Barclays Discount Bank Ltd. v. Bogharian Bros.

MEMORANDUM OPINION AND ORDER

Plaintiffs seek summary judgment in these five actions for collection of promissory notes. Plaintiffs are banks operating out of the Diamond Exchange in Ramat Gan, Israel. Defendants, three American diamond merchants, issued a total of seven notes to Leo Siegman, a leading Israeli diamond dealer, as security for diamonds purchased by the defendants. Siegman endorsed three notes to plaintiff Barclays Discount Bank Ltd. (“Barclays”) and four notes to plaintiff Israel Discount Bank Ltd. (“IDB”) as collateral for his pre-existing obligations to the banks and as collateral for the diamonds shipped to defendants. Plaintiffs presented the notes for payment as they came due; they were returned unpaid. Plaintiffs then commenced these actions for collection of the dishonored notes.

Plaintiffs contend that they are holders in due course; therefore, that they are entitled to recover on the notes. Defendants, on the other hand, contend that plaintiffs had notice of an industry-wide custom that notes given by merchants in exchange for diamond shipments were to be discharged by the holder should the diamonds be returned to the dealer by the merchants.…