pretty good morning your honor is a minute please the court my name is joseph brady and i represent john and don keeley this is a commercial case regarding farm credit my clients are two of the individual farmer descendants and this case concerns issues of civil procedure and specifically the default judgment procedure and despite my client's having filed a timely answer in this case the court entered a default judgment against the defunct partnership entity that's that's something i want to ask you about a no we've got texas law here and this was just a regular general partnership was in it we don't need the one general  partnership called g in k partnership that's crazy but j and k has no standing by itself unless there's some aspect of texas law that changes that you look to the four partners that's correct y as opposed to the four partners your honor the texas courts and specifically in american star versus dowries has accepted the entity theory of partnership as opposed to the aggregate theory and this court has also reviewed that in in evans the evanston case and as a result of that and specifically the provisions of the texas business organization code one fifty two point three zero six the creditor may pursue its claim against post a partnership and the individual partners and both have standing to challenge that i wanted that confirmed now when the answers were filed by the individual partners as i understand it court when the complaint was a when it was removed in the complaint was amended as i understand it mr and mrs keeley filed an answer that's correct and mr greenspan to be filed an answer mr however g and k farms because it was a partnership in bankruptcy the standing was exercised by the trustee in the chapter seven bankruptcy case and they did file an objection to the proof of claim c p s and when the reference was withdrawn up to the district court that objection was filed into the record and in that objection the statute tasia as defense was asserted but there was no formal answer filed by g k foxx because that was an objection to a proof of claim which was filed bankruptcy code that's correct but the the issues in this case that i want to focus on your honors on today are first that the district court should not have entered the full judgment in the dale of data that has been adopted by the circuit courts which is after this case went to trial and my client john keeley in his personal capacity proved his statute of limitations defense the court should have made its alternate determination on the merits consistent by vacating the default judgment and making those findings consistent and mr killie's statue limitations defenses were against his personal liability of the guarantor correct that's correct you liability as a guarantor right but the analysis would be the same and so those judgments to have been made but the trial is a guarantor followed the default judgment against you and that's correct and the because it is a default judgment this court has held him in multiple decisions including the trying to ease the chinese drywall case that only a slight abuse of discretion is required to reverse the default judgment before you get into your argument one banty who's in bankruptcy and in k farms an asset of the state how are they moved over to with this transfer out of bankruptcy into district court how are they moved over they are in light of the usual stay when right based upon section fourteen fifty two and based on the so reference under the local rules was initially referred to the bankruptcy court and approximately one year after the case was filed my client moved to withdraw the reference to the district court which was not objected to and the the case was withdrawn which are all the reference to the bankruptcy court that's correct and it was transferred back to the district court know you have you want to get your marriage the three points but then this may just be my ignorance about texas partnership law but how is it that if your client's assigned their interest in two thousand and nine they are liable at all for the debt is that entry of fault judgment default judgment should never have been entered in the first place under the supreme court's decision and from overseas day will they go and that is a very important case to this appeal and in that case the supreme court held it was a case in each hundred seventy two in which there was a joint fraud charge against eight defendants it was a texas land case and a default judgment or it was a decree pro confessio at the time was obtained against one of the defendants and it was made then a final decree akin to a final judgment in our current so procedure then the case went to trial against the other seven defendants who prevailed on their defense and it was determined that the joint fraud charge was dismissed when the case went up to the supreme court the supreme court said we can't have these inconsistent judgments and that the district court has to make them consistent it has to make and can grow it would lead to absurd results well but it didn't it kind of makes sense when we're talking about a tract of land in france that's correct or where the plane of claim that he had been defrauded by these defendants into executing some conveyances that gave them title to the party that's exactly correct iran and so that it would be inconsistent of the determination was that the property is going to belong to the person who claims to have had it before he was defrauded out of it and then there's a determination that there was no fraud and yet as to one of the  we do not contend that this is a joint liability case it is a joint and several liability case which is distinguishable on those grounds however the circuit courts since the supreme court's holding in frau have extended that logic to joint and several liability in a majority of the circuit courts have extended that reasoning to joint and several liability and in fact this court although it did not mention frau is lewis versus lane incorporated that reasoning and cited cases that those cases themselves cited for out for the proposition that the judgments must be made consistent and in the lower courts in this circuit have consistent a number of these cases the lower courts when faced with a default judgment in a case with multiple defendants have looked hard at the motion for the full judgment looked at the risk for instance there's an argument they say interpret frown narrowly in the district court did in other words is it inconsistent within one judgment as distinct from trying to harmonize two separate liabilities partnership liability personal note liability is that what they're arguing that frau doesn't extend to that broader effort to harmonize things that are dissimilar that's what they're arguing they are a i believe that they're arguing that it does not apply to joint and several liability because the level of harmony as you put it is not as compelling yet however  believe that if she's been settled well but coming back at it and taken since pointing out here we have their liability as a partner and you said they can be held in even though they gave up their partnership right and liability as a guarantor maine c p s obviously wanted to top all its options so not only did the partnership enter into the contract making them labile as partners but they got these personal guarantor guarantees from the keeley's and the other two bensky so it's i don't want to be i don't want to make this sample jargon but it seems like apples and oranges under the texas business organizations code my clients should have had standing and given the opportunity to contest that and they want if they were not given how that's a very important part about texas law because there are and other states some other states if your partner you're absolutely liable you are the legal entity that's to be sued you're calling it derivative liability yes your means their side is the texas statute that makes it deriv step statute your honor is texas business organization code section one fifty two point three zero six subsection b and the important part of that statute and the way it's been interpreted by both dischord and the texas supreme court is that that statute says based upon the same claim and it's it acknowledges that the claim against the partnership entity and the claim against the partners are the same claims that that's the important language and the partners being that they're accused of liability on the same claim must have standing to challenge that liability and that that's what my clients were denied and in this case they are here isn't really  errors that they were denied the opportunity in the partnership is that the reversible error here it isn't that they didn't work misapplied necessarily friend it is is a for our issue as we see it your honor because the way that they were denied that opportunity was by the default judgment against me and k farms which the district court held precluded them from asserting their their defenses as partners although they had in a timely answer asserted tha forty four that asserted the statute of limitations defense and in the default judgment the court did not as as the other cases that we've cited considered the risk of into an inconsistent judgement the court did not mess with or that the limitations offense for the object they had a to do object they could have said something to the trial court before the default judgment into it was entered in fact it was determined and in the killings have admitted in this case they had standing to say something they forty four they say what's the document he referred to as the answer in the partnership case well that's the thing there's never been an answer on behalf of gene k and i want to make that there was nothing i want to clarify there was an objection raised by the group dance he's attorney as relates to the group dance there was nothing wild on that half of gene k farms i think that's a very important to note in the court can find that by week if the parties got together and put together that was a joint appendix of documents from the bankruptcy court and filed it in the district court what's he referring to it nine forty four you know i have no idea of any type of answer on behalf of j k there's nothing that i think the argument was is they were lying on this am starr says all that old case law is no good but their argument is under this case law that the because all of the partners filed an answer that was good enough for gene kane that's not the law there's no case law for that position at all the other thing i wanted to clarify for the court is the reason that we were allowed to proceed in the bank r c m p the district court against gene k is because the trustee allowed us to have popped up and said mission of filed something and said out of an abundance of caution because you know it's our money at stake it's our personal money at stake we object and here's a reason why or they if they felt like they didn't have standing and they did the court found they had that standing there was some way the court found that the keeley's sacked for months on their hands and did nothing because they thought they had this defense this defense was a statute of limitations on their own behalf that compelling factually or legally though i mean when we emphasize they sat with their hands you aren't disputing that your client waited too long on their personal guarantee well yeah and then you wait if you like but but eagerly  if they didn't feel they'd surrendered their interest as being partners in two thousand and nine you wouldn't occur to them that they would have to enter in the us or i disagree i'm just asking you yeah i disagree with that because as they admit it you're exactly right they may have entered into this assignment deal down the road tried to backdate it but the fact the matter is is when gene k incurred this debt they were partners and thing they were on the hook no matter what they did down the road it didn't make a difference there at that i think they could see that when did texas adopt this new entity partnership theory of opposed to aggregate it's interesting we've had three difference tach it's up until ninety ninety nine there was something called the texas uniform partnership act and that was the old aggregate theory ok and then what happened is is i want to say after that we had the texas revised partnership back which adopted the into t theory and then in two thousand and ten we now have this texas business organizations act which applies to any partnership at any time but that basically codified as the old texas revised partnership act so really sensed two thousand nine hundred ninety nine forward where any of this new entity theory this general partnership i believe was created in two thousand and eight but even if i had been creative beforehand the texas business organization code applies to any and all partnerships so if i could move on to this and i've handed the court if there  any i doubt there's anything in the statute is there any authoritative text as to why texas went from the aggregate to the into the i know this was sort of going across the country at the time and all these l l c s were starting at such where you have a general partner and you've got limited part i mean much more emphasis on that we find anything in texas law about why it went from the aggregate to the entity theory i don't know when i would be guessing i will say that the supreme court's case and i have start talks about that is in some detail i don't know if it was because your honor we were under one uniform act it may be that uniformity amongst the states as has changed but it's very clear that in one thousand nine hundred ninety nine that's that's where the change occurs in texas at least and i don't know about other states at the end of the day you know and again it oh no that's far right again under the entity theory both the partnership wa partnership the name whatever  entity from the partners the liability for example on the account claim was gene k farms the partners didn't do anything wrong it was on g m k and what happened is is under the law we had to proceed against them once we have tamed a judgement against them we had to go out and try to execute on gene k farms i think we have ninety days and if we can't collect during that period of time the statutory law says the second step then go against the partners it's a derivative liability is what that is it's not joint and several liability it's not joint liability like what we've talked about for our in the division between the courts but it's derivative liability and that's the key so what you have is when we first got the default judgment liability became fixed and damages were fixed too because they were liquidated damages so there is never any way possible that there was going to be any sort of inconsistency in the judgment as it relates to the keeley's in their partnership capacity and j and k forms it was all set and ready to go and if the if the entity could not pay the debt then they were on the hook that's just the way the wall works and does that is completely distinct from c p s can going against mr kiely individually on the it honestly ok you can apply lynn and you can apply for our broader narrow it doesn't make a difference because the reason a bit is there is no income groups result in none now i'm a firm believer that you apply a court case to the book from what it says and for all dealt with joint liability and you have what's called this narrow point of view with the courts they say it only applies in joint liability cases and i believe the theory that they  is correct because of joint several liability that's a whole bunch of different thing you can have multiple defendants some people get off the hook but you know you can go after one defendant and collect against that one defendant i think the narrow view is the correct view but here's the important thing why you have on this chart when mr keely prevailed he profiled on the limitations defense that applied to the guarantee and i apologize the court we've missed putts now when you filed your action in state court against riband ski and mr kiely  so it was only against pro ban ski and mr kiely dealing you removed then you removed they removed it to bankruptcy court you follow an amended complaint adding this is keely and g n k that's right now why did you do that court and then we amended we brought in gene k and we brought in mrs keely at that period of time and that's when we went forward as the texas business organization why we did what we did but going back when mr keely prevailed on his limitations defense it's a very important to know that you just can't take that finding and apply it over here to the guarantee claim in the reason of it is we're dealing with different sections of the texas civil of the texas civil practice and release code and it's really dealing with the occluded of the limitations period for both claims in this case it relates to the account claim that the four years begins from the sation of the relationship and there's evidence in the record in of the morning will you give you the side if you'd like it that our relationships if yes his relationship with gene k was still going on in the summer of two thousand and ten we filed the amended lawsuit in against to go back to one last thing is if you step back from all of this and you look at it the trial court got it right he tried to synthesize the law he's got a very thorough analysis here and he came to the fair because they're the ones who selected the form they're going or as a as a partnership and they put their personal assets on the line they have a remedy if they don't like what's going on here they can file the proof a claim like they have by the way address the question that the panel asked me guarding the lead why c p s brought this claim against mrs keeley and against gene k farms and to address their position that it was took the position that they lacked standing to answer and defend as partners and despite the fact that they filed their answer and contested statute of limitations when they were sued in that capacity they were they were given the opportunity to prove didn't this is a problem that results from the fact that they were dissociated from the partnership and despite that should have been given the opportunity to prove their claim so were they partners at the time the litigation with they were not partners at the time at the time they had been dissociate and yet you confirmed they owed those debts those are perspective so you so again you're saying the vital document is at nine forty for the for this appeal your honor the opportunity they were denied was it by application of law that they were denied an opportunity or is it a procedural decision if you want to be and we cited in our brief if you look at the the the court's ruling  i would agree that jean king a was was subject to two to rule twelve but the the partners should have been granted an opportunity to defend their liability and they they were never given that opportunity and then the question is why did they not i guess my partners who you just can see that weren't partners at the time these answers were five yes you are but again i have to go back to section one fifty two point three zero six which talks about that the claim against a partnership the claim against the partners is the same claim and they were being sued as partners so they that when they answer and and contest the statute of limitations they must have standing to to challenge that and at the time the decision that was entered by the texas court of appeals an american court emergent store versus towers had reached a different conclusion so there was a great deal of confusion about a lot that may have been confusion but you could have protectively filed you're going to theoretically they could have filed an objection to the ocean for default judgment but they were not required to do so because we had timely answers they didn't they were quite they read the law that was info we would do it and then on up under american star versus towers in the texas court of appeals there statutory there statute of limitations defense would have been preserved and and i want to go to they've never proved that it was an open account claim and in fact they tried to prove as they guarantee claim that went to trial that that was an open account and the court rejected that it did not find that was an open accounts and now they're saying hypothetically that they could have