Introduction. Preston Marshall, Appellant V. Ribosome L.P, is an interesting trust and limited partnership dispute involving the descendants of Texas oilman J. Howard Marshall II. 01-18-00108-CV, 2019 WL 2041062 (Tex. App.—Houston [1st Dist.] May 9, 2019, no pet. h.). The trial court granted a summary judgment against Preston Marshall on his claims against Ribosome for aiding and abetting breach of trustee’s fiduciary duty; breach of oral contract to distribute trust proceeds directly to Preston; promissory estoppel and demand for an accounting. The Houston Court of Appeals affirmed.

Background: According to the record in the court of appeals decision:

“The Marshall family, one of the wealthiest in the country, manages its wealth through a network of partnerships, trusts, and other entities, many of which are located outside the United States. Elaine Marshall, Preston’s mother, has played instrumental roles in the entities involved in this dispute. MarOpCo, a management company, provides administrative services, including accounting, bookkeeping, record maintenance, and tax preparation, for the Marshall entities.”

One of these limited partnerships was Ribosome, of which Elaine served as sole manager of Ribosome’s general partner. Ribosome had multiple limited partners including Preston, his brother and the Falcon and Harrier Trusts. Elaine was Trustee and Preston was a beneficiary of these trusts.

These Trust agreements provided that “[t]he Trustee in her sole discretion may accumulate or distribute income accruing for the benefit of the beneficiary(ies) until expiration of the trust. The Trustee shall have discretion in determining the time or frequency of any distributions. “

Apparently, in 2006, Elaine, as President of MarOpCo, hired Preston to serve as MarOPCo’s Vice President. “In a 2007 family meeting, Preston, his brother, Pierce, Jr., and Elaine entered into an oral agreement, under which Ribosome would bypass the Trusts and pay the Trusts’ shares directly to Preston as their beneficiary. Preston and MarOpCo’s then-controller implemented this distribution agreement, and it remained in place through June 2015, when Elaine terminated Preston’s employment.”

In addition to terminating Preston’s employment Elaine also ended the distribution agreement so that going forward distributions would be made to the Trust bank accounts. These accounts accumulated income but no trust benefits were subsequently paid to Preston.

Subsequently, litigation ensued which included claims made by Preston against Ribosome who filed a motion for summary judgment. The trial court granted Ribosome’s motion disposing of Preston’s claims, resulting in this appeal.

Court’s findings. In regard to the alleged breach of the oral distribution agreement, the court of appeals found that it was a contract of indefinite duration. “As a contract of indefinite duration that contemplated continuing or successive performance, it was terminable at the will of either party.” Thus, there was no breach for terminating the oral agreement and Ribosome resuming making distributions directly to the Trust bank accounts rather than directly to Preston. The court found that Preston’s promissory estoppel claims failed for similar reasons.

In regard to Preston’s claim that Ribosome aided and abetted Elaine in breaching fiduciary duties she owed as Trustee to the Trusts, the court found that “[u]nder the Trusts’ language the Trustee has absolute, unfettered discretion over the decision to accumulate or distribute the Trust income.” The court went on to hold that no evidence was presented raising a fact issue as to whether Elaine abused her discretionary authority under the Trust agreements. Thus, there was no underlying breach of fiduciary duty by Elaine to support Preston’s aiding and abetting of breach of fiduciary duty claim against Ribosome.

Lastly, in regard to the claim that an accounting must be given by the limited partnership Ribosome to Preston, this claim failed because Ribosome had provided Preston with all the financial information that was required by the limited partnership agreement. Although the agreement gave the limited partners the right to inspect Ribosome’s books and records, it did not include any additional right to an accounting. Therefore, the court found that as a matter of law Preston was not entitled to an accounting.

Lessons learned. This case shows the importance of carefully drafting the language in family trust and limited partnership documents. The trust documents apparently gave the trustee broad discretion in managing the trusts and the limited partnership documents specified the rights of the limited partners to review and receive limited partnership financial information. As a result, the court was able to look to the language of these documents to decide this matter through summary proceedings rather than a long and protracted trial.

Introduction. The case of Jang Won Cho v. Kun Sik Kim, involves a dispute between 3 investors who invested in a retail strip shopping mall venture in Houston, Texas.  No. 14-16-00962-CV, 2019 WL 1442412 (Tex. App.—Houston [14th Dist.] Apr. 2, 2019, no pet. h.). The 3 investors formed a corporation in which they became shareholders and the corporation purchased the land for the shopping mall. A strip center was built and became part of the property owned and managed by the corporation. The shopping center’s occupancy declined over time and relations between the investors became strained.

Two investors, the plaintiffs, sued the third investor, the defendant, who was also a director and officer of the corporation. The plaintiffs accused the defendant of abusing “their trust and confidence by secretly gaining personal benefits at their expense and driving the business off a financial cliff.” More specifically, the plaintiffs alleged that the defendant refused to contribute his fair share of capital, engaged in self-dealing including by awarding a construction contract to a company he owned and making misrepresentations regarding the cost of construction.

Trial court judgment. The case proceeded to trial and the jury found that the defendant  failed to comply with his fiduciary duties owed to the plaintiffs, committed fraud, committed negligent misrepresentation, and converted property belonging to the plaintiffs. Based upon the jury’s verdict, the trial court signed a final judgment against the defendant in the amount of $1,128,283 in actual damages and $6,769,698 as exemplary damages plus prejudgment interest. The defendant appealed the judgment.

Appellate decision. First, the court of appeals addressed the jury’s affirmative finding that the defendant breached his fiduciary duties. The court found that the circumstances did not give rise to a formal fiduciary relationship because a “co-shareholder in a closely held corporation, as a matter of law, does not owe a fiduciary duty to his co-shareholder.” The court stated that, as the corporation’s director, the defendant owed fiduciary duties to the corporation but not to the individual shareholders. The plaintiffs were not asserting a derivative claim on behalf of the corporations so this was not before the court.  The court also found that no informal fiduciary relationship existed since there was no evidence that a “long-standing personal or business relationship existed between the parties.” Thus, the court reversed the trial court’s judgment regarding liability and damages for breach of fiduciary duty.

Next, in addressing the jury’s affirmative finding regarding fraud by nondisclosure, the court found that there was insufficient evidence to support this finding. In regard to fraud by misrepresentation, the court found that there was no evidence to support the allegations that the defendant had made misrepresentations about management fees, interest paid on a loan, attorney’s fees paid, and profits. However, the court found that there was sufficient evidence  to support a finding based upon misrepresentations pertaining to the construction costs.

The court then examined the award of damages and after correcting what the court considered to be a double recovery, the court found that the total amount of actual damages that should have been awarded was only $352,600. Given that this was much lower than the actual damages set forth in the judgment, the court also reduced the amount of the exemplary damages award to $1,057,800. Thus the judgment awarding a total of $7,897,981 was reduced to $1,410,400. The case was remanded to the trial court for recalculation of prejudgment interest.

Lessons learned. Shareholders in a closely held corporation should diligently monitor the activities and finances of the corporation, and carefully scrutinize any self-dealing transactions between the corporation and its principals. Carefully drafted shareholder agreements can also help avoid these problems and the expense of protracted litigation. Further, in the event that one or more shareholders wants a business divorce from the other shareholders, these agreements can also provide a formula to liquidate the shares of unhappy shareholders.

Introduction. The San Antonio Court of Appeals has held that a property owner’s personal injury premises defect claim sounded in negligence rather than premises liability, even though the injuries were not caused by a contemporaneous activity of the contractor allegedly at fault. Arredondo v. Techserv Consulting & Training, Ltd., 567 S.W.3d 383 Tex. App.—San Antonio 2018, pet. filed).

Background. In this case, an electric company entered into a contract with a utility contractor for the contractor to perform services that included replacing utility poles for the electric company. In 2013, the utility contractor, pursuant to a work order from the electric company, removed a utility pole from the plaintiff’s property. The engineering firm retained by the electric company to inspect the utility contractor’s work, marked the work completed on December 2, 2013. On July 30, 2014, the plaintiff property owner stepped into a hole while mowing her grass, causing her to fall and injure her knee and back. The plaintiff sued the utility contractor, the electric company and the engineering firm.

This article only addresses negligence and premises liability issues concerning the utility contractor. The utility contractor filed a motion for summary judgment with the trial court requesting that the court find as a matter of law that the contractor was not liable for causing the injuries. The contractor argued in its motion that since this was a premises defect case then plaintiff’s claim sounded in premises liability rather than ordinary negligence. The significance of this is that in order to prove a premises liability claim one of the elements that the plaintiff would have to prove is that the contractor had knowledge (knew or should have known) of the existence of the defect at the time the injuries were sustained. This element does not have to be specifically proven to support an ordinary negligence claim. The trial court granted the contractor’s motion for summary judgment. The plaintiff property owner appealed the trial court’s ruling to the San Antonio Court of Appeals.

The San Antonio Court of Appeals overturned the summary judgment that had been rendered in favor of the contractor. The appellate court discussed the general rule that in order for a premises injury claim to be governed by ordinary negligence principles, the plaintiff’s injuries must be the result of the contemporaneous negligent activity of another. When the injuries are the result of the property’s condition, then premises liability principles apply. However, the court stated that a premises condition may also arise from another’s creating the dangerous condition. “When the property’s dangerous condition is caused or created by another, an independent claim against the other may lie in negligence.”  Arredondo v. Techserv Consulting & Training, Ltd., supra, at p. 392.

Court’s holding, The San Antonio Court of Appeals held that, since the plaintiff’s allegations were based upon the contractor creating the dangerous condition, the plaintiff had alleged a claim that sounded in ordinary negligence rather than premises liability. Thus, fact issues existed as to whether the contractor’s negligence proximately caused plaintiff’s injuries. As a result, the court of appeals reversed the summary judgment previously rendered in favor of the contractor as to plaintiff’s negligence claim, and remanded that claim to the trial court for further proceedings. Stay tuned–it appears that a petition for review has been filed with the Texas Supreme Court.

Lessons learned. A contractor performing construction or other premises work should take steps to protect themselves from exposure to liability. This  could include maintaining a log of the progress and completion date of the work, as well as photographing the condition of the premises upon completion. If the contractor has no choice but to leave the premises in a potentially dangerous condition, then proper barricades and warnings should be put into place. The contractor performing the work could also give written notice of the potentially dangerous condition to the party hiring the contractor and to the owner.

Lawsuits involving alleged violations by former employees of non-competition agreements are often hotly contested and involve injunctive relief. These cases can be challenging for the employer to obtain relief because covenants not to compete are governed by statutory law requiring these restrictive covenants to be reasonable as to time, geographical area, and scope of activity to be restrained. Tex. Bus. & Com. Code Ann. § 15.50 (West). There is a tendency for employers to draft these covenants too broadly causing problems when it becomes necessary to seek court enforcement.

In a recent Texas federal district court case involving the alleged breach of employment non-compete agreements, misappropriation of trade secrets, and other complaints, the Court dissolved the temporary restraining order (TRO) and denied  the Plaintiff employer’s request for preliminary injunctive relief. Scalefactor, Inc., Plaintiff, v. Process Pro Consultin, LLC; Adam Sharrow; & Andrew Millet; Defendants., 1:19-CV-229-RP, 2019 WL 1317332 (W.D. Tex. Mar. 22, 2019). In this case, the individual Defendants were former employees of Plaintiff, a company engaged in the business of solving finance and accounting problems for small businesses. These individual Defendants had signed non-compete agreements with Plaintiff. After the individual Defendants left their employment with Plaintiff, they formed the Defendant entity, Consultin, LLC, to advise small and medium sized businesses on improving their sales,  marketing and customer success  processes. Consultin, LLC provided no accounting or finance products or services.

Plaintiff alleged that the Defendants violated their non-compete agreements, misappropriated trade secrets, and committed fraud and other improper conduct. The Court granted Plaintiff’s request for a TRO at a telephonic hearing and ordered the parties to appear before the court only 8 days later to determine whether to grant Plaintiff’s request for preliminary injunctive relief. At this juncture, the Plaintiff was probably feeling pretty confident. Not so fast–the Court dissolved the TRO previously granted and denied the Plaintiff’s request for preliminary injunctive relief.

Beginning with the alleged violations of the non-competition agreements, the court held that the individual Defendants did not violate the agreements because the entity formed by them was not in competition with Plaintiff since the entity did not provide accounting or finance products or services. Thus, Plaintiff failed to establish a substantial likelihood  of proving that the former employees breached their non-compete agreements, an essential element that had to be proved to support the award of temporary injunctive relief.

In regard to the misappropriation of trade secret claim, the Court held that Plaintiff failed to demonstrate that the Defendants probably used or disclosed trade secrets–elements that the Plaintiff had to prove in order to prevail on its request for temporary injunctive relief based upon this cause of action. In regard to the remaining alleged causes of action, Plaintiff failed to show that damages would be unavailable or that Plaintiff would suffer irreparable harm if injunctive relief was not granted–also elements Plaintiff had to prove. The Court denied the Plaintiff’s request for preliminary injunctive relief and dissolved the TRO.

Lessons learned. When seeking a TRO and preliminary injunctive relief, the Plaintiff must thoroughly perform an investigation and prepare the supporting evidence well in advance of the TRO and preliminary injunction hearings. This is because, within a couple of weeks after the Court grants the TRO, the Plaintiff will be required to present its proof at the preliminary injunction hearing which is nothing short of a mini-trial. If the Plaintiff fails to have all ducks in a row or there is simply insufficient evidence to support the requested relief, the court will deny the Plaintiff’s request for preliminary injunctive relief.

It is also important for the employer’s attorney to carefully draft the non-competition agreement. Typical boilerplate language won’t do. The agreement should provide a detailed description of the employee’s job duties and an itemized list of any confidential information being provided to the employee. At the same time, the post-employment restrictions imposed upon the employee’s right to compete should be drafted to be reasonable as to time, the scope of the employee’s restricted postemployment activities and the restricted geographic area. If the restrictive covenants are too broad, they will be unenforceable or reformed by the court. If the court reforms the covenants, the Plaintiff will not be allowed to recover any related damages sustained before the court reformation.

“It is cheaper to kill a mare than it is to cripple her.”  This was considered the law in Texas until the recent Texas Supreme Court decision of J & D Towing, LLC v. Am. Alternative Ins. Corp., 478 S.W.3d 649, 652 (Tex. 2016) involving the question of first impression before the Texas Supreme Court of whether the owner of personal property totally destroyed by another’s negligence is entitled to recover loss of use damages in addition to the fair market value of the destroyed property.

In an effort to explain the history of the right to recover loss of use damages and to make a dry subject interesting, the court begins its analysis by discussing a 1932 Amarillo case in which the owner of a horse that was killed sued the party at fault to recover not only the value of the horse but also the loss of use of the horse since it was used in the owner’s hauling business. That Court held there was no right to recover loss of use damages when property is totally destroyed. See City of Canadian v. Guthrie, 87 S.W.2d 316 (Tex. Civ. App.–Amarillo 1932, no writ). After the Guthrie case, many other Texas courts of appeals followed this rule that, although loss of use damages were recoverable when property was partially damaged, these damages were not recoverable when property was totally destroyed.

The Texas Supreme Court finally settled this issue once and for all. In the J & D Towing case cited abovethe plaintiff’s tow truck was destroyed in an accident caused by the negligence of the defendant. The issue of first impression before the court was whether the owner of property destroyed by another’s negligence was entitled to recover loss of use damages from the party at faulty.    The Court recognized that under our tort system when a plaintiff sustains damages due to a defendant’s wrongful conduct, i.e. negligence, the plaintiff is entitled to be fully compensated for the damages incurred. Thus, the Court held that the plaintiff was not only entitled to recover damages for the fair market value of the tow truck but also for loss of use of the truck.

The court stated  that the owner of property totally destroyed is entitled to recover loss of use damages for the reasonable period the owner is deprived of the vehicle. The court indicated that in these types of cases that, depending upon the circumstances, loss of use damages could be measured by lost profits, the cost to rent replacement property, or the reasonable rental value of the property destroyed.

Thus, if you find yourself haggling with an insurance adjuster over whether loss of use damages are recoverable when your personal property has been totally destroyed, let the adjuster know that in Texas it is no longer cheaper to kill a horse than to maim it.

In Texas, a plaintiff filing a lawsuit pertaining to a construction project for damages arising out of the provision of services by licensed design professionals such as architects or engineers, must file an affidavit by a competent expert with the lawsuit supporting the claims against these professionals. Otherwise, the lawsuit will be dismissed.

This issue was recently addressed by the Houston Court of Appeals in Texas Southern University v. Kirksey Architects, Inc., 2019 WL 922296 (Tex.App.-Hous. (14 Dist.)) (Tex.App.-Hous. (14 Dist.), 2019) in which the Plaintiff, Texas Southern University (TSU), filed suit against architectural and engineering firms for the alleged defective design of a building on TSU’s campus. TSU failed to file a certificate of merit affidavit with the lawsuit and the Defendants sought dismissal on these grounds. The trial court dismissed TSU’s lawsuit with prejudice, and the Houston Court of Appeals affirmed this decision.

Comments. Civil Practice & Remedies Code § 150.002 requires, in any action for damages against a licensed or registered professional such as an architect or engineer arising out of the professional provided, that the plaintiff file with the lawsuit an affidavit of a competent expert. The expert must hold the same license or registration as the defendant professional and set forth the information required by the statute. Although, the statute provides an exception and extension of time for filing the affidavit under certain circumstances, the affidavit will have to be provided. The trial court must dismiss the lawsuit if the plaintiff fails to file the affidavit as required, and the dismissal may be with prejudice to refiling the lawsuit.

Thus, a party who anticipates filing a lawsuit covered by the statute should consult with an experienced litigation attorney and qualified experts early on who can provide supporting affidavits to be filed with the lawsuit.

Introduction. The Texas Supreme Court recently reversed another multi-million dollar business fraud verdict in Mercedes-Benz USA, LLC v. Carduco, Inc., 16-0644, 2019 WL 847845, at *1 (Tex. Feb. 22, 2019). The court found that the underlying contract between the parties negated the fraud claim.

Background. In this case, Carduco, Inc. entered into a Dealer Agreement with Mercedes-Benz USA, LLC (referred to in the agreement as “MBUSA”). The agreement identified Harlingen, TX as the dealership location and prohibited Carduco from changing locations without the consent of Mercedes-Benz. The agreement stated:

“MBUSA will assign to Dealer a geographic area consisting of a collection of zip codes or census tracts that is called an Area of Influence (“AOI”). MBUSA may alter or adjust Dealer’s AOI at any time. The AOI is a tool used by MBUSA to evaluate Dealer’s performance of its primary obligations hereunder. Dealer agrees that it has no right or interest in any AOI and that MBUSA may add new dealers to or relocate dealers into Dealer’s AOI. Any such addition or relocation of a dealer will result in an alteration or adjustment of Dealer’s AOI.”

(See Mercedes-Benz USA, LLC v. Carduco, Inc., supra, at *4). Carduco’s Area of Influence under the agreement included McAllen, Texas.

According to the record, two months after signing the agreement, Mercedes-Benz entered into an agreement with another dealer allowing the dealer to open a Mercedes dealership in McAllen, Texas. After learning of this, Carduco requested authorization from Mercedes to relocate to the McAllen area. Mercedes denied the request.

Carduco sued Mercedes and other related defendants alleging that the defendants fraudulently induced Carduco to believe that Mercedes would give Carduco the opportunity to relocate to McAllen as the exclusive Mercedes dealership. This was apparently based, at least in part, upon discussions that Carduco had with Mercedes representatives prior to entering the Dealer Agreement. After hearing the evidence, the jury found that Mercedes and the other named defendants fraudulently induced Carduco into making the related dealership acquisition, and awarded $15.3 million in actual damages and $100 million in punitive damages against Mercedes. The trial court entered a judgment based upon the jury’s findings. On appeal, the appellate court upheld the award for actual damages and suggested a reduction in the punitive damages award.

Holding. The Texas Supreme Court overturned the judgment based upon the jury verdict and rendered that Carduco take nothing. The court found that in order to recover on a fraud claim, the claimant must show that the claimant justifiably relied upon the alleged improper conduct and actions of the defendant. The court held that a party cannot justifiably rely on improper conduct and actions that directly conflict with the terms of the signed contract. The court held that the terms quoted above in the Dealership Agreement directly contradicted Carduco’s fraudulent inducement claims and Carduco’s reliance upon the alleged misconduct and improper actions of Mercedes was unjustified as a matter of law.

Lessons learned. It is becoming more difficult in Texas for a buyer in a business transaction to recover on fraudulent inducement claims. A seller to a transaction can avoid liability for fraud through carefully drafting the written sale agreement. Buyer’s should specify in the written agreement all terms material to the buyer’s decision to make the purchase.

Introduction. The Texas Supreme Court has now held that contractual limitation of liability clauses barring  a party’s right to recover punitive damages are enforceable, even if one of the parties to the contract commits fraud.  Bombardier Aerospace Corp. v. SPEP Aircraft Holdings, LLC, 17-0578, 2019 WL 406075, at *8 (Tex. Feb. 1, 2019)

Background. In the Bombardier case, the plaintiffs sued defendant for breach of contract, breach of warranty, and fraud. In 2010, plaintiffs purchased a Challenger 300 aircraft from defendant for $19,850,000. In the purchase negotiations the plaintiffs specified that the aircraft was to be new. However, the written purchase and aircraft management agreements contained limitation of liability clauses under which the plaintiffs agreed to waive their rights to recover punitive damages.

Subsequent to the purchase, plaintiffs discovered that the aircraft was sold with used engines. The jury awarded the plaintiffs $2,694,160 in actual damages and $5,388,320 in punitive damages. The trial court entered judgment based upon the verdict and the Dallas Court of Appeals affirmed.

Holding. The Texas Supreme Court reversed the Court of Appeals regarding the portion of the judgment awarding $5 million+ in punitive damages on the grounds that the plaintiffs waived their rights under the contracts to recover punitive damages. The Court held that, generally, contractual limitation of damages clauses are valid and enforceable. This is the law even when a party to a contract commits fraud.

Lessons learned. This case shows why a purchasing party to a contract should carefully consider whether to accept clauses limiting the right to recover damages or waiving a claim for fraud.  It also shows how the seller under a contract can limit exposure to liability through careful and meticulous drafting.

The Texas Supreme Court has finally put to rest the question of whether the implied warranty to repair or modify tangible goods or property in a good and workmanlike manner can only be brought by a consumer under the Texas Deceptive Trade Practices Act (DTPA) or whether it can be brought under the common law as well. The Court held it could in fact be brought under both, in Nghiem v. Sajib, 2019 WL 406123 (Tex.), 1 (Tex., 2019). This is significant because a consumer must bring an action under the DTPA for the breach of this implied warranty within two years or the action will be barred by the DTPA two-year statute of limitations. On the other hand, it appears that a consumer has up to four years to bring an action for breach of this implied warranty under the common law before being barred by the applicable statute of limitations. Further, there are additional criteria that must be met to bring a claim under the DTPA that do not have to be met under the common law.

In the Ngheiem case, the consumer’s airplane was damaged in a crash-landing when the airplane engine failed. The consumer made a claim against the company that had serviced the airplane for years and made repairs to it immediately before the crash. The consumer alleged that the defendant company breached the common law implied warranty to make repairs in a good and workmanlike manner. The defendant company alleged that the consumer’s claim could only be brought under the DTPA and not under common law.  Therefore, the claim was barred by the DTPA two-year statute of limitations because the consumer waited too long to file the lawsuit.  The trial court agreed and rendered judgment for the defendant and court of appeals affirmed.

The Texas Supreme Court granted the consumer’s petition for review and held that this implied warranty could be brought both under the common law and the DTPA. Since the consumer brought the action under the common law, the claims were not barred by the DTPA two-year statute of limitations.

The result of this opinion is that it will give consumers including large corporations who may not qualify for consumer status under the DTPA the right to bring an action for breach of this implied warranty. Further, it should also give consumers up to four years from the date of the breach to bring this action.

The equitable constructive trust. In Texas, a court acting in equity may impose a constructive trust upon property held by a party to a transaction that belongs to another. The Austin Court of Appeals recently used this remedy to impose a constructive trust upon life insurance proceeds that, under a divorce decree, should have passed to the decedent’s minor children.

Factual background. “Kristi and Hugh divorced in February of 2013. The agreed final decree of divorce required them to each purchase $250,000 in life insurance, designate the other “as beneficiary in trust for the benefit of the children,” and maintain the coverage until both of their children had turned 18.”  Etcheverry v. Lankford, 03-17-00797-CV, 2018 WL 6615624, at *1 (Tex. App.—Austin Dec. 18, 2018, no pet. h.).  Kristi purchased the life insurance as required by the decree.  However, three days before her death she changed the life insurance beneficiaries to Thomas and Etcheverry. Kristi committed suicide in December 2016.

Two months later, Hugh filed suit against Thomas, Etcheverry, and the life insurance company and requested that the trial court impose a constructive trust upon the proceeds for Hugh to hold in trust for the minor children. Thomas agreed to assign his share to Hugh and Etcheverry contested the proceedings.

Court’s holding. The court stated, “Even though “breach of a special trust or fiduciary relationship or actual or constructive fraud is ‘generally’ necessary to support a constructive trust,” the remedy can be imposed in other circumstances where property is “obtained through bad faith or unconscionable acts.”” The Court held that even though Etcheverry had done nothing wrong, the policy against unjust enrichment supported the imposition of a constructive trust upon the life insurance proceeds in favor of the children.  Kristi (the decedent) violated the divorce decree by changing the beneficiaries and Etcheverry would not have received anything but for that violation. Etcheverry v. Lankford, 03-17-00797-CV, 2018 WL 6615624, at *2 (Tex. App.—Austin Dec. 18, 2018, no pet. h.).

Conclusion. The court acting in equity imposed a constructive trust upon the life insurance proceeds in favor of the minor children.