Appeals court: Judgment against partnership not automatically judgment against partner

Steve Korris Dec. 17, 2008, 11:58am

When Texans win a lawsuit against a partnership but can't collect on the judgment, they can start a second suit against a partner that wasn't named in the first suit, according to appellate judges in Beaumont.

The Texas Ninth District Court of Appeals reversed Montgomery County District Judge Suzanne Stovall, who had thrown out a suit seeking to collect a judgment from an earlier suit.

"Under Texas law, a third party is not required to sue a partner in the same suit as the partnership," Justice David Gaultney wrote.
Chief Justice Steve McKeithen and Justice Hollis Horton agreed.

Now plaintiffs Todd and Pam McNamara can try to hold Inland Environments Ltd. responsible for a default judgment they obtained against RMB/Inland.

They hired RMB/Inland in 2002 for mold remediation at their home. The letterhead on the contract read, "RMB/Inland, a division of RMB Construction."

The contractor's work didn't satisfy the McNamaras. They sued RMB/Inland, and in 2006 they obtained default judgment.

They didn't collect, so in 2007 they sued Inland Environments Ltd.

Inland Environments Ltd. moved for summary judgment, claiming the McNamaras couldn't collect a judgment in a suit to which it was not a party.

Inland Environments Ltd. asserted that it was not named or served in the first suit, and that the claims in the suits weren't the same.
The McNamaras contended that the two businesses were essentially the same entity, by virtue of alter ego, joint enterprise or partnership.

Judge Stovall agreed with Inland Environments Ltd., but the Ninth District disagreed.

"A partnership is an entity distinct from its partners," Gaultney explained.

Generally, he wrote, all partners are liable for debts and obligations of a partnership unless otherwise agreed or provided by law.

He quoted a decision from the Fourth District appeals court in San Antonio that, "a partnership creditor should not be precluded from commencing a subsequent suit against a partner merely because the partner was not part of the original suit or judgment."

He quoted a Supreme Court of Texas decision that judgment against a partnership is not automatically judgment against a partner.

In that case the court held that, "Partners against whom judgment is sought should be both named and served so that they are on notice of their potential liability and will have an opportunity to contest their personal liability."

Gaultney wrote, "The opportunity to contest liability is important whether the plaintiff sues and serves the partnership and the partner in the same suit, or sues them in separate suits as here."

He added that the judgment the McNamaras seek from Inland Environments Ltd. is based on the same claim they asserted against RMB/Inland.

In a footnote he wrote, "We do not address the question of what the McNamaras must prove to recover from Inland, as that issue has not been briefed by the parties."

Bonnie Rust, John Devine and Keith Weber represented the McNamaras. Kerwin Stone represented Inland Environments Ltd.

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