American Title Insurance Company, Plaintiff-appellant, v. Burke & Herbert Bank & Trust Company, Defendant-appellee, 25 F.3d 1038 (4th Cir. 1994)

Plaintiff/Appellant, American Title Insurance Company ("American Title"), underwrote title insurance to certain lenders on three separate real estate transactions in Virginia. The title policies were issued through American Title's authorized agent, Landmark Title Corporation ("Landmark"). Here, the lenders delivered monies (totalling approximately $395,000) to Landmark to be held in escrow to pay off priority lienholders. Landmark was to deposit these monies in a trust account at Burke & Herbert Bank & Trust Company ("B & H Bank"), Defendant/Appellee. Thereafter, Landmark was to write checks to the priority lienholders. Landmark did issue three checks to the priority lienholders (hereinafter "the payees"), but a Landmark employee had embezzled part of the lenders' escrow monies. The payees presented the checks for payment, but by midnight of the following day, B & H Bank had neither paid the checks nor returned them to the payees.¹  B & H Bank held the checks for several days on the false promise of a Landmark employee, who was also the embezzler, that the checks would be covered. When it became apparent to B & H Bank that the three checks would not be covered, the Bank returned them to the payees stamped "insufficient funds."

After the payees' checks were not honored, American Title paid the payees in full to extinguish their priority liens, thus providing the insured lenders with their expected first-lien positions. The payees then delivered the three checks to American Title. About one year later, American Title exercised its right to endorsement of the checks pursuant to Va.Code Ann. Sec. 8.3-201(3). The payees also assigned all "right, title, and interest" in the checks to American Title. JA 126, 133, 137. B & H Bank refused American Title's demand for payment on the checks, however, and American Title brought this action against the bank. After cross-motions for summary judgment, the district court granted the motion of B & H Bank.

After considering the record in this case, the briefs and the oral arguments, we are of the opinion that the judgment of the district court should be affirmed. We affirm on the reasoning of the district court in its memorandum opinion, American Title Ins. Co. v. Burke & Herbert Bank & Trust Co., 813 F. Supp. 423 (E.D. Va. 1993).² 

AFFIRMED