Russo-Chinese Bank v. National Bank of Commerce of Seattle, Wash.

• Decision Date: 03 April 1911
• Docket Number: 1,888.
• Citation: 187 F. 80
• Parties: RUSSO-CHINESE BANK v. NATIONAL BANK OF COMMERCE OF SEATTLE, WASH.
• Court: U.S. Court of Appeals — Ninth Circuit

187 F. 80

RUSSO-CHINESE BANK v. NATIONAL BANK OF COMMERCE OF SEATTLE, WASH.

No. 1,888.

United States Court of Appeals, Ninth Circuit.

April 3, 1911

On the 10th day of December, 1903, the Centennial Mill Company, of Seattle, delivered to the Boston Steamship Company and Boston Towboat Company, at Seattle, 35,312 quarter sacks of flour for shipment by the steamship Hyades to Clarkson & Co. at Port Arthur and/or Dalny in Manchuria. The Centennial Mill Company received from the steamship company its bill of lading in duplicate. The bill of lading contained the following: 'Received from Centennial Mill Co. * * * for shipment at Seattle, by steamship Hyades * * * 35,312 Qr. Sax Flour * * * to be carried by said steamer or any other steamer of the above company to the port of Port Arthur &/or Dalny * * * and to be there delivered unto shipper's order or to his or their assigns. (Notify Clarkson &amp Co.)'

The flour had been sold to Clarkson & Co. at Port Arthur on terms of 90 days' draft, through the Russo-Chinese Bank, at Sec.4.10 per barrel, amounting to $36,194.80. It appears that Clarkson & Co. were merchants at Port Arthur engaged in buying and selling different kinds of goods. They were also agents at that place for different steamship companies including the Boston Steamship Company and the Boston Towboat Company, and were therefore the agents of the steamship Hyades, which carried the 35,312 quarter sacks of flour sold by the Centennial Mill Company to Clarkson & Co., to be delivered to the latter at Port Arthur. The Centennial Mill Company had made other sales of flour to Clarkson & Co. which need not be referred to in this opinion. The Russo-Chinese Bank is a banking corporation existing under the laws of the Russian Empire, with its head office at St. Petersburg, and with numerous branches throughout the empire. At the dates referred to in this case it had a branch bank at Port Arthur Manchuria, and another at Shanghai, China. In referring to either of these banks hereafter we shall designate it by its locality.

In accordance with the terms of the sale of the flour a draft was drawn by the Centennial Mill Company on Clarkson & Co. at Port Arthur for $36,194.80, with exchange and collection charges payable in 90 days after sight to the National Bank of Commerce, at Seattle. The Centennial Mill Company procured insurance on the flour with the Fireman's Fund Insurance Company of San Francisco in the sum of $40,000. The Centennial Mill Company thereupon took this draft on Clarkson & Co., the bill of lading issued to it by the steamship company for the flour, the insurance policy issued by the Fireman's Fund Insurance Company attached thereto, and delivered the same to the National Bank of Commerce at Seattle, with whom the Centennial Mill Company regularly transacted business, and, in accordance with the customary business usage, the bank discounted the draft, and paid the mill company the value thereof. Thereupon the bank sent the draft wtih the other documents by letter dated December 11, 1903, to the Port Arthur branch of the Russo-Chinese Bank for collection. The letter was received by the latter in due course of mail on January 22, 1904, according to the Gregorian, or 'new style,' calendar, or on January 9, 1904, according to the Julian, or 'old style,' calendar. The new style calendar prevails in this country. The old style in Russia. Under the latter the corresponding date is 13 days earlier than in this country. The dates referred to in this opinion will be according to the 'new style' calendar in use in this country, and will involve a change of dates to that extent in documents issued, and transactions had in Port Arthur. The letter with its inclosures, received by the Port Arthur branch of the Russo-Chinese Bank on January 22, 1904, from the National Bank of Commerce of Seattle, was acknowledged on the same date. In this letter of acknowledgment the Port Arthur bank called the attention of the Seattle bank to the fact that instructions were required as to the return of documents accompanying the draft if the draft should be protested for nonacceptance or nonpayment. The letter states: 'Please note: (1) That, unless otherwise instructed, bills of any description sent us for procuring acceptance and/or for collection will be protested both for nonacceptance or nonpayment and immediately returned to the sender. (2) When sending us for collection documents and bills or only documents clearly state in your letter accompanying same whether in case of dishonor: (a) Both bills and documents are to be promptly returned with the relative deed of protest, or (b) if the bill is to be returned and the relative documents are to be kept here at your disposal, or (c) if the goods are to be stored by us and fire insurance is to be recovered pending receipt of your instructions.'

It does not appear that the Seattle bank ever furnished the Port Arthur bank any instructions with respect to the matters referred to in this letter. The Port Arthur bank presented the draft to Clarkson &Co. for acceptance on January 23, 1904. It was accepted by Clarkson & Co. on January 30, 1904, and on the same date the Port Arthur bank notified the Seattle bank by letter of the acceptance of the draft. The acceptance of the draft on January 30, 1904, fixed its maturity on April 30, 1904. On April 28, 1904, or two days before the maturity of this draft, the Port Arthur bank received a telegram from the Shanghai branch of the Russo-Chinese Bank making inquiry concerning a reported sale of the flour by Clarkson & Co. without paying for it. The Port Arthur bank replied that the draft was due on the following day; that the fact that Clarkson & Co. had got possession of the flour through the bill of lading in the hands of the bank was due to Clarkson & Co. being the agents of the steamer carrying the flour and could be in no way prevented by the bank. On April 30, 1904, the draft became due, but was not paid. Under the Russian law two days' grace are allowed in the matter of the payment of bills of exchange. At the expiration of this period of grace, on May 2, 1904, the Port Arthur bank delivered the draft to the notary public at Port Arthur for protest. On the following day, May 3, 1904, the draft was protested.

The Russo-Japanese War, formally declared February 10, 1904, was then in progress. The Japanese had been directing naval operations against the Russian naval base at Port Arthur from February 9, 1904, at which date a complete blockade of Port Arthur on the water side had been effected by the Japanese fleet. About May 3, 1904, it was completed by the Japanese military forces on land, and, when the deed and protest was received by the bank from the notary, communication between Port Arthur and the outside world had been completely cut off by the besieging forces of the Japanese army. The draft with the deed of protest was thereupon placed by the Port Arthur bank in its safe to be kept until such time as communication should be restored. On January 2, 1905, the Japanese forces took possession of all the papers and documents belonging to the Russo-Chinese Bank at Port Arthur, and retained possession of them until March, 1906, when they were all returned to the Russo-Chinese Bank. While the books, papers, and effects of the Port Arthur bank were in the possession of the Japanese the bank had no access to them. When they were returned to the bank, they were taken to the home office of the principal bank at St. Petersburg.

Pending this situation of affairs at Port Arthur, the Seattle bank, on July 7, 1904, wrote to the St. Petersburg bank that Clarkson had advised the Centennial Mill Company that certain drafts on Clarkson & Co., including the one due on April 30, 1904, had been paid before maturity. To this letter the St. Petersburg bank replied to the effect that it was unable at that time to correspond with the Port Arthur bank, and was unable to trace the matter referred to, but, as soon as it was possible to investigate the subject, it would not fail to revert to it. These letters were followed by others passing between the two banks, in which the Seattle bank insisted that it had information that Clarkson & Co. had paid the amount of the draft to the Port Arthur bank and demanding payment. The St. Petersburg bank repeated its former statement that communication with Port Arthur had been suspended, and it was unable to trace the matter. Finally, on October 12, 1904, the Seattle bank concluded a letter upon the subject addressed to the St. Petersburg bank with the following: 'We would respectfully request that you notify us immediately on receipt of this letter what you propose doing in the premises, and trust you will not by further delay compel us to take steps in this country to enforce our rights, which we most certainly shall do.'

The St. Petersburg bank replied under date of November 9, 1904, in which, after referring to matters connected with the controversy, it said: 'Of course, as the matter now stands, we are unable to discuss the question any further and therefore, hand you enclosed, in cover of the bill for: U.S. $36,194.80, claimed by you, cheque on Messrs. Ladenburg, Thalmann & Co., New York, for U.S. $36,013.70, as per note at foot, receipt of which kindly acknowledge. It remains of course however understood that in case your above remittance proves not to have been paid for by Clarkson & Co. you are held responsible to refund the amount of our today's cheque.'

The Seattle bank replied under date of December 5, 1904 acknowledging receipt of the draft for $35,013.70, but declining to accept that amount as full payment for the draft. In this letter the Seattle bank said: 'The draft to this date would amount to G$38,312.19, leaving a...