Sokoloff v. National City Bank of New York

• Decision Date: 31 December 1928
• Citation: Sokoloff v. National City Bank of New York, 250 N.Y. 69 (N.Y. 1928)
• Court: New York Court of Appeals Court of Appeals
• Parties: BORIS N. SOKOLOFF, Respondent, v. THE NATIONAL CITY BANK OF NEW YORK, Appellant.

250 N.Y. 69

164 N.E. 745

SOKOLOFF

v.NATIONAL CITY BANK OF NEW YORK.

Court of Appeals of New York.

Dec. 31, 1928.

Action by Boris N. Sokoloff against the National City Bank of New York. Judgment of Special Term, entered upon the report of a referee (130 Misc. Rep. 66, 224 N. Y. S. 102), was affirmed by the Appellate Division (223 App. Div. 754, 227 N. Y. S. 907), and defendant appeals.

Affirmed.

Andrews, Kellogg, and O'Brien, JJ., dissenting.Appeal from Supreme Court, Appellate Division, First Department.

John A. Garver, Carl A. Mead, and Wm. Deering Howe, all of New York City, for appellant.

Morris Hillquit, of New York City, for respondent.

CRANE, J.

This case was here before on the pleadings. 239 N. Y. 158, 145 N. E. 917, 37 A. L. R. 712. It is here now on the facts after a trial before a referee. The objections to the recovery by the plaintiff are payment and the lack of a proper demand.

Boris N. Sokoloff, a Russian subject, was in the United States from 1914 to 1917, when he returned to Russia. On June 27, 1917, he gave to the National City Bank of New York, at its main office in New York City, $30,225 and $883.50 with which to open an account for him in its Russian branch in Petrograd. The receipt given by the bank explains the transaction.

‘New York, June 27, 1917.

‘Received from Boris N. Sokoloff thirty thousand two hundred twenty-five dollars, representing the cost of Rs. 130,000 at 23 1/4 cents, which are to be transferred to our Petrograd Branch to open his account.

‘The National City Bank of New York.

‘$30,225.

p. p. C. V. Sheehan.'

This agreement was carried out to the extent that the account was opened by the defendant at its Petrograd branch, which held on deposit to the credit of Boris N. Sokoloff 133,800 rubles. A passbook for this amount was given to Sokoloff by the branch when he appeared in Petrograd in September of 1917. Thereafter, in the ordinary course of business, on different occasions, he withdrew 13,800 rubles from the account. Toward the end of October and the first part of November, 1917, Sokoloff, who was then in the city of Kharkoff, Russia, sent a letter to the Petrograd branch of the defendant, instructing it to transfer 120,000 rubles from his account through the State Bank to the credit of the Kharkoff Mutual Credit Society for his account, giving in the said letter the numbers of the Kharkoff Mutual Credit Society's account with the Kharkoff Branch of the State Bank. The Russian State Bank was a government institution. It was depositary of the defendant's reserves, and had branches in almost every town and hamlet of Russia. Upon receiving this letter from Sokoloff, the Petrograd branch communicated with the State Bank as follows: ‘We instruct you herewith to debit our account with the amount of 120,000 rubles, and transfer same to the credit of the account of Kharkoff Mutual Credit Society with your Kharkoff Branch, number so and so [giving the number], for the account of Mr. Boris Sokoloff.’

The transfer was made in accordance with the Giro system, a system which in Russia applied to intercity or intracity transfers. The Giro system is simply a matter of bookkeeping, and is explained as follows: ‘Upon the receipt of the order we debit the client's account to the amount which he requested to be transferred. Our record and our account with the State Bank is credited with the same amount. Then the State Bank, upon receipt of our instructions, perform a similar operation; they debit our account and credit the account of the Kharkoff Branch with the same amount. They send a similar instruction to their Kharkoff Branch, where the system of debits and credits is repeated. Our part of the transfer is complete when we sent out our instructions to the State Bank. The rest of this transfer would be performed in the State Bank Petrograd or the State Bank Kharkoff or the Kharkoff Mutual Credit Society.’

A few days later Mr. Sokoloff sent another letter to the Petrograd branch of the defendant, in which he advised in that he had not received the money as requested in his instructions, and that, in view of this fact, the bank was to hold the funds at the disposal of his sister in Petrograd, who would call for them very shortly. Thereupon the defendant wrote to the State Bank inquiring about the transfer, which replied that it had given instructions to its Kharkoff branch to make the transfer, and that since then disorders had broken out between Kharkoff and Petrograd, and it was unable to advise the defendant as to whether the transfer had been made or not, or return the funds. The Petrogram branch then wrote Mr. Sokoloff and told him that it had already acted upon the instructions in his first letter, had transferred the funds to the State Bank, and that therefore it was not in a position to hold them at the disposal of his sister.

The evidence regarding these transactions was given by the parties interested without the production of the original letters or any copies. The contents of the letters and telegrams were given from memory. There was, however, no dispute regarding the tenor of these communications. Mr. Sikes, an employee of the Petrograd branch, testified that, after receiving the second letter from Mr. Sokoloff, countermanding the transfer to Kharkoff, the communication to the State Bank was as follows: ‘Please ascertain whether the transfer ordered by us on a certain date on behalf of Mr. Sokoloff has been effective, and if it has not, re-credit us with the amount.’ In December, 1917, Mr. Sokoloff's sister, following up his letter, called at the Petrograd branch for his money. ‘We,’ says Mr. Sikes, ‘explained the circumstances to her, and that we had acted upon Mr. Sokoloff's first instructions and therefore did not have the funds there to hold at her disposal. She explained that her brother had not received the funds at Kharkoff, and we endeavored to trace them. * * * The State Bank did not tell us in their letter whether they were going to re-credit or had re-credited us with that money, and I wrote and asked them if the transfer had not been made to kindly recredit our account with the money. * * * I did not hear anything more about it until the last part of April or the first part of May, when we got a letter from the State Bank in Petrograd referring to our communication before the first of the year, showing that they had just received information from their Kharkoff Branch that the transfer had not been made; that the Kharkoff Branch of the State Bank had not made the transfer to the Kharkoff Mutual Credit Society.’ Mr. Sikes further states that they never received any communication from the State Bank to the effect that the money had been recredited to the account of the Petrograd branch.

I have given the evidence as it appears in the record, for upon it depends the claim of the defendant that these transfers constituted payment.

[1][2] There may be many instances where an entry upon the books of a bank evidence a completed transaction or transfer, and constitute payment. Baldwin's Bank of Penn Yan v. Smith, 215 N. Y. 76, 109 N. E. 138, L. R. A. 1918F, 1089, Ann. Cas. 1917A, 500;Briggs v. Central National Bank, 89 N. Y. 182, 42 Am. Rep. 285;Kirkham v. Bank of America, 165 N. Y. 132, 58 N. E. 753,80 Am. St. Rep. 714. There can be no rule of law that the mere bookkeeping entry in itself constitutes payment. We must always look through the form of transactions and business communications to get the exact facts. National Butchers' & Drovers' Bank v. Hubbell, 117 N. Y. 384, 389,22 N. E. 1031 (7 L. R. A. 852, 15 Am. St. Rep. 515).

We start these transactions with these fundamental facts. On the books of the State Bank there were many thousand rubles to the credit of the Petrograd branch. On the books of the Petrograd branch there were 120,000 rubles to the credit of Boris N. Sokoloff. The Petrograd branch undertook to pay out this money belonging to Sokoloff. It was not to pay it to the State Bank, but to pay it through the State Bank to the Kharkoff Mutual Credit Society at Kharkoff, Russia. This would be done by entering a credit in the account of that society in the Kharkoff branch of the State Bank. Therefore the instructions of the Petrograd branch to the State Bank were these: ‘Out of the moneys which you have belonging to us in our account with you, transfer 120,000 rubles to the credit of the Kharkoff Mutual Credit Society at your Kharkoff Branch, and debit our account.’ The instructions would not be executed until the credit had been established in favor of the Mutual Kharkoff Credit Society in the Kharkoff branch. The credit was never established, the money was never transferred to Kharkoff. The debit, if made upon the books of the State Bank in the account of the Petrograd branch, was premature; it was the entry in anticipation of fulfillment, but not an entry of a payment made. If the Petrograd branch had notified the State Bank to pay 120,000 rubles to a Mr. A., when he should call for them, properly identified, and debit the account of the Petrograd branch, I can see no reason, under the Giro system, as explained, why the Petrograd branch could not effectually stop payment or countermandthe instructions before Mr. A. showed up and got the money. Up until the time that the book entries resulted in some change of position between the parties or the establishment of rights in third parties, they were nothing more than book entries. Pratt v. Foote, 9 N. Y. 463, 468;Consolidated Nat. Bank of New York v. First Nat. Bank of Middleton, 129 App. Div. 538, 114 N. Y. S. 308, affirmed 199 N. Y. 516,92 N. E. 1081.

For the reason, therefore, that the transfer directed by the Petrograd branch had not been completed in accordance with instructions, justifying a debit of its account with the State Bank, there was no effectual payment to Sokoloff of his money with the Petrograd branch. It is straining at the facts to say that the Petrograd branch was out...