Sanchez v. Matthews

• Decision Date: 21 April 1982
• Docket Number: No. 16726,16726
• Citation: 636 S.W.2d 455
• Parties: Andrew SANCHEZ, Jr., Appellant, v. James O. MATTHEWS, Appellee.
• Court: Texas Court of Appeals

Page 455

636 S.W.2d 455

Andrew SANCHEZ, Jr., Appellant, v. James O. MATTHEWS, Appellee.

No. 16726.

Court of Appeals of Texas, San Antonio.

April 21, 1982.

Rehearing Denied Aug. 4, 1982.

Richard Sommer, P. Otis Hibler, San Antonio, for appellant.

Leonard J. Gittinger, Jr., James M. Parker, San Antonio, for appellee.

Before CADENA, C. J., and BUTTS and CLARK, JJ.

OPINION

BUTTS, Justice.

This is an appeal from a judgment rendered by the district court which decreed a constructive trust in favor of appellee, James O. Matthews based upon a breach of a fiduciary duty arising in a joint venture. We affirm the judgment as reformed.

The bench trial disclosed that appellee Matthews, in 1970, and appellant Sanchez, jointly acquired 538 acres, more or less, of undeveloped land in Bexar County, bounded by St. Hedwig Road and Highway 90 East, for immediate resale. The parties bought the property under a six-month earnest money contract, which both parties signed. Unable to sell the land in that time, and to prevent loss of both the land and the invested money, appellant provided an additional seventeen thousand dollars ($17,000.00) and other security to purchase the land. At that point the real estate agent James Eaton, who initially handled the sale of the property, agreed to join the two others in the venture. Eaton, not a party to this suit, appellee, and appellant Sanchez executed a written "Joint Venture Agreement" to take effect on August 20, 1970. Provisions pertinent to this appeal are:

X. TERMINATION

This Joint Venture shall terminate upon the sale of the hereinbefore described property (the 538-acre tract) and distribution of profits or payment of losses, as the case may be.

XI. ALTERNATE OPTION FOR SALE OF PROPERTY

In the event and only in the event that on July 1, 1971, the Joint Venture has not sold the property ..., or has not entered into an Earnest Money Contract executed by a Buyer for the purchase of same, by which this Joint Venture would realize a profit, then and in such event, the aforedescribed property belonging to this Joint Venture shall be placed on the market for a price to include the initial cost of said property, plus any and all expenses incurred for the purchase, repair, mortgaging and resale of said property, exclusive of time rendered by each Joint Venturer....

Appellee and Eaton each held a twenty-five percent interest, while Sanchez held a fifty percent interest. The legal title to the property was deeded to Sanchez. Although the joint venture agreement specified that all parties would exert their efforts to find a buyer for the land, the agreement was that Sanchez would actively manage the property.

The evidence at trial disclosed that the land remained unsold on July 1, 1971. At a meeting on July 12, 1971, the joint venturers agreed to sell the land simply to recover their initial costs and expenses. The evidence showed that Sanchez secured a fifteen-day earnest money contract from Dr. Arthur Berger on July 19, 1971. The price of the property was five hundred twenty-four thousand seven hundred eighty dollars ($524,780.00). On July 19, 1971, Sanchez further borrowed against the property the sum of fifteen thousand dollars ($15,000.00) from Dr. Berger, executing a promissory note secured by a deed of trust on the property to the doctor. Appellee and Eaton each received three thousand seven hundred fifty dollars ($3,750.00) as net profit. Appellee and Eaton executed releases on August 13, 1971. Thereafter, appellee received two thousand five hundred five dollars ($2,505.00) as final payment from the joint venture. Evidence showed that on August 2, 1971, Sanchez agreed with Berger and Dean L. Toland to repurchase his same fifty percent interest in the property. It was August 9, 1971, when the total property was conveyed by deed to Berger. On August 10, 1971, Berger conveyed by deed to Sanchez an undivided fifty percent interest in the land, and, further, to Toland an undivided twenty-five percent interest. Sanchez's deed was not recorded until February 22, 1972.

On October 9, 1973, Sanchez conveyed by deed to B. J. McCombs an undivided twenty-five percent interest in the same property. These four then joined to convey fee title to a trustee, Philip Benson. Prior to this time appellee had caused to be filed in the deeds records certain instruments to cloud title to the property. In November, 1973, the property was sold for well over the sum of one million dollars ($1,000,000.00). All of appellant's profits from the sale were finalized and realized by July 2, 1974. His testimony showed that he could utilize all of the monies he derived from the property for investment purposes after that date.

The trial court entered its findings of fact and conclusions of law after imposing a constructive trust on Sanchez's proceeds from the sale. Sanchez had also retained an undivided fifty percent interest in a 20-acre tract of land in the original property. FINDINGS OF FACT (Summarized)

1. That appellee and Sanchez were joint venturers as to the described real property.

2. That Sanchez owed a fiduciary duty to appellee to disclose to him the entire agreement between Sanchez and Berger at the time Sanchez agreed to retain an interest in that property.

3. That Sanchez owed a fiduciary duty to appellee to disclose the full agreement with Berger at the time Sanchez received a deed from Berger to an undivided fifty percent interest in the property.

4. That Sanchez did not advise appellee that he was retaining that interest in the joint venture property.

5. That Sanchez concealed from appellee the information that he had received back from Berger that interest in the property.

6. That as a result of the failure to disclose and concealment, appellee did not and could not know the true facts when he agreed in writing to the sale to Berger and executed a release of his interest in the property and a release of Sanchez.

7. That there was no consideration for the agreement or release.

8. That by reason of the actions of Sanchez a constructive trust arose in favor of appellee as to the joint venture property and any profits made by Sanchez from such property.

9. That Sanchez made a net profit of at least one hundred fifty-three thousand seven hundred twenty-eight dollars ($153,728.00) from the Joint Venture property, resulting from his continued ownership of a fifty percent interest.

10. That Sanchez is indebted to appellee for one-fourth of that realized net profit.

CONCLUSIONS OF LAW (Summarized)

1. That Sanchez owed a fiduciary duty to his joint venturer, appellee, to disclose fully all terms and conditions of the sale of the joint venture property and his continued ownership interest therein.

2. That Sanchez breached his fiduciary duty to appellee.

3. That the purported release dated August 13, 1971 and the letter agreement of the sale to Berger, both executed by appellee, are invalid and ineffective.

4. That by reason of the actions of Sanchez a constructive trust arose in favor of appellee as to the joint venture property and any profits made by Sanchez from such property.

5. That Sanchez made a profit of not less than one hundred fifty-three thousand seven hundred twenty-eight dollars ($153,728.00) from the sale of the joint venture property.

6. Appellee is entitled to judgment against Sanchez for one-fourth of the net profit made by Sanchez after completion of the sale of the property. He is entitled to judgment against Sanchez for the sum of thirty-eight thousand four hundred thirty-two dollars ($38,432.00), together with interest thereon from date of judgment at the legal rate and all costs of court.

The judgment recited that appellee would take nothing against Berger, Benson, and McCombs. Further it decreed that appellee would not recover any interest in the real property the subject of this suit.

Constructive trusts are often imposed in cases where a person in a fiduciary relationship to another acquires something in violation of his duty as a fiduciary. The persons in a joint venture have a fiduciary relationship in many instances. 5 Scott, the Law of Trusts, § 495 (3rd Ed. 1967). A constructive trust will be imposed on a fiduciary where a person in a fiduciary relationship to another acquires property, and the acquisition or retention of the property is in violation of his duty as a fiduciary. Restatement of Restitution, § 160 (1937). And where a fiduciary in violation of his duty to the beneficiary acquires the property through the use of confidential information, he holds the property as acquired upon a constructive trust for the beneficiary. Id. at § 200.

Sanchez brings forward two related points of error, which the court will address before taking up his last point of error. These are: That the joint venture had ended, the purpose had failed before his repurchase of the land, and the joint venture land had been sold to Berger before the repurchase. Further, he maintains that the equitable remedy of constructive trust should not have been imposed by the trial court. We do not agree with these contentions.

Joint venturers are defined as "(p)ersons combined in a common enterprise so as to share profits and losses, but ... not technically partners. They have present or prospective interests in the same property." Bogert, the Law of Trusts and Trustees, § 488 (Rev.2d Ed. 1978). The plaintiffs in Omohundro v. Matthews, 161 Tex. 367, 341 S.W.2d 401 (1960) sued to recover an undivided interest in a one-sixteenth overriding royalty interest acquired by their joint venture. They argued that the royalty derived from lands in an area which they had tried to develop under a joint venture. The Supreme Court agreed and held the joint venture was still in existence and upheld the imposition of the constructive trust.

It was Consolidated Gas and Equipment Co. v. Thompson, 405 S.W.2d 333, 336 (Tex.1966) which proclaimed: "(F)or a constructive truat to arise there must be a fiduciary...