Even in Virginia, which recently placed
which recently placed first in a ranking of the "Best
States for Business" by Forbes.com, businesses often fail.
Particularly in small companies, relationships among the owners sour and partnership
disputes arise. Here in Fairfax County, where my practice is located, it is
not uncommon for disgruntled partners to attempt to withdraw large sums from
corporate bank accounts prior to dissolution or to attempt to block other
owners' access to the company's accounts. Banks need to be careful not to get
caught in the crossfire by inadvertently facilitating a wrongful cash grab by
one of the business owners. Fortunately, as illustrated by a recent
decision by Fairfax Judge Bellows, Virginia's adoption of the Uniform Commercial Code
provides some valuable protection to banks.
v. Alliance Bank (Fairfax Circuit Court, Dec. 22, 2009) involved a dispute
between two owners of Advantage Title and Escrow, LLC, Khan and Kazmi. Both
were authorized signatories on the company's account held with Alliance Bank.
After the two had a falling out, Kazmi instructed the bank to remove Khan as a
signatory. A few days later, Khan wrote a $35,000 check against Advantage
Title's account in exchange for a cashier's check for that amount. Upon
learning of the transaction, Kazmi sent an "Affidavit of Unauthorized
Transaction" to Alliance Bank. This document alleged, under oath, that Khan
obtained the cashier's check through fraud as Khan
was (according to Kazmi) not authorized to withdraw funds from the company's
account. In reliance on that affidavit, Alliance Bank canceled the cashier's
check and credited $35,000 back to the Advantage account.
UCC Protects Bank from Breach of Contract Allegations in its
entirety on Virginia Business Litigation Lawyer Blog.