## Facts

- A German wine exporter sold wine to a U.S. buyer, with payment to be made through an international documentary collection handled by the exporter’s German bank (remitting bank) and a Texas bank (collecting/presenting bank).
- The remitting bank sent the collecting bank a letter of collection with a bill of lading and invoices; instructions required payment “on arrival of goods in Houston harbor” and directed the collecting bank to notify a designated party “in case of any difficulty of lack payment.”
- The invoices listed an estimated Houston arrival date shortly after the documents were received by the collecting bank.
- The collecting bank presented the documents to the buyer on receipt, before the goods arrived; the buyer did not pay and asked the bank to hold the documents while it attempted to raise funds.
- The collecting bank did not notify the remitting bank or the designated party that the buyer had not paid and instead held the documents for weeks.
- The goods arrived at the port, were not taken up by the buyer, deteriorated while stored in containers, and were ultimately sold by U.S. Customs; the buyer later went out of business and the exporter was not paid.
- The exporter sued the collecting bank for negligence based on failure to provide the required notice of payment difficulty.
- The district court entered judgment for the collecting bank, reasoning that payment was not due until arrival, the bank lacked notice of arrival, and it had no duty to determine whether arrival had occurred.

## Issues

1. Whether the collection instructions and applicable international collection rules required the collecting bank to notify the remitting bank or designated party of “difficulty” or “lack of payment” when the buyer failed to pay on presentment and requested the documents be held.
2. Whether the collecting bank’s lack of knowledge of the goods’ actual arrival excused any duty to notify.
3. Whether the collecting bank’s failure to notify could constitute negligence causing the exporter’s loss.

## Decision

- The court of appeals reversed the take-nothing judgment for the collecting bank.
- The court held the collecting bank was on notice of a potential dishonor once the buyer failed to pay on presentment and asked that the documents be held.
- The court concluded the collecting bank should have promptly informed the remitting bank (or designated agent) of the payment difficulty under the collection instructions and governing collection rules.
- The bank’s asserted lack of knowledge of the actual arrival date did not eliminate the duty to communicate the collection problem once it became apparent.

## Legal Principles

- In an international documentary collection, a collecting/presenting bank must follow the collection order and applicable collection rules, including required communications to the remitting bank or designated agent.
- A duty to notify can be triggered by a material payment difficulty discovered on presentment, even if payment is not yet technically due and final dishonor has not occurred.
- A collecting bank’s silence after learning the buyer cannot or will not pay on presentment may support liability where prompt notice was required and the failure to notify foreseeably contributed to loss of the goods or proceeds.

## Conclusion

The court held that the collecting bank’s knowledge of the buyer’s inability to pay on presentment triggered an obligation, under the collection instructions and collection rules, to notify the remitting side of the payment problem; the bank’s failure to do so required reversal of the judgment entered in its favor.


Rheinberg Kellerei GmbH v. Brooksfield Nat'l Bank of Com. Bank, 901 F.2d 481 (5th Cir. 1990)