Blumberg v. Taggart
| Decision Date | 03 July 1942 |
| Docket Number | No. 33163.,33163. |
| Parties | BLUMBERG v. TAGGART et al. |
| Court | Minnesota Supreme Court |
Appeal from District Court, Hennepin County; Vince A. Day, Judge.
Action by Stanley Blumberg against Gordon H. Taggart and American National Insurance Company. A trial to the court between the insurance company and plaintiff resulted in findings for the company, plaintiff's motion for amended findings or a new trial was denied, and judgment was entered, from which the plaintiff appeals.
Affirmed.
David London and Jack Werner, both of Minneapolis, for appellant.
Faegre, Benson & Krause, Geo. D. McClintock, and Everett A. Drake, all of Minneapolis, for respondent.
Action to recover $1,200 from defendant Taggart on the basis of fraud practiced by him to plaintiff's loss in that amount. Liability against defendant insurance company is predicated upon the theory that $1,000 of this amount has been traced into its hands, and that because of Taggart's fraud this sum became "impressed with a trust in favor" of plaintiff. Taggart defaulted. A trial to the court between the insurance company and plaintiff resulted in findings for the company. Plaintiff's motion for amended findings or a new trial was denied, judgment was entered, and he appeals. We shall refer to the insurance company as the defendant.
There is no substantial dispute about the facts. They may be thus summarized: On July 8, 1939, one Minnie Mortensen applied to an agent of defendant for a policy of insurance, referred to as "a continuous premium deferred life annuity" policy. Her application and $1,000 in cash were turned over to the agent. By this payment all premiums for the full period of 21 years were fully paid. The agent with whom she dealt delivered the application and the money to Taggart, who was a general agent for defendant to the extent of being authorized to receive and receipt for money coming into his hands for his principal but not to withdraw any funds so received from the principal's depository, the Northwestern National Bank & Trust Company of Minneapolis. Taggart sent the application to the home office at Galveston, Texas, but retained the $1,000, converting it to his own use and saying nothing to his principal about the cash payment. On July 28, defendant, its officers at Galveston having no actual knowledge of its agent's perfidy, issued to Miss Mortensen a deferred annuity contract which provided for premium payments of $65.59 on the eighth day of July each year until premiums for 21 full years had been paid or until her prior death.
There is no question that plaintiff was defrauded by Taggart. The court so found, and that finding is not challenged. The fraudulent transaction occurred on or shortly prior to October 7, 1939. In that deal plaintiff gave Taggart a cashier's check for $1,200 payable to him. This transaction was a private one between Taggart and plaintiff. It did not in any way concern Taggart's principal and was entirely outside the scope of his employment. The check, which was made and delivered October 7, was promptly cashed by Taggart at the bank upon which it was drawn. He deposited to the credit of defendant, his principal, $1,000 of the currency received and sent to defendant at Galveston a duplicate deposit slip showing the credit of this "currency" deposit to defendant's account on that day. It bears this identification: "Mortensen, Annuity # 679633." The remaining $200 was pocketed by Taggart. Defendant, upon receipt of the deposit slip, on October 10 issued to Miss Mortensen its premium trust fund certificate, stating, in substance, that all the premiums provided for in her policy had been fully paid. The insurance policy and the trust certificate are in full force and effect. With regard to the $1,000 cash deposited to defendant's credit, the court found its position to be that of "a bona fide purchaser for value," and that it was not unjustly "enriched by said deposit." Plaintiff made no demand upon defendant for this sum until after he and Taggart had entered into a covenant not to sue, dated December 7, 1939. That was an agreement whereby Taggart agreed to repay to plaintiff, in monthly installments, the $1,200 of which he had been defrauded. It was to be "operative only if said schedule of payments" was "adhered to." Taggart paid only $200 and defaulted as to the remaining payments. The present suit was commenced in September 1940.
1. No doubt, as between the insured and defendant, the policy became operative as and when her money was delivered to and accepted by one authorized to receive it. Taggart was such an agent. Mason St.1927, § 3757. As to her, his theft or embezzlement was a loss his principal should bear, since a principal is bound by the acts of his agent to the extent of the authority, expressed or implied, with which he has clothed him. But this case does not hinge upon the legal principles obtaining in such a case. Here, as we have seen, the deal between plaintiff and Taggart is entirely outside defendant's field of operations and wholly aside and beyond his employment. His fraud upon plaintiff had nothing to do with any duty owed to his employer, nor was he, as to plaintiff, a representative of defendant. The problem is whether the money so wrongfully obtained by Taggart and directly traced to defendant is impressed with a resulting trust so that defendant, who had nothing to do with the original transaction and as a matter of actual fact knew nothing of it, should bear the loss, or, on the other hand, whether it is for the plaintiff to bear.
2. In Penn Anthracite Min. Co. v. Clarkson Sec. Co., 205 Minn. 517, 522, 287 N.W. 15, 18, we held: Cf. 25 Minn.L. Rev. 667, 710; 3 Scott, Trusts, § 469, pp. 2336, 2337; 26 R.C.L. 1236, and cases under note 1.
3. In American Ry. Exp. Co. v. Houle, 169 Minn. 209, 213, 210 N.W. 889, 890, 48 A.L.R. 1266, we held: "The rule is well established that, where a constructive trust of embezzled funds comes into being for the protection of an injured party, it is not cut off by any transfer of the property or of other property substituted therefor until such property reaches the hands of a bona fide purchaser for value."
As to Taggart, there can be no question that he received plaintiff's property under a constructive trust and is liable to him as a trustee. Our statute recognizes the stated rule, Mason St.1927, § 8089: "No implied or resulting trust shall be alleged or established to defeat or prejudice the title of a purchaser for a valuable consideration, and without notice of such trust." The following cases, amongst others, uphold the rule: Cochran v. Stewart, 21 Minn. 435, 438; MacLaren v. Cochran, 44 Minn. 255, 257, 46 N.W. 408; Newton v. Newton, 46 Minn. 33, 37, 48 N.W. 450; 18 Minn L.Rev. 366; 25 Minn.L.Rev. 674, 689; United States v. Dunn, 268 U.S. 121, 132, 45 S.Ct. 451, 69 L.Ed. 876; 4 Bogert, Trusts & Trustees, § 881.
4. The court found that defendant "stands in the position of a bona fide purchaser for value" and "was not unjustly enriched" by the deposit made by Taggart to its credit in the designated bank. That defendant had no actual knowledge of Taggart's wrongdoing is abundantly shown by the record. In this situation it becomes important to determine whether Taggart's fraud, he having, of course, full knowledge of his own wrong, thereby created a situation whereby his knowledge also became that of his principal. We think it is well settled law that an agent's knowledge will not be imputed to his principal when he is engaged in an independent fraud. In such circumstances it cannot be supposed that he will inform his principal of it. In Rudd Lbr. Co. v. Anderson, 161 Minn. 353, 357, 201 N.W. 548, 550, we held that (Citing cases.) 3 C.J.S., Agency, § 269, notes 53, 54, and § 270, note 61; 2 Am.Jur., Agency, § 374; Restatement, Agency, § 282.
On this phase it is deemed important to consider the cases which form the bases upon which the authors of 2 Am.Jur., Agency, § 380, 3 C.J.S., Agency, § 269, and Restatement, Agency, § 274, rely in their formulation of the exceptions to or limitations on the rule we have discussed. The following are considered the leading cases: Curtis, Collins & Holbrook Co. v. United States, 262 U.S. 215, 43 S.Ct. 570, 67 L.Ed. 956, was a suit brought by the United States to cancel certain patents to lands acquired under the Stone and Timber Act. One Holbrook, general manager and vice president of the company, actively took in hand the acquisition from the government of title to certain valuable timber lands. When the required proofs had been furnished and final approval of the entry made, the individual entrymen conveyed their respective properties (215 U.S. pages 221, 222, 224, 43 S.Ct. page 572, 67 L.Ed. 956) by him. He "was the sole agent acting for the company in securing titles to land for it." The company and he were engaged "in a common adventure." He "was to...
To continue reading
Request your trial