Does a Constructive Trust Have to Be in Writing?

Texas courts have long recognized their equitable power to impose constructive trusts as a remedy to prevent unjust enrichment. However, is it necessary to have a constructive trust in writing? The case Pope v. Garrett, No. 147 Tex. 18 (Tex. 1948) case illustrates how constructive trusts can arise orally and override legal ownership to remedy wrongdoing.

Facts & Procedural History

This case involved a dispute over the decedent’s estate. She intended to execute a will leaving all her property to an intended beneficiary, but was forcibly prevented from signing it by two heirs.

After she died intestate, her property passed to her legal heirs under intestacy laws. The intended beneficiary sued the heirs, seeking to have the inheritance held in constructive trust for her benefit since the decedent was wrongly prevented from signing the planned will.

The trial court imposed a trust on the entire inheritance. But the appeals court modified this to exclude innocent heirs who did not participate in the wrongdoing. The Texas Supreme Court reinstated the trial court’s broad constructive trust.

Constructive Trusts

In Texas, a constructive trust is an equitable remedy imposed by a court to prevent unjust enrichment. A constructive trust may be imposed when there is clear and convincing evidence that:

  1. The person against whom the trust is imposed would be unjustly enriched if he were permitted to keep the property
  2. The person who establishes the trust has a clear and convincing claim to the property
  3. One party has committed fraud or breach of contract

Constructive trusts are generally not created by agreement of the parties; rather, they are imposed by courts as an equitable remedy. However, in some cases, parties may specifically agree to create a constructive trust in order to avoid potential disputes later on.

Requirements for a Constructive Trusts in Texas

In order for a constructive trust to be valid in Texas, there are several requirements that must be met, which include:

  1. Evidence that there was an express or implied agreement between the parties to create the trust
  2. Proof that the property was transferred to the trustee with the intention of benefiting the beneficiary
  3. Evidence that the beneficiary has a vested interest in the property
  4. Evidence that the trustee has breached their fiduciary duty to the beneficiary
  5. It must be shown that there was resulting damages due to the breach of fiduciary duty

As it relates to the case, a constructive trust is not required to be in writing. The state of Texas recognizes constructive trusts imposed by courts without written agreements to prevent unjust enrichment from wrongdoing. The court ruled the wrongful conduct justified imposing a constructive trust on the inheritance, notwithstanding lack of a written trust agreement.

Benefits of a Constructive Trust

The benefits of imposing a constructive trust, including:

  • Restoring property to its rightful owner: This is perhaps the most obvious benefit of a constructive trust. When someone has wrongfully acquired or transferred property, a constructive trust can be used to correct the situation and return the property to its rightful owner.
  • Preventing someone from profiting from their wrongdoing: A constructive trust can also be used to prevent someone from profiting from their own wrongdoing. For example, if someone commits fraud or breaches a fiduciary duty, they may be required to hold any property or money they acquired through these wrong actions in a constructive trust for the benefit of the victim.
  • Deterring future wrongdoing: Imposing a constructive trust may also deter future wrongdoing by sending a message that this type of behavior will not be tolerated and will not result in any financial gain.

Drawbacks of a Constructive Trust

However, there are some drawbacks to using a constructive trust as a remedy.

  1. The court will only order a constructive trust if it finds that the party who wrongfully obtained the property would be unjustly enriched if they were allowed to keep it. This can be difficult to prove, and may require expensive and time-consuming litigation.
  2. Even if the court orders a constructive trust, the party who was unjustly enriched may still refuse to give up the property. In this case, the other party would have to go back to court and ask for enforcement of the order, which can be costly and time-consuming as well.
  3. A constructive trust is not always easy to create or maintain. The parties must have a clear understanding of their rights and obligations under the trust in order for it to work properly. If there is any misunderstanding or disagreement between the parties, the trust may be voided or dissolved by the court.

The Takeaway

The Pope v. Garrett case established that under Texas law, constructive trusts can be imposed by courts without a written agreement to prevent unjust enrichment resulting from wrongdoing. Even when the technical requirements for a valid written trust are absent, courts retain broad equitable power to declare a party a constructive trustee, overriding legal rights to property.

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The content of this website is for informational purposes only and should not be construed as legal advice. The information presented may not apply to your situation and should not be acted upon without consulting a qualified probate attorney. We encourage you to seek the advice of a competent attorney with any legal questions you may have.

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