John Abraham A.

Alsol
2011-04194
LEONARDI v. CHASE NATIONAL BANK OF THE CITY OF NEW YORK
FACTS
A check made to the order of Leonardi and wife for $3750 and drawn to Bank of Manhattan
Trust Company of Jamaica, NY is the subject of this case.
Leonardi deposited the said check to the Bank of Bay Biscayne, of Miami, FL (FL Bank) with the
endorsement: For deposit of Florence Leonardi and John Leonardi.
The Bank of Bay Biscayne, FL sent this check along with others to its NY correspondent (NY
Bank) with cash remittance letter. NY Bank was able to clear the check. Amount was credited to
FL Bank by NY Bank.
FL Bank became insolvent and was being liquidated. The FL Bank owed NY Bank for over a
million dollars. When NY bank learned of the insolvency, it set off this indebtedness against the
credits of FL Bank in its book, including the proceeds of Leonardis books.
Leonardi claimed that he was still owner of the check, and that he could collect from the NY
Bank.
ISSUE
WON the plaintiff was a creditor of the FL Bank at the time the NY Bank set off the credit of the
credits of the FL Bank in its books
HELD: YES
RULING AND APPLICATION
Leonardis endorsement for deposit was restrictive. It made the FL Bank an agent for
collection, not the owner. Upon a collection of the note, principal-agent relationship ceased and
a creditor-debtor relationship ensued.
The same can be said with the relationship of the NY bank and the FL Bank. Its principal-agent
relationship ceased and FL Bank became its creditor. Thus, the NY Bank has the right to set off
the credit.
Leornardi, therefore, only had the same right as all other creditors of the bank. It cannot collect
from the NY Bank.

SIMPSON v. FIRST NATIONAL BANK OF ROSEBURG

FACTS
In 1907, First National Bank of Roseburg loaned Josephson for $1000 who gave her promissory
note for the same amount.
At this time, Simpson had existing credit in the bank for $1200. Banks officers advised her to let
the bank to loan $1000 of the said credit. Thereupon, th bank appropriated Simpsons $1000
and assigned to her the note of Josephson.
The bank continued to hold the note for collection of principal and interest. The bank tried to
cash the note but it was not paid except for a portion of the interest. In 1914, Simpson received
the instrument from the bank.
Simpson claimed that she was first entitled to the endorsement of the bank on the note and then
to collect the balance due on the instrument from the bank.
ISSUE
WON Simpson is entitled to the endorsement of the bank
HELD: YES
RULING AND APPLICATION
The law is clear that when a transfer of a note payable to order happens for value, the right to a
proper endorsement from the transferor vests into the transferee. In this case, wherein the bank
appears as payee of the note, the right to proper endorsement vested to Simpson. She can
compel the bank to indorse the note. The court further held that the right was to an unqualified
endorsement, unless the parties agreed that it should be qualified.
It was also mentioned in the discussion that this case was filed as an action of law. The court
cannot compel an endorsement in an action of law. Simpson must file a suit in equity.