Khoury v. Tomlinson
2017 Tex. App. LEXIS 2758
| Tex. App. | 2017Background
- Tomlinson solicited investment in PetroGulf using an 11‑page business plan stating PetroGulf had a contract to sell fuel oil into Syria and offering investors 14% interest plus 10% of net profits; Khoury invested $400,000 by borrowing from Garantía.
- Khoury signed a subscription agreement acknowledging he had information to evaluate the investment; he later complained about lack of disclosure.
- On Jan 9, 2012, Khoury and Tomlinson agreed Tomlinson would personally repay the $400,000 over four or five years; Khoury emailed a summary and Tomlinson replied, “We are in agreement.”
- Tomlinson admitted at trial he had declined the Syrian contract before meeting Khoury and that the business‑plan statement “should not have been in” the plan.
- A jury found for Khoury on breach of contract, Texas Securities Act violations, and common‑law fraud, awarding $400,000 on each claim and attorneys’ fees; the trial court granted JNOV for Tomlinson on the securities and breach claims but denied it on fraud.
- On appeal the court reversed the JNOV on breach and securities claims, holding the e‑mail satisfied the Statute of Frauds under UETA and that materiality, damages, and other defenses did not defeat the securities claim; remanded for a new trial on attorneys’ fees (segregation issue).
Issues
| Issue | Khoury’s Argument | Tomlinson’s Argument | Held |
|---|---|---|---|
| Whether the Jan 2012 e‑mail satisfies the Statute of Frauds (signature) | The e‑mail ("from" field and signature block) authenticated Tomlinson’s agreement | The e‑mail was unsigned and therefore fails Statute of Frauds | Held: e‑mail header/signature block qualifies as an electronic signature under UETA; writing satisfied Statute of Frauds; jury verdict on breach stands |
| Whether the repayment agreement was too indefinite to be enforceable | Terms (amount, interest, monthly payments; Tomlinson to elect 4 vs 5 years) are sufficiently definite | Indefinite because it didn’t fix 4 v. 5 years | Held: agreement was sufficiently definite (parties intended to be bound; election by Tomlinson was not a material open term) |
| Whether the note was a “security” under the Texas Securities Act | Note included 10% of net profits (profit‑sharing), so it is a security | Note was a commercial loan and therefore exempt | Held: note not a mere commercial loan because profit‑sharing gave investor a stake; claim can proceed |
| Whether Tomlinson’s business‑plan statements were immaterial or time‑barred or failed to prove damages | Statements (Syrian contract) were material; limitations defense was not pleaded; damages evidence supported Khoury | Misrepresentations were not material; claim time‑barred; Khoury had no damages because payments due to Garantía | Held: materiality was a fact issue for the jury; limitations defense waived as affirmative defense not pleaded; there was evidence Khoury suffered damages |
| Whether Khoury can recover attorneys’ fees awarded by the jury without segregation | Fees need not be segregated when services advance all claims from same nucleus of facts | Fees need not be awarded because Khoury failed to segregate between recoverable and unrecoverable claims/parties | Held: Khoury failed to prove proper segregation; remand required for new trial on attorneys’ fees (some fees may be recoverable but jury award cannot stand as awarded) |
Key Cases Cited
- King Ranch, Inc. v. Chapman, 118 S.W.3d 742 (Tex. 2003) (no‑evidence legal‑sufficiency standard)
- City of Keller v. Wilson, 168 S.W.3d 802 (Tex. 2005) (view evidence in light favoring jury; credit favorable evidence)
- Wal‑Mart Stores, Inc. v. Miller, 102 S.W.3d 706 (Tex. 2003) (similar standard for viewing evidence in sufficiency review)
- Lone Star Air Sys., Ltd. v. Powers, 401 S.W.3d 855 (Tex. App. Houston [14th Dist.] 2013) (signature under Statute of Frauds authenticates writing)
- Bellah v. First Nat’l Bank of Hereford, Tex., 495 F.2d 1109 (5th Cir. 1974) (distinguishing commercial loan from investment/security)
- Stewart Title Guar. Co. v. Sterling, 822 S.W.2d 1 (Tex. 1991) (when fees need not be segregated for interrelated claims)
- Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299 (Tex. 2006) (modern segregation rule for attorneys’ fees)
- Fischer v. CTMI, L.L.C., 479 S.W.3d 231 (Tex. 2016) (contract definiteness; construe contract as whole to determine essential terms)