Opinion
CV 13-00127 RSWL (AJWx)
04-02-2014
P. Kellie C. Brimberry, Plaintiff, v. The Northwestern Mutual Life Insurance Company, and Does 1 through 50, inclusive Defendant. The Northwestern Mutual Life Insurance Company, a Wisconsin corporation, Counter-Claimants, v. P. Kellie C. Brimberry, an individual; Fiduciary Trust International of California, a California corporation; and Does 1 through 10, inclusive, Counter-Defendants.
STATEMENT OF
UNCONTROVERTED FACTS AND
CONCLUSIONS OF LAW RE:
COUNTER-DEFENDANT
FIDUCIARY TRUST
INTERNATIONAL'S MOTION
FOR SUMMARY JUDGMENT
[138]
After consideration of all the papers submitted pursuant to Counter-Defendant Fiduciary Trust International of California's ("Fiduciary") Motion for Summary Judgment [138], the Court makes the following findings of fact and conclusions of law:
UNCONTROVERTED FACTS
1. Kurt Brimberry ("Mr. Brimberry") was employed by Fiduciary in its Los Angeles, California office from November 2001 until August 14, 2012. Fiduciary's Statement of Uncontroverted Facts & Conclusions of Law ("SUF") # 1.
2. On August 14, 2012, Fiduciary terminated Mr. Brimberry's employment. Id. at # 615.
3. At the time of his termination, Mr. Brimberry's title was Managing Director and Business Development Officer. Id. at # 2.
4. As Managing Director and Business Development Officer, Mr. Brimberry was responsible for generating, maintaining, and overseeing relationships with high-net-worth clients. Id. at # 3.
5. Mr. Brimberry died in August 2012 of unknown causes. Id. at # 618.
6. Prior to Mr. Brimberry's death, Northwestern Mutual Life Insurance Company ("Northwestern") issued two life insurance policies to Mr. Brimberry - life insurance policy number 15395737 ("Policy 15395737") and life insurance policy number 15404334 ("Policy 15404334") (collectively, "Policies"). Id., at # 619.
7. At the time of Mr. Brimberry's death, Policy 15395737 provided a net benefit of $1,500,366.41 and Policy 15404334 provided a net benefit of $2,001,325.05. Id., at ## 620-621.
8. The Policies provided a net benefit of $3,501,691.46, and the sole designated beneficiary under the Policies was P. Kellie C. Brimberry ("Mrs. Brimberry"). See Mrs. Brimberry's Separate Statement of Material Facts ("SMF") # 12.
9. On August 31, 2012, Mrs. Brimberry notified Northwestern of her claim for benefits under the Policies. Dkt. # 3, ¶ 12.
10. While investigating Mrs. Brimberry's claim, Northwestern was contacted by counsel for Fiduciary. Id. at ¶ 14.
11. Fiduciary's counsel asserted that Fiduciary had an interest in the benefits payable under the Policies because Mr. Brimberry had embezzled funds from Fiduciary during his employment there and had used the embezzled funds to pay some or all of the Policies' premiums. Id.
12. On November 29, 2012, Fiduciary's counsel wrote to Northwestern on behalf of both Fiduciary and Mrs. Brimberry, making a joint demand that Northwestern stay further processing of the separate claims for benefits while Fiduciary and Mrs. Brimberry attempted to informally resolve their competing claims. Id. at ¶ 17.
13. From 2008 through 2012, expense reimbursement requests by employees of Fiduciary were governed by the Franklin Templeton U.S. Employee Handbook ("Handbook") and the Franklin Templeton Travel and Expense Reporting Policy ("T&E Policy"). SUF # 5.
14. The Handbook states that certain behavior "will not be tolerated," including "[a]ny act which causes doubt about an employee's integrity, such as falsifying company records and documents," and also "[a]ny act of dishonesty or falsification of any company records or documents." Id. at # 6.
15. The T&E Policy states that Franklin and its subsidiaries, including Fiduciary, will only "reimburse employees for [] reasonable and necessary expenses" and only if the "expense is incurred while conducting Company business in the capacity of an employee" and is "properly substantiated." Id. at # 7.
16. The T&E Policy states that for corporate credit cards for Franklin Templeton and its U.S. subsidiaries - including Fiduciary - the "corporate card is the property of the Company and is for business use only." Id. at # 8.
17. On September 7, 2007, Mr. Brimberry signed a certificate acknowledging that he had received and understood that he was expected to comply with the Handbook. Id. at # 9.
18. From 2006 through 2012, the Handbook and the T&E Policy were posted to the Franklin Templeton intranet, where they could have been accessed at any time by Fiduciary employees. Id. at # 10.
19. Prior to July 2012, Fiduciary was not aware of Mr. Brimberry submitting personal expenses for reimbursement that he falsely characterized as business expenses. Id. at # 15.
20. In late July 2012, Franklin's Internal Audit Department ("Internal Audit") reviewed Mr. Brimberry's expense reimbursement requests. SUF # 16.
21. As part of their review, Internal Audit obtained and analyzed, among other documents: (1) all of the physical expense reports Mr. Brimberry submitted between 2008 and July 2012, including all back up documentation he provided, (2) all available corporate credit card statements issued for Mr. Brimberry's account, (3) duplicate receipts for select vendors that appeared frequently on Mr. Brimberry's expense reports and were willing to provide receipts, (4) Mr. Brimberry's corporate calendar, and (5) a portion of Mr. Brimberry's relevant corporate emails provided by Fiduciary. SUF # 17.
22. The investigation by Internal Audit revealed that from 2008 through 2012, Mr. Brimberry sought and received expense reimbursement for non-business (i.e. personal) expenses ("the Expense Reimbursement Scheme"). Id. at # 18.
23. Mr. Brimberry frequently sought and received expense reimbursement for travel expenses - including flights, car service, and hotel stays - for personal trips for Mr. Brimberry and his family by falsely claiming that the travel expenses were for business-related purposes. Id. at ## 19-25.
24. For example, Mr. Brimberry submitted a Corporate AmEx Charge for reimbursement for $840.00 from Oakmont Executive Transportation Inc. (SUF # 23), characterizing said expense as a "Sales Call and Referral Source" with three listed individuals (SUF # 24), when in fact the charge was for eight hours of SUV service on New Year's Eve, when a car and driver picked up Mr. Brimberry's son and five other passengers (which did not include Mr. Brimberry) and transported them to, among other places, a restaurant and lounge in downtown Los Angeles (SUF # 25).
25. Mr. Brimberry frequently requested reimbursement for purported "business meals" and associated parking expenses when the expenses were actually grocery or meal purchases by a member of Mr. Brimberry's family. Id. at ## 26-30.
26. Mr. Brimberry frequently submitted claims for payment of unauthorized club dues and expenses as well as false "mileage" and "parking" reimbursement requests relating to club dues payments by altering receipts and invoices and falsely asserting that the dues and expenses were purported "business meal" expenses. Id. at # 31.
27. Between April 2008 and August 2012, Mr. Brimberry sought and obtained reimbursement for falsified expense reports. Id. at ## 20-359.
28. For example, on April 18, 2012, Mr. Brimberry submitted a Corporate AmEx charge for reimbursement for $284.93 at Jacob Maarse Florist in Pasadena, California. SUF # 35. Mr. Brimberry characterized this expense as "Birthday Floral Arrangements for 2 Clients;" however, Mr. Brimberry had the flowers delivered to Mrs. Brimberry at their home. Id. at ## 36-37.
29. On August 14, 2012, Fiduciary's President and Chief Executive Officer, Henry P. Johnson, and Franklin's Vice President-Human Resources, Aileen Schiltz, met with Mr. Brimberry. Id. at # 360.
30. Ms. Schiltz showed Mr. Brimberry evidence of his personal expenses that were falsely submitted as business expenses and for which Mr. Brimberry was reimbursed. Id. at # 362.
31. Mr. Brimberry admitted that he could not explain any of the expenses and was extremely apologetic about his actions. Id. at # 363.
32. Ms. Schiltz offered to review additional personal expenses with Mr. Brimberry that Mr. Brimberry had falsely characterized as business expenses, and he declined. Id. at # 364.
33. That day, Ms. Schiltz informed Mr. Brimberry that Fiduciary was terminating his employment, effective immediately. Id. at # 365.
34. At that meeting, Mr. Brimberry also signed a written acknowledgment that he had falsified expense reimbursement requests. Id. at # 366. The acknowledgment reads, in pertinent part:
"I, Kurt Brimberry, acknowledge that as a result of my submission for and receipt of money purportedly for business expenses by me that violated Franklin Templeton Investments / Fiduciary Trust ('Company') policies in an amount that the Company believes exceeds $100,000 as of August 14, 2012, I currently owe the Company money . . . . As such, I am endorsing back to FTI my final payout of vacation and [personal] days in the net amount of $16,941 in order to reduce the amount that is ultimately determined that I owe the Company."Id. at # 367.
35. Following the termination of Mr. Brimberry's employment and his subsequent disappearance, Fiduciary launched a further independent investigation after a search of Mr. Brimberry's office revealed documents suggesting that Mr. Brimberry may have also carried out a scheme to defraud YF Partners North Mountain LP ("YF Partners"). Id. at # 369.
36. Mr. Brimberry was the relationship contact for a number of clients, including the Friedman Family Residual Trust No. 2. Id. at # 4.
37. YF Partners is an entity affiliated with the Friedman Family Trust, and one of Fiduciary's clients for which Mr. Brimberry served as a relationship manager. Id. at # 369. YF Partners owns a multi-unit apartment complex (the "Property"). Id. at # 370.
38. Since 2005, YF Partners engaged three property management firms to manage the Property. Id. at ## 370-373. Until spring 2006, SkyWest Properties ("SkyWest") managed the Property. Id. at # 371. From spring 2006 through 2007, Stratus Arizona, LLC ("Status") managed the Property. Id. at # 372. In 2007, Riverstone Residential Group ("Riverstone") acquired Stratus and began to manage the Property. Id. at # 373.
39. SkyWest, Stratus, and Riverstone (collectively, "Property Managers") all handled the Property's management-related fees and expenses, collected rents, and advertised and filled vacancies. In that capacity, the Property Managers had control over the Property bank account (the "Property Account") which was not custodied with Fiduciary. Id. at # 374.
40. Bantry Holdings, LLC ("Bantry") provided real estate investment management services to Fiduciary clients, including in connection with the Property. Id. at # 375. In this capacity, Bantry was responsible for developing an asset-management strategy and coordinating and managing other real estate specialty firms, including property manager firms like the Property Managers. Id. at # 376. Fiduciary retained Bantry to provide real estate advice because Fiduciary and Mr. Brimberry lacked such expertise. Id. at # 377.
41. Fiduciary's investigation revealed that, between February 2006 and December 2010, Mr. Brimberry engaged in two schemes - the General Scheme and the BSA Scheme - to defraud YF Partners out of approximately $1.9 million. Id. at ## 380-605. To execute those schemes, Mr. Brimberry created two fictitious entities that he held out as "consultants," and used those fictitious entities to funnel monies from YF Partners into personal accounts that Mr. Brimberry controlled to pay personal expenses, including premiums on the Policies at issue. Id.
42. In November 2005, Mr. and Mrs. Brimberry contracted with General Heating & Air Conditioning, Inc., a company located in Monrovia, California, to install a heating and air conditioning system in their home. Id. at # 378.
43. After rebates, the total cost of installing the heating and air conditioning system in the Brimberrys' home was $37,624.00. Id. at # 379.
44. On January 30, 2006, Star Pleasant, of General Heating & Air Conditioning, Inc., sent Mr. Brimberry instructions to wire $37,624.00 to General Heating & Air Conditioning, Inc.'s account at Citizens Business Bank, to the attention of Corrine Grosenbach. Id. at # 380.
45. On February 1, 2006, Mr. Brimberry emailed SkyWest and claimed that one of the members of the Friedman Family, Leonard Friedman, had hired a real estate consultant, "General," to review the Property and offer assessments and recommendations. Id. at # 381. Brimberry instructed Allen Glidewell of SkyWest to wire $37,624.00 from the Property Account to "General" at an account at Citizens Business Bank. Id.
46. Mrs. Brimberry has never heard of a real estate consulting firm named "General," instead, she testified, "General Heating & Air Conditioning is the only thing I know." Id. at # 384.
47. Starting in February 2006 until December 2010, Mr. Brimberry requested that SkyWest, Status and Riverstone send payments from the Property Account for services purportedly performed by "BSA," later referred to by Mr. Brimberry as "B.S.A. Pasadena" and "BSA Advisors" (together, "BSA"). Id. at ## 387-389, 392-393, 395-397, 399-400, 406-408, 411, 417-418, 422, 431-432, 436-437, 441-442, 451-453, 458-459, 464, 468, 472, 478, 482, 489, 495, 499, 507, 511, 519, 523, 531, 539, 545, 552, 558, 566, 572, 578, 584, 588, 592.
48. Starting in December 2006, Mr. Brimberry began asking Stratus, which had since taken over the Property from SkyWest, to make quarterly payments to BSA from the Property Account. Id. at ## 399-441.
49. In December 2006, at Mr. Brimberry's request, Bantry emailed Stratus and asked for the Property Manager to "issue a check in the amount of $49,500 payable to BSA and forward directly to Kurt Brimberry." Id. at # 399.
50. Mr. Brimberry faxed purported BSA invoices to Stratus, and Stratus continued to remit payments to BSA from the Property Account at Mr. Brimberry's request. Id. at ## 411-413, 417-418, 422, 429, 431-433, 436-437, 441-442.
51. In March 2008, after taking over managing the Property from Stratus, Riverstone, at Mr. Brimberry's request, began making nearly monthly payments to BSA, again drawing such payments from the Property Account. Id. at ## 451-452, 458-459, 464, 468, 472, 478, 482, 489, 495, 499, 507, 511, 519, 523, 531, 539, 545, 55, 558, 566, 572, 578, 584, 588, 592.
52. Mr. Brimberry represented to the Property Managers that BSA was a real estate consulting firm that Mr. Friedman retained in connection with the Property. Id. at # 395.
53. However, BSA was actually another fictitious entity that Mr. Brimberry had created to funnel money from the Property Account to himself. Id. at ## 369, 404-405, 412-414, 416 & 423-424.
54. Mr. Brimberry asked that BSA payments be sent to his attention and informed the Property Managers that he would forward the payments to BSA. Id. at ## 387, 392, 395, 399.
55. Numerous Microsoft Word versions of purported BSA invoices were found on Mr. Brimberry's work computer, with metadata identifying Mr. Brimberry as the creator of those documents. Id. at # 412.
56. The address on the BSA Invoices was not an address for any company called BSA Advisors, but rather was the address for La Jolla Shores Postal & Shipping in La Jolla, California. Id. at # 413.
57. The phone number on the BSA Invoices did and does not lead to an entity called BSA Advisors. Id. at # 414.
58. While Mr. Brimberry indicated to Stratus that BSA's taxpayer identification number was 95-1643984 (Id. at # 403), that taxpayer identification number belongs to the Boy Scouts of America's San Gabriel Valley Council (Id. at # 405).
59. Records produced by Bank of America show that, from February 2006 through June 2007, Mr. Brimberry deposited checks made payable to BSA into an account maintained at that bank in the name of Boy Scout Troop #358 (the "Troop 358 Account"). Id. at ## 389, 393, 397, 400, 407, 408 & 418.
60. At that time, and until June 2007, Mr. Brimberry was the treasurer of the Boy Scout Troop #358, and had signatory authority over the Troop 358 Account. Id. at # 391.
61. Among other things, saved on Mr. Brimberry's work computer was an unsigned letter purportedly prepared for the signature of William S. Waldo, Esq., an attorney who served as chairperson of the Boy Scouts' San Gabriel Valley Council Finance Committee. Id. at # 423. The letter purports to authorize Mr. Brimberry to "establish a BankAmerica [sic] checking account and conduct business on behalf of Boy Scouts of America," notes the BSA Account's specific account number, and asks that the account "be named BSA." Id. at # 424. Mr. Waldo, however, did not write, authorize, approve, assist in preparing, or sign any letter authorizing Mr. Brimberry to open the BSA Account, nor did he verbally authorize Mr. Brimberry to open the BSA Account. Id. at # 425.
62. Mr. Brimberry was the only signor on the BSA Account. Id. at # 427.
63. From July 2007 through December 2010, Mr. Brimberry regularly deposited checks drawn on the Property Account into the BSA Account. Id. at ## 427-593.
64. From at least July 2007 through December 2010, Mr. Brimberry regularly transferred funds from the BSA Account to an account at Citizens Business Bank for which Mr. and Mrs. Brimberry were both signors ("CBB 255500736"). Id., at ## 429-599.
65. Mr. Brimberry's transfers between the two accounts occurred primarily through checks drawn from the BSA Account and deposited directly into CBB 255500736 and, beginning in October 2007, through cashier's checks that Mr. Brimberry purchased from BSA Account funds and subsequently deposited into CBB 255500736. Id.
66. BSA was a fictitious entity whose initials Mr. Brimberry borrowed from the Boy Scouts of America - an organization in which Mr. Brimberry was long involved. Id. at ## 403, 405.
67. Both Mrs. Brimberry and her son, Kurt A. Brimberry Jr. ("Kurt Jr.") testified that they had never seen BSA business cards, marketing materials, a website, email address, or documents of incorporation or other legal documents establishing its existence. Id. at ## 602-603. Although Mrs. Brimberry testified that she "[does not] know one way or another whether [BSA] was legitimate . . . or illegitimate," Kurt Jr. testified that, based on his review of files kept on his father's computer, he believes that BSA is a "fictitious company" and that his father, Mr. Brimberry, "committed fraud in relationship to a client account at Fiduciary Trust." Id. at ## 605, 613.
68. From August 2006 through December 31, 2011, Mr. Brimberry made all Premium Payments for both Policies from CBB 255500736. SUF # 624.
69. The Premium Payments between August 2006 and December 2011 totaled $42,106. Uetlzen Decl. ¶ 22.
70. From August 2006 through October 31, 2011, Mr. Brimberry deposited his Fiduciary paychecks, including his salary, expense reimbursements, and other compensation, totaling $3,223,588, into his Citizens Business Bank Account 255500736 ("CBB 255500736"). SUF # 642; Ueltzen Decl. ¶ 21(b), 23, 35.
71. On August 15, 2006, Mr. Brimberry deposited a total of $22,371 of ill-gotten salary and other compensation into CBB 255500736. Ueltzen Decl. ¶ 24. Mr. Brimberry then deposited additional ill-gotten salary and other compensation approximately every two weeks into CBB 255500736 until October 2011. Id.
72. At all times starting August 15, 2006, the amount of ill-gotten salary and compensation deposited into CBB 255500736 exceeded the Premium Payments made from CBB 255500736. SUF # 645; Ueltzen Decl. ¶ 21(b), 24.
73. On the date of each Premium Payment starting August 16, 2006, the amount of ill-gotten salary and other compensation deposited into CBB 255500736 exceeded the available balance in CBB 255500736. SUF # 646; Ueltzen Decl. ¶ 21(b), 25.
74. On October 3, 2011, Mr. Brimberry opened a Citizens Business Bank Account 255316656 ("CBB 255316656"). SUF # 637.
75. On October 14, 2011, Mr. Brimberry transferred $218,842.00 from CBB 255500736 to CBB 255316656. Id. at # 638; Ueltzen Decl. ¶ 39.
76. On October 14, 2011, the total amount of ill-gotten compensation that had been deposited into CBB 255500736 exceeded the available balance in CBB 255500736. SUF # 647; Ueltzen Decl. ¶ 40.
77. At all times starting January 1, 2012, the total amount of funds transferred into CBB 255316656 from CBB 255500736 on October 14, 2011, exceeded the Premium Payments made from CBB 255316656. SUF # 648, Ueltzen Decl. ¶ 42.
78. From January 1, 2012 through August 15, 2012, Mr. Brimberry made all Premium Payments from CBB 255316656. SUF # 639.
79. From November 1, 2011 through August 2012, Mr. Brimberry deposited his Fiduciary paychecks, including his salary, expense reimbursements, and other compensation, directly into CBB 255316656. SUF # 643, Ueltzen Decl. ¶ 21(h).
80. Mr. Brimberry's January 2012 through August 15, 2012 Premium Payments were $6,453. Ueltzen Decl. ¶ 21(f).
81. At all times starting January 17, 2012, the amount of ill-gotten salary and compensation deposited into CBB 255316656 exceeded the Premium Payments made from CBB 255316656. SUF # 650; Uetlzen Decl. ¶ 21(h), 45.
82. In addition, on the date of each Premium Payment from CBB 255316656, the amount of ill-gotten salary and other compensation deposited into CBB 255316656 exceeded the available balance in CBB 255316656. SUF # 651; Uetlzen Decl. ¶ 21(h).
83. The policy date for Policy 15395737 began on April 28, 2000 (Hoffman Decl. ¶ 60, Ex. 59 at 693) and the policy date for Policy 15404334 began on April 15, 2000 (Hoffman Decl. ¶ 62, Ex. 61 at 716).
84. Mr. Brimberry began making payments towards Policy 15395737 in April 2000. Hoffman Decl. ¶ 60, Ex. 59 at 693.
85. Fiduciary provides a Northwestern document with a table of annual premiums that lists the scheduled and maximum Premium Payments per year for Policy 15395737. Hoffman Decl. ¶ 60, Ex. 59 at 695.
86. Mr. Brimberry paid a total $8,290.00 in Premium Payments between 2000 and 2004 for Policy 15395737. Id.
87. Mr. Brimberry paid at most $6,315.00 in 2005 for Policy 15395737. Id.
88. Policy 15395737 was entitled to a $258.90 credit. Id. at 705.
89. Fiduciary presents a document produced by Northwestern entitled "Insurance Service Account History" indicating the actual Premium Payments made on Policy 15395737 between January 2006 and July 2006 -$1,265.16. Hoffman Decl. ¶ 61, Ex. 60 at 707.
90. Between April 2000 and July 2006, Mr. Brimberry paid a total of $16,129.06 ($8,290 + $6,315 + $258.90 + $1,265.16) in Premium Payments for Policy 15395737.
91. Between August 2006 and August 2012, Mr. Brimberry made $16,009.48 in Premium Payments for Policy 15395737. Ueltzen Decl. ¶ 50; Hoffman Decl. ¶ 61, Ex. 60
92. Mr. Brimberry began making Premium Payments towards Policy 15404334 in April 2000. Hoffman Decl. ¶ 62, Ex. 61 at 716.
93. Fiduciary provides a Northwestern document with a table of annual premiums that lists the scheduled and maximum Premium Payments per year for Policy 15404334. Hoffman Decl. ¶ 62, Ex. 61 at 717.
94. Mr. Brimberry paid a total $14,930.00 in Premium Payments between 2000 and 2004 for Policy 15404334. Id.
95. Mr. Brimberry paid at most $9,540.00 in 2005 for Policy 15404334. Id.
96. Policy 15404334 was entitled to a $563.52 credit. Id. at ¶ 62, Ex. 61 at 729.
97. Fiduciary presents a document produced by Northwestern entitled "Insurance Service Account History" evidencing the actual Premium Payments made on Policy 15404334 between January 2006 and July 2006 - $2,456.98. Hoffman Decl. ¶ 61, Ex. 60 at 707.
98. Between April 2000 and July 2006, Mr. Brimberry paid a total of $27,490.50 ($14,930.00 + $9,540.00 + $563.52 + $2,456.98) in Premium Payments for Policy 15404334.
99. Between August 2006 and August 2012, Mr. Brimberry made $32,548.61 in Premium Payments for Policy 15404334. Ueltzen Decl. ¶ 50; Hoffman Decl. ¶ 61, Ex. 60.
CONCLUSIONS OF LAW
1. Where funds of another have been misappropriated and used to purchase, or pay premiums on, life insurance, courts will generally allow the person whose funds were misused some form of recovery; for example, a court can impose a constructive trust on the proceeds of the life insurance policy. See Brodie v. Barnes, 56 Cal. App. 2d 315 (1942).
2. Thus, "when the premiums of a life insurance policy are paid in part with embezzled funds, the owner of the embezzled money is entitled to the proceeds of the policy, as against the beneficiaries, in the proportion in which the funds so appropriated paid the premiums." 5 Couch on Insurance § 74.38 (2013); Brodie, 56 Cal. App. 2d at 323.
3. If payments for the insurance premiums can be traced to funds wrongfully obtained from Fiduciary, then the fruit of such payments is held in constructive trust for the benefit of Fiduciary. See Church v. Bailey, 90 Cal. App. 2d 501, 504 (1949) ("One who wrongfully detains funds of another is an involuntary trustee thereof for the benefit of the owner, and a trust will be impressed upon property acquired with such funds unless the same is held by a bona fide purchaser for value without notice in good faith.").
4. Employees are under a duty of loyalty to the employer. See, e.g., Dana Perfumes, Inc. v. Mullica, 268 F.2d 936, 937 (9th Cir. 1959) (law imposes on an employee implied conditions of loyalty to the employer); Paramount Mfg. Co. v. Mohan, 196 Cal. App. 2d 372 (1961) (employee or agent must account to employer for secret profits and benefits received in course of employment).
5. By engaging in the Expense Reimbursement and Client Fraud Schemes, Mr. Brimberry abused and breached his duty to Fiduciary. At the very moment he was paid his salary, Mr. Brimberry should have advised Fiduciary of his embezzlements. See Brown v. New York Life Ins. Co., 152 F.2d 246, 250 (9th Cir. 1945). Instead, Mr. Brimberry continued to collect substantial salary and other compensation. The salary received by Mr. Brimberry is considered "the receipt [] of moneys not due to him, obtained under false pretenses of his performance of his trust obligations to [Fiduciary]." See id. at 250. Thus, in failing to inform Fiduciary of his two schemes, the salary that he received was subject to a constructive trust in favor of Fiduciary. See id.
6. Because Mr. Brimberry, like the former employee in Brown, made Premium Payments with ill-gotten money paid to him by Fiduciary, Fiduciary is entitled to a share of the insurance proceeds in proportion to the amount of Premium Payments he made with his ill-gotten salary. See id. at 249-50.
7. "[W]hen the money of the trustor can be traced to a particular fund, or deposit, though it be mingled with other money, the beneficiary may enforce the trust." Mitchell v. Dunn, 211 Cal. 129, 136 (1930).
8. "When a trust fund has been partially dissipated by the trustee, and later the trustee deposits in the depleted account personal funds, there is a strong presumption that it was the trustee's intention in making such deposits to make the trust fund whole." Id. at 134.
9. Where the perpetrator of a fraud depletes the account and then deposits lawfully obtained monies into it, the lawfully obtained monies are presumed to replace the dissipated funds belonging to the beneficiary of the constructive trust. See Church, 90 Cal. App. 2d at 504.
10. Even if Mr. Brimberry commingled the trust money with legitimate funds, the Policies would still be purchased with trust funds. See Church, 90 Cal. App. 2d at 504.
11. Even where a trust fund has been dissipated, the trust can be revived by subsequent deposits that are specifically intended to achieve this purpose. Alioto v. U.S., 593 F. Supp. 1402, 1411 (N.D. Cal. 1984) (citing In re Gottfried Baking Co., 312 F. Supp. 643, 645 (S.D.N.Y. 1970); Restatement (Second) of Trusts § 202 comment m.
12. "When a trust fund has been partially dissipated by the trustee, and later the trustee deposits in the depleted account personal funds, there is a strong presumption that it was the trustee's intention in making such deposits to make the trust fund whole." Mitchell, 211 Cal. at 134. Thus, [i]t needs no citation of authority to support the proposition that when a person has stolen, embezzled or misappropriated another's property the injured party should be restored to the possession of his property or its equivalent." Church, 90 Cal. App. 2d at 504. In other words, where a trustee commingles personal funds with trust funds, and dissipates the commingled funds such that the trust funds are affected, and then deposits additional personal funds into the account, it may be presumed that the trustee was intending to reimburse the trust funds. Id.; Mitchell, 211 Cal. at 134. In such a situation, the trust funds will be replenished.
13. Even if Mr. Brimberry dissipated the entire fund, the trust has been revived by subsequent deposits, as it is presumed that those subsequent deposits were intended to revive the fund. See Church, 90 Cal. App. 2d at 504.
14. As Mr. Brimberry paid the premiums with trust funds from that commingled account, the Policies at issue were purchased, in part, with Fiduciary's funds, and Mr. Brimberry was holding the Policies in trust for Fiduciary. See Mitchell, 211 Cal. at 137.
15. Because the Premium Payments were made with the ill-gotten salary that Fiduciary paid to Mr. Brimberry, Fiduciary is entitled to its proportionate share of the life insurance proceeds at issue. See Brodie, 56 Cal. App. 2d at 323.
IT IS SO ORDERED.
___________________
HONORABLE RONALD S.W. LEW
Senior U.S. District Judge