PRINCIPAL AND AGENT-WHETHER PRINCIPAL CONSTRUCTIVE TRUSTEE OF MONEY SECURED BY FRAUD FROM THIRD PERSON TO MAKE UP EMBEZZLED FUNDS

Taggart embezzled from his principal, defendant American National Insurance Company, $1,000 received from Miss Mortensen for a deferred life annuity. Subsequently, in a transaction with plaintiff, wholly outside the scope of his general receiving agency for the insurance company, Taggart secured $1,200 through fraud. From this Taggart then replaced the $1,000 due his principal. In suit by plaintiff to recover, Taggart defaulted; liability of the insurance company is based upon the theory that $1,000 has been traced into its hands, and because of Taggart\u27s fraud, this sum became impressed with a constructive trust in favor of the plaintiff. Held, insurance company not liable; in accepting the $1,000, which its agent had procured through an independent fraud, as discharge of an antecedent claim, the insurance company is a bona fide purchaser for value, cutting off the constructive trust impressed upon the agent. Blumberg v. Taggart, (Minn. 1942) 5 N. W. (2d) 388