Sokoloff v. National City Bank of New York

The National City Bank of New York (bank) (defendant) was a New York-based bank. The bank operated a branch in Petrograd, Russia. In March 1917, the Provisional Government of Russia (Kerensky government) superseded the Imperial Government of Russia. The United States (US) recognized the Kerensky government as the de jure and de facto Russian government. Boris Sokoloff (plaintiff) was a Russian citizen. In June 1917, while living in New York, Sokoloff paid the bank approximately $31,000 in two transactions at the bank’s New York head office. The bank provided Sokoloff with receipts stating that his payments would be converted to 133,800 Russian rubles and would be used to open an account on Sokoloff’s behalf with the Petrograd branch or to transfer funds to Sokoloff’s Petrograd account. In August 2017, the Petrograd branch opened Sokoloff’s account with a balance of 133,800 rubles. In November 2017, the Bolshevik revolution overthrew the Kerensky government and created the supposed Soviet government. The US did not recognize the legitimacy of the Soviet government. In March and May 1918, the Petrograd branch mailed letters to its depositors asking them to withdraw their deposits with the branch. Beginning on September 1, the Soviet army requisitioned most of the Petrograd branch’s offices; the Soviets fully occupied the branch’s office on December 16. On December 29, the supposed Soviet government nationalized all private banks, which were merged into the People’s (State) Bank. By this action, the Soviet government confiscated the Petrograd branch’s assets. Sokoloff sued the bank, seeking payment of 120,370 rubles. Sokoloff did not seek damages (i.e., interest) caused by the payment delay. Sokoloff did not make a demand on the bank’s Petrograd branch for payment of this amount. The bank denied liability, arguing that its agreement with Sokoloff required performance in Russia, where newly enacted laws prohibited—and thus excused—the bank’s Petrograd branch from performing or, in the alternative, shielded the bank from damages for the failure to perform. In support of the bank’s position, a Russian lawyer testified that under Russian law, force majeure would be a defense against a depositor’s claim for payment from a bank if the bank was unable to pay due to revolutionary conditions. The Russian lawyer added that in such a case, the bank would be liable to the depositor after the force majeure condition ended.