## Facts

- Phil & Kathy’s, Inc. (P&K) maintained a bank account at Harris Trust and Savings Bank (Harris).
- On July 2, 2003, P&K’s agent instructed Harris to wire $1,500,000 to Safra National Bank of New York (Safra) for a beneficiary identified as “Banco Do Brasil SA/Proteknika Do Brasil.”
- Safra could not identify any customer or account matching that beneficiary designation, making payment impossible, and P&K was notified on July 3, 2003.
- Banco do Brasil suggested changing the beneficiary to “Blue Vale” (or “Blue Vale, Ltd.”).
- P&K submitted a second payment order through Harris directing a $1,500,000 wire to Safra for credit to Blue Vale’s account.
- Harris sent urgent wire messages to Safra requesting that the first payment order be amended to substitute Blue Vale as the beneficiary.
- Safra credited Blue Vale’s account with $1,500,000 on July 7, 2003, pursuant to the second payment order.
- On July 9, 2003, Safra credited Blue Vale’s account with an additional $1,500,000, treating the first payment order as amended by Harris’s messages; this occurred within five business days of the first order.
- P&K alleged Safra wrongfully executed the first payment order, arguing it became void once Safra could not identify the original beneficiary, and sought to recover the second $1,500,000.

## Issues

1. Under New York UCC Article 4A, does a payment order with an unidentifiable or nonexistent beneficiary become void or canceled automatically upon the receiving bank’s inability to identify the beneficiary?
2. If not, may the receiving bank await and act on a timely amendment of that unexecuted payment order and execute it in accordance with the amendment under UCC § 4-A-211(4)?
3. Do the pleaded facts state a claim against the receiving bank when the bank executed the amended order within the statutory time period?

## Decision

- The court granted Safra’s Rule 12(b)(6) motion to dismiss for failure to state a claim.
- The court held UCC § 4-A-211(4) controlled and permitted Safra to await and act upon a timely amendment to an unexecuted payment order.
- The court rejected the contention that an unidentifiable beneficiary renders a payment order void by operation of law.
- The court found the amendment instructions were received before execution of the first order and were acted upon within the five-business-day period.
- Because the complaint’s allegations showed Safra complied with Article 4A, P&K could not plead facts entitling it to relief.

## Legal Principles

- UCC Article 4A provides the exclusive, structured rules governing rights and duties in wire transfers covered by the statute.
- A receiving bank’s inability to identify the named beneficiary at receipt does not, by itself, nullify the payment order; the order may remain unexecuted and subject to statutory cancellation or amendment rules.
- Under UCC § 4-A-211(4), when a receiving bank has not executed a payment order, the sender’s right to cancel or amend continues until execution or the close of the fifth funds-transfer business day after the order’s stated execution date.
- A receiving bank may rely on and execute a timely amendment received within the period allowed by § 4-A-211(4).
- Where the pleaded facts show statutory compliance with Article 4A in executing an amended payment order, a claim seeking recovery of the transferred funds fails as a matter of law.

## Conclusion

The court dismissed P&K’s complaint because Article 4A permitted Safra to treat the initial, unexecuted wire order as amendable and to execute it as amended within the statutory period, notwithstanding that the original beneficiary designation could not be identified.


Phil & Kathy’s, Inc. v. Safra Nat’l Bank of N.Y., 595 F. Supp. 2d 330 (S.D.N.Y. 2009)