AKB Hendrick v. Musgrave Enterprises, No. 05-11-00251
August 23, 2012This lawsuit arose from the sale of a 42,000 acre West Texas ranch. In 2007, JP Morgan, the trustee holding the ranch, entered into a contract with AKB Hendrick Limited Partnership, granting AKB ten months to raise money to purchase the ranch during which JP Morgan would not market, solicit or accept any “back up” offers to purchase the ranch. AKB would deposit $250,000 in escrow, from which fees would be deducted as time passed. Despite this contract, Hamilton, a member of AKB, subsequently approached Kenneth Musgrave about purchasing the ranch. Musgrave and Hamilton entered into an agreement whereby AKB permitted Musgrave to seek to purchase the ranch if AKB were paid $1M upon Musgrave’s successful purchase.
AKB then informed JP Morgan that it was terminating their agreement. Negotiations continued between Musgrave and JP Morgan. The parties agreed to a sale in April 2008, but in August 2008, before closing, Musgrave terminated the agreement. AKB sued Musgrave (and various Musgrave entites) for fraud, breach of contract, and several other counts. The trial court granted summary judgment in favor of Musgrave, and AKB appealed.
On the fraud count, the Court of Appeals found that AKB was not justified in relying on certain representations made by Musgrave because, when the representations were made, the two were involved in a commercial transaction and “the representation took place in an adversarial context.” The Court also dismissed fraud claims stemming from Musgrave’s statement that “he could help out with certain fees if those became an issue.” According to the Court, promises of future performance are only actionable misstatements if the promise was made with no intention to perform, and AKB did not present evidence establishing such intent. The also Court found that Musgrave did not breach its contract with AKB because Musgrave never successfully purchased the Ranch.
