In Ahlgren v. Ahlgren, plaintiffs sued a defendant alleging that the defendant was a trustee of an oral trust who breached duties by refusing to return certain property. No. 13-22-00029-CV, 2023 Tex. App. LEXIS 4182 (Tex. App.—Corpus Christi – Edinburg,  June 15, 2023, no pet. history). After the trial court entered judgment for the plaintiff, the defendant appealed. The court of appeals first discussed the requirements for an oral trust:

The Texas Trust Code provides that “[a] trust may be created by . . . a property owner’s inter vivos transfer of the property to another person as trustee for the transferor or a third person[.]” Tex. Prop. Code Ann. § 112.001(2). “A trust in either real or personal property is enforceable only if there is written evidence of the trust’s terms bearing the signature of the settlor or the settlor’s authorized agent.” Id. § 112.004. However, an oral trust in personal property “is enforceable if created by . . . a transfer of the trust property to a trustee who is neither settlor nor beneficiary if the transferor expresses simultaneously with or prior to the transfer the intention to create a trust.” Id. § 112.004(1); see Ayers v. Mitchell, 167 S.W.3d 924, 928 (Tex. App.—Texarkana 2005, no pet.).

“A trust is created only if the settlor manifests an intention to create a trust.” Tex. Prop. Code Ann. § 112.002. Although “[t]echnical words of expression” are not essential, the beneficiary, the res, and the trust purpose must be identified. Perfect Union Lodge No. 10, A.F. & A.M., of San Antonio v. Interfirst Bank of San Antonio, N.A., 748 S.W.2d 218, 220 (Tex. 1988); ETC Tex. Pipeline, Ltd. v. Addison Expl. & Dev., LLC, 582 S.W.3d 823, 840 (Tex. App.—Eastland 2019, pet. denied); Pickelner v. Adler, 229 S.W.3d 516, 526 (Tex. App.—Houston [1st Dist.] 2007, pet. denied).

“[W]hen a valid trust is created, the beneficiaries become the owners of the equitable or beneficial title to the trust property and are considered the real owners.” Bradley v. Shaffer, 535 S.W.3d 242, 248 (Tex. App.—Eastland 2017, no pet.) (quoting City of Mesquite v. Malouf, 553 S.W.2d 639, 644 (Tex. App.—Texarkana 1977, writ ref’d n.r.e.)). “[I]t is well established that the legal and equitable estates must be separated; the former being vested in the trustee and the latter in the beneficiary.” Perfect Union Lodge, 748 S.W.2d at 220. However, “[i]t is not absolutely necessary that legal title be granted to the trustee in specific terms.” Id. Furthermore, “[p]roperty may be added to an existing trust from any source in any manner unless the addition is prohibited by the terms of the trust or the property is unacceptable to the trustee.” Tex. Prop. Code Ann. § 112.006.

An express trust establishes “a fiduciary relationship with respect to property which arises as a manifestation by the settlor of an intention to create the relationship and which subjects the person holding title to the property to equitable duties to deal with the property for the benefit of another person.” Id. § 111.004(4). “The trustee shall administer the trust in good faith according to its terms . . . .” Id. § 113.051. “[I]n administering the trust[,] the trustee shall perform all of the duties imposed on trustees by the common law.” Id. “The trustee is accountable to a beneficiary for the trust property and for any profit made by the trustee through or arising out of the administration of the trust, even though the profit does not result from a breach of trust[.]” Id. § 114.001(a). A trustee is liable for “any damages resulting from” a breach of trust, including lost trust property, profit to the trustee, and profit the trust would have realized without breach. Id. § 114.001(c); see also Williams v. Williams, No. 03-21-00109-CV, 2022 Tex. App. LEXIS 8164, 2022 WL 16702520, at *3 (Tex. App.—Austin Nov. 4, 2022, no pet.) (mem. op.).

Id. The court held that there was sufficient evidence of intent to create a trust:

While Nim did not describe a transfer of legal title in explaining the agreement, Nim clearly identified the beneficiary—Nim; the res—Nim’s First Tennessee assets; and the trust purpose—the management and investment of Nim’s holdings. See id. Paco’s own representations confirmed the intent of the parties—”I’m going to continue to legally transfer as much of Nim’s estate as I can into my own name”; “any money I move into my name from Nim’s accounts I intend to keep in my name until he needs me to help him out”; “I’ve been managing [Nim’s] money for four years.” See id.; see also In re Borbidge, 90 B.R. 728, 735 (Bankr. E.D. Pa. 1988), aff’d sub nom. Eckell v. Borbidge, 114 B.R. 63 (E.D. Pa. 1990) (concluding that an oral trust was intended based on testimony by son “that his mother gave him control and access to her assets to be exercised for her benefit”). Viewing the evidence in the light most favorable to the verdict, we conclude that the record would enable reasonable and fair-minded people to find that Nim intended to create an express trust.

Id. The court also held that there was evidence of a transfer of assets where the defendant liquidated certain investments and transferred them. The court held that the intent and the transfer did not have to occur at the same time.

The court also held that the statute of frauds did not defeat the oral trust where the assets at the time of the creation of the trust were personal property:

[A]appellants argue that the statute of frauds bars the enforcement of the oral trust. We disagree. As noted above, the Trust Code’s statute of frauds provision permits the enforcement of oral trusts if the trust consists of personal property at its creation. See Tex. Prop. Code Ann. § 112.004(1) (“A trust consisting of personal property . . . is enforceable if created by . . . a transfer of the trust property to a trustee who is neither settlor nor beneficiary . . . .”) (emphasis added). If the settlor funds the oral trust with personal property, the trustee cannot render the entire trust unenforceable by later converting the trust assets to real property.

Id. The court affirmed the trial court’s holding that there was an express oral trust.

The defendant also challenged an award of profit disgorgement alleging that there was no evidence of the value of the asset at the time of the breach. The court noted that there was evidence of the asset at the time of trial, which was sufficient for a breach of fiduciary duty claim:

Next, appellants argue that the Bitcoin should have been valued at the time of breach—not the time of trial—in calculating Paco’s profits. Appellants cite a rule of law applying to contract damages. See Miga v. Jensen, 96 S.W.3d 207, 214 (Tex. 2002) (“But the rule in Texas has long been that contract damages are measured at the time of breach, and not by the bargained-for goods’ market gain as of the time of trial.”). However, appellants cite no authority applying this limitation to a breach of fiduciary duty claim, and we have found none. See Tex. R. App. P. 38.1(i). Rather, “[u]nlike a contract case, the law favors granting the benefit of the delay to the victim of the fraud.”

Id. The court affirmed the judgment for the plaintiff.

Email this postTweet this postLike this postShare this post on LinkedIn
Photo of David Fowler Johnson David Fowler Johnson

[email protected]

David maintains an active trial and appellate practice and has consistently worked on financial institution litigation matters throughout his career. David is the primary author of the The Fiduciary Litigator blog, which reports on legal cases and issues impacting the fiduciary…

[email protected]

David maintains an active trial and appellate practice and has consistently worked on financial institution litigation matters throughout his career. David is the primary author of the The Fiduciary Litigator blog, which reports on legal cases and issues impacting the fiduciary field in Texas. Read More

David’s financial institution experience includes (but is not limited to): breach of contract, foreclosure litigation, lender liability, receivership and injunction remedies upon default, non-recourse and other real estate lending, class action, RICO actions, usury, various tort causes of action, breach of fiduciary duty claims, and preference and other related claims raised by receivers.

David also has experience in estate and trust disputes including will contests, mental competency issues, undue influence, trust modification/clarification, breach of fiduciary duty and related claims, and accountings. David’s recent trial experience includes:

  • Representing a bank in federal class action suit where trust beneficiaries challenged whether the bank was the authorized trustee of over 220 trusts;
  • Representing a bank in state court regarding claims that it mismanaged oil and gas assets;
  • Representing a bank who filed suit in probate court to modify three trusts to remove a charitable beneficiary that had substantially changed operations;
  • Represented an individual executor of an estate against claims raised by a beneficiary for breach of fiduciary duty and an accounting; and
  • Represented an individual trustee against claims raised by a beneficiary for breach of fiduciary duty, mental competence of the settlor, and undue influence.

David is one of twenty attorneys in the state (of the 84,000 licensed) that has the triple Board Certification in Civil Trial Law, Civil Appellate and Personal Injury Trial Law by the Texas Board of Legal Specialization.

Additionally, David is a member of the Civil Trial Law Commission of the Texas Board of Legal Specialization. This commission writes and grades the exam for new applicants for civil trial law certification.

David maintains an active appellate practice, which includes:

  • Appeals from final judgments after pre-trial orders such as summary judgments or after jury trials;
  • Interlocutory appeals dealing with temporary injunctions, arbitration, special appearances, sealing the record, and receiverships;
  • Original proceedings such as seeking and defending against mandamus relief; and
  • Seeking emergency relief staying trial court’s orders pending appeal or mandamus.

For example, David was the lead appellate lawyer in the Texas Supreme Court in In re Weekley Homes, LP, 295 S.W.3d 309 (Tex. 2009). The Court issued a ground-breaking opinion in favor of David’s client regarding the standards that a trial court should follow in ordering the production of computers in discovery.

David previously taught Appellate Advocacy at Texas Wesleyan University School of Law located in Fort Worth. David is licensed and has practiced in the U.S. Supreme Court; the Fifth, Seventh, and Eleventh Federal Circuits; the Federal District Courts for the Northern, Eastern, and Western Districts of Texas; the Texas Supreme Court and various Texas intermediate appellate courts. David also served as an adjunct professor at Baylor University Law School, where he taught products liability and portions of health law. He has authored many legal articles and spoken at numerous legal education courses on both trial and appellate issues. His articles have been cited as authority by the Texas Supreme Court (twice) and the Texas Courts of Appeals located in Waco, Texarkana, Beaumont, Tyler and Houston (Fourteenth District), and a federal district court in Pennsylvania. David’s articles also have been cited by McDonald and Carlson in their Texas Civil Practice treatise, William v. Dorsaneo in the Texas Litigation Guide, and various authors in the Baylor Law ReviewSt. Mary’s Law JournalSouth Texas Law Review and Tennessee Law Review.

Representative Experience

  • Civil Litigation and Appellate Law