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CAUSE NO.
OLD REPUBLIC NATIONAL TITLE IN THE DISTRICT COURT OF
INSURANCE COMPANY,
Plaintiff,
Vv HARRIS COUNTY, TEXAS
THOMAS G. NALER
Defendant. JUDICIAL DISTRICT
PLAINTIFF’S ORIGINAL PETITION
Old Republic National Title Insurance Company (“Old Republic”) files this
Plaintiff's Original Petition against Defendant Thomas G. Naler (“Naler’) and for causes
of action shows the following:
I
DISCOVERY CONTROL PLAN
1 Pursuant to Rule 190.3 of the Texas Rules of Civil Procedure, Plaintiff
intends to proceed under Discovery Control Plan Level 2.
I.
PARTIES
2 Plaintiff, Old Republic, is a Minnesota corporation registered to do
business in the state of Texas.
3 The Defendant, Thomas G. Naler, is a Texas resident residing in Collin
County, Texas. Naler may be served with process at 2 Canyon Crest Court, Frisco,
Texas 75034, or any other place he may be found.
I.
JURISDICTION
4. This court has jurisdiction over this matter as Plaintiff seeks an amount far
in excess of this court's minimum jurisdictional limits.
IV.
VENUE
5. The events, actions and omissions giving rise to Plaintiff Old Republic’s
claims occurred in Harris County, Texas. Venue of this case is therefore proper
pursuant to Texas Civil Practice and Remedies Code § 15.002(a)(1).
Vv.
FACTS
6. Defendant is an attorney licensed to practice law in the State of Texas. To
conduct business, he started a company, Exchange Title, L.L.C. (“Exchange Title’).
Naler is the sole managing member of Exchange Title. On or about January 26, 2010,
Old Republic executed an Agency Agreement with Defendant Naler and his company,
Exchange Title. (See Exhibit A). The Agreement’s purpose was to appoint Defendant
Naler and Exchange Title as Old Republic's policy issuing agents, thereby authorizing
Exchange Title and Naler to sign, countersign and issue commitments for title
insurance, binders of title insurance, title insurance policies and endorsements, and to
collect and remit premiums on Old Republic’s behalf. (Exhibit A).
7. The Agency Agreement further required Naler, as an agent, to “keep
safely in federally insured trust account separate from [Exchange Title]’s operating
accounts all funds received by [Exchange Title and Naler] in connection with
transactions where [Old Republic]’s Title Insurance Forms are issued, and disburse said
funds only for the purposes for which the same were entrusted, and reconcile all such
accounts not less frequently than monthly;....” (See Exhibit A, Section 2(F)). Naler was
further required to comply with all statutes and governmental rules and regulations
concerning the licensing and operation of his business, Exchange Title.
8 Upon collection of premium, Naler was obligated to promptly remit the
required percentage of the title insurance premiums to Old Republic as the underwriting
fee for its assumption of the risk. (See Exhibit A, Section 6). The Agency Agreement
made clear that all premiums owed to Old Republic “shall, upon receipt by [Naler on
behalf of Exchange Title], be considered the property of [Old Republic] and shall be held
in trust by [Naler by way of Exchange Title] for the benefit of [Old Republic] until such
time said amounts are paid over to [Old Republic]. (See Exhibit A, Section 6(D)).
9. Naler through his company Exchange Title agreed to remit to Old
Republic all amounts due to Old Republic under the Agency Agreement. (See Exhibit
A). The remittance was due to Old Republic on or before the tenth (10") day of the
second month following the closing date on which the title insurance liability attached.
(See Exhibit A, Section 6(C)).
10. Old Republic has issued invoices to Naler for remittance of earned
premiums totaling $30,143.81. Naler has failed and/or refused to remit premiums to Old
Republic which he holds in a fiduciary capacity in accordance with the terms of the
Agency Agreement. Naler is well beyond the deadline for remittance.
Termination of the Agency Agreement
11. On December 12, 2010, Old Republic terminated its Agency Agreement
with Exchange Title and Naler effective immediately in accordance with its rights under
Section 14 of the Agency Agreement. (Exhibit A).
12. In accordance with the terms of the Agency Agreement, Naler by way of
Exchange Title was obligated, upon termination, to furnish Old Republic with a complete
accounting of all remittances due under the Agency Agreement and “all Title Insurance
Forms furnished by [Old Republic] to [Exchange Title] and to deliver to [Old Republic] all
such forms and all files kept pursuant to Section 2(B) above relating to [Old Republic]’s
Title Insurance Forms.” (Exhibit A). As of the date of this pleading, Naler has failed to
disclose the status of seven (7) policies of title insurance.
Vendor Services Agreement
13. Old Republic also entered into a Vendor Services Agreement with Naler
by way of Exchange Title allowing Naler to purchase title evidence from Old Republic
for agreed upon prices. (See Exhibit C). Contemporaneous with termination of the
Agency Agreement, the Vendor Services Agreement was also terminated. In
accordance with the terms of the Vendor Services Agreement, Naler by way of
Exchange Title was obligated to tender payment for production of title evidence. Naler
received invoices which reflect $15,540.00 due and owing to Old Republic for
production of title evidence. Naler failed and refused to pay these sums.
14. Old Republic previously filed suit against Defendant Thomas Naler under
Cause No, 2011-22520; Old Republic National Title Insurance Company v. Exchange
Title, L.L.C. and Thomas G. Naler; In the 11" Judicial District Court, Harris County,
Texas. Old Republic obtained a Final Judgment against Exchange Title, L.L.C. on
September 26, 2011. (See Exhibit D). Defendant Naler was non-suited pursuant to his
filing for protection under Chapter 13 of the U.S. Bankruptcy Code, in Case No.
1142634, In Re: Thomas G. Naler, in the U.S. Bankruptcy Court for the Eastern District
of Texas, Sherman Division, which has recently been dismissed. (See Exhibit E).
Vi.
CAUSES OF ACTION
Count One
Breach of Contract
15. Plaintiff incorporates all preceding paragraphs into this count.
16. Old Republic and Naler entered into a valid and enforceable Agency
Agreement. Pursuant to that agreement, Naler in his individual capacity and as the sole
managing member of Exchange Title, was obligated to hold all premiums due to Old
Republic in trust in a separate bank account until such time as the amounts were paid to
Old Republic. Naler was further obligated to remit to Old Republic a policy register
together with premiums paid on or before the tenth (10th) day of the second month
following the closing date on which the title insurance liability attached.
17. Old Republic fully performed under its Agency Agreement with Naler and
Exchange Title.
18. Furthermore, Naler is obligated to comply with all statutes and
governmental rules and regulations related to the licensing and operations of an Agent's
business. Texas Insurance Regulation Rule 2 requires Naler as a policy issuing agent
to “remit the portion of the premium due to the title insurance company not later than the
fifteenth (15th) day of the second month following the month in which the premium was
collected.” (See Exhibit B).
19. Naler breached the Agency Agreement with Old Republic by failing to
timely remit premiums to Old Republic. Furthermore, Naler has violated his obligations
under Texas Insurance Law, which authorizes Old Republic to collect such premiums.
20. Additionally, Naler has failed to timely report on at least seven (7) title
insurance policies it issued as agent for Old Republic. Naler has not advised Old
Republic of the amount of premium due and owing on the seven policies. This also
constitutes a violation of the Agency Agreement. Old Republic has been damaged in an
undetermined amount through Naler's failure to report the issuance of said title policies
and remit premium for such policies.
21. As a direct and proximate result of Defendant Naler’s breach of the
Agency Agreement, Old Republic suffered damages in the amount of at least
$30,143.81. Old Republic has also incurred costs of court, expenses and reasonable
and necessary attorneys’ fees in connection with this lawsuit.
22. Old Republic and Naler through Exchange Title entered into another valid
contract, the Vendor Services Agreement. (See Exhibit C).
23. Old Republic fully performed under the Vendor Services Agreement.
24. Under the terms of the contract, Naler through Exchange Title, was
obligated to tender payment for production of title evidence. Naler was contractually
obligated to pay the invoice amounts of $15,540.00, which were due and owing to Old
Republic for its production of title evidence to Naler.
25. Naler breached the Vendor Services Agreement by failing and refusing to
pay the sums due and owing under the invoices to Old Republic for its production of title
evidence.
26. As a direct and proximate result of Defendant Naler’s breach of contract,
Old Republic suffered damages in the amount of at least $15,540.00. Old Republic has
also incurred costs of court, expenses and reasonable and necessary attorneys’ fees in
onnection with this lawsuit.
Count Two
Conversion
27. Plaintiff incorporates all preceding paragraphs into this count.
28. Old Republic, in accordance with Texas law and its contracts with Naler
as sole managing member of Exchange Title, has ownership rights to all premium paid
to and received by Exchange Title and Naler in connection with its issuance of Old
Republic title policies in accordance with the Agency Agreement. The premium was
delivered to Exchange and Naler for safe keeping, was intended to be segregated and
is intended to be substantially in the form in which it was received or an intact fund. Old
Republic had the right to immediate possession of such premium funds. As such, the
premium funds are a viable subject for a conversion claim as such funds were the
personal property of Old Republic.
29. Naler wrongfully exercised dominion or control over the premium funds to
Old Republic's detriment. As a direct and proximate result of Naler’s conversion, Old
Republic suffered injury and damages to the tune of $30,143.81, which represents the
premiums due and owing to Old Republic.
Count Three
Breach of Fiduciary Duty
30. Plaintiff incorporates all preceding paragraphs into this count.
31. As an agent of Old Republic for purposes of collecting premium, Naler
owed a fiduciary duty to Old Republic. Pursuant to the Agency Agreement, Naler in his
individual capacity and as sole managing member of Exchange Title collected money in
a fiduciary capacity, which premiums totaled $30,143.81. Naler was contractually
obligated to hold all collected premiums in a segregated account for Old Republic.
Moreover, the Agency Agreement makes clear that the funds, upon receipt by
Defendant, are the property of Old Republic.
32. Moreover, a fiduciary relationship exists between Naler and Old Republic.
The Texas Insurance Code broadly defines an agent as anyone who: receives or
transmits an application for an insurance policy, advertises or otherwise gives notice
that the person will receive or transmit an application for an insurance policy, (4)
receives or transmits an insurance policy, or receives, collects or transmits an insurance
premium. See Tex. Ins. Code § 4001.051(b)(2)-(4),(6). Naler through his company
Exchange Title falls within the expansive definition of an “agent” through his collection of
premiums under a fiduciary capacity on behalf of Old Republic.
33. As a fiduciary to Old Republic, Naler as a policy issuing agent owed Old
Republic the following duties: (a) loyalty and utmost good faith; (b) candor; (c) act with
integrity of the strictest kind; (d) fair, honest dealing; (e) duty of full disclosure; and (f)
refrain from self-dealing with trust assets. Furthermore, Naler had a duty to account to
Old Republic for all transactions involving fiduciary funds owned by Old Republic. As a
fiduciary, Naler further owed Old Republic the duty to exercise a high degree of care to
conserve the fiduciary funds and pay them to Old Republic when due.
34. Naler breached his fiduciary duties to Old Republic by violating the duties
described above including, but not limited to, failing to remit premiums owed to Old
Republic in a timely manner. The premiums paid to and received by Exchange Title
and Naler in connection with their issuance of Old Republic title policies were to be
segregated and maintained in a separate trust account, as such funds were the rightful
property of Old Republic. Upon information and belief, Naler breached his fiduciary
duties by commingling the funds owned by and owed to Old Republic with other
operating funds of Exchange Title and with his own personal funds.
35. As a result of Naler’s breach of his fiduciary duties, Old Republic is
entitled to recover all sums due and owing totaling $30,143.81.
36. In light of the fiduciary duty and of Naler’s knowledge that he would
personally benefit from not turning over the premiums owed to Old Republic, Naler's
intentional decision to not pay the premiums and instead use the funds for unauthorized
purposes constituted a willful neglect of his fiduciary duty to Old Republic. Accordingly,
Old Republic seeks to recover exemplary damages from Naler.
37. Old Republic further seeks the imposition of a constructive trust on all
proceeds, funds or property obtained as a result of Naler’s breach of his fiduciary duty.
To the extent Naler has commingled fiduciary funds with other operating funds or
monies, Old Republic seeks a constructive trust over such funds.
38. Further, Old Republic seeks the equitable relief of forfeiture of all fees
collected by Naler as a result of its breach of fiduciary duty.
39. Old Republic also requests this Court to order Naler to make an
accounting of the fiduciary funds.
Count Four
Theft Liability Act
40. Plaintiff incorporates all preceding paragraphs into this count.
41. In accordance with the Agency Agreement, Old Republic had a
possessory right to premium funds held by Naler longer than the contractual and
statutory prescribed time. Naler unlawfully appropriated the premium funds by refusing
to remit such funds to Old Republic despite Old Republic's repeated demands for
payment. Naler misappropriated the premium with the intent to deprive Old Republic of
premium funds which rightfully belonged to Old Republic. As a result of Naler’s theft of
premium funds, Old Republic has sustained damages totaling at least $30,143.81.
42. In accordance with the Texas Theft Liability Act, Old Republic is entitled
to recover its actual damages from Naler totaling at least $30,143.81. Furthermore, Old
Republic is entitled to recover additional damages and exemplary damages, together
with interest, court costs, and attorney's fees.
Count Five
Fraud
43. Naler represented to Old Republic that he would hold all premiums due
and owing to Old Republic in trust, in a separate bank account, until amounts were paid
to Old Republic. Naler further represented to Old Republic he would remit the
premiums together with a policy register to Old Republic on or before the tenth (10th)
day of the second month following the closing date on which the title insurance liability
attached. Naler additionally represented to Old Republic he would tender payment for
all production of title evidence furnished by Old Republic.
44. These representations were material and false when Naler made these
representations. Naler knew these representations were false when he made them and
intended that Old Republic would rely on them to prove Naler title insurance policies
and title evidence. Old Republic acted and relied on these false representations. As a
direct and proximate result of Naler’s fraud, Old Republic has sustained damages in the
amount of at least $45,683.81. Naler is individually liable for his own acts of fraud, even
if performed in his capacity as an agent of Exchange Title.
10
Count 6
Piercing Corporate Veil
45. Naler should be held individually liable under Texas corporate veil
piercing theories which are applicable to Limited Liability Companies, such as Exchange
Title, L.L.C. Specifically, Naler, as the sole managing member, is the alter ego of
Exchange Title, L.L.C. Naler uses the corporate form of Exchange Title to perpetrate a
fraud, to evade an existing legal debt or obligation, to justify a wrong, and/or to create
an injustice.
46. Naler organized and operated his company, Exchange Title, L.L.C., as a
mere tool or business conduit for the purpose of perpetrating an actual and constructive
fraud, and perpetrated an actual and constructive fraud primarily for his own direct
personal benefit. Unity exists between Naler and Exchange Title, such that the
separateness and distinctness of the company and Naler has ceased. Naler through
Exchange Title perpetrated an actual fraud against Old Republic for his own direct
personal benefit. As such, the corporate veil of Exchange Title should be pierced,
subjecting Naler to individual liability for all debts and obligations of Exchange Title due
and owing to Naler.
Vil.
ATTORNEYS’ FEES
47. Under Texas Civil Practice & Remedies Code §38.001, ef. seg., and
§134.005(b), Plaintiff Old Republic is entitled to recover its reasonable and necessary
legal fees and expenses in connection with this lawsuit.
11
Vill.
PRAYER
FOR THESE REASONS, Old Republic National Title Insurance Company prays
that Thomas G. Naler be cited to appear herein and answer, and upon final trial, that
judgment be rendered in favor of Old Republic against Thomas G. Naler in the following
respects:
1 Actual damages in an amount of at least $45,683.81;
2 Exemplary damages in an amount to be determined by a jury;
Reasonable and necessary attorney's fees and expenses;
Costs of Court;
Pre-judgment and post-judgment interest at the highest rate available
under law; and
All further relief to which Old Republic may be justly entitled.
Respectfully submitted,
IRELAN « HARGIS, P.L.L.C.
Bradf . Irelan
State Bar No.: 10411550
Kristina M. Keramati
State Bar No.: 24073497
440 Louisiana Street, Suite 1800
Houston, Texas 77002-1652
Telephone: (713) 222-7666
Facsimile: (713) 222-7669
ATTORNEYS FOR PLAINTIFF
OLD REPUBLIC NATIONAL TITLE
INSURANCE COMPANY
12
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CAUSE NO. OLD REPUBLIC NATIONAL TITLE IN THE DISTRICT COURT OF INSURANCE COMPANY, Plaintiff, Vv HARRIS COUNTY, TEXAS THOMAS G. NALER Defendant. JUDICIAL DISTRICT PLAINTIFF’S ORIGINAL PETITION Old Republic National Title Insurance Company (“Old Republic”) files this Plaintiff's Original Petition against Defendant Thomas G. Naler (“Naler’) and for causes of action shows the following: I DISCOVERY CONTROL PLAN 1 Pursuant to Rule 190.3 of the Texas Rules of Civil Procedure, Plaintiff intends to proceed under Discovery Control Plan Level 2. I. PARTIES 2 Plaintiff, Old Republic, is a Minnesota corporation registered to do business in the state of Texas. 3 The Defendant, Thomas G. Naler, is a Texas resident residing in Collin County, Texas. Naler may be served with process at 2 Canyon Crest Court, Frisco, Texas 75034, or any other place he may be found. I. JURISDICTION 4. This court has jurisdiction over this matter as Plaintiff seeks an amount far in excess of this court's minimum jurisdictional limits. IV. VENUE 5. The events, actions and omissions giving rise to Plaintiff Old Republic’s claims occurred in Harris County, Texas. Venue of this case is therefore proper pursuant to Texas Civil Practice and Remedies Code § 15.002(a)(1). Vv. FACTS 6. Defendant is an attorney licensed to practice law in the State of Texas. To conduct business, he started a company, Exchange Title, L.L.C. (“Exchange Title’). Naler is the sole managing member of Exchange Title. On or about January 26, 2010, Old Republic executed an Agency Agreement with Defendant Naler and his company, Exchange Title. (See Exhibit A). The Agreement’s purpose was to appoint Defendant Naler and Exchange Title as Old Republic's policy issuing agents, thereby authorizing Exchange Title and Naler to sign, countersign and issue commitments for title insurance, binders of title insurance, title insurance policies and endorsements, and to collect and remit premiums on Old Republic’s behalf. (Exhibit A). 7. The Agency Agreement further required Naler, as an agent, to “keep safely in federally insured trust account separate from [Exchange Title]’s operating accounts all funds received by [Exchange Title and Naler] in connection with transactions where [Old Republic]’s Title Insurance Forms are issued, and disburse said funds only for the purposes for which the same were entrusted, and reconcile all such accounts not less frequently than monthly;....” (See Exhibit A, Section 2(F)). Naler was further required to comply with all statutes and governmental rules and regulations concerning the licensing and operation of his business, Exchange Title. 8 Upon collection of premium, Naler was obligated to promptly remit the required percentage of the title insurance premiums to Old Republic as the underwriting fee for its assumption of the risk. (See Exhibit A, Section 6). The Agency Agreement made clear that all premiums owed to Old Republic “shall, upon receipt by [Naler on behalf of Exchange Title], be considered the property of [Old Republic] and shall be held in trust by [Naler by way of Exchange Title] for the benefit of [Old Republic] until such time said amounts are paid over to [Old Republic]. (See Exhibit A, Section 6(D)). 9. Naler through his company Exchange Title agreed to remit to Old Republic all amounts due to Old Republic under the Agency Agreement. (See Exhibit A). The remittance was due to Old Republic on or before the tenth (10") day of the second month following the closing date on which the title insurance liability attached. (See Exhibit A, Section 6(C)). 10. Old Republic has issued invoices to Naler for remittance of earned premiums totaling $30,143.81. Naler has failed and/or refused to remit premiums to Old Republic which he holds in a fiduciary capacity in accordance with the terms of the Agency Agreement. Naler is well beyond the deadline for remittance. Termination of the Agency Agreement 11. On December 12, 2010, Old Republic terminated its Agency Agreement with Exchange Title and Naler effective immediately in accordance with its rights under Section 14 of the Agency Agreement. (Exhibit A). 12. In accordance with the terms of the Agency Agreement, Naler by way of Exchange Title was obligated, upon termination, to furnish Old Republic with a complete accounting of all remittances due under the Agency Agreement and “all Title Insurance Forms furnished by [Old Republic] to [Exchange Title] and to deliver to [Old Republic] all such forms and all files kept pursuant to Section 2(B) above relating to [Old Republic]’s Title Insurance Forms.” (Exhibit A). As of the date of this pleading, Naler has failed to disclose the status of seven (7) policies of title insurance. Vendor Services Agreement 13. Old Republic also entered into a Vendor Services Agreement with Naler by way of Exchange Title allowing Naler to purchase title evidence from Old Republic for agreed upon prices. (See Exhibit C). Contemporaneous with termination of the Agency Agreement, the Vendor Services Agreement was also terminated. In accordance with the terms of the Vendor Services Agreement, Naler by way of Exchange Title was obligated to tender payment for production of title evidence. Naler received invoices which reflect $15,540.00 due and owing to Old Republic for production of title evidence. Naler failed and refused to pay these sums. 14. Old Republic previously filed suit against Defendant Thomas Naler under Cause No, 2011-22520; Old Republic National Title Insurance Company v. Exchange Title, L.L.C. and Thomas G. Naler; In the 11" Judicial District Court, Harris County, Texas. Old Republic obtained a Final Judgment against Exchange Title, L.L.C. on September 26, 2011. (See Exhibit D). Defendant Naler was non-suited pursuant to his filing for protection under Chapter 13 of the U.S. Bankruptcy Code, in Case No. 1142634, In Re: Thomas G. Naler, in the U.S. Bankruptcy Court for the Eastern District of Texas, Sherman Division, which has recently been dismissed. (See Exhibit E). Vi. CAUSES OF ACTION Count One Breach of Contract 15. Plaintiff incorporates all preceding paragraphs into this count. 16. Old Republic and Naler entered into a valid and enforceable Agency Agreement. Pursuant to that agreement, Naler in his individual capacity and as the sole managing member of Exchange Title, was obligated to hold all premiums due to Old Republic in trust in a separate bank account until such time as the amounts were paid to Old Republic. Naler was further obligated to remit to Old Republic a policy register together with premiums paid on or before the tenth (10th) day of the second month following the closing date on which the title insurance liability attached. 17. Old Republic fully performed under its Agency Agreement with Naler and Exchange Title. 18. Furthermore, Naler is obligated to comply with all statutes and governmental rules and regulations related to the licensing and operations of an Agent's business. Texas Insurance Regulation Rule 2 requires Naler as a policy issuing agent to “remit the portion of the premium due to the title insurance company not later than the fifteenth (15th) day of the second month following the month in which the premium was collected.” (See Exhibit B). 19. Naler breached the Agency Agreement with Old Republic by failing to timely remit premiums to Old Republic. Furthermore, Naler has violated his obligations under Texas Insurance Law, which authorizes Old Republic to collect such premiums. 20. Additionally, Naler has failed to timely report on at least seven (7) title insurance policies it issued as agent for Old Republic. Naler has not advised Old Republic of the amount of premium due and owing on the seven policies. This also constitutes a violation of the Agency Agreement. Old Republic has been damaged in an undetermined amount through Naler's failure to report the issuance of said title policies and remit premium for such policies. 21. As a direct and proximate result of Defendant Naler’s breach of the Agency Agreement, Old Republic suffered damages in the amount of at least $30,143.81. Old Republic has also incurred costs of court, expenses and reasonable and necessary attorneys’ fees in connection with this lawsuit. 22. Old Republic and Naler through Exchange Title entered into another valid contract, the Vendor Services Agreement. (See Exhibit C). 23. Old Republic fully performed under the Vendor Services Agreement. 24. Under the terms of the contract, Naler through Exchange Title, was obligated to tender payment for production of title evidence. Naler was contractually obligated to pay the invoice amounts of $15,540.00, which were due and owing to Old Republic for its production of title evidence to Naler. 25. Naler breached the Vendor Services Agreement by failing and refusing to pay the sums due and owing under the invoices to Old Republic for its production of title evidence. 26. As a direct and proximate result of Defendant Naler’s breach of contract, Old Republic suffered damages in the amount of at least $15,540.00. Old Republic has also incurred costs of court, expenses and reasonable and necessary attorneys’ fees in onnection with this lawsuit. Count Two Conversion 27. Plaintiff incorporates all preceding paragraphs into this count. 28. Old Republic, in accordance with Texas law and its contracts with Naler as sole managing member of Exchange Title, has ownership rights to all premium paid to and received by Exchange Title and Naler in connection with its issuance of Old Republic title policies in accordance with the Agency Agreement. The premium was delivered to Exchange and Naler for safe keeping, was intended to be segregated and is intended to be substantially in the form in which it was received or an intact fund. Old Republic had the right to immediate possession of such premium funds. As such, the premium funds are a viable subject for a conversion claim as such funds were the personal property of Old Republic. 29. Naler wrongfully exercised dominion or control over the premium funds to Old Republic's detriment. As a direct and proximate result of Naler’s conversion, Old Republic suffered injury and damages to the tune of $30,143.81, which represents the premiums due and owing to Old Republic. Count Three Breach of Fiduciary Duty 30. Plaintiff incorporates all preceding paragraphs into this count. 31. As an agent of Old Republic for purposes of collecting premium, Naler owed a fiduciary duty to Old Republic. Pursuant to the Agency Agreement, Naler in his individual capacity and as sole managing member of Exchange Title collected money in a fiduciary capacity, which premiums totaled $30,143.81. Naler was contractually obligated to hold all collected premiums in a segregated account for Old Republic. Moreover, the Agency Agreement makes clear that the funds, upon receipt by Defendant, are the property of Old Republic. 32. Moreover, a fiduciary relationship exists between Naler and Old Republic. The Texas Insurance Code broadly defines an agent as anyone who: receives or transmits an application for an insurance policy, advertises or otherwise gives notice that the person will receive or transmit an application for an insurance policy, (4) receives or transmits an insurance policy, or receives, collects or transmits an insurance premium. See Tex. Ins. Code § 4001.051(b)(2)-(4),(6). Naler through his company Exchange Title falls within the expansive definition of an “agent” through his collection of premiums under a fiduciary capacity on behalf of Old Republic. 33. As a fiduciary to Old Republic, Naler as a policy issuing agent owed Old Republic the following duties: (a) loyalty and utmost good faith; (b) candor; (c) act with integrity of the strictest kind; (d) fair, honest dealing; (e) duty of full disclosure; and (f) refrain from self-dealing with trust assets. Furthermore, Naler had a duty to account to Old Republic for all transactions involving fiduciary funds owned by Old Republic. As a fiduciary, Naler further owed Old Republic the duty to exercise a high degree of care to conserve the fiduciary funds and pay them to Old Republic when due. 34. Naler breached his fiduciary duties to Old Republic by violating the duties described above including, but not limited to, failing to remit premiums owed to Old Republic in a timely manner. The premiums paid to and received by Exchange Title and Naler in connection with their issuance of Old Republic title policies were to be segregated and maintained in a separate trust account, as such funds were the rightful property of Old Republic. Upon information and belief, Naler breached his fiduciary duties by commingling the funds owned by and owed to Old Republic with other operating funds of Exchange Title and with his own personal funds. 35. As a result of Naler’s breach of his fiduciary duties, Old Republic is entitled to recover all sums due and owing totaling $30,143.81. 36. In light of the fiduciary duty and of Naler’s knowledge that he would personally benefit from not turning over the premiums owed to Old Republic, Naler's intentional decision to not pay the premiums and instead use the funds for unauthorized purposes constituted a willful neglect of his fiduciary duty to Old Republic. Accordingly, Old Republic seeks to recover exemplary damages from Naler. 37. Old Republic further seeks the imposition of a constructive trust on all proceeds, funds or property obtained as a result of Naler’s breach of his fiduciary duty. To the extent Naler has commingled fiduciary funds with other operating funds or monies, Old Republic seeks a constructive trust over such funds. 38. Further, Old Republic seeks the equitable relief of forfeiture of all fees collected by Naler as a result of its breach of fiduciary duty. 39. Old Republic also requests this Court to order Naler to make an accounting of the fiduciary funds. Count Four Theft Liability Act 40. Plaintiff incorporates all preceding paragraphs into this count. 41. In accordance with the Agency Agreement, Old Republic had a possessory right to premium funds held by Naler longer than the contractual and statutory prescribed time. Naler unlawfully appropriated the premium funds by refusing to remit such funds to Old Republic despite Old Republic's repeated demands for payment. Naler misappropriated the premium with the intent to deprive Old Republic of premium funds which rightfully belonged to Old Republic. As a result of Naler’s theft of premium funds, Old Republic has sustained damages totaling at least $30,143.81. 42. In accordance with the Texas Theft Liability Act, Old Republic is entitled to recover its actual damages from Naler totaling at least $30,143.81. Furthermore, Old Republic is entitled to recover additional damages and exemplary damages, together with interest, court costs, and attorney's fees. Count Five Fraud 43. Naler represented to Old Republic that he would hold all premiums due and owing to Old Republic in trust, in a separate bank account, until amounts were paid to Old Republic. Naler further represented to Old Republic he would remit the premiums together with a policy register to Old Republic on or before the tenth (10th) day of the second month following the closing date on which the title insurance liability attached. Naler additionally represented to Old Republic he would tender payment for all production of title evidence furnished by Old Republic. 44. These representations were material and false when Naler made these representations. Naler knew these representations were false when he made them and intended that Old Republic would rely on them to prove Naler title insurance policies and title evidence. Old Republic acted and relied on these false representations. As a direct and proximate result of Naler’s fraud, Old Republic has sustained damages in the amount of at least $45,683.81. Naler is individually liable for his own acts of fraud, even if performed in his capacity as an agent of Exchange Title. 10 Count 6 Piercing Corporate Veil 45. Naler should be held individually liable under Texas corporate veil piercing theories which are applicable to Limited Liability Companies, such as Exchange Title, L.L.C. Specifically, Naler, as the sole managing member, is the alter ego of Exchange Title, L.L.C. Naler uses the corporate form of Exchange Title to perpetrate a fraud, to evade an existing legal debt or obligation, to justify a wrong, and/or to create an injustice. 46. Naler organized and operated his company, Exchange Title, L.L.C., as a mere tool or business conduit for the purpose of perpetrating an actual and constructive fraud, and perpetrated an actual and constructive fraud primarily for his own direct personal benefit. Unity exists between Naler and Exchange Title, such that the separateness and distinctness of the company and Naler has ceased. Naler through Exchange Title perpetrated an actual fraud against Old Republic for his own direct personal benefit. As such, the corporate veil of Exchange Title should be pierced, subjecting Naler to individual liability for all debts and obligations of Exchange Title due and owing to Naler. Vil. ATTORNEYS’ FEES 47. Under Texas Civil Practice & Remedies Code §38.001, ef. seg., and §134.005(b), Plaintiff Old Republic is entitled to recover its reasonable and necessary legal fees and expenses in connection with this lawsuit. 11 Vill. PRAYER FOR THESE REASONS, Old Republic National Title Insurance Company prays that Thomas G. Naler be cited to appear herein and answer, and upon final trial, that judgment be rendered in favor of Old Republic against Thomas G. Naler in the following respects: 1 Actual damages in an amount of at least $45,683.81; 2 Exemplary damages in an amount to be determined by a jury; Reasonable and necessary attorney's fees and expenses; Costs of Court; Pre-judgment and post-judgment interest at the highest rate available under law; and All further relief to which Old Republic may be justly entitled. Respectfully submitted, IRELAN « HARGIS, P.L.L.C. Bradf . Irelan State Bar No.: 10411550 Kristina M. Keramati State Bar No.: 24073497 440 Louisiana Street, Suite 1800 Houston, Texas 77002-1652 Telephone: (713) 222-7666 Facsimile: (713) 222-7669 ATTORNEYS FOR PLAINTIFF OLD REPUBLIC NATIONAL TITLE INSURANCE COMPANY 12