Filed

10 January 13 A9:56
Jerry Deere
District Clerk
Brazoria District
CAUSE NO. _____________________

FREEPORT ECONOMIC § IN THE DISTRICT COURT

DEVELOPMENT CORPORATION, §
§
Plaintiff, §
§
v. § BRAZORIA COUNTY, TEXAS
§
§
HIRAM WALKER ROYALL, §
FREEPORT WATERFRONT PROPERTIES,L.P., §
FREEPORT MARINA, L.P., §
FREEPORT MARINA GP, LLC, §
BRIARWOOD HOLDINGS, LLC, and §
BRIARWOOD CAPITAL CORPORATION, §
§
Defendants. § _____ JUDICIAL DISTRICT

PLAINTIFF’S ORIGINAL PETITION

Plaintiff Freeport Economic Development Corporation files this Original Petition against

Defendants Hiram Walker Royall, Freeport Waterfront Properties, L.P., Freeport Marina, L.P.,

Freeport Marina GP, LLC, Briarwood Holdings, LLC, and Briarwood Capital Corporation, and

for cause of action shows as follows:

I. DISCOVERY CONTROL PLAN

1. Plaintiff intends to conduct discovery under Level 2 of Texas Rule of Civil

Procedure 190.

II. PARTIES

2. Plaintiff Freeport Economic Development Corporation (the “EDC”) is a Texas

development corporation created under the Development Corporation Act of 1999 (now the

Development Corporation Act, TEX. LOC. GOV’T CODE ANN., § 501.001 et seq.). The EDC’s

principal place of business is at 200 W. 2nd Street, Freeport, Texas 77541.

 3. Defendant Hiram Walker Royall (“Walker Royall” or “Royall”) is a Texas

resident and may be served with process at his place of business at 2911 Turtle Creek Blvd.,

Suite 1240, Dallas, Texas 75219-6252.

4. Defendant Freeport Waterfront Properties, L.P. (“Waterfront Properties”) is a

Texas limited partnership and may be served with process by serving its registered agent for

service of process and general partner, Briarwood Capital Corporation, at 2911 Turtle Creek

Blvd., Suite 1240, Dallas, Texas 75219.

5. Defendant Freeport Marina, L.P. (“Marina LP”) is a Texas limited partnership and

may be served with process by serving its registered agent for service of process, John D.

Powers, at 17330 Preston Rd., # 111D, Dallas, Texas 75252.

6. Defendant Freeport Marina GP, LLC (“Marina GP”) is a Texas limited liability

company and may be served with process by serving its registered agent for service of process,

John D. Powers, at 17330 Preston Rd., # 111D, Dallas, Texas 75252.

7. Defendant Briarwood Holdings, LLC (“Briarwood Holdings”) is a Texas limited

liability company and may be served with process by serving its registered agent for service of

process, H. Walker Royall, at 2911 Turtle Creek Blvd., Suite 1240, Dallas, Texas 75219.

8. Defendant Briarwood Capital Corporation (“Briarwood Capital”) is a Texas

corporation and may be served with process through its registered agent for service of process,

H. Walker Royall, at 2911 Turtle Creek Blvd., Suite 1240, Dallas, Texas 75219-6252.

III. JURISDICTION AND VENUE

9. This Court has jurisdiction over this case because the amount in controversy is

within the jurisdictional limits of the Court.

2
 10. Venue is proper in Brazoria County, Texas because all or a substantial part of the

events or omissions giving rise to Plaintiff’s claims occurred in Brazoria County. See TEX. CIV.

PRAC. & REM. CODE § 15.002(a)(1).

IV. FACTS

11. Historic downtown Freeport, Texas (the “City” or “Freeport”) sits on the banks of

the Old Brazos River which, despite its name, is no longer a river but a protected harbor leading

to the Gulf of Mexico. (In 1920 the Brazos River was diverted south of the City by the Army

Corps of Engineers, leaving the Old Brazos riverbed a protected harbor.) The City has a long

and rich history, but for some number of years found itself in a period of economic decline.

12. In a special election held on November 2, 1999, the City’s voters approved a sales

and use tax to undertake projects to promote new and expanded business enterprises within the

City, including projects related to tourism and waterfront development. On December 20, 1999,

the City Council authorized the formation of an economic development corporation, resulting in

the formation of the City of Freeport Industrial Development Corporation. In September 2000,

the City of Freeport Industrial Development Corporation changed its name to Freeport Economic

Development Corporation.

13. John Smith, III was elected president of the EDC on February 15, 2001. On April

2, 2001 the EDC hired Lee Cameron as the EDC’s Economic Development Director.

14. The City and the EDC then engaged the consulting firm Maritime Trust Company

to evaluate the economic status and prospects of the City and to develop a plan to stimulate the

City’s economy, increase property values, create new jobs, and increase tourism. The report

issued by Maritime Trust recommended a downtown revitalization that would serve as a catalyst

for the revitalization of the entire City. The report concluded that development of a large,

3
mixed-use marina on the Old Brazos River was probably the single most important development

that could bring significant economic stimulus to the City.

15. At the time of the Maritime Trust report, the Old Brazos River was lined with

seafood processing operations, a concrete plant, and vacant land. The report identified a large

tract of vacant land owned by a prominent Texas family, the Blaffers, as the ideal location for the

marina. Lee Cameron made contact with the Blaffer family, resulting in a meeting in late 2001

between City and EDC officials and the Blaffer family’s representative (and family member)

Walker Royall. Royall expressed interest in developing a marina.

16. By May of 2002 Royall had done enough market research to conclude that the

marina was a promising project. On July 31, 2002 City Manager Ron Bottoms and Royall, on

behalf of Waterfront Properties, signed a nonbinding Letter of Intent. The City’s vision for

development of the marina, as set out in the Letter of Intent, was that the marina would be built

primarily on the Blaffer land. Additionally, the City would help Waterfront Properties acquire

two parcels of land immediately under and east of the Pine Street Bridge (one owned by the City,

the other by the Brazos River Harbor Navigation District). The Letter of Intent also

contemplated acquisition of other tracts along the river.

17. In August 2002, the City, the EDC, and Royall began discussions with adjacent

landowners regarding acquisition of their property. The EDC was able to purchase one

waterfront tract from Dorothy Stanley (the “Stanley Land”) in March 2003. Negotiations with

other landowners, however, did not go well, and the EDC initiated eminent domain proceedings

to acquire the properties.

4
The First Development Agreement

18. On September 22, 2003, the City, the EDC, and Royall’s partnership Waterfront

Properties entered into a Development Agreement (the “First Development Agreement”) under

which Waterfront Properties was to act as the marina’s project developer. As project developer,

Waterfront Properties assumed all responsibility for permitting, design, and construction of the

marina. The project was to be financed by equity from the developer and by a loan from the City

to the EDC, the proceeds of which would then be loaned from the EDC to the developer.

19. Royall signed the First Development Agreement as president of Waterfront

Properties’ general partner, Briarwood Capital. The First Development Agreement identified

Royall as the “Project Developer’s Representative,” with full authority to act on behalf of the

developer in all matters arising out of that agreement.

20. The First Development Agreement provided that the Blaffer family would

contribute a portion of its land to the project, and indicated that such land would be accorded an

equity value of $750,000. Waterfront Properties also agreed to fund all costs of developing the

project in excess of $6 million, not to exceed $1 million unless otherwise agreed.

21. The First Development Agreement also provided that the City would: (a) sell to

Waterfront Properties certain land owned by the City (the “City Land”) for $50,000; (b) abandon

and vest title in an easement over the Blaffer family land (the easement is defined as the “Brazos

Boulevard Land”) in Waterfront Properties; and (c) use its best efforts to assist Waterfront

Properties in purchasing land owned by the Brazos River Harbor Navigation District (the

“District Land”) for $25,000.

22. Section 7.1 of the First Development Agreement set out certain conditions to the

City’s performance of its obligations under the agreement, and provided that if those conditions

5
were not fulfilled by July 1, 2004, then the City had the right to terminate the agreement. One of

those conditions was that Waterfront Properties would acquire or arrange to acquire the City

Land, the District Land, the Brazos Boulevard Land, and three other tracts of land owned by

private individuals (Gore, Henderson, and Jones).

23. Another condition was “[m]utual agreement by the City and [Waterfront

Properties] as to the Adjacent Land Development Plan to be attached hereto as Exhibit C.” The

Adjacent Land was comprised in large part of a portion of the Blaffer land. The agreement

contemplated development of hotel, retail, and multi-family residential improvements to serve

the marina and the surrounding community. Waterfront Properties was responsible for preparing

the Adjacent Land Development Plan.

24. Pursuant to an Assignment of Development Agreement dated as of December 15,

2003, and with the consent of the City, Waterfront Properties assigned to another Royall

partnership, Marina LP, all of Waterfront Properties’ right, title, interest and obligations under

the First Development Agreement, except for Waterfront Properties’ obligations pertaining to the

Adjacent Land.

25. As agreed, the City abandoned its easement in the Brazos Boulevard Land and

vested title to the property in Waterfront Properties.

26. And, as agreed, the City conveyed to the EDC, and the EDC conveyed to

Marina LP, the City and District Lands. The conveyance from the EDC to Marina LP was by

General Warranty Deed dated June 25, 2004 (the “City/District Deed”), a copy of which is

attached hereto as Exhibit 1.

27. The City/District Deed gave the EDC the option to repurchase the City Land and

District Land if by the second anniversary of the recording of the deed, Marina LP had failed to

6
commence construction of a marina on the property or, having commenced construction, failed

to use commercially reasonable efforts to pursue the construction to completion.

28. Marina LP was to pay $75,000 for the City Land and District Land, which amount

was to be placed in escrow and used to pay expenses of design and/or development of the

marina. It appears, however, that the $75,000 was paid to a related Walker Royall entity, Sun

Resorts International. Marina LP never has accounted for the use of those funds and the EDC

never has seen any evidence that the $75,000 went toward marina expenses.

29. The City, the EDC, and Marina LP entered into three successive amendments to

the First Development Agreement. The last of these, the Third Amendment to Development

Agreement, dated effective May 22, 2006, extended the date for satisfaction of conditions in

Section 7.2 of the First Development Agreement until January 1, 2007.

The Second Development Agreement

30. On May 3, 2005, Walker Royall appeared at a town hall meeting held at the First

Baptist Church in Freeport, with some 300 to 400 citizens of the City present. Royall declared at

the meeting that he was putting his property up for the project and that he personally would

invest $1 million to develop the marina.

31. By the summer of 2006, however, the EDC had seen little movement on the part

of Royall and Marina LP toward development of the marina. No plans ever materialized – either

for the marina or for development of the Adjacent Land. The eminent domain proceedings

dragged on, and political opposition to the City lending the developer $6 million grew.

Frustrated with the lack of progress, the EDC considered taking over both development and

management of the project itself and building the marina on land already acquired. To that end,

7
on July 21, 2006 the EDC gave Marina LP notice that it wished to repurchase the City and

District Lands, as provided by the Repurchase Option in Exhibit C to the City/District Deed.

32. Royall, however, continued to insist to the City and the EDC that he and the

partnerships he controlled were interested in, and capable of, developing the marina. Royall

persuaded the EDC not to take the City and District Lands back, and agreed to extend the EDC’s

option to repurchase the property until September 1, 2007 if the EDC would agree to rescind its

July 21, 2006 exercise of the option.

33. Royall also persuaded the EDC to sell the Stanley Land to Waterfront Properties,

which the EDC did, by General Warranty Deed dated September 11, 2006 (the “Stanley Deed”),

a copy of which is attached hereto as Exhibit 2. The conveyance of the Stanley Land, however,

was subject to certain conditions, including that the developer’s obligations under the First

Development Agreement were to be substantially completed by September 11, 2008. The

Stanley Deed further provides that upon failure of any condition, the EDC “shall have the right

to terminate the estate herein granted and to re-enter and retake the property hereby conveyed . . .

.” Id. at p. 2.

34. Then, Royall and the EDC entered into certain lease transactions and a second

development agreement containing terms materially different from the first.

35. On February 8, 2007 the EDC and Marina LP entered into a Public Marina

Project Development Agreement (the “Second Development Agreement”). Royall signed the

Second Development Agreement as president of Briarwood Capital, a member of Marina GP, the

general partner of Marina LP. This Second Development Agreement also identified Royall as

the “Project Developer’s Representative,” with full authority to act on behalf of the Developer in

all matters arising out of that agreement.

8
 36. The City was not a party to the Second Development Agreement.

37. The Second Development Agreement shifted all responsibility for design and

construction of the marina to the EDC. And, it provided that the marina would be owned by the

EDC and leased to Marina LP.

38. Under the Second Development Agreement, the EDC was to fund $6 million

toward the costs of designing, developing, and constructing the marina. Marina LP was

obligated to “at its sole cost and expense, fund all costs of developing the Project in excess of

$6,000,000.”

39. The Second Development Agreement contemplated that the marina would be built

primarily on four defined tracts of land:

a. The Blaffer Land. The size of the Blaffer Land to be devoted to the project

shrank considerably; it was now defined as only one acre of waterfront property.

b. The District Land. Now defined to mean the tracts conveyed to Marina LP under

the City/District Deed.

c. The Stanley Land. The property conveyed by the EDC to Waterfront Properties

under the Stanley Deed.

d. The Henderson Land. A tract directly to the east of the Stanley Land. At the time

the Second Development Agreement was signed, neither the EDC nor Marina LP

had acquired the Henderson Land.1

40. The Second Development Agreement provided that the EDC would lease the

Blaffer, District, Stanley, and Henderson Lands (assuming Marina LP acquired the Henderson

1
The EDC acquired the Henderson Land on January 12, 2009. The EDC sold the Henderson Land to
the City on October 12, 2009 for $950,000 – money the EDC needed to finish construction of the marina
project because of Marina LP’s material breaches of the Second Development Agreement.

9
Land) and develop the marina on those properties. Marina LP, however, was obligated to

reimburse the EDC for any rent paid under the leases.

41. And, once the marina was complete and ready for operations, Marina LP would

lease the marina from the EDC for a term of 40 years, pursuant to a Marina Facility Lease

Agreement (the “Marina Lease”) entered into on the same date as the Second Development

Agreement. Like the Second Development Agreement, the Marina Lease also provided that

Marina LP would reimburse to the EDC any rent paid to lease the Blaffer, District, Stanley, and

Henderson Lands.

42. In a nutshell, the EDC was led to believe, pursuant to the Second Development

Agreement and the Marina Lease, that: (a) any rent the EDC would pay to Royall’s partnerships

for land on which the marina was located would be offset by payments from Marina LP; (b) the

EDC’s outlay for the marina would be limited to $6 million, with any costs over that to be paid

by Royall’s partnership Marina LP; and (c) the EDC would more than recoup its $6 million from

the rent the EDC would receive from Marina LP over the forty-year term of the Marina Lease.

43. The EDC began construction of the marina in November 2006.

The Land Leases

44. As provided under the Second Development Agreement, Briarwood Holdings as

landlord and the EDC as tenant executed a lease agreement, pursuant to which the EDC leased

the District, Stanley, and Henderson Lands (the “District/Stanley Land Lease”). Waterfront

Properties as landlord and the EDC as tenant executed a lease agreement pursuant to which the

EDC leased the Blaffer Land (the “Blaffer Land Lease”) (the District/Stanley Land Lease and the

Blaffer Land Lease are sometimes collectively referred to herein as the “Land Leases”).

10
 45. The EDC’s rental obligations under the Land Leases began September 1, 2007.2

46. Annual rent for the first year under both leases was $0. Annual rent under the

District/Stanley Land Lease for years two through five is $36,500. Rent escalates according to

the schedule in the lease, topping off at $97,070 in years 36-40. However, the annual rental

under the District/Stanley Land Lease was to be reduced by $20,000 per year in the event the

landlord did not obtain title to the Henderson Land. Briarwood Holdings has never obtained title

to the Henderson Land. Thus, annual rent for years two through five is $16,500 (for a monthly

rental of $1,375).

47. The EDC began making payments under the District/Stanley Land Lease on

September 1, 2008 (year two of the Term). For the period September 1, 2008 through September

31, 2009 the EDC mistakenly overpaid the rent due on the District/Stanley Land Lease, resulting

in a $21,666.71 overpayment. By letter dated November 10, 2009, the EDC requested that

Marina LP apply $4,125 of the overpayment to the EDC’s rent through December 31, 2009 and

either refund the balance or apply it to the EDC’s obligations under the Blaffer Land Lease.

Marina LP has refused to acknowledge the overpayment, refused to apply any portion of the

overpayment to the EDC’s obligations under the Blaffer Land Lease, and refused to issue a

refund. Instead, it has declared the EDC in default under both leases.

48. Annual rent under the Blaffer Land Lease for years two through five is $70,000.

Rent escalates according to the schedule in the lease, topping off at $186,201 in years 36-40.

2
Rent is payable under the Land Leases in advance on the first day of each month through the “Term”
of the Land Leases. The “Term” began on the earlier of September 1, 2007 or the date the marina opened
for business. The marina has not yet opened for business; accordingly, the Term began on September 1,
2007.

11
The New EDC Board

49. In July 2008 the City Council replaced the EDC board in its entirety. The new

board met for the first time on July 28, 2008; at that meeting, Dan Tarver was elected president.

On October 2, 2008, the board fired Lee Cameron from his position as EDC Director.

50. From the time Tarver and the new board of directors took over until now, their

main focus has been to get the marina built and up and running. Tarver and the EDC board have

repeatedly sought the assistance and cooperation of Walker Royall and Marina LP. The EDC’s

efforts have been met with nothing but refusal on the part of Royall and Marina LP to live up to

their obligations.

Marina LP Breaches the Second Development Agreement

and Royall’s Motives Become Clear

51. As of the date of filing this Petition, the costs the EDC has incurred in developing

the marina total approximately $10 million. Over and above that amount, it is estimated that an

additional $1,550,000 will be required to complete the marina project.

52. The EDC has on numerous occasions requested that Marina LP comply with its

obligations to fund the costs of developing the marina in excess of $6 million. However, in

material breach of the Second Development Agreement, Marina LP has refused to comply with

and has repudiated its obligations to fund the additional costs. Royall has consistently

maintained that he and his partnership have no funding obligations under the Second

Development Agreement.

53. At a meeting with the EDC board on September 25, 2009, Royall was asked if he

had any intention of living up to his obligations under the Second Development Agreement.

Royall responded that he and his partnerships have no money. Even if they did, Royall said, he

would not give the EDC a penny for the marina project.

12
 54. In later conversations with EDC board members and members of the City

Council, Royall suggested that he would be willing to back out of the Second Development

Agreement and the Marina Lease – leaving the EDC to bear the full cost of building and

operating the marina, and leaving Royall a happy landlord under the Land Leases, collecting

exorbitant rents with no offsetting obligation to reimburse the EDC for the rental payments.

The EDC Sends Notices of Default and Terminates the Second Development Agreement

55. On November 2, 2009, pursuant to Section 8.2 of the Second Development

Agreement, the EDC gave Marina LP notice of Marina LP’s material breaches of the agreement.

On November 6, 2009 the EDC gave notice to Marina LP that Marina LP was obligated to

reimburse the EDC $100,917.32 for amounts the EDC had paid under the Land Leases as of

September 30, 2009. Marina LP failed to cure its material breaches under the Second

Development Agreement and refused to reimburse the EDC for amounts the EDC had paid under

the Land Leases. And, by letter dated December 8, 2009, Marina LP repudiated any further

obligations under and purported to terminate the Second Development Agreement and the

Marina Lease. Accordingly, on December 9, 2009, the EDC terminated the Second

Development Agreement and the Marina Lease.

56. By letter dated November 22, 2009, the EDC forwarded an invoice from Andrews

Kurth LLP for the amount of $25,000 – the attorneys’ fees the EDC incurred for preparation of

the Second Development Agreement – and requested reimbursement in that amount. Marina LP

has failed to reimburse the EDC the $25,000 in attorneys’ fees.

57. Development of the marina has been delayed because Royall and Marina LP

refused to perform their obligations under the Second Development Agreement. The EDC has

been forced to seek funding for the marina project from other sources. The EDC sold the

13
Henderson Land to the City for $950,000 to raise funds needed for development of the marina.

And, the EDC borrowed $1.75 million at an interest rate of 1.5% over prime to fund the

remaining amounts required to finish the project.

58. The EDC anticipates that the marina will open for business in April 2010.

V. CAUSES OF ACTION

Breach of the Second Development Agreement (Against Marina LP)

59. All prior paragraphs of this Petition are incorporated herein by this reference.

60. The EDC has complied with all of its obligations under the Second Development

Agreement.

61. Marina LP breached the Second Development Agreement by, among other things:

(1) refusing to fund the cost of developing the marina in excess of $6 million; (2) refusing to

reimburse the EDC for rent paid by the EDC under the Land Leases; and (3) refusing to

reimburse the EDC $25,000 in attorneys’ fees for preparing the Second Development

Agreement.

62. Marina LP’s breaches of the Second Development Agreement proximately caused

the EDC damages, for which the EDC is entitled to recover. Those damages include, but are not

limited to: (1) the cost of developing the marina in excess of $6 million; (2) rent paid by the EDC

under the Land Leases; (3) $25,000 in attorneys’ fees for preparation of the Second Development

Agreement; (4) costs of obtaining additional financing; and (5) damages from delays in

constructing the marina.

Breach of the Marina Lease (Against Marina LP)

63. All prior paragraphs of this Petition are incorporated herein by this reference.

64. The EDC has complied with all of its obligations under the Marina Lease.

14
 65. Marina LP breached the Marina Lease by, among other things, refusing to

reimburse the EDC for rent paid by the EDC under the Land Leases.

66. Marina LP’s breach of the Marina Lease proximately caused the EDC damages,

for which the EDC is entitled to recover.

Fraud and Fraudulent Inducement

(Against Royall, MARINA LP, Briarwood Holdings, and Waterfront Properties )

67. All prior paragraphs of this Petition are incorporated herein by this reference.

68. During negotiation of the Second Development Agreement, the Land Leases, and

the Stanley Deed, Royall and Marina LP made material representations and promises, namely,

that: (a) Marina LP would fund any costs of developing the marina in excess of $6 million;

(b) Marina LP would make rental payments to the EDC under the Marina Lease; (c) the $75,000

Marina LP allegedly paid for the Stanley Land would be used to pay costs of developing the

marina; (d) Marina LP would reimburse the EDC for any amounts paid by the EDC under the

Land Leases; and (e) Marina LP would reimburse the EDC for $25,000 in attorneys’ fees the

EDC incurred for preparation of the Second Development Agreement.

69. Such representations were material.

70. Such representations and promises were false, as Royall, Marina LP, Briarwood

Holdings, and Waterfront Properties knew they had no intention of fulfilling the representations

and/or promises.

71. Such misrepresentations were made for the purpose of inducing the EDC to enter

into the Second Development Agreement, the Marina Lease, the Land Leases, and the Stanley

Deed. Such misrepresentations also were made with the purpose of inducing the EDC not to

exercise its option under the City/District Deed to repurchase the City Land and the District

Land.

15
 72. The EDC relied on such false representations and promises in entering into the

Second Development Agreement, the Marina Lease, the Land Leases, and the Stanley Deed.

The EDC also relied on such false representations and promises in not exercising its option under

the City/District Deed to repurchase the City Land and the District Land.

73. Such reliance has caused the EDC injury. The EDC seeks rescission of the

Second Development Agreement, the Marina Lease, the Land Leases, the City/District Deed, and

the Stanley Deed, and relief that would place the EDC in the status it enjoyed before the fraud,

namely: (1) re-conveyance of the City and District Lands to the EDC; (2) re-conveyance of the

Stanley Land to the EDC; (3) reimbursement of all rental payments made by the EDC under the

Land Leases; and (4) reimbursement of $25,000 in attorneys’ fees the EDC incurred for

preparation of the Second Development Agreement.

74. The EDC seeks, in the alternative, the actual damages the EDC incurred as a

proximate result of such fraud.

75. The EDC further seeks exemplary damages.

Statutory Fraud
(Against Royall, MARINA LP, Briarwood Holdings, and Waterfront Properties)

76. All prior paragraphs of this Petition are incorporated herein by this reference.

77. The Second Development Agreement, the Marina Lease, the Land Leases, the

Stanley Deed, and the repurchase option under the City/District Deed all concern transactions

involving real estate.

78. During those transactions, Royall, Marina LP, Briarwood Holdings, and

Waterfront Properties made material representations and promises, namely that: (a) Marina LP

would fund any costs of developing the marina in excess of $6 million; (b) Marina LP would

make rental payments to the EDC under the Marina Lease; (c) the $75,000 Marina LP allegedly

16
paid for the Stanley Land would be used to pay costs of developing the marina; (d) Marina LP

would reimburse the EDC for any amounts paid by the EDC under the Land Leases; and (e)

Marina LP would reimburse the EDC for $25,000 in attorneys’ fees the EDC incurred for

preparation of the Second Development Agreement.

79. Such representations and promises were false, with no intent to fulfill those

promises.

80. Such misrepresentations and false promises were made for the purpose of

inducing the EDC to enter into the Second Development Agreement, the Marina Lease, the Land

Leases, and the Stanley Deed. Such misrepresentations and false promises also were made with

the purpose of inducing the EDC not to exercise its option under the City/District Deed to

repurchase the City Land and the District Land.

81. The EDC relied on such false representations and promises in entering into the

Second Development Agreement, the Marina Lease, the Land Leases, and the Stanley Deed.

The EDC also relied on such false representations and promises in not exercising its option under

the City/District Deed to repurchase the City Land and the District Land.

82. Such reliance has caused the EDC injury. The EDC seeks rescission of the

Second Development Agreement, the Marina Lease, the Land Leases, the City/District Deed, and

the Stanley Deed, and relief that would place the EDC in the status it enjoyed before the fraud,

namely: (1) re-conveyance of the City and District Lands to the EDC; (2) re-conveyance of the

Stanley Land to the EDC; (3) reimbursement of all rental payments made by the EDC under the

Land Leases; and (4) reimbursement of $25,000 in attorneys’ fees the EDC incurred for

preparation of the Second Development Agreement.

17
 83. The EDC seeks, in the alternative, actual and exemplary damages, all as permitted

under Section 27.01 of the Texas Business and Commerce Code.

Liability of Related Entities

84. Defendant Walker Royall has used the business entities of Waterfront Properties,

Marina LP, Marina GP, Briarwood Holdings, and Briarwood Capital – and, likely, other

partnerships and limited liability companies as well – as shams to perpetrate a fraud on the EDC

in structuring business transactions designed to benefit Walker Royall personally, while hiding

behind the corporate and partnership shields.

85. These entities were organized and operated as a mere tool or business conduit of

Walker Royall. Thus, Walker Royall is personally liable for any and all liabilities and fraud of

Marina LP, Waterfront Properties, Marina GP, Briarwood Holdings, and Briarwood Capital.

86. As the general partner of Waterfront Properties, Briarwood Capital is liable for

the fraud of Waterfront Properties.

87. As the general partner of Marina LP, Marina GP is liable for the obligations

incurred by Marina LP under the Second Development Agreement and for Marina LP’s fraud.

88. As a member of Marina GP, Briarwood Capital is liable for the obligations

incurred by Marina GP, including the liabilities of Marina LP.

89. Further, the Defendants incurred liability under the Second Development

Agreement and the Marina Lease under the corporate fiction of various entities without sufficient

assets to satisfy the obligations under those agreements. The Defendants did so in a manner

designed to reap the financial benefits under the Land Leases but leave the EDC without a viable

party against whom it could seek recourse under the Second Development Agreement and the

Marina Lease.

18
 VI. ATTORNEYS’ FEES

90. The EDC is entitled to recover its attorneys’ fees under Section 38.001 of the

Texas Civil Practice and Remedies Code.

91. Alternatively, the EDC is entitled to recover its reasonable costs, expenses, and

attorneys’ fees pursuant to Section 13.25 of the Second Development Agreement and pursuant to

Section 13.2(g) of the Marina Lease.

VII. JURY DEMAND

92. The EDC demands a trial by jury and concurrently with filing this Petition has

paid the appropriate jury fee.

VIII. PRAYER

Plaintiff Freeport Economic Development Corporation respectfully prays that Defendants

Hiram Walker Royall, Freeport Waterfront Properties, L.P., Freeport Marina, L.P., Freeport

Marina GP, LLC, Briarwood Holdings, LLC, and Briarwood Capital Corporation be cited to

appear and answer, and that the Court, after full trial on the merits, issue a judgment and order:

1) rescinding the Second Development Agreement, the Marina Lease, the City/District

Deed, and the Stanley Deed;

2) upon rescission of the City/District Deed and the Stanley Deed, rescinding the Land

Leases;

3) awarding the EDC all costs of developing the marina in excess of $6 million, all rental

payments made by the EDC under the Land Leases, and $25,000 in attorneys’ fees

incurred by the EDC for preparation of the Second Development Agreement;

4) awarding the EDC actual damages;

5) awarding the EDC exemplary damages;

19
6) awarding the EDC attorneys’ fees, expert witness fees, costs for copies of depositions,

and other costs of court;

7) awarding the EDC pre-judgment and post-judgment interest as allowed by law; and

8) granting the EDC such other and further relief, in law or in equity, to which the Court

may find the EDC justly entitled.

Respectfully submitted,

/s/ Karen Jewell

Lawrence J. Fossi
State Bar No. 07280650
Karen Jewell
State Bar No. 10665020
FOSSI & JEWELL
4203 Yoakum Blvd., Suite 100
Houston, Texas 77006
(713) 529-4000 (telephone)
(713) 529-4094 (facsimile)

ATTORNEYS FOR PLAINTIFF

FREEPORT ECONOMIC DEVELOPMENT
CORPORATION

20
Exhibit 1
Exhibit 2

22