The legal case of Hallenbeck v. Leimert was brought before the Supreme Court and involved overdraft checks that were drawn on a bank affiliated with a clearinghouse. These checks were presented to the drawee through a clearinghouse settlement by a member bank that had received them from an indorser bank for collection. The case was initially brought before the District Court of Northern District of Illinois by the receiver of Central Bank against the receiver of Ashland Bank, in an effort to recover upon five checks drawn upon the former and endorsed by the latter bank.
The case was then brought before the Circuit Court of Appeals for the Seventh Circuit, which affirmed the decision of the District Court. The court stated that if payment had been made by the bank on which the checks were drawn, or if an unconditional credit had been given, then a claim could not be made, even if it was later discovered that there were insufficient funds on deposit. The Supreme Court upheld this decision, with Justice McReynolds delivering the opinion of the Court. The case is significant in establishing the legal principle that a bank's liability for payment of checks is determined at the time of presentment, and cannot be altered by subsequent events.