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Click here for the full text of this decision FACTS:On Jan. 1, 2002, Craig and Joann W. Fahning, as limited partners, and Bradford Custom Homes by Jim Harris Inc. (BCH), as general partner, entered into a limited partnership agreement. They formed a limited partnership called Bradford Partners II LP. The purpose of Bradford Partners was to purchase residential real estate lots and build and market homes on those lots. On March 26, 2002, Bradford Partners borrowed $251,440 from YYP Funds Inc. as evidenced by a promissory note. The note was secured by a deed of trust on six lots. The Fahnings and Harris executed personal guarantees on the notes. Bradford Partners became delinquent on the YYP note. YYP made a demand on the guarantors. When the guarantors failed to pay, YYP sued and obtained a judgment in November 2004. YYP filed an abstract of judgment in the records of Collin County. To collect on the judgment, YYP garnished several of the Fahnings bank accounts. The Fahnings voluntarily made a payment in the amount of $28,013.75. In total, the Fahnings paid $119,949.16 as guarantors on the note. Harris paid a total of $199,039.46 as guarantor on the note. A second abstract of judgment was filed in the records of Collin County against Bradford Partners on Jan. 24, 2005. On Jan. 27, 2005, Bradford Partners executed a deed of trust in favor of C 1 Capital Markets LP and C One Capital Markets LP on lots it owned. A homeowners association filed liens against lots owned by Bradford Partners for failure to pay association dues. The Fahnings did not consent to any of the actions initiated by BCH and considered BCH to be in default under the partnership agreement. On July 26, 2005, the Fahnings removed BCH as the general partner of Bradford Partners and substituted Airchaud Inc. in its place. Appellants Bradford Partners II LP, Wilson James Harris and BCH sued the Fahnings and Airchaud on Aug. 19, 2005, asserting claims for breach of the partnership agreement and breach of fiduciary duty. The appellants sought a declaratory judgment that the Fahnings and Airchaud were in breach of the agreement and that BCH should remain the general partner. The Fahnings and Airchaud counterclaimed. They sought a declaratory judgment that: 1. BCH, as general partner of Bradford Partners, was in default under the agreement; 2. the Fahnings, as limited partners, replaced BCH as general partner pursuant to the agreement; 3. Airchaud is the general partner of Bradford Partners; and 4. the Fahnings were subrogated to the rights of YYP. The Fahnings and Airchaud filed a motion for summary judgment and the trial court granted it. The appellants appealed. HOLDING:Affirmed. First, the appellants contended that the trial court erred in declaring that the Fahnings are subrogated to the rights of YYP. Specifically, the appellants contended that the Fahnings failed to show that they met the statutory requirements for subrogation or that YYP had assigned it rights under the deed of trust to them. In their motion for summary judgment, the Fahnings asserted they were subrogated to the rights of YYP for two reasons: 1. Texas Business & Commerce Code �34.04 provides for subrogation; and 2. case law holds that equity confers the right of subrogation where a surety pays the debt of the principal. Section 34.04(b), the court stated, provides that a surety who pays on a judgment is subrogated to all of the judgment creditor s rights under the judgment. The court noted that the Fahnings claimed to be subrogated to YYP’s rights under the deed of trust. Thus, the court stated that �34.04 was inapplicable. The court, however, found the Fahnings to be equitably subrogated to the rights of YYP. Because the surety promises to pay the debt of another, equity confers the right of subrogation, the court stated. Thus, the court concluded that the trial court did not err in declaring that the Fahnings are subrogated to the rights of YYP, including YYP’s rights under the deed of trust securing the promissory note. Second, the appellants contended that the trial court erred in granting summary judgment declaring that BCH breached the agreement by allowing certain documents to be filed against Bradford. Pursuant to �6.01(b)(ii) of the partnership agreement, the court stated, general partner BCH could not, without the unanimous consent of the partners,” grant or create any mortgages, liens, easements, security interests, restrictions, restrictive covenants or other rights or interests burdening or encumbering the Partnership’s real property.” The summary judgment evidence showed that several encumbrances were filed against Bradford Partners without the consent of the Fahnings. Thus, the court concluded the trial court did not err in granting summary judgment and declaring that BCH breached the agreement. Third, the appellants contended that the trial court erred in granting summary judgment and declaring that BCH was properly removed as the general partner of Bradford Partners. Pursuant to �9.02 of the agreement, the Fahnings, as the limited partners, had the authority to replace BCH as the general partner. The Fahnings replaced BCH with Airchaud, Inc. in accordance with the terms of �9.02. Thus, the court concluded that the trial court did not err in declaring that BCH was properly removed as the general partner of Bradford Partners. The court also concluded, inter alia, that the trial court properly granted a take-nothing judgment on the appellants’ claims of breach of the partnership agreement and breach of fiduciary duty. OPINION: Wright, J.; Wright, Richter and Lang, JJ.

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