(Wis., 202 N. W. 352.) L.R.A. (N.S.) 1110, 110 Am. St. Rep. 844, 103 N. W. 1123, 104 N. W. 917; Bosworth v. Hopkins, 85 Wis. 50, 55 N. W. 424. The Bromley Case is most nearly in point, as in that case the defendant sought to enforce a trust against an insurance policy when it was claimed that it had been procured by the husband of the deceased by the use of money wrongfully diverted from one of the defendants. It appeared that the plaintiff had intrusted her husband with considerable sums of money from her separate estate, and had also furnished him other moneys, amounting to $100, for the express purpose of paying the premiums on the policies involved. The circuit court found that it was not proven that any of the premiums were paid out of the money of the defendant. This finding was sustained in this court. The general rule contended for by counsel for the respondent in this case was declared, although it was said: "The court will go as far as it can in thus tracing and following trust money." It was also said, speaking of the claim of the defendants: "They also contend that they are entitled to the policy of $2,000, and the proceeds thereof, on the ground that the $99.64-being the only premium ever paid thereonwas 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. 369, 20 L.R.A. 566, 34 Am. St. Rep. 463, 34 N. E. 205." Bromley v. Cleveland, C. C. & St. L. R. Co. 103 Wis. 562, at page 567, 79 N. W. 743. 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 duebills 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 duebills 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 effect of tem ing policy on was not until then Insurance- Payment- funds of his employer for years, use the spoils to maintain policies of insurance for the benefit of his family or estate, and prevent a court of equity from affording relief by the mere device of postponing payment of some of the premiums. 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 R. C. L. 1368. -findings of of law. v. Boring, 139 Wis. 403, 121 N. W. 126; Wojahn v. National Union Bank, 144 Wis. 646, 129 N. W. 1068; Goodwin v. Von Cotzhausen, 171 Wis. 351, 177 N. W. 618; Von Trott v. Von Trott, 118 Wis. 29, 94 N. W. 798. On the other hand, we cannot give to the findings of the trial court the weight which usually attaches to such findings. We have already pointed out the serious errors as to trial courtquestions of law effect of errors which we find in the record, and it is by no means clear that the findings of fact would have been the same if these errors had not been committed. It was very recently said in an opinion by Mr. Chief Justice Vinje: "If the trial court did not apply the right legal 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." Boardman's Will, 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 actually used in the payment of the premiums on each policy. It was on this theory that the trial judge held that the appel (— Wis. —, 202 N. W. 352.) lant was entitled to only $33.28, and interest. Although there are many decisions dealing with the right of the cestui que trust to follow the proceeds of funds misappropriated by trustees, there are comparatively few which relate directly to the recovery, when insurance policies have been maintained by such funds. Counsel for the respondents rely especially on Thum v. Wolstenholme, supra. In this case there had been misappropriation for the payment of premiums in the sum of $5,110. It was claimed by the plaintiff that the entire amount of $50,000 derived from the policies should be applied to reimburse the trust fund. The court held that the first premium was paid out of the assured's own funds, and in such a manner that title to the policy vested in him, and that, if there was any trust, it was a resulting trust. It was held that, while the fund was not impressed with a trust such as would absorb the fund, yet it was subject to an equitable lien in the nature of a resulting trust to the amount of the bank's funds used in paying the second and third premiums, with interest. Although there was allowed a recovery of no more than the premiums paid, there was a vigorous dissenting opinion by Chief Justice Bartch, holding that there was a constructive trust, and that when one standing in the fiduciary relation makes a profit under such circumstances as existed in that case, that the profit belongs to the cestui que trust. In the opinion the case of Holmes v. Gilman, 138 N. Y. 369, 20 L.R.A. 566, 34 Am. St. Rep. 463, 34 N. E. 205, is quoted with approval. In the Holmes Case policies aggregating $45,000 had been procured and maintained by misappropriated funds. The faithless partner had, by means of false entries in the books, converted over $220,000. It was argued by counsel for the defendant that the funds had not been traced, and that the funds used in the payment of the premiums were mingled with the property right of the wife, called her insurable inter38 A.L.R.-59. est in her husband's life, so that the policies were not wholly the result of the use of the misappropriated funds, and that the lien on the policies must be limited to the amount of the premiums paid with the funds wrongfully converted. It was held that the wife had suffered no loss so long as the premiums were not paid by her, and that her property had not been used for any purpose, and that she must claim the policies subject to the means used by her husband to procure them and adopt his methods, and that the cestui que trust was entitled to follow the funds and take the money or the policies, at his option. It was not decided what would be the rights of the parties if the funds from the policies had exceeded the whole amount of the misappropriated funds. The report of the referee was affirmed, allowing a lien on the policies for the full value of $45,000. 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 1, 1914, although there was testimony as to such misappropriations. He found that two thirds of the premiums on the New England policy No. 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. We 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 embezzle large sums of money, use some of it in maintaining life insurance, and that the injured party has Insurance portion of policy to which employer entitled. no remedy except to recover the amount paid for the premi ums, which may be only a small fraction of the amount embezzled. It would open too wide a door for the perpetration of the grossest fraud. Some claim is made by the 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 proper- one impressing ly allowed the costs. It is our conclusion that the trial court should have confirmed the report of the referee. Costs-right of trust on funds. Judgment reversed and the cause remanded, with directions to confirm the referee's report and render judgment accordingly. Eschweiler, J., dissents. ANNOTATION. Right with respect to proceeds of life insurance of one whose funds have been wrongfully used to pay premiums. It is the purpose of this annotation to consider the right of a person with respect to the proceeds of an insurance policy on the life of one who has wrongfully appropriated and used, in whole or in part, the funds of the former in the payment of premiums for such insurance. For a discussion of statutory provisions that no one but the insured can defeat his direction that the proceeds of life insurance shall be paid to a designated beneficiary, as affecting the equitable rights of creditors or persons whose money has been wrongfully used in paying premiums, see the annotation in 26 A.L.R. 1408. As to the right of an insolvent to insure his life for the benefit of his relatives, see the annotation in 31 A.L.R. 51, and 34 A.L.R. 838. The general rule seems to be that where a person has embezzled funds and used them for the payment of premiums for insurance on his life, a trust is created in favor of the person from whom they were embezzled, and that the latter is entitled to such proportion of the total insurance as the amount of premiums which have been paid from the embezzled funds bears to the total amount of premiums paid. This rule is followed in the reported case (TRUELSCH V. NORTHWESTERN MUT. L. INS. Co. ante, 914), wherein it is held that where funds of an employer had been embezzled, and had been used in the payment of two thirds of the premiums on a policy on the employee's life, the employer was entitled to have impressed on the policy and its proceeds a trust for two thirds of the amount of the policy. In Vorlander v. Keyes (1924) 1 F. (2d) 67, it appeared that Christian. Vorlander, who was the president of a bank, and was heavily indebted to it, had procured five policies on his life, one of which was in favor of his wife, and the other four in favor of his four children. One half of the initial premium in each of these policies he paid with his own property, and he paid the other half of each premium with the funds of the bank, which he secretly misappropriated to that purpose. The second year's premium on each of these policies was the same amount as that of the first year, and he paid the second year's premium on each in January, 1920, with the funds of the bank, which he secretly misappropriated to that purpose. He died on August 11, 1920. The result was that one fourth of the premiums, which resulted in the proceeds of these policies, was paid by Mr. Vorlander with his own property, and three fourths thereof he paid with the funds of the bank, which he misappropriated to those payments. The bank went into the hands of a receiver, and the litigation between the receiver and the beneficiaries of the policies in the court below resulted in a decision and decrees of that court to the effect that the receiver was entitled to three fourths and the beneficiaries to one fourth, respectively, of the proceeds of the policies. The court, in affirmin the decree of the lower court, said: "One who, acting in a fiduciary capacity, secretly and wrongfully, and therefore fraudulently, uses fiduciary funds to purchase real estate or personal property, including policies of life insurance, for his own benefit, and puts it in his own name, takes the title and interest in it as a trustee ex maleficio for the owner of the misappropriated funds he thus uses, the cestui que trust. The equitable ownership and title of the misappropriated funds and the fruits thereof remain in the cestui que trust as long as they can be traced, and the trustee holds nothing but the naked title for the exclusive benefit of the cestui que trust. In equity, not only the property which the trustee acquires with the misappropriated funds, but all its fruits, in every form,-its increase, its income, other property acquired by the trustee by the exchange or use of it in any way,—becomes, at the option of the cestui que trust, his property, unless it has passed into the hands of a bona fide purchaser for value, without notice of the misappropriation. In no event is the trustee ex maleficio entitled in equity to any benefit to himself from the use of the trust funds. Public policy forbids that one who has corruptly thrust himself into the position of a trustee shall profit by his fraud. Nor may another, in this case the wife, now the widow, of the trustee ex maleficio, though herself innocent of the fraud,-who has paid no consideration for the property purchased with the misappropriated funds, or for their fruits, hold any of them against the cestui que trust, the owner thereof. . . . Without a disregard of these fundamental rules of equity jurisprudence there is no logical or rational way of escape from the conclusion of the court below that, when the insured paid with the funds of the bank one half of the initial premiums of these policies, he became a trustee ex maleficio for the exclusive benefit of the bank of one half of the title and interest in the insurance policies. If he had paid three fourths of those initial premiums with the funds of the bank, he would have held three fourths of the title and interest in the policies in trust for the bank. In this case, before the insured died, he paid with funds of the bank the premiums on the policies for the second year, so that from the time of the payment of those premiums, and at the time of the death of the insured, one fourth of the amount invested in the policies had been paid by the insured with his own property, and three fourths thereof with the misappropriated funds of the bank, and the court divided the fruits of those investments, the proceeds of the policies, between the widow and the receiver of the bank in that proportion. That division is just, equitable, and right, and the decree below is affirmed." In Massachusetts Bonding & Ins. Co. v. Josselyn (1923) 224 Mich. 159, |