Court Opinion

ID: 8654460
Source: CourtListenerOpinion
Date Created: 2022-11-24 21:14:29.210429+00
Date Added: 2024-06-11T16:56:38.525071
License: Public Domain

Baskin, J.,
concurring.
It is alleged in the complaint ‘ ‘ that in his lifetime the said Charles Bunting procured his life to be insured on or about the 29th day of November, 1894, by a life insurance policy, executed by the New York Life Insurance Company, in the sum of $50,000, payable to his estate in the event of his death; that a policy was duly issued to him therefor, as aforesaid, by said life insurance company, that in payment of the first premium, the said Bunting executed his note, due in July, 1895.” These allegations were fully sustained by the evidence, and are not disputed by the appellant. It further appears from the evidence that the note so given in payment of the first premium was for $1,500, payable to Bunting’s own order, on July 1, 1895; that Bunting indorsed and delivered the same to W. C. Fritter, who was the general agent of the insurance company, and represented it in the transaction; that said note and the policy are of the same date; that the agent afterward, for value, indorsed and delivered the same, without recourse, to the First National Bank of Pocatello; that upon the maturity of the note the same was presented to the C. Bunting & Co., bankers, of which Bunting was the manager and one of the directors, and was paid by the latter bank by crediting, under the direction of Bunting, on its bank books, the First National Bank of Pocatello with the amount of said note; that under the direction of Bunting, his account with C. Bunting & Co. was charged with the amount of *472said note; that afterward two other premiums of $1,805 each, were paid out of the funds of C. Bunting & Co., on checks for the same drawn on said bank by Bunting.
There is some conflict in the evidence as to whether Bunting had any money to his credit in C. Bunting & Co. bank, when said note and the two other premiums were paid, but I think that the evidence shows that he had none. The complaint does not allege that Bunting was insolvent, either at the date of the policy or when such payments were made, and the only charge of fraud made against him in the complaint is that while he was the manager of C. Bunting & Co., he caused the note to be paid and drew checks on the bank, which were honored, when he had no money of his own deposited in said bank, and had no credit there upon-which he was entitled to draw, or which he was authorized to use in the payment of his own obligations.
Before Bunting’s death he assigned, without consideration, the insurance policy to the appellant. After the death of Bunting the appellant was paid $50,000 on the policy.
The respondent claims that from these facts there arose a constructive trust in favor of C. Bunting & Co., by virtue of which it became the equitable owner of said policy.
It is evident from the facts that upon the execution of the policy and the note given in payment of the first premium, the assured became the absolute owner of the policy, and that such was the intention of the insurance company when it issued the policy and received said note, and that the only consideration of said policy was said note, unless Bunting paid $305 — the difference between the principal of said note and the amount of the other premiums.
*473No funds of C. Bunting & Co., bankers, constituted any part of the consideration for the policy. The bank was not connected, in any way, with the transaction in which Bunting acquired the legal title to the policy, nor was it in any way injured thereby. Therefore the title which Bunting thus acquired was an absolute one. That Bunting became the absolute owner, and was such owner at the time the note was paid, is conclusively shown by the patent fact that if he had died before the payment of the note, the policy would not have been thereby vitiated, but upon his death could have been enforced against the insurance company. As the bank had no connection whatever with the matter until the note was paid, the alleged trust has no other basis than the payment of said note and the two subsequent premiums.
It follows that unless these payments divested Bunting of all or a. portion of his legal title, no resulting or constructive trust arose in favor of the bank. From the nature of such trusts no such anomalous result as that is possible. No such doctrine has ever been laid down by any of the text writers or held by any court. Anyone who holds the legal title to either real or personal property can not be divested of all or any portion of his title in any such way; nor can any equitable interest in such property be acquired, as against the absolute title, in that way. Neither a resulting or constructive trust, in either real or personal property, can arise from anything which the owner of the legal title may do in regard to such property, after the legal title has been acquired. Equitable liens, however, may be created in favor of other persons by the subsequent acts of such owner. The only difference between a resulting and a constructive trust is well stated in respondent’s brief, as follows: “Resulting trusts arise from an implied agreement; it is enforced as *474an agreement, yet it arises by operation of law; it is implied, for instance, property is bought and paid for out of tbe funds of one person, and is deeded to another, a trust is implied in fayor of the party who furnished the means. * * * Constructive trusts are wholly different from implied trusts in this: They arise out of some actual or constructive fraud; they are not upon the theory of an agreement or contract, but they arise out of the violation of some duty amounting to a fraud and are in iwobtum, and are enforced upon the party regardless of what his intention is.”
From the very nature of these trusts they can only be created by acts done in the acquisition of the legal title, and must vest in the oestui que 'trust the equitable title at the same time that the legal title vests in the trustee, and in cases of constructive trusts, the actual or constructive fraud upon which they arise must have been committed in the acquisition of the property to which the trust attached.
In 1 Beach on Trusts and Trustees, Sec. 180, p. 377, it is stated that, “Whenever it is shown that a fraud, either actual or constructive, has been committed in the acquisition of property, equity will raise a constructive trust in favor of the person defrauded.” (See also the numerous cases cited in note 1, on said page.)
In all cases of resulting or constructive trust, there are two titles, one is legal the other equitable. The latter is the beneficial title, but when the legal title to property is an absolute one, there is no room for a trust. It is conceded by ' counsel for the respondent that Bunting acquired an absolute legal title to the policy. In their brief they say: “Of course the title to this insurance policy vested in Bunting, that is the very cause of the complaint. As long as he carried it without paying for *475it ont of the bank funds be had the right to it, but the moment he paid for it out of the funds belonging to the bank, equity thrusts upon it a trust by construction of law. ’ ’ *
It is admitted by this statement, and such was the fact that up to the time the note was paid, the title of Bunting was as absolute as his title to any other property which he may have owned, and if it be conceded that by its payment he committed an actual fraud, and not an implied one, such payment does not raise a resulting trust in favor of C. Bunting & Co., because it was neither alleged in the complaint nor shown by the evidence that any fraud was committed in the acquisition of Bunting’s absolute title to the policy.
The admission in the brief of respondent’s counsel that ‘ ‘ As long as he (Bunting) carried it (the policy) without paying for it out of the bank’s funds, he had a right to it,” shows that it is not claimed that fraud was committed in the acquisition of the title, but that the only fraud complained of and relied on was the payment of the note and premiums, after the absolute title of Bunting had been acquired.
The note was paid six months after, and the premiums respectively, in one and two years after the title to the policy had been acquired. The execution and delivery of the note was the sole consideration which induced the agent of the insurance company to issue the policy, and it would have continued to be in force if the note had never been paid. Neither did the payment of the note enhance the value of the policy or benefit it in any way. Therefore, C. Bunting & Co. acquired no rights in the policy by virtue thereof.
But the payment of the second and third premiums increased the value of the policy and kept it alive, and not*476withstanding these payments did not raise a resulting trust in favor of 0. Bunting & Co., an equitable lien, in the nature of a resulting trust, was created in its favor on said policy and its proceeds for the amount of each of the last premiums, with legal interest.
In 2 Story’s Equity Juris. (13th ed.), p..558, Sec. 1217, it is stated that “There are liens recognized in equity whose existence is not known or obligation enforced at law, and in respect to which courts of equity exercise a very large and salutary jurisdiction. In regard to these liens it may be generally stated that they ai’ise from constructive trusts. They are therefore wholly independent of possession of the thing to which they attach as a charge or incumbrance, and they can only be enforced in courts of equity.”
Pomeroy, in his work on Equity Jurisprudence, Sec. 166, asserts that it is more accurate to describe these liens as analogous to trusts.
In Jones on Liens, Sec. 28, it is stated that “ Equitable liens do not depend upon possession as do liens at law. Possession by the creditor is not essential to his acquiring and enforcing a lien. ”
In the case of Ferris v. Van Vechten, 9 Hun., 12, it appears that an executor of an estate who had in hiB hands money of the estate sufficient to pay the creditors of the same, but instead of doing so he applied these funds in the payment of taxes and of repairs, and in removing a lien upon real estate devised by said will in trust for certain beneficiaries named therein. It was held that the funds so applied were held in trust by the executor, for the benefit of the creditors, and as the devisees had the benefit of the misappropriation of the fund, it became a charge upon the devised property. The real estate was accordingly sold to satisfy the lien thereby created.
*477The foregoing case, and the case of Haddow, et al., v. Lundy, 59 N. Y., 320, are in point upon the question under consideration. The facts in the latter case are as follows: The defendant, Margaret Lundy, procured letters of administration on the estate of Robert Haddow, deceased, on the false and fraudulent representation that she was the widow of the deceased. Mary Haddow, the widow of the deceased, and his children instituted a suit to revoke the letters granted to the defendant, and to have letters granted to Mary Haddow, and to have certain funds of the estate, which the complaint alleged had been used by the defendant in improving certain real estate belonging to her, decreed a lien upon such real estate. The letters granted to the defendant were set aside, and Mary Haddow was appointed administratrix, and the amount of the money of the estate which the defendant had expended in buildings on her real estate was adjudged to be a lien on said real estate, and the same was ordered. to be sold to .satisfy the lien. The appellate court, in its opinion, said: “A portion of the money belonging to the estate was clearly traced into the building erected by the defendant upon her own land. Although she had also invested money of her own in the same building, the trust fund could, on familiar principles of equity, be followed as an equitable lien, and therefore adjudged and enforced by any appropriate remedy. ’ ’ The judgment of the lower court was affirmed.
The case at bar only differs from this case in this: The trust fund instead of being expended by the trustee in improving real estate which belonged to him, was used in enhancing the value and prolonging the life of an insurance policy, of which he was the owner.
In 2 Lewin on Trusts, 897, Sec. 10, it is said that, ‘ ‘ Whenever a trust fund is traceable into land, and the *478fund constitutes a part only of the money laid out in tbe purchase, tbe court has usually given a lien merely on t-be land for tbe trust money and interest.”
Tbe same practice is stated in Perry on Trusts, Sec. 842.
Tbe principle underlying this practice is applicable to tbe case at bar, and when tbe money which belonged to C. Bunting & Co., that was expended for the benefit of tbe policy, is repaid to it, with interest, out of tbe funds realized on tbe policy by tbe appellant, tbe requirements of equity will have been fully met.
As tbe assignment of tbe policy to Wolstenholme, tbe appellant, was made without consideration, be took and held tbe same subject to tbe equitable lien of C. Bunting & Co., and tbe receiver of said company is entitled to have paid to him, out of the funds in appellant’s bands, realized on tbe policy, the amount of tbe premiums paid on said policy, with interest thereon at tbe legal rate, from tbe time each premium was paid; and for tbe additional reason that, as alleged in tbe complaint, tbe insurance was payable to Bunting’s estate in tbe event of bis death, and tbe appellant not having paid any consideration for tbe assignment, or having paid any premiums on tbe policy, be held tbe same merely as trustee, and as tbe money paid on said premiums is traceable into said fund, he holds said policy subject to said lien and in trust for tbe creditors of Bunting’s estate, and for bis heirs.
This view of tbe case is supported both by tbe principles of equity, and the authorities herein quoted.
I concur in tbe conclusion and judgment announced in tbe opinion of Mr. Justice Miner.
Policy oe Insurance — When Burdened with Trust— CONSTRUCTIVE TRUST. CORPORATION — STOCK OWNED BY ONE INDIVIDUAL , — Corporation Still Exists. Insolvent Corporation — Rights oe Creditors to Follow Assets. Proeit by Trustee — Belongs to Cestui que Trust.
Policy of Insurance — When Burdened with Trust— Constructive Trust.
Where a policy of insurance is paid for entirely out of corporate funds wrongfully and illegally taken by the insured out of assets belonging primarily to the creditors of an insolvent corporation, the policy and the proceeds become impressed with a trust by implication of law, and the insured in his li fetime held the policy as a trustee for the benefit of the creditors and could not shake off the fiduciary character by assignment. In such case the law fastens a constructive trust in inmium upon the conscience of the offending party.1
Corporation — Btoch Owned by One Individual —• Corporation Still Fxists.
Although one person owns a majority of the stock, or all of it, or all but two shares, he does not in consequence thereof acquire thp right to act for the corporation, or as the corporation, independently of the directors. One person may own all the stock, and yet the existence, relations, and business methods of the corporation continue.
Insolvent Corporation — Bights of Creditors to Follow Assets.'
If insurance be procured with assets of an insolvent corporation, which ought to he used in payment of the corporate debts, the creditors have the right to follow the assets into the new investment, and appropriate the proceeds in the hands of those having full knowledge of the equities.
Profit by Trustee — Belongs to Cestui que Trust.
Where a trustee or other person standing in a fiduciary relation makes a profit out of any transaction within the scope of his agency or authority, that profit will belong to his cestui que trust, and the rule extends to all persons standing in a fiduciary relation.