161 Ga. 698 | Ga. | 1926
(After stating the foregoing facts.)
There are but two questions presented for decision in the main bill of exceptions in this case. One is, whether the trial judge erred in refusing to dismiss the exceptions of law and fact filed by the administratrix of Agnes L. Malcom; and the administrator of B. H. Malcom, to certain findings of law and fact made by the auditor. The trial judge did not err in refusing to dismiss these exceptions, under the propositions laid down in headnote 3 preceding this opinion.
The other and more serious question for decision is whether the claim of the administratrix of Agnes L. Malcom is entitled to priority of payment out of the assets of the firm of B. H. Malcom & Brother, over the general creditors of that firm. In 1913 B. H. Malcom as administrator of his wife, Agnes L. Malcom, collected a policy of insurance on her life, payable to her estate. The proceeds of this policy, amounting to $5,019, were deposited with the firm of B. H. Malcom & Brother, of which the administrator was a member, and were used by the firm in the conduct óf its business. The administrator died in 1920. The business of the firm was continued by the surviving partner until December 1922, when the latter filed the present petition to marshal the assets of the firm, on the ground of its insolvency. In this proceeding the administratrix de bonis non of Agnes L. Malcom seeks to trace this fund into the general assets of the firm, and to have the assets of the firm impressed with a trust for its payment, in preference to the unsecured creditors of the firm. The auditor found that the 'administratrix had failed to trace this fund into any par
In a case where trust assets are misapplied and can be traced into the hands of a person affected with notice of the misapplication, the trust attaches still to the assets, and equity will aid in restoring them to their legitimate purpose. Civil Code (1910), § 3785. The beneficiary of a trust may always follow the trust funds wherever they can be traced. Johnston v. Janes, 48 Ga. 554; Gray v. Perry, 51 Ga. 180; Morgan v. Marshall, 62 Ga. 401; Planters’ Bank v. Prater, 64 Ga. 609; Chamblee v. Atlanta Brewing &c. Co., 131 Ga. 554, 557 (62 S. E. 1032). The right to trace trust funds is undeniable, and is undisputed. The method of tracing them is in dispute. What essential factors must exist before a beneficiary can successfully trace misapplied trust funds? Is it essential that the funds remain in the form in which they existed when the misapplication took place; or, if such form is changed, is it necessary, before they can be traced, to show that they exist in some specific fund or property? Let us put the concrete case involved in this litigation. If an administrator wrongfully turns over assets of his intestate to a firm of which he is a partner, and the same are used in the business of the firm and mingled with its assets, in which shape they remain until his death, when a surviving partner becomes possessed of the firm assets and conducts the partnership business until' the firm becomes insolvent, will a court of equity impress upon the firm assets a trust in favor of the beneficiary, to the extent of the trust funds so invested in the business, if such funds remain among the general assets of the firm when taken over by the receiver appointed in a proceeding to wind up the firm’s business ?
Under the ancient rule on this subject, the equitable right to follow and recover property misapplied by one holding it in trust for another depended upon the ability of the owner to identify it in the form in which it existed when misapplied. This rule was subsequently so extended that the equitable right would attach to whatever was obtained in exchange for the property or its
There are authorities which hold to the doctrine that there must be a specific fund or specific property into which the trust funds went, before such a trust will arise in favor of the owner of the misapplied trust funds. We see no good reason why, if trust funds are mingled with the general funds of a firm, and exist among the same when they go into the hands of a receiver, a trust will not be impressed upon such general funds to the extent of the trust funds remaining in the firm's general assets. In Carter v. Lipsey, supra, the decision was also put upon another ground; that is, that upon the death of the guardian our statute gave to the ward a priority of payment of the trust fund from the assets of the firm, in the hands of the surviving partner, over the unsecured creditors of the firm. This principle thus ruled is now binding. As an original proposition much can be said in favor of its soundness; and undoubtedly when the administrator turned over these assets of his intestate to his firm, the latter became a trustee for the beneficiaries thereof. This was so because “When
Judgment on the main bill of exceptions affirmed; cross-bill of exceptions dismissed.