In re Good Hope Chemical Corp.

Good Hope Chemical Corporation (Good Hope) (debtor), a Texas corporation, contracted with Koerver & Lersch (K&L) (creditor), a West German corporation, to manufacture heat exchangers for an ammonia plant. The parties agreed that Good Hope would pay K&L in German marks in three installments, with the first payment due 90 days after the order was placed. Good Hope never made any payments. On October 31, 1975, after K&L had substantially completed the exchangers, Good Hope filed for bankruptcy. On May 9, 1980, pursuant to the bankruptcy plan, K&L’s contract was rejected by the bankruptcy court. On June 12, 1980, the bankruptcy court allowed K&L’s proof of claim; however, K&L and the creditors’ committee could not agree on the exchange-rate date that should be used to calculate K&L’s claim. The creditors’ committee argued that the exchange rate should be calculated on the breach date, which the committee asserted was the bankruptcy-filing date. K&L claimed that the date should be the judgment date, which K&L alleged was the date the proof of claim was allowed. The parties agreed that the cause of action arose under American law. The bankruptcy court held that the judgment date was the correct date, thereby allocating a larger dollar amount to K&L’s claim than alleged by the creditors’ committee. The United States District Court for the District of Massachusetts found that the date of the breach, which was the date the contract was rejected, related back to the bankruptcy-filing date pursuant to § 63 of the United States Bankruptcy Code but affirmed the bankruptcy court’s opinion that the judgment date applied. The creditors’ committee appealed.