This excess above full compensation is not given to the cestui que trust by reason of any merit on his part. It comes to him as a mere windfall. Public policy demands that the faithless trustee should not retain any advantage derived from his breach of trust. Hence the wholesome rule that whatever a trustee loses in the misuse of the trust fund he loses for himself, and whatever he wins, he wins for the beneficiary.1

If this rule is to be applied consistently, it follows that if a trustee buys property partly with his own money and partly with trust money, the cestui que trust is entitled to that proportion of the property bought which the trust money used bears to the entire purchase money. The authorities are numerous to this effect,2 although in several of them this result was assumed as a matter of course without argument. But in two states, Massachusetts and Ohio, the cestui que trust is allowed only a lien upon the new property to secure the amount of the misused trust fund.3

In several other cases the remedy given was that of a lien. But in these cases the question of an alternative right to a proportionate part of the new property was not raised by the counsel nor considered by the court. In truth, the cestui que trust should be given the option of a proportional part of the new property or

1 A pledgee of shares who wrongfully sells them for $5000 and afterwards buys them back for $3000 and gives them to the pledgor upon payment of the debt must also surrender his profit of $2000. Langton v. Waite, 6 Eq. 165, 173.

2 Docker v. Somes, 2 Myl. & K. 655; Re Oatway, [1903] 2 Ch. 356; Nat. Bank v. Ins. Co., 104 U. S. 54, 68; Re Mulligan, 116 Fed. Rep. 715, 717; Barrett v. Kyle, 17 Ala. 306; Tilford v. Torrey, 53 Ala. 120, 122; Walker v. Elledge, 65 Ala. 51 (semble); Kelley v. Browning, 113 Ala. 420; Howison v. Baird, 40 So. Rep. 94 (Ala. 1906); Byrne v. McGrath, 130 Cal. 316; Elizalde v. Elizalde, 137 Cal. 634 (semble); Bazemore v. Davis, 55 Ga. 505; Harris v. McIntyre, 118 Ill. 275; Reynolds v. Sumner, 126 Ill. 58; Fansler v. Jones, 7 Ind. 277; Bitzer v. Bobo, 39 Minn. 18; Morrison v. Kinston, 55 Miss. 71; White v. Drew, 42 Mo. 51'; Bowen v. McKean, 82 Mo. 594; Shaw v. Shaw, 86 Mo. 594; Jones v. Elkins, 143 Mo. 647; Crawford v. Jones, 163 Mo. 578; McLeod v. Venable, 163 Mo. 536; Johnston v. Johnston, 173 Mo. 91, 115; Bohle v. Hasselbroch, 64 N. J. Eq. 334; Dayton v. Claflin Co., 19 N. Y. App. Div. 120; Lyon v. Akin, 78 N. C. 258; Wallace v. Duffield, 2 S. & R. (Pa.) 521 ; Kepler v. Davis, 80 Pa. 153; Rupp's App. 100 Pa. 531; Lloyd v. Woods, 176 Pa. 63; Sheetz v. Neagley, 13 Phila. 506; Green v. Haskell, 5 R. I. 447; Watson v. Thompson, 12 R. I. 467; Kaphan v. Torrey, 58 S. W. Rep. 909 (Tenn. 1899); Moffatt v. Shepard, 2 Pinn. (Wis.) 66.

3 Bresnihan v. Sheehan, 125 Mass. 11; Reynolds v. Morris, 17 Oh. St. 510. Lane v. Dighton, Amb. 409; Price v. Blakemore, 6 Beav. 507; Hopper v. Conyers, L. R. 2 Eq. 549; Re Pumfrey, 22 Ch. D. 255, 260; Graves v. Pinchback, 47 Ark. 470; Humphreys v. Butler, 51 Ark. 351; Nat. Bank v. Barry, 125 Mass. 20; Munro v. Collins, 95 Mo. 33; Day v. Roth, 18 N. Y. 448; Bryant v. Allen, 54 N. Y. App. Div. 500 (affirmed 166 N. Y. 637).

a lien upon it, as may be most for his advantage. If the new property appreciates, it will be for his interest to claim a proportionate share of it. If it depreciates, he will naturally prefer to claim a lien upon it to the extent of the misused trust money. In two states, New Jersey and Pennsylvania, a trustee, who makes a purchase partly with his own money and partly with a trust fund, is treated with extreme severity. In New Jersey he loses not only the share of profit attributable to the trust money, but also that due to his own money, the cestui que trust being entitled to the whole of the new property, subject to a lien in favor of the trustee to the amount of his own contribution.2 In Pennsylvania, if the product of the joint funds is in the form of shares in different companies, some of which have appreciated, while others have depreciated, the cestui que trust may take his proportion of the purchase from the shares which have proved the most profitable.3

The principles thus far considered apply to all fiduciaries, not only to trustees, who have the legal title to the misappropriated property, but to bailees, guardians, and the like, who have possession but not title. Although in a few early American cases the courts declined to permit the owner of property to recover its product, as a constructive trust, if the misappropriation was by any person other than a fiduciary, it is now well settled that one who has been deprived of his property by fraud, by theft, or by any wrongful conversion, may charge the fraudulent vendee, the thief, or other wrongful converter as a constructive trustee of any property received in exchange for the misappropriated property."

1 This option was allowed in Bitzer v. Bobo, 39 Minn. 18; Crawford v. Jones, 163 Mo. 578; Green v. Haskell, 5 R. I. 447.

2 Bohle v. Hasselbroch, 54 N. J. Eq. 334

8 Norris's App., 71 Pa. 106.

4 Re Hallett, 13 Ch. D. 696, 709, 710.

5 Pascoag Bank v. Hunt, 3 Edw. 583; Campbell v. Drake, 4 Eden 94; Rain v. McNary, 4 Humph. (Tenn.) 356; Cunningham v. Wood, 4 Humph. (Tenn.) 417; Hawthorne v. Brown, 3 Sneed (Tenn.) 462.

6 Fraud. Smith v. Atwood, You. 607; Taub v. McClelland Co., 10 Col. App. 190; Farwell v. Homan, 45 Neb. 424 (semble); Bank of America v. Pollock, 4 Edw. 215; American Co. v. Fancher, 145 N. Y. 552; Converse v. Sickles, 146 N. Y. 200 (semble); Reynolds v. Ætna Co., 28 N. Y. App. Div. 591; Menz v. Beebe, 102 Wis. 342.

Theft. Cattley v. Loundes, 34 W. R. 139; Re Hulton, 39 W. R. 303, 8 Morrell 69 s. c.; Pirtle v. Price, 31 La. An. 357; Nat. Bank v. Barry, 125 Mass. 20; Nebraska Bank v. Johnson, 51 Neb. 346; Lamb v. Rooney, 100 N. W. Rep. 40 (Net. 1904);

At one time an action for money had and received was not allowed against a converter for the proceeds of the sale of the converted chattel.1 But this doctrine was overruled two centuries ago.2 There seems to be no good reason why one who has disseised another of his land and sold it, should not be similarly liable to the disseisee for the proceeds of the sale in an action for money had and received. But the right to such an action was denied in Massachusetts in 1843.3 Nor has the writer discovered any decision to the contrary. This Massachusetts decision, it is submitted, should not be followed. But be that as it may, it is believed that the courts of equity will not hesitate to give a disseisee the benefit of any property acquired by the disseisor in exchange for the land of the disseisee. Accordingly, the rule as to following misappropriated property into its product in the hands of the wrongdoer may be formulated as follows: If property of any kind is misappropriated in any manner by one who knows it to belong, either at law or in equity, to another, the true owner may charge the wrongdoer as a constructive trustee of any property in his hands which is the traceable product of the misappropriated res, or, if he prefers, he may enforce an equitable lien upon this traceable product to the extent of the value of the misappropriated res.*

If the misappropriated res, or its product, has been transferred by the wrongdoer, the rights of the defrauded owner to assert a trust or lien against the transferee will vary accordingly as the latter is a mala fide transferee, a bona fide donee, or a bona fide purchaser.

The mala fide transferee, obviously, is in the same case as the original wrongdoer. If he gets the legal title from the wrongdoer he will hold it as the wrongdoer held it. If he gets merely the pos

Newton v. Porter, 69 N. Y. 133 (affirming 5 Lans. 416); Reynolds v. Ætna Co., 28 N. Y. App. Div. 591, 601.

Other wrongful conversion. La Comité v. Standard Bank, 1 C. & E. 87; Re Woods, 121 Fed. Rep. 599; Graves v. Pinchback, 47 Ark. 470 (semble); Humphreys v. Butler, 51 Ark. 351.

1 Philips v. Thompson, 3 Lev. 191 (1675).

2 Lamine v. Dorell, 2 Ld. Raym. 1216; Hitchin v. Campbell, 2 W. Bl. 827.

3 Brigham v. Winchester, 6 Met. (Mass.) 460.

4 It was decided in Lister v. Stubbs, 45 Ch. D. 1, that a fiduciary, who accepted a bribe from a third person, and invested the money in securities which appreciated, although liable to his beneficiary for the amount of the bribe could not be compelled to surrender the securities. It is not easy to see the reason for this discrimination in favor of the bribe taker.

Wheeler v. Kirtland, 23 N. J. Eq. 13.

session from a thief or other converter, he is himself a converter and becomes a trustee of any property which he may receive in exchange for the converted res.

The bona fide donee may or may not acquire the legal title to the res conveyed to him by the wrongdoer. If he gets the title, its acquisition, it is true, is honest; but its retention, after knowledge of his grantor's wrong in conveying it, would be dishonest, for he, a volunteer, would thereby enrich himself at the expense of the defrauded cestui que trust. From the moment of his discovery of his grantor's fraud, therefore, the bona fide donee is in the same position as to the res in his hands as if he had at that moment acquired the property mala fide.1

If, however, the bona fide donee should dispose of the property before discovering his grantor's fraud, he is not accountable for its value to the cestui que trust. Not at common law, for he has committed no legal tort in dealing with property which by the common law was his own. Not in equity, for he has committed no equitable wrong in parting with a legal title which he believed to be free from any equitable incumbrance. If his transfer was gratuitous, he is not liable in any way to the defrauded cestui que trust.2 If, however, his transfer was for value received, the situation is changed. If he keeps the value received he, a volunteer, is making a positive gain at the expense of the cestui que trust. He must, therefore, either surrender the value received or account to the cestui que trust for the value of the misappropriated trust-res. But he should have the option of doing the one or the other. If the value received was less than the value of the res transferred by him, or if the newly acquired property has depreciated below the value of that res, the donee does all that can, in justice, be required of him by giving up what he received in exchange for his transfer. He has acted honestly and makes no profit. If, on the other hand, the newly acquired property appreciates, and the donee prefers to give the cestui the value of the misappropriated res, the latter having received full compensation for what was taken from him cannot

1 Standish v. Babcock, 52 N. J. Eq. 628; Laws v. Williams, 56 N. J. Eq. 553.

2 Blake v. Metzgar, 150 Pa. St. 291; Bonesteel v. Bonesteel, 30 Wis. 516. He may also buy the property from a subsequent bona fide purchaser and keep it. Mast v. Henry, 65 Iowa 193.

A striking illustration of this principle is the emancipation by an innocent donee of a slave conveyed to him by a fraudulent donee.

Robes v. Bent, Moo. 552; Wheeler v. Kirtland, 23 N. J. Eq. 13 (semble); Trues. dell v. Bourke, 29 N. Y. App. Div. 95 (affirmed 161 N. Y. 634).

rightfully demand more. The donee, it is true, may, in this case, profit by the misconduct of the wrongdoer. But the retention of this profit by the bona fide donee is not forbidden by the principle of public policy which is properly invoked against the mala fide grantee of the wrongdoer. Even if the innocent donee cannot make reparation in value, because of his insolvency, he ought not to be obliged to give up to the defrauded cestui que trust the whole of the newly acquired property if that is worth more than the misappropriated trust-res. Full justice will be done if the cestui que trust is given a lien upon the newly acquired property to the extent of the value of the original trust-res. The surplus should go to the general creditors of the insolvent donee.

If the bona fide donee does not acquire the title to the misappropriated res, as when he receives it from a thief or other converter, he is himself, although morally innocent, guilty of a conversion, and must either surrender the converted chattel to the true owner or make reparation in value. Furthermore, if after discovering the title of the true owner, he should transfer the converted res in exchange for other property, he would be chargeable as a constructive trustee of the newly acquired property for the benefit of the true owner. Is he also chargeable as a constructive trustee, if his transfer was before his discovery of the tort of his transferor? There seems to be no decision upon this point. It is conceived, however, that equity should not create a constructive trust in this case, if the morally innocent donee is able and willing to make reparation in value for his technical tort. Even his insolvency should not give the defrauded owner more than a lien upon the newly acquired property, if its value exceeds that of the converted res, for compensation should be the limit of recovery for a tort, if the defendant acted in good faith.

If a bona fide donee of a thief or other converter may keep the product of the converted res, in case he is ready to pay the value of the latter to the true owner, a bona fide purchaser from the wrongdoer must have the same privilege. And there is authority to this effect. In the well-considered case, Dixon v. Caldwell,1 a military bounty warrant for 160 acres was stolen from the plaintiff, and, after the thief had forged the plaintiff's indorsement, sold to the defendant, a purchaser for value without notice of the theft or forgery.

1 15 Oh. St. 412, approved in Mack v. Brammer, 28 Oh. St. 508. See to the same effect, Fletcher v. McArthur, 117 Fed. Rep. 393.