W. Graeme Roustan Statutory Fraud Appeal - appeal to the Supreme Court of Texas

NO. 12-0051

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IN THE SUPREME COURT OF TEXAS

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W. GRAEME ROUSTAN,

Petitioner,

v.

MICHAEL SANDERSON, WIFE ANN GAINOUS,

AND RIDGLEA ENTERTAINMENT, INC.,

Respondents

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On Petition for Review

from the Second Court of Appeals, Fort Worth, Texas

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

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RESPONDENT’S BRIEF ON THE MERITS

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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

INDEX OF AUTHORITIES

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).

Respectfully submitted,

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

CERTIFICATE OF SERVICE

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

W. Graeme Roustan Statutory Fraud Appeal - appeal to the Supreme Court of Texas

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Transcript of W. Graeme Roustan Statutory Fraud Appeal - appeal to the Supreme Court of Texas