American Idol, General, LP D/B/A the REO, and Randy Hanson A/K/A Randall Hanson v. Pither Plumbing Co., Inc.

Opinion

ACCEPTED 12-14-00134-CV TWELFTH COURT OF APPEALS TYLER, TEXAS 4/9/2015 4:16:09 PM CATHY LUSK CLERK

BRETT F. MILLER BMILLER@WSFIRM.COM

FILED IN 12th COURT OF APPEALS TYLER, TEXAS

April 9, 2015 4/9/2015 4:16:09 PM CATHY S. LUSK Clerk

Cathy S. Lusk, Clerk Twelfth Court of Appeals 1517 West Front Street, Suite 354 Tyler, Texas 75702

Re: Case Number: 12-14-00134-CV Trial Court Case No.: 2012-1842-A

Style: American Idol, General, LP d/b/a The REO, and Randy Hanson a/k/a Randall Hanson v. Pither Plumbing Co., Inc.

Dear Ms. Lusk:

During today’s oral argument, the Justices requested that I send this letter with the following citations and enclose copies of those opinions:

1. Thomas v. Long, 207 S.W.3d 334, 339-340 (Tex. 2006) (implicit ruling case)

2. Am. Star Energy & Minerals Corp. v. Stowers, No. 13-0484, 2015 Tex. LEXIS 161, *5 (Tex. Feb. 27, 2015) (partner liability case)

Please deliver a copy of this letter and the enclosed opinions to each Justice for their review and consideration. Thank you in advance for your assistance in this matter.

Very respectfully yours,

Brett F. Miller

BFM/tlw

Enclosures

cc: Mr. Ken Good (via electronic filing)

P.O. BOX 1231 LONGVIEW, TEXAS 75606 T 903.757.6400 F 903.757.2323 WWW.WSFIRM.COM | | Caution As of: April 9, 2015 12:36 PM EDT

Thomas v. Long Supreme Court of Texas February 11, 2004, Argued ; April 21, 2006, Delivered NO. 03-0204

Reporter 207 S.W.3d 334; 2006 Tex. LEXIS 280; 49 Tex. Sup. J. 532; 24 I.E.R. Cas. (BNA) 956 TOMMY THOMAS, SHERIFF OF HARRIS for lack of jurisdiction his appeal of a trial court’s COUNTY, PETITIONER, v. JEANNE LONG, denial of his plea to the jurisdiction. RESPONDENT Overview Subsequent History: [**1] As Corrected April The underlying dispute concerned the 26, 2006. interpretation of an order issued by the county sheriff’s department civil service commission Prior History: ON PETITION FOR REVIEW relating to respondent former county employee’s FROM THE COURT OF APPEALS FOR THE appeal of her termination. The court held that FOURTEENTH DISTRICT OF TEXAS. although the sheriff’s plea was made as part of a Thomas v. Long, 97 S.W.3d 300, 2003 Tex. App. summary judgment motion, the court of appeals LEXIS 129 (Tex. App. Houston 14th Dist., 2003) had jurisdiction to consider the interlocutory appeal. By ruling on the merits of the employee’s Core Terms declaratory judgment claim, the trial court necessarily denied the sheriff’s challenge to its trial court, interlocutory appeal, Commission’s, jurisdiction. That implicit denial satisfied Tex. Civ. subject matter jurisdiction, exclusive jurisdiction, Prac. & Rem. Code Ann. § 51.014(a)(8) and gave court of appeals, termination, employees, return the court of appeals jurisdiction to consider the to work, Remedies, summary judgment, sheriff’s interlocutory appeal. However, the court reinstatement, pet, lack of subject matter dismissed the claims relating to the employee’s jurisdiction, sheriff’s department, physical ability, reinstatement to employment because her failure jurisdictional challenge, summary judgment to exhaust administrative remedies deprived the motion, disciplinary action, seniority, benefits, trial court of subject matter jurisdiction over those partial, orders, declaratory judgment, claims. Once the employees of a department administrative body, no loss, regulations, requires, elected to create a commission, and the exhaust, rights commission’s rules created rights employees would not have at common law, the commission Case Summary obtained exclusive jurisdiction over those matters under Tex. Loc. Gov’t Code Ann. §§ 158.032-.033, Procedural Posture .035.

In an interlocutory appeal, petitioner sheriff Outcome challenged a judgment of the Court of Appeals for The court reversed the court of appeals’ judgment the Fourteenth District of Texas, which dismissed and rendered judgment dismissing for lack of

Page 2 of 11 207 S.W.3d 334, *334; 2006 Tex. LEXIS 280, **1

subject matter jurisdiction the employee’s claims HN3 It is proper for a trial court to dismiss claims relating to her reinstatement. over which it does not have subject matter jurisdiction but retain claims in the same case LexisNexis® Headnotes over which it has jurisdiction. A trial court is not required to deny an otherwise meritorious plea to Civil Procedure > ... > Subject Matter Jurisdiction > the jurisdiction or a motion for summary judgment Jurisdiction Over Actions > General Overview based on a jurisdictional challenge concerning Civil Procedure > ... > Summary Judgment > some claims because the trial court has jurisdiction Motions for Summary Judgment > General over other claims. To the extent some courts of Overview appeals have held otherwise, the state supreme court disapproves of those holdings.

Civil Procedure > Appeals > Appellate Jurisdiction > Interlocutory Orders Civil Procedure > ... > Subject Matter Jurisdiction > Jurisdiction Over Actions > General Overview HN1 Because there is a conflict among the courts of appeals on whether a governmental unit’s Civil Procedure > Appeals > Appellate Jurisdiction > challenge to subject matter jurisdiction is Interlocutory Orders appealable if raised in a motion for summary Civil Procedure > Appeals > Appellate Jurisdiction > judgment, the state supreme court has jurisdiction State Court Review over an interlocutory appeal involving the issue. Tex. Gov’t Code Ann. §§ 22.001(a)(2), 22.225(c). HN4 The legislature has provided for an interlocutory appeal when a trial court denies a Civil Procedure > ... > Responses > Defenses, governmental unit’s challenge to subject matter Demurrers & Objections > Motions to Dismiss jurisdiction, irrespective of the procedural vehicle Civil Procedure > Appeals > Appellate Jurisdiction > used. Tex. Civ. Prac. & Rem. Code Ann. § Final Judgment Rule 51.014(a)(8). To the extent some courts of appeals Civil Procedure > Appeals > Appellate Jurisdiction > have held otherwise, the state supreme court Interlocutory Orders disapproves of those holdings.

HN2 Generally, appeals may only be taken from Civil Procedure > ... > Subject Matter Jurisdiction > final judgments or orders. Tex. Civ. Prac. & Rem. Jurisdiction Over Actions > General Overview Code Ann. § 51.014. Section 51.014(a)(8) provides Civil Procedure > ... > Responses > Defenses, an exception to this general rule by allowing an Demurrers & Objections > Motions to Dismiss appeal from an interlocutory order that grants or denies a plea to the jurisdiction by a governmental Civil Procedure > Appeals > Appellate Jurisdiction > unit as that term is defined in Tex. Civ. Prac. & Interlocutory Orders Rem. Code Ann. § 101.001.

HN5 To be entitled to an interlocutory appeal, Civil Procedure > ... > Subject Matter Jurisdiction > Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(8) Jurisdiction Over Actions > General Overview requires the denial of a jurisdictional challenge.

The Texas Rules of Appellate Procedure only Civil Procedure > ... > Responses > Defenses, require that the record show the trial court ruled Demurrers & Objections > Motions to Dismiss on the request, objection, or motion, either Civil Procedure > Dismissal > Involuntary expressly or implicitly. Tex. R. App. P. Dismissals > Appellate Review 33.1(a)(2)(A). Because a trial court cannot reach Civil Procedure > Appeals > Appellate Jurisdiction > the merits of a case without subject matter State Court Review jurisdiction, a trial court that rules on the merits of

Page 3 of 11 207 S.W.3d 334, *334; 2006 Tex. LEXIS 280, **1

an issue without explicitly rejecting an asserted HN7 Determining whether the Harris County jurisdictional attack has implicitly denied the Sheriff’s Department Civil Service Commission jurisdictional challenge. has exclusive jurisdiction requires examination and construction of the relevant statutory scheme.

Administrative Law > Judicial Review > Where there is no express legislative indication of Reviewability > Exhaustion of Remedies exclusive jurisdiction, the state supreme court Administrative Law > Judicial Review > Standards looks to the legislative scheme to determine if the of Review > De Novo Standard of Review legislature intended the Commission to have sole Administrative Law > Separation of Powers > authority to make the initial determination in a Jurisdiction dispute.

Administrative Law > Separation of Powers > Governments > Local Governments > Legislative Controls > Scope of Delegated Authority Administrative Boards Civil Procedure > ... > Subject Matter Jurisdiction > HN8 Tex. Loc. Gov’t Code Ann. §§ 158.033 and Jurisdiction Over Actions > General Jurisdiction 158.034 permit the creation of a sheriff’s HN6 Whether the Harris County Sheriff’s department civil service system and a commission Department Civil Service Commission has in certain counties. exclusive jurisdiction over a dispute is a question of law that the state supreme court reviews de Governments > Local Governments > novo. Texas trial courts are courts of general Administrative Boards jurisdiction with the power to hear and determine HN9 See Tex. Loc. Gov’t Code Ann. § 158.035(a).

any cause that is cognizable by courts of law or equity and to grant any relief that could be granted Administrative Law > Separation of Powers > by either courts of law or equity. Tex. Gov’t Code Legislative Controls > Scope of Delegated Authority Ann. § 24.007-.008; Tex. Const. art. V, § 8. In contrast, administrative bodies only have the Governments > Local Governments > powers conferred on them by clear and express Administrative Boards statutory language or implied powers that are Governments > Local Governments > Employees & reasonably necessary to carry out the legislature’s Officials intent. When the legislature grants an Labor & Employment Law > Employment administrative body the sole authority to make an Relationships > At Will Employment > Public initial determination in a dispute, the agency has Employees exclusive jurisdiction over the dispute. If an administrative body has exclusive jurisdiction, a HN10 The Harris County Sheriff’s Department party must exhaust all administrative remedies Civil Service Commission is authorized by statute before seeking judicial review of the decision. to regulate employment matters in the sheriff’s Until the party has satisfied this exhaustion department. The Harris County Sheriff’s requirement, a trial court lacks subject matter Department Civil Service Regulations detail the jurisdiction and must dismiss those claims without rules and procedures adopted by the Commission. prejudice to refiling. Harris County, Tex., Sheriff’s Dep’t Civil Serv.

Regs. R. 1.01-19.01. The regulations address Administrative Law > Separation of Powers > employment position classification, employment Jurisdiction criteria, disciplinary actions (including layoffs Administrative Law > Separation of Powers > and dismissals) and appeals, grievances, and Legislative Controls > Scope of Delegated Authority performance evaluations, among other things.

Page 4 of 11 207 S.W.3d 334, *334; 2006 Tex. LEXIS 280, **1

Harris County, Tex., Sheriff’s Dep’t Civil Serv. sheriff’s decision to the Commission. Harris Regs. R. 4.01-.06, 6.01-.02, 12.01-.05, 13.01-.04, County, Tex., Sheriff’s Dep’t Civil Serv. Regs. R. 15.01-.08. One of these regulations, Harris County, 12.04. Tex. Loc. Gov’t Code Ann. § 158.037 then Tex., Sheriff’s Dep’t Civil Serv. Regs. R. 12.03(a), provides for a substantial evidence review of the states that no employee shall be subject to any Commission’s decision by the district court. An disciplinary action including termination except employee subject to for-cause termination has a for just cause. The Regulations define ″disciplinary property interest in continued employment action″ as any action taken against an employee sufficient to entitle the employee to judicial review by the Department due to improper conduct by the of an administrative decision to terminate employee that will result in termination, employment. suspension, demotion, reduction in rank, or refusal Administrative Law > Agency Adjudication > to rehire at the end of a contractual period. Harris General Overview County, Tex., Sheriff’s Dep’t Civil Serv. Regs. R. 12.01. Administrative Law > Separation of Powers > Jurisdiction Labor & Employment Law > Employment Governments > Local Governments > Relationships > At Will Employment > General Administrative Boards Overview Governments > Local Governments > Employees & HN11 Absent an express agreement to the Officials contrary, Texas is an employment-at-will state. Labor & Employment Law > Employment Subject to certain exceptions, employment is Relationships > At Will Employment > Public terminable at any time by either party with or Employees without cause. However, an employer may modify HN13 Although the statute authorizing the creation the employment terms of the at-will status of its of the Harris County Sheriff’s Department Civil employees. Service Commission does not contain the words ″exclusive jurisdiction,″ as many statutes granting Administrative Law > Agency Adjudication > an administrative body exclusive jurisdiction do, Review of Initial Decisions it authorizes the Commission to extend specified Administrative Law > Judicial Review > Standards rights to employees that are not available at of Review > Substantial Evidence common law. By promulgating Harris County, Governments > Local Governments > Employees & Tex., Sheriff’s Dep’t Civil Serv. Regs. R. 12.03(a), Officials as authorized by the Texas Local Government Code, the Commission vested Department Labor & Employment Law > Employment Relationships > At Will Employment > Exceptions employees with for-cause employment status, which they have only because the Commission HN12 The Harris County Sheriff’s Department conferred that right on them. To enforce those Civil Service Commission’s rules implement rights, employees must follow the procedures procedures for disciplinary actions, including enumerated in the Commission’s rules as termination for just cause. Harris County, Tex., authorized by statute. Once the employees of a Sheriff’s Dep’t Civil Serv. Regs. R. 12.03(a). The department elect to create a commission, and the regulations describe the initial parts of the appellate commission’s rules create rights employees would process: within the prescribed time periods, an not have at common law, the commission obtains employee may appeal a disciplinary action to the exclusive jurisdiction over those matters. Tex. sheriff; after that, the employee may appeal the Loc. Gov’t Code Ann. § 158.032-.033, .035.

Page 5 of 11 207 S.W.3d 334, *334; 2006 Tex. LEXIS 280, **1

Counsel: For PETITIONER: Mr. Michael A. Sheriff’s Department terminated Jeanne Long’s Stafford, Mr. Michael R. Hull, HARRIS COUNTY employment as a jailer for violations of the ATTORNEY, Houston, TX. Department’s employee conduct manual. Long appealed her termination to the Harris County For RESPONDENT: Mr. Bruce A. Coana, Mr. Sheriff’s Department Civil Service Commission. Ajay Choudhary, COANA & ASSOCIATES, Over a year later on September 6, 2001, the Houston, TX. Commission determined that Long’s termination was not supported by sufficient evidence and For AMICUS CURIAE:Mr. Kristofer S. Monson, ordered the Department to reinstate Long with no ASSISTANT SOLICITOR GENERAL, Austin, loss of seniority or benefits. The Commission TX. denied Long’s request for reimbursement of wages. Long did not appeal the Commission’s Judges: JUSTICE WAINWRIGHT delivered the decision. In letters dated September 7, 2001, and opinion of the Court. November 7, 2001, the Department informed Long that she would be required to complete a Opinion by: J. Dale Wainwright physical ability test before returning to work. Long refused to take the test. The Department Opinion maintained its position that because Long had been absent from duty for more than twelve [*336] JUSTICE WAINWRIGHT delivered the months, the Department’s employee manual opinion of the Court.

required Long to complete the physical ability test This is an interlocutory appeal of a trial court’s [**3] before returning to work. The denial of a jurisdictional plea. Although the plea Commission’s order did not mention the test. was made as part of a motion for summary judgment, the court of appeals had jurisdiction to On November 13, 2001, Long filed suit in state consider the interlocutory appeal under section district court against Harris County Sheriff Tommy 51.014(a)(8) of the Texas Civil Practice and Thomas and 2 the Harris County Sheriff’s Remedies Code. We conclude that the court erred Department seeking a declaration that she was in determining that it was without jurisdiction to entitled to immediately return to work with no consider the appeal. However, we dismiss the loss of seniority or benefits, without taking any claims relating to the respondent’s reinstatement tests, without re-applying for employment, but to her employment because her failure to exhaust with back pay dating from the Commission’s administrative remedies deprived the trial court of order. Long sought a writ of mandamus compelling subject matter jurisdiction over those claims. 1 Thomas to comply with the Commission’s order, and she sought a temporary restraining order and [**2] I. Factual and Procedural Background temporary injunction allowing her to return [*337]

to work immediately with no loss of seniority or The underlying dispute concerns the interpretation benefits and without undergoing additional testing. of an order issued by an administrative body. It is Long’s petition also included a retaliation claim not an appeal from the administrative order itself. under section 21.055 of the Texas Labor Code. In a June 1, 2000 letter, the Harris County Thomas asserted a partial plea in bar, contending 1 The respondent’s retaliation claim under section 21.055 of the Texas Labor Code, and claims for attorney’s fees and back pay, are not part of this interlocutory appeal and remain pending at the trial court. 2 Long later amended her petition nonsuiting all claims against the Department.

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that the trial court ″should not exercise jurisdiction Thomas’s notice also acknowledged that his over any of Plaintiff’s reinstatement claims ″appeal includes all three of the orders signed by because exclusive or primary jurisdiction over the Court on March 4, 2002 since all three orders this matter has been given to the Harris County relate to [Thomas’s] dispute as to [the trial court’s] Sheriff’s Department Civil Service Commission.″ jurisdiction.″ The court of appeals dismissed the The trial court never explicitly ruled on Thomas’s appeal for lack of jurisdiction, explaining that [**4] partial plea in bar. ″because our record does not contain an order Long moved for partial summary judgment on the granting or denying a plea to the jurisdiction, and declaratory judgment and mandamus actions. because section 51.014(a) does not include an Thomas filed a cross-motion for summary appeal of the denial of a summary judgment based judgment on the same causes of action, arguing on lack of subject matter jurisdiction, that statute that the trial court lacked subject matter jurisdiction does not explicitly provide that we have over those claims. Arguing in the alternative, jurisdiction over this interlocutory appeal.″ 97 S.W.3d 300, 302. Thomas petitioned this Court Thomas requested the trial court to decline to [**6] for review.

exercise jurisdiction over the matter because the Commission had primary jurisdiction. Finally, II. Jurisdiction of this Court Thomas argued that even if the trial court had jurisdiction, he was entitled to judgment as a HN1 We have jurisdiction over this interlocutory matter of law on Long’s mandamus and appeal because there is a conflict among the declaratory judgment actions. The trial court courts of appeals on whether a governmental entered a partial judgment in favor of Long unit’s challenge to subject matter jurisdiction is declaring that ″under the Civil Service appealable if raised in a motion for summary Commission’s September 6, 2001 Order, (1) judgment. TEX. GOV’T CODE §§ 22.001(a)(2), Plaintiff is entitled to immediately return to work 22.225(c); 3 [*338] Tex. Dep’t of Parks & with no loss of seniority or benefits, (2) Plaintiff Wildlife v. Miranda, 133 S.W.3d 217, 223, 47 Tex. does not need to perform any tests as a condition Sup. Ct. J. 386 (Tex. 2004); compare 97 S.W.3d at to returning to work, and (3) Plaintiff [**5] does 302, and Brazos Transit Dist. v. Lozano, 72 not need to apply for re-employment.″ On the S.W.3d 442, 445 (Tex. App.-Beaumont 2002, no same day, the trial court granted Thomas’s motion pet.) (dismissing interlocutory appeals from denials for partial summary judgment in part and of motions for summary judgment challenging dismissed Long’s request for mandamus relief. subject matter jurisdiction for lack of jurisdiction), The court also entered an order identifying Long’s with Bexar County v. Gant, 70 S.W.3d 289, 291-92 claims for retaliation, attorney’s fees, and back (Tex. App.-San Antonio 2002, pet. denied), and pay as the only remaining claims before the court. Sw. Tex. State Univ. v. Enriquez, 971 S.W.2d 684, Thomas filed a notice of an interlocutory appeal 685 (Tex. App.-Austin 1998, pet. denied), to challenge the court’s ″denial of his Plea to the abrogated on other grounds by Kerrville State Jurisdiction signed by [the trial court] on March 4, Hosp. v. Fernandez, 28 S.W.3d 1, 6, 43 Tex. Sup. 2002.″ Ct. J. 1036 (Tex. 2000) (assuming jurisdiction 3 The Legislature amended section 22.001 of the Texas Government Code, effective September 1, 2003. Act of June 2, 2003, 78th Leg., R.S., Ch. 204, § 1.04, 2003 Tex. Gen. Laws 847, 849-50 (codified as section 22.001(e) of the Texas Government Code). The amendment, which applies to actions filed on or after September 1, 2003 and therefore does not govern our jurisdiction in this case, provides that ″one court holds differently from another when there is inconsistency in their respective decisions that should be clarified to remove unnecessary uncertainty in the law and unfairness to litigants.″ The Legislature amended section 22.225 to add a similar provision. Act of June 2, 2003, 78th Leg., R.S. Ch. 204, § 1.02, 2003 Tex. Gen. Laws 847, 848-49 (codified as section 22.225(e) of the Texas Government Code).

Page 7 of 11 207 S.W.3d 334, *338; 2006 Tex. LEXIS 280, **6

over interlocutory appeals of jurisdictional the Department conceded that the trial court had challenges raised in motions for summary jurisdiction over at least one claim. 685 S.W.2d judgments). [**7] We address both issues raised 22, 28 Tex. Sup. Ct. J. 235 (Tex. 1985). In Speer, in this petition for review: (1) whether the court of this Court held that a trial court’s order sustaining appeals had subject matter jurisdiction to address a misnomered plea in abatement, which challenged Thomas’s interlocutory appeal and (2) whether the trial court’s subject matter jurisdiction, was a the trial court had jurisdiction to issue a declaratory final and appealable order. 685 S.W.2d at 23. judgment interpreting the Commission’s order. Comparing the effect of the two pleas, the Court stated that ″sustaining a plea to the jurisdiction [**8] III. Jurisdiction of the Court of Appeals requires dismissal; sustaining a plea in abatement requires that the claim be abated until removal of HN2 Generally, appeals may only be taken from some impediment.″ Id. Long argues this means if final judgments or orders. See TEX. CIV. PRAC. the trial court lacks jurisdiction over some claims & REM. CODE § 51.014; Qwest Commc’ns Corp. but not others, it must [**10] deny the plea. We v. AT&T Corp., 24 S.W.3d 334, 336, 43 Tex. Sup. disagree. As we recognized in American Motorists Ct. J. 600 (Tex. 2000); Jack B. Anglin Co. v. Tipps, Insurance Company v. Fodge, HN3 it is proper 842 S.W.2d 266, 272, 36 Tex. Sup. Ct. J. 205 (Tex. for a trial court to dismiss claims over which it 1998). Section 51.014(a)(8) of the Texas Civil does not have subject matter jurisdiction but Practice and Remedies Code provides an retain claims in the same case over which it has exception to this general rule by allowing an jurisdiction. 63 S.W.3d 801, 805, 45 Tex. Sup. Ct. appeal from an interlocutory order that ″grants or J. 122 (Tex. 2001) (holding that the trial court denies a plea to the jurisdiction by a governmental erred in dismissing all claims but the [*339] court unit as that term is defined in Section 101.001.″ of appeals erred in requiring the reinstatement of Thomas’s appeal to the court of appeals challenged all claims); see also Tex. Highway Dep’t v. Jarrell, the trial court’s interlocutory orders denying his 418 S.W.2d 486, 488, 10 Tex. Sup. Ct. J. 522 (Tex. motion for partial summary judgment disputing 1967) (″As applied to a pending claim for relief or the trial court’s subject matter jurisdiction. The cause of action, a plea to the jurisdiction, if court of appeals concluded that it lacked sustained, would require a dismissal . . . .″). A trial jurisdiction for two reasons. 97 S.W.3d at 302. court is not required to deny an otherwise First, it concluded there was no final judgment meritorious plea to the jurisdiction or a motion for disposing of all issues and parties, observing that summary judgment based on a jurisdictional one of the trial court’s orders explicitly identified challenge concerning some claims because the pending claims, which include claims for trial court has jurisdiction over other claims. See retaliation, attorney’s fees, [**9] and back pay. Fodge, 63 S.W.3d at 805. To the extent some Id. Second, the court held that because the ″record courts of appeals have held otherwise, we does not contain an order granting or denying a disapprove of those holdings. See Aledo Indep. plea to the jurisdiction, and because section Sch. Dist. v. Choctaw Props., L.L.C., 17 S.W.3d 51.014(a) does not include an appeal of the denial 260, 262-63 (Tex. App.-Waco 2000, no pet.); of summary judgment based on lack of subject Harris County Flood Control Dist. v. PG & E Tex. matter jurisdiction, that statute does not explicitly Pipeline, L.P., 35 S.W.3d 772, 773 [**11] (Tex. provide that [the court of appeals has] jurisdiction App.-Houston [1st Dist.] 2000, pet. dism’d w.o.j.), over this interlocutory appeal.″ Id. disavowed on other grounds by City of Houston v.

Northwood Mun. Util. Dist.No. 1, 74 S.W.3d 183 Relying on Speer v. Stover, Long argues that the (Tex. App.-Houston [1st Dist.] 2002, no pet.); Life trial court properly denied Thomas’s plea because Mgmt. Ctr. for MH/MR Servs. v. Cruz, 2003 Tex.

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App. LEXIS 10419, No. 08-03-00121-CV, 2003 rejection of Thomas’s jurisdictional challenges. WL 22923927, at *3-*4 (Tex. App.-El Paso Dec. The Texas Rules of Appellate Procedure only 11, 2003, no pet.) (mem. op.). require that the record show the trial court ruled The court of appeals correctly observed that the on the request, objection, or motion, either record does not contain an order explicitly denying expressly or implicitly. TEX. R. APP. P. a plea to the jurisdiction. Thomas did not file a 33.1(a)(2)(A). Because a trial court cannot reach document titled ″plea to the jurisdiction″ with the the merits of a case without subject matter trial court. However, Thomas’s summary judgment jurisdiction, Tex. Ass’n of Bus. v. Tex. Air Control motion clearly challenged the trial court’s subject Bd., 852 S.W.2d 440, 443, 36 Tex. Sup. Ct. J. 607 matter jurisdiction. HN4 The Legislature provided (Tex. 1993), a trial court that rules on the merits of for an interlocutory appeal when a trial court an issue without explicitly rejecting an asserted denies a governmental unit’s challenge to subject jurisdictional [*340] attack has implicitly denied matter jurisdiction, irrespective of the procedural the jurisdictional challenge. See, e.g., Soberay vehicle used. 4 TEX. CIV. PRAC. & REM. CODE Mach. & Equip. Co. v. MRF Ltd., 181 F.3d 759, § 51.014(a)(8); Harris County v. Sykes, 136 S.W.3d 762 (6th Cir. 1999); Ahuna v. Dep’t of Hawaiian 635, 638, 47 Tex. Sup. Ct. J. 618 (Tex. 2004); see Home Lands, 64 Haw. 327, 640 P.2d 1161, 1165 also Surgitek, Bristol-Myers Corp. v. Abel, 997 n.9 (Haw. 1982). By ruling on the merits of S.W.2d 598, 601, 42 Tex. Sup. Ct. J. 993 (Tex. Long’s declaratory judgment claim, the trial court 1999)(holding that the availability of interlocutory necessarily denied Thomas’s challenge to the appeal [**12] from a section 15.003(a) joinder court’s jurisdiction. That implicit [**14] denial decision is not ″constrained by the form or caption satisfies section 51.014(a)(8) of the Texas Civil of a pleading″ but will be determined by ″the Practice and Remedies Code and gives the court substance of a motion to determine the relief of appeals jurisdiction to consider Thomas’s sought, not merely its title″). To the extent some interlocutory appeal. courts of appeals have held otherwise, we disapprove of those holdings. See 97 S.W.2d at IV. Jurisdiction of the Trial Court-Exhaustion 302; Lozano, 72 S.W.3d at 445; City of Garland v. of Remedies Rutherford, 1998 Tex. App. LEXIS 6006, No. Thomas contends that the trial court lacked subject 05-98-00295-CV, 1998 WL 652318, at *4 & n.1 matter jurisdiction because the Commission had (Tex. App.-Dallas Sept. 24, 1998, no pet.) (not exclusive jurisdiction over Long’s reinstatement designated for publication). claims, and Long failed to exhaust her administrative remedies before filing this suit.

HN5 To be entitled to an interlocutory appeal, section 51.014(a)(8) requires the denial of a HN6 Whether the Commission has exclusive jurisdictional challenge. In this case, none of the jurisdiction over this dispute is a question of law trial court’s orders on the parties’ cross-motions that we review de novo. Subaru of Am. v. David for summary judgment explicitly denied the relief McDavid Nissan, Inc., 84 S.W.3d 212, 222, 45 sought in the section of Thomas’s motion for Tex. Sup. Ct. J. 907 (Tex. 2002). Texas district summary judgment challenging the [**13] trial courts are courts of general jurisdiction with the court’s subject matter jurisdiction. However, the power to ″hear and determine any cause that is trial court’s rulings on the merits of some claims cognizable by courts of law or equity″ and to for which Thomas argued the trial court lacked ″grant any relief that could be granted by either subject matter jurisdiction constitute an implicit courts of law or equity.″ TEX. GOV’T CODE § 4 We refer to ″governmental unit″ as defined by section 101.001 of the Texas Civil Practice and Remedies Code.

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24.007-.008; see also TEX. CONST. art. V, § 8; (a) HN9 The commission shall adopt, David McDavid Nissan, 84 S.W.3d at 220; Dubai publish, and enforce rules regarding: Petroleum Co. v. Kazi, 12 S.W.3d 71, 75, 43 Tex.

(1) selection and classification of Sup. Ct. J. 412 (Tex. 2000). In contrast, employees;

administrative [**15] bodies only have the powers conferred on them by clear and express statutory (2) competitive examinations; language or implied powers that are reasonably necessary to carry out the Legislature’s intent. (3) promotions, seniority, and tenure; David McDavid Nissan, 84 S.W.3d at 220; Tex. (4) layoffs and dismissals; Workers’ Comp. Comm’n v. Patient Advocates of Tex., 136 S.W.3d 643, 652, 47 Tex. Sup. Ct. J. 607 (5) disciplinary actions; (Tex. 2004). When the Legislature grants an (6) grievance procedures; administrative body the sole authority to make an initial determination in a dispute, the agency has (7) the rights of employees during an exclusive jurisdiction over the dispute. David internal investigation; and McDavid Nissan, 84 S.W.3d at 221. If an [*341] (8) other matters relating to the administrative body has exclusive jurisdiction, a selection of employees and the procedural party must exhaust all administrative remedies and substantive rights, advancement, before seeking judicial review of the decision. Id. benefits, and working conditions of Until the party has satisfied this exhaustion employees. requirement, the trial court lacks subject matter jurisdiction and must dismiss those claims without TEX. LOC. GOV’T CODE § 158.035(a). Thus, prejudice to refiling. Id. HN10 the Commission is authorized [**17] by HN7 Determining whether the Commission has statute to regulate employment matters in the exclusive jurisdiction requires examination and sheriff’s department. The Harris County Sheriff’s construction of the relevant statutory scheme. Id. Department Civil Service Regulations detail the Here, there is no express legislative indication of rules and procedures adopted by the Commission. exclusive jurisdiction. Thus, we look to the HARRIS COUNTY SHERIFF’S DEP’T CIVIL legislative scheme to determine if the Legislature SERV. REGS. R. 1.01-19.01. The regulations intended [**16] the Commission to have sole address employment position classification, authority to make the initial determination in this employment criteria, disciplinary actions dispute. Id. at 223. (including layoffs and dismissals) and appeals, grievances, and performance evaluations, among HN8 Sections 158.033 and 158.034 of the Texas other things. Id. R. 4.01-.06, 6.01-.02, 12.01-.05, Local Government Code permit the creation of a 13.01-.04, 15.01-.08. One of these regulations, sheriff’s department civil service system and a Rule 12.03(a), states that ″no employee shall be commission in certain counties. Thomas contends subject to any disciplinary action [including that subsection 158.035(a) of the Texas Local termination] except for just cause.″ 5 Government Code vests the Commission with exclusive jurisdiction over the dispute in this case. [**18] HN11 Absent an express agreement to the Section 158.035, titled ″Powers of the contrary, Texas is an employment-at-will state. Commission,″ provides in relevant part: City of Odessa v. Barton, 967 S.W.2d 834, 835, 41 5 The Regulations define ″Disciplinary action″ as ″any action taken against an employee by the Department due to improper conduct by the employee that will result in termination, suspension, demotion, reduction in rank, or refusal to rehire at the end of a contractual period.″ HARRIS COUNTY SHERIFF’S DEP’T CIVIL SERV. REGS. R. 12.01.

Page 10 of 11 207 S.W.3d 334, *341; 2006 Tex. LEXIS 280, **18

Tex. Sup. Ct. J. 663 (Tex. 1998). Subject to certain in the Commission’s rules as authorized by statute. exceptions, employment is terminable at any time [*342] See Bullock v. Amoco Prod. Co., 608 by either party with or without cause. Barton, 967 S.W.2d 899, 901, 24 Tex. Sup. Ct. J. 15 (Tex. S.W.2d at 835; see Fed. Express Corp. v. 1980). We hold that once the employees of a Dutschmann, 846 S.W.2d 282, 283, 36 Tex. Sup. department elect to create a commission, and the Ct. J. 530 (Tex. 1993); see also East Line & Red commission’s rules create rights employees would River R.R. Co. v. Scott, 72 Tex. 70, 10 S.W. 99, 102 not have at common law, the commission obtains (1888). However, an employer may modify the exclusive jurisdiction over those matters. See employment terms of the at-will status of its TEX. LOC. GOV’T CODE § 158.032-.033, .035. employees. Barton, 967 S.W.2d at 835. In this We therefore conclude that the Commission had case, HN12 the Commission’s rules implement exclusive jurisdiction over the employment dispute procedures for disciplinary actions, including in this case. Long exercised her rights under the termination for just cause. HARRIS COUNTY Commission’s scheme when she appealed her SHERIFF’S DEP’T CIVIL SERV. REGS. R.

termination by the sheriff to the Commission. Her 12.03(a). The regulations describe the initial parts appeal was successful--the Commission overturned of the appellate process: within the prescribed Long’s termination and ordered that she be allowed time periods, an employee may appeal a to return to work with no loss of seniority or disciplinary action to the sheriff; after that, the benefits. Nothing in our record indicates whether employee may appeal the sheriff’s decision to the Commission. Id. R. 12.04. Section 158.037 of the Thomas or Long raised the physical ability test Texas Local Government Code then provides for a requirement with the Commission, and the ″substantial evidence″ [**19] review of the Commission did not address the issue in its order. Commission’s decision by the district court. 6 As In a letter dated the day after the Commission’s we have recognized, an employee subject to order, the Department [**21] notified Long that, for-cause termination has a property interest in according to its interpretation of the order, she continued employment sufficient to entitle the would be required to complete a physical ability employee to judicial review of an administrative test upon her return to work after a year-long decision to terminate employment. Barton, 967 absence. Long did not return to the Commission S.W.2d at 835-36. to obtain a decision regarding the Department’s enforcement of a physical ability test requirement.

HN13 Although the statute authorizing the creation If she had, and she received an adverse decision, of the Commission does not contain the words she could have appealed to the district court. ″exclusive jurisdiction,″ as many statutes granting Instead, she bypassed the Commission and filed an administrative body exclusive jurisdiction do, this suit seeking interpretation and enforcement of it authorizes the Commission to extend specified the Commission’s first order. Although Long rights to employees that are not available at obtained a decision in her favor regarding common law. By promulgating Rule 12.03(a), as reinstatement, the law requires Long to exhaust authorized by the Local Government Code, the her administrative remedies by obtaining a Commission vested Department employees with Commission decision regarding Thomas’s refusal for-cause employment status, which they have to allow her to return to work without completing only because [**20] the Commission conferred a physical ability test. She failed to do so. For that right on them. To enforce those rights, these reasons, the trial court did not have subject employees must follow the procedures enumerated matter jurisdiction over Long’s reinstatement 6 Presumably because Long’s appeal to the Commission was successful, she did not pursue judicial review of the order. The constitutionality of the standard of review provided by the Code was not challenged.

Page 11 of 11 207 S.W.3d 334, *342; 2006 Tex. LEXIS 280, **21

claims. challenge. The fact that Long fashioned this suit as a V. Conclusion declaratory judgment action does not change this analysis. The subject matter of her declaratory For the reasons stated above, we reverse the court judgment action--the interpretation of the of appeals’ judgment and render judgment Commission’s order as it applies to completing a dismissing for lack of subject matter jurisdiction physical ability test--is [**22] the same subject Long’s claims relating to her reinstatement. matter over which the Legislature intended the J. Dale Wainwright Commission to exercise exclusive jurisdiction. Justice The trial court was without subject matter jurisdiction to issue a declaratory judgment in this OPINION DELIVERED: April 21, 2006 case and erred in denying Thomas’s jurisdictional | | Neutral As of: April 9, 2015 12:38 PM EDT

Am. Star Energy & Minerals Corp. v. Stowers Supreme Court of Texas October 14, 2014, Argued; February 27, 2015, Opinion Delivered NO. 13-0484

Reporter 2015 Tex. LEXIS 161; 58 Tex. Sup. J. 401 Notice: PUBLICATION STATUS PENDING. Partnership Act, not the agreement, but it was still CONSULT STATE RULES REGARDING based on the judgment creditor’s underlying PRECEDENTIAL VALUE. contract claim, consistent with § 152.306(b)(2);

[4]-The partners had the same opportunity to Prior History: [*1] ON PETITION FOR contest their liability as they would have had were REVIEW FROM THE COURT OF APPEALS they sued within the underlying limitations period. FOR THE SEVENTH DISTRICT OF TEXAS. Am. Star Energy & Minerals Corp. v. Stowers, Outcome 405 S.W.3d 905, 2013 Tex. App. LEXIS 5933 (Tex. Judgment reversed. App. Amarillo, 2013)

LexisNexis® Headnotes Core Terms Business & Corporate Law > ... > Management partnership, partner, limitations period, entity, Duties & Liabilities > Rights of Partners > Authority limitations, accrued, citations, accrual, Oil, cause to Act of action, court of appeals, statute of limitations, Business & Corporate Law > ... > Management trial court, prerequisites, satisfaction, cases, Duties & Liabilities > Rights of Partners > separate suit, obligations, parties Partnership Property

Case Summary HN1 A Texas partnership is an entity distinct from its partners, Tex. Bus. Orgs. Code Ann. § 152.056. Though that has not always been clear, the Overview Legislature unequivocally embraced he entity HOLDINGS: [1]-While the judgment creditor theory of partnership when it enacted the Texas could have named the partners in the original suit, Revised Partnership Act (TRPA), since codified in doing so would not change the result as the the Texas Business Organizations Code. As an judgment creditor would not have been able to independent entity, a partnership may enter into pursue the partners’ assets until after judgment contracts in its own name, may own its own was finalized in 2009, Tex. Bus. Orgs. Code Ann. property, and may sue and be sued in its own § 152.306(b)(2)(C)(iii); [2]-There was no evidence name, Tex. Bus. Orgs. Code Ann. § 152.101; Tex. that the partnership’s agreement with the judgment R. Civ. P. 28. creditor imposed any obligation on the partners or gave the judgment creditor the right to compel Business & Corporate Law > ... > Management anything of the partners; [3]-The suit was to Duties & Liabilities > Causes of Action > enforce liability created by the Texas Revised Partnership Liabilities

Page 2 of 11 2015 Tex. LEXIS 161, *1

HN2 Under the Texas Revised Partnership Act functions to compel the exercise of a right of (TRPA), a partner remains jointly and severally action within a reasonable time. However, when liable for all obligations of the partnership, Tex. the Legislature employs the term ″accrues″ without Bus. Orgs. Code Ann. § 152.304(a). This personal an accompanying definition, the courts must liability, undoubtedly an aggregate-theory feature, determine when that cause of action accrues and is a defining characteristic of the partnership form thus when the statute of limitations commences to and distinguishes it from other entity types. run. To determine accrual in any particular case is Through its scheme for enforcing that liability, to establish a general rule of law for a class of however, the TRPA imposes even on this aggregate cases. feature an entity aspect. A judgment against a partnership is not by itself a judgment against a Governments > Legislation > Statute of partner, so a creditor must obtain a judgment Limitations > Time Limitations against the partner individually, Tex. Bus. Orgs.

Business & Corporate Law > ... > Management Code Ann. § 152.306(a). A creditor may attempt Duties & Liabilities > Causes of Action > to do so in the suit against the partnership or in a Partnership Liabilities separate suit, Tex. Bus. Orgs. Code Ann. § 152.305. It may not, however, seek satisfaction of the Business & Corporate Law > ... > Management Duties & Liabilities > Causes of Action > Derivative judgment against a partner until a judgment is Actions rendered against the partnership, § 152.306(b)(2)(A). HN5 The appellate court is left to establish a rule of accrual for partner-liability suits, which must Business & Corporate Law > ... > Management be founded on reason and justice. Reason requires Duties & Liabilities > Causes of Action > the appellate court to consider the Texas Revised Partnership Liabilities Partnership Act’s overall scheme and the HN3 The Texas Revised Partnership Act (TRPA) legislative intent expressed therein. Justice requires generally requires time to collect the debt from the appellate court to examine the rule’s policy the partnership first: the judgment against the implications and equity of its consequences. In partnership must go unsatisfied for ninety days light of a partnership’s status as a separate entity before a creditor may proceed against a partner and the statutory prerequisites to proceeding and his assets, Tex. Bus. Orgs. Code Ann. § against a partner, the cause of action against a 152.306(b)(2)(C). The enforcement of a partner’s partner does not accrue until a creditor can proceed liability is considered the most confusing aspect against a partner’s assets—that is, generally at the of partnership law. Still, the passage of time, in expiration of the ninety-day satisfaction period. conjunction with the plain language of the TRPA’s text, forecloses any argument that the Legislature Business & Corporate Law > ... > Management Duties & Liabilities > Causes of Action > rejected any aspect of the entity theory.

Partnership Liabilities Governments > Legislation > Statute of Business & Corporate Law > ... > Management Limitations > Time Limitations Duties & Liabilities > Rights of Partners > Partnership Property HN4 Generally a cause of action accrues when facts come into existence that authorize a claimant HN6 As a result of the partnership’s statutorily to seek a judicial remedy, when a wrongful act confirmed status as a separate entity, a causes some legal injury, or whenever one person partnership’s acts are only its own, not a partner’s. may sue another. The resulting limitations period Individual partners do not own partnership income

Page 3 of 11 2015 Tex. LEXIS 161, *1

and profits while they remain in the partnership’s Business & Corporate Law > ... > Management hands and have not been distributed to the partners. Duties & Liabilities > Causes of Action > Partnership Liabilities Business & Corporate Law > ... > Management Duties & Liabilities > Causes of Action > HN9 The Texas Revised Partnership Act allows a Partnership Liabilities partner to be sued in the action against the partnership or in a separate action, and the HN7 The statutory prerequisites to enforcement appellate court’s definition of accrual in an action make a partner’s liability not only derivative of against the partner is consistent with that the partnership’s liability, but contingent on it for permissive rule, Tex. Bus. Orgs. Code Ann. § all practical purposes. If a partnership obligates 152.305. Especially considering its enforcement itself to pay a sum or perform a service under a scheme, this rule suggests the Legislature considers contract, the individual partners, though liable for the collection action to be separate from the the obligation under the Texas Revised Partnership underlying litigation. The only practical reason to Act, cannot immediately be called on to pay or sue a partner separately is to be able to sue him perform in lieu of the partnership. In either case, later—a concurrent separate suit would the claim must be litigated against the partnership presumably be consolidated or sit pending so that its obligation is determined, reduced to disposition of the case against the partnership. damages, and fixed in a judgment, Tex. Bus. Orgs. The most likely time, if not the only logical time, Code § 152.306(b)(2)(A). Second, the a plaintiff would do so is when the partnership plaintiff-creditor must have ninety days’ fails to satisfy the judgment. In allowing separate opportunity to satisfy that judgment from the suits, the Legislature must have contemplated that partnership’s assets, § 152.306(b)(2)(C). at least some subsequent actions against partners would be brought outside of the original limitations Business & Corporate Law > ... > Management Duties & Liabilities > Causes of Action > period. Partnership Liabilities Business & Corporate Law > ... > Management HN8 Considering the derivative and contingent Duties & Liabilities > Causes of Action > General nature of that liability, the only obligation for Overview which a partner is really responsible is to make Governments > Legislation > Statute of good on the judgment against the partnership, and Limitations > Time Limitations generally only after the partnership fails to do so. The significance of joint and several liability in HN10 Limitations exist to compel the exercise of the partnership context is that once that the a right of action within a reasonable time so that prerequisites are met, a creditor can seek the the opposing party has a fair opportunity to whole debt from one party and is not required to defend while witnesses are available. In the join all the partners, obtain judgments against partnership context, these concerns are addressed them, or apportion liability among them. This by the limitations period applying to the underlying scheme defers a partner’s liability, and as a result cause of action against a partnership. a creditor cannot seek a judicial remedy from a Business & Corporate Law > ... > Management partner until these prerequisites are met. Because Duties & Liabilities > Causes of Action > a creditor’s rights against a partner do not arise Partnership Liabilities when the partnership incurs an obligation, the appellate court defines accrual as occurring when HN11 A judgment against a partnership is not by those rights arise. itself a judgment against a partner.

Page 4 of 11 2015 Tex. LEXIS 161, *1

Business & Corporate Law > General Partnerships > a judgment creditor attempted to collect from a Formation > Partnership Agreements partnership after litigating a contract claim for over a decade and a half, only to find the HN12 The partnership form has built-in partnership insolvent. When the creditor sought a mechanisms to provide further notice of any judgment against the individual partners, the trial impending liability. First, each partner has a right court ruled the limitations period began when the to manage and conduct partnership business, Tex.

underlying cause of action accrued. Because that Bus. Orgs. Code Ann. § 152.203(a). When a period had passed, limitations precluded pursuit partnership is sued, the litigation presumably of the partners’ assets. The court of appeals becomes part of that business. Second, each affirmed. We hold today that the limitations period partner owes to the others a duty of care, Tex. Bus.

against a partner generally does not commence Orgs. Code Ann. § 152.204(a)(2). When a until after final judgment against the partnership partnership is served with a lawsuit, that duty may is entered. Because this action was brought within require the partner served to apprise the other that period, we reverse the court of appeals’

partners. Third, partners can agree to provide judgment.

notice of pending litigation to one another in their partnership agreement, Tex. Bus. Orgs. Code Ann. I § 152.002.

In 1980, the four petitioners (together, the Partners)

Business & Corporate Law > ... > Management formed S & J Investments, a Texas general Duties & Liabilities > Causes of Action > partnership, to [*2] invest in and manage certain Partnership Liabilities oil and gas properties. S & J and American Star HN13 A party doing business with a partnership Energy and Minerals Corporation were parties to does so knowing that if the partnership fails on its an agreement that governed operation of those obligations, relief is not wholly subject to the properties. In the early 1990s, American Star sued adequacy of the partnership assets. Conversely, S & J for breach of that agreement and eventually individuals who choose the partnership form as prevailed on its claims. S & J appealed that the vehicle for their enterprise do so knowing that judgment, and a court of appeals reversed it in their personal assets are on the line. Equity part and remanded the case to the trial court. See demands the court leave these expectations S & J Invs. v. Am. Star Energy & Minerals Corp., undisturbed where a plaintiff proceeds as the law No. 07-99-0090-CV, 2001 Tex. App. LEXIS 7730, allows. 2001 WL 1380027, at *6 (Tex. App.—Amarillo Nov. 7, 2001, pet. denied) (not designated for Judges: JUSTICE BROWN delivered the opinion publication). In 2007, the trial court awarded of the Court. American Star a second judgment, and S & J again appealed. The court of appeals affirmed that Opinion by: Jeffrey V. Brown judgment, and we denied review of its decision.

See S & J Invs. v. Am. Star Energy & Minerals Opinion Corp., No. 07-07-0357-CV, 2008 Tex. App. LEXIS 5078, 2008 WL 2669665, at *5 (Tex.

In this case we must decide whether Texas App—Amarillo July 8, 2008, pet. denied) (mem. partnership law requires a plaintiff seeking to op.). enforce a partner’s liability for a partnership debt to sue the partner within the limitations period on S & J owes American Star $227,884.46 under the the underlying claim against the partnership. Here, judgment. But S & J proved to be undercapitalized,

Page 5 of 11 2015 Tex. LEXIS 161, *2

and its assets cannot satisfy the judgment debt. In distinguishes it from other entity types. Cf. id. § June 2010, American Star brought this action 152.801(a) (″[A] partner is not personally liable . seeking a judgment against the Partners . . for any obligation of the partnership incurred individually. In response, the Partners argued the while the partnership is a limited liability action was barred by the four-year statute of partnership.″); id. § 101.114 (″[A] member or limitations that applies to the underlying manager is not liable for a debt, obligation, or breach-of-contract claim. Both sides moved for liability of a limited liability company . . . .″); summary judgment. The trial court granted the Willis v. Donnelly, 199 S.W.3d 262, 271 (Tex. [*3] Partners’ motion and ordered that American 2006) (″A bedrock principle of corporate law is Star take nothing. A divided court of appeals that an individual can incorporate a business and affirmed, holding the limitations period began thereby normally shield himself from personal when the underlying breach-of-contract claim liability for the corporation’s contractual against the partnership accrued, barring this suit. obligations.″) (collecting cases); see also 1 ALAN 405 S.W.3d 905, 906-07 (Tex. App.—Amarillo R. BROMBERG & LARRY E. RIBSTEIN, BROMBERG AND 2013). American Star sought this review. RIBSTEIN ON PARTNERSHIP § 1.03(c)(4) (2012) (″The personal liability of partners is perhaps the most II important aggregate feature of partnership . . . .″).

HN1 A Texas partnership is ″an entity distinct Through its scheme for enforcing that liability, from its partners.″ TEX. BUS. ORGS. CODE § 152.056. however, the TRPA imposes even on this aggregate Though that has not always been clear, the feature an entity aspect. See TEX. REV. CIV. STAT. Legislature ″’unequivocally embrace[d] the entity ANN. art. 6132b-3.05 cmt. (Vernon Supp. 2010) theory of partnership’″ when it enacted the Texas (Comment of Bar Committee—1993) (stating the Revised Partnership Act (TRPA), since codified in TRPA’s enforcement provisions ″are consistent the Texas Business Organizations Code.1 In re with the emphasis [*5] on the partnership as an Allcat Claims Serv., L.P., 356 S.W.3d 455, 464 entity″). ″A judgment against a partnership is not (Tex. 2011) (quoting TEX. REV. CIV. STAT. ANN. art. by itself a judgment against a partner,″ so a 6132b-2.01 cmt. (Vernon Supp. 2010) (Comment creditor must obtain a judgment against the partner of Bar Committee—1993)) (alteration in original). individually. TEX. BUS. ORGS. CODE § 152.306(a). A As an independent entity, a partnership may enter creditor may attempt to do so in the suit against into contracts in its own name, may own its own the partnership or in a separate suit. Id. § 152.305. property, and may sue and be sued in its own It may not, however, seek satisfaction of the name. See TEX. BUS. ORGS. CODE § 152.101; TEX. R. judgment against a partner until a judgment is CIV. P. 28. rendered against the partnership. Id. § 152.306(b)(2)(A). On top of that,HN3 the TRPA Nonetheless,HN2 under the TRPA, a partner generally requires time to collect the debt from remains ″jointly and severally liable for all the partnership first: the judgment against the obligations [*4] of the partnership.″ TEX. BUS. partnership must go unsatisfied for ninety days ORGS. CODE § 152.304(a). This personal liability, before a creditor may proceed against a partner undoubtedly an aggregate-theory feature, is a and his assets.2 Id. § 152.306(b)(2)(C). The defining characteristic of the partnership form and enforcement of a partner’s liability is considered 1 The parties disagree whether the TRPA or the recodified version applies to this case. There is no substantive difference in the provisions we apply today. Though we refer to the law applied as TRPA, we cite to the codified version for practicality’s sake. 2 The TRPA allows a creditor to forego this satisfaction period if (1) the partnership is in bankruptcy, (2) the parties have agreed to waive the period, (3) a [*6] court orders so after finding that the partnership assets are clearly insufficient or that the satisfaction period

Page 6 of 11 2015 Tex. LEXIS 161, *5

the most confusing aspect of partnership law. See functions ″to compel the exercise of a right of ROBERT A. RAGAZZO & FRANCES S. FENDLER, CLOSELY action within a reasonable time.″ Moreno v. HELD BUSINESS ORGANIZATIONS 193 (2d ed. 2012) Sterling Drug, Inc., 787 S.W.2d 348, 351 (Tex. (quoting 2 BROMBERG & RIBSTEIN, supra, § 5.08(a)). 1990) (citation omitted). However, ″[w]hen the Still, ″[t]he passage of time, in conjunction with [L]egislature employs the term ’accrues’ without the plain language of the TRPA’s text, forecloses an accompanying definition, the courts must any argument that the Legislature rejected any determine when that cause of action accrues and aspect of the entity theory.″ Allcat, 356 S.W.3d at thus when the statute of limitations commences to 467. run.″ Id. at 351-52, 354 (refusing to apply the discovery rule to a wrongful-death action, but III noting that it would have applied had the applicable statute of limitations not specifically Despite the Legislature’s efforts to define the fixed the point of accrual). ″’[T]o determine relationship between a partner and the partnership [accrual] in any particular case is to establish a and to control the circumstances under which a general rule of law for a class of cases . . . .’″ Id. partner’s liability may be enforced, it did not at 351 (quoting Fernandi v. Strully, 35 N.J. 434, expressly dictate when a suit against a partner 173 A.2d 277, 285 (N.J. 1961)) (other citations must be brought. The Partners argue that because omitted). American Star could have sued them in its original suit against S & J, this cause of action accrued and The statutes of limitations applicable here use the limitations on this suit began to run at the same term ″accrues″ but do not specify when accrual time as on the suit against S & J—at the breach of occurs. Compare TEX. CIV. PRAC. & REM. CODE § the underlying agreement. American Star, on the 16.004(a)(3) (providing limitations period for a other hand, insists the Partners owed no obligation debt cause of action), and id. § 16.051 (providing until the judgment against S & J became final in residual [*8] limitations period), with id. § 2009, and the limitations period began then. The 16.003(b) (″The cause of action [for wrongful parties agree that a four-year limitations period death] accrues on the death of the injured person.″). applies to this action. They further acknowledge HN5 We are thus left to establish a rule of accrual this action was brought more than four years after for partner-liability suits, which ″’must be founded the underlying cause of action accrued but within on reason and justice.’″ Moreno, 787 S.W.2d at four years of the judgment [*7] against S & J. 351 (quoting Fernandi, 173 A.2d at 285) (other citations omitted). Reason requires us to consider HN4 Generally a cause of action accrues ″when the TRPA’s overall scheme and the legislative facts come into existence [that] authorize a intent expressed therein. See Tex. Dep’t of Transp. claimant to seek a judicial remedy,″ ″when a v. City of Sunset Valley, 146 S.W.3d 637, 642 (Tex. wrongful act causes some legal injury,″ or 2004) (stating ″[w]e must read the statute as a ″whenever one person may sue another.″ Exxon whole″ and ″consider the objective the law seeks Corp. v. Emerald Oil & Gas Co., 348 S.W.3d 194, to obtain″ (citations omitted)). Justice requires us 202 (Tex. 2011) (citations omitted); S.V. v. R.V., to examine the rule’s policy implications and 933 S.W.2d 1, 4 (Tex. 1996) (citations omitted); equity of its consequences. In light of a Luling Oil & Gas Co. v. Humble Oil & Ref. Co., partnership’s status as a separate entity and the 144 Tex. 475, 191 S.W.2d 716, 721 (Tex. 1945) statutory prerequisites to proceeding against a (citation omitted). The resulting limitations period partner, we hold that the cause of action against a is excessively burdensome, or (4) the partner’s liability arises independently of his status as a partner. TEX. BUS. ORGS. CODE § 152.306(c). None of those exceptions apply here.

Page 7 of 11 2015 Tex. LEXIS 161, *8

partner does not accrue until a creditor can proceed good on the judgment against the partnership, and against a partner’s assets—that is, generally at the generally only after the partnership fails to do so. expiration of the ninety-day satisfaction period.3 See 1 BROMBERG & RIBSTEIN, supra, § 1.03(c)(4)

(″Under [the entity theory], the partners are A essentially guarantors of an independent partnership debt rather than being directly HN6 As a result of the partnership’s statutorily responsible.″); cf. UNIF. P’SHIP ACT § 307 cmt. 4 confirmed status as a separate entity, a (1997) (″[The Revised Uniform Partnership Act’s partnership’s acts are only its own, not a partner’s. exhaustion requirement] respects the concept of a [*9] Cf. Allcat, 356 S.W.3d at 468 (″Individual partnership as an entity and makes partners more partners do not own [partnership income and in the nature of guarantors than principal debtors profits] while they remain in the partnership’s on every partnership debt.″). The significance of hands and have not been distributed to the joint and several liability in the partnership context partners.″ (citations omitted)). Here, it was S & J is that once that the prerequisites are met, a that was party to and breached the agreement with creditor can seek the whole debt from one party American Star. The Partners, separate entities by and is not required to join all the partners, obtain statute, were not in privity with American Star, judgments against them, or apportion liability and they committed no wrongful act and caused among them. Cf. 2 BROMBERG & RIBSTEIN, supra, § no legal injury. See S.V., 933 S.W.2d at 4. Surely, 5.08(g) (stating the exhaustion requirement defeats the Partners are liable for S & J’s breach, but only the joint-and-several characterization). This by operation of the statute. An effect of the entity scheme defers a partner’s [*11] liability, and as a theory is that a partner’s liability is wholly result a creditor cannot seek a judicial remedy derivative of the partnership’s liability.

from a partner until these prerequisites are met.

HN7 The statutory prerequisites to enforcement See Exxon Corp., 348 S.W.3d at 202. Because a make a partner’s liability not only derivative of creditor’s rights against a partner do not arise the partnership’s liability, but contingent on it for when the partnership incurs an obligation, we all practical purposes. If a partnership obligates define accrual as occurring when those rights itself to pay a sum or perform a service under a arise. See S.V., 933 S.W.2d at 3 (″[Limitations] contract, the individual partners, though liable for quicken diligence by making [a claim] in some the obligation under the TRPA, cannot measure equivalent to a right . . . .″ (quoting immediately be called on to pay or perform in lieu Gautier v. Franklin, 1 Tex. 732, 739 (1847)) of the partnership. In either case, the claim must (internal quotation marks omitted)). be litigated against the partnership so that its obligation is determined, reduced to damages, and HN9 The TRPA allows a partner to be sued in the fixed in a judgment. See TEX. BUS. [*10] ORGS. action against the partnership or in a separate CODE § 152.306(b)(2)(A). Second, the action, and our definition of accrual in an action plaintiff-creditor must have ninety days’ against the partner is consistent with that opportunity to satisfy that judgment from the permissive rule. See TEX. BUS. ORGS. CODE § partnership’s assets. Id. § 152.306(b)(2)(C). 152.305. Especially considering its enforcement scheme, this rule suggests the Legislature considers HN8 Considering the derivative and contingent the collection action to be separate from the nature of that liability, the only obligation for underlying litigation. The only practical reason to which a partner is really responsible is to make sue a partner separately is to be able to sue him 3 Because the satisfaction period applies here, we do not address accrual when a creditor may proceed directly against a partner under Texas Business Organizations Code section 152.306(c).

Page 8 of 11 2015 Tex. LEXIS 161, *11

later—a concurrent separate suit would begin to run. Id. at 209 (citing Getty Oil Co. v. Ins. presumably be consolidated or sit pending Co. of N. Am., 845 S.W.2d 794, 799 (Tex. 1992)); disposition of the case against the partnership. City of San Antonio v. Talerico, 98 Tex. 151, 81 The most likely time, if not the only logical time, S.W. 518, 520 (Tex. 1904) (″It is permitted by our a plaintiff would do so is when the partnership law to bring into the suit against it the party whom fails to satisfy the judgment. Though the time it seeks to hold liable as an indemnitor, . . . but this required here to obtain [*12] the judgment against does not make the limitation applicable to the S & J is probably extraordinary, this case illustrates cause of action of the plaintiff control its action that litigation of such claims can continue well over against the indemnitor.″). This rule is based beyond the applicable limitation periods. In on our interest in judicial economy. See Getty Oil, allowing separate suits, the Legislature must have 845 S.W.2d at 799 (″Forcing the indemnity suit to contemplated that at least some subsequent actions wait for judgment in the liability suit ’would against partners would be brought outside of the contravene the policy of the courts to encourage original limitations period. See UNIF. P’SHIP ACT § settlements and to minimize litigation.’″ (quoting 307 cmt. 2 (1997) (″[Allowing separate suit of K & S Oil Well Serv., Inc. v. Cabot Corp., 491 partners] will simplify and reduce the cost of S.W.2d 733, 739 (Tex. Civ. App.—Corpus Christi litigation, especially in cases of small claims 1973, writ ref’d n.r.e.))). where there are known to be significant partnership assets and thus no necessity to collect judgment Similarly, Luling Oil & Gas’s rule does not out of the partners’ assets.″). While American Star readily apply to the partnership-liability context. could have named the Partners in the original suit, In that case, we addressed a garden-variety contract doing so would not change the result here: action between a seller and buyer of [*14] oil and American Star would not have been able to pursue gas interests. See 191 S.W.2d at 718-19, 721-22 the Partners’ assets until after the judgment was (noting the contract ″fixed the rights and finalized in 2009. See TEX. BUS. ORGS. CODE § obligations of the parties″ and gave the seller ″the 152.306(b)(2)(C)(ii) (providing the satisfaction right to compel″ the relief sought). ″In this period as to a contested partnership judgment situation,″ we held, ″the statute of limitation begins only once a stay on execution expires). begins to run at the time when a suit could be commenced upon the claim asserted.″ Id. at 722 Despite this specific statutory context, the Partners (emphasis added) (citation omitted). Here, there is and the court of appeals would apply to this suit no evidence that S & J’s agreement with American the general rule of accrual as stated in Luling Oil Star imposed any obligation on the Partners or & Gas: ″[W]henever one person may [*13] sue gave American Star the right to compel anything another[,] a cause of action has accrued.″ 191 of the Partners. Further, the TRPA’s scheme S.W.2d at 721 (citation omitted). That rule is not, mirrors aspects of our indemnity jurisprudence however, universal. For example, a cause of and serves as a legislative basis for excepting suits action for indemnity does not accrue ″until the against partners from the general accrual rule. indemnitee’s liability to the party seeking damages becomes fixed and certain,″ generally by a The Partners and the court of appeals also rely on judgment. Ingersoll-Rand Co. v. Valero Energy the TRPA’s requirement that the judgment against Corp., 997 S.W.2d 203, 208 (Tex. 1999) (citations a partner must be ″based on the same claim″ as omitted). Still, ″an indemnitee may bring a claim the judgment against the partnership to argue this against an indemnitor before the judgment is suit is really a suit on the underlying contract assigned against the indemnitee″—before the obligation. See TEX. BUS. ORGS. CODE § cause of action accrues and before limitations 152.306(b)(2). If the judgment created an

Page 9 of 11 2015 Tex. LEXIS 161, *14

independent cause of action, the Partners argue, contained no provision similar to the TRPA’s American Star could not satisfy this statutory liability-enforcement provision). The Partners prerequisite. We are not persuaded. This suit is to unconvincingly argue the Legislature confirmed enforce liability created by the TRPA, not the the rule applied in these cases when it codified the agreement, [*15] but it is still based on American TRPA into the Business Organizations Code Star’s underlying contract claim, consistent with without overruling those decisions. On the the statute. contrary, the TRPA’s passage eliminates any instructive or persuasive value those decisions Federal courts applying the TRPA have reached may have once had. We therefore decline to rely the same conclusion we reach today. See Evanston on them. Ins. Co. v. Dillard Dep’t Stores, Inc., 602 F.3d 610, 617 (5th Cir. 2010) (holding a cause of action B to recover against partners of law firm successfully Our holding does not disturb the policy purposes sued for trademark infringement accrued on entry behind limitations. HN10 They exist ″to compel of judgment against the firm, at the earliest); In re the exercise of a right of action within a reasonable Jones, 161 B.R. 180, 183 (Bankr. N.D. Tex. 1993)

time so that the opposing party has a fair (″Under the entity theory of partnerships, it is opportunity [*17] to defend while witnesses are logical that a partner has no liability until the available.″ Moreno, 787 S.W.2d at 351 (citation partnership liability is established.″). The Partners omitted). In the partnership context, these concerns cite lower-court precedent to argue that the are addressed by the limitations period applying federal-court decisions are contrary to Texas law, to the underlying cause of action against a which they insist has always required partners to partnership. Here, by suing S & J within the be individually named and served within the statute of limitations on the claim, American Star limitations period running from the underlying did exercise its contract right of action within a claim.4 Those cases, however, were decided under reasonable time. This action to collect the the Texas Uniform Partnership Act (TUPA), the judgment debt from the Partners does not require TRPA’s predecessor, and contain no meaningful relitigation of that claim. At issue is only whether discussion of relevant statutory partnership law.

the judgment exists and whether the Partners were The TUPA did not expressly follow the entity in fact partners at the time of injury alleged.

theory and did not impose the prerequisites to Applied here, the limitations period running from proceeding against a partner. See Allcat, 356 the underlying claim ″would fail to serve the S.W.3d at 463-64 (stating that though the TUPA underlying purpose of limitations and instead ″’lean[ed] heavily toward the entity idea,’″ the would be a purely formal exercise.″ See Matthews TRPA was passed ″’to allay previous concerns Constr. Co. v. Rosen, 796 S.W.2d 692, 694 (Tex.

that stemmed from [*16] confusion as to whether 1990) (citation omitted).

a partnership was an entity or an aggregate of its members’″ (citations omitted) (alteration in The Partners argue that this suit imposes original)); Kao Holdings, L.P. v. Young, 261 ″automatic″ liability and undermines their S.W.3d 60, 63 (Tex. 2008) (stating the TUPA dueprocess rights. They point to Kao Holdings, in 4 See Mathew v. McCoy, 847 S.W.2d 397, 400 (Tex. App.—Houston [14th Dist.] 1993, no writ) (holding no judgment could be taken against partners who were not added and served within the limitations period running from the underlying claim); Partee v. Phelps, 840 S.W.2d 512, 514-15 (Tex. App.—Dallas 1992, no writ) (holding res judicata barred suit against partners); Cothrum Drilling Co. v. Partee, 790 S.W.2d 796, 800 (Tex. App.—Eastland 1990, writ denied) (holding statute governing service on partnership ″does not authorize a judgment against the partners who were not served before the claims against them were barred by the statute of limitations″ (citations omitted)).

Page 10 of 11 2015 Tex. LEXIS 161, *17

which we said partners ″should be both named instances to recognize a special accrual date and served so that they are on notice of their where the policies underlying limitations outweigh potential liability and will have an opportunity to any justification for doing so. See, e.g., Robinson contest″ that liability. 261 S.W.3d at 64. There, we v. Weaver, 550 S.W.2d 18, 22 (Tex. 1977) (declining overturned a judgment against a partner who had to apply the discovery rule to cases involving not been named or served at all, either in the [*18] medical misdiagnosis). This is not such an original suit against the partnership or in a separate instance. suit. Id. at 65. In doing so, we simply applied the Similarly, our holding avoids the injustice of a TRPA’s rule thatHN11 a judgment against a partner shielding himself from liability through partnership is not by itself a judgment against a limitations where their policy purposes are not partner. Id. at 63-64. The Partners’ liability is not served. See Matthews Constr., 796 S.W.2d at 694 automatic—this action naming them personally is (refusing to apply limitations where doing so required to establish it. They have the same ″would effectively permit the corporate form to be opportunity to contest their liability as they would used as a ’cloak for fraud’″ (citation omitted)); have had were they sued within the underlying Moreno, 787 S.W.2d at 351 (″[Courts] have limitations period. consciously sought to apply [limitations] with due More generally, the Partners were on notice of regard to the underlying statutory policy of repose, their potential liability when they agreed to form without, however, permitting unnecessary and do business as a partnership. HN12 The individual injustices.″ (quoting Fernandi, 173 partnership form has built-in mechanisms to A.2d at 285) (other citations omitted)). HN13 A provide further notice of any impending liability. party doing business with a partnership does so First, each partner has a right to manage and knowing that if the partnership [*20] fails on its conduct partnership business. TEX. BUS. ORGS. obligations, relief is not wholly subject to the CODE § 152.203(a). When a partnership is sued, adequacy of the partnership assets. Conversely, the litigation presumably becomes part of that individuals who choose the partnership form as business. Second, each partner owes to the others the vehicle for their enterprise do so knowing that a duty of care. Id. § 152.204(a)(2). When a their personal assets are on the line. Equity partnership is served with a lawsuit, that duty may demands we leave these expectations undisturbed require the partner served to apprise the other where a plaintiff proceeds as the law allows. partners. See Zinda v. McCann St., Ltd., 178 S.W.3d 883, 890 (Tex. App.—Texarkana 2005, pet. *** denied) (″Partners have a duty to one another to The Legislature has gone to great lengths to make full disclosure of all matters affecting the address enforcement of a partnership debt against partnership . . . .″ (citations omitted)). Third, a partner. The court of appeals did not see in the partners can agree [*19] to provide notice of TRPA’s scheme legislative intent to supersede our pending litigation to one another in their more general limitations jurisprudence. We do, partnership agreement. See TEX. BUS. ORGS. CODE § and that intent spurs our determination today. 152.002 (″[A] partnership agreement governs the Accordingly, we hold that limitations does not bar relations of the partners and between the partners American Star’s suit against the Partners.5 We and the partnership.″). Though the Partners would reverse the court of appeals’ judgment and remand have us presume our holding causes them harm, the case to the trial court for further proceedings we are not persuaded. We have declined in some consistent with this opinion. 5 The Partners argue that ″[t]olling or any other basis to suspend the running of limitations″ was not presented to the trial court and cannot serve as grounds for reversal. American Star’s argument at all stages concerns when limitations began, however, not that they

Page 11 of 11 2015 Tex. LEXIS 161, *20

Jeffrey V. Brown OPINION DELIVERED: February 27, 2015

Justice

were tolled or suspended. ″Deferring accrual and thus delaying the commencement [*21] of the limitations period is distinct from suspending or tolling the running of limitations once the period has begun.″ S.V., 933 S.W.2d at 4. Our holding today does the former.