## Facts

- John Khoury invested $400,000 in PetroGulf, Ltd., a company led by Prentis B. Tomlinson, Jr.
- Before the investment, Tomlinson presented an 11-page business plan offering investors 14% interest plus 10% of net profits and describing planned fuel-oil transactions, including repeated references to a contract for deliveries to Syria.
- Khoury alleged the Syria-contract representations were materially false or misleading and that he received little information or return after investing.
- After Khoury demanded repayment, Khoury and Tomlinson discussed a personal repayment arrangement under which Tomlinson would repay the $400,000 in monthly payments over four or five years.
- Khoury sent an email summarizing the repayment terms and requesting confirmation; Tomlinson replied by email stating they “were in agreement,” with his name appearing in the email “from” line.
- Tomlinson made no payments, and Khoury sued Tomlinson individually for Texas Securities Act (TSA) violations, common-law fraud, and breach of contract.
- A jury found for Khoury on all claims, but the trial court granted JNOV on the TSA and contract claims (leaving the fraud verdict intact) and denied attorneys’ fees because fee-bearing claims were removed from the judgment.

## Issues

1. Whether the repayment agreement was enforceable under the Statute of Frauds and sufficiently “signed” by an electronic signature under the Texas Uniform Electronic Transactions Act (UETA).
2. Whether the repayment terms (four- or five-year repayment period at Tomlinson’s election) were too indefinite to form an enforceable contract.
3. Whether Khoury’s interest constituted a “security” under the TSA and whether evidence supported material misrepresentation, reliance, and causation.
4. Whether limitations barred the TSA claim where the defendant did not properly plead limitations as an affirmative defense.
5. Whether the trial court should have granted JNOV on the fraud claim (cross-appeal).
6. Whether reinstatement of the TSA and contract claims required reconsideration of attorneys’ fees.

## Decision

- The court of appeals reversed the trial court’s JNOV on the TSA claim and the breach-of-contract claim and remanded for further proceedings.
- The court held the email exchange could satisfy the Statute of Frauds because Tomlinson’s reply constituted an electronic signature under UETA.
- The court held the repayment agreement was sufficiently definite despite allowing a limited election between four and five years.
- The court held the investment was a TSA “security” because it combined a fixed return with a share of profits, and the evidence supported the jury’s findings on misrepresentation, reliance, and damages.
- The court rejected Tomlinson’s limitations defense because limitations was not properly pleaded.
- On cross-appeal, the court affirmed the trial court’s refusal to set aside the fraud verdict.
- The court remanded the attorneys’ fees issue for reconsideration in light of reinstated fee-bearing claims.

## Legal Principles

- Under UETA, an electronic signature may be any electronic symbol or process logically associated with a record and adopted with intent to sign; an email reply can satisfy the Statute of Frauds when attributable to the sender and adopting the terms.
- A contract is not unenforceably indefinite merely because one party has a limited election between definite alternatives, so long as obligations are ascertainable.
- An investment arrangement offering both a fixed return and a share of profits may qualify as a “security” under the Texas Securities Act rather than a mere commercial loan.
- A securities purchaser generally has no duty to independently investigate the truth of a seller’s material representations for purposes of reliance under the TSA.
- Statute of limitations is an affirmative defense that must be pleaded; failure to plead it bars reliance on the defense after verdict.
- When trial-court action removes claims that provide statutory or contractual bases for attorneys’ fees, reversal reinstating those claims may require remand for a new determination of fees.

## Conclusion

The court reinstated the jury’s securities and contract liability findings, held that an email confirmation could satisfy the Statute of Frauds under UETA, rejected challenges to the fraud verdict, and remanded for further proceedings including attorneys’ fees.


Khoury v. Tomlinson, 518 S.W.3d 568 (Tex. App.—Houston [1st Dist.] 2017)