Hallenbeck Vs Leimert Case Essay Examples & Outline

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Hallenbeck V. Leimert

The respondent who was a receiver of the central bank sued the petitioner a receiver of Ashland bank in a district court in northern district of Illinois. The intention of the suit was to recover five checks that had been initially drawn by the former and later endorsed by the latter bank. The jury was waived and the district court entered a judgment that favored the respondent for the amount demanded.

The banks in question had their operations located in Chicago. James g. Hodgkinson was a board member in both Ashland bank and Hodgkinson & Durfee, Inc.

He drew five checks and delivered them to Ashland bank, which endorsed four of the checks. It later deposited the endorsed checks with the Federal Reserve Bank for collection on 23 April the same year. The fifth check was endorsed and collected at the First national bank. Both the Federal Reserve and first national bank were active members of the Chicago clearing house association, which is an affiliate of the central bank. Ashland bank was not. Chicago clearing house had a rule that provided that in order for any person presenting checks for clearing to give special instructions, they must be affiliate members.

Early morning on 25th of April the same year, Federal Reserve Bank presented the four checks to the clearinghouse. The central bank cleared the checks, as it was the norm and indicated the balance before 11:30 am. Hour later it learnt that Hodgkinson & Durfee has insufficient funds. First national bank sent the fifth check to the drawee’s business place.

Central bank ascertained the condition of the Hodgkinson & Durfee accounts, notified the firm and on 26th, the five checks were sent to Ashland bank to be reimbursed (Hallenbeck V. Leimert
, 1935). The central bank was not notified by any of the parties. The trial court concluded that the payment of the checks was conditional. It also concluded that the notice sent to Ashland bank was adequate to fix responsibility. Therefore, the trial court judgment went against the petitioner.

Upon an appeal, the appeal court concluded that approach used in transacting business allowed the members to examine the different items that affect the balance and the lapse of time is the only thing that makes the settlement final in the event that the checks are not dishonored before the time elapses. The court of appeal decided to reverse the judgment made by the trial court.

The judgment by the circuit of court of appeal was correct since Ashland bank was not looking for an enforcement of the rules of the Chicago clearing house. The bank was looking for the effecting of the payment in consistency with the rules of the clearinghouse. The drawee bank had the duty to pay or not. The tentative payments were final since they applied as if the money had actually passed to the involved parties. There was no objection to the rules of the Chicago clearing house in the trial court proceedings. Section 102 of negotiable instruments law covered the notice of dishonor and not the duration of returning a dishonored check (Brannan & Beutel, 1948). The section does not cover the period in which the dishonored check might be returned. Neither does it cover the advice about an overdraft. Since there was no sign of malicious intent, the ruling ought to by the appellate court was correct.


Brannan, J., & Beutel, F. (1948). Beutel's Brannan Negotiable instruments law (1st ed.). Cincinnati: W.H. Anderson Co.
Cornel Law,. (1935). HALLENBECK v. LEIMERT. | LII / Legal Information Institute. Law.cornell.edu. Retrieved 25 August 2014,