Chicago Title Insurance Co. v. Allfirst Bank

394 Md. 270, 905 A.2d 366 (2006)

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Chicago Title Insurance Co. v. Allfirst Bank

Maryland Court of Appeals
394 Md. 270, 905 A.2d 366 (2006)

Facts

Mark Shannahan refinanced his home. Chicago Title Insurance Company, through its agent, First Equity (collectively, FE) (plaintiffs), settled the loan. FE provided Shannahan with two checks drawn on its account with Allfirst Bank (Allfirst) (defendant). The first check was payable to Shannahan; the second (Check No. 2) was payable to Farmers Bank (Farmers) (defendant) and was meant to pay Shannahan’s line of credit with Farmers, which was secured by Shannahan’s home. FE also gave Shannahan a letter instructing Farmers how to use Check No. 2. Shannahan did not provide the letter to Farmers, instead indorsing and depositing both checks into his personal Farmers account. Farmers subsequently moved to foreclose on Shannahan’s property due to the unpaid credit line. FE sued Farmers and Allfirst regarding Check No. 2; Farmers and Allfirst responded with interpleader counterclaims against FE. The trial court ruled, among other things, that Farmers was negligent in its handling of Check No. 2 and that FE could not recover against Allfirst for paying Check No. 2 because the check was not forged and was fully indorsed. The intermediate appellate court affirmed those rulings. FE and Farmers filed further appeals. On appeal, the parties primarily disputed whether (1) Farmers indorsed Check No. 2 as a depository bank or as a payee bank, (2) the Uniform Commercial Code (UCC) displaced common-law negligence claims for improperly paid checks, and (3) FE had the requisite intimate nexus with Farmers to support a negligence claim (if the UCC allowed such a claim).

Rule of Law

Issue

Holding and Reasoning (Greene, J.)

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