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United General Title Insurance Co. v. Malone

Supreme Court of Nebraska

January 30, 2015

UNITED GENERAL TITLE INSURANCE COMPANY, APPELLANT,
v.
DANIEL MALONE ET AL., APPELLEES

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Appeal from the District Court for Douglas County: J RUSSELL DERR, Judge.

Thomas M. Locher and Matthew E. Eck, of Locher, Pavelka, Dostal, Braddy & Hammes, L.L.C., for appellant.

Robert F. Peterson and Kathleen M. Foster, of Laughlin, Peterson & Lang, for appellees.

HEAVICAN, C.J., WRIGHT, CONNOLLY, STEPHAN, MCCORMACK, MILLER-LERMAN, AND CASSEL, JJ.

OPINION

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[289 Neb. 1009] Cassel, J.

I. INTRODUCTION

Improper transfers were made from a title insurance agent's escrow account. The agent's principal, United General Title Insurance Company (United General), paid the loss pursuant to a statute.[1] Relying upon numerous legal theories, it sued to recover the loss from multiple persons and entities, including recipients of the transferred funds. Although it recovered judgment against some persons and entities, summary judgment was entered against it on various claims. After a jury trial, several recipients successfully defended the action on the remaining issues. United General appeals.

As we will explain in more detail, the district court correctly granted summary judgment on United General's claim for contribution but erred in doing so on its claims for conversion and a constructive trust. At trial, the court properly rejected a proposed jury instruction, denied amendment of the complaint, and partially directed a verdict. After trial, it correctly granted a motion for judgment notwithstanding the verdict. We affirm in part, and in part reverse and remand for further proceedings.

II. BACKGROUND

1. Parties

United General is a title insurance company authorized to issue title insurance commitments and policies of insurance in Nebraska. Several years before the improper transfers were discovered, it entered into a " Title Insurance Agency Agreement" with A.G. Ventures, LLC, doing business as Guardian Title Services (Guardian). The agreement authorized Guardian to originate and solicit applications

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for United General's title insurance products in Nebraska. It essentially permitted Guardian to issue title insurance policies underwritten bye United General. As part of the agreement, Guardian was to collect premiums, earnest deposits, and other payments from customers and hold them in escrow for disbursement.

[289 Neb. 1010] From January to September 2008, Guardian was owned solely by Daniel Malone. Guardian was managed by Investment Property Resources, Ltd. (IPR), a management and brokerage company owned by Malone and his wife. IPR managed several other entities in which Malone had an interest. These entities included Maple Office Partners, LLC, in which Malone had a membership interest, and Via Christe, L.L.C., of which Malone was the managing member. In addition to these entities, IPR also managed Northwest Village 2nd Addition Homeowners Association, Inc. (Northwest Village), and Angel Guardians, Inc.

2. Shortage

In July 2008, a shortage was discovered in one of Guardian's escrow accounts. United General advised its parent company of the shortage, and auditors were dispatched to assess the situation. The auditors ultimately determined that $588,671.80 was missing from the escrow account and that Guardian had failed to remit premiums for title insurance policies to United General in the amount of approximately $22,000. United General's parent company made immediate arrangements to cover the shortage by transferring $588,000 from United General to Guardian. United General also terminated its agency agreement with Guardian, and the Nebraska Department of Insurance prohibited Guardian from conducting further real estate closings.

In the investigation of the shortage, the auditors determined that frequent transfers of substantial amounts were made between Guardian's escrow account and its operating account. Some of the transferred funds remained in the operating account, while subsequent transfers were made to IPR, entities managed by IPR, or entities in which Malone had an interest. Further transfers were made between these entities in varying amounts. One auditor opined that the " majority of the money transferred out was used to keep the various businesses owned by . . . Malone functioning." The auditor further provided, " If you remove the transfers in and out . . . from each account none of the businesses would show a profit."

[289 Neb. 1011] 3. Complaint

After paying the loss, United General filed a complaint against 16 named defendants and 3 unknown entities associated with Malone or IPR. The defendants relevant to this appeal included:

o Malone;
o Tara Heitkamp (IPR's primary business manager);
o Guardian;
o Via Christe;
o IPR;
o Fidelis, LLC;
o Northwest Village;
o Angel Guardians;
o Maple Office Partners; and
o M & M Property Partners.

In its complaint, United General asserted 12 causes of action seeking to recover the unpaid premiums and the funds it had paid out to cover the shortage. The causes of action and their key factual allegations relevant to this appeal included:

o Conversion--One or more of the defendants intentionally converted United General's property, causing it damages in the amount of at least $22,000.

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o Civil conspiracy--Guardian, Heitkamp, Malone, and the remaining defendants acted to accomplish the unlawful taking of funds from Guardian's escrow account and used the funds for improper and illegal purposes.
o Common-law indemnification--One or more of the defend-ants was obligated to indemnify United General.
o Contribution--One or more of the defendants was obligated to contribute to the loss sustained by United General.
o Constructive trust--One or more of the defendants received funds transferred from Guardian's escrow account as a result of fraud, misrepresentation, or an abuse of an influential or ...

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