Leeds v. Chase Manhattan Bank, N.A.

Facts

The Leeds contracted with Egnasko to help them sell their home. Egnasko closed the sale on the home and accepted a settlement check for $87,293.56 on the Leeds’ behalf. The check was made payable to the Leeds and another individual, and was a United Jersey Bank teller’s check. Summit Bank is the successor-in-interest to United Jersey Bank. Unbeknownst to the Leeds, Egnasko altered the check to present himself as the payee, stating that the check was payable to him on behalf of his clients. Egnasko then deposited the check in his lawyer trust account at Chemical Bank (now Chase Manhattan Bank). Chase presented the check for payment to Summit and Summit honored the teller’s check.

On June 6, 1996, Egnasko withdrew funds from a lawyer trust account he held at the Trust Company of New Jersey (Trustco) to pay the Leeds the proceeds from the sale of their home. However, the money in the Trustco account was owed to a different bank, Shrewsbury State Bank (“Shrewsbury”), stemming from a mortgage loan in an unrelated transaction. Egnasko managed to obtain the funds and deposit them in his Trustco account by using the same scheme of fraudulently altering a check to make it payable to himself. Prior to the filing of the instant case, Trustco sued Egnasko and the Leeds for conversion after being subject to a lawsuit from Shrewsbury. On December 24, 1997, the Leeds filed this action alleging strict liability for payment on the altered check against both Chase and Summit.