Russo-Chinese Bank v. National Bank of Commerce,
241 U.S. 403 (1916)

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U.S. Supreme Court

Russo-Chinese Bank v. National Bank of Commerce, 241 U.S. 403 (1916)

Russo-Chinese Bank v. National Bank

of Commerce of Seattle, Washington

No. 244

Argued April 13, 14, 1916

Decided June 5, 1916

241 U.S. 403


In an action by a bank in Port Arthur to recover money, remitted by it to a bank in Seattle for a draft secured by shipping documents sent to it for collection by the Seattle Bank, and which the Port Arthur Bank declared had not been paid, but for which it remitted on agreement of the Seattle Bank to refund in case nonpayment was proved, the jury found a general verdict in favor of the Seattle Bank and also a special finding to the effect that the Port Arthur Bank did receive payment for the draft in question;such special finding was based on testimony to effect that the Port Arthur Bank permitted the consignee to take possession of the goods covered by the documents attached to the draft on his agreeing to deposit the proceeds thereof as sold, and an instruction to the effect that such action on the part of a bank receiving a draft for collection constituted a payment in law, judgment being entered thereon and affirmed by the circuit court of appeals, this Court, reviewing on certiorari, held that:

The fair import of the instructions of the trial judge in their entirety being that the finding of payment was to be reached only in case the value of the goods was not less than the amount of the draft, there was no error therein.

Where a bank, holding a draft for collection with documents annexed and with instructions to deliver the documents only on payment, allows the drawee to take the goods covered by the documents on his promises to sell and account for proceeds, it amounts to a misappropriation of the property, and liability to account for its value immediately arises.

There was no error in charging that the collecting bank became invested with the ownership of the goods and could not be excused from obligation to account by declaring that the goods had disappeared without its knowledge, the charge not being to effect that the relation of vendor and vendee did exist, but that the relation of principal and agent did exist, and, as such agent, the collecting

Page 241 U. S. 404

bank was obligated to act in good faith to protect the rights of the owner of the draft.

The special finding, being supported by adequate evidence, is controlling.

Even if a bank, sending a draft for collection, suffers no loss on account of its guaranty from the original owner, it may, in view of its relation to commercial paper, demand, as principal, an accounting from its correspondent, and resist an action to recover back the money which it received upon the draft.

206 F. 646 affirmed.

The facts, which involve questions relating to a transaction between two banks regarding drafts and documents annexed thereto, are stated in the opinion.

Page 241 U. S. 406

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