … or in money of the country at the rate of exchange at which the Bank of Costa Rica may purchase letters of the same kind, on the day on which the price may be paid.”
On January 31, 1934, the President reduced the weight of the gold dollar,62 pursuant to the Gold Reserve Law, from 25.8 grains to 155/21 grains of gold. During the period of some five years following this devaluation, the vendors delivered to Compañía Bananera de Costa Rica, a Delaware corporation which succeeded United Fruit Co., some 240,000 bunches of bananas for which Compañía paid the vendors some $120,000 by means of bank checks, a part in colones (the Costa Rican monetary unit) and the rest in American dollars. The vendors’ successor thereafter brought suit in the Civil Court of San José, Costa Rica, to recover an additional sum of some $85,000, on the ground that payment was called for in the original gold dollar but had been made in a devalued dollar worth only about sixty percent of its former value. The court entered judgment for plaintiff, and the First Appellate Section of the Supreme Court affirmed.
There can be little doubt that the Costa Rican courts had jurisdiction of the controversy and of the parties. Any criticism of the decision must therefore be directed solely to its legal merits, and Assistant Attorney General Shea’s memorandum discusses the decision from that aspect.
According to the New York Times of August 23, 1943, the Superior Court of Costa Rica—the court of last resort—has recently reversed the judgment, holding that the contract did not contain a true gold clause, and that since the Costa Rican colones had not appreciated with respect to the dollar the plaintiff had not suffered any appreciable damage. Since the final decision in this case is favorable to American business men who had entered into obligations to pay gold dollars in Costa Rica, the interest of your Department in the controversy [Page 134] may have terminated. However, in view of the fact that the principles involved in this litigation may arise in other countries in which American firms have undertaken similar contractual obligations, the enclosed memorandum from Assistant Attorney General Shea may prove of value.
Sincerely,