Mullikin v. Pedersen

• Decision Date: 15 July 1955
• Docket Number: No. 33758,33758
• Parties: Walter R. MULLIKIN, as Trustee in Bankruptcy of Pedersen-Ayars Furniture Company, a co-partnership, Appellant-Cross-Appellee, v. Maysel I. PEDERSEN, Cross-Appellant, and Bankers Life Insurance Company of Nebraska, a Nebraska corporation, Appellees.
• Court: Nebraska Supreme Court

Page 485

71 N.W.2d 485

161 Neb. 22

Walter R. MULLIKIN, as Trustee in Bankruptcy of Pedersen-Ayars Furniture Company, a co-partnership, Appellant-Cross-Appellee, v. Maysel I. PEDERSEN, Cross-Appellant, and Bankers Life Insurance Company of Nebraska, a Nebraska corporation, Appellees.

No. 33758.

Supreme Court of Nebraska.

July 15, 1955.

Syllabus by the Court.

1. The provisions of section 44-371, R.R.S.1943, are not applicable to the proceeds of an insurance policy on the life of an insured, the cost of which was paid in whole or in part by funds of another wrongfully, illegally, or fraudulently procured by the insured.

2. The burden of establishing a constructive trust is upon the person who bases his right thereon and he must do so by evidence that is clear, satisfactory, and convincing.

3. Circumstantial evidence is insufficient to warrant a recovery in a civil case unless the circumstances proved are of such a nature and so related to each other that only one conclusion can be reasonably drawn therefrom.

Donald V. Lowe, North Platte, for appellant.

Maupin & Dent, Richard W. Satterfield, North Platte, James N. Ackerman, Lincoln, for appellees.

Heard before SIMMONS, C. J., CARTER, YEAGER, CHAPPELL, WENKE, and BOSLAUGH, JJ., and FLORY, District Judge.

BOSLAUGH, Justice.

This is an action in equity to have a trust declared and impressed upon the proceeds of a life insurance policy on the life of Hilbert F. Pedersen, payable to his wife, because as it is claimed the funds used by the insured to satisfy the cost of the insurance were wrongfully obtained by him from the partnership of which he was a member.

Pedersen-Ayars Furniture was organized March 5, 1947, by Hilbert F. Pedersen and Homer R. Ayars of North Platte as a partnership in accordance with the Uniform Partnership Act of Nebraska to engage in and conduct a retail furniture, floor coverings, and appliance business in that city. Its capital structure was $34,000 apportioned to the organizers as the only members thereof on the basis of $20,000 to Hilbert F. Pedersen and $14,000 to Homer R. Ayars. It was agreed that the partners should own the business and assets of the partnership 20/34ths by the former and 14/34ths by the latter; that the partners should each devote his entire time and efforts to the business and affairs of the firm; that each should until it was otherwise agreed receive monthly $250 as compensation; and that the compensation of each should always be an equal amount. Hilbert F. Pedersen was constituted general manager and was empowered to determine the policies of the organization.

Hilbert F. Pedersen, spoken of hereafter as deceased, died June 1, 1954. The partnership June 23, 1954, was on the petition of Homer R. Ayars, the surviving partner, adjudged a bankrupt by the United States District Court for the District of Nebraska, and July 9, 1954, appellant was appointed and qualified as trustee of the estate of the bankrupt.

Deceased made application to Bankers Life Insurance Company of Nebraska July 24, 1952, for a policy of insurance on his life and it issued to him the next day a policy of insurance in the maximum amount of $10,000 in which Maysel I. Pedersen, his wife, was designated beneficiary. She survived him. The premiums on the policy were payable monthly. They were aid except the last which was due but not delinquent at the time of the death of the deceased and it was deducted from the proceeds of the policy as authorized by its terms.

The claim of appellant in this litigation is that all the premiums except the final one were paid by the deceased with funds of the partnership misappropriated to that use by him secretly without notice to, knowledge, or consent of his partner Homer R. Ayars and contrary to the terms of the articles of partnership; that during the time of the illegal abstraction and wrongful appropriation of the funds of the firm to the payment of the insurance premiums the deceased was acting in a fiduciary capacity for the firm and by virtue thereof he became and was a trustee of the policy for the partnership; that he held only the legal title thereof for the exclusive benefit of the partnership as the cestui que trust; that Maysel I. Pedersen claimed to be the only beneficiary of the policy of insurance, was attempting to appropriate to her use the proceeds thereof, and would do so unless prevented by the judgment of the court; and that the insurer unless prevented by the court would pay to the named beneficiary the proceeds of the policy. The relief asked was that the insurer be restrained from paying and the beneficiary be enjoined from receiving the proceeds of the insurance; that a trust be imposed upon the proceeds of the policy in favor of appellant; and that he have and receive the proceeds of the policy of insurance.

The Bankers Life Insurance Company of Nebraska conceded the existence and validity of the policy of insurance on the life of deceased; the receipt of all premiums on its account except the last one due at the time of the death of the deceased; the deduction of it from the amount of the policy; the fact that Maysel I. Pedersen was the named beneficiary therein; and that the net amount of the insurance was held by the insurer subject to the rights of the beneficiary. The insurer offered to pay the amount due on the policy with interest as the court adjudged.

The substance of the answer of Maysel I. Pedersen was a denial of the allegations of appellant except she admitted the existence of the partnership and the adjudication of bankruptcy against it; that appellant was the trustee in bankruptcy; and that the policy of insurance on the life of the deceased duly issued by the insurer was in force at the time of the death of the deceased and Maysel I. Pedersen was beneficiary of the insurance. She asserted that the premiums on the policy were required to be paid monthly; that it granted a grace period of 31 days for the payment of any premium from the due date thereof; that the policy had no provisions for paid-up or extended insurance and it wholly terminated on the 31st day after any monthly premium thereon became due; and that the beneficiary to keep the policy in force for her benefit paid with her individual funds to the insurer premiums on the policy including those for the months of March and April 1954. If she had not done so the policy would have terminated before the death of the deceased and that no amount would have been realized from it.

The district court found that the motion of appellees for a dismissal of the petition of appellant made at the close of his evidence should be sustained; that the Bankers Life Insurance Company of Nebraska should pay the proceeds of the policy of insurance issued by it on the life of the deceased including any accruals thereon to the clerk of the district court; that when payment had been made by the insurer it should be discharged from liability upon the contract of insurance and the temporary injunction issued herein should be dissolved; that the proceeds of the insurance policy were the property of appellee Maysel I. Pedersen; that the clerk of the court upon receipt of the amount thereof from the insurer should pay to appellee $9,158.20 and any accruals on the policy, and the clerk should retain $785.50, the amount of the funds of the partnership devoted to payment of premiums on the insurance contract, until the further order of the court; and that it was not possible for the court to determine from the proof produced whether the partnership funds used by deceased to pay insurance premiums on the policy were the distribution of firm assets to him or whether they were wrongfully received and appropriated by him and are recoverable as partnership property. A judgment was rendered in harmony with the findings made. A determination of the correctness thereof is the purpose of this appeal.

The ground of the claim of appellant that he is entitled to the insurance fund, the subject of this controversy, is that the premiums upon the policy were paid by money wrongfully taken by the insured from the partnership and that this affords a basis for equity to impress a trust upon the fund in favor of appellant to remedy a wrong done by the insured and to prevent the beneficiary profiting from the misappropriation and wrongful acts of the deceased. The claim of appellant that he should recover the entire fund realized from the insurance contract cannot prevail in any event because of a failure of proof that all of the cost of the insurance was satisfied with partnership funds. There is no authority which supports this claim. There are decisions that if a person wrongfully obtains money of another and uses it in the payment of premiums for insurance on his life a trust is created in favor of the person from whom the money was wrongfully, illegally, or fraudulently appropriated, and that the latter is entitled to such portion of the total insurance as the amount of the premiums which have been paid from the money bears to the total premiums paid. Truelsch v. Miller, 186 Wis. 239, 202 N.W. 352, 38 A.L.R. 914; Vorlander v. Keyes, 8 Cir., 1 F.2d 67; Massachusetts Bonding & Ins. Co. v. Josselyn, 224 Mich. 159, 194 N.W. 548; Shaler v. Trowbridge, 28 N.J.Eq. 595; Brodie v. Barnes, 56 Cal.App.2d 315, 132 P.2d 595; Jansen v. Tyler, 151 Or. 268, 47 P.2d 969, on rehearing 151 Or. 288, 49 P.2d 372; Proctor v. MacClaskey, 278 Mass. 238, 179 N.E. 600; Annotation, 38 A.L.R. 930; 29 Am.Jur., Insurance, s. 1299, p. 969. In other jurisdictions the doctrine is that recovery in such a situation is limited to the amount of the premiums paid by the insured with wrongfully acquired money of another. Board of Public Instruction v. Mathis, 132 Fla. 289, 181 So. 147; Thum v. Wolstenholme, 21 Utah 446, 61 P. 537; Succession of Onorato, 219 La. 1, 51 So.2d 804, 24 A.L.R.2d 656; American Nat. Bank v. King, 158 Okl. 278, 13 P.2d 164; Hubbard v. Stapp, 32...