# Chris Wilmot v. Harry A. Bouknight, Junior

> Court of Appeals of Texas · March 3, 2015 · 466 S.W.3d 219

URL: https://www.frixlaw.com/law-library/cases/3081783

## Case

- **Full name:** Chris WILMOT, Appellant v. Harry A. BOUKNIGHT, Jr., Appellee
- **Court:** Court of Appeals of Texas
- **Decided:** March 3, 2015
- **Citations:** 466 S.W.3d 219; 39 I.E.R. Cas. (BNA) 1728; 2015 Tex. App. LEXIS 1967
- **Precedential status:** Published
- **Opinion:** Opinion by Keyes
- **Judges:** Jennings, Keyes, Radack
- **Cited by:** 3 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/3081783

## Opinion text

Opinion issued March 3, 2015

In The

Court of Appeals
For The

First District of Texas
————————————
NO. 01-13-00738-CV
———————————
CHRIS WILMOT, Appellant
V.
HARRY A. BOUKNIGHT, JR., Appellee

On Appeal from the 295th District Court
Harris County, Texas
Trial Court Case No. 2010-00373

OPINION

Appellee, Harry A. Bouknight, Jr., sued appellant, Chris Wilmot, for

fraudulent inducement relating to an employment contract and, following a bench

trial, the trial court rendered judgment in Bouknight’s favor. In five issues on
appeal, Wilmot challenges the trial court’s judgment, arguing that (1) Bouknight’s

fraudulent inducement claim fails as a matter of law; (2) the evidence supporting

the trial court’s finding of fraudulent inducement was legally and factually

insufficient; (3) the evidence supporting the trial court’s award of damages was

legally and factually insufficient; (4) various legal doctrines, such as the economic

loss rule, prohibit Wilmot’s liability as a matter of law, and (5) the Texas Supreme

Court’s opinion in Sawyer v. E.I. DuPont De Nemours & Co. precludes

Bouknight’s recovery.

We affirm.

Background

Petroci, the national oil company of Côte d’Ivoire in West Africa, wanted to

build a refinery, also known as the Côte d’Ivoire Peace Refinery. Through its

managing director, Kassoum Fadika, it contracted with WCW International, Inc.

(“WCW”) to manage the project, which included everything from obtaining a

feasibility study through final development of the Peace Refinery. Wilmot is the

sole owner of WCW and a majority owner of its holding company, WCW

International Holding Company, Ltd. (“WCW Holding”). In 2007, Wilmot hired a

company called Energy Allied International (“Energy Allied”) to prepare a

feasibility study for building the Peace Refinery. Bouknight, an engineer

specializing in the energy industry, worked for Energy Allied at the time Wilmot

2
hired it. Bouknight was involved in completing and presenting a feasibility study

on the Peace Refinery Project to government officials in Côte d’Ivoire. The Côte

d’Ivoire government and Petroci approved the Peace Refinery Project and a site

was dedicated in Abidjan, Côte d’Ivoire.

In November 2007, because of Bouknight’s role in the feasibility study and

his experience in the field, Wilmot sought Bouknight’s participation in the Peace

Refinery Project by asking him to serve as chief operating officer (“COO”).

In December 2007, planning for the Peace Refinery Project began in earnest.

Energy Allied withdrew from the project because it could not obtain the necessary

funding. Bouknight decided to leave Energy Allied and work for Wilmot at

WCW. Project development activities began in early 2008, and Bouknight signed

an executive employment agreement (“EEA”) with Côte d’Ivoire Peace Refinery

Ltd. (“CIPR”), a corporation formed by Petroci and WCW Holding.

The EEA provided that it was made effective as of January 5, 2008. It stated

that it was entered into between Bouknight and the “Cote d’Ivoire Peace Refinery

Ltd, a corporation incorporated under the law of the British Virgin Islands, with its

principal place of business at 1001 McKinney, Suite 1660, Houston (hereinafter

referred to as the “Company”).” The EEA stated that the “Company hereby agrees

to engage [Bouknight] as its Chief Operating Officer (“Executive”) and Executive

hereby accepts such employment in accordance with the terms of this Agreement.”

3
It set out Bouknight’s responsibilities as COO, including “solicit[ing], identify[ing]

and secur[ing] new business opportunities for Company” and “manag[ing] and

supervis[ing] the construction of the refinery and related facilities.”

Regarding compensation, the EEA provided that Bouknight was entitled to a

$100,000 signing bonus, $300,000 in annual salary for the first year, $400,000 in

the following years, and various stock options and other benefits. The majority of

the compensation provisions were contingent upon CIPR’s obtaining initial

funding for its activities: “Executive acknowledges that Company is in the process

of obtaining initial funding for the activities of the Company and execution of the

Project and consequently Company would not be able to commence payment of

the entire base salary until such initial funding is in place.” However, the EEA

provided, “In the interim and until the initial funding is acquired, Company agrees

to pay Executive a monthly allowance of $25,000.”

The EEA was to remain in effect for a term of five years and was subject to

renewal under certain circumstances. The EEA also provided that it “may be

terminated at Company’s discretion, provided that Company shall pay to Executive

an amount equal to payment at Executive’s base salary rate for the remaining

period of the Agreement.”

Following execution of the EEA, Bouknight worked to obtain funding for

the Peace Refinery Project. Petroci wired $2.5 million to WCW that Bouknight

4
contended was for the Peace Refinery Project, and Bouknight eventually arranged

a financing deal with a Chinese bank. In the meanwhile, Bouknight was not being

paid regularly under the terms of the EEA. He informed Wilmot that he was not

being paid, and Wilmot told him that he would be paid and that things were just

slow. CIPR paid Bouknight a total of $152,500.

In April 2009, Bouknight and Wilmot traveled to China to complete the

financing deal. In September 2009, Wilmot sent Bouknight an email terminating

his employment and representing that CIPR would not honor the EEA.

The Peace Refinery Project subsequently collapsed. According to Wilmot,

this was due in part to the financial collapse that began in 2008 and in part to a war

and regime change in Côte d’Ivoire.

Bouknight sued Wilmot and WCW for tortious interference with the EEA,

for conspiracy, and for fraudulent inducement, and he also argued that he was

entitled to recover under a quantum meruit theory. Wilmot designated CIPR as a

responsible third party and asserted cross-claims against Bouknight.

Bouknight testified at trial that Wilmot recruited him to be COO of CIPR,

telling him that he was needed for his technical experience and his previous work

on the project while he was employed by Energy Allied. Bouknight stated that,

based on a verbal agreement between Wilmot and himself, he began working out

of an office at WCW. As far as he was aware, there was never a separate office for

5
CIPR in Houston. Bouknight testified that in January 2008, when he signed the

EEA, Wilmot told him that the agreement had to be between Bouknight and CIPR,

rather than Wilmot individually or WCW, because CIPR was the entity that was

going to lead the development of the Peace Refinery and ultimately operate it.

At the time he left his employment with Energy Allied and signed the EEA,

Bouknight did not have first-hand knowledge of the financial situation or corporate

structure of CIPR, and he relied upon what Wilmot told him. He testified that

Wilmot negotiated the terms of the EEA with him, acted as his supervisor and

assigned him work on behalf of CIPR, and provided him with his paychecks.

Bouknight became aware that CIPR had a bank account that Wilmot controlled.

He stated that whenever he would complain to Wilmot that he had not been paid in

accordance with the terms of the EEA, Wilmot would assure him that he was

arranging for payment and that Bouknight would be paid soon. Bouknight further

testified that Wilmot was very complimentary of his work on behalf of CIPR.

However, in September 2009, Bouknight received an email from Wilmot

terminating his employment. The September 2009 email stated that his

employment on the project had actually been terminated in April 2009, before

Bouknight’s trip to China to obtain funding from a Chinese bank. Shortly after

receiving this email, Bouknight obtained other employment.

6
Wilmot testified at trial that Bouknight was recruited by other people

involved in the Peace Refinery Project and that he paid Bouknight as a consultant.

He further stated that Bouknight was “kicked out by Energy Allied” and that he

allowed Bouknight to office out of WCW as a favor. Regarding the EEA, Wilmot

testified that he intended to bind CIPR to the EEA. However, he also testified that

he knew he did not have authority to bind CIPR to the EEA at the time he and

Bouknight executed it because his authority was subject to board approval.

Wilmot, who was the chairman of CIPR’s board, stated that the board never met or

considered the EEA. He testified that he never called a board meeting because the

formulation of the board changed and CIPR changed its organizational structure.

Wilmot testified that in March 2008, approximately two months after he and

Bouknight signed the EEA, he traveled to Côte d’Ivoire and met with the Chief

Executive, Kassoum Fadika, who told him that CIPR could not sign the document.

Wilmot testified that the laws of Côte d’Ivoire precluded Bouknight from being an

employee of CIPR and that Bouknight could only function as a consultant. Wilmot

also testified that the only reason the EEA was ever effective was because he was

trying to do a personal favor for Bouknight after Bouknight lost his job at Energy

Allied. He further testified that he called Bouknight to his office, first in April

2008 and then again in April 2009, and told him that CIPR was terminating the

EEA. After originally indicating that CIPR never approved the EEA and that it

7
was terminated in March 2008, Wilmot subsequently testified that CIPR

terminated the EEA in April 2009.

Wilmot testified that the EEA was a contingent contract because it was not

enforceable unless initial funding occurred. He argued that initial funding was $40

million, and CIPR never obtained this amount. Wilmot further testified that he and

Bouknight discussed and understood that Bouknight was working as a contractor

and that they did not have a written consultation agreement because he believed a

handshake was sufficient to establish the agreement. Wilmot also argued at trial

that Bouknight never complained of any violations of the EEA in writing.

Wilmot challenged Bouknight’s ability to pursue liability solely against

Wilmot personally. He testified that he was an agent of CIPR at all relevant times.

As such, he argued, he could not be personally liable to Bouknight under the EEA.

Wilmot also testified that Bouknight knew and worked with Kassoum Fadika,

another principal of CIPR, and that Bouknight was aware that CIPR was a start-up

company with uncertain funding and that the business and political climate in Côte

d’Ivoire was unstable. Thus, he argued, Bouknight was a knowing and willing

participant in the enterprise, and he could not have relied upon any representations

made by Wilmot.

The trial court found in Bouknight’s favor on his fraudulent inducement

claim against Wilmot individually and awarded Bouknight $1,337,500 in damages

8
on that claim. The trial court determined that Wilmot and WCW did not commit

tortious interference with a contract or conspiracy and that Bouknight was not

entitled to relief for quantum meruit. The trial court likewise found that Wilmot

and WCW failed to establish their counter-claims against Bouknight.

In its findings of fact and conclusions of law, the trial court found that

Wilmot represented to Bouknight that Wilmot had the authority to bind CIPR to

the terms of the EEA and that “[t]his was an intentional material

misrepresentation.” The trial court further found that Wilmot did not have the

authority to bind CIPR to the EEA, that Wilmot knew he did not have the authority

to bind CIPR to the EEA, and that Bouknight “reasonably relied on [Wilmot’s]

misrepresentations when entering into the [EEA].” The trial court determined that

Bouknight suffered economic damages as a result of Wilmot’s fraud in the

inducement because he was “owed $25,000 a month for five years . . . decreased

by the amount of $152,500.00 which he [had] previously received for his services.”

Accordingly, the trial court concluded that Wilmot “committed fraudulent

inducement against” Bouknight and that Bouknight was entitled to $1,337,500 in

economic damages.

Fraudulent Inducement

In his first issue, Wilmot argues that Bouknight’s fraudulent inducement

claim fails as a matter of law based on the trial court’s findings that Wilmot did not

9
have authority to bind CIPR to the EEA. He argues that if he did not have

authority to bind CIPR to the EEA, then there was no valid and binding contract

and, therefore, Bouknight’s fraudulent inducement claim fails under Texas law. In

his second issue, Wilmot argues that the evidence is legally and factually

insufficient to support the trial court’s findings on each element of fraudulent

inducement. In his fourth issue, Wilmot argues that “[t]here is no legally or

factually sufficient evidence or the [judgment] otherwise cannot legally stand”

because all of his acts were done as an agent of CIPR, the economic loss rule bars

recovery, the EEA’s merger clause prohibits a fraud in the inducement finding, and

CIPR is a responsible third party. In his fifth issue, Wilmot argues that the Texas

Supreme Court case Sawyer v. E.I. DuPont De Nemours & Co. prohibits recovery

for fraudulent inducement in this case. We construe all of these arguments as

attacking the legal and factual sufficiency of the evidence to support trial court’s

judgment in favor of Bouknight on his fraudulent inducement claim.

A. Standard of Review

In an appeal of a judgment rendered after a bench trial, the trial court’s

findings of fact have the same weight as a jury’s verdict, and we review the legal

sufficiency of the evidence used to support them just as we would review a jury’s

findings. Daniel v. Falcon Interest Realty Corp., 190 S.W.3d 177, 184 (Tex.

App.—Houston [1st Dist.] 2005, no pet.) (citing Catalina v. Blasdel, 881 S.W.2d

10
295, 297 (Tex. 1994)). In conducting a legal-sufficiency review, we credit

favorable evidence if a reasonable fact-finder could and disregard contrary

evidence unless a reasonable fact-finder could not. City of Keller v. Wilson, 168

S.W.3d 802, 827 (Tex. 2005); Brown v. Brown, 236 S.W.3d 343, 348 (Tex. App.—

Houston [1st Dist.] 2007, no pet.). We consider the evidence in the light most

favorable to the finding under review and indulge every reasonable inference that

would support it. City of Keller, 168 S.W.3d at 822. We sustain a no-evidence

contention only if: (1) the record reveals a complete absence of evidence of a vital

fact; (2) the court is barred by rules of law or of evidence from giving weight to the

only evidence offered to prove a vital fact; (3) the evidence offered to prove a vital

fact is no more than a mere scintilla; or (4) the evidence conclusively establishes

the opposite of the vital fact. Id. at 810; Volkswagen of Am., Inc. v. Ramirez, 159

S.W.3d 897, 903 (Tex. 2004).

In reviewing a challenge to the factual sufficiency of the evidence, we must

consider and weigh all the evidence and should set aside the judgment only if it is

so contrary to the overwhelming weight of the evidence as to be clearly wrong and

unjust. Arias v. Brookstone, L.P., 265 S.W.3d 459, 468 (Tex. App.—Houston [1st

Dist.] 2007, pet. denied) (citing Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986)).

The trial court acts as fact-finder in a bench trial and is the sole judge of the

credibility of witnesses. HTS Servs., Inc. v. Hallwood Realty Partners, L.P., 190

11
S.W.3d 108, 111 (Tex. App.—Houston [1st Dist.] 2005, no pet.). We review a

trial court’s conclusions of law de novo, and we will uphold the conclusions if the

judgment can be sustained on any legal theory supported by the evidence. BMC

Software Belg., N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002); In re Moers,

104 S.W.3d 609, 611 (Tex. App.—Houston [1st Dist.] 2003, no pet.).

B. Law of Fraudulent Inducement

The elements of fraud are: (1) that the speaker made a material

misrepresentation (2) that he knew was false when he made it or that he made

recklessly without any knowledge of its truth and as a positive assertion (3) with

the intent that the other party act upon it and (4) that the other party acted in

reliance on the misrepresentation and (5) suffered injury thereby. Italian Cowboy

Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323, 337 (Tex. 2011). A

representation is material if “a reasonable person would attach importance to [it]

and would be induced to act on the information in determining his choice of

actions in the transaction in question.” Id. 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); Clark v. Power Mktg. Direct, Inc., 192 S.W.3d 796, 799 (Tex. App.—

Houston [1st Dist.] 2006, no pet.). That is, with a fraudulent inducement claim, the

12
elements of fraud must be established as they relate to an agreement between the

parties. Haase, 62 S.W.3d at 798–99.

Fraud requires a showing of actual and justifiable reliance. Grant Thornton

LLP v. Prospect High Income Fund, 314 S.W.3d 913, 923 (Tex. 2010). In

evaluating justification, the court considers whether, “given a fraud plaintiff’s

individual characteristics, abilities, and appreciation of facts and circumstances at

or before the time of the alleged fraud[,] it is extremely unlikely that there is actual

reliance on the plaintiff’s part.” Id. (quoting Haralson v. E.F. Hutton Grp., Inc.,

919 F.2d 1014, 1026 (5th Cir. 1990)).

C. Legal and Factual Sufficiency of the Evidence

The trial court found that Wilmot made a material misrepresentation to

Bouknight when he represented that he had the authority to bind CIPR to the terms

of the EEA. The trial court further found that Wilmot did not have the authority to

bind CIPR to the EEA, that Wilmot knew he did not have the authority to bind

CIPR to the EEA, and that Wilmot’s misrepresentation was “intentional.” The trial

court also found that Bouknight “reasonably relied on [Wilmot’s]

misrepresentations when entering into the [EEA].”

The misrepresentation identified by the trial court was Wilmot’s

representation to Bouknight that Wilmot had the authority to bind CIPR to the

EEA. This is the type of information that “a reasonable person would attach

13
importance to and would be induced to act on . . . in determining his choice of

actions in the transaction in question.” See Italian Cowboy, 341 S.W.3d at 337.

Thus, it was a material misrepresentation.

Wilmot signed the EEA in his capacity as “Chairman” of CIPR. He

acknowledged at trial that he did not have authority to bind CIPR to the EEA and

that he knew he lacked such authority at the time he and Bouknight executed the

EEA. He also knew he needed the approval of CIPR’s board, but he, in his

capacity as chairman of the board, never called a board meeting and never

presented the EEA to the board for approval. He further testified that he knew in

March 2008 that CIPR would not agree to the EEA, but he testified that he did not

provide this information to Bouknight until April 2008 or April 2009. This is

legally and factually sufficient evidence that Wilmot made a material

misrepresentation that he knew was false when he made it. See id.; see also City of

Keller, 168 S.W.3d at 810 (setting out standard for legally sufficiency review);

Arias, 265 S.W.3d at 468 (setting out standard for factual sufficiency review).

Bouknight, on the other hand, testified that Wilmot recruited him to work as

CIPR’s COO and that he did extensive work for the Peace Refinery Project,

including traveling to Africa and Asia and obtaining funding for the project, while

under the impression that he was an executive of CIPR. He stated that every time

he complained to Wilmot that he was not being paid under the terms of the EEA,

14
Wilmot assured him that the financial arrangements were being made and that he

would receive his full compensation soon. Bouknight testified that Wilmot did not

tell him that CIPR would not honor the EEA until September 2009. This is legally

and factually sufficient evidence that Wilmot misrepresented his authority to enter

into the EEA with the intent that Bouknight act upon it by agreeing to the EEA and

providing services pursuant to its terms. See Italian Cowboy, 341 S.W.3d at 337;

City of Keller, 168 S.W.3d at 810; Arias, 265 S.W.3d at 468.

Finally, Bouknight testified that, at the time he entered into the EEA and left

his consulting job with Energy Allied, he relied on Wilmot’s representations about

CIPR’s corporate structure and financing. He testified that he performed work for

the Peace Refinery Project in what he believed was his capacity as COO, including

overseeing development and obtaining funding. Specifically, Bouknight testified

that he flew to China to finalize a funding deal with a Chinese bank in April 2009

and that Wilmot did not inform him that CIPR would not honor the EEA until

September 2009, after Bouknight had once again asked about his compensation

and status on the Peace Refinery Project. Wilmot testified that he told Bouknight

that CIPR would not honor the EEA in April 2008 or 2009 and that Bouknight

continued working only as a consultant, but Wilmot acknowledged that they had

no written consulting agreement. Although the parties disagreed about whether

initial funding was obtained that would trigger all of the EEA’s compensation

15
provisions, it is undisputed that Bouknight was not paid the monthly allowance of

$25,000 that was due him under the terms of the EEA “[i]n the interim and until

the initial funding [was] acquired” for the Peace Refinery. Rather, Bouknight was

paid $152,000 for his work between January 2008 and September 2009. Thus,

there was sufficient evidence to support the trial court’s finding that Bouknight

acted in reliance on Wilmot’s misrepresentation and that he suffered injury

thereby. See Italian Cowboy, 341 S.W.3d at 337 (setting out elements of fraud);

City of Keller, 168 S.W.3d at 810; Arias, 265 S.W.3d at 468.

Likewise, there is evidence that the fraud here arose in the context of a

contract, namely the EEA. See Haase, 62 S.W.3d at 798. Wilmot argues that

because the trial court found that he did not have the authority to bind CIPR to the

EEA, it was not a valid contract and thus will not support a conclusion that he

fraudulently induced Bouknight into the executing the EEA, and he relies on

Haase to support his argument. However, Haase is distinguishable from the

present case. In Haase, the supreme court held that Texas law imposes a duty to

abstain from inducing another to enter into a contract through the use of fraudulent

misrepresentations, but “there can be no breach of that duty when one is not

induced into a contract.” Id. at 798. The Haase court stated, “[W]hen a party has

not incurred a contractual obligation, it has not been induced to do anything.” Id.

16
It concluded that because the parties in Haase “never reached a final agreement”

the plaintiff could not maintain a fraudulent inducement claim. Id.

Here, by contrast, the trial court never found that the EEA was not a valid

agreement. It merely found that Wilmot misrepresented his authority to enter into

it on behalf of CIPR. The record demonstrates the existence of a valid contract, in

that Wilmot offered Bouknight employment as the COO of the Peace Refinery

Project, Bouknight accepted his offer, both of them agreed to the terms set forth in

the EEA and executed the agreement, and Bouknight performed his obligations

under the EEA. See DeClaire v. G & B McIntosh Family Ltd. P’ship, 260 S.W.3d

34, 44 (Tex. App.—Houston [1st Dist.] 2008, no pet.) (setting out elements of

valid contract as requiring “(1) an offer, (2) an acceptance, (3) a meeting of the

minds, (4) each party’s consent to the terms, and (5) an execution and delivery of

the contract with the intent that it be mutual and binding”).

There is likewise evidence of Bouknight’s detrimental reliance on Wilmot’s

misrepresentation: Bouknight left his consulting position with Energy Allied after

being recruited by Wilmot, and he worked on the Peace Refinery Project while

under the impression that he was an executive on the project and believed

Wilmot’s representations that the financing was being arranged and that he would

soon get paid under the terms of the EEA. See Haase, 62 S.W.3d at 798

(discussing significance of detrimental reliance element of fraudulent inducement

17
claim). Texas courts have long held that when one party enters into a contract with

no intention of performing, that misrepresentation may give rise to an action in

fraud. See, e.g., Formosa Plastics Corp. USA v. Presidio Eng’rs & Contractors,

Inc., 960 S.W.2d 41, 46–47 (Tex. 1998); Crim Truck & Tractor Co. v. Navistar

Int’l Transp. Co., 823 S.W.2d 591, 597 (Tex. 1992).

We conclude that the evidence was legally and factually sufficient to support

the trial court’s conclusion that Wilmot fraudulently induced Bouknight into

executing the EEA.

Wilmot also argues that he cannot be held liable for fraudulent inducement

in his individual capacity because he acted at all times as an agent of CIPR.

However, as we discussed above, the evidence was sufficient to support the trial

court’s conclusion that Wilmot did not have the authority to bind CIPR to the EEA.

Wilmot has pointed to no legal authority to support his contention that he should

not be held liable for his own acts of fraud. See, e.g., Kingston v. Helm, 82 S.W.3d

755, 758–59 (Tex. App.—Corpus Christi 2002, pet. denied) (holding that

corporation’s employee is personally liable for tortious acts that he directs or

participates in during his employment and that “a corporate agent can be held

individually liable for fraudulent statements or knowing misrepresentations even

when they are made in the capacity of a representative of the corporation”) (citing

Leyendecker & Assocs., Inc v. Wechter, 683 S.W.2d 369, 375 (Tex. 1984), and

18
Commercial Escrow Co. v. Rockport Rebel, Inc., 778 S.W.2d 532, 541 (Tex.

App.—Corpus Christi 1989, writ denied)); Maintenance, Inc. v. ITT Hartford

Group, Inc., 895 S.W.2d 816, 819 (Tex. App.—Texarkana 1995, writ denied) (“An

agent may be liable for its own acts of negligence or fraud committed in

performing a contract for its principal if those negligent or fraudulent acts cause

reasonably foreseeable harm to a third party.”).

Wilmot argues that the merger clause in the EEA prevents a finding of

fraudulent inducement. However, even a written contract containing a merger

clause can be avoided for fraud in the inducement, and the parol evidence rule does

not stand in the way of proof of such fraud. Italian Cowboy, 341 S.W.3d at 331;

see also Formosa Plastics, 960 S.W.2d at 46 (“This Court has also repeatedly

recognized that a fraud claim can be based on a promise made with no intention of

performing, irrespective of whether the promise is later subsumed within a

contract.”); Dallas Farm Mach. Co. v. Reaves, 307 S.W.2d 233, 239 (Tex. 1957)

(“[T]he law long ago abandoned the position that a contract must be held sacred

regardless of the fraud of one of the parties in procuring it.”).

Wilmot further argues that the economic loss rule prohibits Bouknight from

prevailing on his fraudulent inducement claim. This argument likewise fails

because the Texas Supreme Court has held that “tort damages are not precluded

19
simply because a fraudulent representation causes only an economic loss.”

Formosa Plastics, 960 S.W.2d at 47.

Wilmot also contends that Bouknight’s fraudulent inducement claim must

fail as a matter of law because CIPR was a responsible third party. The trial court

permitted Wilmot to name CIPR as a responsible third party. However, the trial

court did not apportion any liability to CIPR in its findings of fact and conclusions

of law or in its final judgment. Furthermore, Wilmot has not presented any

evidence that CIPR was a participant in his fraud against Bouknight. Thus, this

argument also fails.

Finally, Wilmot argues that the supreme court’s opinion in Sawyer v. E.I.

DuPont De Nemours & Co. prohibits Bouknight from establishing his fraudulent

inducement claim. In Sawyer, former employees brought an action against their

former employer, DuPont, alleging that they were fraudulently induced to

terminate their employment with DuPont and accept employment with its wholly-

owned subsidiary, DuPont Textiles and Interiors (“DTI”). 430 S.W.3d 396, 398

(Tex. 2014). The former employees alleged that DuPont assured them that it

would not sell DTI and that they would continue to have the same pay and benefits

they had had at DuPont. Id. However, after the employees moved to DTI, DuPont

sold DTI to another company that reduced the former DuPont employees’ pay and

benefits. Id. The supreme court held that because the employees were at-will

20
employees, they could not bring an action for fraud that depended upon continued

employment, citing the holding of various Texas courts that “a fraud claim cannot

be based on illusory promises of continued at-will employment.” Id. at 400.

Sawyer is factually distinguishable from the present case, which does not

involve a promise of continued at-will employment. Bouknight was not an at-will

employee of Wilmot’s at the time that Wilmot made the fraudulent

misrepresentation that induced Bouknight to leave his consulting job with Energy

Allied and work for CIPR with Wilmot as his supervisor. In fact, Bouknight was

hired for a term of years pursuant to the EEA, which obligated his new employer to

provide him with at least his base pay for a period of five years unless he was

terminated for cause. Thus, Sawyer does not apply here. Furthermore, as the

Saywer court recognized, its holding in that case did not mean that even an at-will

employee can never sue for fraud. Id. “Recovery of expenses incurred in reliance

on a fraudulent promise of prospective employment has been allowed because

neither the injury nor the recovery depends on continued employment.” Id. Again,

here, Wilmot fraudulently induced Bouknight to enter into the EEA by

misrepresenting his authority to bind CIPR to the EEA. Bouknight performed the

services and duties of the COO as set out in the EEA, but he was not paid

according to its terms because of Wilmot’s fraudulent misrepresentation.

We overrule Wilmot’s first, second, fourth, and fifth issues.

21
Damages

In his third issue, Wilmot argues that the evidence is legally and factually

insufficient to support the trial court’s award of damages. Alternatively, he argues

that the amount of damages awarded was excessive.

A. Damages for Fraudulent Inducement

Damages for fraudulent inducement typically conform to one of two

measures of damages: an “out-of-pocket” measure or a “benefit-of-the-bargain”

measure. See, e.g., Aquaplex, Inc. v. Rancho La Valencia, Inc., 297 S.W.3d 768,

775 (Tex. 2009); Formosa Plastics, 960 S.W.2d at 49. “The out of pocket measure

computes the difference between the value paid and the value received, while the

benefit-of-the-bargain measure computes the difference between the value as

represented and the value received.” Aquaplex, Inc., 297 S.W.3d at 775 (quoting

Formosa Plastics, 960 S.W.2d at 49); see also Baylor Univ. v. Sonnichsen, 221

S.W.3d 632, 636 (Tex. 2007) (per curiam) (observing that out-of-pocket damages

“derive from a restitutionary theory,” while benefit-of-the-bargain damages “derive

from an expectancy theory”). “Under the benefit-of-the bargain measure, lost

profits on the bargain may be recovered if such damages are proved with

reasonable certainty.” Aquaplex, Inc., 297 S.W.3d at 776 (citing Formosa Plastics,

960 S.W.2d at 50).

22
B. Sufficiency of the Evidence of Damages

Here, the trial court found that Bouknight “suffered economic injury as a

result of [Wilmot’s] fraud in the inducement” and that Bouknight “was owed

$25,000 per month for five years.” The trial court found that the amount that

Bouknight was owed must be “decreased by the amount of $152,500 which he

[had] previously received for his services.” It awarded Bouknight damages of

$1,337,500.

The trial court based its findings on the clause in the EEA that provided, “In

the interim and until the initial funding is acquired, Company agrees to pay

Executive a monthly allowance of $25,000.” The EEA, by its own terms, was to

be effective from when it was executed in January 2008 for a period of five years.

Furthermore, the terms of the agreement required payment of “an amount equal to

[Bouknight’s] base salary rate for the remaining period of the Agreement” if the

EEA was terminated at CIPR’s discretion at any point. It is undisputed that

Bouknight was paid $152,500 for his work. Thus, there was sufficient evidence to

support the trial court’s conclusion that $1,337,500 constituted the benefit of the

bargain to Bouknight. Stated another way, that amount, as proved with reasonable

certainty by Bouknight based on the terms of the EEA and the evidence presented

at trial, reflected the difference between the value of the EEA as represented to

23
Bouknight and the value he actually received. See Aquaplex, Inc., 297 S.W.3d at

775–76.

Wilmot argues that Bouknight could not obtain benefit-of-the-bargain

damages in this case because Bouknight did not contract with Wilmot in his

individual capacity. However, as we have already held, the record demonstrates

the existence of a valid contract, in that Wilmot offered Bouknight employment as

the COO of the Peace Refinery Project, Bouknight accepted his offer, both of them

agreed to the terms set forth in the EEA and executed the agreement, and

Bouknight performed his obligations under the EEA. See DeClaire, 260 S.W.3d at

44 (setting out elements for valid contract). Likewise, Wilmot has not presented

any valid legal theory supporting his claim that he cannot be held individually

liable for his own act of fraud. See, e.g., Kingston, 82 S.W.3d at 758–59.

Wilmot also argues that Bouknight mitigated his damages by working

elsewhere following his termination in 2009. However, the fact that Bouknight

was subsequently employed by a different company is irrelevant in determining the

benefit he anticipated from the performance of the EEA. The EEA entitled him to

five years of his base salary if CIPR terminated his employment in its discretion

before the EEA expired on its own terms. The EEA did not limit Bouknight’s

ability to find new employment upon termination or otherwise condition the

payment of his base salary for the full term of the contract on his remaining

24
unemployed after being terminated by CIPR at its discretion. An injured party is

required to exercise reasonable care to minimize his damages, if the damages can

be avoided with only slight expense and reasonable effort. Harris Cnty. v. Smoker,

934 S.W.2d 714, 721 (Tex. App.—Houston [1st Dist.] 1996, writ denied). As the

terms of the EEA demonstrate, no action on Bouknight’s part could have

minimized his employer’s damages for the failure of the EEA. See id. Wilmot

does not cite any authority indicating that Bouknight should not receive as

damages the amount he would have received under the EEA had it been performed

according to its terms. See Cook Composites, Inc. v. Westlake Styrene Corp., 15

S.W.3d 124, 135 (Tex. App.—Houston [14th Dist.] 2000, pet. dism’d) (holding

that breaching party bears burden of proving that damages could have been

mitigated and that injured party was not required to mitigate its damages by

forgoing its rights and remedies under its agreement with breaching party).

Wilmot also argues that there was no evidence that his fraudulent

inducement was the proximate cause of Bouknight’s damages. He argues that

factors such as the financial crash of 2008 and the civil war in Côte d’Ivoire were

the causes of the failure of the Peace Refinery Project and CIPR. However, as

discussed above, the evidence demonstrates that Wilmot induced Bouknight into

the EEA by misrepresenting his ability to bind CIPR to the terms of the EEA.

According to Wilmot’s own testimony, CIPR never intended to honor the EEA,

25
and Wilmot knew this within two months after he and Bouknight executed the

EEA. However, he continued to assign Bouknight job responsibilities and

Bouknight performed his obligations under the EEA for more than a year and a

half, relying on Wilmot’s initial misrepresentation and on his continued

representations that the financing was being arranged and that Bouknight would

eventually be paid pursuant to the EEA. We conclude that there is evidence that

Wilmot’s misrepresentation was the cause of Bouknight’s damages, as found by

the trial court.

Wilmot also argues that Bouknight waived his $25,000 per month allowance

and that Bouknight waived any requirement of written notice of termination, but

these contentions are likewise unsupported by the record. Wilmot further contends

that employment law principles limit Bouknight’s recovery in this case. However,

Wilmot does not point to any place in the record where he presented this argument

to the trial court. Accordingly, it is waived. See TEX. R. APP. P. 33.1(a).

We overrule Wilmot’s third issue.

Conclusion

We affirm the judgment of the trial court.

Evelyn V. Keyes
Justice

Panel consists of Chief Justice Radack and Justices Jennings and Keyes.

26

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/3081783. Public record. Not legal advice.