Opinion ID: 21695
Heading Depth: 3
Heading Rank: 1

Heading: State Law Statutory Fraud

Text: 30 Jordan contends that the December 24, 1996 contract violates Texas securities laws because it allegedly involved the transfer of securities under a fraudulently induced contract. Section 27.01(a) of the Texas Business and Commerce Code imposes civil liability for false representations of material facts that are relied on by a plaintiff in entering into a real estate or stock transaction. Fraud under this section consists of either a false representation of a past or existing material fact, when the false representation is made to another person with the intent to induce that person to enter into the contract and that person relies on that representation, or a false promise to do an act, when the false promise is material and made without the intention of completing it. Tex. Bus. & Com. Code Ann 27.01(a). Therefore, the securities fraud laws generally embody the same elements of common law fraud, including the elements of reliance and materiality. See Haralson v. E.F. Hutton Group, Inc., 919 F.2d 1014, 1026 n.4 (5th Cir. 1991). Section 27.01(a) also applies only to situations where there is an actual conveyance of the stock, and not to situations where there is merely a breach of contract to convey stock. See Stanfield v. O'Boyle, 462 S.W.2d 270, 271 (Tex. 1971). This narrow reading of Section 27.01(a) is consistent with the Supreme Court of Texas' interpretation that the statute is penal in nature and thus must be strictly construed. See Bykowicz v. Pulte Home Corp., 950 F.2d 1046, 1050 (5th Cir. 1992). 31 Intent to defraud is an element of both statutory securities fraud and common law fraudulent inducement. See Haralson, 919 F.2d at 1026 n.4. As discussed supra, Jordan introduced no evidence that demonstrates the existence of a genuine issue of material fact as to whether Kimmons intended to enter into two separate contracts. At most the evidence indicates that the parties once contemplated two contracts, but that they ultimately settled on one. Accordingly, summary judgment is affirmed on this issue as well. 32