Opinion issued March 10, 2011
Court of Appeals
First District of Texas
ANGLO-DUTCH PETROLEUM INTERNATIONAL, INC., Appellant
SHORE HARBOUR CAPITAL MANAGEMENT CORPORATION,
On Appeal from the 333rd District Court
Harris County, Texas
Trial Court Case No. 2004-48053
Anglo-Dutch Petroleum International, Inc. appeals the trial court’s judgment
awarding Shore Harbour Capital Management Corporation $100,000, plus pre- and
post-judgment interest on its claim for fraud. Shore Harbour alleged that Anglo-
Dutch made a fraudulent misrepresentation to persuade Shore Harbour to invest in
a project with Anglo-Dutch. On appeal, Anglo-Dutch contends that the trial court
erred by ruling in Shore Harbour’s favor on its fraud claim arguing, among other
things, that the claim was barred as a matter of law because the alleged
misrepresentation was an expression of an opinion. We agree, and we reverse and
render judgment that Shore Harbour take nothing on its fraud claims.
Factual and procedural background
The facts underlying this case span nearly two decades, involve multiple
transactions related to the development of a foreign oil and gas field, and relate to
numerous lawsuits involving Anglo-Dutch. For the purposes of this appeal, the
following facts are relevant.
Anglo-Dutch Petroleum International, Inc. was a partner in Anglo-Dutch
Kazakhtenge (ADK), which itself was a partner in a joint enterprise to develop an
oil and gas field in Kazakhstan, called the Tenge Joint Enterprise. The other jointenterprise partner was the national oil company of Kazakhstan. Anglo-Dutch
wanted to buy out its ADK partners and required working capital to finance its
expenses related to this transaction.
Shore Harbour considered a proposal to contribute capital to Anglo-Dutch to
facilitate the buy-out transaction. In making its decision to contribute, Shore
Harbour relied on oral conversations between its managing shareholder, Don
Chamberlin, and Anglo-Dutch’s president, Scott Van Dyke. Shore Harbour also
relied upon a prospectus received from Anglo-Dutch. In the initial letter AngloDutch sent to Shore Harbour, Van Dyke stated:
As we discussed, Anglo-Dutch is in the final stages of buying
its current partners’ interests in the Tenge Field. Anglo-Dutch is
buying the interests of . . . a subsidiary of . . . the national oil company
of Taiwan, and the interests of some other smaller partners. Funds are
being raised from Franklin Natural Resource Fund, InterCapital
Investments, Inc., and from an individual in Pennsylvania.
Anglo-Dutch attached a copy of the proposed Profit Distribution Agreement with
the prospectus. The agreement stated:
Anglo-Dutch is attempting to purchase ADK’s 50% interest in the
Tenge JE. At Closing . . . Anglo-Dutch intends to assign the ADK
interest to a newly formed company (herein referred to as ―Eur-Oil‖).
To fund its purchase of the ADK interest and to raise additional
development capital for the Tenge JE, Anglo-Dutch intends to sell a
portion of Eur-Oil to one or more companies at Closing.
The agreement specifically states that conveyance of a percentage interest of up to
0.25% of the revenue from the Tenge Field would occur at the closing of the deal
to buy out ADK’s partners. It also specifies that, ―in the event Closing occurs,‖
Shore Harbour’s initial contribution of $25,000 would be returned within one year
Finally, the agreement requires both parties to take all actions
―necessary to effectuate the intent and purpose of this Agreement and carry out the
transaction as contemplated herein.‖
Two days after Chamberlin had his first conversation with Van Dyke, he
signed the agreement on behalf of Shore Harbour. Shore Harbour contributed a
total of $100,000 to Anglo-Dutch pursuant to the Profit Distribution Agreement.
Chamberlin never asked to see any documentation about Anglo-Dutch’s proposed
buy-out transaction. Van Dyke testified that he encouraged Chamberlin to visit a
Houston data room that held all the documentation Van Dyke had collected
pertinent to the Tenge Field. The data room included information pertaining to
geology, engineering, production, governmental licenses and interactions, and
correspondence from partners and investors or potential investors. Van Dyke
testified that he filed all documents pertaining to the Tenge Field and the Tenge
Joint Enterprise in the data room. Chamberlin testified that he could not recall if
Van Dyke had invited him to see the data room, but both parties agree that
Chamberlin never visited the data room or reviewed the information included
At trial, Chamberlin, who was also an investment advisor by trade, testified
that he knew he was making an investment, not a loan, but he did not realize he
could lose his investment if Anglo-Dutch did not close the buy-out transaction.
Chamberlin contended in the trial court, as he does in this appeal, that Van Dyke
represented to him that the deal would close.
The deal did not close. In violation of a confidentiality agreement, a third
party misused information gained from Anglo-Dutch’s data room and purchased
the interests of Anglo-Dutch’s partners. Anglo-Dutch initiated litigation over the
breach and attempted to block the sale. When that was unsuccessful, Anglo-Dutch
sought damages representing the value of the data itself as well as the lost
opportunity. Anglo-Dutch prevailed in that lawsuit and later reached a settlement
with one party, but Anglo-Dutch’s recovery was far less than the damages it
sought. Shore Harbour demanded repayment of its $100,000 contribution, but
Anglo-Dutch did not refund Shore Harbour’s money.
Instead, Anglo-Dutch filed suit seeking a declaration of the parties’ rights
under the contract. Shore Harbour countersued, alleging fraud and fraudulent
inducement, among other things.
Relying on Shore Harbour’s discovery
responses, the trial court limited Shore Harbour’s fraud and fraudulent inducement
claims at trial to a single alleged misrepresentation by Anglo-Dutch, specifically
that ―the deal would close.‖ After a bench trial, the trial court awarded Shore
Harbor $100,000 on its fraud claim, plus pre- and post-judgment interest. In its
sole issue, Anglo-Dutch contends that the trial court erred by ruling in Shore
Harbour’s favor on its fraud claim because the alleged misrepresentation was not
the kind of statement for which a cause of action for fraud may be pursued.
Standards of review
Anglo-Dutch requested findings of fact and conclusions of law before the
interlocutory ruling on Shore Harbour’s fraud claims and before the final judgment
in this case. The appellate record does not include a notice of past due findings of
fact and conclusions of law, see TEX. R. CIV. P. 297, and Anglo-Dutch does not
challenge the trial court’s failure to make findings of fact on appeal. Because the
trial court did not issue findings of fact and conclusions of law, ―all facts necessary
to support the judgment and supported by the evidence are implied.‖
Software Belg., N.V. v. Marchand, 83 S.W.3d 789, 795 (Tex. 2002). Thus we
presume that the trial court resolved all factual disputes in favor of its judgment.
See Tri-State Bldg. Specialties, Inc. v. NCI Bldg. Sys., L.P., 184 S.W.3d 242, 246
(Tex. App.—Houston [1st Dist.] 2005, no pet.) (citing American Type Culture
Collection, Inc. v. Coleman, 83 S.W.3d 801, 806 (Tex. 2002)). These findings are
not conclusive when the appellate record includes both reporter’s and clerk’s
records, and they may be challenged for legal and factual sufficiency on appeal.
Id. To the extent that the underlying facts are undisputed, however, we conduct a
de novo review. Glattly v. CMS Viron Corp., 177 S.W.3d 438, 445 (Tex. App.—
Houston [1st Dist.] 2005, no pet.). We review de novo a trial court’s implied
conclusions of law. See BMC Software, 83 S.W.3d at 794.
In reviewing the legal sufficiency of the evidence, we view the evidence in
the light most favorable to the fact finding, crediting favorable evidence if
reasonable persons could, and disregarding contrary evidence unless reasonable
persons could not. City of Keller v. Wilson, 168 S.W.3d 802, 807 (Tex. 2005). We
must sustain a legal sufficiency point: (1) when there is a complete absence of a
vital fact; (2) when rules of law or evidence preclude according weight to the only
evidence offered to prove a vital fact; (3) when the evidence offered to prove a
vital fact is no more than a scintilla; or (4) when the evidence conclusively
establishes the opposite of the vital fact. El-Khoury v. Kheir, 241 S.W.3d 82, 86
(Tex. App.—Houston [1st Dist.] 2007, pet. denied) (citing City of Keller, 168
S.W.3d at 810 & nn. 15–16 (Tex. 2005)). ―The final test for legal sufficiency must
always be whether the evidence at trial would enable reasonable and fair-minded
people to reach the verdict under review.‖ City of Keller, 241 S.W.3d at 827.
Shore Harbour alleged causes of action for fraud and fraudulent inducement.
Its theory of the case was that Anglo-Dutch falsely misrepresented that the deal to
buy out its ADK partners ―would close,‖ thereby inducing Shore Harbour to enter
into the Profit Distribution Agreement.
The elements of fraud are: (1) that a material representation was made;
(2) that it was false; (3) that, when the speaker made it, he knew it was false or
made it recklessly without any knowledge of its truth and as a positive assertion;
(4) that he made it with the intention that it should be acted upon by the party;
(5) that the party acted in reliance upon it; and (6) that he thereby suffered injury.
Johnson & Higgins of Tex., Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507, 524
(Tex. 1998); Trenholm v. Ratcliff, 646 S.W.2d 927, 930 (Tex. 1983). Fraudulent
inducement is ―a particular species of fraud that arises only in the context of a
contract and requires the existence of a contract as part of its proof.‖ Haase v.
Glazner, 62 S.W.3d 795, 798 (Tex. 2001).
An actionable misrepresentation is one concerning a material fact; a pure
expression of opinion will not support an action for fraud. Trenholm, 646 S.W.2d
at 930. Whether a statement is an actionable statement of ―fact‖ or merely one of
―opinion‖ often depends on the circumstances in which a statement is made.
Transport Ins. Co. v. Faircloth, 898 S.W.2d 269, 276 (Tex. 1995). Among the
relevant circumstances are the statement’s specificity, the speaker’s knowledge, the
comparative levels of the speaker’s and the hearer’s knowledge, and whether the
statement relates to the present or the future. Id. An opinion may constitute fraud
if the speaker has knowledge of its falsity. Trenholm, 646 S.W.2d at 930. An
opinion about a future event may also constitute fraud where the speaker purports
to have special knowledge of facts that will occur or exist in the future. Id.
Finally, ―[a] promise of future performance constitutes an actionable
misrepresentation if the promise was made with no intention of performing at the
time it was made.‖
Formosa Plastics Corp. USA v. Presidio Eng’rs &
Contractors, 960 S.W.2d 41, 48 (Tex. 1998). But the mere failure to perform a
contract is not evidence of fraud. Id.
By its judgment in favor of Shore Harbour on its fraud claims, the trial court
impliedly concluded that the alleged misrepresentation that ―the deal would close‖
was actionable as a matter of law. On appeal, Anglo-Dutch argues that the alleged
statement was an expression of opinion and not actionable as a matter of law. We
review this contention de novo.
See BMC Software, 83 S.W.3d at 794.
accordance with the principles outlined above, we specifically consider the
circumstances in which that statement was made, the speaker’s knowledge of the
alleged falsity, any special knowledge the speaker may have had of future facts,
and whether a promise to perform had been made with no intention of performing
Circumstances in which the statement was made. Chamberlin testified that
in their initial conversation, Van Dyke said that Anglo-Dutch was trying to buy out
its partners and needed money for transaction costs. Chamberlin asserts that Van
Dyke told him that the deal would close during this conversation, in which they
discussed the proposed Profit Distribution Agreement.
The agreement itself,
which Van Dyke sent to Chamberlin later that day, explained that Anglo-Dutch
was ―attempting‖ to buy out its partners. The contract describes a bargain in which
Chamberlin would give Anglo-Dutch money in exchange for the contingent rights
to receive repayment of the initial contribution and a percentage of revenue if
Anglo-Dutch successfully closed its buy-out transaction. The agreement required
that Anglo-Dutch ―do all such further acts . . . as may be necessary to effectuate the
intent and purpose of this Agreement and carry out the transaction as contemplated
Both parties agreed that Anglo-Dutch had a data room in Houston pertaining
to the Tenge Field and that no representative from Shore Harbour ever visited the
data room. They also agreed that this was an arms-length transaction. See DRC
Parts & Accessories, L.L.C. v. VM Motori, S.P.A., 112 S.W.3d 854, 858 (Tex.
App.—Houston [14th Dist.] 2003, pet. denied) (―[A] party to an arm’s length
transaction must exercise ordinary care and reasonable diligence for the protection
of his own interests, and a failure to do so is not excused by mere confidence in the
honesty and integrity of the other party.‖). The unrefuted evidence at trial was that
all documents relevant to the project were kept in the data room, including the
information that Shore Harbour now contends Anglo-Dutch should have but failed
to disclose. Chamberlin was an experienced investor, and he testified that he
should have asked more questions. The circumstances all suggest that the alleged
representation that the transaction ―would close‖ would be most properly
understood as an expression of Van Dyke’s opinion and not a representation that a
future event certainly would occur.
Knowledge of falsity. Van Dyke testified that he believed the statement in
his letter to Shore Harbour, ―Anglo-Dutch is in the final stages of buying its
current partners’ interests in the Tenge Field,‖ was true at the time he wrote it. He
testified that he had been working to acquire Anglo-Dutch’s partners’ interests for
two to three years before Shore Harbour signed the Profit Distribution Agreement,
that he had been exchanging proposed contracts with the partners, and that he had
no reason to doubt that they would sell to Anglo-Dutch because it had the only data
room pertaining to the Tenge Field. He also had been negotiating with three other
potential investors listed in his letter to Shore Harbour. Nothing in the record
contradicts Van Dyke’s testimony on these matters. See El-Khoury, 241 S.W.3d at
86 (noting that court must sustain legal sufficiency challenge when evidence
conclusively establishes the opposite of the vital fact); see also Tri-State Bldg.
Specialties, Inc., 184 S.W.3d at 246 (holding that implied findings of fact may be
challenged for legal sufficiency).
Chamberlin testified in his deposition that he believed Van Dyke had
answered his questions truthfully when they initially spoke. At trial Chamberlin
said that he later found out that Van Dyke had been untruthful, but he also testified
that he stood by his deposition testimony, in which he said that Van Dyke had been
truthful but he had not asked the right questions. Accordingly, assuming that Van
Dyke did tell Chamberlin that the deal would close, the evidence at trial could not
have supported a conclusion that Van Dyke, acting on behalf of Anglo-Dutch,
knew that this statement was false or that he made it recklessly without knowledge
of its truth or falsity. Likewise, the evidence did not support a conclusion that
Anglo-Dutch promised to close the deal with no intention of doing so.
Special knowledge of future facts. Nothing in the record suggests that Van
Dyke purported to have special knowledge of facts that would occur or exist in the
future. Van Dyke testified extensively about his knowledge and work regarding
the Tenge Field. For example, he testified that he spent two years doing his own
due diligence and analysis before initially deciding to invest. He compiled all of
his information and documentation regarding the Tenge Field into a data room in
Houston. He testified that the data room contained the production histories of the
existing wells, seismic data, governmental contracts, engineering designs of
surface facilities, correspondence with partners and governmental agencies, and
licenses. Van Dyke testified that the information was organized in file cabinets
and available for review by potential investors. None of this evidence of AngloDutch’s accumulated knowledge, however, shows that it purported to have the kind
of special knowledge of future events necessary to make Van Dyke’s opinion
about the future closing of a transaction actionable as a fraudulent
misrepresentation. See Trenholm, 646 S.W.2d at 930.
Shore Harbour argues that Van Dyke’s failure to mention then-existing facts
transformed his opinion about a future event into a representation of fact. For
example, Shore Harbour argues that Van Dyke failed to disclose existing tax
liabilities and threats by the Kazakh government to revoke the Tenge JE’s license.
However, Shore Harbour’s fraud claim was limited to the single misrepresentation
allegation disclosed in discovery, i.e., that the deal would close. Accordingly, the
trial court could not have ruled in Shore Harbour’s favor on a fraud-by-omission
theory, and we do not imply such a conclusion.
Shore Harbour presented no evidence that the alleged statement was made
with knowledge of its falsity, that Van Dyke purported to have knowledge of
specialized facts not available to Chamberlin or Shore Harbour, or that Van Dyke
(on behalf of Anglo-Dutch) promised to take action to carry out the transaction
without the intent to do so. Under these circumstances, we conclude that the
alleged statement, if made, was an expression of opinion. We therefore hold that it
cannot, as a matter of law, be the basis of a cause of action for fraud. We sustain
Anglo-Dutch’s sole issue.
We reverse the judgment of the trial court and render judgment that Shore
Harbour take nothing by its claims.
Panel consists of Justices Keyes, Sharp, and Massengale.