Leeds v. Chase Manhattan Bank, N.A.

Attorney Louis Egnasko accepted a settlement check on behalf of his clients, William and Carol Leeds (plaintiffs). The check was a teller’s check drawn at Summit Bank (Summit) (defendant) and payable to the Leedses. Egnasko altered the check by typing “Louis Egnasko as attorney for” above the payee line containing the Leedses’ names. Egnasko endorsed the check and deposited it into his attorney trust account at Chase Manhattan Bank (Chase) (defendant). Chase presented the check to Summit, and Summit honored the check. Egnasko later drew a check for the amount owed to the Leedses, payable to the Leedses, from an account at the Trust Company of New Jersey (Trustco). That account contained funds that Egnasko had obtained by similarly altering a check intended for another client drawn from a different bank. Trustco honored the check drawn to the Leedses, and the Leedses received payment on the check. Trustco filed suit against Egnasko and the Leedses in New York. While that case was pending, the Leedses filed suit in New Jersey against Chase as the depository bank and Summit as the drawer, the drawee, and the payor bank, alleging strict liability for payment on the altered check to the Leedses. Chase and Summit moved for summary judgment. The lower court granted summary judgment in favor of Chase and Summit and dismissed the Leedses’ complaint. The Leedses appealed.