Court Opinion

ID: 9619657
Source: CourtListenerOpinion
Date Created: 2023-08-22 05:30:56.15712+00
Date Added: 2024-06-11T12:45:28.454932
License: Public Domain

TOM GRAY, Chief Justice,
dissenting.
There are three major aspects of the Court’s opinion with which I disagree. *167These are (1) the resolution of the capaeity/liability issue, (2) the charge issue on damages, and (3) the damage computation. The charge issue is dispositive of the appeal, but I must address the other two issues, at least briefly.
There is a question presented in this appeal that appears to be a question of first impression in Texas. To reach this question, we must first agree upon the answer to another question: what is the liability of co-sureties1 when one, of several, co-surety “purchases” the underlying debt that all have guaranteed? The answer is not all that remarkable. First, we look to an agreement that defines the relationship between the co-sureties. If, as in this case, the only express agreement signed by each surety was with the lender, then we turn to the common law to determine the relationship between the various sureties. The holding is unremarkable because, absent an express agreement to the contrary, each surety is held hable for them “contributive share.” See Restatement (Third) on Suretyship and Guaranty §§ 53 & 55 (1996). I will come back to the Court’s holding of what constitutes “contributive share;” but with this part of the opinion, I find no particular fault, other than it may not be necessary to a disposition of the appeal.
It may be unnecessary because the relationship of the co-sureties in this case involved what I would characterize as a dispositive twist. You see, the most significant issue in this aspect of this ease is a question of first impression regarding the merger of legal rights and obligations — the right to receive payment and the obligation to pay. In particular, what is the proper result when the entity that owes a debt is a joint venture and a general member of the joint venture, who is also a co-surety guaranteeing payment of the note, subsequently acquires ownership of the note? The Court holds that if one co-surety acquires the note, that co-surety can collect from the other co-sureties their contributive share of the note. The holding of the Court works fine if the co-surety that acquires the note is not also a debtor with an obligation for payment of the debt. But the purpose of the secondary obligation is to stand behind the obligation of the principal obligor to perform the underlying obligation. Restatement (Third) on Suretyship and Guaranty § 34, Comment a (1996).
My common sense question is why should the Nelms Partnership, which was a general member of the joint venture with the primary obligation to pay the note, be allowed to recover anything from anyone because of the acquisition of a note for which it owed the entire amount? Why does acquisition of the note by the Nelms Partnership not extinguish the obligation, or at the very least limit the acquiring general partner’s ability to recover from other general partners of the joint venture according to the terms of their joint venture agreement? Can an entity owe itself money, guarantee payment of the debt itself, default on the debt, and then collect any part of the debt from a co-surety? I have seen nothing to indicate that is, or should be the law, that is, until this Court’s opinion.
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. As I understand Byrd’s argument, it is that even if the Nelms Partnership has the legal capacity to sue, the *168Nelms Partnership has not proved its capacity to recover the damages for which it has sued. Cf. Tex.R. Civ. P. 93.1 and Tex.R. Civ. P. 93.2. This is an entirely different question regarding capacity than one of capacity to bring suit in a Texas court. And it is broader than simply having paid the note as a surety. It is about the factual and legal question of whether the Nelms Partnership has shown itself to be the owner of the note or entitled to a recovery because it paid the note.
Byrd has always argued that the Nelms Partnership was not entitled to sue in the capacity in which the note was paid; that is, the Nelms Partnership paid the debt when it was not in default. And the question submitted to the jury said “paid.” Therefore, the Nelms Partnership could not collect from the other co-sureties. For example, a surety may be entitled to sub-rogation, meaning it steps in as the obligee or creditor, if it pays the entire obligation owed. See Restatement (Third) Surety-ship and Guaranty § 27 (1996). However, performance by a surety in the absence of a default by the principal obligor will not entitle the surety to subrogation. Id. Comment c. If a surety cannot step in as the creditor when it pays prior to a default, then why should the Nelms Partnership be able to do so as a co-surety and then collect from the other co-sureties? It should not.
This brings us to the charge issue. It is the issue regarding the submission of a question regarding the Nelms Partnership’s damages that should resolve this appeal. Byrd objected to the failure to submit a damages question. The Nelms Partnership had the burden to establish the extent of its damages. First, how could the Nelms Partnership be damaged by acquiring a note that it owed? Second, why would the extent of the tax savings the Nelms Partnership enjoyed not be an offset to its damages, if any? But most importantly, if the Court were correct in its analysis that Byrd is responsible for his contributive share of the debt, the extent of that obligation is not limited to a simple mathematical computation of debt divided by the number of co-sureties. It is undisputed that at least one of the co-sureties is bankrupt and did not pay its contributive share. Why should Byrd not have to incur some of the debt of the bankrupt co-surety? The simple answer is that he should. To properly determine the amount of damages, the Nelms Partnership needed to establish which co-sureties were insolvent so that the remaining co-sureties’ payment could be proportionally increased to cover the bankrupt co-surety’s contributive share of the note. See Restatement (Third) Suretyship and Guaranty § 57(2) (1996). This question should have been addressed and answered by the Nelms Partnership upon the original trial. These issues were not addressed because a damages issue was not submitted, and Byrd objected to that failure.
At least one of the other disputed issues regarding the amount of a contributive share would be whether a smaller settlement was taken as to some co-sureties than their contributive share due to their insolvency. Does this mean their contri-butive share should be treated as fully paid? Would the same rule have applied to those settling co-sureties that paid less than their contributive share to resolve the dispute with the Nelms Partnership? As to those co-sureties that settled with the Nelms Partnership for less that their con-tributive share, if Byrd does have to pay the shortfall, can Byrd then pursue them for their unpaid portion of the note payments, that portion that Byrd ultimately must pay in addition to his contributive share? And in making all these computations of damages, the other co-sureties that suffered through this trial would have had their damages calculated, and we would now be able to determine exactly what portion of the judgment was released *169by the post-judgment settlement with those co-sureties.
The Court has simply taken a short-cut to a result, knowing that damages were not properly established by the Nelms Partnership, but not holding the Nelms Partnership responsible for its own'failure in this regard. By his objection to the charge, Byrd preserved the issue and is entitled to a reversal and rendition because no damages issue was submitted. See Clayton W. Williams, Jr., Inc. v. Olivo, 952 S.W.2d 523, 530 (Tex.1997); Stripling v. McKinley, 746 S.W.2d 502, 505 (Tex.App.-Dallas 1988), aff'd, 763 S.W.2d 407 (Tex.1989).
Of course, this also brings us back to the third aspect of the case with which I disagree which you will see also brings us back to where we began: A damages computation is immaterial if this case is resolved by the simple holding that when an entity that is primarily responsible on a note, like a general partner in a joint venture, acquires the note in any form of transaction, as a matter of law the duty to pay the note is merged with the right to receive payment on the note, and thus no surety can be called upon to pay the obligation. Any other rule seems a bit circular. Upon the payment as a co-surety of the note by Byrd to the Nelms Partnership, the Nelms Partnership will immediately become liable to Byrd for repayment of that amount because it has primary liability on the note as a member of the joint venture (the maker of the note). See Restatement (Third) Suretyship and Guaranty § 58 (1996). And the Nelms Partnership will obviously have assets with which to pay Byrd, the very money Byrd just paid to the Nelms Partnership, even if the Nelms Partnership had no other assets before the payment.
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. Because the majority does not, I respectfully dissent.

. The jury found the Nelms Partnership paid the note as a guarantor. The majority opinion uses "guarantor” and “surety” interchangeably. These days, there is not much distinction between the two terms. For the sake of consistency and ease in referencing the Restatement, I will use the terms "surety” and "co-surety.”