Hill v. Ozar (In Re Wholesale Furniture Mart, Inc.)

W.D. Missouri

Hill v. Ozar (In Re Wholesale Furniture Mart, Inc.)

24 B.R. 240, 1982 Bankr. LEXIS 3277

CourtUnited States Bankruptcy Court, W.D. Missouri

DecidedSeptember 22, 1982

Docket18-30665

StatusPublished

Cited by17 cases

This text of 24 B.R. 240 (Hill v. Ozar (In Re Wholesale Furniture Mart, Inc.)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, W.D. Missouri primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

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Hill v. Ozar (In Re Wholesale Furniture Mart, Inc.), 24 B.R. 240, 1982 Bankr. LEXIS 3277 (Mo. 1982).

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Opinion

FINDINGS OF FACT, CONCLUSIONS OF LAW AND FINAL JUDGMENT FOR PLAINTIFFS AGAINST THE DEBTOR CORPORATION AND RESPONDENTS GRAY IN VARIOUS SUMS

DENNIS J. STEWART, Bankruptcy Judge.

This is an action initiated by a customer of the debtor corporation who, as of the time of the conversion of these former chapter 11 proceedings to chapter 7 proceedings, had paid all or part of the price of certain merchandise but never received that merchandise. The court of bankruptcy has treated the action thus initiated as a class action in favor of all customers who had paid the chapter 11 debtor for merchandise which they did not receive. 1

*242 The hearings and inquiries which have accordingly been conducted by the court to determine (1) the membership of the plaintiff class and the amount each has paid for merchandise which he or she has not received and (2) the disposition of these monies.

It has been the contention of the trustee in bankruptcy throughout these proceedings (1) that the class action is improper and (2) that, even if monies paid by members of the plaintiff class can in fact be traced into the bankruptcy estate, the class members must nevertheless be relegated to status of general unsecured claimants. 2

The court, nevertheless, in the exercise of its duty and power to ensure that a class action is properly prosecuted, even in the temporary absence of a proper class representative, 3 has made successive efforts to ascertain the composition of the class and to trace the monies which they paid for merchandise which they did not receive into the estate or elsewhere. To this end, the court has set successive hearings, but has been frustrated at several junctures in the proceeding, first by the withdrawal of counsel for the defendants Gray and then by the refusal of the defendants Gray to retain any successor counsel.

At last, at the hearing set by the court for June 28, 1982, the defendant Richard Gray appeared before the court without counsel and submitted records which purported to show the list of persons who made payments for merchandise which they did not receive. That list is reproduced in the marginal note. 4 It was his contention that the monies thus paid are shown to be traceable to the same $18,500.00 which were in the debtor corporation’s bank account as of the date of the conversion of chapter 11 proceedings to chapter 7 proceedings.

A review of the records which were submitted by Mr. Gray only purports to show that the monies collected from the members of the plaintiff class went into the bank account which had the above balance of $18,500.00 in it as of the date of the conversion. But these records hardly purport to show that the monies paid in by the members of the plaintiff class were the same monies as those which remained in the bank account as of the date of conversion. Rather, they only show that those monies went into the bank account; that they were there commingled with other monies; that operating and other expenses were paid out of the bank account, and that, of a much larger total deposited in the bank account over the period of time purporting to be *243 covered by the records, the sum of $18,-500.00 remained in the bank account as of the date of conversion.

These facts compel the court to conclude that the monies paid by the would-be purchasers of merchandise from the debtor cannot be traced into the bankruptcy estate and such tracing is the necessary condition for recovery from the estate. See 4A Collier on Bankruptcy ¶ 70.25, pp. 346, 348 (1978), to the following effect:

“Money paid to the bankrupt prior to bankruptcy under a mistake of fact is impressed with a constructive trust that follows it into the hands of the bankruptcy trustee ... A trust relationship may also be created by conduct ... One of the more common forms of constructive or involuntary trusts created by conduct is that of the trust ex maleficio — that is, created by wrongdoing. Such a trust usually arises out of the conversion of money or property belonging to another. Where the existence of the trustee will be ordered to turn over the property or proceeds, subject, of course, to the beneficiary’s discharging the burden of tracing the trust property.” (Emphasis added.)

Accordingly, the plaintiffs cannot recover from the bankruptcy estate. 5

Rather, the right of the plaintiffs to recover exists directly against the defendants Gray. The monies paid to the debtor corporation by the would-be purchaser of merchandise was paid subject to return in the event the merchandise were not delivered. As such, it constituted a special fund which should not have been commingled with the other monies of the debtor corporation before the delivery of the merchandise. 6 Under the governing authorities, such commingling constituted conversion of the money of the plaintiffs. 7 Even though the money was converted to the use and benefit of the debtor corporation, the managing officers and agents of the corporation, the Grays, who effected the conversion, are jointly and severally liable to the plaintiffs for the conversion. See Matter of Transport Clearings-Midwest, Inc., 16 B.R. 890, 895, 896 (Bkrtcy.W.D.Mo.1979), to the following effect:

“ ‘By the great weight of authority it is recognized that officers of a corporation are personally liable, or are jointly liable with the corporation, to one whose money or property has been misappropriated-or converted by them to the uses of the corporation, although they derived no personal benefit therefrom and acted merely as agents of the corporation — the theory being that an agent cannot escape the consequences of his tort by the fact that he committed the tort as agent for his principal.’ Anno., Personal Liability of Corporate Directors or Officers to Third Persons for Restitution, or for Damages for Conversion, Under Circumstances Rendering the Corporation Itself Liable, 152 A.L.R. 696, 705 (1944).

“ ‘Of course, defendant’s liability did not depend upon his having derived any personal benefit from the alleged conversion.’ Darling & Co., v. Fry, supra, [24 S.W.2d] at 724. A corporate officer was held liable for conversion of the plaintiff’s money to pay other corporate debts for which the officer bore no personal liability in Patrons Bank & Trust Co., v. Shapiro, 215 Kan. 856, 528 P.2d 1198 (1974). ‘The debt ... would seem to have been created by his appropriation or defalcations while acting as an officer of the bankrupt corporation ... whether or *244 not he profited personally by the transaction.’ Kaufman v. Lederfine, 49 F.Supp. 144, 145 (S.D.N.Y.1943).”

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FINDINGS OF FACT, CONCLUSIONS OF LAW AND FINAL JUDGMENT FOR PLAINTIFFS AGAINST THE DEBTOR CORPORATION AND RESPONDENTS GRAY IN VARIOUS SUMS

DENNIS J. STEWART, Bankruptcy Judge.

This is an action initiated by a customer of the debtor corporation who, as of the time of the conversion of these former chapter 11 proceedings to chapter 7 proceedings, had paid all or part of the price of certain merchandise but never received that merchandise. The court of bankruptcy has treated the action thus initiated as a class action in favor of all customers who had paid the chapter 11 debtor for merchandise which they did not receive. 1

*242 The hearings and inquiries which have accordingly been conducted by the court to determine (1) the membership of the plaintiff class and the amount each has paid for merchandise which he or she has not received and (2) the disposition of these monies.

It has been the contention of the trustee in bankruptcy throughout these proceedings (1) that the class action is improper and (2) that, even if monies paid by members of the plaintiff class can in fact be traced into the bankruptcy estate, the class members must nevertheless be relegated to status of general unsecured claimants. 2

The court, nevertheless, in the exercise of its duty and power to ensure that a class action is properly prosecuted, even in the temporary absence of a proper class representative, 3 has made successive efforts to ascertain the composition of the class and to trace the monies which they paid for merchandise which they did not receive into the estate or elsewhere. To this end, the court has set successive hearings, but has been frustrated at several junctures in the proceeding, first by the withdrawal of counsel for the defendants Gray and then by the refusal of the defendants Gray to retain any successor counsel.

At last, at the hearing set by the court for June 28, 1982, the defendant Richard Gray appeared before the court without counsel and submitted records which purported to show the list of persons who made payments for merchandise which they did not receive. That list is reproduced in the marginal note. 4 It was his contention that the monies thus paid are shown to be traceable to the same $18,500.00 which were in the debtor corporation’s bank account as of the date of the conversion of chapter 11 proceedings to chapter 7 proceedings.

A review of the records which were submitted by Mr. Gray only purports to show that the monies collected from the members of the plaintiff class went into the bank account which had the above balance of $18,500.00 in it as of the date of the conversion. But these records hardly purport to show that the monies paid in by the members of the plaintiff class were the same monies as those which remained in the bank account as of the date of conversion. Rather, they only show that those monies went into the bank account; that they were there commingled with other monies; that operating and other expenses were paid out of the bank account, and that, of a much larger total deposited in the bank account over the period of time purporting to be *243 covered by the records, the sum of $18,-500.00 remained in the bank account as of the date of conversion.

These facts compel the court to conclude that the monies paid by the would-be purchasers of merchandise from the debtor cannot be traced into the bankruptcy estate and such tracing is the necessary condition for recovery from the estate. See 4A Collier on Bankruptcy ¶ 70.25, pp. 346, 348 (1978), to the following effect:

“Money paid to the bankrupt prior to bankruptcy under a mistake of fact is impressed with a constructive trust that follows it into the hands of the bankruptcy trustee ... A trust relationship may also be created by conduct ... One of the more common forms of constructive or involuntary trusts created by conduct is that of the trust ex maleficio — that is, created by wrongdoing. Such a trust usually arises out of the conversion of money or property belonging to another. Where the existence of the trustee will be ordered to turn over the property or proceeds, subject, of course, to the beneficiary’s discharging the burden of tracing the trust property.” (Emphasis added.)

Accordingly, the plaintiffs cannot recover from the bankruptcy estate. 5

Rather, the right of the plaintiffs to recover exists directly against the defendants Gray. The monies paid to the debtor corporation by the would-be purchaser of merchandise was paid subject to return in the event the merchandise were not delivered. As such, it constituted a special fund which should not have been commingled with the other monies of the debtor corporation before the delivery of the merchandise. 6 Under the governing authorities, such commingling constituted conversion of the money of the plaintiffs. 7 Even though the money was converted to the use and benefit of the debtor corporation, the managing officers and agents of the corporation, the Grays, who effected the conversion, are jointly and severally liable to the plaintiffs for the conversion. See Matter of Transport Clearings-Midwest, Inc., 16 B.R. 890, 895, 896 (Bkrtcy.W.D.Mo.1979), to the following effect:

“ ‘By the great weight of authority it is recognized that officers of a corporation are personally liable, or are jointly liable with the corporation, to one whose money or property has been misappropriated-or converted by them to the uses of the corporation, although they derived no personal benefit therefrom and acted merely as agents of the corporation — the theory being that an agent cannot escape the consequences of his tort by the fact that he committed the tort as agent for his principal.’ Anno., Personal Liability of Corporate Directors or Officers to Third Persons for Restitution, or for Damages for Conversion, Under Circumstances Rendering the Corporation Itself Liable, 152 A.L.R. 696, 705 (1944).

“ ‘Of course, defendant’s liability did not depend upon his having derived any personal benefit from the alleged conversion.’ Darling & Co., v. Fry, supra, [24 S.W.2d] at 724. A corporate officer was held liable for conversion of the plaintiff’s money to pay other corporate debts for which the officer bore no personal liability in Patrons Bank & Trust Co., v. Shapiro, 215 Kan. 856, 528 P.2d 1198 (1974). ‘The debt ... would seem to have been created by his appropriation or defalcations while acting as an officer of the bankrupt corporation ... whether or *244 not he profited personally by the transaction.’ Kaufman v. Lederfine, 49 F.Supp. 144, 145 (S.D.N.Y.1943).”

In this case, it was the defendants Gray who determined during the relevant time periods how the monies in the custody of the corporation should be handled and disposed of. Consequently, they participated in the tort of conversion and are therefore liable to the plaintiffs for the value converted. 8

The court in this action has not been able to conduct a hearing to determine whether the conversion was wilful and malicious within the meaning of § 523(a)(2) of the Bankruptcy Code. Further, that issue has not been relevant to the action at bar because the defendants Gray are not themselves debtors in title 11 proceedings. If it becomes relevant, a hearing on the issue may be conducted at a later time and a. judgment on any future issue of discharge-ability rendered.

It is therefore, for the foregoing reasons,

ADJUDGED that the plaintiff’s claims for reclamation of any monies or property directly from the estate in bankruptcy be, and they are hereby, denied. It is further

ADJUDGED that the plaintiff class members, and each of them, have and recover from the respondent debtor corporation and from Thomas Gray and Pamela Gray, jointly and severally, the sums set out in the marginal note, 9 and that, with respect to the debtor corporation, the indebtedness be, and it is hereby, declared to be nondischargeable in bankruptcy. 10

EXHIBIT "A”

PRIOR TO CHAPTER 11 PETITION DEPOSITS

Amy Armstrong Claim incurred $222.40

500 E. 3rd St., Apt. 9 March 23,1980

Lee’s Summit, Mo. 64063

W. H. Benton Claim incurred 412.00

11308 E. 44th St. March 7,1980

Kansas City, Mo. 64133

Terry Lee Boone Claim incurred 418.56

1508 E. 43rd St. March 2,1980

Indep., Mo. 64055

Troy Brantley Claim incurred -0~

24401W. 86th Terr. March 26,1980

Olathe, Ks. 66061

Anthony Brzezinski Claim incurred 792.00

2404 W. 38th Ave. September 6,1979

Kansas City, Ks. 66103

Faye and Nick Cavlovich Claim incurred 256.68

9132 E. 43rd Terr. January 28,1980

Kansas City, Mo. 64133

Bob DeMay Claim incurred -0-

3901 Queen Ridge February 22,1980

Indep., Mo. 64055

W. E. Dummit Claim incurred 568.63

Route 1, Box 275 December 10,1979

Gardner, Ks. 66030

David Etter Claim incurred -0-

16005 W. 154th St. December 14,1979

Olathe, Ks. 66061

Kyle and Brenda Fitzgerald • Claim incurred 422.83

8917 W. 101st St. January 18,1980

Overland Park, Ks. 66212

Judy Galate Claim incurred 500.00

509 Myrtle March 13,1980

Kansas City, Mo. 64124

Patricia C. Hanks Claim incurred 200.00

10812 W. 56th Terr. October 30,1979

Shawnee Mission, Ks. 66203

Omar Hazley Claim incurred 300.00

8600 E. 50th Terr. January 10,1980

Kansas City, Mo. 64129

John Heath Claim incurred 501.72

9409 E. 84th St. February 17,1979

Raytown, Mo. 64138

Patricia Henderson Claim incurred 100.00

7820 Grant, #14 March 30,1980

Overland Park, Ks. 66201

Thomas J. Houston Claim incurred 848.65

1902 Peach October 21,1979

Higginsville, Mo. 64037

Kansas City Foreign Car Claim incurred 900.00

Parts & Salvage February 28,1980

1301N. Century Dr.

Kansas City, Mo. 64120

Joseph Martinez Claim incurred 54.75

2112 Taylor Dr. May 1,1980

Olathe, Ks. 66062

Gayle Newman Claim incurred 219.75

12613 W. 104th Terr. December 18,1979

Olathe Park, Ks.

Susan Prather Claim incurred 367.24

13401 Winchester February 2,1980

Grandview, Mo. 64030

*245 EXHIBIT “A”

PRIOR TO CHAPTER 11 PETITION DEPOSITS

Claim incurred Robert L. Smith 33.76

January 4,1979 5103 Long Dr.

Shawnee, Ks. 66216

Jesse T. or Anita Stenner Claim incurred 226.27

Route 1, Box 169 December 7,1979

Kearney, Mo. 64060

William R. and Kathleen Venable Claim incurred 65.00

3941W. 98th St. January 12,1980

Overland Park, Ks. 66207

Nancy C. Victor Claim incurred 206.99

7013 Gillette January 30,1980

Shawnee Mission, Ks. 66212

Alan W. Viebrock Claim incurred 206.56

4815 W. 55th March 21,1980

Roeland Park, Ks. 66205

C. R. Warren Claim incurred

16601 Lamar February 17,1980

Stilwell, Ks. 66085

AFTER CHAPTER 11 PETITION DEPOSITS

Steve Able Claim incurred $186.15

7708 W. 60th Terr. August 1,1980

Overland Park, Ks. 66202

G. R. Allan Claim incurred 100.00

9510 Halsey, Apt. 204 May 5,1980

Lenexa, Ks. 66215

Robert Baker Claim incurred 100.00

5225 Brookwood August 1,1980

Kansas City, Mo. 64130

H. Bass Claim incurred 400.00

Box 224 September 27,1980

Mayview, Mo. 64071

H. Berry Claim incurred 120.00

5607 Garfield September 21,1980

Kansas City, Mo. 64130

Roger Betts Claim incurred 280.00

6018 E. 127th June 3,1980

Grandview, Mo. 64030

Susan L. Brown Claim incurred

6624 Grand August 29,1980

Kansas City, Mo. 64113

Sylvester Brown Claim incurred 35.00

7350 State July 19,1980

Kansas City, Ks. 66112

Mark Carter Claim incurred 46.00

6112 E. 126th St. June 20,1980

Grandview, Mo. 64030

Charles W. Coffman Claim incurred 202.00

4800 W. 64th St. September 1,1980

Prairie Village, Ks. 66208

Mike N. Connors Claim incurred 122.00

10506 W. 73rd November 6,1980

Shawnee Mission, Ks. 66203

David Deutscher Claim incurred 102.00

12122 W. 97th St. May 17,1980

Lenexa, Ks. 66215

Ben Douglas Claim incurred 200.00

5314 N. Lydia August 10,1980

Kansas City, Mo. 64118

Lillian Frankenfield Claim incurred 55.92

508 S. Hospital Dr. November 22,1980

Paola, Ks. 66071

Lillian Frankenfield Claim incurred 19.76

508 S. Hospital Dr. November 22,1980

Paola, Ks. 66071

Dee Dee Glover Claim incurred 20.00

1009 A. Dennis Ct. January 2,1980

Olathe, Ks. 66061

W. Harries Claim incurred 200.00

6563 W. 49th September 11,1980

Mission, Ks. 66202

Bill Helms Claim incurred 616.00

3107 N.E. 65th Terr. November 8,1980

Gladstone, Mo. 64119

Bill Helms Claim incurred 156.00

3107 N.E. 65th Terr. December 6,1980

Gladstone, Mo. 64119

Eagle Enterprises (Leo Hill) Claim incurred 100.00

5311 Hardey July 12,1980

Raytown, Mo. 64133

Lunnell Hollinshed Claim incurred 104.16

1908 Washington Ave. August 6,1980

Kansas City, Ks. 66102

Greg Joens Claim incurred 325.00

4030 W. 98th Terr. October 26,1980

Overland Park, Ks. 66207

Steve Joens Claim incurred 200.00

4030 W. 98th Terr. October 24,1980

Overland Park, Ks. 66207

Jackie Johnson Claim incurred 161.04

9244 Wedd February 19,1981

Overland Park, Ks. 66212

Raymond J. Kerrin Claim incurred 150.00

1113 Palmer Circle September 21,1980

Olathe, Ks. 66061

D. Knudson Claim incurred 382.00

441 N. 83rd Terr. September 5,1980

Kansas City, Ks. 66112

Marquita Lee Claim incurred 300.00

8540 Walmer January 16,1981

Overland Park, Ks. 66212

Jack Lewis Claim incurred 125.00

2959 Jackson October 6,1980

Kansas City, Mo. 64128

Albert J. Lowe, III Claim incurred 600.20

5121 Oakleaf Dr. August 13,1980

Kansas City, Mo. 64129

Albert J. Lowe, III Claim incurred

5121 Oakleaf Dr. August 13,1980

Kansas City, Mo. 64129

Virginia McGrew Claim incurred 150.00

R.R. 3,259C June 10,1980

Leavenworth, Ks. 66048

Stephen McGuckin Claim incurred 80.00

1118 Penntower September 30,1980

3100 Broadway

Kansas City, Mo. 64111

Phyllis J. Mejia Claim incurred 60.00

966 S. 65th St. September 19,1980

Kansas City, Ks. 66111

Louise Mimms Claim incurred 100.00

9901 Rosehill Rd. June 1,1980

Lenexa, Ks. 66215

*246 EXHIBIT “A”

AFTER CHAPTER 11 PETITION DEPOSITS

Louise Mimms Claim incurred 10.00

9901 Rosehill Rd. June 1,1980

Lenexa, Ks. 66215

Cheryle Mitchell Claim incurred 25.00

8258 Monroe Dr. Apt. A October 23,1980

Kansas City, Ks. 66112

Harold Monlowe Claim incurred 50.00

7119 Myrtle - August 13,1980

Kansas City, Mo. 64132

Walter Randolph Claim incurred 100.00

8800 Bristol June 23,1980

Kansas City, Mo. 64138

Bobby Richardson Claim incurred 200.00

Sue Blackburn December 1,1980

8816 Flora

Kansas City, Mo. 64131

D. Reed Claim incurred 50.00

7218 E. 87th Terr., Apt. 302 September 14,1980

Kansas City, Mo. 64138

Mary Reed Claim incurred 30.56

13917 Summertree August 30,1980

Olathe, Ks. 66061

Michael Rodman Claim incurred 150.00

Box 354 October 26,1980

LaCygne, Ks. 66040

T. Smith Claim incurred 203.76

Route 2, South Madison September 18,1980

Raymore, Mo. 64083

Gary Stamps Claim incurred 100.00

5629 E. 40th July 7,1980

Kansas City, Mo. 64130

Shirley Standrys Claim incurred 458.00

7508 W. 63rd St. June 16,1980

Overland Park, Ks. 66202

Richard Stroud Claim incurred 276.00

619 E. 3rd St. November 17,1980

Garnett, Ks. 66032

Greg Taylor Claim incurred 250.00

4425 Lane January 16,1981

Olathe, Ks. 66061

Dee Vincent Claim incurred 50.00

6925 Cener August 19,1980

Shawnee, Ks. 66216

Bobbie R. Watts Claim incurred 50.00

7200 Norton June 11,1980

Kansas City, Mo. 64132

Larry Wise Claim incurred 350.00

9220 Rose Hill, Apt. 7 August 1,1980

Lenexa, Ks. 66215

1

. The defendants Richard and Pamela Gray have objected to the institution of this action by means of a show cause order rather than by means of the process described in Rule 704 of the Rules of Bankruptcy Procedure. But it has long been recognized in the bankruptcy context that show cause orders are sufficient substitutes for process, conferring all the notice which is necessary. “(A)n order to show cause (is) ... in the nature of process.” 2 Collier on Bankruptcy para. 24.39(1), p. 796 (1976). In actions which are brought to gain judgment for money or property against a debtor or an officer or director of a debtor corporation, it has been held that “(t)he referee may make the essential investigation ... and for such purpose may cite the claimant to show cause.” 2 Collier on Bankruptcy para. 23.07, p. 524 (1976).

The court also finds that the prerequisites for a class action exist in this case as they are set out in Rule 23, F.R.Civ.P. The class representative has filed a complaint for relief and has thereby adequately prosecuted the class action. Although he failed to appear for the subsequent hearings, it was never shown that he was not a proper class representative and maintenance of the class action in his name was therefore proper. See, e.g., Goodman v. Schlesinger, 584 F.2d 1325, 1332, 1333 (4th Cir.1978). The only requirement for the class action certification which offers any trouble in this case is numer-osity of the class. In this respect, as to the number of claimants which warrant the class certification, “no hard and fast number rule can or should be stated, since ‘numerosity’ is tied to ‘impracticability’ of joinder under the specific circumstances.” 3B Moore’s Federal Practice para. 23.05(1), pp. 23-150, 23-151 (1982). In this case, the impracticability of joinder, when the members of the class are all claimants of relatively small sums which, if sought individually, would likely be consumed by the costs of litigation, is the crucial issue requiring class certification in this case. Further, since this action is basically one affecting the dischargeability of an indebtedness, it is basically one in equity and the judgment is in the form of one declaring the indebtedness to be nondischargeable in bankruptcy. Therefore, the class may be, and is hereby, certified under the provisions of Rule 23(b)(2), F.R.Civ.P., as one in which “the party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final ... declaratory relief with respect to the class as a whole.” In ruling on the dischargeability of the judgment with respect to the corporation, the court also has jurisdiction to rule on the liability and, therefore, on the joint and several liability of the co-defendants before the court as a matter ancillary to the dischargeability determination. See sections 1471(b), (c), Title 28, United States Code. Both Richard and Pamela Gray are before the *242 court by reason of the service of the show cause order upon their counsel, who then represented them both, even though he has since withdrawn as their counsel.

2

. There is authority for the position of the trustee in this respect. See 4A Collier on Bankruptcy para. 70.25, pp. 346, 348 (1978), to the following effect: “Money paid to the bankrupt prior to bankruptcy under a mistake of fact is impressed with a constructive trust that follows it into the hands of the bankruptcy trustee ... A trust relationship may also be created by conduct ... One of the more common forms of constructive or involuntary trusts created by conduct is that of the trust ex maleficio —that is, created by wrongdoing. Such a trust usually arises out of the conversion of money or property belonging to another. Where the existence of the trust has been established, the bankruptcy trustee will be ordered to turn over the property or proceeds, subject, of course, to the beneficiary’s discharging the burden of tracing the trust property.” But, as is further noted in the text of this memorandum, the monies paid by the members of the plaintiff class cannot unfailingly be traced with any certainty into the monies which are currently in the estate. “Where the property involved, or its proceeds, has been intermingled with other goods or funds of the debtor’s, the owner must definitely trace that which he claims is contained in the assets of the estate. It is not enough to show generally that the property or the money representing sales of the property was added to the debtor’s assets at the time of acquisition. The goods sought to be recovered must be definitely traced into the property of the estate, or the proceeds thereof must be traced to a particular fund or to specific property in which it was invested. Upon failure to do this, the bailor, principal, or consignor becomes only a general creditor with the same rights appertaining to other general creditors.” 4 Collier on Bankruptcy para. 541.08, p. 541^44 (1982).

3

. See note 1, supra.

4

. See Exhibit “A” attached hereto.

5

. See also 4 Collier on Bankruptcy para. 541.-08, p. 541-44 (1982), the relevant substance of which is quoted in marginal note 2, supra.

6

. The money which was paid to the corporation and the defendants Gray by the would-be purchasers could not become the property of the corporation until delivery of the furniture. It was only on deposit with them as bailees of the money. See, e.g., Breece v. Jett, 556 S.W.2d 696 (Mo.App.1977), to the effect that money can constitute a subject of conversion if it is money in a special fund designated for a special purpose.

7

.“The act of wrongfully mixing the property of one person with that of another so that the property cannot be identified is an act of conversion, especially where coupled with the defendant’s use of the mixed property ...” 18 Am.Jur.2d Conversion para. 51, p. 189 (1965).

8

.The measure of damages is the amount of money converted. Further, in order to give the injured party full indemnity, interest may be allowed from the date of conversion. Independence Flying Service, Inc. v. Ailshire, 409 S.W.2d 628 (Mo.1966).

9

. Plus interest at the legal rate from the respective dates on which the claims were incurred. See Exhibit “A” attached.

10

. See section 727 of the Bankruptcy Code generally denying discharges to corporate debtors.

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