Title: Arch Insurance Co. v. FVCbank
Citation: N/A
Docket Number: 211050
State: Virginia
Issuer: Virginia Supreme Court
Date: December 29, 2022

PRESENT:  All the Justices 
 
ARCH INSURANCE COMPANY 
 
 
 
OPINION BY 
v.  Record No. 211050 
JUSTICE THOMAS P. MANN 
 
 
 
DECEMBER 29, 2022 
FVCBANK 
 
FROM THE CIRCUIT COURT OF FAIRFAX COUNTY 
Richard E. Gardiner, Judge 
 
This appeal turns on the legal principle that when a company obtains a right through 
subrogation, that company is placed in the position of its subrogor and can have no greater rights 
than those of the subrogor.  Arch Insurance Company (“Arch”) appeals from the judgment of the 
Fairfax County Circuit Court striking Arch’s conversion and unjust enrichment claims.  Arch 
asserts that the circuit court erred by refusing to permit Arch’s forensic accounting expert to 
testify, and by granting FVCbank’s motion to strike Arch’s claims.  Both of Arch’s assignments 
of error stem from the circuit court’s underlying legal conclusion that Arch was incapable of 
demonstrating a priority right to the disputed funds as a matter of law.  Because Arch’s rights 
were limited to those of its subrogor, Dominion Mechanical Contractors, Inc. (“Dominion”), we 
agree with the circuit court and affirm the judgment below. 
BACKGROUND 
 
Dominion is a subcontractor based in Fairfax, Virginia, that provides mechanical and 
plumbing work for various construction projects.  When the underlying cause of action arose, 
Dominion subcontracted from certain general contractors, like the Whiting-Turner Contracting 
Company (“Whiting-Turner”) and itself subcontracted to various labor, equipment, and materials 
suppliers, and subcontractors (collectively, the “Suppliers”). 
 
 
2 
 
I.  Dominion obtains a line of credit from FVCbank 
In May 2017, Dominion and FVCbank executed a loan agreement, providing Dominion 
with an $8,000,000 revolving line of credit (the “Line of Credit Agreement”).  From that line of 
credit, FVCbank would advance up to 80% of the billed accounts receivable on contracts which 
were not subject to surety bonds, while funds from bonded contracts would be excluded in the 
calculation of available credit.  Dominion was required to consistently update FVCbank with 
certifications of the available accounts receivable, as well as whether those receivables were 
from bonded or non-bonded contracts. 
Dominion maintained four accounts with FVCbank:  a payroll account, a money market 
savings account, a primary operating account (the “Operating Account”), and a cash 
management account (“the Cash Collateral Account”).  Dominion was required to maintain the 
Operating Account and the Cash Collateral Account with FVCbank until Dominion’s obligations 
were satisfied.  The Operating Account would draw directly from the line of credit.  Incoming 
payments from third parties for projects would be deposited in the Cash Collateral Account and 
the Operating Account.  The Cash Collateral Account would be “swept,” or emptied, daily to pay 
down the line of credit.  Funds in the Operating Account would then be used by Dominion to 
make third-party payments, transferred to the payroll account to fund employee payroll, or 
transferred to the money market savings account. 
In exchange for the revolving line of credit, Dominion granted FVCbank a “perfected and 
continuing security interest in” among other things, “all of [Dominion]’s . . . deposit accounts 
with any financial institution with which [Dominion] maintains deposits, whether now owned or 
3 
 
existing or hereafter acquired or arising,” and “all Proceeds and products of the foregoing.”1  
Additionally, the Line of Credit Agreement defined “Collateral” in part as “all property of 
[Dominion] subject from time to time to the Liens of this Agreement” and any of the loan 
documents.  Under the Line of Credit Agreement, “Lien” included any “security interest . . . of 
any kind in real or personal property securing any indebtedness . . . owed to, or claimed to be 
owed to, a Person, all whether perfected or unperfected, avoidable or unavoidable, based on the 
common law, statute or contract or otherwise.”2  Thus, “Collateral” included Dominion’s 
“deposit accounts with any financial institution” and “all Proceeds and products” thereof. 
The Line of Credit Agreement further outlined how Dominion would trigger a default if it 
failed to comply with certain covenants.  A default would, in turn, entitle FVCbank to certain 
remedies regarding Dominion’s deposit accounts.  Among the remedies available to FVCbank 
were specific rights regarding Collateral.  A default would entitle FVCbank to declare any and 
 
1 The Line of Credit Agreement defined “Proceeds” as “the meaning described in the 
Uniform Commercial Code as in effect from time to time.”  Code § 8.9A-102(a)(64) generally 
defines “Proceeds” as 
 
(A) whatever is acquired upon the sale, lease, license, exchange, or other disposition of 
collateral; 
 
(B) whatever is collected on, or distributed on account of, collateral; 
 
(C) rights arising out of collateral; 
 
(D) to the extent of the value of collateral, claims arising out of the loss, nonconformity, 
or interference with the use of, defects or infringement of rights in, or damage to, the 
collateral; or 
 
(E) to the extent of the value of collateral and to the extent payable to the debtor or the 
secured party, insurance payable by reason of the loss or nonconformity of, defects or 
infringement of rights in, or damage to, the collateral. 
 
2 The Line of Credit Agreement defined “Person” as “an individual, a corporation, a 
partnership, a joint venture, a limited liability company or partnership, a trust, an unincorporated 
association, a Governmental Authority, or any other organization or entity.” 
4 
 
all of the outstanding loan obligations due and payable, without notice to Dominion.  Moreover, 
FVCbank could, without notice to Dominion, “demand, collect, receipt for and give renewals, 
extensions, discharges and releases of any of the Collateral” and “take any other action necessary 
or beneficial to realize upon or dispose of the Collateral or to carry out the terms of th[e] 
Agreement.”  Importantly, in the event of default, FVCbank was authorized by Dominion 
“without notice to, or consent of, [Dominion], to set off, appropriate, seize, freeze and apply any 
or all items  . . . against all Obligations then outstanding (whether or not then due), all in such 
order and manner as shall be determined by [FVCbank] in its sole and absolute discretion.”3 
At the same time the Line of Credit Agreement was executed, Dominion executed a 
commercial promissory note for the line of credit (the “Line of Credit Promissory Note”) for up 
to $8,000,000.  Dominion and FVCbank also entered into a security agreement (the “Security 
Agreement”) granting FVCbank a “first priority security interest in” among other things, all of 
Dominion’s “presently existing or hereafter acquired or created accounts.” 
Importantly, Dominion and FVCbank executed a Collateral Assignment and Security 
Agreement, specifically governing two of Dominion’s accounts at FVCbank:  the Operating 
Account and the Cash Collateral Account, funded by receivables from Dominion’s contracts.  
The Collateral Assignment and Security Agreement explicitly assigned a security interest in the 
two accounts to FVCbank, prohibited Dominion from withdrawing any money from the Cash 
Collateral Account without permission from FVCbank, and provided the bank with a right of 
offset.  Under the right of offset, if Dominion defaulted, FVCbank could apply “any or all of” the 
two accounts to Dominion’s unpaid debt. 
 
3 The Line of Credit Agreement defined “Obligation” to include “all present and future 
indebtedness . . . in connection with . . . the provisions of [the loan documents].” 
5 
 
 
At the same time, a Uniform Commercial Code (“UCC”) financing statement was filed in 
favor of FVCbank covering “all presently existing or hereafter acquired or created accounts, 
[and] accounts receivable.” 
II.  Arch issues surety bonds to Dominion 
Beginning in May 2018, Arch, a surety company, issued contract surety bonds,4 also 
called “payment and performance” bonds, for some of Dominion’s projects.  The bonds at issue 
in this case were for three projects:  Capital One Block C Project, Capital One Performing Arts 
Center Project, and Fleet Elementary School Project.  Performance bonds were issued to ensure 
performance of a project by Dominion for Whiting-Turner, a general contractor.  The 
performance bonds were accompanied by payment bonds, to ensure Dominion’s payment of its 
obligations to the Suppliers.  If Dominion were unable to meet its obligations to Whiting-Turner 
or the Suppliers, Arch would satisfy the claims owed by Dominion. 
Contract surety bonds are often accompanied by general indemnity agreements, to ensure 
the surety’s rights if the bonds go into default.  The bonds issued by Arch to Dominion were 
accompanied by the General Indemnity Agreement (the “GIA”) executed May 16, 2018.  The 
GIA stated that it was a security agreement under the UCC and contained an assignment 
provision, in which Dominion assigned all of its rights under bonded contracts to Arch, in the 
event of default.  Moreover, Paragraph 25 of the GIA, 5 titled TRUST FUNDS, provided: 
[Dominion] and Indemnitors agree and expressly declare that all funds due or to 
become due under any Bonded Contract are trust funds, whether in the possession 
of [Dominion] or another and whether designated trust funds or not, for the 
 
4 Contract surety bonds are issued to ensure the contractor will meet its “payment and 
performance obligations to other contractors.”  Here, the bonds were issued by Arch, the surety, 
to Dominion, the principal. 
 
5 “Indemnitors” included “All Persons who sign this Agreement or whose representatives 
sign this Agreement or any other agreement that incorporates by reference the terms of this 
Agreement.” 
6 
 
benefit and payment of all persons to whom [Dominion] incurs obligations in the 
performance of such contract, for which [Arch] may be liable under any Bond.  If 
[Arch] discharges any such obligation, it shall be entitled to assert the claim of 
such person to the trust funds. 
 
Crucially, FVCbank was not a party to the GIA or related agreement, and therefore not an 
Indemnitor. 
III.  Dominion and FVCbank agree to a term loan and amend the loan documents 
 
 
In July 2018, Dominion “failed to comply with the imposed restrictions regarding 
distributions to its shareholders,” which was a designated event of default under the Line of 
Credit Agreement with FVCbank.  As a result, Dominion and FVCbank agreed to an amendment 
to the Line of Credit Agreement and other loan documents (the “First Amendment”).  The First 
Amendment’s covenants were cumulative with those in the original agreement, and the First 
Amendment did not affect FVCbank’s rights in the event of default. 
 
In February 2019, Dominion and FVCbank executed a loan agreement providing 
Dominion with a term loan from FVCbank for $1,500,000 (the “Term Loan Agreement”).  
Under the Term Loan Agreement, Dominion was bound by all the non-monetary covenants set 
forth in the Line of Credit Agreement and other loan documents, and violation of any of those 
covenants constituted an event of default.  The Term Loan Agreement provided that in the event 
of default, FVCbank was entitled to all remedies provided in the loan documents, and to declare 
all outstanding debt under the term loan due and payable.  Moreover, Dominion agreed “to allow 
the UCC-1 Financing Statement filed with the Virginia State Corporation Commission against 
the collateral property described in the Security Agreement to remain a matter of record.”  At the 
same time, Dominion also executed a commercial promissory note for the term loan (the “Term 
Loan Note”) for $1,500,000. 
7 
 
 
Dominion and FVCbank also amended the Line of Credit Agreement a second time in 
February 2019 (“Second Amendment”).  They agreed that Dominion had breached the Line of 
Credit Agreement again by failing to maintain the debt ratio required by the agreement.  The 
Second Amendment lowered the line of credit to $7,500,000 and restricted the available credit to 
$7,000,000 until the term loan was fully repaid.  The Second Amendment’s covenants were 
cumulative with those in the original agreement, and the Second Amendment did not affect 
FVCbank’s rights in the event of default.  FVCbank and Dominion also amended the Security 
Agreement to cover the revised amount of the line of credit and the term loan and agreed that the 
UCC-1 financing statement would cover both of Dominion’s debts to FVCbank. 
IV.  Dominion’s financial struggles mount 
In June 2019, Dominion began to seek financial assistance from Arch to pay Suppliers.  
To analyze Dominion’s financial situation Arch hired a financial consultant, who informed Arch 
that Dominion could not obtain additional financial support from FVCbank.  In July, Arch 
requested that Dominion deposit all bonded project receivables into a separate trust account so 
that it would not have a contest with FVCbank over those funds. 
In August, Arch and Dominion entered into an Interim Financial Assistance Agreement 
(“IFAA”).  The IFAA contained voluntary letters of default indicating that Dominion was in 
default to Arch under the GIA, and that Dominion would request that FVCbank establish a 
segregated account for bonded funds.  In conjunction with the IFAA, Dominion executed a 
promissory note in favor of Arch for $3,865,079.69.  Arch advanced the same amount to 
Dominion for payment to the Suppliers. 
Throughout the summer, Dominion had requested that FVCbank set up a separate trust 
account for bonded receivables.  At no point did FVCbank agree to set up a separate trust 
8 
 
account.  Dominion continued to deposit its bonded and nonbonded receivables into its general 
deposit accounts at FVCbank through August 16, 2019.  On August 15, FVCbank froze 
Dominion’s accounts.  FVCbank swept approximately $2,500,000 from Dominion’s accounts to 
pay down the term loan and the line of credit. 
V.  The litigation 
After FVCbank froze Dominion’s accounts, Arch and Dominion sued the bank, claiming 
conversion and unjust enrichment.  Arch, in its case in chief, attempted to call an expert, David 
Stryjewski (“Stryjewski”), to testify about the tracing of bonded funds from Dominion’s 
accounts.  FVCbank objected to Stryjewski’s expert testimony on relevance grounds.  The bank 
argued that testimony regarding tracing was irrelevant, because as a matter of law all the funds, 
bonded and nonbonded alike, were commingled and the bank had a priority interest in the 
accounts.  Arch responded that the bank was on notice that the bonded funds were to be held in 
trust, and therefore had no right to offset the funds.6  The circuit court sustained the objection, 
ruling, “I find as a matter of law that we do not need the testimony of a tracing expert and I 
sustain [FVCbank]’s objection to the gentleman testifying as a tracing expert.” 
At the close of Arch’s evidence, FVCbank moved to strike Arch’s claims of conversion 
and unjust enrichment.  FVCbank argued that Dominion was in default, and therefore the bank’s 
security interest took priority over any claim by Arch.  Arch responded that there may have been 
sufficient evidence of default but would not stipulate to that point, claiming “[w]e didn’t put on 
any evidence - we’re not Dominion - as to whether they are or are not in default.”7  Arch 
 
6 Arch has made no argument, below or on appeal, regarding any event of default with 
respect to the relevance of Stryjewski’s testimony. 
 
7 On appeal, Arch concedes that “[t]he trial court did find that Dominion defaulted under 
its loan agreement with FVCbank, a different issue which is not contested in this appeal.”  
(Reply Br. 5, n.3). 
9 
 
reiterated its argument that FVCbank should have been on notice of the trust character of the 
bonded funds and therefore there was sufficient evidence of conversion and unjust enrichment.  
The circuit court granted FVCbank’s motion to strike Arch’s claims.  The court found that, even 
in the light most favorable to Arch, because FVCbank had a priority interest in Dominion’s 
accounts, there was no legal claim for unjust enrichment or conversion.  Arch brought this 
appeal. 
ANALYSIS 
 
The circuit court concluded that, as a matter of law, Arch would be unable to demonstrate 
a superior claim to the disputed funds.  Both of Arch’s assignments of error turn on that legal 
conclusion, and the application of that conclusion to the admission of expert testimony and 
FVCbank’s motion to strike the conversion and unjust enrichment claims. 
I.  Standard of Review 
 
Regarding the testimony of Arch’s tracing expert, we review “a trial court’s decision to 
admit or exclude expert testimony under an abuse of discretion standard.”  Condo. Servs., Inc. v.  
First Owners’ Ass’n of Forty Six Hundred Condo., Inc., 281 Va. 561, 575 (2011).  A court 
abuses its discretion “when a relevant factor that should have been given significant weight is not 
considered; when an irrelevant or improper factor is considered and given significant weight; and 
when all proper factors, and no improper ones, are considered, but the court, in weighing those 
factors, commits a clear error of judgment.”  Manchester Oaks Homeowners Ass’n, Inc. v. Batt, 
284 Va. 409, 426 (2012) (quoting Landrum v. Chippenham & Johnston–Willis Hosps., Inc., 282 
Va. 346, 352 (2011)).  Moreover, a court “by definition abuses its discretion when it makes an 
error of law.”  Helmick Family Farm, LLC v. Comm’r of Highways, 297 Va. 777, 794 (2019) 
(quoting Porter v. Commonwealth, 276 Va. 203, 260 (2008)). 
10 
 
 
With respect to FVCbank’s motion to strike, we “review a circuit court’s decision on a 
motion to strike in the light most favorable to the non-moving party,” in this case, Arch.  Dill v. 
Kroger Ltd. P’ship I, 300 Va. 99, 109 (2021).  Moreover, “the non-moving party ‘must be given 
the benefit of all substantial conflict in the evidence, and all fair inferences that may be drawn 
therefrom.’”  Id. (quoting Egan v. Butler, 290 Va. 62, 73 (2015)). 
II.  Arch’s expert witness 
 
Generally, “[a]ll relevant evidence is admissible,” except as otherwise provided by law.  
Va. R. Evid. 2:402(a).  Relevant evidence is that which has “any tendency to make the existence 
of any fact in issue more probable or less probable than it would be without the evidence.”  Va. 
R. Evid. 2:401. 
 
If FVCbank had a superior right to the disputed funds over Arch as a matter of law, no 
amount of expert testimony on tracing would affect the outcome and the expert testimony would 
be irrelevant.  Yet, the facially simple issue of relevance requires an analysis of the complex 
conflict between FVCbank’s security interest and Arch’s security interest acquired through 
subrogation. 
A.  FVCbank’s interest in Dominion’s deposit accounts 
 
FVCbank’s interest in Dominion’s bank deposits is governed by the loan documents.  
FVCbank first obtained a security interest in Dominion’s deposit accounts in 2017, as part of the 
Line of Credit Agreement, the Security Agreement, and the Collateral Assignment and Security 
Agreement.  Additionally, a UCC-1 financing statement was filed with the State Corporation 
Commission, reflecting the bank’s security interest.  FVCbank’s security interest in the deposit 
accounts was unaffected by the First Amendment, the Second Amendment, or the Term Loan 
Agreement. 
11 
 
 
Importantly, FVCbank’s security interest was perfected by its control over the deposit 
accounts.  Under the UCC, “a security interest in a deposit account may be perfected only by 
control under § 8.9A-314” except for “proceeds” as provided in Code § 8.9A-315(c) and (d).  
Code § 8.9A-312(b)(1). 
Code § 8.9A-314(a) provides that a security interest in a deposit account “may be 
perfected by control of the collateral under . . . [§] 8.9A-104.”  In turn, Code § 8.9A-104(a)(1) 
states that “[a] secured party has control of a deposit account if:  . . . the secured party is the bank 
with which the deposit is maintained.”  Here, Dominion’s accounts were maintained at 
FVCbank, and FVCbank was the secured party under the loan documents.  Moreover, since 
FVCbank had a perfected security interest in the entirety of Dominion’s deposit accounts, the 
exceptions provided in Code §§ 8.9A-315(c) and (d) are not applicable. 
 
The loan documents provided that, in the event of default, FVCbank had the right to 
offset any of Dominion’s accounts against the company’s outstanding debts to FVCbank.  
Neither party contests on appeal that Dominion was in default at the time FVCbank exercised its 
rights under the loan documents, and neither party raised the issue of default with respect to the 
relevance of Stryjewski’s testimony. 
Therefore, as between FVCbank and Dominion, given Dominion’s default, FVCbank had 
a clear right under the loan documents to offset Dominion’s deposit accounts against the 
company’s debt.  Next, we turn to Dominion’s relationship with Arch, and whether that 
relationship impacts FVCbank’s clear right of offset. 
B.  Arch’s interest in Dominion’s deposit accounts 
 
Arch’s interest in Dominion’s deposit accounts is set forth in the GIA and the IFAA.  The 
GIA stated that it was a security agreement under the UCC and authorized the filing of a UCC 
12 
 
financing statement reflecting the same.  Yet, the record contains no evidence that Arch filed a 
UCC financing statement prior to FVCbank sweeping Dominion’s deposit accounts. 
A security interest in a deposit account “may be perfected only by control 
under § 8.9A-314.”  Code § 8.9A-312(b)(1).  A secured party can have control of a deposit 
account under three circumstances: 
(1) the secured party is the bank with which the deposit account is 
maintained; 
(2) the debtor, secured party, and bank have agreed in an 
authenticated record that the bank will comply with instructions 
originated by the secured party directing disposition of the funds in 
the deposit account without further consent by the debtor; or 
(3) the secured party becomes the bank’s customer with respect to 
the deposit account. 
 
Code § 8.9A-104.  Arch is not the bank where Dominion’s deposit accounts are maintained and 
is not the bank’s customer with respect to the accounts.  Moreover, there is no agreement that the 
bank would comply with instructions from Arch regarding the purported trust funds.  Therefore, 
Arch’s security interest in the deposit accounts was not perfected.  Likewise, Arch did not have a 
perfected interest in the proceeds from the bonded contracts because Arch did not file a UCC 
financing statement covering the original bonded contract funds, and “a security interest in 
proceeds is a perfected security interest if the security interest in the collateral was perfected.”  
Code § 8.9A-315(c). 
The GIA provided for assignment of Dominion’s rights under bonded contracts to Arch 
in the event of default.  This subrogation right was confirmed and explicitly not waived by the 
IFAA.  The GIA also contained specific language designating the proceeds of bonded contracts 
as trust funds and requiring Dominion to hold them as such.  The IFAA required Dominion to set 
up a trust account and reiterated the purported trust nature of the funds.  Thus, in addition to the 
13 
 
security interest provided in the GIA, Arch acquired an equitable interest through subrogation in 
Dominion’s deposit accounts. 
C.  FVCbank and Arch’s competing interests in the deposit accounts 
Having detailed the nature of Arch’s interest in Dominion’s accounts, we analyze the 
competing claims of Arch and FVCbank under the UCC and Virginia caselaw.   
1.  Claims of FVCbank and Arch under the UCC 
 
Under the UCC, FVCbank’s perfected security interest takes priority over Arch’s 
unperfected security interest.  Code § 8.9A-327 outlines the priority rules when there are 
conflicting security interests in the same deposit accounts.  The first rule of priority controls the 
outcome here.  Code § 8.9A-327(1) provides that “[a] security interest held by a secured party 
having control of the deposit account under § 8.9A-104 has priority over a conflicting security 
interest held by a secured party that does not have control.”  FVCbank has a perfected security 
interest through control of the deposit; Arch does not. 
The second priority rule is inapplicable.  Code § 8.9A-327(2) ranks “security interests 
perfected by control . . . according to priority in time of obtaining control.”  Since Arch never 
obtained control or perfected its interest, this rule does not apply. 
The third priority rule supports FVCbank’s priority interest.  That rule provides that “a 
security interest held by the bank with which the deposit account is maintained has priority over 
a conflicting security interest held by another secured party.”  Code § 8.9A-327(3).  Thus, the 
bank’s security interest has priority over Arch’s conflicting security interest. 
The last possible exception, priority rule four, provides that “[a] security interest 
perfected by control under § 8.9A-104 (a)(3) has priority over a security interest held by the bank 
with which the deposit account is maintained.”  Code § 8.9A-327(4).  Arch’s security interest 
14 
 
was not perfected at all, much less by control under § 8.9A-104(a)(3).  Therefore, under the 
UCC, FVCbank’s security interest in the account takes priority over Arch’s interest as a matter 
of law. 
2.  Equitable subrogation and trust character 
Arch argues that it nonetheless had a superior interest in the bonded deposits under the 
doctrine of equitable subrogation, and that FVCbank was on notice of Arch’s claimed right to the 
funds because of their trust status.  This argument fails for two reasons. 
First, Arch’s interest is a claimed right of subrogation and cannot exceed the rights of 
Dominion.  Subrogation refers to “[t]he substitution of one person in the place of another with 
reference to a lawful claim, demand or right . . . so that he who is substituted succeeds to the 
rights of the other in relation to the debt or claim, and its rights, remedies, or securities,”  
Reynolds Metals Co. v. Smith, 218 Va. 881, 883 (1978) (quoting Black’s Law Dictionary 1595 
(rev. 4th ed.1968)), and “the substitution of one for another as a creditor so that the new creditor 
succeeds to the former’s rights in law and equity.”  Id. (quoting Webster’s Third New 
International Dictionary 2278 (1969)).  In Peerless Insurance Co. v. County of Fairfax, this 
Court succinctly applied this definition, reasoning that where a subrogee steps into the shoes of a 
principal, it “can have no greater rights than [the principal].”  274 Va. 236, 247 (2007).  That 
principle holds true in this case.  Arch’s subrogation right permits the surety to step into the 
shoes of Dominion; that subrogation right is limited to the rights of Dominion.  Arch cannot 
exceed the rights of Dominion, and Dominion already provided a priority security interest to 
FVCbank.  Regardless of the bonded or nonbonded character of Dominion’s funds, Arch only 
obtained Dominion’s right to the deposit accounts – a right Dominion had already signed away. 
15 
 
Second, Arch’s argument fails because FVCbank never agreed to hold the bonded funds 
in trust.  In Virginia, “[t]he general rule is that ‘the relation between a general depositor and the 
bank in which his deposit is made is simply that of debtor and creditor.  The moneys deposited 
immediately become the property of the bank, and the latter becomes [a] debtor of the 
depositor.’”  Bernardini v. Cent. Nat. Bank of Richmond, 223 Va. 519, 521 (1982) (quoting Fed. 
Rsrv. Bank of Richmond, Va. v. State & City Bank & Tr. Co., 150 Va. 423, 430-31 (1928)).  In 
Bernardini, a couple deposited funds into their bank, where the husband had significant business 
debt.  Id. at 520.  The Bernardinis conceded that they did not designate those funds “for a 
specific purpose and that the bank had no knowledge of the sources of the funds.”  Id. at 521.  
The bank then offset those funds against the business debt.  Id. at 520.  This Court held that “by 
depositing the checks in a general account and commingling them with other nonexempt money, 
the Bernardinis’ funds lost whatever exemptions they may have had.”  Id. at 522. 
Here, Dominion deposited funds into FVCbank accounts while expecting them to be held 
in trust.  Dominion notified FVCbank of that purpose and requested a trust account, which 
FVCbank denied.  Thus, the events here resemble those in Bernardini, except for the ineffectual 
notice provided by Arch to FVCbank and the request that Dominion establish a trust account for 
bonded receivables. 
The issue of notice and trust funds was addressed by this Court in Williams v. Dickenson 
County Bank, Inc.  175 Va. 359, 363-64 (1940).  There, the Court held that “[i]n the absence of a 
clear agreement to the contrary, expressed or implied, a deposit is presumed to be a general 
deposit.”  Id.  The Court explicitly stated that this presumption applies 
even though the depositor styles himself a fiduciary and the funds 
are credited to a separate fiduciary account, . . . even though the 
funds are known by the bank to be trust funds, and . . . even if the 
funds are to be used for a particular purpose, so long as the 
16 
 
depositor assents to their being commingled with the general funds 
of the bank. 
 
Id. at 364. 
 
Arch contends that this principle is not controlling, and instead argues that a bank is 
required to treat funds as special deposits when the bank knows the funds are intended to be trust 
funds.  Arch first cites Overseers of the Poor of Norfolk v. Bank of Virginia for the proposition 
that the law “entitle[s] a principal, in all cases where he can trace his property, whether it be in 
the hands of the agent, or of his representatives, or assignees, to reclaim it, unless it has been 
transferred bona fide to a purchaser of it, or assignee for value, without notice.”  43 Va. (2 Gratt.) 
544, 548 (1846). 
Arch’s argument regarding Overseers of the Poor fails because its interest was obtained 
through subrogation – Arch is not a principal.  Dominion, the principal, already transferred a 
security interest to FVCbank in the event of default.  Therefore, there is simply no property 
interest belonging to Arch for Arch to trace. 
 
Arch next cites Peoples National Bank v. Coleman, where this Court stated that “[w]here 
trust funds are deposited with a bank, and the bank has notice of their trust character, it has no 
right to appropriate them to the payment of the individual debt of the depositor due from him to 
it.”  175 Va. 483, 487 (1940) (citing Fed. Rsrv. Bank of Richmond, 150 Va. at 438). 
 
In that case, J.B. Coleman sued Peoples National Bank of Pulaski, claiming that the bank 
refused to honor a check written to him by R.S. Cecil.  Id. at 484.  Cecil, a real estate agent, sold 
a property for Coleman and deposited the amount due to Coleman in his bank account.  Id. at 
485.  The account was explicitly in the name of “R.S. Cecil, agent,” even though the check was 
originally written to Cecil in his individual capacity.  Id. at 487.  Thus, unlike here, the bank had 
designated the account as one of an agent, and it was not a general deposit account.  Id.  This 
17 
 
Court therefore concluded that the bank had no right to offset those funds against Cecil’s 
personal debt.  Id. at 488. 
 
Relatedly, Federal Reserve Bank of Richmond directly contradicts Arch’s position in this 
case.  There, the Bank of Virgilina (“Virgilina”) was in debt to State and City Bank (“State and 
City”) and had an ordinary checking account with the bank.  Fed. Rsrv. Bank of Richmond, 150 
Va. at 426-27.  When Virgilina closed, State and City offset Virgilina’s deposits against the debt.  
Id. at 427.  Virgilina had also written a check to the Federal Reserve Bank of Richmond, but 
State and City did not know the check was outstanding.  Id. at 427-28.  While the Court cited 
language indicating that the bank’s knowledge was relevant, the Court concluded that the Federal 
Reserve Bank “had no equity . . . in the account of the Virgilina Bank . . . which was superior to 
the equity of” State and City.  Id. at 440-41.  Moreover, “[w]hen the Federal Reserve Bank 
presented its check from [Virgilina] these funds had not only been blended with the funds 
credited to [Virgilina] in [State and City], but they had been credited on the notes then due by 
[Virgilina] to [State and City].”  Id. at 441.  As a result, the Court held that State and City had the 
right to offset Virgilina’s commingled deposits against the outstanding debt.  Id. 
 
The law of equitable subrogation does not permit Arch to rise above the rights of its 
subrogor, Dominion.  Moreover, any equitable interest Arch had in Dominion’s deposit accounts 
was destroyed when the funds were deposited in a general deposit account, and Dominion and 
the bank never agreed to create a trust account.  FVCbank was not required to treat the funds as 
trust deposits simply because Dominion and Arch claimed as much.  Nor was it required to pick 
its own pocket and enable Arch to circumvent the bank’s priority interest under the UCC. 
Under the UCC and Virginia caselaw, FVCbank’s interest in Dominion’s deposit 
accounts was superior to Arch’s interest as a matter of law.  As a result, in the evidentiary 
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proceeding below, any testimony on the tracing of accounts was irrelevant, because FVCbank’s 
claim was superior regardless of the bonded character of the deposits. 
III.  FVCbank’s motion to strike 
 
The circuit court relied on the same legal analysis in granting FVCbank’s motion to 
strike, concluding that because FVCbank’s claim to the disputed funds was superior as a matter 
of law, Arch’s conversion and unjust enrichment claims failed. 
A.  Conversion 
Applying the legal conclusion that FVCbank’s interest was superior to that of Arch, 
addressed above, the circuit court correctly concluded that there was insufficient evidence of 
conversion.  “Conversion is ‘any wrongful exercise or assumption of authority . . . over another’s 
goods, depriving him of their possession; [and any] act of dominion wrongfully exerted over 
property in denial of the owner’s right, or inconsistent with it.’”  Mackey v. McDannald, 298 Va. 
645, 659 (2020) (alteration in original) (quoting United Leasing Corp. v. Thrift Ins. Corp., 247 
Va. 299, 305 (1994)). 
Here, FVCbank did not commit a “wrongful exercise or assumption of authority” over 
Arch’s goods.  There is no dispute on appeal that Dominion was in default when FVCbank offset 
the deposit accounts against Dominion’s outstanding debt.  FVCbank had a superior interest in 
Dominion’s deposit accounts under both the UCC and the doctrine of equitable subrogation.  See 
supra, section III.C.  As a result, there was insufficient evidence to support a claim of 
conversion. 
B.  Unjust enrichment 
Likewise, the evidence was insufficient as a matter of law for Arch’s unjust enrichment 
claim.  To state a cause of action for unjust enrichment, a plaintiff must allege that:  (1) the 
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plaintiff conferred a benefit on the defendant; (2) the defendant knew of the benefit and should 
reasonably have expected to repay the plaintiff; and (3) the defendant accepted or retained the 
benefit without paying for its value.  Schmidt v. Household Fin. Corp. II, 276 Va. 108, 116 
(2008). 
 
FVCbank had a superior claim to Arch under the UCC and equitable subrogation.  As a 
result, there was no benefit improperly retained by FVCbank that the bank should have expected 
to repay.  Thus, there was insufficient evidence to make out a claim of unjust enrichment by 
FVCbank. 
 
In sum, because FVCbank had a superior claim to Dominion’s deposit accounts over 
Arch, the circuit court did not err in granting the bank’s motion to strike as to conversion and 
unjust enrichment. 
CONCLUSION 
 
The circuit court correctly concluded that FVCbank’s interest in Dominion’s deposit 
accounts took priority over Arch’s interest as a matter of law.  Given that conclusion, the court 
properly excluded the testimony of Arch’s “tracing” expert and granted FVCbank’s motion to 
strike, dismissing the claims with prejudice.  Thus, we affirm the judgment of the circuit court. 
Affirmed.