The following opinion was filed January 13, 1925:
Thе views of the referee and the trial judge as to the legal questions involved present a striking contrast. The trial court held that Paul was a mere employee and in no sense a trustee; that the letters and books of the company offered were mere hearsay; that the title to the policies became at once vested in the plaintiff under the statutes and could not be divested except by surrender and indorsement.
In treating the letters as pure hearsay the court disregarded an important exception to the rule excluding hearsay evidence which has long been recognized as well settled. In his work on Evidence Mr. Wigmore traces the history of the exception and shows that it had its origin more than a century ago. Secs. 1456, 1476. The exception is that the declarations of-persons, since deceased, are admissible in evidence provided the declarant had 'peculiar means of knowing the matter stated, if he had no interest to misrepresent it, and if it was opposed to his pecuniary or proprietary interest. Such declarations are not received as admissions, nor as entries made in the ordinary course of business,
The reason for the exception is thus stated in 1 Green-leaf on Evidence, § 148:
“The ground upon which this evidence is received is the extreme improbability of its falsehood. The regard which men usually pay to their own interest is deemed a sufficient security, both that the declarations were not made undеr any mistake of fact, or want of information on the part of the declarant, if he had the requisite means of knowledge, and that the matter declared is true.”
The fact that the statements are not admissible during the life of the declarant and that such declarations are sometimes the only mode of proof available are regarded as additional reasons for the reception of such statements in evidence without the sanction of an oath by the declarant. Mr. Wigmore vigorously argues that the exception should be so extended as to include confessions of crime or other statements of facts ggainst penal interest. See § 1476. But, as he concedes, this view has not been generally accepted. 4 Chamberlayne, Evidence, § 2779, and cases cited.
The letters in this case are plainly within the class of declarations contemplated by the exception under discussion and should not have been disregarded. The testimony showed and the referee found that Paul was the confidential clerk and bookkeeper of the defendant and was intrusted with the collection, custody, handling, and depositing in the bank of moneys belonging to the business as well as keeping the accounts. Entries by Paul on the debit side of the account were declarations by him that he had received the
There is careful argument in appellant’s brief of the proposition that the letters were not confidential communications between husband and wife within the meaning of sec. 4072, Stats. 1917. We consider the proposition sound for'several reasons. They were not private communications made and completed during marriage. The letter addressed to the plaintiff contained another communication, which she was directed to 'deliver to a third person, and which repeated the most essential facts to which objection might be made. It is plain that, in order to carry out the instructions in the letters, their substance would have to be communicated to others. That this letter addressed to Walt was not privileged is too plain for argument. Counsel for the respondent do not contend that either letter was privileged under the statute, and we shall not extend the discussion of the subject. We only cite a few of the many authorities referred to in the appellant’s brief. Whitford v. North State L. Ins. Co.
Although counsel for the plaintiff do not argue that the letters were confidential and therefore privileged communications, they do strenuously insist, and it was held by the trial court, that they were no part of the res gestee and were irrelevant and incompetent as against the beneficiary. Counsel rely on sec. 2347 of the Statutes, according to which poli-
In his decision the trial judgе said: “Truelsch had the confidence of his employer, but he was a mere employee and not a trustee within the strict definition of equity.” It may be inferred from this statement that the court was of the opinion that it was a condition of recovery on the part of the appellant that he must prove the existence of a conventional or technical trust. If that view was entertained, it is of course impossible to say to what extent it influenced the determination by the court of the other questions. The duties of Paul Truelsch have been already stated, and it is plain from all the evidence that the appellant reposed in him thе utmost confidence. We do not regard it as very important in this case whether his relation to his employer be described as employee, agent, or trustee. If during the performance of such duties as were intrusted to him he stole or embezzled the funds of his employer and an equitable remedy were necessary to right the wrong and reach the funds or property into which they might pass, there existed a ■ constructive trust, which a court of equity might enforce against the wrongdoer if he were living. The rule applies in cases where property is stolen or embezzled, although it is most often invoked to prevent the success of fraud in the myriad fоrms which it assumes. When necessary, the courts thrust the trust on the wrongdoer without regard to whether there was an intention by the parties to create a trust and in the absence of a technical or conventional trust relation.
It seems to have been the opinion in the trial court that the general rule had no application here because the title to the policies vested in the plaintiff and became her sole and separate property free from any trust or incumbrance by
The .respondent’s counsel argue that there was no constructive trust impressed on the policies because, as they claim, none of the appellant’s moneys were used in procuring or maintaining the policies, and the trial court so found except as to $33.28 used in paying a premium of the
The following were the shortages disclosed by the exami
The testimony is that all the methods above described are not unсommonly used by those who attempt to falsify book accounts; that although the methods are somewhat crude they may be carried on without discovery, especially where great confidence is reposed in the bookkeeper. According to the testimony the shortages were created through operations on the cash drawer before the moneys got into the bank. Dawson testified that it would be too much trouble for him to go into the details of the daily transactions between the dates above mentioned to see how the shortages were concealed between the dates in the list above set forth. Nоr did he undertake to discover when the moneys were stolen. ITe only established the shortages, leaving the details for future consideration. He stated, however, that it would be possible to ascertain approximately the date when any money was taken out by taking each day’s receipts and disbursements and verifying the cash in hand and the bank balance, but that it would entail much labor. This labor
Another chart was prepared by Wratten from the exhibits offered in evidence, giving in more condensed form a history of the different policies and the premiums and the times and modes of payment. These statements and charts prepared by Walton Miller and Wratten were sworn to be correct, and the statement prepared by Walton Miller was submitted to respondent’s counsel before the hearing and was not challenged. The investigation by Walton Miller was not con-fined to the period covered by the chartered accountant, but commenced on March 19, 1912. For convenience counsel for appellant have printed in their brief a schedule showing in more compact form some of the particulars as to the amounts of premiums, the times and mode of payment, and the dates of shortages. This statement has been given in the statement of facts. Its correctness does not seem to have been questioned by the respondent’s counsel. The referee had the opportunity of examining in detail the statements and exhibits used in the trial and of hearing the testi
On the subject of tracing the funds, counsel for the respondent rely on the legal proposition that the burden was on the appellant to prove that the money embezzled went into the policies; that when the funds cannot be traced, the equitable right of the cestui que trust to follow and reclaim a trust fund fails; that the right to follow and reclaim a trust fund is always based upon the right of property and not on the theory of preference by reason of an unlawful conversion. For this construction counsel rely on the following cases: Bromley v. C., C., C. & St. L. R. Co.
“They also contend that they are entitled to the policy of $2,000 and the proceeds thereof, on the ground that the*258 $99.64 — being the only premium ever paid thereon — was so paid with money belonging to the defendants. If it-were clearly established by the evidence that such were the facts, then we should have no difficulty in holding with the defendants. Holmes v. Gilman,138 N. Y. 3 .69,34 N. E. 205 .” Bromley v. C., C., C. & St. L. R. Co.103 Wis. 562 , 567,79 N. W. 741 .
The wide, difference from the case now before us is quite apparent. . Here. it was found by the referee-that all the moneys which maintained the policies during the period were paid from funds belonging to the .appellant which had been wrongfully appropriated by the deceased.
It is another, contention of. the respondent’s-counsel that since the deceased sometimes gave notes and due-bills to the agent of the insurance company-, which were later paid, this .negatives the claim that the premiums were paid by the moneys embezzled; that whenever such notes or due-bills were given the premiums were thereby paid, and it- should be presumed they were paid by Paul’s money and not money taken from the appellant. It is true that as between the assured and the company the acceptance of these forms of credit operated to extend the time of the payment and kept the policies alive. But it was not until the payments were actually made that the real consideration for carrying the insurance was received by the company. It was not until then that the investment by Paul was made, and it is the investment by the wrongdoеr in other property which gives the cestui que trust the right to follow the funds -to their destination. Counsel for the respondent greatly rely on Thum v. Wolstenholme,
The general rule applicable to cases of this character is thus stated in Ruling Case Law:
“Proceedings to establish and enforce trusts are, generally speaking, governed by the usual rules as to presumptions and burden of proof, and the admissibility, weight, and sufficiency of evidence applicable in other civil actions. The burden of proof as to the existence of a trust rests on the party who alleges it, and whatever may be the rule as to the exact extent to which trust property must be followed and identified, in any particular jurisdiction, it may be stated generally that the burden of identifying the trust property in a satisfactory manner to the required extent rests on the party seeking to establish the trust.” 26 Ruling Case Law, 1368.
Although in this case the proof of criminal conduct on the part of Paul was involved, it is very clear, on well settled rules, that it was not necessary to prove either the embezzlement or the tracing of the funds beyond a reasonable doubt. Npr was it necessary in proving that the moneys embezzled were used to pay for the premiums to show that the identical specie or bills abstracted were so- employed.
“If the trial court did not apply the right lеgal test to the evidence, then its findings of fact have no potency to control the judgment of this court as to what they should be.” Will of Boardman,178 Wis. 517 ,190 N. W. 355 ; Kelley v. Crawford,112 Wis. 368 ,88 N. W. 296 ; Luckow v. Boettger,140 Wis. 62 ,121 N. W. 649 .
It is further claimed by counsel for the respondent that in any event the appellant is entitled only to a lien upon the proceeds to- the extent that stolen or embezzled moneys were
In the present case, as already stated, counsel for the respondent claim the limit of the lien would be the amount paid on the premiums. Counsel for the appellant claimed in their answer and now claim a lien equal to the amount of the funds embezzled and no more. Three of the policies were issued with Paul’s mother as beneficiary and before his marriage. The referee did not undertake to ascertain the defalcations prior to January Í, 1914, although there was testimony as to such misappropriations. He found that two thirds of' the premiums on the New England policy number 245,641 for $1,000 had been paid by money embezzled, and held that there should be impressed on the policy and its proceeds a trust for two thirds of the $1,000, and that the remainder was owned by the plaintiff. As already appears, there is but little authority to guide us in determining the extent to which a trust should be impressed on the proceeds of misappropriated funds in a situation like that now before us. Wе are of the opinion that the mode of apportionment adopted by the referee was equitable and as favorable to the plaintiff as can be fairly claimed. We cannot sanction the proposition that a fiduciary may
Some claim is made by counsel for the respondent that the appellant is precluded from recovery because of gross laches in the prosecution of his claim. The referee refused to find that there had been such delay. The trial court did make such a finding but did not make it the basis of the judgment. On the contrary, the appellant was allowed a recovery of the amount already stated. We have examined the record, and although there was much delay in the conduct of the litigation, there were such complications as excused much of it, and the delay was by no means wholly due to the appellant. This contention of the respondent’s counsel is not sustained.
It is further claimed and argued that any demand of the appellant was against the deceased; that the plaintiff owned the policies as her separate estate and that she had the right to defend her title; and that neither she nor the fund in court should be subjected to' the payment of costs. The appellant was successful in the hearing before the referee, and in our opinion was properly allowed the costs. It is our conclusion that the trial court should have confirmed the report of the referee.
By the Court. — Judgment reversed, and the cause remanded with directions to confirm the referee’s report and render judgment accordingly.
A motion for a rehearing was denied, with $25 costs, on March 10, 1925.
