graeme roustan - ridglea entertainment, inc - history of w. graeme roustan statutory fraud case in...

12-11-16 6:37 PMW. GRAEME ROUSTAN v. MICHAEL SANDERSON, WIFE ANN GAINOUS AND R…EA ENTERTAINMENT, INC., 12-0051 - Supreme Court of Texas Blog

of 3http://data.scotxblog.com/scotx/no/12-0051

DOCKETDOCKET

DATADATA

RecentRecent

OpinionsOpinions

RecentRecent

OrdersOrders

StagingStaging

TablesTables

CaseCase

OriginsOrigins

TAMES

No. 12-0051

Opinions Issued Docket Details Parties and Counsel

Court of Appeals

AppellateDistrict:

2nd Court ofAppeals

OutcomeBelow:

AFF/PT,REV/REND/PT

COADocketNo.:

02-09-00377-CV

OpinionAuthor:

Honorable LeeAnnDauphinot

Trial Court

TrialCourt:

342nd DistrictCourt

County: Tarrant

TrialJudge:

HonorableRobert S.McGrath

TrialDocket:

342-223829-07

Entries onSCOTXOrdersLists

None yet

W. GRAEME ROUSTAN v. MICHAELSANDERSON, WIFE ANN GAINOUSAND RIDGLEA ENTERTAINMENT,INC.A petition was filed on January 17, 2012. The Courtrequested full merits briefing on August 31, 2012.

Blog FrontBlog Front Recent OrdersRecent Orders Cases on the DocketCases on the Docket Feeds Feeds

Search cases... Search

http://data.scotxblog.com/scotx/staging/decided

http://data.scotxblog.com/recent/orders

http://data.scotxblog.com/scotx/staging

http://docketdb.scotxblog.com/origins

http://www.search.txcourts.gov/Case.aspx?cn=12-0051

http://data.scotxblog.com/scotx/no/12-0051#opinions

http://data.scotxblog.com/scotx/no/12-0051#docket

http://data.scotxblog.com/scotx/no/12-0051#parties

http://www.scotxblog.com/

http://www.scotxblog.com/

http://data.scotxblog.com/recent/orders

http://data.scotxblog.com/scotx/staging/granted

http://data.scotxblog.com/scotx/no/12-0051#



Date Event

2012-12-05

Pet/Rel reply brief on the merits due

2012-11-20

Respondent/Real party in interest brief on themerit due

Date Event Outcome

2012-10-30

Brief filed (Petitioner) !

2012-09-24

Motion for Extension of Time disposed.(Petitioner) !

Filinggranted

2012-09-21

Motion for extension of time to file brief.(Petitioner) !

2012-09-12

Case Record Filed !

2012-09-04

Record Requested in Petition for Review !

2012-08-31

Brief on the Merits Requested !

This case was waiting for a decision aboutbriefing or a possible grant between June26, 2012 and August 31, 2012.

2012-06-26

Reply filed (Petitioner) !

2012-06-11

Response to Petition for Review filed(Respondent) !

Upcoming

Docket Entries



06-11 (Respondent) !

2012-05-22

Motion for Extension of Time to FileResponse disposed (Respondent) !

Filinggranted

2012-05-18

Motion for Extension of Time to FileResponse (Respondent) !

2012-05-18

Designation of Lead Counsel (Respondent) !

2012-04-16

Motion for Extension of Time disposed. ! Filinggranted

2012-04-13

Motion for Extension of Time to FileResponse (Respondent) !

2012-03-23

Supreme Court of Texas RequestedResponse !

2012-02-21

Case forwarded to Court

2012-01-17

Appendix Filed (Petitioner) !

2012-01-17

Petition for Review filed (Petitioner) !

12-11-16 5:58 PMAPPELLANT v. APPELLEES, NO. 02–09–00377–CV, September 30, 2011 - TX Court of Appeals | FindLaw

Page 1 of 14http://caselaw.findlaw.com/tx-court-of-appeals/1581487.html

Court of Appeals of Texas, Waco.

APPELLANT v. APPELLEESW. Graeme Roustan APPELLANT v. Michael Sanderson, Wife Ann Gainous, and Ridglea

Entertainment, Inc. APPELLEES

NO. 02–09–00377–CV

-- September 30, 2011

COURT OF APPEALS

SECOND DISTRICT OF TEXAS

FORT WORTH

MEMORANDUM OPINION1

In six issues, Appellant W. Graeme Roustan appeals from the trial court's judgment awardingdamages to Appellees Michael Sanderson, his wife Ann Gainous, and Ridglea Entertainment,Inc. (collectively S & G) on their breach of contract and fraud claims against him. Because wehold that the evidence is insufficient to support an award of damages against Roustanindividually on S & G's breach of contract claim but sufficient to support an award of damageson S & G's statutory fraud claim, we reverse in part and affirm in part.



Background

Sanderson and Gainous wanted to start their own ice rink business, and in November 2004,Gainous signed a two-year lease for an ice rink in Fort Worth owned by YDIDI, I LP. The leasecontained an option to purchase the property during the lease term. Sanderson and Gainousformed a corporation, Ridglea Entertainment, Inc., to operate the business, and they opened forbusiness in December 2004.

In March 2005, S & G began having equipment problems, which caused problems with the ice. They finally identified and repaired the source of the problem at the end of May 2005. Becauseof the problem with the ice, the rink had been closed for business from March until the end ofJune. Meanwhile, in April 2005, Sanderson contacted Roustan, an investor in and operator of anumber of other ice rinks, about Roustan buying a controlling interest in the couple's business.

In May 2005, Sanderson and Gainous went to Las Vegas to an ice rink convention and met withRoustan while there. At the meeting, Roustan gave a presentation about his ice rink businessventure in which he told Sanderson and Gainous about ice rink facilities he currently owned andothers that he planned to acquire in the next few years.

The parties signed a purchase agreement on August 1, 2005, in which a new entity, RoustanRidglea, LLC (Ridglea LLC) purchased the lease and all of the assets of the ice rink business,except that Gainous kept the $30,000 security deposit that she had paid when she signed thelease. Ridglea LLC agreed to assume the utility contracts for the premises, including theelectricity service. Ridglea LLC also agreed to transfer a twenty-five percent ownership interestin the entity to Ridglea Entertainment and to pay $75,000, in two installments of $37,500 each, toGainous and Ridglea Entertainment. At trial, the parties disputed whether the secondinstallment was ever paid.

At the same time, Gainous executed an assignment of the lease as well as an assignment of thepurchase option. As part of the consideration for the agreement, Ridglea LLC agreed to employSanderson as general manager of the ice rink and to employ Gainous as a full-time employee.

Ridglea Entertainment and Roustan Inc. (a company of which Roustan is the sole stockholder)also executed an operating agreement for Ridglea LLC. Under the agreement, Roustan Inc. held asixty-five percent ownership interest in Ridglea LLC. Ridglea Entertainment owned twenty-fivepercent, and two trusts each took a five percent ownership interest.

The agreement called for Roustan Inc. to make a $150,000 capital contribution to Ridglea LLC,with $20,000 paid prior to formation and the remaining $130,000 due upon formation. RidgleaEntertainment's capital contribution consisted of its assignment of its interest in the ice rink and



its sale of all of the business assets as set out in the purchase agreement. Roustan made anadvance of $20,000 prior to closing on the purchase agreement and another $55,000 around thetime of closing. The parties disputed at trial whether Roustan Inc. ever satisfied the rest of itscapital contribution.

Attached to the agreement as Exhibit 2 was an unexecuted promissory note, dated July 1, 2005,under which Ridglea LLC promised to pay the Fernandez Family Trust a sum of $200,000 plusinterest over a period of three years. The operating agreement provided that Roustan, themanaging member, was authorized to pay the note “as set forth in Exhibit ‘2.’ ” This trust was notone of the two trusts that received a five percent membership interest in Ridglea LLC.

By October 2005, Ridglea LLC did not have enough money in its account to pay all of its bills,and the business was not generating enough income to cover them. Roustan had not had theutilities transferred out of Gainous's name, and in the spring of 2006, the business began gettingshut-off notices from the utility company for failure to pay the rink's bills. S & G paid thesebills with their personal charge cards.

In September 2006, the business continued to have trouble making money, and Roustan informedS & G that he would not put any more money into the business. That same month, theelectricity was shut off for failure to pay the bill, and S & G paid $22,000 to have the serviceturned on again. S & G also received notice that month that there were insufficient funds tomake payroll.

Sanderson and Gainous notified Roustan that they would be taking the revenue from the ice rinkand putting it in Ridglea Entertainment's account. They paid the rent for October andNovember. After accepting that rent, YDIDI notified S & G that the September rent had notbeen paid and that the lease was in default. They sent a check to YDIDI, but the entity held thecheck and, in December, evicted S & G. The next day, the rink opened up again for business,now under the management of Firland Management LLC, a company used by Roustan to manageother ice rinks in which he invests.

During this time, Roustan's lawyer was negotiating with YDIDI for a new lease and newpurchase option, but with a new company instead of with Ridglea LLC. On November 30, 2006,Roustan sent an email to a YDIDI representative stating that

[f]rom what I hear, [Sanderson] is having trouble getting an Insurance Certificate for RidgleaEntertainment, Inc. If your lawyer demands to see one in 5 days, he might not be able to get oneand would be in default ․ even though my policy is still in effect. I am pretty certain he willcome up with the September rent and December rent. Just a thought.



The YDIDI representative responded, “I have forwarded your message to our attorney ․ who isworking on a specific notice to Sanderson. I am confident we will be able to prevail in the end.” On December 18, 2006, the day after S & G were locked out of the ice rink, Roustan registereda new corporation, Roustan Fort Worth, LLC, with the Texas Secretary of State, using the icerink's address as the registered address.

S & G filed suit against Roustan; Ridglea LLC; Roustan Fort Worth, LLC; YDIDI; and FirlandManagement, LLC.2 S & G's petition contained a seven-paragraph section with the heading“Causes of Action Against the Roustan Defendants.” In the first paragraph of that section, theyalleged that Roustan had made false representations “concerning his business acumen, hisfinancial strength[,] and his commitment to funding the new company to which [S & G] sold thebusiness.” S & G then stated a claim “for common law fraud and statutory fraud pursuant toTex. Bus. & Com.Code § 27.01.”

In a separate paragraph in that section, S & G included the following claim: “Ridglea LLC failedto pay the second [half] of the purchase price and thereby breached the contract of Purchase andSale. The breach of contract by [Ridglea LLC] resulted in damages to [S & G].”

After a trial, a jury found that Roustan had failed to comply with his agreement to pay Sandersonand Gainous $75,000 for the transfer of the ice rink business, and it assessed their damages at$37,500. The jury further found that Roustan had not failed to make the agreed $150,000capital contribution and that he did not agree to contribute the money for payment of RidgleaLLC's operating expenses.

The jury also found that Roustan did not commit common law fraud against S & G and that hedid not “engage in any false, misleading, or deceptive act or practice that [S & G] relied on totheir detriment and that was a producing cause of damages to [S & G].” The jury did find thatRoustan committed statutory fraud against S & G, but it awarded statutory fraud damages only toRidglea Entertainment, in the amount of $50,000.

Roustan filed a motion for judgment notwithstanding the verdict. The trial court denied themotion and entered judgment ordering that Sanderson and Gainous recover from Roustan$37,500 plus prejudgment interest and that Ridglea Entertainment recover from Roustan $50,000.

Analysis

Roustan's first two issues relate to S & G's breach of contract claim. His third, fourth, fifth, andsixth issues relate to S & G's statutory fraud claim.

Breach of Contract Claim

http://caselaw.findlaw.com/tx-court-of-appeals/1581487.html#footnote_2



In Roustan's second issue, he argues that the evidence is legally and factually insufficient tosupport the jury's verdict on S & G's breach of contract claim because there is no evidence thatRoustan made any agreement with them in his personal capacity. We agree.

The jury found that Roustan had agreed to pay Sanderson and Gainous $75,000 for the transfer ofthe ice rink business. The agreement regarding the transfer of the business was contained in thepurchase and sale contract, which was between S & G and Ridglea LLC, not Roustanindividually. Roustan signed the agreement as president of Roustan, Inc., which signed as themanaging member of Ridglea LLC. Accordingly, Ridglea LLC may be liable for a breach of thecontract to which it is a party, but Roustan as an officer may not be held individually liable.3 Roustan could, through his actions, cause Ridglea LLC to breach the agreement,4 but because hewas not a party to the contract, he could not personally breach it.5 S & G did not plead any factsor provide sufficient evidence to support a ground for ignoring the limitation on liability affordedto limited liability companies and did not allege that the limitation should be disregarded.6 Bystatute, a member of a limited liability company is not liable for a debt, obligation, or liability ofthe company.7 Fraud is a ground for disregarding the corporate form,8 but although S & G pledthat Roustan fraudulently induced them to enter a contract, they did not plead that Roustan usedthe LLC itself to perpetrate a fraud and that, consequently, the corporate form should bedisregarded and Roustan held individually liable.9 Nor did they plead any other ground fordisregarding the corporate structure.10

S & G argue in their brief that they “had always understood that Roustan would be paying the$75,000 cash portion of the purchase price[,] and it was not until shortly before closing whenthey received the purchase agreement that they understood Roustan had put a provision in thepurchase agreement that the new company would be paying the second half.” They thencontend that they “had a conversation with Roustan about their concerns with capital calls andRoustan had told them that he would personally pay any monetary shortfalls during the first[twelve] months of the operation of the company,” and they therefore “had every reason tobelieve that Roustan was standing by his personal commitment on the purchase price.”

S & G may have put on some evidence of statements Roustan made before or after the contract'sformation about the source of funding for the $37,000, but they did not put on evidence of aseparate contract with Roustan personally to pay them the money. The only contract that theypled had been breached was the purchase agreement, and this was the only agreement that theyproved existed.11 Roustan was not a party to this agreement, and S & G did not put on evidenceto support the disregarding of the corporate form to hold him personally liable.12 Because theyneither pled nor proved a ground for setting aside the corporate form to hold Roustan personallyliable on the purchase agreement, and because they neither pled nor proved a separate contractwith Roustan, he cannot be held individually liable for breach of contract.13 Accordingly,














applying the appropriate standard of review,14 we sustain Roustan's second issue.

Because S & G failed to establish a basis for holding Roustan personally liable, we do not need toreach Roustan's first issue, in which he argues that the pleadings did not support a verdict ofpersonal liability on the contract.15

Statutory Fraud

The remainder of Roustan's issues relate to the jury's verdict of statutory fraud. In his thirdissue, he argues that there is no evidence that he made any representation that was false.

S & G pled a claim for fraud involving real estate or corporate stock under section 27.01 of thebusiness and commerce code.16 To show fraud under section 27.01, a plaintiff may prove either(1) a false representation of a material fact or (2) a false, material promise to do an act.17 If theplaintiff's claim is based on a false representation of fact, the plaintiff must show a “falserepresentation of a past or existing material fact, when the false representation is ․ made to [theplaintiff] for the purpose of inducing [the plaintiff] to enter into a contract; and ․ relied on by [theplaintiff] in entering into that contract.” 18 If the claim is based on a false promise to act, theplaintiff must show that the false promise was material, made to the plaintiff with the intention ofnot fulfilling it and for the purpose of inducing the plaintiff to enter into a contract, and that theplaintiff relied on the promise in entering into that contract.19

The jury charge tracked section 27.01, instructing the jury that statutory fraud can occur wheneither (a) there is a false representation of a past or existing material fact or (b) a party makes afalse promise to do an act. In the short section of Roustan's appellate brief addressing this issue,he asserts that “[t]here was no evidence of any representation by [him] that was false in anyrespect.” He does not, however, argue that there is no evidence that he made a promise to dosomething with the intention of not fulfilling it.

In his reply brief, however, Roustan does make one argument regarding the evidence to support afinding of a false promise in a sentence in a footnote of the brief. He states that testimonysuggesting that he failed to perform on any of his promises cannot support a fraud claim becauseTexas cases have consistently held that failure to perform an agreement cannot support a fraudclaim. We agree with the statement that under Texas law, proof of the failure to perform,without more, does not establish fraud.20 But circumstantial evidence may be used to establishthat, when making the promise, the party had no intention to perform.21 A party's acts after thepromise was made, the party's denial that he ever made a promise, and no pretense ofperformance are all factors that may be considered to show a lack of intent.22

Roustan makes no argument that the evidence was insufficient to show that in order to induce S












& G to enter into a contract, he made a promise with the intention of not fulfilling it. Furthermore, Gainous's and Sanderson's testimony indicates that Roustan led them to believe thathe and his business enterprise had the financial wherewithal to provide the funding to keep theirbusiness going and that he would in fact provide the funding. The emails from Roustan in therecord do nothing to contradict this testimony. For example, when the parties were stillnegotiating the deal, Roustan told Sanderson that he would pay $20,000 up front and then, afterformation of the LLC and the assignment of the lease, “[he ] would then provide an additional$130,000.” [Emphasis added.] Roustan did nothing to disillusion S & G after they formed theLLC; in February 2006, Sanderson asked Roustan about the second payment of $35,000, and inresponse Roustan asked them to wait on payment because “it would make life easier on [him ].” [Emphasis added.] No mention was made of funding the business by taking out a loan. Neither the operating agreement nor the note attached to it indicated that the trust loan was not anadditional source of funds and was instead the primary source of Roustan's contribution to theLLC. The evidence in the record was enough for the jury to conclude that Roustan told S & Gthat he could and would provide a capital contribution of $150,000, either with his own funds orwith the financial resources of his business, but that he actually borrowed money on behalf of theLLC. The record therefore contains sufficient evidence that Roustan made a promise to S & Gthat went unfulfilled.

Roustan does not argue that, even if he did not follow through on a promise, such promise wasnevertheless not made with an intention not to fulfill it. Even if he had so argued, however, ourconclusion would be the same. From Roustan's testimony about how he structures businessdeals, his opinion about the note's satisfaction of his capital obligation, and the operatingagreement's provision making repayment of the loan the obligation of the LLC rather thanRoustan, Inc., the jury could have concluded that Roustan never intended to make a capitalcontribution from his own funds or the funds of Roustan, Inc. and that he had always intended tofund the business by way of a debt that the LLC would have to repay. Accordingly, the jurycould have found that Roustan's borrowing money to fund the LLC and making the LLC liablefor the repayment satisfied Roustan's obligation to make a capital contribution but at the sametime violated his promise to S & G that he personally could and would fund the company.

Roustan does not argue that the promise to provide funding out of his own funds or his business'sfunds was not material. Nor does he argue that the evidence was not sufficient to show that S &G relied on the promise or to show that the promise was made to induce them to sign thepurchase and sale agreement and the assignments. Accordingly, we do not address thesufficiency of the evidence as to those elements of S & G's claim. We overrule Roustan's thirdissue.

In his fourth issue, Roustan argues that the judgment does not conform to the pleadings. The



entirety of his argument on this issue is as follows:

[Texas Rule of Civil Procedure] 301 requires a judgment to conform to the pleadings. Asmentioned above, [S & G] assert in the [p]etition that Roustan made false “representationsconcerning his business acumen, his financial strength and his commitment to funding the newcompany.” ․ However, as discussed above, such representations (even if made) cannot support ajudgment of fraud under Texas law[.] See, Stephanz v. Laird, 846 S.W.2d [895,] 903 [ (Tex.App.—Houston [1st Dist.] 1993, writ denied) ]. Thus, the [j]udgment against Roustan forstatutory fraud does not conform to the pleadings.

Roustan expands on his argument somewhat in his reply brief, in which he asserts that as a matterof law, the allegations that he made false “representations concerning his business acumen, hisfinancial strength and his commitment to funding the new company” cannot support a claim forfraud because “the representation complained of must concern a ‘material fact’ and not ‘a merematter of opinion, judgment, probability, or expectation.’ ” Thus, he argues, the petition failedto plead any grounds that would support a fraud claim.

In the case relied on by Roustan, the court looked to see if the evidence supported a finding ofmisrepresentation, not a finding of a false promise to do an act. Roustan does not explain whythe pleadings cannot support a judgment that he committed statutory fraud based on a falsepromise.

In the paragraph of the pleadings pointed out by Roustan, S & G did state that Roustan madefalse representations about his business ability, his finances, and his commitment to funding thenew company. They assert that these representations were made with knowledge of their falsitywith the intent of inducing them to enter into the purchase and sale agreement, and “[S & G]assert an action for common law fraud and statutory fraud pursuant to Tex. Bus. & Com.Code § 27.01” based on the purchase and sale agreement and the assignments. But S & G did not limittheir statutory cause of action to a claim based on false representations under section 27.01(a)(1). And in their pleadings, S & G alleged that Roustan misled them about his commitment tofunding the new company and that Roustan had represented to them that he had financial capitalto put into the business and to exercise the purchase option “so that the new entity he would formwould own the [p]roperty.” Although S & G used the term “representations,” a term thatgenerally relates to assertions of fact rather than promises, these statements were sufficient to putRoustan on notice of a claim based on statements by him that he would perform acts in the futurewith respect to funding the new company and purchasing the property.23 Roustan makes noargument about why, if S & G proved that Roustan made promises about funding the business,such promises could not serve as the basis of a section 27.01(a)(2) claim.24 The pleadings cansupport a judgment for statutory fraud based on a false promise, and, accordingly, we overrule





this issue.

In Roustan's fifth issue, he argues that the jury's finding that he committed statutory fraud wasinconsistent with its findings as to common law fraud. In reviewing the jury findings forconflict, a court may not strike down jury answers as conflicting if there is any reasonable basisupon which they can be reconciled.25 The question for this court is not whether the findingsmay reasonably be viewed as conflicting but whether there is any reasonably possible basis uponwhich they may be reconciled.26

In Roustan's original brief, he does not explain why the jury's findings are inconsistent andirreconcilable.27 In his reply brief, however, he argues that under the common law fraudquestion, the jury found that he did not make a false representation, but the jury's answer tostatutory fraud requires a finding that he did make a false representation. Thus, he argues, thefindings are in conflict and are irreconcilable.

We disagree. The jury's answers are not irreconcilable. The jury charge on common law fraudlimited liability to the making of misrepresentations, which the charge defined as a falsestatement of fact or opinion. The statutory fraud definition, however, allowed the jury to findthat Roustan had committed fraud either by making a misrepresentation or by making a falsepromise to do an act. The jury could have found that Roustan did not make a false statement offact or opinion and therefore did not commit common law fraud but that Roustan did make afalse promise to do an act and therefore did commit statutory fraud.

Furthermore, when the jury returned its verdict, Roustan did not object to the findings asconflicting.28 We overrule this issue.

In his sixth issue, Roustan contends that the trial court submitted an improper instruction ondamages concerning statutory fraud. The jury charge asked the jury,

What sum of money, if any, if paid now in cash, would fairly and reasonably compensate [S &G] for their damages, if any, that resulted from such statutory fraud?

Consider the following elements of damages, if any, and none other:

1. The economic losses, if any, suffered by [S & G] caused by the [statutory] fraud.

The jury charge instructed the jury to determine “economic losses” but did not define that term. In Roustan's brief on appeal, he argues that the measure of damages for fraud was discussed bythe Supreme Court of Texas in Formosa Plastics,29 in which that court stated that Texasrecognizes two measures of direct damages for fraud: out-of-pocket and benefit-of-the-bargain.








Thus, Roustan argues, the trial court's instruction was contrary to Texas law because the propermeasure of damages for a fraud claim is either out-of-pocket damages or benefit-of-the bargaindamages.

Section 27.01 provides that a plaintiff under that section may recover “actual damages,” and, insome cases, exemplary damages.30 The statute does not define the term “actual damages,” sowe look to the common law for guidance.31 Under the common law, both out-of-pocket andbenefit-of-the-bargain damages are methods of measuring direct actual damages.32 Economicdamages are measured the same way, and in fact courts often use the terms “economic damages”and “actual damages” interchangeably.33 Thus, the jury charge set forth the correct kind ofdamages recoverable on a statutory fraud claim. To the extent that the terms are notinterchangeable, Roustan was not harmed by the trial court's use of the term “economic damages”instead of “actual damages” because “actual damages” could have allowed for greater recovery inthat “actual damages” can include both economic and non-economic damages.34 In sum, out-of-pocket and benefit-of-the-bargain are both measures of “actual damages” and of “economicdamages.”

In his reply brief, Roustan argues that a proper instruction on damages would have “set forth” the“out-of-pocket” and “benefit-of-the-bargain” measures. We construe Roustan's issue liberallyto argue, not that the instruction failed to name the proper measure of damages recoverable, butthat it failed to instruct the jury on how to calculate those damages, that is, that the charge shouldhave instructed the jury to determine either the difference between the value S & G paid and thevalue of what they received (out-of-pocket damages) or the difference between the value asrepresented and the value as received (benefit-of-the-bargain damages).35

In the charge conference, Roustan's attorney objected to the damages question, stating that

the measure of damages stated here is not one of the measures of damages for fraud recognizedby Texas law. It just says the economic losses. And the proper definitions for fraud would bebenefit of the bargain or out-of-pocket or one of the other recognized measures, and this is notone of them. [Emphasis added.]

This objection was not sufficient to advise the trial court of Roustan's objection that the chargewas defective for failing to instruct the jury how to calculate benefit-of-the-bargain damages andout-of-pocket damages. Roustan argued only that economic losses were not a proper measureof fraud damages. Thus, to the extent that Roustan argues that the trial court should haveinstructed the jury on how to calculate the damages, he has not preserved the complaint.36 Tothe extent that Roustan's reply brief merely repeats the argument from his original brief, theargument is overruled because “economic losses” are an appropriate measure of damages for the










statutory fraud claim alleged. We overrule Roustan's sixth issue.

Conclusion

Having sustained Roustan's second issue, we reverse the part of the trial court's judgmentawarding S & G damages on their breach of contract claim and render judgment that they takenothing on the breach of contract claim. We affirm the remainder of the trial court's judgment.

PANEL: DAUPHINOT, WALKER, and GABRIEL, JJ.

GABRIEL, J. concurs without opinion.

DELIVERED: September 29, 2011

FOOTNOTES

1. FN1. See Tex.R.App. P. 47.4.

2. FN2. They subsequently dismissed their claims against Firland and YDIDI.

3. FN3. See Willis v. Donnelly, 199 S.W.3d 262, 271 (Tex.2006) (“A bedrock principle ofcorporate law is that an individual can incorporate a business and thereby normally shield himselffrom personal liability for the corporation's contractual obligations.”).

4. FN4. See In re Vesta Ins. Group, Inc., 192 S.W.3d 759, 762 (Tex.2006) (orig.proceeding)(noting that “corporations must act through human agents”).

5. FN5. See Bernard Johnson, Inc. v. Cont'l Constructors, Inc., 630 S.W.2d 365, 369 (Tex.App.—Austin 1982, writ ref'd n.r.e.) (“As a general rule, a suit for breach of contract may not bemaintained against a person who is not a party to the contract.”).

6. FN6. See Castleberry v. Branscum, 721 S.W.2d 270, 272 (Tex.1986) (setting out sixgrounds on which the corporate form may be disregarded), superseded in part by Act effectiveSept. 1, 1997, 75th Leg., R.S., Ch. 375, § 7, 1997 Tex. Gen. Laws 1522, 1522–23 (amended2003 & 2007) (current version at Tex. Bus. Orgs.Code Ann. § 21.223 (West 2010)); see alsoSSP Partners v. Gladstrong Inv. (USA) Corp., 275 S.W.3d 444, 451–52 (Tex.2008) (stating thatthe limitation on corporate liability may be ignored “only ‘when the corporate form has beenused as part of a basically unfair device to achieve an inequitable result’ ”); McCarthy v. WaniVenture, A.S., 251 S.W.3d 573, 590 (Tex.App.—Houston [1st Dist.] 2007, pet. denied) (notingthat Texas courts have applied to limited liability corporations the same state law principles forpiercing the corporate veil that they have applied to corporations).

http://caselaw.findlaw.com/tx-court-of-appeals/1581487.html#footnote_ref_1








7. FN7. Act effective Aug. 26, 1991, 72nd Leg., R.S., Ch. 901, § 46, 1991 Tex. Gen. Laws3192, 3203 (now renumbered and codified at Tex. Bus. Orgs.Code Ann. § 101.114 (West2010)).

8. FN8. See Castleberry, 721 S.W.2d at 272.

9. FN9. Cf. Houston–Am. Life Ins. Co. v. Tate, 358 S.W.2d 645, 657 (Tex.Civ.App.—Waco1962, no writ) (holding that the corporate fiction was used to perpetrate a fraud and thatadherence to the corporate fiction “would promote injustice and lead to a most inequitableresult”).

10. FN10. See Castleberry, 721 S.W.2d at 272; see also Blond Lighting Fixture Supply Co. v.Funk, 392 S.W.2d 586, 591 (Tex.Civ.App.—San Antonio 1965, no writ) (holding that there wasno justification for disregarding the corporate form when the plaintiffs did not present evidencethat the corporation was formed as a means of perpetrating fraud, that it was operated as a meretool of another corporation or as the alter ego of an individual, that the corporate form was beingused as a means of evading existing obligations, or that the corporation was used to circumvent astatute, protect crime, or justify wrong).

11. FN11. See Fieldtech Avionics & Instruments, Inc. v. Component Control.Com, Inc., 262S.W.3d 813, 825 (Tex.App.—Fort Worth 2008, no pet.) (stating that the elements of a breach ofcontract claim include the existence of a valid contract).

12. FN12. See Castleberry, 721 S.W.2d at 272.

13. FN13. See Bernard Johnson, Inc., 630 S.W.2d at 369.

14. FN14. Cent. Ready Mix Concrete Co. v. Islas, 228 S.W.3d 649, 651 (Tex.2007); City ofKeller v. Wilson, 168 S.W.3d 802, 807, 827 (Tex.2005); Uniroyal Goodrich Tire Co. v.Martinez, 977 S.W.2d 328, 334 (Tex.1998), cert. denied, 526 U.S. 1040 (1999).

15. FN15. See Tex.R.App. P. 47.1.

16. FN16. Tex. Bus. & Com.Code Ann. § 27.01(a) (West 2009).

17. FN17. Id.

18. FN18. Id.

19. FN19. Id.
















20. FN20. Formosa Plastics Corp. USA v. Presidio Eng'rs & Contractors, Inc., 960 S.W.2d 41,48 (Tex.1998).

21. FN21. See Spoljaric v. Percival Tours, Inc., 708 S.W.2d 432, 435 (Tex.1986).

22. FN22. See id.; see also Aquaplex, Inc. v. Rancho La Valencia, Inc., 297 S.W.3d 768, 775(Tex.2009) (“[A] party's intent is determined at the time the party made the representation, [but]it may be inferred from the party's subsequent acts after the representation is made.”) (quotingSpoljaric, 708 S.W.2d at 434).

23. FN23. See Horizon/CMS Healthcare Corp. v. Auld, 34 S.W.3d 887, 896–97 (Tex.2000)(noting that Texas follows a fair notice standard for pleading, that a petition is sufficient if itgives fair and adequate notice of the facts upon which the pleader bases his claim, that when aparty fails to specially except to a pleading, a court should construe the pleadings liberally infavor of the pleader, and that “it is hard to imagine that [Appellee] was unaware of exactly what[Appellant] was claiming”).

24. FN24. See Tex.R.App. P. 38.1(i).

25. FN25. Bender v. S. Pac. Transp. Co., 600 S.W.2d 257, 260 (Tex.1980).

26. FN26. Id.

27. FN27. See Tex.R.App. P. 38.1(i).

28. FN28. See Columbia Med. Ctr. of Las Colinas v. Bush, 122 S.W.3d 835, 861 (Tex.App.—Fort Worth 2003, pet. denied) (holding that the appellants did not preserve complaint aboutconflicting jury findings because they failed to object to the conflict before the jury wasdischarged).

29. FN29. 960 S.W.2d at 49.

30. FN30. Tex. Bus. & Com.Code Ann. § 27.01(b), (c).

31. FN31. Hawkins v. Walker, 233 S.W.3d 380, 391–92 (Tex.App.—Fort Worth 2007, no pet.)(applying without discussion the common law measure of damages for fraud in a section 27.01statutory fraud case); see also Swinnea v. ERI Consulting Eng'rs, Inc., 236 S.W.3d 825, 836(Tex.App.—Tyler 2007) (looking to the common law for guidance and stating that “[t]hemeasure of damages recoverable under [s]ection 27.01 is the same as that under a claim ofcommon law fraud”), rev'd in part on other grounds, 318 S.W.3d 867 (Tex.2010).















32. FN32. See Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 817(Tex.1997) (stating that under the common law, actual damages can be either direct orconsequential and that direct damages for misrepresentation may be measured as out-of-pocket oras benefit-of-the-bargain damages); Everett v. TK–Taito, L.L.C., 178 S.W.3d 844, 858(Tex.App.—Fort Worth 2005, no pet.) (noting that “out-of-pocket” and “benefit-of-the-bargain”are the two common law measures of economic damages).

33. FN33. See Matheus v. Sasser, 164 S.W.3d 453, 458 (Tex.App.—Fort Worth 2005, no pet.)(noting that current version of the Deceptive Trade Practices Act provides for “economicdamages,” that the prior version called for “actual damages,” and that we had found no casesuggesting that the terms had any difference in meaning).

34. FN34. See, e.g., Latham v. Castillo, 972 S.W.2d 66, 69 (Tex.1998) (noting that mentalanguish damages are actual damages recoverable at common law for some torts).

35. FN35. See Arthur Andersen, 945 S.W.2d at 817 (defining out-of-pocket and benefit-of-the-bargain damages).

36. FN36. See Tex.R.App. P. 33.1.

LEE ANN DAUPHINOT JUSTICE

Copyright © 2012 FindLaw, a Thomson Reuters business. All rights reserved.






No. _____

IN THE SUPREME COURT OF TEXAS

W. GRAEME ROUSTAN,

Petitioner,

v.

MICHAEL SANDERSON, WIFE ANN GAINOUS,

AND RIDGLEA ENTERTAINMENT, INC.,

Respondents.

On Petition for Review

from the Second Court of Appeals, Fort Worth, Texas

Court of Appeals No. 02-09-00377-CV

PETITION FOR REVIEW

David E. Keltner State Bar No. 11249500 [email protected] Marianne M. Auld State Bar No. 01429910 [email protected] John T. Wilson IV State Bar No. 24033344 [email protected] Kelly Hart & Hallman LLP

201 Main Street, Suite 2500 Fort Worth, Texas 76102 Telephone: (817) 332-2500 Telecopier: (817) 878-9280

COUNSEL FOR PETITIONER

FILEDIN THE SUPREME COURTOF TEXAS12 January 17 P11:15 BLAKE. A. HAWTHORNECLERK

Petition for Review Page ii

IDENTITY OF PARTIES AND COUNSEL

Petitioner: W. Graeme Roustan

Counsel for Petitioner:

David E. Keltner State Bar No. 11249500 [email protected] Marianne M. Auld State Bar No. 01429910 [email protected] John T. Wilson IV State Bar No. 24033344 [email protected] Kelly Hart & Hallman LLP

201 Main Street, Suite 2500 Fort Worth, Texas 76102 Telephone: (817) 332-2500 Telecopier: (817) 878-9280 Appellate Counsel

Ernest Leonard State Bar No. 12208750 [email protected] Friedman & Feiger, L.L.P.

5301 Spring Valley Road, Suite 200 Dallas, Texas 75254 Telephone: (972) 788-1400 Telecopier: (972) 776-5313

Trial and Appellate Counsel

Respondents: Michael Sanderson Ann Gainous Ridglea Entertainment, Inc.

Counsel for Respondents:

D. Nicholas Acuff State Bar No. 00836000 Acuff & Gamboa, LLP

2501 Parkview Drive, Suite 405 Fort Worth, Texas 76102 Telephone: (817) 885-8500 Telecopier: (817) 885-8504

Trial and Appellate Counsel

Petition for Review Page iii

TABLE OF CONTENTS

Page

IDENTITY OF PARTIES AND COUNSEL...................................................................... ii INDEX OF AUTHORITIES .............................................................................................. iv STATEMENT OF THE CASE .......................................................................................... vi STATEMENT OF JURISDICTION .................................................................................vii ISSUES PRESENTED .....................................................................................................viii PRELIMINARY STATEMENT ......................................................................................... 1 STATEMENT OF FACTS.................................................................................................. 2 SUMMARY OF THE ARGUMENT.................................................................................. 4 ARGUMENT AND AUTHORITIES ................................................................................. 4 I. This is Not a Case of Statutory Fraud ...................................................................... 4 II. There is No Evidence to Support the Jury’s Finding of an Unfulfilled Promise Required to Support Statutory Fraud....................................... 7 A. Roustan did not make a false promise........................................................... 8 B. The court of appeals’ fraud analysis is flawed and conflicts with the jury verdict ................................................... 10 C. Roustan, individually, did not make a promise........................................... 11 PRAYER ........................................................................................................................... 13 CERTIFICATE OF SERVICE.......................................................................................... 14

Petition for Review Page iv

INDEX OF AUTHORITIES

Cases Page

Big Dog Logistics, Inc. v. Strategic Impact Corp., 312 S.W.3d 122 (Tex. App.—Houston [14th Dist.] 2010, pet. denied).............................. 9 Bryant v. Transcon. Gas Pipe Line Corp., 821 S.W.2d 187 (Tex. App.—Houston [14th Dist.] 1991, writ denied) ........................... 13 Burleson State Bank v. Plunkett, 27 S.W.3d 605 (Tex. App.—Waco 2000, pet. denied) ................................................... 4, 5 City of Keller v. Wilson, 168 S.W.3d 802 (Tex. 2005) ............................................................................................... 7 City of Pinehurst v. Spooner Addition Water Co., 432 S.W.2d 515 (Tex. 1968) ............................................................................................. 12 Cunningham v. Zurich Am. Ins. Co., 352 S.W.3d 519 (Tex. App.—Fort Worth 2011, pet. filed) ................................................ 9 Hawkins v. Walker, 233 S.W.3d 380 (Tex. App.—Fort Worth 2007, no pet.) ................................................... 7 Marshall v. Quinn-L Equities, Inc., 704 F. Supp. 1384 (N.D. Tex. 1988) ................................................................................... 6 Nolan v. Bettis, 577 S.W.2d 551 (Tex. Civ. App.—Austin 1979, writ ref’d n.r.e.) ..................................... 5 Ratcliff v. Trenholm, 596 S.W.2d 645 (Tex. Civ. App.—Tyler 1980, writ ref’d n.r.e) ........................................ 5 Satterwhite v. Safeco Land Title of Tarrant, 853 S.W.2d 202 (Tex. App.—Fort Worth 1993, writ denied) ............................................ 6 Spoljaric v. Percival Tours, Inc., 708 S.W.2d 432 (Tex. 1986) ............................................................................................... 9 Thedford Crossing, L.P. v. Tyler Rose Nursery, Inc., 306 S.W.3d 860 (Tex. App.—Tyler 2010, pet. denied) ...................................................... 9

Petition for Review Page v

INDEX OF AUTHORITIES (cont.)

Cases Page

Thompson v. Am. Power & Light Co., 192 F.2d 651 (5th Cir. 1951) ........................................................................................... 6, 7 Ulrich v. Krueger, 272 S.W. 824 (Tex. Civ. App.—Galveston 1924, no writ)................................................. 6 Westcliff Co. v. Wall, 153 Tex. 271, 267 S.W.2d 544 (1954) ................................................................................ 5 Rules and Statutes

Tex. Bus. & Com. Code Ann. § 27.01 ................................................................................ 5

Other Authorities

Othello, Act 3 scene 3......................................................................................................... 1

Petition for Review Page vi

STATEMENT OF THE CASE

Nature of the Case: Respondents Michael Sanderson, Ann Gainous, and

Ridglea Entertainment, Inc. (“Respondents”) sued W. Graeme Roustan (“Roustan”) for various causes of action, including common-law fraud, statutory fraud, and breach of contract. The case was tried to a jury, which returned a verdict finding Roustan liable for breach of contract and statutory fraud but not liable for common-law fraud.

Trial Court Disposition: The trial court entered judgment against Roustan, in favor of Respondents, based upon the breach of contract finding, and in favor of Ridglea Entertainment, Inc., based upon the statutory fraud finding. [App. 1] The judgment also included an award of attorneys’ fees.

Parties on Appeal: Defendant-Appellant-Petitioner: W. Graeme Roustan Plaintiffs-Appellees-Respondents:

Michael Sanderson Ann Gainous

Ridglea Entertainment, Inc. Court of Appeals: Second Court of Appeals, Fort Worth, Texas

Appellate Disposition: Reversed in part and Affirmed in part. Roustan v.

Sanderson, No. 02-09-00377-CV, 2011 WL 4502265 (Tex. App.—Fort Worth Sept. 29, 2011, pet. filed) (per Dauphinot, J., Walker, J., and Gabriel, J.) [App. 3, 4]

In a non-unanimous opinion by Justice Dauphinot, the

court of appeals reversed the judgment as to breach of contract and affirmed the judgment as to statutory fraud.

Justice Gabriel concurred without opinion. The court denied Roustan’s Motion for Rehearing on

December 1, 2011. No further motions for rehearing or en banc reconsideration are pending in the court of appeals at this time.

Petition for Review Page vii

STATEMENT OF JURISDICTION

This Court has jurisdiction over this Petition under Texas Government Code

section 22.001(a).

Under section 22.001(a)(3), this Court has jurisdiction over this Petition because it

involves the construction or validity of a statute necessary to a determination of the case,

Texas Business and Commerce Code section 27.01.

Under section 22.001(a)(2), this Court has jurisdiction over this Petition because

the court of appeals’ opinion conflicts with opinions of other courts of appeals, which

hold that statutory fraud is limited to situations in which misrepresentations of material

fact are made to induce another to enter into a contract for the sale of real property or

stock.

Under section 22.001(a)(6), this Court has jurisdiction over this Petition because

the court of appeals committed errors of law of such importance to the State’s

jurisprudence that they should be corrected, i.e., that the seller of a real property lease can

recover for statutory fraud against the buyer for allegedly unpaid consideration, and that a

cause of action for statutory fraud can be based upon a promise that a jury determines

was fulfilled.

Petition for Review Page viii

ISSUES PRESENTED

The court of appeals’ judgment affirms a finding of statutory fraud against Roustan, the purchaser of the assets of a business that included a commercial lease of real property, for what amounted to an alleged failure to pay the promised consideration.

1. Can a seller of the assets of a business, including a lease of real property,

maintain a statutory fraud cause of action against the buyer based upon a claim that the buyer failed to pay the agreed consideration?

2. Can a fulfilled promise support a finding of statutory fraud?

Petition for Review Page 1

PRELIMINARY STATEMENT

This Petition seeks to rectify an unusual and incorrect application of the statutory

fraud cause of action. Although the dollar amount at stake in this case may not be great

by today’s standards, the case is important nonetheless in that it bears upon the good

reputation of the individual who unjustly has been found liable for statutory fraud. As

William Shakespeare wrote, “But he that filches from me my good name/Robs me of that

which not enriches him/And makes me poor indeed.” Othello, Act 3 scene 3.

Respondents owned a struggling ice rink business in which they asked Roustan’s

company to invest. When the rink ultimately failed, Respondents sued the landlord, the

management company, and Roustan. Respondents ultimately secured a judgment for

breach of contract and statutory fraud against Roustan, individually.

The court of appeals correctly analyzed and reversed the breach of contract portion

of the trial court’s judgment, as it could not stand against Roustan individually.

However, the court of appeals grossly misapplied the law with respect to statutory fraud,

resulting in a judgment that holds the purchaser of a business’s assets liable for statutory

fraud when the promise upon which the statutory fraud claim was premised actually was

fulfilled. Even more troubling, the individual held liable was not a party to the

transaction and did not make the promise; the party making the promise was a

corporation. As a result, there is no evidence to support the judgment, and it must be

reversed.


STATEMENT OF FACTS

In November 2004, Respondents Gainous and Sanderson, a married couple,

formed Ridglea Entertainment, Inc. (“Ridglea Entertainment”) and leased an ice skating

rink in Fort Worth, Texas, in order to open an ice skating business. [2 RR 7-9] They

soon encountered problems with the facility, particularly the ice-making apparatus, but

they were able to open their business toward the end of the year—about a month behind

schedule. [2 RR 11]

Although Ridglea Entertainment was able to make ice and run its business during

the winter months, the ice-making equipment failed to perform adequately as the weather

warmed, which forced a shutdown of the operation. [2 RR 13-14] The business was able

to re-open by the end of June, although Respondents incurred tens of thousands of dollars

of expenses during the shutdown. [2 RR 15-16]

In April 2005, due to their financial desperation, Respondents contacted Roustan

and asked whether he had an interest in partnering with them. [2 RR 18] As a result of

that contact, Roustan, Inc. advanced Respondents $20,000, and Roustan later met with

Respondents to negotiate an agreement. [2 RR 19-20; 3 RR 117] The parties eventually

entered a purchase agreement (“Purchase Agreement”) in July 2005. [PX-3]

Pursuant to the Purchase Agreement, Roustan Ridglea, LLC (“Ridglea LLC”)

purchased the assets of Ridglea Entertainment, including the lease of the ice rink, for

$75,000 ($37,500 paid at signing, $37,500 to be paid within six months). [PX-3] The

Ridglea LLC Operating Agreement (“Operating Agreement”), signed the same day,

provided that Roustan, Inc. would make a $150,000 capital contribution—less the


$20,000 previously delivered—and would own a 65% interest in Ridglea LLC. [DX-21]

Respondents Gainous and Sanderson—through Ridglea Entertainment—would own a

25% interest, and two trusts would each own 5% interests. [Id.]

All told, Roustan, Inc.’s capital contributions to Ridglea LLC far exceeded

$150,000, eclipsing $235,000. [3 RR 129-30] Roustan, Inc. borrowed $200,000 of the

capital in its own name. [3 RR 130-31] The borrowed funds were deposited in Roustan,

Inc.’s lawyer’s trust account and contributed into Ridglea LLC over a period of sixteen

months for Ridglea LLC’s expenses. [3 RR 136, 140-41]

By October 2005, the ice rink had encountered additional financial strains and was

not generating sufficient income to pay its bills. The ice rink ultimately failed by the end

of 2006, and Respondents sued Roustan, Ridglea LLC, the landlord, and the management

company, asserting fraud, statutory fraud, and breach of contract. [Supp CR 2]

The jury found that (1) Roustan was personally liable to Respondents Gainous and

Sanderson for breach of contract; (2) Roustan did not breach a personal promise to make

a $150,000 capital contribution to Ridglea LLC; (3) Roustan did not commit common

law fraud against any plaintiff; (4) Roustan did not engage in any false, misleading, or

deceptive act or practice; and (5) despite these findings, Roustan committed statutory

fraud against Respondents. The trial court entered judgment on the verdict. [CR 33-38;

App. 2]

The court of appeals reversed the judgment as to the breach of contract, finding

that Roustan did not personally contract with Respondents Gainous and Sanderson.

[App. 3] However, the court of appeals affirmed the judgment as to statutory fraud,


holding that Roustan’s promise to make a $150,000 capital contribution supported the

fraud—despite the jury’s specific finding that Roustan fulfilled the promise. [CR 34;

App. 2, 3]

SUMMARY OF THE ARGUMENT

Statutory fraud applies only in limited circumstances involving misrepresentations

of material fact made to induce another to enter into a contract for the sale of real

property or stock. See Burleson State Bank v. Plunkett, 27 S.W.3d 605, 611 (Tex.

App.—Waco 2000, pet. denied). Here, Roustan cannot be liable for statutory fraud

because no contract for the sale of real estate or stock was involved, and a purchaser

cannot be liable for statutory fraud merely because there are allegations that the agreed-

upon purchase price was not paid. Id. Additionally, statutory fraud must be premised on

a false promise. Because the jury found that the only promise that could support a

finding of statutory fraud was not false, but was fulfilled, there can be no statutory fraud

recovery.

ARGUMENT AND AUTHORITIES

I. This is Not a Case of Statutory Fraud.

The court of appeals’ opinion sets a dangerous precedent, expanding the use of

statutory fraud and exposing purchasers to fraud liability any time a seller raises

allegations that the purchase price was not paid. This improperly transforms an alleged


breach of contract into a tort.1 Moreover, the court of appeals’ opinion conflicts with

opinions from several other courts, which confine the application of statutory fraud only

to situations where misrepresentations of material fact are made to induce another into a

contract for sale of land or stock. See e.g., Plunkett, 27 S.W.3d at 611; Nolan v. Bettis,

577 S.W.2d 551, 556 (Tex. Civ. App.—Austin 1979, writ ref’d n.r.e.).

Statutory fraud is a specific cause of action applicable only to “. . . transactions

involving real estate or stock in a corporation . . . .” See Tex. Bus. & Com. Code Ann. §

27.01; [App. 5]; see also Plunkett, 27 S.W.3d at 611; Nolan, 577 S.W.2d at 556 (“An

examination of section 27.01 shows that it is concerned with misrepresentation of

material fact made to induce another to enter into a contract for the sale of land or

stock.”). Section 27.01 is penal in nature and must be strictly construed. Westcliff Co. v.

Wall, 153 Tex. 271, 267 S.W.2d 544, 546 (1954); Ratcliff v. Trenholm, 596 S.W.2d 645,

650 (Tex. Civ. App.—Tyler 1980, writ ref’d n.r.e).

Respondents did not prove—nor can they prove—a claim for statutory fraud

because this case does not involve a sale of real estate or stock. Instead, this case

undisputedly stems from the sale of the assets of Ridglea Entertainment to Ridglea LLC.

[PX-3] While one of those assets was a lease, no sale of real property took place.

Statutory fraud applies to sales of real estate, but it does not apply in situations like

this one, in which the transaction merely relates to real estate. See Plunkett, 27 S.W.3d at

605 (statutory fraud does not apply to loan transactions, even construction loans secured

1 Respondents here have thus far been allowed a second bite at the liability apple, given the court of appeals’ willingness to transform an unsuccessful breach of contract claim into a finding of statutory fraud—a holding considerably more damaging to Roustan’s reputation.


by land); Satterwhite v. Safeco Land Title of Tarrant, 853 S.W.2d 202, 205 (Tex. App.—

Fort Worth 1993, writ denied) (statutory fraud does not apply to title insurance

transactions); Marshall v. Quinn-L Equities, Inc., 704 F. Supp. 1384, 1392 (N.D. Tex.

1988) (statute inapplicable to investors’ purchase of interests in limited partnership

formed for the purpose of acquisition, development, and management of commercial real

estate).

Nor does this case involve the sale or transfer of stock. Like its applicability to

real estate transactions, the statute’s applicability to stock transactions is narrowly

construed. See Ulrich v. Krueger, 272 S.W. 824, 825 (Tex. Civ. App.—Galveston 1924,

no writ) (statute did not apply where “by the undisputed evidence it was the outright

purchase by Dr. Krueger—‘lock, stock and barrel’—of the Republic Tire Company, a

corporation, its entire business and property, and no mention is made anywhere of its

stock as such or of any shares therein.”); Thompson v. Am. Power & Light Co., 192 F.2d

651, 654 (5th Cir. 1951) (statute not applicable to transaction involving stock where

“though it did deal with stock, dealt with it in a completely subordinate and incidental

way, the indebtedness represented by the note being in an amount so large as to deprive

the stock of any substantial value”). In this case, while Respondents were to receive a

25% interest in Ridglea LLC, their interest was a membership interest, not a stock

interest. [PX-3; DX-21]

Not only does the court of appeals’ analysis and judgment fall outside the plain

language of the statute, it also is inconsistent with the purpose behind section 27.01. The

statute, originally known as the Canales Bill, was enacted to prevent sellers from over-


reaching by making false representations and unfulfilled promises in their attempts to sell

land in the Lower Rio Grande Valley of Texas. Thompson, 192 F.2d at 653. Later, in

order to reach oil stock promotions, the statute was broadened to include sales of stock in

corporations and joint stock companies. Id.

Importantly, this case does not involve misrepresentations impacting real property

or stock—the purpose for which the statute was enacted. Consequently, this is not a case

of statutory fraud and the judgment should be reversed.

II. There is No Evidence to Support the Jury’s Finding of an Unfulfilled Promise

Required to Support Statutory Fraud.

The Court should sustain a legal sufficiency challenge when: “(1) the record

discloses a complete absence of evidence of a vital fact; (2) the court is barred by rules of

law or of evidence from giving weight to the only evidence offered to prove a vital fact;

(3) the evidence offered to prove a vital fact is no more than a mere scintilla; or (4) the

evidence establishes conclusively the opposite of a vital fact.” Hawkins v. Walker, 233

S.W.3d 380, 390 (Tex. App.—Fort Worth 2007, no pet.); see also City of Keller v.

Wilson, 168 S.W.3d 802, 827 (Tex. 2005).

The evidence is legally insufficient to support the jury’s finding that Roustan

committed statutory fraud. The court of appeals’ opinion erroneously finds that the

record “contains sufficient evidence that Roustan made a promise to S&G that went

unfulfilled.” [Op. at 14; App. 3] As demonstrated by the record and the jury’s findings,

there is no evidence that Roustan made a false promise that went unfulfilled or made any

other representation that would support a statutory fraud finding.


As the opinion acknowledges, the jury’s verdict finds that Roustan did not commit

common law fraud but that he did commit statutory fraud. [CR 36, 38] The court

harmonizes these two conflicting findings with reference to the charge’s definitions of

“Common Law Fraud” and “Statutory Fraud.” [Op. at 18; CR 31-32; App. 3] However,

there is no evidence to support a finding that Roustan made a false promise to do a

material act with no intention of fulfilling it.

A. Roustan did not make a false promise.

According to the definition of statutory fraud in the charge, the jury was required

to find that Roustan made “a false promise to do an act.” [CR 31-32; App. 2] Because

there is no evidence that a “false promise” was made, that the promise was material, that

“the promise [was] made with the intention of not fulfilling it,” or that the promise was

relied upon in entering the contract, the judgment against Roustan for statutory fraud

cannot stand. [Id.]

First, there is no evidence of a “false promise.” In fact, the only false promise

Respondents allege that could support a fraud finding is the promise in the Operating

Agreement to provide a capital contribution of $150,000 to Ridglea LLC. [DX-21]

Roustan, Inc., however, more than complied with the obligation, contributing capital

totaling $235,000 over a sixteen-month period. [3 RR 129-42] Of this, Roustan, Inc.

borrowed $200,000, but did so in its own name. [3 RR 136] The money was paid to

Roustan, Inc.’s lawyer’s trust account and paid incrementally to Ridglea LLC. [3 RR

140-41] Ridglea LLC was not liable on the note. [3 RR 136] Based on this undisputed

evidence, the jury found that Roustan fulfilled the promise. [CR 34]


Logically, a promise that is fulfilled cannot be a false promise. See Thedford

Crossing, L.P. v. Tyler Rose Nursery, Inc., 306 S.W.3d 860, 872 (Tex. App.—Tyler

2010, pet. denied). Given the jury’s determination that Roustan did not fail to comply

with the promise, the promise was not false. See Big Dog Logistics, Inc. v. Strategic

Impact Corp., 312 S.W.3d 122, 189-29 (Tex. App.—Houston [14th Dist.] 2010, pet.

denied); see also Cunningham v. Zurich Am. Ins. Co., 352 S.W.3d 519, 527 (Tex. App.—

Fort Worth 2011, pet. filed). This is particularly true when, as here, there is no evidence

showing that the alleged false promise caused any injury. See Big Dog Logistics, 312

S.W.3d at 129.

Second, there is no evidence that Roustan made a promise with the intention of not

fulfilling it. A party’s intent is determined at the time the party makes the representation,

but intent may be inferred from the party’s acts after the representation is made.

Spoljaric v. Percival Tours, Inc., 708 S.W.2d 432, 434 (Tex. 1986). “Failure to perform,

standing alone, is no evidence of the promissor’s intent not to perform when the promise

was made. However, that fact is a circumstance to be considered with other facts to

establish intent.” Id. at 435. Here, failure to perform cannot be considered as evidence of

intent because, as the jury found, the promise was fulfilled. Thus, no evidence exists to

support the statutory fraud finding.

In fact, the evidence at trial positively establishes that there was intent to perform

when the promise was made. In determining intent to perform, courts may look to

whether a party confirms or denies that he made a promise to perform. Spoljaric, 708

S.W.2d at 435. Here, Roustan testified that Roustan, Inc. promised to provide, intended


to provide, and in fact did provide the remaining $130,000 of capital contribution. [3 RR

129] This is evidence that the promise was made with the intent to perform.

B. The court of appeals’ fraud analysis is flawed and conflicts with the

jury verdict.

The court of appeals’ analysis of the promise underlying the statutory fraud cannot

be reconciled with the jury verdict. Specifically, the jury expressly found that Roustan

did not fail to comply with the agreement to make a capital contribution of $150,000 to

Ridglea LLC. [CR 34; App. 2] Despite the jury’s finding, however, the court of appeals

held that there was sufficient evidence that Roustan made a promise that went unfulfilled

because “Roustan told S&G that he could and would provide a capital contribution of

$150,000, either with his own funds or with the financial resources of his business, but

that he actually borrowed money on behalf of the LLC.” [Op. at 14; App. 3]

The court of appeals’ opinion is wrong. The undisputed evidence contradicts the

court’s theory that Roustan caused Ridglea LLC to borrow the money so that he would

not have to make a capital contribution. Roustan’s testimony that Roustan, Inc.—not

Ridglea LLC—signed a note for $200,000 is uncontradicted. [3 RR 131-36] In other

words, Roustan, Inc. borrowed the money to make the capital contribution to Ridglea

LLC. Ridglea LLC received the full benefit of the $200,000 and did not have an

obligation to repay the note. [Id.]

The court of appeals’ attempt to justify the statutory fraud finding is contradicted

by the evidence and the jury’s finding that Roustan, Inc. fulfilled its obligation to make


the $150,000 capital contribution required by the Operating Agreement. Thus, the court

of appeals’ judgment must be reversed.

C. Roustan, individually, did not make a promise.

The only evidence of “promises” that the court or Respondents cite are the

promises to (1) pay the purchase price of $75,000, and (2) make a capital contribution of

$150,000 ($20,000 of which was previously delivered). As the court correctly

recognized, Roustan was not a party to the Purchase Agreement, and, therefore, he could

not be held liable for breaching that agreement.2 [Op. at 10; App. 3] Thus, the court

properly held the $75,000 promise unenforceable against Roustan.

The same is true with respect to the promise to make a $150,000 capital

contribution. Roustan did not appeal the finding that he made this promise because the

jury determined that it was fulfilled and awarded no damages. [CR 34] However, the

court of appeals’ logic applies equally to this promise. Like the $75,000 promise, the

$150,000 promise was contained in an agreement to which Roustan was not a party.

[DX-21 at 27, 28]

Specifically, the promise was contained in paragraph 3.2 and Exhibit 1 of the

Operating Agreement, executed the same day as the Purchase Agreement. [DX-21 at 1,

5, 28] The promise was:

(a) Initial Capital Contributions. At the time of, and in connection with, each Member’s admission pursuant to Section 2.6(a), such Member shall contribute to the capital of the Company the consideration set forth opposite such Member’s name on Exhibit “1”.

2 The Buyer in the Agreement was Roustan Ridglea, LLC. The Agreement was executed by Roustan, Inc., its managing member. [PX-3 at 1, 13]


[DX-21 at 5] According to Exhibit 1, Roustan, Inc., a member corporation, would make

a capital contribution of $150,000—$20,000 of which had been delivered preformation.

[DX-21 at 28]

Even if Roustan had made such a promise in his individual capacity, which he did

not, it was made “when the parties were still negotiating the deal.” [Op. at 13; App. 3]

Like the Purchase Agreement, the Operating Agreement contained a merger clause:

“This Agreement and the Articles of Organization contain the entire understanding

among the Members and supersede any prior written or oral agreement among them

respecting the Company.”3 [DX-21 at 25] Therefore, the writing contains all of the

agreements and promises between the parties, none of which were made by or were to be

performed by Roustan, individually.

There is no evidence, or even a legitimate inference, that Roustan made any

promise or representation apart from those memorialized in the Purchase Agreement and

the Operating Agreement. “Courts will give effect to the intention of the parties as

expressed or as is apparent in the writing. In the usual case, the instrument alone will be

deemed to express the intention of the parties for it is objective, not subjective, intent that

controls.” City of Pinehurst v. Spooner Addition Water Co., 432 S.W.2d 515, 518 (Tex.

1968). Here, it is conclusively established that the promises and obligations were those

3 Paragraph 22 of the Agreement provides: “This Agreement contains the entire agreement between Seller and Buyer with respect to the subject matter hereof and the related transactions and supersedes all prior arrangements or understandings, whether written or oral, with respect thereto.” [PX-3 at 11]


of Roustan, Inc.—not Roustan, individually. As such, these promises cannot support a

claim for statutory fraud against Roustan.4

PRAYER

Petitioner W. Graeme Roustan respectfully requests that this Court (1) grant this

Petition for Review, (2) reverse in part the judgment of the court of appeals, and (3)

render judgment that Respondents take nothing from Petitioner. Alternatively, Roustan

requests a remand to correct the errors of law committed by the court of appeals.

Respectfully submitted,

/s/ David Keltner David E. Keltner

State Bar No. 11249500 [email protected] Marianne M. Auld State Bar No. 01429910 [email protected] John T. Wilson IV State Bar No. 24033344 [email protected]

Kelly Hart & Hallman LLP 201 Main Street, Suite 2500 Fort Worth, Texas 76102 Telephone: (817) 332-2500 Telecopier: (817) 878-9280 COUNSEL FOR PETITIONER

4 Fraud cannot arise from pure expressions of opinion, whether personal or legal, or predictions about the future. Bryant v. Transcon. Gas Pipe Line Corp., 821 S.W.2d 187, 190 (Tex. App.—Houston [14th Dist.] 1991, writ denied). Therefore, any promise by Roustan regarding another party’s (Roustan, Inc.) performance in the future could only be an unenforceable prediction and cannot form the basis for a fraud claim.


CERTIFICATE OF SERVICE

The undersigned hereby certifies that a true and correct copy of the above and foregoing document has been served upon Respondent’s counsel via telecopier on January 17, 2012: Via Electronic Filing:

D. Nicholas Acuff Acuff & Gamboa, LLP 2501 Parkview Drive, Suite 405 Fort Worth, Texas 76102



No. _____


W. GRAEME ROUSTAN,

Petitioner,

v.



Respondents.




INDEX TO APPENDIX TO PETITION FOR REVIEW

1. Final Judgment—October 9, 2009. 2. Charge of the Court—August 28, 2009. 3. Roustan v. Sanderson, No. 02-09-00377-CV, 2011 WL 4502265 (Tex. App.—Fort Worth Sept. 29, 2011, pet. filed). 4. Court of Appeals’ Judgment—September 29, 2011. 5. Tex. Bus. & Com Code Ann. § 27.01.

ppendix 1

; No. 342 -223829-07

MICHAEL SANDERSOR, WIVE ANN _ N- THE DISTRICT COURT GAINOUS AND GLIEN-,;•• ENTERTAINMENT, IKC0-;1,,,, _

Plaintiffs fit : oa.

'

g R

VS. • ICIAL DISTRICT NO 342

•

-:: 11 ; W. GRAEME ROUSTAI. SPN RIDGLEA, LLC, ROUSIAN•FORT wo4TH, LLC, YDIDI, IiR a,nd t FIRLAND MANAGEMENTLLC. TN TARRANT COUNTY, TEXAS

Defendants H -

; Y. FilsIAL JUDGMENT

° - On August 24, 2411)Aliis caa was 'called for trid Plaiiiti, Michael Sanderson, Atm ,

Acuff and announced readifor trialiD Gainous and Ridglea •Ente.:..ttakmiint,-Itic., appedred.in person and through their attonrey D.Nicholas

efstaants, •W. Graeme Rotistaii i Roustan Ridglea, LLC, and Roustan Fort Worth, LreC„ 4ppeareit in person and thrbugh their attorney Ernest Leonard and announced ready for trialgr

• i - - -

After a jury was i ie1ed aid sworn: it bearOthe evidericq . Ond arguments of counsel. In response to the jury oharg0; hte juiymae ifndinis that the . court received,ifled; and . entered of record. The questions sutunitited .to gib ju.t r and hte jury's finaings,are attached as Exhibit A and incorporated by reference,Pl*atiffs itled a motion ht disregard the jurY'S answer to question number 28 (b) through •(d) concepintappellnte attorney's fees which the COurt grants.

•- e eat. f • 1

The court hereby TEISDERS judgment for the Plaintiffs as follows. n

,

Gainous recover damage g4••r• interest on that sum at the•:_as•r•• inual .rath•

It is ORDERED, kalpDGED AND DECREED that Plaintiffs Ivlichael Sanderson and Ann Oin Defendant W. Graeme Roustan i

<

n the sum-of $37,500, prejudgment •• o

Ff 5%, in the sum of $4,53 1 for a total of $42,031.00.

. It is further ORDEAir •

ED%-(1

ADJUDGED AND DECREED that PlaintiffRidglea Entertainment, Inc. recover damages frolnpefendant W. Graeme Roustan A in the sum df $50,000, mgrnent

--" i t - : • lir it . I 4 ■•••;--, - ' . "

i . 414 - =

2 It is further ORDN4D, ADMD9ED AND D•

ECREED that the damage awards to the Sandersons and to RidgleaEntertaintene, Inc. will lioth accrud post judgment intemst from the date of this judgment until•,

at rate of 5% .

annum. —

Courtsklinutes* Copy M9'éct to

' Transac Fintail Ju

nd 4 Attorney pf,Ree.ord - Page 1

1 ,

i-ti. Q Q

-• i

.4' •

As Ridglea Entertailiu. nInc.as:entitled byl 27.01(e) Tex. Bus. & Comm. Code to recover, in addition to normal co*ticiiists, the, costs of copies ordepositions and,expert witness fees, it is further ORDERED, ADitt -dEp AND DEC W. Graeme Roustart hte

D that Riciglea Entertaiiiment, Inc. recover from kidEonal A of$2059.25. for snChodaititnal costs and fees.

- t

.

It is further ORDE ADitiDGED ANI3CDEREED f that Plaintiffs jointly recover from

W. Graeme Rous•tan a

•ttofnan .fges ihie sum of $27,500 for the services rendered through the trial

of this case. In the event 104. appeAkr,.W. Graeme Roustan tá the Courtof Appeals, if the appeal

-f;

is unsuccessful, Plain:WOO be.fUither entitled tq $15,000 as a reasonable attorney's fee; in hte event of an appeal to the kiiittne COint of Texas and it is necessa. ryto make or respond to a Petition for Review, Plaintiffs witbeAntitled fto•arradditional $7,500 for the Plaintiffs in the SutiremeCo4it

ioned on a successful outcome of Texas and the Plain ipffs v viir be entitled to an additional

$10,000 in the event the Sumeme Court grants review, conditioned c: .)n a successful outcome in the Texas Supreme Court. 71 , , r • '

4,(:, ); • , d This judgment is ffi,-4: ntdipoSes. a11clai7 and alkiparties,-..and is 4ppea All relief lable.

requested but not grantectis-iknied:' . . ;

, All court costs are gj4tkgifll agOstothe Def

•endant W. Graeme Rouistan. ait

'All writs and proce4seAhr theienforOementand collection of this judgment may issue as necessary. '34'9Natt") , .

I

olr it ' w 1 I I

SIGNED on 4 2009. • • 2

; Judge Bop McGrath it •;:

3 -

g - NM - ; i 1 ,

▪

to t .

E

. ,

3 ' 1 21. - .

-

•

:" -Nyl. •

4 •

•

,1

Final Judgment — Page 2

• g

1112 1 CI OS

Appendix 2

- 'r

7- I it - ..:

. (

•

014 NI , . i .. i Pi ir *. ;;;T

4

v6

No. 342-2t3S29-07 al■

pe is- i i

MICHAEL SANDERS015, *IFE.ANN GAINOUS AND RIDGLEA. ii

IN 1.EiE DISTRICT COURT

ENTERTAINMENT, INC:, ... ..-,•. .V4 Plaintiffs , -. :

:.-. 0 A

VS. — / n, 71 1,-5.,

, JUDICIAL DISTRICT NO. 342 7.

.,7 l' ' ;I• .' y

; •.41 .":" ''.• ,i

W. GRAEME ROUSTAMROUSTAIf ;4 RIDGLEA, LLC, ROUSTM #ORT 4-.-..1. WORTH, LLC. Roo

Defendants IN TARRANT COUNTY, TEXAS

rill .z,. -,!t —

CHARGE OF THE COURT c o

LADIES AND G bi, il . EMEN OF THE JURX: it' This &selfs qmItteltoi you on p1eciifc questions about the facts, which yo• u must

decidifrom the evkiiinbe yon.have heard in this trial. You are the sole judges of the credibility of the witnesses andllii;41eight togie liven their testimony, but in matters of law, you must be governed by the iistrnaio►s irtthis charge. In discharging your responiibility on this jury, you will carefully andAtiOY-obseikse aH the instructions previously given you as well as the following: i: ,.

El .

1. Do not let bias, prbpdice •or,,sympaphy play any pait in your deliherations• .,;.-

2. In arriving at yoUr answers, consider:only the evidence• m' trod u ,6. (1 here -•u nder oath and such nr

' as given you• by thef4e4n Yinn-de: liberaticnii you will not consider or discuss anything that is

exhibits, if any, as-haviii!b gen inliOduced for your consideratiodunOr the rulings of the Judge. In other words, consiOek ii ily what you have seen ,and heard in this cciurtivom, together with the law

not represented byiitht*Videnqein . this case.

. 3. Do not speeulataoy inatters not in hte eVidence ddmitted before you and about which you are not asked in any o4h.e•niestions. Do not basq any answer on sunfise, suspicion, conjecture or personal experienc6,.b* only upon the evidence admitted bgbre you. You cannot guess your way to a just and correct Verdict; t, t 4..Every answer thnt

s

isiiequired r consider that any idquird ansWbr is notlimportant

hy hte charge is important; therefore, no juror should state or 'i.

r. ' . :::,. liV "rf: i 5. You must not de*dAvno yt accordingly. Simplr4' 1ii3Ver tli . que:stions frokthe evidence introdUced before you and do not

u think shouldxvin and then trito ai

nswer the questions

discuss or condem4miitelves Nikith he effect oi' your answers on thè final outcome of the case. z."...r f'zti in t —

6. You will not deoct6 kquestib•bY lot or by drawing straw& or by any other mehtod of chance. -

Do not return a quaieeverdict. A quotient verdict means that the jurors are to abide by the

- J., hr1.1.4EZI q COURT CHARGE

Courts Minij. tes _ A

Page 1

..p..„. I-.:1 IT • a"

Transactiont

#'9y

"If

0i1'

• DATE 0 'F. '. 9— tf? 9

.r?r • I: •..

F it 29 -

.,,,,1

k

'• •.

.5 -

ti

a+_<_—^: .... . _ .

' t 4 ic!, results tci be reache b*add4 together each j,uror's figures, and divide by the number of jurors to get an 'average. DO, not5,Clo any tmding on your answers; that is, one juror should not agree to answer a certain qiiestitn one way if others will agree to answer another question another way.

7. Your verdict ntayibc rendered by all 12 meImbers of the jury, or by a vote of 10 to 2, or 11 to 1. If the verdict is less thin unanimousor-in other words, less than 12, the same 10 or the same 11 jurors, as the case."msybe, must agret to all cif the answers to the questions herein. You may not return a verdict 414 v.erdiet, the presiding juror shall sign the verdict in414ace indicated the last page Olds chat ige. If the verdict is not

4 thin.10 jurors. If you return a'unaninious .

unanimous, then eachgthe 1R;-.4, 1- 11 jurcirs who agree to all tht answers shall each sign the verdict: Thosejur ssdio%oAf agrçe.denot

rsign.

- ='^"g^' o. , • 1 These insetictiOns; are tiSe# to you be8ause your conduct is subject to review the same as

that of the wirnesself. pirties, attorneys, and the judge. If it should be found that you have ignored any of these instrufltitO, it will tipiury misconduct and it may require another trial by another jury; then .allttfort 44* will have been Wasted. i!

1 An importinit Ort .oficiurfunction is to' weigh andievaluite the testimony of each witness

and any document;1 admitted iitio evidence by the Judge; Kexerciiing this function, the jury may consider the witneSe . blas, interest, prejudice, or lack of suh quaiities, and determine the witness' credibility under theAts and bircunistances of this case. You may accept•part of a witness' testimony and rejeof pail of it; You may accept all of it or reject all of it-, and you may accept all of one witness' testinrotiY.litntl rejebt the testimony of other witnesses, although you must not do this arbitrarily. .4 0 r

1 Answer "Yes" or 14\16.7to all questions unless otherwise instructece A n res" answer must be based on a preponderinevbf the evidence untess otherwiie instructed. ' If you do not find that a preponderance of ;die' 4yidence supports a "Yes" answer, thin answer, ."No." Whenever a question requires hl.h Emlwer other than "Yeslor "No," your answer must be based on a preponderance of giiiiidence unledotherwise instructed. If a question calls for a number, and you do not fmd that a mprepandd trance o4f the evidence" s

1

u%

pp•

hrts aTny sulh number, then answer,

zero. " ,2 .eet• • it

' A faceis 2 ft I 1

' drkumentary evidence or by

witnesses who savs7Eict don . the A'rords spoken. A facitis established by %al be fairly And reasonably inferred from other facts proved. circumstantial evideneawh

• eiri

i

ttt J.

During yo*..4iberatilInS, )Tou are instructed thalyou may not consider the fact thatother parties have s&-tlerfAlt the Plaintiffs for i- ny ji'urpdse.

You are inStructeethaf a corporate igent is , personally IiVble flit . his own fraudulent acts even when acting in th4Ourse an•d stope of his employment by iscorpORtion.

. . . k

- . 0 ,

'

,

111 -

COURT CHARGE

-

I Page 2

+^ •. <•.^,

•d

3a# 7 ' : . 7 df. .

1

30 a J.

r I1

' '

?

_ —_ _.—

El f pEFINITIONS

When words are used in tiii3elia rge inrasense that varies fr om the meaning comnionly understood, you are given a properlegal deifnition, whiC. h you are boundtto weep* plaS' of any other meaning.

Common Law. Fraud ocOurs *hen — •

a. avarWmakes.a material misrepresentation, ..• Cr' 13 (

b. the TnfarepreOentation is nuide with knowledge of its falsity or made recklessly Without any knowledge of the truth and as -a positive assertion,

c. smisrepresentation is made with the inte'n t'i onthat if should be acted on, and ti!P

the other .part346lies ifiejnisrepreseritation lind.thereby suffers injury. t . (7,4:. d. .,

Or when

n

f 1 a. there Islafalse*epresentation of a past or exisling lmaterial fact,

. . . tiotri,*.3e rePresontation is ilia de to a person for the purpose of inducing that pOson'to en-W.finta a contract and.

, c. tht fa repreiOtation is relied on by that,PersOn in.entering into that contract.

Misrepresentation means;;. .;• •

a. afalgtfatement of fact; or

b. a stint-I:nen o ..o.prinon basedtaa a false statement of fact; or 4 %

c. a *tell:tent of opintoWthat the maker knows to be false; or

d. ativipresgion of.opinioq that is false, made by one aiming or implying to have speeinetnowledie of the 'subject matt& of the 'Gpinion: "Special knowledge" intlana'f-jcnckwledge-or:iiiarmation superior• to that 'possessed by the other party alatenihiCh tie other party did not have equal acCess.

•n • i f.'V'"I.

; a

Statutory Fraud obcurs when- 1.; 1 ..TX • •

•

iv . a. there is a ralseliptesegiation of a'pasit or existing 'material'fact

the false refitefeOtation;is.made to a .pet•son Or the purpose 6f inducing that person to enter b.

c. the false intis aatintractvAid i

relieli on b5,' that perton inlentering into that contract. OR g ' ' -1! )

a party matteatf alse promise •o do an act, the promise"ls'iiiiterial, 7

a. b. c. the promistlirliade witti the Anentiola ofiot fulfilling it,

->= ^

COURT CHARGE 4

s Page 3 ' T 4

31P1 t ' ' I

z

31 a

4 to ^- ,^^

' • .

},

.,.

E

# .<,,,,

4. — :- 'J, .:, 11 sT

*3'

-1.. cv ':";:

I I. • :.r p

4. -',z4 .'‘.i

' f.P ,..

d. the Protai*Of iniderfib a person folithe purpose of inducing that .person to enter into a

e. that persok) teli6 on thNe'PriSinise mitering into that contract. .14 .',

in

Failure to contply is itrcu;ett& .,.

'. a. by Plaintrffsl agre. emengi

•olf

tpiev"

ic7itir failure

'

fto compl•

y "

with4

. a nifit;?e r

•

al obligation of the same

4 .. ..

b. by,Plaintiffe'tior remidiation of the same agreenient; or

i -') * , 1,vaiv i c.

pit, oefga.

)y Plaintiffs; 0:4'

d. if Plaintift Ai coi0wmitted fraud #gairtst . W. Graeme Roustan.

A party rev:44We.} 4.1f‘greet ndhi when. he indicates,.by hi.words Cr actions, that he is not going to perform his obligation04er the agreement in'the future, showing k fixed intention to abandon, renounce, and refuse to peifOnifi the agreement

.41,...4:41 Waiver is an inteifiogal i sm .:ender of a known right or intentional., conduct inconsistent with

claiming the right.

Proximate Whith, in a natural and L orliitnicius sequence, produces an h

uhet.'t ta

q'Z

l3sitch Oen

ut sweoUld nohave occurred In . oraer to event, and without wic be a proximate cause, the

act or omission complaine0 , 015inust be.:nacitthat a pern using the degree of care required of him would have foreseen that the evpiti tr sontmiltir event

r

might reasonably result therefrom. There may be more htan one proximate °nate 'of an , t

ai -ink= , •. Producing cause •kietilis a..caik9Q-th4t wap.asubstalitial factor if iir inging about the damages, if

cild not live_occurred. There m4i. . be more than one producing any, and without whict tliee ;.

44 ig

g.ges yfo cause. ,f : -,.e . c • ..C.'.

False, misleading, or decein#:e act or 4fo

—ra

.::cafce means

• any of the f011ówihg:

. - Representing:that beneifts, or quantlies iiiiibh diey do not have or that a person has a sponsorship, approval, status,

go04i or s4c cs have §pohtoiship, approval, characteristics, ingredients, uses,

afifliation, or contifictiqh whiCb lie. does not; 4 it„ a Representing thaqvdi.s or seivices are of kpardcular standard: qualify, or grade, or that goods are of a particular st,1CIOr model, if they rae of another; ‘

,.

PrepOnderance of the evidehei nieans the . greater W"eight and degree of credible evidence admitted in this case. ,... .4,

12 ,, .....t

Clear and convincing evi;dencep meansAhe measure .or degree . 01pro

I of:

I, that produces a firm belief or

conviction of the truth bf thfieti'atAllebgaton

t si. sought toile rIstablished. . t,. , .!,_. (k t.'e: ; 51

il

.-,. . ..

.:.t. :. 0 ; 4“.'Z.r

git f h A

't. COURT CHARGE :•;rtz 1 ' ;"1' 4

r Page 4 . P U ' , ..

z P

.y-,; .+.

32 fs 34.ii ..„ :i

'I' IF

4

rY — - -

, ,

:6 4 S

QUESTIONS

QUESTION la .

: - 15

c7!°0 1 - '

Te.

Did W. Graeme Rptistan agree with Ann Gainous and Michael Sanderson to pay $75,000 for the transfer of the ice rink busine07

)2Ab Answer Yes.or No 7 4 -Nth , : 4

If you have answered ',TeX" then ';answer the followink question. Otherwise do not answer the following question. , : A . -

4 , :

4 QUESTION lb

.

1. • . • P .

.

, t •

Did W. Graeme R:e4tän fai*Corpply with the agreemer4r

Answer Yes or No:' ‘,,.Ve5 G

If you have answered "Yerffihnlanattrithe follnwing q'Uestion. Otherwise do not answer the following question. 4.

P

QUESTION lc

Was W. Gramm It-94'dr 's failure to comply excused?

4 i sr.; . P

Answer Yes or No: LP& :4 ,

41,7 ,:

If you have answered "No; 4:Ccmswctsr;:the folliwing question '. Otheir wise do not answer the following

question. - ;

-4 kb+.

QUESTION id 111M

What sum of mona4tany, piid now in cash woiild fairly and reasonably compensate Michael Sanderson and Ann Gainotipl&tIir r drinages, iftuny, that r esuited frorh pc:hfailure to comply?

l Do not add'any iri0ffor inte4st prclamage

Answer in dollars imil,. R#nts forldamages, if any.

Answbr: $ 37 , . 4 .;c

.

• " ; l -

0 v

COURT CHARGE Page 5

K

e M

.: ,, 33

, 1' ,

.

'

I/ . -

N

-

QUESTION 2a MBE

l 1

Did W. - itontila5rt agr'eewith Ann Gainous and .'i.Michael Sanderson to make a Capital Contribution of $ • I i I to Rimstan Ridgleki,LC.?

Answer Yes or No: '

If you have answered "Y0,51#en answer the foltoWing question. Otherwise do not answer the following question.

1;;.: QUESTION 2b

F.• :

$150,000 to Roustan RidgigkktLC.? Did,W.. Graeme Roumn failfto- complyUth the agreement Wriake a Capital Contribution of

?•t,

" " If you have answere-d "Yes; en :er

question. ,„ tr . I —1/4/e-5

c QUESTION 2c a

•

Was W. Graeme rotia 'sfai1re to'complY excused?

7 V

Answer Yes or No: •

. •.•••,•

• • f t . . •

pE t Y.4 J icw - c4Rir .

If you have answered "NeilfOir n anS.*er the following question. Ohterwise do not answer the following question.

- 4 i;

QUESTION 2d 31 j

What sum of monily,, if any, paid nay in cath would fairlY andlreasonably compensate Michael Sanderson and Ann Gaino*sfaitheirdamageS, any, that resultedifrom such failure to comply?

Do not increase oriaince the in i;§imt in oReanswer because of;,your answer to any other question about damages.. Do not seatiAatePab4111 what any party's ulitmate re lco4ery may or may not be Any recovery will be determinettli:the court when it applies the law to -your answers at the time of judgment. Do not add any amount. foriaitetest,di on :nakes, if any.;,"

Answer in dollars and cents fon damages, if any. 1

Answer: $

BRAM i !

COURT CHARGE ',a-. .44• Page 6

q ,

'1 ? i 2.4

.41r- 1 - r

—*N. : ,

•

•

_

QUESTION 3a :erti. 4 Li*.

.17

Did W. Graeme p.otistan agreb with Ann Gainous and Micliabl Sanderson to contribute the monies necessary to pay the overhead?

Operating expenses of Roustan Ridgleá, LLC to allow the company to pay its

Answer Yes or No: A'/ (f"A

„ , K

If you have answered "Ye.' then anwiter-the following question. Otherwise do not answer hte following question.

.-r•6"

QUESTION3b

Did W. Graeme Roustan fai1tcomply with the agreement to contribute the.monies necessary to pay the operating expenses? 3

lal: 1

— .

• ' . -5e;F;t4:_i

If you have answereck.f:YeV? : 11 - 4r l. he„ folk e wi• ng question. Otherwise do not answer the following question.

- •

QUESTION 3c , -

1 • ri : . -

Was W. Grae•me N0112 's failure to comply excused?

&M Answer Yes or No:

If you-have answered "NoZ:thet answer the following question. Otherwise do not answer the following question.

r

QUESTION 3d 54, z -§: r . w

7.' What su. mof monleA4 any , paid now in cal would fairl; and reasonably compensate Michael Sanderson and Ann Gainotiyfort.their cihtiraies„ . if any, that resulted from such failure to comply?

. i f::' I Do not increase orteilnee the..amount in one answer Because , of.your answer to any other question

about damages. Do not specili4e about :what any party'&:ultirnate recovery may or may not be. Any recovery will be determinetrWithe couttkVhen it applies the lawio yoti zr.. aiswers at the time of judgment, Do not add any amountifortnter t sf •on,frgmages, ifIranyt _ -

1

Answer in dollars 644qe:nts forttiam4ges, if any.

Answer: $ -

v)i• m k

- COURT CHARGE Page 7

r-

--1

'7 -

X , ..- s..r.

.- *"E0 M ,i;

a

—--- _ _ 4L'.

_

:-.1 '"'',. :. • 4 4,00 .

t". it .

' Zi "• E

A

itve i,,.rf. ,

QUESTION 4a •': ' 4-

Did,W. Graelne t . .i:

R'411#41 'einrelt co•

mmciti larD---' 1

fraud against any party named below?

Answer Yes or No as to eaU'

4; ii

Michael Sindersciii ‘,...-. 4- i:, • . I/ No ; i- YE5

Ann Gainous ,--' .„;::. itiO 1 - ye5 i - .Ridglea Entertainittenrc. T.-- i - Yg65

If you have answered "Yes,". tciany patt then answer the following question . Otherwise do not answer the following question. -

-.;.' 6 QUESTION 4b

'• • •:'1, t

What sum of money, if any;iffpaid nciw in cash, would fairly and reasonably compensate Plaintiffs for their damages, if any, thatSi .espited from suchicoMmon law fraud?

I Consider the following elements of damages, if any, and none otheii.

.... 1 .The econcttniclosses, if anAluffered:;:by'Plaintiffs caused by the common law fraud.

4 i 41.1 , ;.4 E

Do not increase of 4 ,411Ittp the apoimt intone a4nswer because of your answer to any other question

,

about damages. Do not recovery will be deterht m41

Y , e v• ab o-tifwhat 'any pa1rty's tiltirh• ate r4ec1tery may or may not be Any -corqt,when it Wppltes the law to .yotir abswers at the time of judgment h he

Do not add any amount foirtitoest ort in. es,. if,anY. a

Answer in dollars and f1- ',441

.'., •

• •FLf .' • .. ,i

#.

Answer: Miehael Sanderson $ ? Aiktik ihoui $ . Rideek

1

r Entertai

2imien

4t, Inc.

1 ‘

$ 7 4.. :1 11 t

: '"•.:'. :il

, ,,).-

5T1 !

- . :::,.? .

±: ., 11... ;.(. _

MEE r• 't @

. P '.- ..:.a.:. a.

.?.7 '.-,iit, Pr. .:;,i:;" .'1q1r1;1‘;ii4... t '

-41 ' Ei N

if ? • * 6 e.: i

i

COURT CHARGE Page 8 ..-• (-'.', i

•

.i , n:- NI -,-

- . .

36 ,.: 1

•

F ..1.* • — •

i ••• ' % • r

Eil QUESTION 5a /1:;-

Did W. Graeme Reigtait. engige in any false, misleading, or deceptive act or practice that Plaintiffs relied on to their,a.e4nent and that was a producing cause of damages to Plaintiffs?

' , Answer Yes or No as to ei.6h:

Answer; Michael Sändetton Ann Gainhus

. i Lip i ?

Ridglea EkOrtammenf; Inc. — *

i -

.• If you have answered Yei i n

1y •pa

*, following qUestion. ; Wtthen ansAter the following q0stiiin. Otherwise do not answer the

QUESTION 5b -

•;r "?• i i i _

1 f - What sum of maneY,..Jany, if paid now in cash, would fairly and reasonably compensate Plaintiffs for their damagertf*y, that resulted from such conduct?

In answering quetoi about .damig-es, answer each question separately. Do not increase or reduce the amount in one ..

'

is w! er!beci4Usg of your answer to any other. question about damages. Do not speculate about what anyp. 'artyis ultiMate recovery may or may not be, Ariy recovery will be determined by the court when it applii.s ....th4: law to your anwsers at the time of judgment. Do not add any amount for interest on damages, if any:.

- Answer in Dollars and Caills!

Answer: Michhei Sanderson $ Ann Gainhus• - ‘ $ RiatarEntertaiinnent, Inp $

.

" • .1)

4

A

- -1;:.

' :

. . ,

k '

• Le :,

, 1 -

- . l. . ,•: ••.a

I •

i

COURT CHARGE c - Page 9 . P

, -

' a

31' •An, : • °I A

1i

r / -r. :t--- : 1... 1 ,N, .*

ft-2-::;. _ _______ ___ 4... 4I

2

i

l5t

- -.--

ffl QUESTION 6a _....:.„.

-' i

Did W. Graeme Roustan conu4it statoory fraud against PlOntiffs?' j— • . t

Answer yes or no as to eack: ;.i . .Miehe Sanders on 11. iie -VE.S i -'2* - ii°

k- A.isinn Gainous it —if) — vcs .. Itiidglea Entertainment, Inc. j 1 --rn — yF S I 4 -

/ 4 .

: If you have answered " Yeir! io an1/y‘ pa-r t, then answerlhe following7question. Otherwise do not answerili following question. Q:

.. QUESTION 6b

' d no.4 /#. m• 48.'ig c' hk • . would fairlytinil reaso'pably compensate Plaintiffs for U

What sum of money, if an% - ai their damages, if any

' thatleilii difrotriuch statilloryfraud?

°, ,.ft i-. • • , I.;. .. 7/ - .Aritt.,...

'•

Consider the following of&, mev e.ges, limy, and none other: .„

K 1. The economio ; 44 1s, if antksuffered by Plaintiffs caused by thi

e4Ic-aud. "..i.

Do not increase or reiluce'03 4Mount'40 .one answer becanse of your answer to any other question about damages. Do not speculate dbppt whif :any• party's ultimate recovery may or may not be Any recovery will be determined by the ...CI. Otirtwheh it-applies the law to your anSWers at the time of judgment. .Do not add any amount for intere"t .-. On.:damitgeg :if any. -

4 :.-

t). . 4.,. Answer in dollars and cents'.

-

,

Micha - ganO• soh. IMP! .0 0' Answer: $ Aiin Gamow .. .‘ 71

,-.0- .

g tP , .

# •

$ _10. 001, to

,.

E 14±

'- ik V

— .11 .: ::' tro :4.a -1"A"#-

t.7 f 14 , V

-

i 5, +.• :

,• 1,-:, Y.t.- z ,ip, _

''' 0: - k:!.. '•''

. •

14-4f ! '.• . . 1'

vei4

w. , : -,. . ,‘, , • 4-:

K 111t 7 a . 111 4;;„•.

rsidAN ir I=141

K 1.!

r: . a COURT CHARGE , Page 10

.,..c.... ;.,•t i Lo. '3

- .: • Y

' 2R

:T., ;. 4 ' PT-

- ,

_ __ _

, ::IT Al

1'"-'!* 1.1

4 4.,

-7 'A' . •

n

QUESTION 7a • :-

-:!,; '::

Did W. Graeme Roustan intentionally:interferewith the lease agreement for the ice rink between YDIDI and Ann Gainous?

... .-17

i.. ,':"- I 24 ... _

Interference ii' intentiorral if cOn•

unitted with-the desire to interfere with the contract or with the '4!.. ...;••": '' ,

1. I

N 4- Answer Yes or No: ...,

If your answer is "Yes," Ili' s ':- : swer, the following q'uestion. Otherwise, do not answer the following question.

N .. ,$, ! Z i il, _ QUESTION 7b y

7- > ,. , ',. ' What sum of mOnetIf,4 .any, if paid now in cash, would fairly and reasonably compensate .

Plaintiffs for their iNf4, proximately caused by such interference? arnage ' m2,-,-ili :::: 1

Answer in Dollars and Ce "1,."..',7::

Answer $ L Ahtitailndus i„t i, -

A ,

$ RittglekaitertAliaiient, Inc, .'.1.-::.,: • • ' • E -

QUESTION 8 - Mi ' 7-,.. 1

What sum of money do you',fui4, if anyitio be reasonable and necessary attomey's fees for the.services by kpertainli the probecution of their clainis against the Roustan attorneys representing plai4iff

Defendants, in the followirtg .•IMegerieg , z • -., • f A: ,

','•- I. 1,

Answer in dollars and nts, iir. ,.

(a) Forlegal 'aWiees rendtred in the preparation and trial? It4.1e4-7.

Answer: ' -...e •

2 "7-. _Soo

(b) For legal services if this case is. appealed to the Court of Appeals? Answer:

't ' i: "7 .--

(c) For legal s8rviaes for making or respcindilig to a Petition for Review to the Supreme Court of TeXas7-, Answer: Al , g, .r) . .1: -i-

. (d) For legal serViees.for preparation for an appearance.in Cong in an appeal to the Supreme Court of TO.5. tfis% tlie evetit review:is granted? Answer: -1". .."tot - 17 14.'

11 -.;

4 .!-$2..1 •i? 7 ii,. P 1

is Al".4U: " - :I? /

COURT CHARGE Page 11

.•/- , ......t,

kr P.' VI

8 .

7 - E _

-'. • .1 tis! ■

.QUESTION 9a

Did Plaintiffs conimit Common law fraud against W. (3raeme Roustan? ;

f.ri"

Answer "Yes" or "No" as &each::4

Michael Sanderson' ' )^ fO — AA; 1 yo5 . 1') .KES Ann Gainous •) Ai 0

Ridglea Entertainril'40• 0r( ;, 11,10 Yr s

If your answer to any p qi *es,"11.en answer the following question: Otherwise, do not answer the following question. - T ,

QUESTION 9b '• ,

What sum .of monlotiany; jfpaid tiow in/cash; would fairly i,nd reasonably compensate W. Graeme Roustan for his drtmagels, if any thitresulted from such commoi . law fraud?

Consider the following:elements of damages, if any, and ndne other:.

1. The ainOunt•of money that W. Graeme Roustan put into the ice rink business relying upon tt(41hi1itiffOretresentations.

In answering . question.s,. about damages, answer each question separately. Do not increase or reduce the amount 20 in one : miswer because of your answer to any other questions about damages. Do not speculate about whay:..party's,ultimate recoyew .may or •may not be. Any recovery will be determined by the court wlii applie&•the law to ydur answers at the time ofjudgment. Do not add any amount for interest on daingif any.

Answer in dollars .hrid cents.

•' Answer: $ . '

4.- & Y

QUESTION 9c . "1

For each person found y.y,iy:ou to hame;;f(-cansed these damages pna the percentage caused by each: II 5.

a. Michael San40* ;

b. Ann Gainouski • 1k.

Ridglea Entertamment lxic E % c. 4 ■ i TOTAL 100%

, t f s n

,


• ,.: 1 • r. 11 v ! g

. • — , o

„I

—

. 1 , A A

•:.,.... ••,•'1 4: -

R .ir

1.

d al

- fr t .

T

• e..

.,. -N-

;-:

QUESTION 10a '?t''.1( t,2" 1- ii it: '■

.." .

'-•

--

13 Do you find that 41r0, 1..e 'fa ‘-i'o'•w'mg committed civil thetf of Rouitan Ridglea LLC's property?

...,..4.4 :.

Civil Thetf occurs t3o

f tSi 'ifnlaWfull talces oerty from another without the owner's effective a ercit consent.

-:. Answer "Yes" or "No- '; as to each:

1111 8 Michael.,,,-on:

- Ann gain:W-I.,' 1 ..li T Ridglea EliterfaintameInc.'

5 . 4

4 es r

-Ai * ,

, 1 " then answer thd" folk 1ring question. Merwise, do not answer the If your answer to any parti rli Vei,

following question. _

-

QUESTION 10b ci

.. 4... Ai- ;! tf 4

What sum of .moUeyitfotild af y damages caused .by-the theaf

'il 1 , k,p

fiily and feasonably compdnsate Roustan Ridglea LLC for the

It - ,e .

Answer in dollars 5144 lfts: - I

171'A

r : 41r7 '''';

$ --t.:01 4.., 0 t .1,1

Answer:

-- 7:

e :, _ 0-- .. r7i4

a -K " QUESTION 10c .p., x. ,;-.t 5•.;

.;yi:;,, ,. - ...

For each person found by you to have daused these'damages find the percentage caused by each: -3" ' :V -,- ik'

a. Michael Sanadrse'rn _ co %

AV b. Ann Ga inour1-,,','r' :) %

c. Ridglea EntettaitiMent, Inc, 4 % u TOTAL 1:00%

g

ki

: .

COURT CHARGE :. -;.(l Page 13 /..- .14.

-.1t1. . V.

J.

-..

.,..‘,'..).

.... : • A 01

.-

i .

: ...... .

.

Answer Question 1 "44

if0J1h:only if you unaminously answered "Yes" to any part of Question

questions.

.'v,g

9a. Otherwise, do not ansiekr 4t1h1: eie'

To answer "Yes" 6 . a. lnpart of?Questions 1 a and 1lb, your answers must be unanimous. You may answer "No" to any VO-fliereof otfly upon a vote of ten or 'More jurors. 'Otherwiseyou must not answer that part.

QUESTION 1 a .

Doci you find by clear. ail a

o•nvmzcmg evide• nce that the harm to

fraud of one of the followiiii 3., Pe gn

teas" ` i. t ..

Answer "Yes" or "No"-aV .-Weach: - NM

Michael Sanderson.: Ann Gainous:

, g l: vkt qi F

Ridglea Entertainment, Aper;v: ;=- , 7 :..

4' v 4 Ii - . p 4,

QUESTION ...I lb

What slim of ts?p' 4. rila

illpaig now in cash, should be assessed against any of the persons below and awarded

"Exemplary dmaages" ituh as exempharf damages, if any, for the fraud? , ,..

m4ea4ill 1 aii andinithat `you may in your discretion award as a penalty or by way

of punishment. 9, . , • 1). ki,•;4-. '

Factors to consider in .# % 1,t •.,. i

ng•empyg? if any, . - M

a. The nature ofthe *inn& .

b. The character:of the coudtigt involved. cm 4. !. :• •it . i ii , . 14 :".5.. .4 a.

c. The degree ofitilpfibility j'

ofthe person or:persons. ,,..; 2.- 7,, • :A

ill'

The situationW46nsibilities 44. 21A::

d. of the par4s concenied.

e. The extent to which such c:onduct offends a public sense of justice and propriety.

f. The net wort/II:4A person or p grson: 7

S r - . Answer in dollars and • Outs. ..1:4 4./: .t\ You must unanimouslx.age.e on the amount of any award of exemplary damages.

_ .,...'„,,,.,..,:

4 elki Michael Sanderson: • - ; 7i=‘.

gt , Ann Gainous: 7, , 4r:4- Ridglea Entertainment, llic..,:f!.11 - S

* ,..4 • 4 A

1


i W :;,..:1-

y A °I

.. IP' - '

-

? !,-.t'4Nr ryi

Answer Question 124 12b Only if you unanimously answered "Yes" to any part of Questionf 10a .Ohterwise, do not ese

any'. -.• • cl'i''''o4' ons.;

''k 14' i :

To an swer "Yes" t.4n5

- -.

4! (it, il S,.

$. ,ar part iof Questione12a and 12b, your answers inust be unanimous. You a vcite of ten or more jurors. Otherwise, you must not may answer No to any iit •*roof nl

ry N

■' -on

answer that part. : ;(s . _

V '41';,-,:ai QUESTION 12a 4 '13,Ar, .-

Do you fmd by cliar'd .conygleingeV. idence that the haxan to Roustan Ridglea, LLC, resulted 113

from the civil theft of one Of the!follov;ing parties? z.

Answer "Yes" or "No" u•,s :to;,each:

/t/D.. Mic1.--1 Sanderson.: Ann Gainous:

I-X. - '' 4 '' .1. : t _ FAR

Ridglea Entertainment, IVA, .„,. •.

QUESTION 12b ;`' 4 * e, ...4 -0, '4

What sum of money; i listed below and awarded tii .10iistan itiifleA, LLC, as ixemplary damages, if any, for the civil theft?

.RW:-‘rar; any, i f paid now inn cash, should be assesSed against any of the persons

.. i4,0- tf - A

"Exemplary damagbs" • 004 ait•

o. tint thht Sriou may in.your discretidi award as a penalty or by way of punishment. ,.....< i i., :.1 !• '•c

gi % i .i.

.:

Factors to consider in aWatdmA,

g exem tilary damages, if any, aro-e a ;-

411. .itti?

ft. The nature. ofttliiitrong. g

b. The characteifoi, conduOt -invOlVed. Ix

c. The degree okeultability of the person or persons.

d. The situation ifid.seniihilities of the'partiestoncemed„ - :

e. The extent to Aiyhidh .suchconduct offends a public sense of justic -e and propriety.

f. The net worth:. tKe .erson or persons. ETeam 1,, N irs

Answer in dollars and Cents. zo ii,,,,it?. ,:-:.-Jr,-.i; - •

You must unanimatigragre.e . .oVaelamotmtof any aWard of exemplary damages. ..., 1, *

Michael Sanderson: Ann Gainous:

srnW7 '- 73 0 - ',; I d

0 . 7 it Iiiii- 0 .t ,, ' $ Ridglea Entertainment,. VnP:,.r;:;

; • 0 _

t, '` . E _

COURT CHARGE Page 15 :*;-...,4:' ` inaM

.. -, ti.., ;.' it -, '

ii , -; :f

— A "

. -

= "t%

- - - - ----- :'k •s '

•

—'•^ — - -

E -

^^.' -

1

After you retire to the jury`roorq, you will select your Own presiding juror. You will then deliberate upon your answers to the question§ asked-.

-

It is theduty of thOmeskding jurot•to-- i

5;; . , t.

preside durigoadur deliiv` rations,•

1.

,(1,7 , • 2. see that'yo i deuberattohs . conclude•d in an orderly Manner and in accordance with the instructions in this charge,..i..

3. vvrite out, haiii to 'the bailiff any com:munic'ations • concerning the case that you desire to have delivered to $e,j,id ge,

4. vote on theiqu'

eSt*ions, ' 1

' th, 14 5. write youfanswers to tps questions in the spaces pr

Yovided, and

6. certify to )Tó ' ti e rd' ict . e space provided for the presiding juror's. signature or to obtain the signatures of all the juroisOagre6with the verdict if your verdict is less than xmanimous. .:ho:

You should not digugslthe.ease with anyone, not even with other members of the jury, unless all of you are present and assiiiithlid in the jury room. Should anyone .attempt to talk to you about the case before the verdict is rehmi&lA

'kether at the courthouse, at your home, or elsewhere, please inform the

judge of this fact. 11

When you have ariiwi•ed all tli4 questions yciu are required to answer under the instructions of the judge and your presidiV Ar has Aced yciur answers in the spaces provided and signed the verdict as presiding juror or obtaiiif you have reached a.:verdie

Ognufitres, you will inform the ,bailiff at t thedooi of the jury room that en 37cht.jvil1 ref* into court with your Virdict.

. —if - 0.0 r

- , 113:0 n

f.t JUDGE BOB McGRATH

4 ^ /

a i # N

4 .

R3

, “

a COURT CHARGE .

Page 16 ?

xr

iP • P .

1.1 -

F A A IT=

r 4 I

- . . :

.4 if ' r

CERTIFICATE

We, the jur y, haveansiiefed tlie.aboVe and foregoing questions as ierein indicated, and herewith .Feturn same into court as oUimerdict. I /

(To be signed here by the prei"iiI iiig jursg only if unanimouS.)

t

Presiding:Juror

(To be signed agree. to all-answers if less than unanimous)

( i 11151E411ffl1 / I , C)/7/./na- ge--"z"0--1

7

/ i

• c.

N

EME

-w

0 7 A

e ••• t - _ c

F 5 •% .

. At 1 . . , •

. . 4

, t - N

, X 4:

1

v

COURT CHARGE p Page 17

- . ; . .04p

Appendix 3

COURT OF APPEALS SECOND DISTRICT OF TEXAS

FORT WORTH

NO. 02-09-00377-CV

W. GRAEME ROUSTAN APPELLANT

V.

MICHAEL SANDERSON, WIFE ANN GAINOUS, AND RIDGLEA ENTERTAINMENT, INC.

APPELLEES

FROM THE 342ND DISTRICT COURT OF TARRANT COUNTY

MEMORANDUM OPINION'

-- R

In six issues, Appellant W. Graeme Roustan appeals from the trial court's

judgment awarding damages to Appellees Michael Sanderson, his wife Ann

Gainous, and Ridglea Entertainment, Inc. (collectively S&G) on their breach of

contract and fraud claims against him. Because we hold that the evidence is

insufficient to suppotr an award of damages against Roustan individually on

1 See Tex. R. App. P. 47.4.

S&G's breach of contract claim but sufficient to support an award of damages on

S&G's statutory fraud claim, we reverse in patr and afifrm in part.

Background

Sanderson and Gainous wanted to start their own ice rink business, and in

November 2004, Gainous signed a two-year lease for an ice rink in Fort Worth

owned by YDIDI, I LP. The lease contained an option to purchase the property

during the lease term. Sanderson and Gainous formed a corporation, Ridglea

Entertainment, Inc., to operate the business, and they opened for business in

December 2004.

In March 2005, S&G began having equipment problems, which caused

problems with the ice. They finally identified and repaired the source of the

problem at the end of May 2005. Because of the problem with the ice, the rink

had been closed for business from March until the end of June. Meanwhile, in

April 2005, Sanderson contacted Roustan, an investor in and operator of a

number of other ice rinks, about Roustan buying a controlling interest in the

couple's business.

In May 2005, Sanderson and Gainous went to Las Vegas to an ice rink

convention and met with Roustan while there. At the meeting, Roustan gave a

presentation about his ice rink business venture in which he told Sanderson and

Gainous about ice rink facilities he currently owned and others that he planned to

acquire in the next few years.

2

The parties signed a purchase agreement on August 1, 2005, in which a

new entity, Roustan Ridglea, LLC (Ridglea LLC) purchased the lease and all of

the assets of the ice rink business, except that Gainous kept the $30,000 security

deposit that she had paid when she signed the lease. Ridglea LLC agreed to

assume the utility contracts for the premises, including the electricity service.

Ridglea LLC also agreed to transfer a twenty-five percent ownership interest in

the entity to Ridglea Entertainment and to pay $75,000, in two installments of

$37,500 each, to Gainous and Ridglea Entertainment. At trial, the parties

disputed whether the second installment was ever paid.

At the same time, Gainous executed an assignment of the lease as well as

an assignment of the purchase option. As patr of the consideration for the

agreement, Ridglea LLC agreed to employ Sanderson as general manager of the

ice rink and to employ Gainous as a full-time employee.

Ridglea Entertainment and Roustan Inc. (a company of which Roustan is

the sole stockholder) also executed an operating agreement for Ridglea LLC.

Under the agreement, Roustan Inc. held a sixty-five percent ownership interest in

Ridglea LLC. Ridglea Entertainment owned twenty-five percent, and two trusts

each took a five percent ownership interest.

The agreement called for Roustan inc. to make a $150,000 capital

contribution to Ridglea LLC, with $20,000 paid prior to formation and the

remaining $130,000 due upon formation. Ridglea Entertainment's capital

contribution consisted of its assignment of its interest in the ice rink and its sale

3

of all of the business assets as set out in the purchase agreement. Roustan

made an advance of $20,000 prior to closing on the purchase agreement and

another $55,000 around the time of closing. The parties disputed at trial whether

Roustan Inc. ever satisfied the rest of its capital contribution.

Attached to the agreement as Exhibit 2 was an unexecuted promissory

note, dated July 1, 2005, under which Ridglea LLC promised to pay the

Fernandez Family Trust a sum of $200,000 plus interest over a period of three

years. The operating agreement provided that Roustan, the managing member,

was authorized to pay the note "as set forth in Exhibit '2. '" This trust was not one

of the two trusts that received a five percent membership interest in Ridglea LLC.

By October 2005, Ridglea LLC did not have enough money in its account

to pay all of its bills, and the business was not generating enough income to

cover them. Roustan had not had the utilities transferred out of Gainous's name,

and in the spring of 2006, the business began getting shut-off notices from the

utility company for failure to pay the rink's bills. S&G paid these bills with their

personal charge cards.

In September 2006, the business continued to have trouble making

money, and Roustan informed S&G that he would not put any more money into

the business. That same month, the electricity was shut off for failure to pay the

bill, and S&G paid $22,000 to have the service turned on again. S&G also

received notice that month that there were insufficient funds to make payroll.

4

Sanderson and Gainous notified Roustan that they would be taking the

revenue from the ice rink and putting it in Ridglea Entertainment's account. They

paid the rent for October and November. After accepting that rent, YDIDI notified

S&G that the September rent had not been paid and that the lease was in

default. They sent a check to YDIDI, but the entity held the check and, in

December, evicted S&G. The next day, the rink opened up again for business,

now under the management of Firland Management LLC, a company used by

Roustan to manage other ice rinks in which he invests.

During this time, Roustan's lawyer was negotiating with YDIDI for a new

lease and new purchase option, but with a new company instead of with Ridglea

LLC. On November 30, 2006, Roustan sent an email to a YDIDI representative

stating that

[f]rom what I hear, [Sanderson] is having trouble getting an Insurance Certificate for Ridglea Entertainment, Inc. If your lawyer demands to see one in 5 days, he might not be able to get one and would be in default even though my policy is still in effect. I am pretty certain he will come up with the September rent and December rent. Just a thought.

The YDIDI representative responded, "I have forwarded your message to our

attorney . . . who is working on a specific notice to Sanderson. I am confident we

will be able to prevail in the end." On December 18, 2006, the day after S&G

were locked out of the ice rink, Roustan registered a new corporation, Roustan

Fotr Worth, LLC, with the Texas Secretary of State, using the ice rink's address

as the registered address.

5

S&G filed suit against Roustan; Ridglea LLC; Roustan Fotr Worth, LLC;

YDIDI; and Firland Management, LLC. 2 S&G's petition contained a seven-

paragraph section with the heading "Causes of Action Against the Roustan

Defendants. " In the first paragraph of that section, they alleged that Roustan had

made false representations "concerning his business acumen, his financial

strength[,] and his commitment to funding the new company to which [S&G] sold

the business." S&G then stated a claim "for common law fraud and statutory

fraud pursuant to Tex. Bus. & Com. Code § 27.01."

In a separate paragraph in that section, S&G included the following claim:

"Ridglea LLC failed to pay the second [half] of the purchase price and thereby

breached the contract of Purchase and Sale. The breach of contract by [Ridglea

LLC] resulted in damages to [S&G]. "

After a trial, a jury found that Roustan had failed to comply with his

agreement to pay Sanderson and Gainous $75,000 for the transfer of the ice rink

business, and it assessed their damages at $37,500The jury further found that

Roustan had not failed to make the agreed $150,000 capital contribution and that

he did not agree to contribute the money for payment of Ridglea LLC's operating

expenses.

The jury also found that Roustan did not commit common law fraud against

S&G and that he did not "engage in any false, misleading, or deceptive act or

2They subsequently dismissed their claims against Firland and YDIDI.

6

practice that [S&G] relied on to their detriment and that was a producing cause of

damages to [S&G]. " The jury did find that Roustan committed statutory fraud

against S&G, but it awarded statutory fraud damages only to Ridglea

Entertainment, in the amount of $50,000.

Roustan filed a motion for judgment notwithstanding the verdict. The trial

court denied the motion and entered judgment ordering that Sanderson and

Gainous recover from Roustan $37,500 plus prejudgment interest and that

Ridglea Entertainment recover from Roustan $50,000.

Analysis

Roustan's first two issues relate to S&G's breach of contract claim. His

third, fourth, fifth, and sixth issues relate to S&G's statutory fraud claim.

Breach of Contract Claim

In Roustan's second issue, he argues that the evidence is legally and

factually insufficient to support the jury's verdict on S&G's breach of contract

claim because there is no evidence that Roustan made any agreement with them

in his personal capacity. We agree.

The jury found that Roustan had agreed to pay Sanderson and Gainous

$75,000 for the transfer of the ice rink business. The agreement regarding the

transfer of the business was contained in the purchase and sale contract, which

was between S&G and Ridglea LLC, not Roustan individually. Roustan signed

the agreement as president of Roustan, Inc., which signed as the managing

member of Ridglea LLC. Accordingly, Ridglea LLC may be liable for a breach of

7

the contract to which it is a party, but Roustan as an officer may not be held

individually liable. 3 Roustan could, through his actions, cause Ridglea LLC to

breach the agreement, 4 but because he was not a party to the contract, he could

not personally breach it. 5 S&G did not plead any facts or provide sufifcient

evidence to support a ground for ignoring the limitation on liability afforded to

limited liability companies and did not allege that the limitation should be

disregarded.6 By statute, a member of a limited liability company is not liable for

3See Willis v. Donnelly, 199 S.W.3d 262, 271 (Tex. 2006) ("A bedrock principle of corporate law is that an individual can incorporate a business and thereby normally shield himself from persona( liability for the corporation's contractual obligations.").

4See In re Vesta Ins. Group, Inc., 192 S.W.3d 759, 762 (Tex. 2006) (orig. proceeding) (noting that "corporations must act through human agents").

5See Bernard Johnson, Inc. v. Cont'! Constructors, Inc., 630 S.W.2d 365, 369 (Tex. App.—Austin 1982, writ refd n.r.e.) ("As a general rule, a suit for breach of contract may not be maintained against a person who is not a party to the contract.").

6See Castleberry v. Branscum, 721 S.W.2d 270, 272 (Tex. 1986) (setting out six grounds on which the corporate form may be disregarded), superseded in part by Act effective Sept. 1, 1997, 75th Leg., R.S., Ch. 375, § 7, 1997 Tex. Gen. Laws 1522, 1522-23 (amended 2003 & 2007) (current version at Tex. Bus. Orgs. Code Ann. § 21.223 (West 2010)); see also SSP Partners v. Gladstrong Inv. (USA) Corp., 275 S.W.3d 444, 451-52 (Tex. 2008) (stating that the limitation on corporate liability may be ignored "only 'when the corporate form has been used as part of a basically unfair device to achieve an inequitable result'"); McCarthy v. Wani Venture, A.S., 251 S.W.3d 573, 590 (Tex. App.—Houston [1st Dist.] 2007, pet. denied) (noting that Texas courts have applied to limited liability corporations the same state law principles for piercing the corporate veil that they have applied to corporations).

8

a debt, obligation, or liability of the company. 7 Fraud is a ground for disregarding

the corporate form, 8 but although S&G pled that Roustan fraudulently induced

them to enter a contract, they did not plead that Roustan used the LLC itself to

perpetrate a fraud and that, consequently, the corporate form should be

disregarded and Roustan held individually liable. 9 Nor did they plead any other

ground for disregarding the corporate structure. 1°

S&G argue in their brief that they "had always understood that Roustan

would be paying the $75,000 cash portion of the purchase price[,] and it was not

until shortly before closing when they received the purchase agreement that they

understood Roustan had put a provision in the purchase agreement that the new

company would be paying the second half " They then contend that they "had a

conversation with Roustan about their concems with capital calls and Roustan

7Act effective Aug. 26, 1991, 72nd Leg., R.S., Ch. 901, § 46, 1991 Tex. Gen. Laws 3192, 3203 (now renumbered and codified at Tex. Bus. Orgs. Code Ann. § 101.114 (West 2010)).

8See Castlebeny, 721 S.W.2d at 272.

8Cf Houston-Am. Life Ins. Co. v. Tate, 358 S.W.2d 645, 657 (Tex. Civ. App.—Waco 1962, no writ) (holding that the corporate ifction was used to perpetrate a fraud and that adherence to the corporate fiction "would promote injustice and lead to a most inequitable result").

10See Castleberry, 721 S.W.2d at 272; see also Blond Lighting Fixture Supply Co. v. Funk, 392 S.W.2d 586, 591 (Tex. Civ. App.—San Antonio 1965, no writ) (holding that there was no justification for disregarding the corporate. form when the plaintiffs did not present evidence that the corporation was formed as a means of perpetrating fraud, that it was operated as a mere tool of another corporation or as the alter ego of an individual, that the corporate form was being used as a means of evading existing obligations, or that the corporation was used to circumvent a statute, protect crime, or justify wrong).

9

had told them that he would personally pay any monetary shortfalls during the

first [twelve] months of the operation of the company, and they therefore "had "

every reason to believe that Roustan was standing by his personal commitment

on the purchase price."

S&G may have put on some evidence of statements Roustan made before

or after the contract's formation about the source of funding for the $37,000, but

they did not put on evidence of a separate contract with Roustan personally to

pay them the money. The only contract that they pled had been breached was

the purchase agreement, and this was the only agreement that they proved

existed. " Roustan was not a party to this agreement, and S&G did not put on

evidence to support the disregarding of the corporate form to hold him personally

liable. 12 Because they neither pled nor proved a ground for setting aside the

corporate form to hold Roustan personally liable on the purchase agreement, and

because they neither pled nor proved a separate contract with Roustan, he

cannot be held individually liable for breach of contract. 13 Accordingly, applying

the appropriate standard of review, 14 we sustain Roustan's second issue.

"See Fieldtech Avionics & Instruments, Inc. v. Component Control.Com , Inc., 262 S.W.3d 813, 825 (Tex. App.—Fort Worth 2008, no pet.) (stating that the elements of a breach of contract claim include the existence of a valid contract).

12See Castlebeny, 721 S.W.2d at 272.

13See Bernard Johnson, Inc., 630 S.W.2d at 369.

14Cent. Ready Mix Concrete Co. v. Islas, 228 S.W.3d 649, 651 (Tex. 2007); City of Keller v. Wilson, 168 S.W.3d 802, 807, 827 (Tex. 2005); Uniroyal

10

Because S&G failed to establish a basis for holding Roustan personally

liable, we do not need to reach Roustan's first issue, in which he argues that the

pleadings did not support a verdict of personal liability on the contract. 15

Statutory Fraud

The remainder of Roustan's issues relate to the jury's verdict of statutory

fraud. In his third issue, he argues that there is no evidence that he made any

representation that was false.

S&G pled a claim for fraud involving real estate or corporate stock under

section 27.01 of the business and commerce code. 16 To show fraud under

section 27.01, a plaintiff may prove either (1) a false representation of a material

fact or (2) a false, material promise to do an act. " If the plaintiff's claim is based

on a false representation of fact, the plaintiff must show a "false representation of

a past or existing material fact, when the false representation is . . . made to [the

plaintiff] for the purpose of inducing [the plaintiff] to enter into a contract; and . . .

relied on by [the plaintiff] in entering into that contract. " 18 If the claim is based on

a false promise to act, the plaintiff must show that the false promise was material,

Goodrich 'Tire Co. v. Martinez, 977 S.W.2d 328, 334 (Tex. 1998), cert. denied, 526 U.S. 1040 (1999).

15See Tex. R. App. P. 47.1.

16Tex. Bus. & Com. Code Ann. § 27.01(a) (West 2009).

171d.

180

11

made to the plaintiff with the intention of not fulfilling it and for the purpose of

inducing the plaintiff to enter into a contract, and that the plaintiff relied on the

promise in entering into that contract. 19

The jury charge tracked section 27.01, instructing the jury that statutory

fraud can occur when either (a) there is a false representation of a past or

existing material fact or (b) a party makes a false promise to do an act. In the

short section of Roustan's appellate brief addressing this issue, he asserts that

"[t]here was no evidence of any representation by [him] that was false in any

respect. " He does not, however, argue that there is no evidence that he made a

promise to do something with the intention of not fulfilling it.

In his reply brief, however, Roustan does make one argument regarding

the evidence to support a finding of a false promise in a sentence in a footnote of

the brief. He states that testimony suggesting that he failed to perform on any of

his promises cannot support a fraud claim because Texas cases have

consistently held that failure to perform an agreement cannot suppotr a fraud

claim. We agree with the statement that under Texas law, proof of the failure to

perform, without more, does not establish fraud. ° But circumstantial evidence

may be used to establish that, when making the promise, the party had no

19Id.

20Formosa Plastics Corp. USA v. Presidio Eng'rs & Contractors, Inc., 960 S.W.2d 41, 48 (Tex. 1998).

12

intention to perform.21 A party's acts atfer the promise was made, the party's

denial that he ever made a promise, and no pretense of performance are all

factors that may be considered to show a lack of intent. 22

Roustan makes no argument that the evidence was insufficient to show

that in order to induce S&G to enter into a contract, he made a promise with the

intention of not fulfilling it. Furthermore, Gainous's and Sanderson's testimony

indicates that Roustan led them to believe that he and his business enterprise

had the financial wherewithal to provide the funding to keep their business going

and that he would in fact provide the funding. The emails from Roustan in the

record do nothing to contradict this testimony. For example, when the parties

were still negotiating the deal, Roustan told Sanderson that he would pay

$20,000 up front and then, after formation of the LLC and the assignment of the

lease, "[he] would then provide an additional $130,000." [Emphasis added.]

Roustan did nothing to disillusion S&G atfer they formed the LLC; in February

2006, Sanderson asked Roustan about the second payment of $35,000, and in

response Roustan asked them to wait on payment because "it would make life

easier on [him]." [Emphasis added.] No mention was made of funding the

business by taking out a loan. Neither the operating agreement nor the note

21 See Spoljaric v. Percival Tours, Inc., 708 S.W.2d 432, 435 (Tex. 1986).

22See id.; see also Aquaplex, Inc. v. Rancho La Valencia, Inc., 297 S.W.3d 768, 775 (Tex. 2009) ("[A] party's intent is determined at the time the party made the representation, [but] it may be inferred from the party's subsequent acts after the representation is made.") (quoting Spoljaric, 708 S.W.2d at 434).

13

attached to it indicated that the trust loan was not an additional source of funds

and was instead the primary source of Roustan's contribution to the LLC. The

evidence in the record was enough for the jury to conclude that Roustan told

S&G that he could and would provide a capital contribution of $150,000, either

with his own funds or with the financial resources of his business, but that he

actually borrowed money on behalf of the LLC. The record therefore contains

sufficient evidence that Roustan made a promise to S&G that went unfunled.

Roustan does not argue that, even if he did not follow through on a

promise, such promise was nevertheless not made with an intention not to fulfill

it. Even if he had so argued, however, our conclusion would be the same. From

Roustan's testimony about how he structures business deals, his opinion about

the note's satisfaction of his capital obligation, and the operating agreement's

provision making repayment of the loan the obligation of the LLC rather than

Roustan, Inc., the jury could have concluded that Roustan never intended to

make a capital contribution from his own funds or the funds of Roustan, Inc. and

that he had always intended to fund the business by way of a debt that the LLC

would have to repay. Accordingly, the jury could have found that Roustan's

borrowing money to fund the LLC and making the LLC liable for the repayment

satisfied Roustan's obligation to make a capital contribution but at the same time

violated his promise to S&G that he personally could and would fund the

company.

14

Roustan does not argue that the promise to provide funding out of his own

funds or his business's funds was not material. Nor does he argue that the

evidence was not su • cient to show that S&G relied on the promise or to show

that the promise was made to induce them to sign the purchase and sale

agreement and the assignments. Accordingly, we do not address the sufficiency

of the evidence as to those elements of S&G's claim. We overrule Roustan's

third issue.

In his fourth issue, Roustan argues that the judgment does not conform to

the pleadings. The entirety of his argument on this issue is as follows:

[Texas Rule of Civil Procedure] 301 requires a judgment to conform to the pleadings. As mentioned above, [S&G] assetr in the [p]etition that Roustan made false "representations concerning his business acumen, his financial strength and his commitment to funding the new company." . . . However, representations (even if made) cannot suppotr a judgment of fraud under Texas law[.] See, Stephanz v. Laird, 846 S.W.2d [895,] 903 [(Tex. App.—Houston [1st Dist.] 1993, writ denied)]. Thus, the [j]udgment against Roustan for statutory fraud does not conform to the pleadings.

as discussed above, such

Roustan expands on his argument somewhat in his reply brief, in which he

asserts that as a matter of law, the allegations that he made false

"representations concerning his business acumen, his financial strength and his

commitment to funding the new company" cannot support a claim for fraud

because "the representation complained of must concern a 'material fact' and not

'a mere matter of opinion, judgment, probability, or expectation. ® Thus, he

argues, the petition failed to plead any grounds that would support a fraud claim.

15

In the case relied on by Roustan, the court looked to see if the evidence

supported a finding of misrepresentation, not a finding of a false promise to do an

act. Roustan does not explain why the pleadings cannot suppotr a judgment that

he committed statutory fraud based on a false promise.

In the paragraph of the pleadings pointed out by Roustan, S&G did state

that Roustan made false representations about his business ability, his finances,

and his commitment to funding the new company. They assert that these

representations were made with knowledge of their falsity with the intent of

inducing them to enter into the purchase and sale agreement, and "[S&G] assetr

an action for common law fraud and statutory fraud pursuant to Tex. Bus. & Com.

Code § 27.01" based on the purchase and sale agreement and the assignments.

But S&G did not limit their statutory cause of action to a claim based on false

representations under section 27.01(a)(1). And in their pleadings, S&G alleged

that Roustan misled them about his commitment to funding the new company

and that Roustan had represented to them that he had financial capital to put into

the business and to exercise the purchase option "so that the new entity he

would form would own the [p]roperty." Although S&G used the term

"representations," a term that generally relates to assertions of fact rather than

promises, these statements were sufifcient to put Roustan on notice of a claim

based on statements by him that he would perform acts in the future with respect

16

to funding the new company and purchasing the property. 23 Roustan makes no

argument about why, if S&G proved that Roustan made promises about funding

the business, such promises could not serve as the basis of a section 27.01(a)(2)

claim. 24 The pleadings can support a judgment for statutory fraud based on a

false promise, and, accordingly, we overrule this issue.

In Roustan's fifth issue, he argues that the jury's finding that he committed

statutory fraud was inconsistent with its findings as to common law fraud. In

reviewing the jury findings for conflict, a court may not strike down jury answers

as conlficting if there is any reasonable basis upon which they can be

reconciled. 25 The question for this coutr is not whether the findings may

reasonably be viewed as conlficting but whether there is any reasonably possible

basis upon which they may be reconciled. 26

In Roustan's original brief, he does not explain why the jury's findings are

inconsistent and irreconcilable. 27 In his reply brief, however, he argues that

23See Horizon/CMS Healthcare Corp. v. Auld, 34 S.W.3d 887, 896-97 (Tex. 2000) (noting that Texas follows a fair notice standard for pleading, that a petition is sufficient if it gives fair and adequate notice of the facts upon which the pleader bases his claim, that when a party fails to specially except to a pleading, a court should construe the pleadings liberally in favor of the pleader, and that qt is hard to imagine that [Appellee] was unaware of exactly what [Appellant] was claiming").

24See Tex. R. App. P. 38.1(i).

25Bender v. S. Pac. Transp. Co., 600 S.W.2d 257, 260 (Tex. 1980).

26o.

27 See Tex. R. App. P. 38.1(i).

17

under the common law fraud question, the jury found that he did not make a false

representation, but the jury's answer to statutory fraud requires a finding that he

did make a false representation. Thus, he argues, the findings are in conflict and

are irreconcilable.

We disagree. The jury's answers are not irreconcilable. The jury charge

on common law fraud limited liability to the making of misrepresentations, which

the charge defined as a false statement of fact or opinion. The statutory fraud

definition, however, allowed the jury to find that Roustan had committed fraud

either by making a misrepresentation or by making a false promise to do an act.

The jury could have found that Roustan did not make a false statement of fact or

opinion and therefore did not commit common law fraud but that Roustan did

make a false promise to do an act and therefore did commit statutory fraud.

Furthermore, when the jury returned its verdict, Roustan did not object to

the findings as conflicting. 28 We overrule this issue.

In his sixth issue, Roustan contends that the trial coutr submitted an

improper instruction on damages concerning statutory fraud. The jury charge

asked the jury,

What sum of money, if any, if paid now in cash, would fairly and reasonably compensate ES&G] for their damages, if any, that resulted from such statutory fraud?

28See Columbia Med. Ctr. of Las Colinas v. Bush, 122 S.W.3d 835, 861 (Tex. App.—Fort Worth 2003, pet. denied) (holding that the appellants did not preserve complaint about conlficting jury findings because they failed to object to the conlfict before the jury was discharged).

18

Consider the following elements of damages, if any, and none other:

1. The economic losses, if any, suffered by [S&G] caused by the [statutory] fraud.

The jury charge instructed the jury to determine "economic losses" but did

not define that term. In ,Roustan's brief on appeal, he argues that the measure of

damages for fraud was discussed by the Supreme Coutr of Texas in Formosa

Plastics, 29 in which that court stated that Texas recognizes two measures of

direct damages for fraud: out-of-pocket and benefit-of-the-bargain. Thus,

Roustan argues, the trial court's instruction was contrary to Texas law because

the proper measure of damages for a fraud claim is either out-ofpocket damages

or benefit-of-the bargain damages.

Section 27.01 provides that a plaintiff under that section may recover

"actual damages," and, in some cases, exemplary damages. 39 The statute does

not define the term "actual damages," so we look to the common law for

guidance. 31 Under the common law, both out-of-pocket and benefit-of-the-

29960 S.W.2d at 49.

30Tex. Bus. & Com. Code Ann. § 27.01(b), (c).

31 Hawkins v. Walker, 233 S.W.3d 380, 391-92 (Tex. App.—Fort Worth 2007, no pet.) (applying without discussion the common law measure of damages for fraud in a section 27.01 statutory fraud case); see also Swinnea v. ER! Consulting Eng'rs, inc., 236 S.W.3d 825, 836 (Tex. App.—Tyler 2007) (looking to the common law for guidance and stating that "[t]he measure of damages recoverable under [s]ection 27.01 is the same as that under a claim of common law fraud"), rev'd in part on other grounds, 318 S.W.3d 867 (Tex. 2010).

19

bargain damages are methods of measuring direct actual damages 32 Economic

damages are measured the same way, and in fact courts often use the terms

"economic damages" and "actual damages" interchangeably. 33 Thus, the jury

charge set forth the correct kind of damages recoverable on a statutory fraud

claim. To the extent that the terms are not interchangeable, Roustan was not

harmed by the trial court's use of the term "economic damages" instead of "actual

damages" because "actual damages" could have allowed for greater recovery in

that "actual damages" can include both economic and non-economic dannages.34

In sum, out-of-pocket and benefit-of-the-bargain are both measures of "actual

damages" and of "economic damages."

In his reply brief, Roustan argues that a proper instruction on damages

would have "set forth" the "out-of-pocket" and "benefit-of-the-bargain" measures.

We construe Roustan's issue liberally to argue, not that the instruction failed to

32See Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 817 (Tex. 1997) (stating that under the common law, actual damages can be either direct or consequential and that direct damages for misrepresentation may be measured as out-of-pocket or as benefit-of-the-bargain damages); Everett v. TK- Taito, L.L.C., 178 S.W.3d 844, 858 (Tex. App.—Fort Worth 2005, no pet.) (noting that "out-of-pocket" and "benefit-of-the-bargain" are the two common law measures of economic damages).

33See Matheus v. Sasser, 164 S.W.3d 453, 458 (Tex. App.—Fort Worth 2005, no pet.) (noting that current version of the Deceptive Trade Practices Act provides for "economic damages," that the prior version called for "actual damages," and that we had found no case suggesting that the terms had any difference in meaning).

34See, e.g., Latham v. Castillo, 972 S.W.2d 66, 69 (Tex. 1998) (noting that mental anguish damages are actual damages recoverable at common law for some torts).

20

name the proper measure of damages recoverable, but that it failed to instruct

the jury on how to calculate those damages, that is, that the charge should have

instructed the jury to determine either the difference between the value S&G paid

and the value of what they received (out-of-pocket damages) or the difference

between the value as represented and the value as received (benefit-of-the-

bargain damages).35

In the charge conference, Roustan's attorney objected to the damages

question, stating that

the measure of damages stated here is not one of the measures of damages for fraud recognized by Texas law. It just says the economic losses. And the proper definitions for fraud would be beneift of the bargain or out-of-pocket or one of the other recognized measures, and this is not one of them. [Emphasis added.]

This objection was not sufficient to advise the trial court of Roustan's objection

that the charge was defective for failing to instruct the jury how to calculate

benefit-of-the-bargain damages and out-of-pocket damages. Roustan argued

only that economic losses were not a proper measure of fraud damages. Thus,

to the extent that Roustan argues that the trial court should have instructed the

jury on how to calculate the damages, he has not preserved the complaint. 36 To

the extent that Roustan's reply brief merely repeats the argument from his

original brief, the argument is overruled because "economic losses" are an

35See Arthur Andersen, 945 S.W.2d at 817 (defining out-of-pocket and benefit-of-the-bargain damages).

36See Tex. R. App. P. 33.1.

21

appropriate measure of damages for the statutory fraud claim alleged. We

overrule Roustan's sixth issue.

Conclusion

Having sustained Roustan's second issue, we reverse the part of the trial

court's judgment awarding S&G damages on their breach of contract claim and

render judgment that they take nothing on the breach of contract claim. We

affirm the remainder of the trial court's judgment.

LEE ANN DAUPHINOT JUSTICE

PANEL: DAUPHINOT, WALKER, and GABRIEL, JJ.

GABRIEL, J. concurs without opinion.

DELIVERED: September 29, 2011

22

Appendix

Fax sent by 81788419321 SECOND CT OF APPEALS 81-12-12 15:58 Ps: 2/2

,

COURT OF APPEALS SECOND DISTRICT OF TEXAS

FORT WORTH

NO. 02-09-00377-CV

W. Graeme Roustan § From the 342nd District Court

v. § of Tarrant County (342-223829-07)

Michael Sanderson, Wife Ann Gainous, and Ridglea Entertainment, Inc.

§ September 29, 2011

§ Opinion by Justice Dauphinot

JUDGMENT

This court has considered the record on appeal in this case and holds that

there was error in the trial court's judgment. It is ordered that the judgment of the

trial court is affimned in patr and reversed in part. We reverse that portion of the trial

court's judgment awarding Michael Sanderson, Wife Ann Gainous, and Ridglea

Entertainment, Inc. damages on their breach of contract claim and render judgment

that they take nothing on the breach of conrtact claim. We affirm the remainder of

the trial court's judgment.

It is further ordered that Appellant W. Graeme Roustan shall pay one-half of

all costs of this appeal and Appellees Michael Sanderson, Wife Ann Gainous, and

Ridglea Entertainment, Inc. shall jointly and severally pay one-half of all costs of this

appeal, for which let execution issue.

SECRND DISTRICT COURT OF APPEALS I 1

ppendix 5

of 95

Westlaw, V.T.C.A., Bus. & C. § 27.01 Page 1

C Effective:[See Text Amendments]

Vernon's Texas Statutes and Codes Annotated Currentness Business and Commerce Code (Refs & Annos)

/Kw Title 3. Insolvency, Fraudulent Transfers, and Fraud cw Chapter 27. Fraud

§ 27.01. Fraud in Real Estate and Stock Transactions

(a) Fraud in a transaction involving real estate or stock in a corporation or joint stock company consists of a

(1) false representation of a past or existing material fact, when the false representation is

(A) made to a person for the purpose of inducing that person to enter into a contract; and

(B) relied on by that person in entering into that contract; or

(2) false promise to do an act, when the false promise is

(A) material;

(B) made with the intention of not fulfilling it;

(C) made to a person for the purpose of inducing that person to enter into a contract; and

(D) relied on by that person in entering into that contract.

(b) A person who makes a false representation or false promise commits the fraud described in Subsection (a) of this section and is liable to the person defrauded for actual damages.

(c) A person who makes a false representation or false promise with actual awareness of the falsity thereof com-mits the fraud described in Subsection (a) of this section and is liable to the person defrauded for exemplary damages. Actual awareness may be inferred where objective manifestations indicate that a person acted with ac-tual awareness.

© 2012 Thomson Reuters. No Claim to Orig. US Gov. Works.

http://web2.westlaw.com/print/printstream.aspx?fn= top&rs=WLW 12. 1/13/2012

of 95 V.T.C.A., Bus. & C. § 27.01 Page 2

(d) A person who (1) has actual awareness of the falsity of a representation or promise made by another person and (2) fails to disclose the falsity of the representation or promise to the person defrauded, and (3) benefits from the false representation or promise commits the fraud described in Subsection (a) of this section and is li-able to the person defrauded for exemplary damages. Actual awareness may be inferred where objective mani-festations indicate that a person acted with actual awareness.

(e) Any person who violates the provisions of this section shall be liable to the person defrauded for reasonable and necessary attorney's fees, expert witness fees, costs for copies of depositions, and costs of court.

CREDIT(S)

Acts 1967, 60th Leg., vol. 2, p. 2343, ch. 785, § 1. Amended by Acts 1983, 68th Leg., p. 5208, ch. 949, §§ 1, 2, eff. Sept. 1, 1983.

HISTORICAL AND STATUTORY NOTES

2009 Main Volume

Acts 1983, 68th Leg., p. 5208, ch. 949, in subsec. (b), in the first sentence substituted "commits" for ", and a person who benefits from that false representation or false promise, commit" and "is" for "are jointly and severally" and deleted the former second sentence; in subsec. (c), in the first sentence deleted "wilfully", substituted "with actual awareness of the falsity thereof commits" for ", and a person who knowingly benefits from a false representation or false promise, commit" and "is" for "are", and deleted "not to exceed twice the amount of the actual damages" and added the second sentence; added subsecs. (d) and (e).

The former second sentence of subsec. (6) read:

"The measure of actual damages is the difference between the value of the real estate or stock as represented or promised, and its actual value in the condition in which it is delivered at the time of the contract."

Sections 3 and 4 of Acts 1983, 68th Leg., p. 5208, ch. 949 provide:

"Sec. 3. This Act applies to fraud if every element of the fraud occurred on or after the effective date of this Act. If an element of fraud occurred before the effective date [Sept. 1, 1983] of this Act, the fraud is governed by Section 27.01, Business & Commerce Code, as it existed before being amended by this Act, and that law is con-tinued in effect for that purpose.

"Sec. 4. The provisions of Section 27.01, Business & Commerce Code, as amended, and this Act do not abrogate or repeal any other laws relating to the rights, duties, obligations, or liabilities of principals and agents to one an-other or to third parties."

© 2012 Thomson Reuters. No Claim to Orig. US Gov. Works.

http://web2.westlaw.com/print/printstream.aspx?fn= top&rs=WLW 1 2 ... 1 /1 3/20 12

No. 12-0051


W. GRAEME ROUSTAN,

Petitioner,

v.



Respondents.




REPLY TO RESPONSE TO PETITION FOR REVIEW

David E. Keltner State Bar No. 11249500 [email protected] Marianne M. Auld State Bar No. 01429910 [email protected] John T. Wilson IV State Bar No. 24033344 [email protected]

Kelly Hart & Hallman LLP



FILEDIN THE SUPREME COURTOF TEXAS12 June 26 P1:45 BLAKE. A. HAWTHORNECLERK

Reply to Response to Petition for Review Page ii

TABLE OF CONTENTS

Page

INDEX OF AUTHORITIES .............................................................................................. iii INTRODUCTION ............................................................................................................... 1 REPLY POINTS .................................................................................................................. 2 I. A Fulfilled Promise is Not False and Cannot Support Statutory Fraud ................... 2 II. W. Graeme Roustan Did Not Make the Promise ..................................................... 5 III. This is Not a Case of Statutory Fraud ...................................................................... 6 PRAYER ............................................................................................................................. 8 CERTIFICATE OF SERVICE ............................................................................................ 9

Reply to Response to Petition for Review Page iii


Cases Page

Bank One, Tex., N.A. v. Stewart, 967 S.W.2d 419 (Tex. App.—Houston [14th Dist.] 1998, pet. denied) .......................... 3, 4

Big Dog Logistics, Inc. v. Strategic Impact Corp., 312 S.W.3d 122 (Tex. App.—Houston [14th Dist.] 2010, pet. denied) .............................. 2 Burleson State Bank v. Plunkett, 27 S.W.3d 605 (Tex. App.—Waco 2000, pet. denied) ....................................................... 7 Cunningham v. Zurich Am. Ins. Co., 352 S.W.3d 519 (Tex. App.—Fort Worth 2011, pet. filed) ................................................ 2 Greenway Bank & Trust of Houston v. Smith, 679 S.W.2d 592 (Tex. App.—Houston [1st Dist.] 1984, writ ref’d n.r.e.) ......................... 7 IKON Office Solutions, Inc. v. Eifert, 125 S.W.3d 113 (Tex. App.—Houston [14th Dist.] 2003, pet. denied) .............................. 3 MCI Sales & Serv., Inc. v. Hinton, 329 S.W.3d 475 (Tex. 2010) ............................................................................................... 1 Reyna v. First Nat’l Bank of Edinburg, 55 S.W.3d 58 (Tex. App.—Corpus Christi 2001, no pet.) .................................................. 3 Satterwhite v. Safeco Land Title of Tarrant, 853 S.W.2d 202 (Tex. App.—Fort Worth 1993, writ denied) ............................................ 7 Spoljaric v. Percival Tours, Inc., 708 S.W.2d 432 (Tex. 1986) ............................................................................................... 3 Thedford Crossing, L.P. v. Tyler Rose Nursery, Inc., 306 S.W.3d 860 (Tex. App.—Tyler 2010, pet. denied) ...................................................... 2 Westcliff Co. v. Wall, 153 Tex. 271, 267 S.W.2d 544 (1954) ................................................................................ 7

Rules and Statutes

Tex. Bus. & Com. Code Ann. § 27.01 ................................................................................ 1

Reply to Response to Petition for Review Page 1

INTRODUCTION

Respondents convinced the court of appeals to expand the boundaries of Texas

Business and Commerce Code § 27.01’s statutory fraud cause of action to a most unusual

and unwise conclusion, allowing a fraud recovery on (1) a promise made by another and

(2) a promise found to be fulfilled. The promise to make a $150,000 capital contribution

was made by Roustan, Inc. – not by W. Graeme Roustan. Moreover, the jury found that

the capital contribution promise was kept.

What, then, is the basis for fraud and damages? Respondents say the fraud is that,

while Mr. Roustan made the payment in cash, he did so with borrowed funds.1 They say

it makes no difference that their business received the promised cash and that neither they

nor their business was liable on the note.

Under Respondents’ theory of section 27.01, if a potential homebuyer notifies the

seller that he will pay in cash and actually tenders the agreed amount in cash, the

homebuyer can be held liable for statutory fraud if he obtains from a third party the

money that he uses to make the payment. The statute does not permit – and the Texas

Legislature did not intend – this result. Indeed, this result is directly contrary to the

“fundamental tenant of tort law” that a defendant is liable only for his “own injury

causing conduct.” MCI Sales & Serv., Inc. v. Hinton, 329 S.W.3d 475, 505 (Tex. 2010).

Here, the judgment is against one who did not make the promise and is for damages that

Respondents never incurred.

1 While this is the argument made by Respondents, it plainly misstates the facts. Mr. Roustan, individually, did not participate in the transactions. All actions were taken by Roustan, Inc., the entity that acquired the interest in Roustan Ridglea, LLC and that made the promise to contribute capital.

http://web2.westlaw.com/result/default.wl?rs=WLW12.04&ss=CNT&cnt=DOC&cite=329+SW3D+475&cxt=DC&service=KeyCite&fn=_top&n=1&elmap=Inline&tnprpdd=None&vr=2.0&tnprpds=TaxNewsFIT&rlt=CLID_FQRLT2031451413266&mt=Westlaw&rlti=1&migkchresultid=1&tf=0&rp=%2fKeyCite%2fdefault.wl&tc=0&pbc=BC6E23F9&scxt=WL&sv=Split


Equally important, this is not a case of statutory fraud. The transaction was a sale

of business assets rather than a sale of real estate or stock; the fact that the business’s

assets happened to include a lease of real property was entirely incidental to the

transaction. Indeed, it is undisputed that the alleged fraud had nothing to do with the

lease. Nonetheless, Respondents spend the majority of their response suggesting that

Petitioner’s position is that section 27.01 does not apply to leases of real estate. That is

simply not true. The problem with Respondents’ statutory fraud action is not that it deals

with a lease, but that the lease has little to do with the transaction and nothing to do with

the alleged fraud.

The issues in this Petition are important both to W. Graeme Roustan and to the

jurisprudence of the State. The judgment brands a well-respected businessman with

fraud, even though the promise made by another entity was more than fulfilled. This slur

on his reputation was accomplished only by an expansion of section 27.01 so far past the

statute’s plain meaning that it does damage to the statute.

REPLY POINTS

I. A Fulfilled Promise is Not False and Cannot Support Statutory Fraud.

Respondents offer no authority that a fulfilled promise can be a “false promise” to

support a finding of statutory fraud. Instead, Texas law reveals the opposite to be true.

See e.g., Thedford Crossing, L.P. v. Tyler Rose Nursery, Inc., 306 S.W.3d 860, 872 (Tex.

App.—Tyler 2010, pet. denied); Big Dog Logistics, Inc. v. Strategic Impact Corp., 312

S.W.3d 122, 138-39 (Tex. App.—Houston [14th Dist.] 2010, pet. denied); Cunningham

v. Zurich Am. Ins. Co., 352 S.W.3d 519, 527 (Tex. App.—Fort Worth 2011, pet. filed).





Although intent to perform is determined as of the time the promise is made, intent

may be inferred from the party’s subsequent acts.2 Spoljaric v. Percival Tours, Inc., 708

S.W.2d 432, 434 (Tex. 1986). It has thus been held that even partial performance of a

promise will negate an intent not to keep the promise at the time it was made. IKON

Office Solutions, Inc. v. Eifert, 125 S.W.3d 113, 124 (Tex. App.—Houston [14th Dist.]

2003, pet. denied).

For instance, in Reyna v. First National Bank, Reyna and First National Bank

entered into an agreement for the installation of a computer system for FNB. 55 S.W.3d

58, 63 (Tex. App.—Corpus Christi 2001, no pet.). Reyna was to acquire and install the

equipment, and FNB was to pay the vendor of the equipment directly. Id. When FNB

did not timely make payment, Reyna brought common law fraud claims against the bank.

The court granted summary judgment on the fraud claim because FNB had tendered a

partial payment of $90,000, holding that FNB “negated any claim that they had no

intention of paying.” Id. at 68.

Likewise, in Bank One, Texas, N.A. v. Stewart, Midland Associates, a joint

venture, executed a $9 million promissory note. 967 S.W.2d 419, 446 (Tex. App.—

Houston [14th Dist.] 1998, pet. denied). For five years, Midland Associates made

payments on the note, but then defaulted. Id. at 427-28. The court submitted a common

law fraud question to the jury, which was decided against Midland Associates. On

2 Mr. Roustan disagrees with Respondents’ argument that the court of appeals correctly applied Spoljaric. [Resp. at 4] Spoljaric holds that “failure to perform, standing alone, is no evidence of the promissor’s intent not to perform when the promise was made,” but may be considered along with other facts showing intent. 708 S.W.2d at 435. In Spoljaric, the promissor failed to make any performance, and other evidence demonstrated his intent not to perform when the promise was made.





http://web2.westlaw.com/result/default.wl?rs=WLW12.04&ss=CNT&cnt=DOC&cite=125+SW3D+113&tnprpdd=None&cxt=DC&service=KeyCite&fn=_top&n=1&elmap=Inline&kcpm=True&vr=2.0&tnprpds=TaxNewsFIT&rlt=CLID_FQRLT4520021813266&mt=Westlaw&rlti=1&tf=0&rp=%2fKeyCite%2fdefault.wl&tc=0&pbc=BC6E23F9&scxt=WL&sv=Split



appeal, the court held that because “Midland Associates initially performed on the

Midland Note, we find no probative evidence to support the jury’s finding that

Trendmaker and Weyerhaeuser executed the Midland Note and Letter Guaranty with no

intent to perform.” Id. at 446.

The principle that a fulfilled (and even a partially fulfilled) promise is not false

and cannot support a fraud is axiomatic. It is particularly true when, as here, the fulfilled

“false promise” did not cause any injury to the promisee. While claiming that “the flaw

in Petitioner’s argument is apparent on its face,” Respondents fail to point out that flaw.

They further fail to demonstrate (1) why the fulfilled promise should support the fraud, or

(2) how they were injured by the method in which Roustan, Inc. acquired the capital

contribution. In truth, they are unable to answer the rhetorical question they pose: “What

difference does it make where I get the money from as long as I get it.” [Resp. at 5] The

answer, of course, is that it makes no difference to Respondents since they received all of

the money they were promised, and only Roustan, Inc. incurred an obligation to repay the

loan it undertook in order to obtain the funds with which to pay Respondents.

Contrary to the court of appeals’ analysis, the record reflects, and the jury found,

that Roustan, Inc. contributed over $150,000 (actually $235,000) to Roustan Ridglea,

LLC. [3 RR 129-42] Roustan, Inc. borrowed $200,000 in its own name. [3 RR 136]

Roustan Ridglea, LLC was not liable on the note. [Id.] Based on this undisputed

evidence, the jury found the promise to contribute $150,000 to Roustan Ridglea, LLC

fulfilled. [CR 34]



Because Roustan, Inc. fulfilled the promise, the statutory fraud finding cannot

stand.

II. W. Graeme Roustan Did Not Make the Promise.

Respondents acknowledge that “[s]ufficient evidence shows that the Petitioner met

his obligation to make a capital contribution,” yet they claim that “at the same time [Mr.

Roustan] violated his promise to Respondents that he would and could make that

contribution from his personal funds.”3 [Resp. at 1] Their argument misses the mark and

fails to address the appropriate issue.

Although there is legally insufficient evidence to support the jury’s finding that he

personally made a promise to contribute $150,000, Mr. Roustan did not challenge that

finding below, given the jury’s finding that the promise was fulfilled. In fact, it was not

until the court of appeals issued its erroneous opinion holding Mr. Roustan liable for

statutory fraud based upon this fulfilled promise that the finding became material.

Nonetheless, it is curious that Respondents claim “[i]t is clear from the record”

that Mr. Roustan personally made a promise, without citing to the record. [Resp. at 4]

The record reflects otherwise.

First, the documentary evidence reveals that it was Roustan, Inc., not Mr. Roustan,

that was obligated to make a capital contribution. This is reflected in the Operating

Agreement. [DX-21 at 1, 5, 28] Moreover, Mr. Roustan testified at trial that Roustan,

Inc. was obligated to make, and in fact did make, the $150,000 capital contribution. [3

RR 129]

3 Again, Mr. Roustan did not make the promise.


Respondents’ own testimony confirmed this fact. For instance, with respect to the

$20,000 payment, Gainous testified:

Q And, in fact, that was given by Mr. Roustan’s company to your old company, Ridglea Entertainment, correct?

A Correct.

[2 RR 35] She also testified:

Q Now, would you agree with me that in this operating agreement, the only obligation of Mr. Roustan’s company was to pay the $150,000 as far as cash into the company?

A Yes, it appears that way.

[2 RR 38]

Likewise, Sanderson knew from emails with Mr. Roustan during the negotiation

stage that Mr. Roustan had two partners with whom he had to consult before the company

could contribute any money. [2 RR 165; DX-8]

Even Appellees’ Brief in the court of appeals provides: “Roustan Inc. was

supposed to contribute $130,000.00 as a capital contribution in addition to $20,000.00

previously advanced by Graeme Roustan in return for the 65%.” [App’ee Br. at 4]

The evidence is therefore clear that Mr. Roustan, individually, never made, and

cannot be held liable for, such a promise.

III. This is Not a Case of Statutory Fraud.

Respondents fail to grasp Mr. Roustan’s argument that statutory fraud does not

apply in this case. In fact, in attempting to establish that statutory fraud can apply in a

lease transaction, they have not cited a single authority contrary to Mr. Roustan’s

position. Mr. Roustan is not arguing that statutory fraud cannot apply to lease


transactions in certain instances. However, it cannot apply where the lease is merely

incidental to another transaction. The problem with applying statutory fraud to these

facts is emphasized by the fact that the alleged misrepresentation in no way relates to the

real estate.4

Section 27.01, the statutory fraud statute, is penal in nature and must be strictly

construed. Westcliff Co. v. Wall, 153 Tex. 271, 267 S.W.2d 544, 546 (1954). For this

reason, courts have refused to apply statutory fraud to situations where the real estate was

merely incidental to the transaction. See Burleson State Bank v. Plunkett, 27 S.W.3d 605,

611 (Tex. App.—Waco 2000, pet. denied) (statutory fraud does not apply to loan

transactions, even construction loans secured by land); Satterwhite v. Safeco Land Title of

Tarrant, 853 S.W.2d 202, 205 (Tex. App.—Fort Worth 1993, writ denied) (statutory

fraud does not apply to title insurance transactions); Greenway Bank & Trust of Houston

v. Smith, 679 S.W.2d 592, 596 (Tex. App.—Houston [1st Dist.] 1984, writ ref’d n.r.e.)

(statutory fraud does not apply to guaranty agreements secured by real estate or to a party

who “merely” loaned money for the purchase of real estate).

Here, the transfer of the real estate interest was completely unrelated to the alleged

misrepresentation by Mr. Roustan. In fact, the events occurred in two separate

transactions. The promise, if any, was made in conjunction with Roustan, Inc.’s

4 Specifically, the lease, under which Gainous was the tenant, was assigned by Gainous to Roustan Ridglea, LLC, the entity in which both Roustan, Inc. and Respondents would own interests and that would run the skating rink on August 1, 2005. [PX-1; PX-3] The instrument used to transfer the lease was the Agreement for Purchase and Sale of Leasehold Interest in Real Property, Business, and Attendant Personal Property, referred to as the “Purchase Agreement” in Mr. Roustan’s Petition. [PX-3] At the same time, the parties executed the Roustan Ridglea LLC Operating Agreement, referred to as the “Operating Agreement,” which contains the promise by Roustan, Inc. to make a capital contribution. [DX-21]

http://web2.westlaw.com/result/default.wl?rs=WLW12.04&ss=CNT&cnt=DOC&cite=679+SW2D+592&tnprpdd=None&cxt=DC&service=KeyCite&fn=_top&n=1&elmap=Inline&kcpm=True&vr=2.0&tnprpds=TaxNewsFIT&rlt=CLID_FQRLT19735462613266&mt=Westlaw&rlti=1&tf=0&rp=%2fKeyCite%2fdefault.wl&tc=0&pbc=BC6E23F9&scxt=WL&sv=Split



http://web2.westlaw.com/result/default.wl?rs=WLW12.04&ss=CNT&cnt=DOC&cite=153+TEX+271&cxt=DC&service=KeyCite&fn=_top&n=1&elmap=Inline&tnprpdd=None&vr=2.0&tnprpds=TaxNewsFIT&rlt=CLID_FQRLT4493342213266&mt=Westlaw&rlti=1&migkchresultid=1&tf=0&rp=%2fKeyCite%2fdefault.wl&tc=0&pbc=BC6E23F9&scxt=WL&sv=Split


acquisition of an interest in Roustan Ridglea, LLC. [DX-21] Separate and apart from

that promise was Gainous’s assignment of the lease to Roustan Ridglea, LLC. [PX-3]

The paper-thin connection to statutory fraud was that the assets of Roustan Ridglea, LLC,

into which Roustan, Inc. was buying, incidentally included a lease of an ice-skating rink.

By applying statutory fraud in this case, the court of appeals is in conflict with its

own earlier opinions, as well as opinions of other courts of appeals, which properly have

taken a more restrictive view of the statute.

PRAYER

Petitioner W. Graeme Roustan respectfully requests that this Court (1) grant this

Petition for Review, (2) reverse in part the judgment of the court of appeals, and (3)

render judgment that Respondents take nothing from Petitioner. Alternatively, Mr.

Roustan requests a remand to correct the errors of law committed by the court of appeals.



State Bar No. 11249500 [email protected] Marianne M. Auld State Bar No. 01429910 [email protected] John T. Wilson IV State Bar No. 24033344 [email protected]

Kelly Hart & Hallman LLP





The undersigned hereby certifies that a true and correct copy of the above and foregoing document has been served upon Respondent’s counsel via electronic filing service on June 26, 2012:

Via Electronic Filing:

Kirk Claunch Jim Claunch 2912 West 6th Street Fort Worth, Texas 76107


NO. 12-0051

==========================================================


==========================================================

W. GRAEME ROUSTAN,

Petitioner,

v.



Respondents

===============================================================




===============================================================

RESPONDENT’S BRIEF ON THE MERITS

===============================================================

Kirk Claunch

State Bar No. 04326075

Jim Claunch


THE CLAUNCH LAW FIRM

2912 West 6th

Street

Fort Worth, Texas 76107

817-335-4003

817-335-7112 fax

COUNSEL FOR RESPONDENTS

FILEDIN THE SUPREME COURTOF TEXAS12 November 15 P3:18 BLAKE. A. HAWTHORNECLERK

Respondent’s Brief on the Merits ii

TABLE OF CONTENTS

Page

INDEX OF AUTHORITIES ……………………………………………………… iii

REPLY ISSUES …………………………………………………………….……. iv

PRELIMINARY STATEMENT…………………………………………………… 1

STATEMENT OF FACTS……………………………………………………….... 1

SUMMARY OF THE ARGUMENT..…………………………………………….. 8

ARGUMENT AND AUTHORITIES ……………………………………………… 10

I. THE PETITIONER DID NOT FULFILL HIS PROMISE AND COMMITTED

STATUTORY FRAUD

II. THERE IS EVIDENCE OF A FALSE PROMISE

III. THE PETITIONER DID NOT RAISE HIS THIRD POINT OF ERROR TO THE

COURT OF APPEALS

IV. THIS IS A CASE OF STATUTORY FRAUD

CONCLUSION and PRAYER .………………………………………………..….. 18

CERTIFICATE OF SERVICE …………………………………………………..... 18

Respondent’s Brief on the Merits iii


Cases Page

Aquaplex, Inc. v. Rancho La Valencia, Inc.,

297 S.W.3d 768, 775 (Tex. 2009)…………………………………………………. 12

Baber v. Pioneer Concrete of Texas,

919 S.W.2d 664 (Tex. App. – Fort Worth 1995)…………………………………... 17

Beckham v. Mantle,

13-09-00083-CV (Tex.App. – Corpus Christi, 2010)……………………………… 17

Edwards v. Strong,

213 S.W.2d 979, 980 (Tex. 1948)…………………………………………………. 14

F.A. Hubacek v. Ennis State Bank,

325 S.W.2d 124, 125-126 (Tex. 1959)…………………………………………….. 15

Lott v. Lott,

370 S.W.2d 463 (Tex. 1963)……………………………………………………..... 14

Prudential Ins. v. Italian Cowboy,

270 S.W.3d 192 (Tex. App. [11th

] 2005)…………………………………………… 17

Spoljaric v. Percival Tours, Inc.,

708 S.W.2d 432, 435 (Tex. 1986) ………………………………………………… 12

Swanson v. Schlumberger,

895 S.W.2d 719 (Tex.App. – Texarkana 1994)………………………………….... 17

Wise v. Pena, 552 S.W.2d 196, 202

(Tex.App. – Corpus Christi 1977, writ dism’d)……………………………..….16, 17

Rules and Statutes

Tex. Bus. & Com. Code § 27.01…………………………………………. 9, 15, 16 17

Tex. Bus. & Com. Code § 27.01(a)………………………………………...……… 16

Tex. Bus. & Com. Code § 27.01 (e)………………………………………………... 18

Texas Occ. Code §1101.022 (5)……………………………………………….. 9, 16

Respondent’s Brief on the Merits iv

REPLY ISSUES

The Respondent addresses the two issues presented by the Petitioners.

Respondent‟s Brief on the Merits 1

PRELIMINARY STATEMENT

The Petitioner has submitted a preliminary statement which attacks the reasoning

of the Court of Appeals in upholding the jury verdict finding the Petitioner committed

statutory fraud. The Petitioner is asking this Court to re-evaluate factual issues that were

exhaustively analyzed by the Court of Appeals which found sufficient evidence to uphold

the jury verdict. Further, the Petitioner is asking this Court to review for the first time the

issue of whether he made the false promise which is the basis of the statutory fraud in his

personal capacity. This is an issue that the Petitioner chose not to raise to the Court of

Appeals.

Finally, the Petitioner attempts to argue that the Court of Appeals grossly

misapplied the law with respect to statutory fraud because the promise upon which the

statutory fraud claim was premised actually was fulfilled. That is not the case here. Again

the Court of Appeals carefully analyzed the facts and evidence and found that the

promise was not fulfilled because the promise was for more than just a capital

contribution. The promise was that the capital contribution would be made from personal

funds. The Petitioner broke that promise by making his capital contribution from a loan

instead.

STATEMENT OF FACTS

Michael Sanderson had twenty plus years experience in the ice skating business

and had a dream of opening an ice rink of his own. (RR Vol. 2, 7:7-11). Michael had

started working at the ice rink at the Tandy Center in Fort Worth as a young man and


spent twenty years working there in various positions, including general manager of the

business. (RR Vol. 2, 86: 18-25).

In 2004, Michael Sanderson and his wife Ann Gainous Sanderson found an ice

rink located on the Benbrook Circle in Fort Worth that had ceased operations. (RR Vol.

2, 8:1-10) Ann signed a lease in November, 2004 (RR Vol. 2, 10:17) for the ice rink

property.1 Although the Sandersons were told the refrigeration equipment was in good

working order, the equipment ultimately would not make sufficient ice for a skating rink.

(RR Vol. 2, 11:5 – 12:6). Eventually they were able to open for business in December

2004 (RR Vol. 2, 12:6 -23). However, when the weather got warmer in March, 2005, the

refrigeration equipment couldn‟t keep the ice frozen and, due to the “wet ice,” the

Sandersons had to shut down the ice skating rink. (RR Vol. 2, 13:14-14:12). After

replacing compressors and completing lots of trouble shooting, the problem was found at

the end of May 2005 to be the chiller barrel, and the business opened again at the end of

June (RR Vol. 2, 14:1 – 15:22).2

In January, 2005 the Sandersons had been contacted by Graeme Roustan who

expressed an interest in buying into their business. At that point the Sandersons were not

interested. (RR Vol. 2, 17:23 – 18:7) They believed that the equipment issues had been

solved and felt the business would be successful. (RR Vol. 2, 104:9-17) After they

experienced subsequent equipment problems in March 2005, the extended shut downs

1 A CPA had recommended that there might be some benefits to having the business owned by a female.

(RR Vol 2, 92:1-9)

2 The lease with YDIDI I, the landlord, became very contentious as to what the representations were by

YDIDI I as to the equipment, the amount in repairs for which YDIDI I should be responsible and the

communications between YDIDI I and Roustan while YDIDI I was preparing to evict the Sandersons; however,

YDIDI I settled with the Plaintiffs before trial so those details are not covered in any detail.


and the expenditure of additional funds, the Sandersons‟ attitude changed and Michael

Sanderson contacted Roustan at the end of April, 2005. (RR Vol. 2, 18:2-16).

Graeme Roustan invited the Sandersons to a meeting in Las Vegas where he put

on a power point presentation which referenced the facilities Roustan supposedly owned,

plus more he planned to acquire in 2007, and up to 40 facilities by 2008. The Sanderson

were impressed. (RR Vol. 2, 107:2 -22).

The Sandersons believed Roustan when he told them about his vast holdings and

his ability to purchase all the additional ice rink facilities (RR Vol. 2, 107:9 – 108:7).

Roustan was aware at that time of the equipment and ice problems at the Benbrook ice

rink because he had provided an engineer to help with the problems before the Las Vegas

meeting. (RR Vol. 2, 110:13 – 111:4)

In addition to his financial strength, Roustan represented he would supply to the

Fort Worth rink, through his other companies, his marketing services, bookkeeping

services, web services and that he would make the equipment supplier he owned

available to the Sandersons (RR Vol. 2, 22:15 -23:15). Ann characterized all of the

benefits that Roustan represented he would provide as “huge things that were out of the

realm of what Michael and I could have been able to accomplish.” (RR Vol. 2, 23:1-17)

The Sandersons eventually entered into an agreement with Roustan whereby

Ann‟s lease with YDIDI I, the landlord, would be assigned to Roustan as well as the

option to purchase the property (RR Vol. 2, 21:2-15). Ann retained the rights to the

$30,000.00 security deposit, the right to sue the landlord for all the equipment problems

and she remained liable to the landlord on the lease. (RR Vol. 2, 21:6-14). Roustan was


to pay Ann and Michael $75,000.00 for an assignment of the lease and the purchase of

the business from Ridglea Entertainment, Inc. (the Sandersons‟ company running the

business), plus Ridglea Entertainment, Inc. was to receive 25% ownership in the new

company to be set up by Roustan. (RR Vol. 2, 21:2-15).

Thereafter, Roustan set up a new company called Roustan Ridglea, LLC and an

operating agreement was entered into which provided that the Sandersons would own

25% and Roustan Inc. would own 65%. (RR Vol. 6, Defendant‟s Exhibit 21) Roustan

Inc. was supposed to contribute $130,000.00 as a capital contribution in addition to the

$20,000.00 previously advanced by Graeme Roustan in return for the 65% interest. (RR

Vol. 3, 129:1 – 132:25)

Roustan testified that because he had obtained a loan for the new company,

Roustan Ridglea, Inc. for which the new company was liable, that somehow excused the

fact that he did not make his capital contribution (RR Vol. 3, 133:10 – 135:8). Roustan

testified that in his mind there was no difference in a capital contribution to the new

company and a promissory note which was owed by the new company. (RR Vol. 3,

135:3-8). The Sandersons were not told that Roustan was not funding his capital

contribution.

The Sandersons had concerns about the infusion of capital and potential capital

calls because the purchase price did not come close to offsetting the amount they had

contributed. They spoke to Roustan about not being required to contribute additional

capital during the first 12 months and such a provision was placed in the operating

agreement. Roustan assured the Sandersons that he would personally fund whatever the


monetary requirements were at least during the first eleven months. (RR Vol. 3, 65:2-

16). The purchase agreement between the parties was, thereafter, signed on August 1,

2005. (RR Vol. 2, 23:20-21).

Throughout the negotiations with Roustan, it was understood that Roustan would

pay the $75,000 cash portion of the purchase price up front. Right before the purchase

agreement was signed, Roustan said it would help him to break the payment into two

payments. (RR Vol. 2, 119:17-25). As it turned out, when the Sandersons got the written

purchase agreement, Roustan had provided that the second $37,500 was to be paid by the

new company, Roustan Ridglea, of which the Sandersons company was to be part

owner. Michael Sanderson had understood that Roustan would be individually paying

the entire $75,000. (RR Vol. 2, 120:8-121:3) Of course, as noted above, Roustan had

told the Sandersons he would personally cover any shortfalls in the monetary requirement

during the first 12 months.

In the spring of 2006, problems arose when Roustan wrongfully failed to pay the

utility bills.3 In order to keep the rink open, the Sandersons paid utility bills to the

electric company, to the gas company, advertising bills, etc. The total for all of these

critical expenses was $75,763. (RR Vol. 2, 26:1-29:25).

When the agreement was entered into by the parties the Sandersons understood

that Roustan would be contributing $150,000 in a capital contribution, less the $20,000

that he had advanced prior to signing the agreement, and that a trust was advancing a

3 The agreements between the parties provided Roustan would assume liability for and transfer the utility bills out of

Ann Gainous‟s name. That did not occur. (RR. Vol. 2, 24:22-25:6).


loan to the new company in the amount of $200,000. The total cash available to the new

company would be $330,000. (RR Vol. 2, 125: 1 – 126: 29). Had those monies actually

been funded by Roustan there would never have been a shortfall in funds needed to pay

bills in 2006. (RR Vol. 2, 126:5-11). Based on Michael Sanderson‟s review of the

Quickbooks records produced by Roustan in this litigation, that money was never funded.

(RR Vol. 2, 125:15 – 126: 4).

Despite the problems with the bills not being paid, when Michael Sanderson

emailed Roustan in April 2006 to inquire as to whether Roustan wished to exercise the

option to renew the lease beyond the November 1, 2006 expiration date, Roustan

responded that he did want to exercise the option to extend the lease. (RR Vol. 2, 134:1-

13).

When Michael Sanderson asked Rouston about getting reimbursed for the bills he

and Ann were paying out of their pocket, and the $37,500 they were owed on the

purchase price, Roustan told Michael that he was about to purchase the property, that he

had submitted the paperwork for the loan, that he had established a line of credit with GE

Capital and that he was going to use that credit line to put an infusion of capital into the

facilities. But that never happened. (RR Vol. 2, 138: 5-12).

In September of 2006, the electricity was shut off for failure to pay the bill, and

the Sandersons had to pay a two-months delinquent electric bill for $22,000 to get the

electricity turned back on. (RR Vol. 2, 135: 5-7). Also in September the Sandersons

received a notice that there were insufficient funds to meet payroll obligations. (RR Vol.

2, 137:12-15). Sometime around the end of September, the Sandersons notified Roustan


that since bills were not getting paid and they were not getting reimbursed for the bills

they had paid, they were going to take the revenue from ice rink and deposit it in the bank

account of their company, Ridglea Entertainment, Inc. (RR Vol. 2, 141:9-17).

The Sandersons paid the $8,000 monthly rent due in October and November and

notified the landlord, YDIDI I, that they, not Roustan, would be paying the rent. After

accepting the October and November rent, YDIDI I notified the Sandersons that the lease

was in default because the September rent had not been paid. The Sandersons assumed

Roustan had paid the September rent at the beginning of September because the on-line

version of Quickbooks they could look at showed its payment. (RR Vol. 3, 33:5-34:1)4

When the Sandersons received notice that the September rent had not been paid, they sent

a check to YDIDI I by Federal Express. YDIDI I held the check and proceeded to evict

the Sandersons from the ice rink. (RR Vol. 2, 142:2-25)

At this time, unbeknownst to the Sandersons, Roustan was communicating with

Melinda Collins (also know by her married name, Melinda de la Isla) a principal in

YDIDI I, the landlord of the rink. Roustan sent her an email stating “Hi Melinda, from

what I hear Mike is having trouble getting an insurance certificate for Ridglea

Entertainment, Inc. If your lawyer demands to see one in five days, he may not be able to

get one and will be in default, even though my policy is still in effect. I‟m pretty certain

he will come up with the September rent and December rent. Just a thought, Graeme.”

(RR Vol. 3, 175: 20-25).

4 The Sandersons could look at an online version of Quickbooks that Roustan maintained but could not

print a report or make entries. (RR Vol. 3, 57:11-17)


When asked at trial if the email is suggesting to Melinda Collins how YDIDI can

find the Sandersons in default on the lease, Roustan responded “Yes, absolutely”. (RR

Vol. 3, 176:2-5).

Roustan also confirmed that in this period of time his lawyer was negotiating with

YDIDI for a new lease and new purchase option for a new company. (RR Vol. 3,

179:11-15) On December 18, 2006 Roustan incorporated a new corporation with the

Texas Secretary of State named Roustan Fort Worth, LLC. The registered address of the

corporation is the same address as the ice rink on Benbrook Circle. (RR – Plaintiffs‟

Exhibit 27).

A day after the Sandersons were evicted and excluded from the rink, the facility

was back in business under the management of Firland Management LLC, (RR Vol. 2,

144:10-21). Roustan listed Firland Management on a web site as a strategic partner of

the Roustan companies. (RR Vol. 3, 184:6-23).5

SUMMARY OF THE ARGUMENT

The jury found that W. Graeme Roustan committed statutory fraud against

Michael Sanderson, Ann Gainous, and Ridglea Entertainment, Inc. in response to

Question 6a of the Court‟s charge.

5 Firland Management was an original defendant in this lawsuit but settled before trial.


The jury found in answer to questions 6a of the Court‟s Charge that W. Graeme

Roustan committed statutory fraud against the Plaintiffs and they should recover damages

in the amount of $50,000.00 from W. Graeme Roustan.

Roustan clearly made a false promise that he never intended to perform when he

promised to make a capital contribution from personal funds in the amount of $150,000

as part of a purchase agreement of an ice rink that concerned the assignment of a lease

with an option to buy. The Court of Appeals made an exceedingly thorough factual

analysis to conclude that Roustan committed statutory fraud by not fulfilling his promise

to make a capital contribution from personal funds even though he fulfilled a contractural

obligation to do so by means of a loan.

Further, Roustan now improperly attempts to raise a completely new argument

which he chose not to address to the Court of Appeals, namely that the false promise was

not made in his individual capacity. This new argument has been waived and should not

be considered by this Court.

Finally, Tex. Bus. & Com. Code Ann. § 27.01 is applicable to the present case

wherein Roustan made a false promise to the Sandersons while entering into a contract to

purchase the assets of Ridglea Agreement LLC. The assets included the lease of an ice

rink with an option to purchase the ice rink. Assets is a term broad enough to cover all of

any form of ownership of Ridglea Agreement LLC.

The terms, real estate, stock in a corporation or stock in a joint-stock company,

Tex. Bus. & Com. Code § 27.01, are not defined in § 27.01. However, the term real estate

is defined in the Texas Occupation Code, under the Real Estate License Act, as follows:


any “interest in real property, including a leasehold located in or outside of Texas. Tex.

Occ. Code § 1101.002 (5). A real estate transaction which includes a lease with an

option to buy is clearly within the scope and intent of the statutory fraud statute and is

consistent with existing case law.

ARGUMENT & AUTHORITIES

REPLY TO POINT 1: THE PETITIONER DID NOT FULFILL HIS PROMISE

AND COMMITTED STATUTORY FRAUD

The Court of Appeals correctly held that Roustan committed statutory fraud when

he did not fulfill his promise to make a $150,000 capital contribution from personal

funds. Roustan argues that the promise to provide the capital contribution was fulfilled

based upon the jury‟s finding that the $150,000 capital contribution was paid from a loan.

The Court of Appeals correctly reasoned that while the jury found that Roustan fulfilled

the contractural promise, the promise was false for purposes of statutory fraud because

the money was borrowed. [Opinion at 13-14]

Roustan testified that because he had obtained a loan for the new company, for

which the new company was liable, that somehow excused the fact that he did not make

his capital contribution (RR Vol. 3, 133:10 – 135:8). Roustan testified that, in his mind,

there was no difference in a capital contribution to the new company and a promissory

note which was owed by the new company. (RR Vol. 3, 135:3-8). The Sandersons were

not told that Roustan was not funding his capital contribution. Contrary to Petitioner‟s

argument, there is direct testimony from Roustan that he did not fulfill his promise to

personally fund the $150,000.


Roustan attempts to argue that his promise to the Sandersons was simply one to

make a capital contribution of $150,000. This ignores the fact his promise to the

Sandersons was for his contribution to be made from his personal funds. That was not

done by Roustan. Instead, he made his capital contribution from a loan. Roustan‟s

promise to the Sandersons was not fulfilled. Accordingly, Roustan‟s action supports the

jury‟s finding of Statutory Fraud and a judgment in favor of the Sanderson‟s on that

point.

REPLY TO POINT 2: THERE IS EVIDENCE OF A FALSE PROMISE

The Court of Appeals correctly upheld the jury verdict that the Petitioner

committed statutory fraud against the Respondents, finding that there was sufficient

evidence to support that verdict. [Op. at 17] The Petitioner argues that Roustan did not

make a false promise with the intent not to perform because a) there is no evidence that

Mr. Roustan made a false promise; b) there is no evidence of an intent not to perform and

c) the promise was not material and did not cause any injury. Roustan also argues that the

Court of Appeals fraud analysis is flawed and conflicts with the jury verdict.

Roustan did not argue in the Court of Appeals that the promise to provide funding

out of his own funds or his business‟s was not material. Further, he did not argue to the

Court of Appeals that the evidence was not sufficient to show that the Sandersons relied

on the promise or to show that the promise was made to induce them to sign the purchase

and sale agreement and the assignments. As a result, the Court of Appeals did not have

the opportunity to address the sufficiency of the evidence as to those elements of the

Sanderson‟s claims, and Petitioner has waived those newly urged arguments. [Op. at 14]


The Petitioner here is simply attempting to retry a fact issue that was properly

decided by the jury and that underwent a careful and thoughtful analysis by the Court of

Appeals, both of whom reached the conclusion that there is sufficient evidence to

support the jury‟s verdict.

With respect to any claim that there is no evidence that Mr. Roustan made a false

promise, the Court of Appeals correctly applied this Court‟s analysis in Spoljaric v.

Percival Tours, Inc., which holds that circumstantial evidence may be used to establish

that, when making a promise, the party had no intention to perform. Spoljaric v. Percival

Tours, Inc., 708 S.W.2d 432, 435 (Tex. 1986). [Op. at 13] Further, the Court of Appeals

also correctly applied this Court‟s opinion in Aquaplex, Inc. v. Rancho La Valencia, Inc.

in its analysis, which holds that “a party‟s intent is determined at the time the party made

the representation, [but] it may be inferred from the party‟s subsequent acts after the

representation is made.” Aquaplex, Inc. v. Rancho La Valencia, Inc., 297 S.W.3d 768,

775 (Tex. 2009)(quoting Spoljaric, 708 S.W.2d at 434). [Op. at 13]

It is clear from the record, as reflected in the Court of Appeals‟ opinion, that

Roustan told Sanderson that he would pay $20,000 up front and then, after formulation of

the LLC and the assignment of the lease, “[he] would then provide an additional

$130,000. [Emphasis added][Op. at 13] It is important to note that the Court of Appeals

notes the fact that the Petitioner made “[n]o mention of funding the business by taking

out a loan. Neither the operating agreement nor the note attached to it indicated that the

trust loan was not an additional source of funds and was instead the primary source of

Roustan‟s contribution to the LLC. [Op. at 13-14]


The Court of Appeals then correctly concludes that “the evidence in the record

was enough for the jury to conclude that Roustan told S&G that he could and would

provide a capital contribution of $150,000, either with his own funds or with the financial

resources of his business, but that he actually borrowed money on behalf of the LLC. The

record therefore contains sufficient evidence that Roustan made a promise to S&G that

went unfulfilled.” [Op. at 13-14]

The Petitioners argument that a false promise was not made is without merit. The

Petitioner‟s argument is better characterized as nothing more than an ex post facto excuse

that goes: “What difference does it make where I get the money from as long as I get it.”

The flaw in Petitioner‟s argument is apparent on its face, and provides an easy

explanation as to how the jury could find that the Petitioner met his obligation to make a

capital contribution but at the same time violated his promise to the Respondents. There

simply is no way around the fact that there is evidence the Petitioner individually made a

“promise to S&G that he personally could and would fund the company.” [Op. at 14]

That did not happen and both the jury‟s verdict and the decision of the Court of Appeals

should be upheld.

With regard to the Petitioner‟s purported claim that there is no evidence of intent

not to perform, the Court of Appeals made a thorough analysis into this subject and

rightfully found that “the jury could have concluded that Roustan never intended to make

a capital contribution from his own funds or the funds of Roustan, Inc. and that he had

always intended to fund the business by way of a debt that the LLC would have to repay.

Accordingly, the jury could have found that Roustan‟s borrowing money to fund the LLC


and making the LLC liable for the repayment satisfied Roustan‟s obligation to make a

capital contribution but at the same time violated his promise to S&G that he personally

could and would fund the company.” [Op. at 14]

With regard to the meritless claim that the promise was not material, Roustan

made no such argument to the Court of Appeals and that court chose not to address the

sufficiency of the evidence as to those elements of the Sanderson‟s claim. [Op. at 15]

Accordingly, any such argument raised now for the first time is waived. A point not

assigned as error in the Court of Appeals cannot be considered on review by the Supreme

Court. Lott v. Lott, 370 S.W.2d 463, 465 (Tex. 1963); Edwards v. Strong, 213 S.W.2d

979, 980 (Tex. 1948).

REPLY TO POINT 3: THE PETITIONER DID NOT RAISE HIS THIRD POINT

OF ERROR TO THE COURT OF APPEALS

Roustan attempts to argue for the first time that he did not personally make a

promise to make a capital contribution. Mr. Roustan did not challenge this finding in the

Court of Appeals and raises this point for the first time now. The Sandersons would show

that this point for purposes of review has been waived. A point not assigned as error in

the Court of Appeals cannot be considered on review by the Supreme Court. Lott v. Lott,

370 S.W.2d 463, 465 (Tex. 1963); Edwards v. Strong, 213 S.W.2d 979, 980 (Tex. 1948).

Regardless, the Court of Appeals made a thorough evaluation of the evidence in

rendering its opinion. The Court of Appeals held that the “evidence in the record was

enough for the jury to conclude that Roustan told S&G that he could and would provide a


capital contribution of $150,000, either with his own funds or with the financial resources

of his business….” [Op. at 14]

Under the same false premise that such a promise was not made in his personal

capacity, Roustan now claims that there was no promise regarding the source of the

capitial contribution. The Court of Appeals thoroughly analyzed this topic and their

ruling should be upheld. In reviewing a judgment of a Court of Appeals, the Supreme

Court must assume that concurring justices reached the conclusion they did only after

weighing the evidence properly before them and with proper rules of law as their guide.

F.A. Hubacek v. Ennis State Bank, 325 S.W.2d 124, 125-126 (Tex. 1959). The Court of

Appeals held that “the jury could have concluded that Roustan never intended to make a

capital contribution from his own funds or the funds of Roustan, Inc. and that he had

always intended to fund the business by way of a debt that the LLC would have to repay.

Accordingly, the jury could have found that Roustan‟s borrowing money to fund the LLC

and making the LLC liable for the repayment satisfied Roustan‟s obligation to make a

capital contribution but at the same time violated his promise to S&G that he personally

could and would fund the company.” [Op. at 14] Roustan cannot raise a new issue to this

Court that was not addressed to the Court of Appeals and the rulings of the Court of

Appeals as to the sufficiency of evidence of the jury findings should be upheld.

REPLY TO POINT NO. 4: THIS IS A CASE OF STATUTORY FRAUD

Statutory Fraud is applicable to real estate transactions that involve a leasehold

interest. The Petitioner argues otherwise. Simply stated, the Petitioner attempts to limit

the application of Tex. Bus. & Comm. Code §27.01 to transactions involving the sale of


real estate only. That argument is an incorrect interpretation of the statute and is contrary

to Texas case law.

Further, Petitioner attempts to characterize the lease of the ice skating rink as

merely “incidental” and as being a “paper-thin” connection to statutory fraud. This

argument is wrong. The subject matter of this transaction concerned the ice skating rink

which was secured by a leasehold interest held by the Sandersons. The transaction

included the assignment of the lease. It is illogical to conclude that the lease was

“incidental” to the statutory fraud when it was in fact “indispensible” to the fraud because

the ice rink itself was the heart of the deal. The capital contribution by Roustan was

consideration for the assignment of the lease of the rink which also included an option to

buy the ice rink. Accordingly, there is a direct connection between the capital

contribution and the lease assignment.

Texas Bus. & Com. Code §27.01(a) applies to a “transaction involving real estate

or stock in a corporation or joint stock company….” In the present case, the Petitioner

made misrepresentations to the Respondents while entering into a contract to purchase

the assets of Ridglea Agreement, LLC, which included the lease of the ice rink. The term

“real estate” is not defined in Section 27.01 of the Texas Business and Commerce Code.

However, the term “real estate” is defined under the Texas Occupations Code §1101.022

(5) as any “interest in real property, including a leasehold located in or outside of Texas.”

This definition is consistent with Texas case law which clearly includes a leasehold as

applicable under the provisions §27.01 of the Business and Commerce Code. In Wise v.

Pena, the Corpus Christi Court of Appeals held that a claim based upon a “ „lease-


purchase‟ type of arrangement…was entitled to recovery under Section 27.01” Wise v.

Pena, 552 S.W.2d 196, 202 (Tex.App. – Corpus Christi 1977, writ dism‟d).

There are several examples of cases alleging statutory fraud on the basis of a lease

agreement that have appeared in Texas courts in which the parties did not dispute the

application of statutory fraud to lease agreements involving real estate. In Prudential Ins.

v. Italian Cowboy, 270 S.W.3d 192 (Tex. App. [11th

] 2005)(reversed on other grounds),

the parties did not dispute the application of statutory fraud where the underlying real

estate transactions were lease agreements. . In Beckham v. Mantle, 13-09-00083-CV

(Tex.App. – Corpus Christi, 2010), the parties did not dispute the application of statutory

fraud in a case involving the assignment of an interest in a mineral lease. . In Baber v.

Pioneer Concrete of Texas, 919 S.W.2d 664 (Tex. App. – Fort Worth 1995), the parties

did not dispute the application of statutory fraud in a case involving leases to mine sand

and gravel. . In a similar case in Swanson v. Schlumberger, 895 S.W.2d 719 (Tex.App. –

Texarkana 1994), it was undisputed by both parties that mineral interest would be treated

as real estate for purposes of §27.01. .

Clearly, leases of real estate should be included within the definition of

transactions involving real estate as contemplated by §27.01. That is especially true in

this case when the lease included an option to buy which Roustan clearly took steps to

exercise. To limit the application of statutory fraud to transactions simply involving the

sale of real estate would be an incorrect and needlessly narrow interpretation of §27.01,

and would conflict with established Texas case law.


CONCLUSION and PRAYER

Roustan clearly made a false promise that he never intended to perform that

concerned the assignment of a lease with an option to buy. Further, Roustan now attempts

to improperly raise new issues that were not addressed by the Court of Appeals, including

that the false promise was not made in his individual capacity. This Court should refuse

to consider Petitioner‟s newly-raised issues. Respondents, Ann Gainous and Michael

Sanderson respectfully request that this Court (1) deny the Petition for Review, (2) affirm

the judgment of the Court of Appeals, and (3) render judgment that Petitioner should be

assessed the additional attorneys fees of $7,500.00 awarded by the trial court and

provided by Tex. Bus. & Com. Code §27.01(e).


THE CLAUNCH LAW FIRM

2912 West 6th

Street

Fort Worth, Texas 76107

817-335-4003

817-335-7112 fax

By: /s/Kirk Claunch

Kirk Claunch


Jim Claunch


Attorneys for Respondents


The undersigned hereby certifies that a true and correct copy of the above and

foregoing has been served upon Petitioner‟s counsel via electronic filing on November

15, 2012.

/s/ Kirk Claunch

Kirk Claunch

12-11-16 6:04 PMTAMES SEARCH - Supreme Court

Page 1 of 2http://www.search.txcourts.gov/Case.aspx?caseid=3f91f94f-36e0-4624-8658-4c483354d23f&coa=cossup&p=1

[ PDF/406 KB ]

[ PDF/195 KB ]

[ PDF/153 KB ]

[ PDF/442 KB ]

[ PDF/2.18 MB ]

[ PDF/406 KB ]

[ PDF/195 KB ]

NOTICE [ PDF/152 KB ]

[ PDF/37 KB ]

NOTICE [ PDF/178 KB ]

[ PDF/153 KB ]

[ PDF/442 KB ]

[ DOC/98 KB ]

[ PDF/135 KB ]

[ PDF/135 KB ]

TAMES SEARCH - Supreme Court

Case # 12-0051

Case Information:Case Number: 12-0051

Date Filed: 01/17/2012

Case Type: Petition for Review under Tex. R. App. P. 53.1

Style: W. GRAEME ROUSTAN

v.: MICHAEL SANDERSON, WIFE ANN GAINOUS AND RIDGLEA ENTERTAINMENT, INC.

Appellate Briefs:Date Event Type Description Remarks Document

11/15/2012 Brief filed Respondent Response Brief on the Merits filed on behalf of Michael Sanderson, et al.

10/30/2012 Brief filed Petitioner Petitioner W. Graeme Roustan's Brief on the Merits. (HARD COPIES REC'D

06/26/2012 Reply filed PetitionerReply in Support of Petition for Review filed on behalf of W. Graeme Roustan. (HARD COPIES REC'D)

06/11/2012Response to Petition forReview filed

RespondentResponse to Petition for Review filed on behalf of Michael Sanderson, et al. (HARD COPIES REC'D)

01/17/2012 Appendix Filed Petitioner Appendix attached.

01/17/2012 Petition for Review filed PetitionerEFILED Petition for Review filed on behalf of W. Graeme Roustan. (HARDCOPIES REC'D)

Case Events:Date Event Type Description Disposition Remarks Document

11/15/2012 Brief filed Respondent Response Brief on the Merits filed on behalf of MichaelSanderson, et al.

10/30/2012 Brief filed Petitioner Petitioner W. Graeme Roustan's Brief on the Merits. (HARDCOPIES REC'D

09/24/2012Motion for Extensionof Time disposed.

PetitionerFilinggranted

Petitioner brief due 10/31/12; Response brief due 11/20/12;Reply brief due 12/05/12; FURTHER REQUESTS FOREXTENSION OF TIME FOR THIS FILING WILL BEDISFAVORED.

09/21/2012Motion for extensionof time to file brief.

Petitioner Unopposed Motion for Extension of Time to File Petitioner Briefon the Merits filed on behalf of W. Graeme Rouston.

09/12/2012 Case Record Filed Clerk's record (1V), supp clk's record (1V),

09/04/2012Record Requestedin Petition for

Review

Record requestes from the 2nd COA

08/31/2012Brief on the MeritsRequested

Indicatesfiling ofPetition forReview

Brief on the merits requested: Petitioner's brief due no later than10/1/12; Response brief due 10/22/12; Reply brief due 11/6/12.

06/26/2012 Reply filed Petitioner Reply in Support of Petition for Review filed on behalf of W.Graeme Roustan. (HARD COPIES REC'D)

06/11/2012Response to Petitionfor Review filed

Respondent Response to Petition for Review filed on behalf of MichaelSanderson, et al. (HARD COPIES REC'D)

05/22/2012Motion for Extensionof Time to FileResponse disposed

RespondentFilinggranted

Motion for Extension of Time is granted. Requested Response isdue June 22, 2012. FURTHER REQUESTS FOR EXTENSIONSOF TIME FOR THIS FILING WILL NOT BE CONSIDERED.

05/18/2012Motion for Extensionof Time to FileResponse

Respondent Joint Motion for Extension of Time to file Response to Petitionfiled on behalf of Michael Sanderson, et al.

05/18/2012Designation of LeadCounsel

Respondent Lead Counsel Notice submitted by Kirk Claunch, The ClaunchLaw Firm, 2912 W. 6th Street, Fort Worth, Texas 76107,Telephone: (817) 335-4003.

http://www.search.txcourts.gov/SearchMedia.aspx?MediaVersionID=c34fa1bf-66f4-4e1f-abe1-20e1009144de&coa=cossup&DT=BRIEFS&MediaID=37395a41-65a4-41d5-8682-5accd7bede09

http://www.search.txcourts.gov/SearchMedia.aspx?MediaVersionID=2e269ba1-e43d-466b-8c05-ac2c3eac8e1e&coa=cossup&DT=BRIEFS&MediaID=971aabe9-a2c3-4550-9790-714023826998

http://www.search.txcourts.gov/SearchMedia.aspx?MediaVersionID=71d2532e-8683-4929-9467-aebe7e99c67e&coa=cossup&DT=BRIEFS&MediaID=83b7710a-4cc0-4733-9f68-319dc42ef42d

http://www.search.txcourts.gov/SearchMedia.aspx?MediaVersionID=b04a5fb9-6474-414d-8dd6-3d76720650ae&coa=cossup&DT=BRIEFS&MediaID=5330d8d0-926c-4e6b-a144-85f8c3519975

http://www.search.txcourts.gov/SearchMedia.aspx?MediaVersionID=db4c345c-0e33-49e9-b71e-281b1d37d929&coa=cossup&DT=BRIEFS&MediaID=094878a7-7d5a-494f-9d15-56928ed09687

http://www.search.txcourts.gov/SearchMedia.aspx?MediaVersionID=c34fa1bf-66f4-4e1f-abe1-20e1009144de&coa=cossup&DT=BRIEFS&MediaID=37395a41-65a4-41d5-8682-5accd7bede09

http://www.search.txcourts.gov/SearchMedia.aspx?MediaVersionID=2e269ba1-e43d-466b-8c05-ac2c3eac8e1e&coa=cossup&DT=BRIEFS&MediaID=971aabe9-a2c3-4550-9790-714023826998

http://www.search.txcourts.gov/SearchMedia.aspx?MediaVersionID=61fdf3ae-fa99-4276-8c22-6a02c4665140&coa=cossup&DT=M/E/T%20DISP&MediaID=18dbe385-edbe-497b-b96e-7876e113cf5f

http://www.search.txcourts.gov/SearchMedia.aspx?MediaVersionID=8820d2f0-17cd-48a4-a74f-b45bb7b566a2&coa=cossup&DT=MET&MediaID=03e53fa5-683b-4452-be7d-789db517856e

http://www.search.txcourts.gov/SearchMedia.aspx?MediaVersionID=a5acb5d4-b1c6-4bd2-b7b5-3c47009eff9e&coa=cossup&DT=BRIEFING/MERITS%20REQ.&MediaID=0515b25f-ae32-4ba7-a8e1-b2bfc25be740

http://www.search.txcourts.gov/SearchMedia.aspx?MediaVersionID=71d2532e-8683-4929-9467-aebe7e99c67e&coa=cossup&DT=BRIEFS&MediaID=83b7710a-4cc0-4733-9f68-319dc42ef42d

http://www.search.txcourts.gov/SearchMedia.aspx?MediaVersionID=b04a5fb9-6474-414d-8dd6-3d76720650ae&coa=cossup&DT=BRIEFS&MediaID=5330d8d0-926c-4e6b-a144-85f8c3519975

http://www.search.txcourts.gov/SearchMedia.aspx?MediaVersionID=b4548895-3ac9-42bf-b91b-200edcb0b0f9&coa=cossup&DT=OTHER&MediaID=19e99d66-cd72-4687-9229-d5bdc04a58a2

http://www.search.txcourts.gov/SearchMedia.aspx?MediaVersionID=04e2071a-ba92-4249-998c-918f33ddb7ba&coa=cossup&DT=MET&MediaID=536531d1-0f92-4297-ad97-93d69b6c30ad

http://www.search.txcourts.gov/SearchMedia.aspx?MediaVersionID=960fef64-ce61-4245-b71a-66b9496b6298&coa=cossup&DT=OTHER&MediaID=0b898d09-28ea-438c-97e3-86ed79a68825

12-11-16 6:04 PMTAMES SEARCH - Supreme Court

Page 2 of 2http://www.search.txcourts.gov/Case.aspx?caseid=3f91f94f-36e0-4624-8658-4c483354d23f&coa=cossup&p=1

[ DOC/97 KB ]

[ PDF/38 KB ]

[ DOC/98 KB ]

[ PDF/2.18 MB ]

Telephone: (817) 335-4003.

04/16/2012Motion for Extensionof Time disposed.

** SeeRemarks

Filinggranted

Requested Response is due May 23, 2012. FURTHERREQUESTS FOR EXTENSIONS OF TIME FOR THIS FILINGWILL BE DISFAVORED

04/13/2012Motion for Extensionof Time to FileResponse

Respondent Unopposed Motion to Extension to file Response. On behalf ofMichael Sanderson, et al.

03/23/2012Supreme Court ofTexas RequestedResponse

Indicatesfiling ofPetition forReview

Requested response to petition for review due no later than4/23/12.

02/21/2012Case forwarded toCourt

01/17/2012 Appendix Filed Petitioner Appendix attached.

01/17/2012Petition for Reviewfiled

Petitioner EFILED Petition for Review filed on behalf of W. GraemeRoustan. (HARD COPIES REC'D)

Calendars:Set Date Calendar Type Reason Set Remarks

02/21/2012 Work-Up by Staff / Review by Justices judicial review of petition for review Set by the Forward Matters process

12/05/2012 Status Pet/Rel reply brief on the merits due

Parties:Party PartyType Representative

Sanderson, Michael RespondentMr. Kirk Matthew Claunch Mr. D. Nicholas Acuff

Mr. Jim (James) Claunch

Roustan, W. Graeme Petitioner

Ms. Marianne M. Auld Mr. Ernest Walter Leonard Mr. David E. Keltner Mr. John Thomas Wilson IV

Court of Appeals Case Information:COA Case Number: 02-09-00377-CV

COA Disposition: AFF/PT, REV/REND/PT

Opinion Cite: ___ SW3d ___, 09-29-11

Court of Appeals District: 2nd Court of Appeals

Court of Appeals Judge:Justice: Honorable LeeAnn Dauphinot

Trial Court Information:Trial Court: 342nd District Court

County: Tarrant

Trial Court Judge: Honorable Robert S. McGrath

Trial Court Case #: 342-223829-07

Trial Court Reporter:

Punishment:

To view or print PDF files you must have the Adobe Acrobat® reader. This software may be obtained without charge from Adobe. Download the reader from the AdobeWeb site

http://www.search.txcourts.gov/SearchMedia.aspx?MediaVersionID=1efda572-4d2f-4a5f-8cb1-8e29177bce75&coa=cossup&DT=OTHER&MediaID=c819911f-57a4-4a31-b8b8-e67691971565

http://www.search.txcourts.gov/SearchMedia.aspx?MediaVersionID=6b8e223f-1bf7-4f8f-9f38-81ea4b913e45&coa=cossup&DT=MET&MediaID=1ffd0c0f-65c0-47c9-98a7-c3bd5d3383a6

http://www.search.txcourts.gov/SearchMedia.aspx?MediaVersionID=37b6a0e3-e5dd-49e2-819b-6c7f1fa20117&coa=cossup&DT=OTHER&MediaID=7d41ce14-13ec-4e14-b45a-8f24096460f5

http://www.search.txcourts.gov/SearchMedia.aspx?MediaVersionID=db4c345c-0e33-49e9-b71e-281b1d37d929&coa=cossup&DT=BRIEFS&MediaID=094878a7-7d5a-494f-9d15-56928ed09687

http://www.adobe.com/products/acrobat/readstep2.html

graeme roustan - ridglea entertainment, inc - history of w. graeme roustan statutory fraud case in...

Documents