Court Opinion

ID: 9825035
Source: CourtListenerOpinion
Date Created: 2023-09-01 11:57:41.144058+00
Date Added: 2024-06-11T07:40:21.311489
License: Public Domain

Former opinion modified and petition for rehearing denied September 24, 1935
On Petition for Rehearing
(49 P. (2d) 372)
BEAN, J.
Respondents filed a petition for rehearing ; appellant submits a motion to modify the opinion, which is in the nature of a petition for rehearing. It seems to be unquestioned that William Anson Tyler, deceased, while president of the Municipal Reserve and Bond Company, held a fiduciary position. It is admitted that he paid the first three premiums on the two policies of insurance in question with the funds of the corporation.
Respondents contend, with considerable zeal, that in order for plaintiff to recover it is necessary for it to show that the use of the funds by Tyler constituted an embezzlement. With this contention we are unable to agree. It is not essential that a managing officer of a corporation, who is often spoken of as a trustee but is rather a quasi-trustee, in the wrongful use of the funds of the corporation for his own benefit, should commit a technical embezzlement. We may call it a conversion, misapplication, misappropriation, or an embezzlement.
In our former memorandum we stated: ‘ ‘In order for plaintiff to recover, it was necessary for him to *289show that premiums on the policies of life insurance were paid from the funds of the Municipal Reserve and. Bond Company, which had been appropriated wrongfully by William Anson Tyler, deceased.” To this statement we still adhere. Counsel for respondents were considerably exercised for the reason that the cases cited by the court in the former opinion chanced to involve an embezzlement. It is well settled that whenever a trustee, or other person in a fiduciary position, wrongfully purchases land or personal property with trust funds, or funds in his hands impressed with a fiduciary character, and takes title to such property in his own name, without any declaration of a trust, a trust with respect to such property at once results in favor of the original cestui que trust or other beneficiary. The doctrine in regard to such a trust is of wide operation and is used by courts of equity in maintaining and protecting beneficial rights of property. It is applied to trustees proper, to executors, administrators, directors and managers of corporations, guardians of infant wards, agents using money of their principals, partners using partnership funds, and to all persons who stand in fiduciary relations towards others: I Pomeroy, Equity Jurisprudence, (4th Ed.) § 422. There may or may not be an element of embezzlement in such transactions. In addition to the authorities cited in our former opinion, see the following cases, which are instructive in regard to the rule involved in trusts: Manaudas v. Mann, 22 Or. 525 (30 P. 422); Dunham v. Siglin, 39 Or. 291, 299 (64 P. 661); Young v. Hughes, 39 Or. 586 (65 P. 987, 66 P. 272); Thorsen v. Hooper, 57 Or. 75 (109 P. 388); North v. Union Savings & Loan Association, 59 Or. 483 (117 P. 822); Templeton v. Bockler, 73 Or. 494 (144 P. 405); Barnes v. Spencer, 79 Or. 205 (153 P. 47).
*290 In applying the principle that the cestuique trust, the receiver of the Municipal Reserve and Bond Company, is entitled to the proceeds of the policies in the proportion that the payments paid from the trust funds bore to the total premiums paid, we figured the first three premiums as having been paid by the company; the fourth by Tyler; and, in payment of the fifth, a dividend on each policy of $203.75 was applied in payment of that premium. This we allocated to plaintiff and'to the trustee for Mrs. Tyler and her daughter, according to the interest of each party in the policy. In regard to the policy loan of $1,295, which, together with another policy dividend, paid the quarterly premiums Nos. 7 to 12 inclusive, but little was said in the argument or briefs as to the application of the loan, and, as Tyler signed a note for samé, the premiums paid from the policy loan were credited to him. In this we were in error. We think, after mature deliberation, that the proceeds of the policy loan should be apportioned and applied the same as a policy dividend. A policy loan is made upon the sole security of the .policy of insurance, and, when made, it does not create the ordinary relation of debtor and creditor between the insurance company and the insured. It is an advancement on the policy without a personal obligation as to repayment. Section 46-506, subd. 1 (f), Oregon Code 1930, requires that the loan shall be made “on proper assignment or pledge of the policy and on the sole security thereof”. The regular relation of debtor and creditor does not exist between the borrower and the company. It is in the nature of a withdrawal of the reserve pro tanto, as under the terms of the contract the insured is entitled at any time to demand and receive a loan, and he alone has the option of deciding whether he will ever repay it or not: 32 C. J. 1166, § 279; *291Rustin v. Aetna Life Ins. Co., 98 Neb. 426 (153 N. W. 548); 2 Couch Cyc. of Ins. Law, 995, § 355; 1 Cooley, Briefs on Insurance (2d Ed.) 159; Wagner v. Thieriot, 203 App. Div. 757 (197 N. Y. S. 560, affirmed 236 N. Y. 588, 142 N. E. 295). Policy loans are not liabilities of the estate of the insured: Faris v. Faris, 76 Ind. App. 336 (130 N. E. 444); 45 A. L. R. 718, Annot.
The Municipal Beserve and Bond Company is entitled to its proportionate share of the dividends and policy loan, and to credit therefor. We therefore compute the amount of the proceeds of the policies that each party is entitled to, as follows: Policies No. 649852 and No. 649853, each for $25,000, were on the life of William Anson Tyler, issued July 2, 1929, first premium July 2, 1929, $222.50, paid by the Municipal Beserve and Bond Company; second premium October 2, 1929, $220, paid by the company; third premium January 2,1930, $220, paid by the company. The fourth premium, April 2, 1930, $220, was paid by Tyler. The fifth premium, July 2, 1930, $222.50, was paid by applying a policy dividend of $203.75, of which the company was entitled to 75.07 per cent, or $152.96, and Tyler was entitled to 24.93 per cent thereof, or $50.79, according to their then interest in the policies. In addition Tyler paid $18.75, or a total of $69.54. The sixth premium, due October 2, 1930, $220, was paid by Tyler; the seventh premium to the twelfth, both inclusive, were paid by policy loan of $1,295 and accrued dividend of $210. The seventh to twelfth premiums, both inclusive, the first due January 2, 1931, and the latter due April 2, 1932, make 12 quarterly premiums, although it is contended by respondents that there were 16 quarterly premiums paid. The interest of the Municipal Beserve and Bond Company in the policies at the date of the loan and dividend was 61.54 per cent, and *292it was entitled to that per cent of the premiums. The premiums amounted to $1,322.50. The amount of the policy loan to which the company is entitled is $813.88. The share of the funds belonging to Tyler, derived from the policy loan, amounted to $508.62. Therefore the company paid premiums, which, together with the credits to which they are entitled on account of the dividends and policy loan, total $1,629.34, or 61.54 per cent of the total amount of premiums paid. The amount of the premiums paid by Tyler, together with the credits to which he is entitled on account of - the policy loan and dividends totals $1,018.16, or 38.46 per cent of the amount of premiums paid. Settlement of each of the policies was made July 21, 1931, and, after deducting $1,091.51 for loan, and perhaps some interest, payment of $23,903.49 was made on each policy, or a total of $47,806.98 on both policies. Therefore: the receiver of the Municipal Reserve and Bond Company is entitled to the proceeds of the two policies in proportion that the payments made from the trust funds of the company bear to the total premiums paid, or 61.54 per cent of $47,806.98, which equals $29,420.42, together with interest thereon at 6 per cent from July 21,' 1931, for which a decree will be entered in favor of plaintiff. The rule which we have enunciated and followed and applied is equitable and just. No third innocent party is interested or affected.
It is the contention of the respondents that the Municipal Reserve and Bond Company waived its right to any interest in the policies involved. The basis for this contention is that a resolution to that effect was written and placed in the minutes of the corporation. There was no meeting of the directors. It was not, as we think, an act of the corporation but an act of Tyler himself. It was a mere form of resolution and not *293valid. It seems that Blanchard and Horal, to whom the shell of the corporation was transferred after it had been denuded of about everything of value by Hattrem and Tyler, were convenient tools for Tyler in the matter of permitting the resolution to be placed in the minutes. There was no valid waiver of the right of the corporation in the two policies. The scheme was not complete until the trustee for Mrs. Tyler and the daughter was made beneficiary in the policies, which merely extended the time for the completion of the conversion of the funds.
Our finding in the former memorandum opinion that the premium payments on the two policies “were paid by Mr. Tyler except the first three quarterly premiums ’ ’ should have read as follows: “were paid by Mr. Tyler or from dividends or loan on the policies, except the first three quarterly premiums”.
Appellant makes the contention, in regard to the fourth quarterly premium paid April 2,1980, for which a note was given by the company to the insurance company and afterwards a note given by the company to agents who advanced premiums, that said premium was paid by the Municipal Reserve and Bond Company. The giving of the note did not pay the premium. Eventually Tyler paid the note and premium and his estate should be credited with the same. It is not shown that Tyler paid same with the funds of the corporation: Sisemore v. Pelton, 17 Or. 546 (21 P. 667). Respondent’s petition for rehearing will be denied.
Our former opinion will be changed in accordance herewith and the decree of the trial court will be modified in accordance with this opinion.
Kelly and Belt, JJ., not participating.