Opinion ID: 2459497
Heading Depth: 1
Heading Rank: 1

Heading: appeal of oakes

Text: Oakes' first contention is that a constructive trust requiring the defendant to account for profits is an appropriate remedy only when breach of a fiduciary relationship is involved. This is clearly erroneous. [T]he circumstances which give rise to a constructive trust may or may not involve a fiduciary relationship. Restatement of Restitution § 160, Comment a at 641. It is not essential for the application of the constructive trust doctrine that a fiduciary relationship exist between the wrongdoer and the beneficial owner. Actual fraud, as well as breach of a confidential relationship, justifies the imposition of a constructive trust. Thigpen v. Locke, 363 S.W.2d 247 (Tex.1962); Fitz-Gerald v. Hull, 150 Tex. 39, 237 S.W.2d 256 (1951); Pope v. Garrett, 147 Tex. 18, 211 S.W.2d 559 (1948); Mills v. Gray, 147 Tex. 33, 210 S.W.2d 985 (1948); Miller v. Huebner, 474 S.W.2d 587 (Tex.Civ.App. Houston [14th Dist.] 1971, writ ref'd n.r. e.). Some confusion may have arisen from the following language in this court's opinion in Consolidated Gas & Equipment Co. v. Thompson, 405 S.W.2d 333, 336 (Tex.1966): Our holdings above cited are to the effect that for a constructive trust to arise there must be a fiduciary relationship before, and apart from, the agreement made the basis of the suit. Such is our holding here. As stated, the fact that one businessman trusts another, and relies upon his promise to carry out a contract, does not create a constructive trust. To hold otherwise would render the Statute of Frauds meaningless. This language must be viewed in the context of the fact situation that gave rise to it. Thompson was a suit to enforce an oral agreement to execute an assignment of an overriding royalty on an oil and gas lease. No actual fraud was pleaded or proved. This court has imposed stringent prerequisites to the enforcement of oral agreements like the one in Thompson to avoid abrogating the Statute of Frauds and the Texas Trust Act. [2] Similar considerations do not exist in the instant case since it is a suit for rescission because of fraud, not an attempt to enforce an oral agreement to convey property. Bearing in mind that Oakes procured the apartment complex from Bierschwale by fraud, Bierschwale would have, but for the sale to Goldman, been entitled to the imposition of a constructive trust on the apartment complex. It follows that Bierschwale is entitled to a constructive trust on the proceeds of the sale of the apartment complex to Goldman; these proceeds include any profit Oakes made on the sale to Goldman. Fidelity & Deposit Co. Maryland v. Wiseman, 103 Tex. 286, 124 S.W. 621 (1910); Alexander v. Harris, 254 S.W. 146 (Tex.Civ.App.Fort Worth 1923, writ ref'd); Smith v. Green, 243 S.W. 1006 (Tex.Civ.App.Amarillo 1922, writ ref'd); Restatement of Restitution §§ 160, 202. Restatement of Restitution, Section 202, at 818, deals with the imposition of a constructive trust on the proceeds from the disposition of property wrongfully acquired and states: Where a person wrongfully disposes of property of another knowing that the disposition is wrongful and acquires in exchange other property, the other is entitled at his option to enforce either (a) a constructive trust of the property so acquired, or (b) an equitable lien upon it to secure his claim for reimbursement from the wrongdoer. The Restatement also speaks to the recovery of profits: Section 1, Comment e at 14: ... where a person with knowledge of the facts wrongfully disposes of the property of another and makes a profit thereby, he is accountable for the profit and not merely for the value of the property of the other with which he wrongfully dealt. Section 160, Comment d at 644: ... where the defendant makes a profit through the consciously wrongful disposition of the plaintiff's property, he can be compelled to surrender the profit to the plaintiff and not merely to restore to the plaintiff his property or its value. Oakes next argues that any constructive trust which is imposed should be limited to specifically traceable property and that Bierschwale is not entitled to a money judgment equal to the balance of the proceeds from the Goldman sale. We agree that a constructive trust on unidentifiable cash proceeds is inappropriate. Even so, the award of a cash judgment to fully compensate Bierschwale is within the equitable powers of the court. See Restatement of Restitution § 160, Comment d at 644. Several points brought forward by Oakes deal with the Texas Securities Act. Section C of Article 581-5, Vernon's Texas Revised Civil Statutes Annotated, provides an exemption from the Act if, among other things, the sales are isolated transactions not made in the course of repeated and successive transactions of a like character;... The jury failed to find that the transfer of the notes was an isolated transaction not made in the course of repeated transactions of a like character. Oakes contends there was no evidence of probative force to support the submission of this issue. In addition, Oakes takes issue with the court of civil appeals' analysis of Article 581-33A of the Act. Section 33A states that the seller is liable to the person buying the security from him, who may sue either at law or in equity to recover the consideration paid .... Oakes argues that damages are limited by Section 33A to the value of the consideration Bierschwale gave for the Black Hardware notes and does not include any profit that Oakes made on the subsequent transfer of the apartment complex to Goldman. Since the fraud findings of the jury fully justify awarding the proceeds of the Goldman sale to Bierschwale, this court specifically declines to rule on Oakes' points dealing with the Texas Securities Act. When the case was submitted to the jury an instruction defining the term plaintiff to include both Bierschwale and Meadows was included in the charge. Neither Oakes nor bierschwale objected to this instruction. As a result, the jury's fraud findings are postured to favor Meadows as well as Bierschwale. Oakes attacks these findings on the grounds that an agent is not entitled to rely on statements made to the agent in his representative capacity. Oakes points out that in any event there is no pleading, no evidence and no jury issue on whether Oakes made representations to meadows to induce action on Meadows' part. There is authority for the proposition that a person making a representation is only accountable for its truth to the person or persons he seeks to influence. See Westcliff Co. v. Wall, 153 Tex. 271, 267 S.W.2d 544 (1954); Williamson v. Patterson, 106 S.W.2d 753 (Tex.Civ.App. Eastland 1937, writ dism'd). Oakes points out that he was not obligated to Meadows in any way; that Meadows was Bierschwale's agent in the transaction. However valid Oakes' argument may be, error was not preserved on this issue in Oakes' motion for new trial as required by Rule 374, Texas Rules of Civil Procedure. Oakes further argues that the jury's findings on fraud do not support the trial court's judgment. The jury found that Oakes transferred the notes to the plaintiffs by means of an untrue statement or statements of a material fact or facts; that the plaintiffs did not know the statements were untrue; that the plaintiffs relied on the untrue statements. The jury also found that the plaintiffs in the exercise of reasonable care could have known all such statements were untrue. The jury further found that Oakes omitted to state a fact or facts which would make the statements made by him not misleading, but that the Plaintiffs knew of such omission to state such fact or facts. The court of civil appeals places the proper interpretation on these jury findings and appropriately construes them to sustain a judgment on the basis of fraud. The court of civil appeals also correctly found harmless error in the admission of certain evidence complained of by Oakes. All other points asserted by Oakes are overruled.