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Click here for the full text of this decision FACTS:In 1981, six parties entered into a joint venture to purchase a Houston office business. The parties executed a $3 million promissory note, and paid into the $750,000 down payment for the building in the same ratio as their partnership interest: 25 percent for W. D. Culwell; 25 percent for William R. Dean; 25 percent for John O’Leary; 12.5 percent for James H. Byrd, 6.25 percent for the Nelms Partnership, and 6.25 percent for Elouise A. Nazro. The note was secured by a deed of trust, and by unconditional guaranty agreements executed by all six partners. Through a series of refinancings, the note was ultimately held by Texas Commerce Bank. In 1986, Dean and O’Leary assigned their interests in the venture to the other four, though they did not revoke their guaranty agreements. Byrd then assigned his interest to the remaining three, though he did not revoke his guaranty agreement, either. Culwell followed suit soon after, so that the Nelms Partnership and Nazro each became 50 percent owners of the joint venture. The office building was sold in 1989 to a corporation formed by the venture called Buffalo Speedway Investments. This corporation sold the building for $1,1 million in March 1992. TCB released its lien on the property the day before, and the net proceeds of the building sale were applied to the note. A balance of $1,052,758 remained. After agreeing that they were each 50 percent liable for the balance on the note, Nazro paid his half, and the Nelms Partnership executed a new note for its half. TCB assigned its interest in the first note and guaranty agreements to the Nelms Partnership and Nazro, though the assignment made no mention of the joint venture. The Nelms Partnership paid the balance due on the second note in October 1992. The Nelms Partnership and Nazro sued the four other parties to the joint venture in November 1993, seeking compensation for breach of the guaranty agreements. Alternatively, they asked for contribution from the co-guarantors. O’Leary was dismissed because he declared bankruptcy, and Nazro was dismissed for lack of jurisdiction. Byrd filed a verified plea in abatement under T.R.Civ.P. 93(1), saying there was insufficient information to determine in what capacity the Nelms Partnership had brought its suit. Byrd argued that the Nelms Partnership could not maintain a suit if it had failed to file an assumed name certificate in the county in which it was conducting business under that name. The assumed name certificate referred to “the Estate of H. G. Nelms,” and Byrd said it was unclear if that meant the entity was acting as the representative of Mr. Nelms’ estate, or acting as the Nelms Partnership when it filed suit. The trial court denied Byrd’s plea. The trial court entered a judgment for the Nelms Partnership for $459,428 from the other three original partners. The Nelms Partnership settled with Dean and Culwell. Byrd appealed. HOLDING:Affirmed in part; reversed and remanded in part. The court first discusses the trial court’s denial of Byrd’s plea in abatement. The court points out that the named plaintiff in this case is “the Estate of H. G. Nelms,” which is described as a partnership, and which is the same name on the assumed name certificate. The court finds that the trial court’s conclusion that the Nelms Partnership thus had the legal capacity to sue was correct. The court adds that much of Byrd’s evidence that the Nelms Partnership and “the Estate of H. G. Nelms” were separate entities was not raised during the plea in abatement hearing. It’s too late to raise that evidence now, the court says. Nonetheless, the court does take note of the fact that the assumed name certificate stating that “The Estate of H. G. Nelms” was a general partnership consisting of four trusts was on file in Harris county more than a month before the July 21, 1992, transaction between the Nelms Partnership and Texas Commerce Bank. The court then addresses Byrd’s argument that the jury’s finding that the Nelms Partnership paid the note in its capacity as guarantor was supported by factually insufficient evidence. Eschewing Byrd’s suggestion to rely on the elements that must be proved to recover on a breach of guaranty agreement, the court sets out the applicable four-part test: (1) the existence and ownership of the guaranty agreement; (2) the terms of the underlying contract by the holder; (3) the occurrence of the conditions upon which liability is based; and (4) the failure or refusal to perform the promise by the guarantor. The court states that it is the first element that is under fire in this case. The court examines the capacity in which the Nelms Partnership obtained the guaranty agreement, starting from the premise that the Nelms Partnership is both a partner in the joint venture and a co-guarantor to the debt executed by the joint venture. Thus, the Nelms Partnership is primarily liable on the note as a partner in the joint venture and secondarily liable on the note as a co-guarantor. While Byrd argues that the Nelms Partnership paid the note as a partner, thereby extinguishing Byrd’s own liability, the Nelms Partnership argues that whatever money was paid to TCB was to buy the debt and underlying agreements as co-guarantors, not to pay off the debt. After reviewing the testimonial and documentary evidence at trial, the court concludes that reasonable minds could arrive at different answers. Therefore, the evidence was sufficient to support the jury’s finding that the Nelms Partnership paid the debt in its capacity as guarantor. The court next reviews the sufficiency of evidence to support the trial court’s finding as a matter of law that the TCB note matured on its own terms on March 1, 1995, and that the Nelms Partnership had shown that notice of default was given to the co-guarantors. Byrd asserts that because the Nelms Partnership paid the note as a partner in the joint venture in 1992, the note does not mature at all. And secondly, because Byrd was sued 18 months before the maturity date, the note could not have matured on its own terms. The first argument was dealt with by the jury, who found that the Nelms Partnership purchased the loan in its capacity as a co-guarantor. In doing so, the Nelms Partnership becomes an assignee of the note, allowing the Nelms Partnership to stand in the shoes of the creditor and seek payment from the principle debtor (the venture) or the guarantors. As to the second argument, normally, an assignee must wait until the note matures or there is a default on the note before pursuing its claims against the principle debtor or the guarantors. However, as long as the note is mature and due at the time of trial, there is no error. The court next turns to whether the trial court erred in not submitting various jury charges. Byrd faults the trial court for not submitting a question on whether a partnership existed between the four trusts comprising the Nelms Partnership when it paid the bank for the assignment of the note. Any question concerning the Nelms Partnership’s capacity to sue was determined by the trial court as a matter of law in ruling on Byrd’s plea in abatement, the court rules, a determination already affirmed by this court. Byrd also complains of the trial court’s refusal to submit a question on whether Byrd breached his guaranty agreement. Again, whether the Nelms Partnership is the holder of the note is an issue of capacity, was found by the trial court as a matter of law, and has already been addressed in this opinion. Whether the note was in default was found by the trial court, too, and affirmed in this court’s review of the sufficiency of the evidence. The court rejects Byrd’s remaining two objections to various jury charge omissions. The court the considers whether the trial court erred in making a finding that the co-guarantors are jointly and severally liable. The court says that while issues of suretyship and guaranty were decided long ago, the issue of whether a guarantor, by purchasing the underlying debt, can recover the full amount due on the note from a co-guarantor based upon “joint and several” language in the guaranty agreement is “a more recent conundrum.” The court finds no Texas precedent on point, so it looks at other jurisdictions, and it looks at the Restatement of Security �149 and the Restatement (Third) of Suretyship and Guaranty �57 to conclude that the Nelms Partnership’s right to sue on the note and guaranty agreements as purchaser/assignee is limited as a matter of law to the contributive share of its co-guarantors. Furthermore, the jury found that the Nelms Partnership purchased the debt in its capacity as a guarantor, so absent an express agreement among the guarantors to the contrary, the contributive share of the Nelms Partnership is limited to the total amount of liability divided by the number of co-guarantors. Therefore, sustaining Byrd’s argument, the court rules that Byrd owes only one-sixth of the note. The court sustains the Nelms Partnership’s cross point that it should have been awarded prejudgment interest. OPINION:Felipe Reyna, J.; Gray, C.J., Vance and Reyna, JJ. DISSENT:Tom Gray, C.J. “You see, the most significant issue in this aspect of this case is a question of first impression regarding the merger of legal rights and obligations � the right to receive payment and the obligation to pay. . . . But the first issue to discuss on our way to resolving this case has to be capacity. I do not disagree with the analysis of the Nelms Partnership’s capacity to sue. But the Court has not fully appreciated the issue regarding the Nelms Partnership’s capacity.” The dissent thinks all of the issues are interrelated and ultimately hinge on the capacity to sue issue, but as to the issue of how much Byrd shout pay on the note, the dissent states: “What the Court is actually doing is forcing Byrd to pay, not as a surety of a note, but as a general partner of a joint venture who has been assessed for an additional capital contribution. We miss the mark. Further, due to the failure of the Nelms Partnership to obtain a damages finding necessary in support of its claim, a finding necessary for the trial court to render a proper judgment, the trial court erred when it calculated the Nelms Partnership’s damages over Byrd’s objections to the refusal to submit a damages issue. I would therefore reverse and render judgment that the Nelms Partnership take nothing from Byrd.”

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