Article

Note: To collect payment for the sale of computer equipment, Korea Data Systems (Seller/ Drawer), located in Korea, drew bills of exchange on Princeton Graphic Systems (Buyer) located in California as drawee. Korea Export Insurance Corporation (Guarantor) guaranteed payment of the bills of exchange as part of a Korean Government program. Kookmin Bank and H&CB (Remitting Banks) subsequently gave value for the bills of exchange which the court said were assigned to them. Remitting Banks forwarded the bills of exchange, bills of lading and invoices, along with collection instructions subject to URC 522, to California Center Bank (Collecting/Presenting Bank), for collection from Buyer/Drawee. When presented, the bills of exchange were signed by an employee of Buyer/ Drawee, but Buyer/Drawee disputed the authority of the signer to accept and refused to pay.

Guarantor paid the Remitting Banks and filed suit in California to recover from Buyer/Drawee. Buyer/ Drawee cross-complained against Remitting Banks seeking equitable indemnity. Remitting Banks moved to dismiss the cross-complaint for lack of personal jurisdiction since they had no offices in California. The Superior Court of Orange County, California, Velasquez, J., denied the motion to dismiss, and Remitting Banks petitioned for a writ of mandate challenging the denial of the motion to dismiss. The Court of Appeal of California, Fourth Appellate District, Division Three, Fybel, J., denied the petition for a writ of mandate.

The appellate court concluded that the Remitting Banks "purposefully availed themselves of forum benefits by paying value for bills of exchange and sending them to a bank in California for collection from a company located in California [and are] therefore subject to specific jurisdiction in California." In analyzing the jurisdictional question, the court distinguished the instant case of the Remitting Banks actively seeking to collect bills of exchange from cases which ruled that there was no personal jurisdiction over a nonforum bank in an action by a beneficiary to enforce a letter of credit in the beneficiary's forum. The court stated "[h]ere, in contrast to those letter of credit cases, [Remitting Banks] reasonably could expect to defend a lawsuit in California because they actively sought to collect the bills of exchange in this state. [Remitting Banks] took affirmative steps to avail themselves of forum benefits by purchasing bills of exchange with a California corporation as drawee and sending them, with instructions, to a bank in California for collection."

Remitting Banks argued that the trial court erred in concluding that the Presenting Bank acted as their agent in presenting the documents to the Drawee/ Buyer. The appellate court cited a provision of local law, UCC Section 4-201 that provided "unless a contrary intent clearly appears and before the time that a settlement given by a collecting bank for an item is or becomes final, the bank, with respect to the item, is an agent or subagent of the owner of the item." It also noted that the Remitting Banks were the owners of the bills of exchange and the documents.

The appellate court also concluded that "URC 522 supports jurisdiction here by recognizing the supremacy of state and local law. Article 1a of URC 522 states the uniform rules, if incorporated into collection instructions, 'are binding on all parties thereto unless otherwise expressly agreed or contrary to the provisions of a national, state or local law and/ or regulation which cannot be departed from.' (URC 522, supra, at p. 8.) According to the commentary to article 1a, 'in order that all parties are aware of the possibility that these Rules and collection instructions can be overridden by requirements of individual countries, it was felt that the Rules should make reference to national, state and/or local law.' (Ibid.) The California Uniform Commercial Code thus overrides the URC to the extent the two are inconsistent as to whether [Presenting Bank] was the agent of [Seller/Drawer] and/or of [Remitting Banks]. This conclusion is not inconsistent with the International Chamber of Commerce's stated purpose of 'serving world business by promoting trade and investment and the free market system.' (URC 522, supra, at p. 41.)"

[JEB/ees]

COPYRIGHT OF THE INSTITUTE OF INTERNATIONAL BANKING LAW & PRACTICE

The views expressed in this Case Summary are those of the Institute of International Banking Law and Practice and not necessarily those of ICC or the other partners in DC-PRO.