## Facts

- National City Bank of New York operated a Petrograd branch under Russian authorization that contemplated compliance with Russian decrees affecting branch operations.
- In June 1917, Boris N. Sokoloff paid $30,225 and $883.50 to the bank in New York to purchase 133,800 rubles for transfer to the Petrograd branch at a stated exchange rate.
- The Petrograd branch credited Sokoloff with 133,800 rubles; he withdrew 13,800 rubles, leaving 120,000 rubles.
- Sokoloff instructed the Petrograd branch to transfer the 120,000-ruble balance to the Kharkoff Mutual Credit Society through the Russian State Bank.
- The Petrograd branch directed the State Bank to debit the branch and credit the Kharkoff institution, but the State Bank later indicated its Kharkoff branch had not made the transfer.
- The Petrograd branch countermanded the instruction and ordered the State Bank to re-credit the Petrograd branch’s account.
- Sokoloff (and his sister) demanded the funds; the Petrograd branch treated the funds as already transferred despite the transfer not being completed.
- Soviet authorities later requisitioned and took over the Petrograd branch, and Soviet decrees purported to nationalize private banks and confiscate assets; the branch ceased functioning.
- Sokoloff sued the New York head office seeking recovery of the remaining ruble balance (and its dollar equivalent at the contract rate), without delay damages or interest, arguing further demand in Petrograd would have been futile.

## Issues

1. Whether the instruction to transfer 120,000 rubles to Kharkoff was executed (completed) or remained executory.
2. Whether the bank had “parted with” the funds so as to discharge its obligation to the depositor.
3. Whether an uncompleted transfer order could be revoked, permitting the depositor to recover the deposit (or its dollar equivalent).
4. Whether foreign decrees nationalizing and confiscating branch assets discharged the bank’s obligation in a New York action when the foreign regime was not recognized by the United States.

## Decision

- The court determined the Kharkoff transfer remained executory because the intended beneficiary was never actually credited and the instruction was countermanded.
- The bank had not made an effectual payment and had not truly parted with the funds; it remained liable to the depositor.
- Sokoloff could revoke the transfer instruction and recover the ruble balance (or its dollar equivalent) from the New York bank.
- The foreign nationalization and confiscation decrees did not discharge the bank’s contractual obligation in a New York forum.
- Judgment was awarded for Sokoloff for 120,370 rubles converted to dollars at the contract exchange rate, without additional interest.

## Legal Principles

- Provisional or incomplete bookkeeping entries between banks do not constitute payment where the contemplated credit to the beneficiary is not consummated and the instruction is subject to countermand.
- A depositor may revoke a funds-transfer order that remains unperformed where the bank retains control of the funds.
- Acts of an unrecognized foreign government purporting to expropriate property will not be given effect in New York to discharge a domestic bank’s contractual obligation to its depositor.
- When a branch has ceased to function due to seizure, formal demand at the branch may be excused as futile in an action against the solvent home office.

## Conclusion

The court held the bank remained liable because the Kharkoff transfer was never completed and was countermanded, leaving the bank in control of the funds; the depositor could revoke the instruction and recover at the contract exchange rate, and foreign confiscatory decrees from an unrecognized regime did not discharge the obligation in New York.


Sokoloff v. Nat'l City Bank of N.Y., 224 N.Y.S. 102 (Sup. Ct. N.Y. Cnty. 1927)