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Inox Wares Pvt. Ltd. v. Interchange Bank

2008 WL 4691906 (U.S. Dist. Ct. D. N.J. 2008) (Unpublished)

BANKS; UNIFORM RULES FOR COLLECTIONS; UCC — New Jersey’s Uniform Commercial Code imposes no obligation upon a bank to act as a collecting bank and the Uniform Rules for Collections have no binding effect until a collecting bank accepts a document for collection which is accompanied by a particular collection instruction under the Uniform Rules.

An importer had a relationship with an overseas exporter under which kitchenware products were shipped to the importer. The products were shipped directly to the importer on about ninety-seven different occasions. Each time, the sales transaction documents were shipped by overseas courier to the importer’s bank, which then forwarded them to the importer without opening the envelopes. Most of the transactions were made on a “documents against acceptance” basis under which the exporter’s bank sent the transaction documents to the importer’s bank at which point the importer was able to take possession of the merchandise at the point of entry. According to the exporter, twenty-two of the transactions were made on a “documents against payment” basis in which transaction documents were to be sent to a collecting agent who was to receive payment and transfer it to the exporter before the imported merchandise could be released to the importer. Since no bank personnel opened the packages for the transaction documents, the bank was unaware that payment was required on any before the importer could receive the merchandise. The exporter later alleged that it only received partial payment on those transactions and sued the importer’s bank for breach of contract, negligence, and breach of the covenant of good faith and fair dealing, all for failing to collect payment on the transactions. The bank then brought a third-party complaint against the importer requesting indemnification and contribution, asserting that it was entitled to recover pursuant to an agreement between the parties.

The exporter’s summary judgment motion for negligence was dismissed by the Court because the exporter failed to prove that the bank explicitly accepted the obligation to collect payment on behalf of the exporter, which is a requirement under the Uniform Commercial Code before such liability could attach. The Court granted the bank’s motion for summary judgment to dismiss all three of the exporter’s claims. It concluded, as a matter of law, that the importer’s argument that it was reasonably mistaken when it believed the bank was responsible for collecting payment, was insufficient to prove the bank had a duty to collect payment from the importer. The bank’s motion for summary judgment against the importer was denied on the grounds that there were factual questions as to whether there was an agreement requiring the importer to indemnify the importer against legal action for claims arising out of the importer-exporter relationship. Finally, the importer’s motion for dismissal, based on its argument that the bank had failed to join the exporter’s bank as a party to the dispute, thus preventing a resolution of all of the parties’ claims, was denied. Based on the Court’s conclusions of law, the exporter’s claim for negligence against the bank, the bank’s third-party indemnification claim, and the importer’s request to dismiss the entire matter, were all dismissed. The Court, as a matter of law, also dismissed all of the exporter’s claims against the bank for the bank’s failure to collect from the importer on its behalf.

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