EX PARTE JOSE ZAMARRIPA ALVARADO (Other)

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State: Texas

Court: Criminal Court of Appeals

Docket No: AP-76,365

Case Date: 06/16/2010

Plaintiff: Patricia Louise Harkins

Defendant: The State of Texas--Appeal from County Criminal Court No. 10 of Tarrant County

Preview:Edward B. Elmer, M.D., P.A. v. Santa Fe Properties, Inc.--Appeal from 81st Judicial District Court of Atascosa County
MEMORANDUM OPINION No. 04-05-00821-CV Edward B. ELMER, M.D., P.A., Appellant v. SANTA FE PROPERTIES, INC., Appellee From the 81st Judicial District Court, Atascosa County, Texas Trial Court No. 00-12-0611-CVA-A Honorable Donna S. Rayes, Judge Presiding

Opinion by: Catherine Stone, Justice Sitting: Alma L. L pez, Chief Justice Catherine Stone, Justice Sarah B. Duncan, Justice Delivered and Filed: December 13, 2006 AFFIRMED Edward B. Elmer, M.D., P.A., a partner in Atascosa Medical Associates, L.L.P., appeals the trial court's judgment holding him liable for the partnership's failure to pay a judgment on a partnership debt. We affirm. Factual and Procedural Background Santa Fe Properties, Inc. ("Santa Fe") originally sued Atascosa Medical Associates, L.L.P. ("AMA"), Verdon J. Peters, D.P.M., and Edward B. Elmer, M.D. for breach of a commercial lease. Santa Fe later added Verdon J. Peters, D.P.M, P.A. and Edward B.Elmer, M.D., P.A. by virtue of their status as the only partners of AMA. On October 19, 2001, the trial court held that AMA breached the lease and granted partial summary judgment in favor of Santa Fe awarding approximately $125,000 in damages and costs. Nearly one year later the court severed the judgment from the remaining parties and claims making the judgment against AMA final. After nearly two years elapsed, Santa Fe could not collect the judgment from AMA. On June 1, 2004, the trial court granted a take-nothing judgment in favor of Elmer individually, but awarded partial summary judgment in favor of
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Santa Fe holding Elmer, M.D., P.A. liable as a partner for the damages previously assessed against AMA due to the breach of contract. (1) Ultimately, Santa Fe non-suited Peters in his individual capacity and as a partner, as well as any remaining unadjudicated issues, making the judgment against Elmer final. On appeal, Elmer challenges the trial court's summary judgment award and his liability for Santa Fe's judgment against AMA. Specifically, Elmer contends that because Santa Fe initially obtained judgment against AMA alleging it was an LLP, Santa Fe's suit against Elmer as a partner is barred by judicial or quasi-estoppel and the doctrine of election of remedies. Elmer also contends that he is not subject to liability for partnership debts because at all relevant times Elmer maintained the type of liability insurance required by TRPA. We disagree with Elmer's contentions and hold that because AMA was not a properly registered limited liability partnership when it incurred its lease obligations, Elmer was not protected from individual liability, and therefore Santa Fe could properly pursue judgment against Elmer. Texas Revised Partnership Act In order to protect partners from individual liability, registered limited liability partnerships (LLPs) must comply with statutory registration requirements set forth in article 6132b-3.08 of the Texas Revised Partnership Act (TRPA). Tex. Rev. Civ. Stat. Ann. art. 6132b-3.08 (Vernon Supp. 2006). Article 6132b-3.08(a) provides that partners are protected from individual liability for partnership debts and obligations incurred while the partnership is a properly registered limited liability partnership. Id. In order to qualify as a properly registered limited liability partnership, certain statutory requirements must be met. Article 6132b-3.08(d) provides as follows: (d) Insurance or Financial Responsibility. (1) A registered limited liability partnership must: (A) carry at least $100,000 of liability insurance of a kind that is designed to cover the kinds of errors, omissions, negligence, incompetence, or malfeasance for which liability is limited by Subsection (a)(2); or (B) provide $100,000 of funds specifically designated and segregated for the satisfaction of judgments against the partnership based on the kinds of errors, omissions, negligence, incompetence, or malfeasance for which liability is limited by Subsection (a)(2) by: (i) deposit in trust or in bank escrow of cash, bank certificates of deposit, or United States Treasury obligations; or (ii) a bank letter of credit or insurance company bond. Tex. Rev. Civ. Stat. Ann. art. 6132b-3.08 (Vernon Supp. 2006). A plain reading of the statute reveals that it contains no substantial compliance language. Compare Tex. Rev. Civ. Stat. Ann. art. 6132a-1 2.02(e) (Vernon Supp. 2006) (providing that substantial compliance with certificate amendment filing requirements is sufficient for limited partnerships) with Tex. Rev. Civ. Stat. Ann. art. 6132b-3.08(b),(d) (setting forth filing requirements for registered limited liability partnerships, but not including a substantial compliance clause). Therefore, a partnership must be in strict compliance with the insurance or financial responsibility requirements in article 6132b-3.08(d) in order for its partners to receive protection from individual liability under article 6132b-3.08(a). See APCAR Investment Partners VI, LTD. v. Gaus, 161 S.W.3d 137,142 (Tex. App.-Eastland 2005, no pet.) (holding that LLP was required to comply with statutory renewal requirements for maintaining its status as a registered LLP in order to protect its partners from individual liability; noting that article 6132b-3.08(b) does not contain a substantial compliance section for filing the renewal application required each year). We recognize that Elmer displayed individual financial responsibility by obtaining errors and omissions insurance coverage for himself individually. However, this coverage does not protect him from liability for partnership debts under article 6132b-3.08(a) because it is not the type of insurance required by article 6132b-3.08(d). Elmer is the named insured on the policy, and it does not appear to provide coverage for either AMA or Peters. Because AMA did not have the required insurance or other forms of financial responsibility, it was not a properly registered LLP when it incurred its lease obligations; consequently Elmer is not protected from individual liability under Article 6132b3.08(a). See id. While Elmer can be held liable as a partner for the damages resulting from AMA's contract breach, we must determine whether Santa Fe can properly pursue summary judgment against Elmer subsequent to obtaining a judgment against AMA.
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Pre-TRPA Cases Since the creation of the TRPA in 1994, Texas courts have not addressed this subject. However, there are two relevant pre-TRPA cases. In Carlyle Joint Venture v. H.B. Zachry Co., this court affirmed the trial court's arbitration award against a joint venture and held that the joint venture's partners were also jointly and severally liable despite the fact that they were not served or joined in the arbitration proceeding. 802 S.W.2d 814 (Tex. App.-San Antonio 1990, writ denied). The court's holding was based entirely on Section 15 of the Texas Uniform Partnership Act, which was the predecessor of the TRPA. See Former Tex. Rev. Civ. Stat. Ann. art. 6132b 15 (Vernon 1970). (2) Another notable case is In re Jones. 161 B.R. 180 (Bankr. N.D. Tex. 1993). Here a trustee was unable to obtain satisfaction of a judgment from the partnership and subsequently sued four partners individually. Id. The partners in turn claimed that the suit was barred by res judicata and collateral estoppel. Id. at 181. After addressing Carlyle and sections 16.004 and 17.022 of the Texas Civil Practice and Remedies Code, the court stated that "there is nothing wrong with the partnership being sued and, if its liability is established, a subsequent suit being filed against the partners on their personal liability for the partnership's obligation." Id. at 183. The court held that collateral estoppel barred the partners from relitigating the partnership's liability for which the partners were liable under the Uniform Partnership Act. Id. at 184. Based on the reasoning of both Carlyle and In re Jones, we conclude there are no collateral estoppel or res judicata issues regarding Santa Fe's subsequent suit against Elmer. As a partner, Elmer is personally liable for AMA's obligations and he has no liability protection because of AMA's defunct LLP status. Post-TRPA Cases Elmer's liability for the partnership's debt is likewise established by the governing provisions of the TRPA. Article 6132b-3.05(b) provides that "an action may be brought against a partnership and any or all of the partners in the same action or in separate actions," thus clearly allowing a creditor to sue a partnership and its partners in one suit or in any number of subsequent actions. Tex. Rev. Civ. Stat. Ann. art. 6132b-3.05(b). While there are no post-TRPA cases specifically addressing article 6132b-3.05's impact on the interplay between lawsuits against a partnership and its partners, based on this section's statutory construction, we conclude 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. Allowing a subsequent suit against an individual partner will not disserve policies underlying res judicata such as promoting judicial economy and the prevention of vexatious litigation. Cf. Barr v. Resolution Trust Corp. 837 S.W.2d 627, 629 (Tex. 1992) (stating that the policies behind res judicata reflect "the need to bring all litigation to an end, prevent vexatious litigation, maintain stability of court decisions, promote judicial economy and prevent double recovery"). Because collateral estoppel mandates that the damage amount awarded in the suit against the partnership act as a limit on the total damages awarded to the creditor, there will be no opportunity for the creditor to receive a double recovery in subsequent suits against partners. See generally Brian Martin, Comment, To What Extent Are Partnership Creditors Afforded More Than One Bite At the Same "Apple": TRPA Section 3.05 and Its Interplay With Principles of Res Judicata, Collateral Estoppel, and Statutes of Limitation, 51 Baylor L. Rev. 149, 161 (1999) (addressing TRPA section 3.05 and its interplay with res judicata and collateral estoppel). Additionally, partnership creditors can use offensive collateral estoppel in a subsequent suit against a partner who was not part of the original suit to prevent the partner from relitigating liability issues previously decided in the creditor's favor. See Sysco Food Services, Inc. v. Trapnell, 890 S.W.2d 796, 801 (explaining requirements for establishing a collateral estoppel bar). Conclusion We hold that article 6132b-3.05 allows separate actions against a partnership and its partners without creating res judicata or collateral estoppel issues. Therefore, Elmer can be sued in a subsequent action by AMA's creditor, Santa Fe, and held liable for the original judgment amount against AMA because AMA was not properly registered as an LLP as required by article 6132b- 3.08 of the Texas Revised Partnership Act. The judgment of the trial court is affirmed.

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Catherine Stone, Justice 1. Hereinafter, Elmer, M.D., P.A. will be referred to as "Elmer." In light of the final summary judgment in favor of Elmer in his individual capacity, his individual liability is no longer an issue. 2. Act of 1961, 57th Leg., R.S., ch. 158 (expired Jan. 1, 1999), amended by Act of 1993, 73rd Leg., R.S., ch. 917 sec. 3.05, 1993 Tex. Gen. Laws 3887, 3893.

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