The able David Gunn has written a provocative article in the Baylor Law Review about damages under Texas law for fraudulent inducement claims. While that topic has been the subject of considerable and thoughtful attention by the Texas Supreme Court in recent years, his article points out that those opinions don’t fully mesh with the supreme court’s emphasis on horizontal stare decisis / orderliness — and much older cases from that court on that topic in years past.

This question is particularly relevant as the new business courts and 15th Court of Appeals work to identify their controlling precedent, a process that I’ve analyzed in this short article.

The plaintiff in Wooten v. Northwestern Mut. Life. Ins. Co. sued for alleged misrepresentations about the sale of disability-insurance policies. The Fifth Court affirmed summary judgment for the defense:  “‘[P]olicy provisions and other documentation addressed above demonstrate the policies did not provide the coverage or the payout appellees allegedly misrepresented. ‘His injury was not inherently undiscoverable because he easily could have discovered his injury by reading the policies.'” No. 05-20-00798-CV (July 31, 2013) (mem. op.).

The Fifth Court affirmed a $3 million fraud judgment, rendered after a bench trial, reaching these conclusions:

• This choice-of-law provision did not encompass a fraud claim that did not involve construction of the referenced LLC agreeement: “This LLC Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of Delaware, without regard to any principles of conflicts of law that would result in the application of the laws of any other jurisdiction.” 
• For similar reasons, Texas tort law applied in a Restatement-based choice-of-law analysis.
• Sufficient evidence supported fraud liability when “BKSI disclosed certain facts to ECOM regarding the Promenade Project’s status and operating condition, creating the false impression that it intended to continue operating the project as a long-term investment, and thus obligated BKSI to disclose the ‘whole truth’ concerning the project, specifically the approaching sale of the project to Madera.”

BK Series Investors, LLC v. ECOM Series Investors, LLC, No. 05-22-00115-CV (Apr. 7, 2023) (mem. op.).

In bringing to an end a long-running international oil-and-gas dispute, the Texas Supreme Court examined a seeming tension between two earlier opinions about the specificity required for an effective release: “‘[W]hile the misrepresentation in Schlumberger “pertained to the very matter negotiated, settled, and released,”‘ the misrepresentation in Forest Oil ‘did not concern known disputed matters (which were settled and released) but potential future disputes (which were set aside and reserved).'” The Court concluded:

“Here, the evidence does not suggest that the parties actually considered or discussed allegations that Astra representatives bribed Petrobras officials to approve the 2006 stock-purchase agreement or offered to bribe them to approve the 2012 settlement agreement. But the evidence—including the terms of the settlement agreement itself does establish that the parties entered into the settlement agreement only after an extended series of complex and hotly contested negotiations that included discussions about the need to resolve all prior, pending, and possible claims between the parties, including those that were ‘unknown’ at the time.”

Transcor Astra Group S.A. v. Petrobras America Inc., No. 20-0932 (Tex. April 29, 2022).

The allegedly overlapping fraud and contract claims in Benge General Contracting v. Hertz Electric were as follows:

• “Appellees’ breach-of-contract counterclaim was based on ‘enforceable agreements’ under which appellees agreed to provide ‘electrical contracting and painting services at several jobsites in North Texas’ in exchange for BGC’s promise to compensate appellees for the services.”
• “Their fraud counterclaim, as stated in appellees’ fourth amended counterclaims, was based on Dennie’s reliance [on] Benge’s allegedly false representation that he would pay for work performed by appellees ‘in exchange for the signing of lien releases.’ Appellees alleged that appellants knew the representations were false when made and omitted facts regarding Benge’s misappropriation of project funds otherwise intended to compensate appellees for work performed.”

The Fifth Court concluded: “Appellants characterize this counterclaim as fraud by omission and argue there is no evidence a special relationship to support such a claim. … The gravamen of appellees’ fraud counterclaim, however, was not that Benge fraudulently omitted information but that he fraudulently induced Dennie to sign lien waivers to obtain a payment he never intended to make; indeed, a payment already owed under the contracts. Thus, appellees stated a claim for fraudulent inducement.” No. 05-19-01506-CV (Sept. 7, 2021) (mem. op.) (later modified slightly on rehearing).

No disclaimer found when: “[T]he specific misrepresentations about which Amy complains, that Paul said he was walking away from the title business but was actually accepting a bonus and a well-paid position with Alamo, were not referenced in the agreement and were not disclosed to Amy. Thus, we reject the Mundheims’ argument that the disclaimer-of-reliance provision in the agreement was binding to preclude Amy from asserting she relied on the Mundheims’ misrepresentations when she entered the agreement.” Mundheim v. Lepp, No. 05-19-01490-CV (May 13, 2021) (mem. op.).

The Fifth Court reversed a judgment based on a jury finding of fraud in BBVA Compass v. Bagwell, No. 05-18-00860-CV (Dec. 14, 2020) (mem. op.), finding inadequate evidence of justifiable reliance. (LPHS represents the Intervenor appellees in this matter).

Cornwell v. Scothorn addressed the interplay between the opposing sides’ fraud and promissory estoppel claim. It distinguished El Paso Healthcare System v. Piping Rock Corp., 939 S.W.2d 695 (Tex. App.—El Paso 1997, writ denied), as “address[ing] whether an unclean hands defense barred recovery on a promissory estoppel claim. Piping Rock does not stand for the proposition that Stewart’s fraud in this case negated the Scothorns’ promissory estoppel claims. Ro the extent the jury found Stewart committed fraud and damaged McKinney $9427.86 in out-of-pocket damages and $8000 in damages for loss of credit reputation, we cannot conclude this finding precluded the jury from also finding that the Scothorns were entitled to damages of $201,318.04 on their promissory estoppel claim against Cornwell and McKinney.” No. 05-18-00799-CV (Sept. 17, 2020) (mem. op.).

In its third case this term about the effect of contractual disclaimers in commercial disputes, the Texas Supreme Court held:

‘We have no trouble concluding that the factors generally support a finding that Lufkin effectively disclaimed reliance on IBM’s misrepresentations. The parties negotiated the Statement of Work at arm’s length, they were both knowledgeable in business matters and represented by counsel, and the two clauses expressly and clearly disclaim reliance. But as Lufkin points out, the clauses only disclaim reliance on representations that are “not specified” in the Statement of Work or the Customer Agreement. Relying on two other provisions, Lufkin argues that the misrepresentations on which it based its fraudulent-inducement claim were “specified” in the Statement of Work, and at a minimum, reading those provisions together with the disclaimers’ “not specified” language renders the clauses too ambiguous to be enforceable. We are not convinced.‘

Encompass Office Solutions v. Blue Cross & Blue Shield of Louisiana, No. 17-0666 (Tex. March 15, 2019).

The Texas Supreme Court’s recent opinion in Mercedez-Benz v. Carduco holds, in a nutshell, that this clause foreclosed fraud claims based on alleged misrepresentations about exclusive area for a car dealership:

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

No. 16-0644 (Tex. Feb. 22, 2019).

The Texas Supreme Court’s opinion in Mercedez-Benz v. Carduco has sparked discussion about the interplay between contract terms and oral representations. An important component of that discussion is that Court’s reminder that: “Another issue for Carduco in this case is the testimony of Renato Cardenas, Carduco’s sole owner and decision maker, who testified that none of the defendants actually made any oral representation to him about Carduco’s ability to move the dealership to the McAllen area as the exclusive Mercedes-Benz dealership there.” The lack of such evidence mooted a dispute over the situations where partial disclosure can create an obligation to make corrective representations. No. 16-0644 (Feb. 22, 2019).

At trial, Claymore Holdings won its fraud claim against Credit Suisse, establishing the loss of a $250 million investment as a result of a flawed appraisal. The Fifth Court affirmed, focusing on two bedrock principles of modern businesss litigation.

1. “Specific provisions concerning an issue are controlling over general provisions.” Legally and factually, Claymore showed that Credit Suisse’s disclaimers of reliance did not foreclose liability for the specific issues about the appraisal raised by Claymore.
2.  “[T]he trial court was not limited to the jury’s award of damages on Claymore’s fraudulent inducement claim in determining appropriate equitable relief on the claims for which the parties waived their right to jury trial.” On the facts of this case, “[h]aving obtained favorable findings from the jury on the fraud claim and from the trial court on the contract claim, Claymore could elect rescission as its remedy.”

Credit Suisse AG v. Claymore Holdings LLC, No. 05-15-01463-CV (Feb. 20, 2018) (mem. op.)

A fraudulent inducement claim, brought by a subcontractor against the project owner, turned on the sub’s evidence of the owner’s inteot not to perform at the time it entered into an agreement about payment. The Fifth Court reviewed the five pieces of cited evidence and concluded: “Except for . . . negotiat[ing] the discount and . . . emailing the template, the other actions by Riverdale occurred as many as eight months prior to November 2010. Regardless of the timing of the pre-agreement events, there is no ‘logical bridge’ between any of these occurrences and the conclusion Riverdale, at the time it made the agreement, did not intend to pay Dixie.” Residences at Riverdale LP v. Dixie Carpet Installations Inc., No. 05-15-01030-CV (July 7, 2017) (applying IKON Office Solutions v. Eifert, 125 S.W.3d 113, 131 (Tex. App.–Houston [14th Dist.] 2003, pet. denied).

Graman v. Graman involved a contentious dispute about the operation of a family restaurant business.  On a fraud claim related to a loan, a witness testified to a conversation with the defendant: “We ended up talking about his loans his parents made to him and he told me that he never intended to pay his parents back at that point in time . . . He told me that he never intended on paying them back — and that’s why he never signed on what I recall him telling me was approximately $850,000.  Finding that the first statement was not evidence of the defendant’s intent at the time of the loans, the Fifth Court then found: “As for the second statement, a fact finder could determine that statement showed Jason’s intent at the time of all the loans,” and reversed a no-evidence summary judgment on this claim.  No. 05-14-01254-CV (Jan. 20, 2016) (mem. op.)

The Hales sued their homebuilder for fraud and violation of the DTPA, alleging serious problems with the foundation of their Rockwall home (right).  They substantially succeeded at trial, and the Dallas Court of Appeals affirmed in large part in Bishop Abbey Homes, Ltd. v. Hale, No. 05-14-00137-CV (Dec. 16, 2015) (mem. op.)  In particular, the Court affirmed as to limitations – a significant issue in this long-simmering dispute – noting that “each time the Hales raised a concern about the foundation, they were assured by one of appellants’ experts that the foundation was not the cause of the problems the Hales observed.”  The court also affirmed as to sufficiency challenges to liability, several claims of improper closing argument, and a challenge to the the basis of the exemplary damages award based on constitutional and Kraus factors. The court requested a remittitur as to (a) mental anguish damages (for sufficiency reasons) above $208,856 per plaintiff; and (b) a portion of the additional/exemplary damages award, based on the applicable cap and the conclusion that the total award “exceeds the guidelines set forth in [Bennett v. Reynolds, 315 S.W.3d 867 (Tex. 2010)] and [Tony Gullo Motors I, LP v. Chapa, 212 S.W.3d 299 (Tex. 2006)] for the type of harm suffered by the Hales as a result of appellants’ conduct.”

Starting off our review of Friday night’s wave of opinions is a hedge fund securities case arising out of the 2008 financial crash. Plaintiffs contended that the defendants had falsely misrepresented that other investors’ redemption requests “were not significant,” leaving them in the lurch when the fund imploded. The trial court granted summary judgment for the defendants, and the Court of Appeals affirmed. Plaintiffs sought to avoid a “scheme of arrangement” issued by the Bermuda Supreme Court that established how the fund was to be liquidated, but the Court of Appeals held that the plaintiffs were bound by that instrument as a foreign judgment. The Court also held that there was no evidence of reliance by the plaintiffs on the defendants’ alleged misrepresentations, concluding that their testimony was speculative on what they would have done if they had been informed of the true rate of redemption.

LV Highland Credit Feeder Fund LLC v. Highland Credit Strategies Fund, LP, No. 05-13-01118-CV

JPMorgan, as Trustee of the Red Crest Trust, signed a letter of intent for Orca Assets to lease oil and gas properties in the Eagle Ford Shale. Unfortunately, JPMorgan had leased those same properties to GeoSouthern Energy six months earlier. GeoSouthern recorded its lease three days after Orca signed the letter of intent with JPMorgan, but Orca did not conduct any forward-looking title searches after the letter of intent. Orca proceeded to sign the leases a month later and promptly recorded them. GeoSouthern then contacted JPMorgan about the duplicate leases, and the bank promptly offered to refund Orca’s $3.2 million lease payment. Instead, Orca sued for $400 million in lost profits. At a Rule 166 pretrial conference, the trial court dismissed all of Orca’s claims, ruling that the leases unambiguously disclaimed any warranties, and that Orca could not establish justifiable reliance as a matter of law. The Dallas Court of Appeals reversed in part, holding that the disclaimers in the leases foreclosed Orca’s breach of contract claim, but not fraud and negligent misrepresentation.

Under the express language of the contractual disclaimer, Orca was to be “without recourse” under the lease if title to the oil and gas interests failed. That was sufficient to negate contract liability for JPMorgan’s failure to convey good title, but not fraud and negligent misrepresentation. Noting that the leases did not also include any provisions disclaiming reliance on any extra-contractual representations, the Court held that Orca could proceed with claims based on an oral representation that the properties in question were “open” for lease. In the course of that holding, the Court analyzes a number of other recent fraudulent inducement cases, leaving the distinct impression that courts are going to continue drawing some pretty narrow distinctions in the wake of the Texas Supreme Court’s Italian Cowboy opinion.

Orca Assets, G.P., LLC v. JPMorgan Chase Bank, N.A., No. 05-13-01700-CV

In this insurance fraud case, the Court of Appeals rejected the insured argument that the insurer could not have relied on fraudulent representations as a matter of law because the insurer conducted its own investigation into the claim.   The Court found that the plaintiff could show reliance because the defendant had undertaken a “systematic campaign to hinder or hamper the investigation” by, among other things, “covering up the physical evidence that the roof was not damaged when or as [the defendant] claimed, by directing employees to lie to [the insurer’s] claims specialist, and by creating fraudulent invoices to support his claimed cost of repair.”

Fulgham v. Allied Prop. & Cas. Ins. Co.

In this complex fraud case involving the purchase of a dry cleaning business, the Court of Appeal upheld the trial court’s granting of a directed verdict in the defendant’s favor because, among other things, the plaintiff did not identify a fraudulent statement.  The plaintiff alleged that, in the course of purchasing a dry cleaning business, the defendant purportedly asserted that the price offered to the plaintiff was “fair, reasonable, and supported by a valid appraisal.”  However, the court found that there was no evidence that the defendant made any such statement.  Indeed, the plaintiff testified that she did not negotiate the price of the business and was simply told that the price of $1.6 million was a take-it-or-leave-it number.

Kwik Indus., Inc. v. Rock Prairie Holdings, Ltd.

In a prior action, the plaintiff (through counsel) negotiated a settlement through the defendant’s attorney and the attorney then sent the plaintiff a final settlement agreement, which the plaintiff signed.  The defendant, however, refused to sign the agreement and later filed bankruptcy.  The plaintiff then sued the defendant’s attorney for fraud, arguing that the attorney had misrepresented that her client would settle based on the agreed upon terms.

The trial court granted the attorney’s motion for summary judgment, holding that the plaintiff could not establish the justifiable reliance element of his fraud claim.  The Court of Appeals affirmed because the attorney made no express representation that her client had approved or would sign the settlement agreement, and reliance on representations made in business transactions are  not justified when the representation takes place in an adversarial context such as litigation.

Weilbacher v. Craft

An investor in an office building sued the building’s architect and engineering consulting firm for fraud, negligent misrepresentation, aiding and abetting, and conspiracy. The investor did not file a certificate of merit with the original petition, so the defendants moved to dismiss. The claims against the engineering firm were dismissed without prejudice, and the plaintiff refiled with a new complaint that included a certificate of merit. After consolidating the old and new cases, the trial court granted a motion to dismiss as to all claims against the engineering firm, but only as to the negligent misrepresentation claim for the architects. An interlocutory appeal ensured, and the Court of Appeals ended up siding with the plaintiff. As to the plaintiff’s claim against the engineering firm, the Court held that dismissal without prejudice did not prevent the plaintiff from refiling a new lawsuit — the one under appeal — that included a certificate of merit. As to the claims against the architecture firm, no certificate of merit was required because the plaintiff’s case was based on the allegation that the firm knew of defects in the building due to its occupancy in the building, not in connection with any professional services that the firm had provided. Accordingly, no certificate of merit was necessary, and all of the plaintiff’s claims against the architecture firm were also remanded for further proceedings.

TIC N. Central Dallas 3, LLC v. Envirobusiness, Inc., No. 05-13-01021-CV

In this fraud case, the Court of Appeals rejected the plaintiff’s argument that its fraud claim should survive summary judgment because the defendant failed to disclose information that it “should have known”  According to the Court, a fraud claim based on a failure to disclose theory requires that the defendant actually knew the information because “[t]here is . . . no duty if a defendant fails to disclose material facts it ‘should have known.'”

Dontos v. Banco Popular

A builder sued the prospective buyers of a townhome for breach of contract and fraud after they backed out of the sale before closing. The Court of Appeals affirmed a jury verdict for the buyers. The seller’s first issue on appeal was simply that “the evidence demonstrates [buyers] committed fraud against [seller],” a complaint that was too broad and generic to preserve any specific error. The Court also affirmed an award of $9,675 in attorney fees to the buyers under a prevailing-party clause of the contract, holding that the seller’s briefing about that award failed to discuss the evidence concerning the fees and did not explain how the cited case law should be applied to the jury’s finding.

Davenport Meadows LP v. Dobrushkin, No. 05-12-01471-CV

In a follow-up from an opinion issued a few months ago, the Court of Appeals has affirmed summary judgment in favor of the financiers of a development project in Fort Worth. For essentially the same reason that the buyer could not recover against the architect who had referred the deal in the first place — namely, that the paperwork for the sale fully disclosed the fact that the property was partially situated on a 100-year floodplain. Because the architect’s summary judgment motion had conclusively negated any possibility that he was personally responsible for any fraudulent misrepresentations, the buyer could not recover for fraud against the finance he was allegedly representing in the transaction.

Collective Asset Partners, LLC v. Pana, No. 05-13-00552-CV

In 2005, Brad Keiller, an investor in adult entertainment clubs all over the world, came to Dallas to explore the purchase of Texas Show Girls, a club owned and operated by Curtis Wise.  Following negotiations, the parties signed a share purchase agreement in which Wise warranted that Keiller could rely on Wise’s representations that, among other things: (1) the club’s lease was in good standing and not in default; and (2) the club had only one pending investigation by the Texas Alcoholic Beverage Commission.  As it turned out, neither of these representations were true.  The club’s lease had been terminated and the purported single pending TABC investigation was actually 12 separate charges (for, among other things, underage drinking, prostitution, lewd conduct, and drug use) consolidated into a single action that was going to result in the termination of the club’s liquor license.  On appeal, the Court upheld the jury’s $704,480.45 fraud verdict based on these facts, finding that Keiller had presented sufficient evidence to establish his fraud claim.

Wise v. SR Dallas, LLC

In this negligent misrepresentation and fraud case, the Court of Appeals has affirmed summary judgment for the defendant based on the statute of limitations. Collective Asset Partners LLC sued Michael Schaumburg and his architectural firm after Schaumburg informed CAP about a property for sale in Tarrant County and took a $1 million fee in the resulting sale. Half of the property turned out to be located on a floodplain, which allegedly caused CAP to be unable to develop it. Schaumburg sought and obtained summary judgment that there had been no misrepresentation because the paperwork for the sale included disclosures that identified the floodlplain. Nor could CAP show a misrepresentation based on a $10.25 million appraisal on the property, as that appraisal was only intended for use by the bank that commissioned it and could not be justifiably relied upon by third parties.

Collective Asset Partners LLC v. Schaumburg, No. 05-13-00040-CV

Miller Global Properties worked with Marriott International to build a resort and golf club in the Hill Country outside San Antonio. They entered into a series of agreements for planning and budgeting the resort, but the final contract by which Miller purchased the report included an “as-is” sale provision. In that clause, Miller acknowledged and agreed that Marriott had not made any representations, and went on to “specifically negate and disclaim any representations.” A related contract regarding the construction of the property also contained a merger clause. The cost to build the resort proved to be $90 million higher than the budget, and Miller sued Marriott on con-tort claims, alleging that Marriott had misrepresented that the plans and specifications for the resort were essentially complete and that the budget would be adequate to complete construction.

The trial court granted summary judgment for Marriott, which argued that the contracts negated the element of reliance necessary to support Miller’s tort claims. The Court of Appeals affirmed, holding that the as-is provision negated and disclaimed the extrinsic representations Marriott was alleged to have made to Miller. That met the standard set by Italian Cowboy Partners, Ltd. v. Prudential Ins. Co., 341 S.W.3d 323 (Tex. 2011), which had permitted a misrepresentation case to proceed where the parties’ contract only disclaimed the existence of representations about the subject matter of the contract, without also disclaiming reliance on any representations made outside the contract. Because the contracts negotiated between Miller and Marriott disclaimed both the existence of additional representations and any reliance on them, Miller’s claims were barred.

Miller Global Props., LLC v. Marriott Int’l, Inc., No. 05-12-0822-CV

Appellant Danny Katave and two other individuals solicited Israeli investors to develop commercial real estate. The negotiations took place in Israel, and were conducted in Hebrew. The discussions resulted in two written contracts, one in Hebrew and one in English. The Hebrew document provided for a 10% success fee to Katave, but the English document included a 20% success fee. Naturally, Katave claimed the 20% fee when the property was sold. In the resulting litigation, the jury sided with the investors, finding that Katave had committed fraud by failing to disclose that the English document did not contain the same terms as the Hebrew contract.

The Court of Appeals confirmed the adequacy of the evidence supporting the finding of fraud by omission, holding that Katave had a duty to make a full disclosure in order to correct the false impression conveyed by his partial disclosure that the terms of the documents were consistent. The Court also affirmed the trial court’s finding of $466,226 in out-of-pocket damages, rejecting Katave’s contention that his agreement to submit the issue of “damages” to the trial court did not include the measure of damages to be applied. However, the Court of Appeals reversed the trial court’s award of attorney fees in favor of the investors, holding that the investors had plead and prevailed in the case as a fraud claim, not a claim for breach of contract. Because attorney fees are not recoverable on the basis of fraud, the investors could only recover their out of pocket damages.

K.A. West, LLC v. GK Investments, Inc., No. 05-11-00617-CV

Majestic Cast, Inc. entered into a contract with ProCon Paving to serve as a subcontractor on the construction of a Montessori school. Citing numerous complaints, Majestic Cast terminated the contract and filed suit against “Majed Khalef d/b/a ProCon Paving and Construction, Inc.” for theft, conversion, breach of contract, and fraud. Majestic Cast’s posited that Khalaf was using ProCon’s corporate form as an empty shell to avoid liability, and that he should therefore be held personally liable as an alter ego of ProCon. The trial court granted traditional and no-evidence motions for summary judgment, and Majestic Cast appealed. The Court of Appeals reversed as to the claims for theft, conversion and fraud. Whereas Majestic Case had pleaded those tort claims against Khalaf individually, Khalaf had sought summary judgment only by arguing that Majestic Cast could not pierce the veil to hold him liable on ProCon’s contract.  Because a corporate agent can be held liable for his own fraudulent or tortious acts even while acting within the scope of the agency, Khalaf was not entitled to summary judgment on the tort claims. As to Majestic Cast’s breach of contract claim, however, the Court held that there was no evidence to raise a fact issue on any theory for disregarding the corporate fiction in order to make Khalaf individually liable for breach of the Majestic Cast-ProCon contract. Thus, summary judgment was affirmed only as to the contract claim, with the tort claims remanded for further proceedings.

Majestic Cast, Inc. v. Khalaf, No. 05-12-00112-CV

General Capital Group, a German investment firm, claimed that it entered into an oral deal with AT&T in January 2009 to broker the purchase of T-Mobile for a 2% commission on what was to be a $39 billion deal. In May 2009, GC held another meeting with AT&T, during which AT&T indicated it was not interested in pursuing the transaction at that time. After two years with no communication between GC and AT&T, the latter announced that it intended to acquire T-Mobile. GC approached AT&T, which denied that it had any deal with GC.

GC filed suit for breach of contract.  During the pendency of the suit, AT&T announced that it was not longer going to pursue the T-Mobile deal due to opposition by the Justice Department.  With no sale on which to base its claim for a massive commission, GC changed its theory to to fraud, seeking recovery of $30 million for the “reasonable value of its services.” The trial court granted summary judgment, and the court of appeals affirmed. GC could not recover for fraud because even if AT&T had agreed to a 2% success fee, GC could not show harm because there hadn’t ever been any success for such a fee to be based on. Likewise, GC could not recover for quantum meruit because it has no expectation of being paid unless there was a successful acquisition.

General Capital Group v. AT&T, No. 05-12-00446-CV

In a commercial dispute concerning a furniture liquidation sale, the trial court awarded appellees damages for breach of contract and fraud, and attorney’s fees, but reduced the jury’s attorney’s fee award by nearly $425,000.  Among other issues, appellants challenge the trial court’s $100,000 judgment against Lavercombe based on fraud, and appellees challenge the trial court’s reduction of attorney’s fees.

The court of appeals reversed the trial court’s judgment with respect to the fraud claim.  The court found no evidence in the record showing that Lavercombe made a material misrepresentation as to the quantity and availability of upholstery products with an intent to deceive and with no intention of performing as represented.  The court of appeals also reinstated the jury’s higher award of attorney’s fees because there was more than a scintilla of evidence in the record supporting the jury’s award.  In all other respects, the court of appeals affirmed the trial court’s judgment.

Broyhill Furniture Indus. v. Murphy, No. 05-11-01545-CV

The court affirmed the trial court’s judgment declaring Wilhoite’s quitclaim deed void and awarding Sims damages and attorney’s fees. The parties are sisters that each inherited a half interest in their grandfather’s house. In 2007, Sims signed a quitclaim deed transferring the interest in the property to Wilhoite for no consideration. Sims testified they agreed that after the house was sold, they would share the money from the sale equally; Wilhoite testified that Sims gifted her interest. Sims performed repairs on the house in 2008 and moved into the house in 2010 and performed maintenance. Sims testified that Wilhoite agreed to put those costs towards Sims’s interest in the house. In 2011, Wilhoite attempted to evict Sims for unpaid rent. Sims filed suit in district court seeking a declaratory judgment that the quitclaim deed was voidable and claims for statutory fraud and breach of contract. The jury found that Sims did not gift the property, that Wilhoite committed statutory fraud, and that Wilhoite breached her agreement to reimburse Sims for one-half of her repair and maintenance expenses.

The court first held that Wilhoite did not have adverse possession of the house by mere color of title through the quitclaim deed, and therefore the court was correct in refusing to apply a three-year limitations period. Second, neither agreement – to share in the proceeds from sale or reimburse for expenses – were contracts for the sale of real estate, so both were outside of the statue of frauds. Next, the court held that the declaratory judgment was proper, despite Sims’ failure to pursue a trespass to try title action, because the it merely canceled the deed and made no determination of title to the property. Finally, Sims’ counsel’s statement that her son was “protecting us in Afghanistan” was not an incurable argument. Thus, the court affirmed.

Wilhoite v. Sims, No. 05-12-00228-CV

Timothy Brown, a professional golfer, started a company and then sold it to Golf & Tennis Pro Shop, Inc. (“GTPS”).  Brown then worked for GTPS for a while, but the relationship deteriorated and he left the company shortly thereafter.  Brown, however, remained bound by a non-compete agreement with GTPS.  Still, he entered into discussions with Jeff Blankinship to pursue a similar idea to his former company, but this time apart from GTPS.  As Brown negotiated a contract with Blankinship, Brown had his lawyer, Gary Blanscet, review the agreement.  Blanscet required changes to the agreement to reflect Brown’s prior dealings with GTPS.  Blankinship signed the revised agreement without reading it and, a week later, found out about GTPS.  Blankinship sued Brown and Blanscet for, among other things, fraud and negligent misrepresentation.  The trial court granted Blanscet’s no evidence summary judgment motion.  Later, the jury found in favor of Blankinship as against Brown.  Blankinship appealed the trial court’s summary judgment decision concerning Blanscet.

On appeal, the Court found that Blankinship could not establish the reliance element of his causes of action because, among other things, Blankinship admitted at trial that he never read the contract before he signed it.  Blankinship tried to argue that Blanscet had a duty to him under the Texas Rules of Professional Conduct not to make any misrepresentations, but the Court of Appeals found that a non-client cannot rely on an attorney’s representation unless the attorney invites that reliance, such as when the attorney issues an opinion letter or some other type of evaluation.  Because that was not the case here, the Court upheld the trial court’s grant of summary judgment in favor of Blanscet.

Blankinship v. Brown

The court affirmed a take-nothing summary judgment on fraud and promissory estoppel claims arising out of the purchase of land. Mavex purchased property, which was subject to subject to a easement, for the construction of a condominium complex. The parties to the easement amended it to allow for the condominium and the use of an adjacent parking deck subject to approval of the construction plans. Metzler, one of the easement holders, later refused to approve the condominium plans due to a dispute over the correct allocation of parking spaces for the exclusive use of the condominium tower as Mavex’s plans specified. Mavex sued Metzler and its predecessors-in-interest. Mavex alleged that before and after they entered into the purchase agreement for the property, the defendants assured Mavex that the plans were acceptable and that they relied on this approval of the condominium plans. The trial court granted summary judgment against Mavex.

On appeal, the court held that Mavex presented no evidence to support their promissory estoppel and fraud claims because Mavex’s affidavit evidence merely provided conclusory allegations that the appellees made assurances Mavex relied on, but did not identify with any specificity when the statements were made nor what actions appellants took in reliance on them. The court further held that, at any rate, the alleged statements were insufficient to support Mavex’s claims, and affirmed the summary judgment.

Mavex Management Corporation v. Hines Dallas Hotel Limited Partnership, et al, 05-09-01281-CV

This 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.

AKB Hendrick v. Musgrave Enterprises, No. 05-11-00251

The court of appeals has reversed summary judgment for the defendant in a bill of review case.  After 23 years of marriage, the appellant had filed for divorce from her husband.  Their divorce papers purported to waive the parties’ right to investigate assets and financial information.  But the wife later found out that her husband had substantially more assets than she had been led to believe, which in turn led her to seek a bill of review to overturn the couple’s property division, claiming extrinsic fraud in the judgmenmt.  The trial court granted summary judgment in favor of the husband.  The court of appeals disagreed, holding that whether the husband’s alleged misrepresentations of his financial position and attempts to intimidate his wife into foregoing further investigation  presented a fact question for the jury on whether the settlement was procured by extrinsic fraud.  The court also rejected the husband’s estoppel defense, as there was a fact question whether the wife’s prior testimony that the settlement was fair and equitable was based on mistake, fraud, or duress.  Having reversed the summary judgment, the court of appeals remanded the case to the trial court for further proceedings.

In re Stroud, No. 05-00982-CV