Riehl v. Evansville Foundry Ass'n

• Decision Date: 24 November 1885
• Citation: 3 N.E. 633,104 Ind. 70
• Parties: Riehl and others v. Evansville Foundry Ass'n.
• Court: Indiana Supreme Court

104 Ind. 70

3 N.E. 633

Riehl and others

v.Evansville Foundry Ass'n.

Supreme Court of Indiana.

Filed November 24, 1885.

Appeal from Vanderburgh circuit court.

Denby & Kumler and Gilchrist & Butterfield, for appellant.

Buchannan, Buchannan & Gooding, for appellee.

ELLIOTT, J.

The substantial averments of the appellee's complaint are these: Frederick A. Riehl was the appellee's book-keeper and salesman, and, in that capacity, received of its money $6,000, which he embezzled. With the money embezzled he bought real estate, caused the title to be made to his wife, and built a house on the real estate so purchased and conveyed to her; that she had no money of her own with which to purchase the property, but, with knowledge of her husband's fraudulent appropriation of his employer's money, took the title to the property for the purpose of defrauding his employer. A book-keeper or salesman who receives the money of his employer by virtue of his employment does receive it in a fiduciary capacity; and if he fraudulently appropriates it to his own use, he is guilty of a breach of trust. The funds which come into the hands of an agent for his principal are trust funds, and the latter, as the beneficiary, becomes in equity the owner of the property purchased by the agent with these funds. Where one occupies the position of a trustee, either by express appointment or by implication of law, and wrongfully uses the money received by him as trustee in the purchase of property, the beneficiary may follow it into the property. Pom. Eq. Jur. § 1051; Story, Eq. Jur. § 1260; Pollock v. Bank, 7 N. Y. 274;Bank v. Pollock, 4 Edw. Ch. 215;Taylor v. Plumer, 3 Maule & S. 562; Pugh v. Pugh, 9 Ind. 132. “The trust,” says Mr. Bigelow, “will follow the estate into the hands of all purchasers with notice, and of volunteers or persons taking by gift or descent from the trustees.” Bigelow, Eq. 63.

In this instance Mrs. Riehl was a volunteer, and had notice of the trust. Clearly enough she cannot successfully resist the effort of the beneficiary to follow the money into the property conveyed to her. The complaint is not one by a creditor to set aside a fraudulent conveyance of property, but is one to enforce a trust arising by implication of law. Where an agent, in violation of his trust, uses the money of his principal, the law implies a trust in favor of the principal; and to enforce the trust thus implied equity will subject the property purchased to the claims of the principal as against either a volunteer or a fraudulent grantee. It is this equitable principle which the complaint invokes.

Cases are cited holding that where an agent embezzles money from his employer, and invests it in property, the principal cannot follow the trust into the property, because the remedy against the agent is by a criminal prosecution. Campbell v. Drake, 4 Ired. Eq. 94;Pascoag Bank v. Hunt, 3 Edw. Ch. 583. We have no doubt that these cases were not well decided. They are in conflict with the very great weight of authority, and are unsound in principle. The fact that the agent may be criminally prosecuted does not affect the right of the principal to get back his money. With quite as much reason might it be urged that the principal could not take from the embezzler the money if found on his person because he can be punished by a criminal prosecution, as to urge that the principal cannot follow the trust because the embezzler is liable to be punished by a prosecution at the instance of the state. There is no conceivable reason why the wronged employer may not secure his money and the embezzler be also punished. The punishment is not to vindicate or reward the principal, but to protect the community from the criminal acts of embezzlers.

We agree with counsel that the beneficiary cannot follow the trust into the property purchased by the agent, and also compel payment of the money from the agent. Barker v. Barker, 14 Wis. 131;Murray v. Lylburn, 2 Johns. Ch. 441. But that question does not arise in this case. Here the beneficiary seeks to subject the property bought with the trust funds to its claims, and does not seek to coerce the agent to also refund the money embezzled. The rule of which we are speaking does not forbid the beneficiary from obtaining a judgment against the agent for the sum remaining due after deducting the value of the property, and, under our system, the plaintiff, in such case as this, may, in one action, obtain both equitable and legal relief. This is what the complaint seeks, and it is not vulnerable to a dem...