G & M Motor Co. v. Thompson
No reporter information provided (1977)
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Rule of Law:
Where wrongfully obtained funds are used to pay premiums on a life insurance policy, the victim is entitled to a constructive trust on a pro-rata share of the policy proceeds, not merely a return of the premiums paid.
Facts:
- A. Wayne Thompson was employed as an accountant for G & M Motor Company from January 1, 1968, to August 2, 1970.
- During his employment, Thompson embezzled $78,856.45 from the motor company.
- Thompson used a portion of the embezzled funds to pay premiums on various life insurance policies he held.
- Thompson died on August 2, 1970.
- Thompson's surviving wife, Shirley Thompson, and child were the beneficiaries of the insurance policies.
Procedural Posture:
- G & M Motor Company brought an action against Shirley Thompson, the decedent's wife.
- The trial court impressed a constructive trust in favor of the motor company on a portion of the insurance proceeds.
- Shirley Thompson appealed to the Court of Appeals, Division 1.
- The Court of Appeals affirmed in part but modified the judgment on the insurance proceeds, limiting the motor company's recovery to the amount of premiums paid with embezzled funds plus interest.
- G & M Motor Company petitioned the Supreme Court of Oklahoma for a writ of certiorari, which was granted.
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Issue:
Does a constructive trust imposed upon life insurance proceeds, where premiums were paid with embezzled funds, entitle the victim to a proportionate share of the proceeds, or is recovery limited to the amount of embezzled funds used to pay the premiums plus interest?
Opinions:
Majority - Berry, Justice
Yes, a constructive trust entitles the victim to a proportionate share of the proceeds. The proper basis for imposing a constructive trust is to prevent unjust enrichment. When a wrongdoer uses another's property to acquire a new asset that subsequently increases in value, the victim is entitled to the profit, not just the value of what was taken. The court explicitly adopts the Restatement of Restitution's view (§ 202 and § 210), which holds that where a wrongdoer mingles wrongfully and rightfully acquired funds to purchase property, the owner of the wrongful funds is entitled to a proportionate share of the acquired property. Therefore, the motor company is entitled to a pro-rata share of the insurance proceeds based on the proportion of premiums paid with its embezzled funds. The court rejected the older view that recovery should be limited to the premiums paid, finding that such a rule would fail to prevent the wrongdoer's beneficiaries from being unjustly enriched and would not adequately deter wrongdoing.
Analysis:
This decision aligns Oklahoma law with the modern majority rule and the Restatement of Restitution regarding constructive trusts on life insurance policies. By rejecting the older view that limited recovery to the amount of stolen premiums, the court established a stronger remedy for victims of embezzlement. The ruling ensures that wrongdoers, or their beneficiaries, cannot profit from illegal activities by tracing stolen funds into more valuable assets. This precedent strengthens the principle of preventing unjust enrichment and serves as a significant deterrent by removing the financial incentive for such wrongdoing.
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