Check if monitor edges actually touch each other. Even one pixel of space between them will prevent mouse pointer from moving to the other screen.
You can verify this by taking a screenshot, zooming it in and examining the edge between top and bottom screen. If there's a black line between them, then that's the issue.
In this case, try moving around monitors in the display setup. If snapping doesn't work properly and you're unable to get them to work, try moving screen (1) up, then snap (2) to (3)'s bottom and move (1) back in its place.
Alternatively, you can try to use your graphics card's settings panel. These usually offer screen settings too, but use different positioning and snapping algorithms.
As a last resort, you can try to adjust screen position manually in registry.