Fain v. Beaver

• Decision Date: 30 March 1972
• Docket Number: No. 5103,5103
• Citation: 478 S.W.2d 816
• Parties: Warren FAIN et al., Appellants, v. Morris D. BEAVER, Appellee.
• Court: Texas Court of Appeals

Page 816

478 S.W.2d 816

Warren FAIN et al., Appellants, v. Morris D. BEAVER, Appellee.

No. 5103.

Court of Civil Appeals of Texas,

Waco.

March 30, 1972.

Rehearing Denied April 20, 1972.

Tom L. Ragland, Waco, for appellants.

Joe Cannon, Groesbeck, for appellee.

OPINION

JAMES, Justice.

This is a partition suit involving realty and personalty, with a constructive trust problem. On August 24, 1962, Appellant Warren Fain took in his name as lessee a written lease contract from BiStone Municipal Water Supply District as lessor leasing a lake lot near Lake Mexia described as the surface rights of Lot 14, Block B, Burr Oak Subdivision, Lake Mexia, Limestone County, Texas. The lease contract called for a 99-year term, calling for a bonus of $250.00 to be paid by lessee at the time of the execution of the lease contract (either in cash or on an installment basis), and a $25.00 per year annual rental. Six men, being Appellant Fain, Appellee Beaver, and four others, all of whom had been friends for some ten years, entered into an oral agreement among themselves whereby they would share the expenses equally of leasing this lake lot and constructing a house thereon, as well as sharing equally the taxes, insurance, interest on borrowed money, and any other maintenance or operating expenses incident to this house and lot, with each party having equal rights to the use and enjoyment of the property. It was further agreed among them that the lease was to be taken in Fain's name as lessee. The record is not clear as to why the lease was taken in only Fain's name, because the trial court sustained an objection when that question was asked appellee Beaver; however, it appears to have been done because Fain was living in Mexia and it was more convenient for him to be the named lessee. The six men were Appellants Fain and Peters, Appellee Beaver, one Long, one DeBerry, and one Gunn.

All six parties borrowed $3000.00 from the First National Bank of Mexia, and all six executed a chattel mortgage instrument to said Bank, putting up as collateral a frame house 24 ft. by 34 ft., on the leased lake lot along with some other property, said $3000.00 being payable in 30 monthly installments of $111.00 each beginning May 17, 1962. The parties took this borrowed $3000.00 and put some additional money of their own with it, and constructed the house or cabin on the leased lake lot. This expense was shared equally and each party repaid his pro rata share of the principal and interest to the Bank, so that this debt was discharged at the time of this suit.

At some point along the way, after the execution of the chattel mortgage instrument above referred to, and prior to the time of this suit, DeBerry and Long wanted out of the joint arrangement; whereupon the remaining four in equal shares bought out DeBerry and Long.

The record goes on to show that the remaining four, to-wit, Appellants Fain and Peters, Appellee Beaver, and Gunn, thereafter equally shared pro rata the annual lease rental on the lot, the taxes, insurance, and all other expenses incident to up-keep of the place until the time of trial which took place in July 1971, to the end that each of the four had spent about $1500.00 as his pro rata share of the total expense.

It was agreed among the parties that Fain would hold the lease of the lake lot in his name for himself and the others, and all were to have equal rights to the possession and use of the house and lot, and they all did go into joint possession and did so use the property.

Appellee Beaver brought this suit as Plaintiff against Fain, Peters, Gunn, and BiStone Water Supply District as defendants, and in his First Amended Original Petition he sets up substantially the above fact situation and alleged that Fain is a constructive trustee for the benefit of himself (Beaver), Peters, and Gunn, concerning the lake lot and house; that Fain had fraudulently represented to Beaver, Peters, and Gunn that he was holding title for the benefit of all four, and thereby induced him (Beaver) to invest money in the lease and the house; that Fain violated a fiduciary relationship with him (Beaver) and would be unjustly enriched if he (Fain) were permitted to be the sole owner of subject lot and house. Beaver further alleged that he, Peters, Gunn and Fain were each owners of a one-fourth undivided interest in and to the leasehold and house; set up that subject lot and house were incapable of partition in kind, and prayed for appointment of a receiver to sell the leasehold and house, pay the expenses and costs, and divide the net proceeds four ways among the four joint owners thereof. BiStone was made a party defendant in order to make possible an adjudication of the title to the leased lot.

Fain and Peters answered each by general denial, and in addition thereto Fain alleged in effect that the oral agreement was void and unenforceable because it violated the Statute of Frauds (Section 26.01 of the Business and Commerce Code, V.T.C.A.), the Statute of Conveyances (Article 1288) and the Texas Trust Act (Article 7425b--7), Vernon's Ann.Tex.Civ.St.

Defendant Gunn filed a waiver of appearance.

Trial was had before the court without a jury; whereupon Plaintiff-Appellee Beaver was the only interested party to testify. Fain and Peters were represented by counsel but neither of them appeared in person. Gunn did not appear either in person or by counsel.

The trial court entered judgment for Plaintiff-Appellee Beaver, finding the subject leased lot and house were incapable of partition in kind, adjudged that Beaver, Fain, Gunn and Peters each owned an undivided one-fourth thereof, appointed a receiver to sell the house and the leasehold lot and divide the net proceeds among the four parties after payment of costs and sale expenses, taking into account the rights of BiStone as lessor of subject lot.

Fain and Peters requested Findings of Fact and Conclusions of Law, which were made by the trial court. The facts found by the trial court were substantially those hereinabove outlined. The pertinent conclusions of law in effect were that Fain was holding the house and leased lot as a constructive trustee for Beaver, Peters and Gunn; that Fain owed the other three a fiduciary relationship; that Fain would be unjustly enriched if he were permitted to be sole owner of subject property; that the judgment does not violate the Statute of Frauds, the Statute of Conveyances, and the Texas Trust Act.

Fain and Peters prosecute this appeal on nine points of error. The first three points in effect complain that the imposition of a constructive trust on the leased lot violates the parol evidence rule, the Statute of Frauds, the Statute of Conveyances, and the Texas Trust Act.

Let us first discuss the Trust Act aspect. Appellant says the oral agreement among the parties regarding Fain's holding title to the leasehold lot for himself and the others is an express oral trust and therefore violates Article 7425b--7, V.A.T.S. This last named Article sets up the requisites of an express trust and, insofar as applicable to the case at bar, in effect holds such an oral agreement (where one person holds title for himself and third persons) in relation to real property invalid unless created, established or declared by a written instrument subscribed by the trustor or by his agent duly authorized in writing.

However, Article 7425b--2 plainly states that 'Trust' for the purpose of the Texas Trust Act (Articles 7425b--1 through 7425b--48a inclusive) means an express trust only, and does Not include resulting or constructive trusts.

To resolve this problem we have the benefit of several opinions of our Supreme Court which shed light on various aspects thereof. The philosophy behind the theory of the constructive trust is best summed up by Judge Cardozo as quoted by Justice ...