Opinion
No. 05-08-00876-CV
Opinion Issued July 24, 2009.
On Appeal from the 193rd Judicial District Court, Dallas County, Texas, Trial Court Cause No. 06-11473.
Before Justices MORRIS, RICHTER, and LANG-MIERS.
MEMORANDUM OPINION
Appellant Joe Abuzaid appeals from a post-answer default judgment rendered in favor of appellee Fayiza Abuzaid on her "Petition for Partnership Dissolution and Division of Partnership Assets." In seven issues, appellant argues that the evidence is legally and factually insufficient to support the judgment, the judgment does not conform to the petition, and the trial court abused its discretion when it denied appellant's motion for new trial. We conclude that the evidence is legally insufficient to support the trial court's judgment. We reverse the trial court's judgment and render judgment in favor of appellant.
Background
According to appellee's petition, the Abuzaids' divorce was resolved in the 254th Judicial District Court of Dallas County in 2003. During their marriage, the Abuzaids
owned and operated a partnership in the State of California, which partnership included, but was not limited to, Alamo Flags International of Monterrey; Americana of San Francisco; Simply Monterrey; Moda Jewelry; Flags America of San Francisco; Destination Clothes of San Francisco[;] Destination Clothes of Monterrey[;] and Le Corre Fine Cigars; all of which are retail establishments doing business in the State of California.
At the time of their divorce, the Abuzaids "entered into a partition and exchange agreement by which the stores would go to [appellant] in exchange for which [appellant] would pay [appellee] the sum of $200,000." Claiming that appellant breached that agreement, appellee filed another proceeding in the 254th District Court and took a default judgment against appellant in June 2006, in which the trial court awarded appellee "one half partnership interest in the partnerships known as Alamo Flags International of Monterrey, Americana of San Francisco, Simply Monterrey, Moda Jewelry, Flags America of San Francisco, Destination Clothes of San Francisco[,] Destination Clothes of Monterrey[,] and Le Corre Fine Cigars." Appellee then filed this lawsuit in November 2006, in which she sought "an accounting of the partnership assets, dissolution of the partnerships and division of the partnership assets between Joe Abuzaid and herself." Appellant answered and asserted a general denial and the affirmative defense of fraudulent inducement in connection with the partition and exchange agreement.
This agreement, which appellant describes as a "settlement agreement," is not in our appellate record.
Appellee claims that appellant breached the agreement by ceasing to make the required monthly payments. In response, appellant contends that he stopped making payments when he learned that the basis for his agreement-appellee's representation "that she was suffering from cancer and would probably die in the next few years"-was untrue.
During the nonjury trial in this case, appellee and her attorney characterized the June 2006 default judgment as "creat[ing] a constructive trust to put [appellee] back into the partnerships" under the theory of unjust enrichment. According to appellant, he was not served with process in that proceeding, and a bill of review is currently pending in the 254th Judicial District Court, in which appellant is seeking "to overturn the fraudulently obtained settlement agreement which forms the foundation for the partnership agreement ordered by the 254th Judicial District Court."
Appellee used the terms "partnership" and "partnerships" interchangeably in her petition, but refers strictly to a singular "partnership" in her appellee's brief.
The trial court held a nonjury trial for which only appellee and her attorney appeared. Both appellee and her attorney testified. During the short trial, appellee first testified that she and appellant bought the Alamo Flags store from appellee's brother "as partners," took out insurance policies on the stores "as partners," and paid income tax in California "as partners." Appellee then identified four exhibits, which were introduced into evidence. The first exhibit contains (1) a 1994 purchase agreement for Alamo Flags, (2) amended declarations to a commercial insurance policy issued to the Abuzaids, "DBA ALAMO FLAGS," for a March 2001 to March 2002 policy period, (3) the Abuzaids' California personal joint income tax returns for 1996 through 1999, and (4) the Abuzaids' federal joint income tax returns for 1997, 1999, and 2000. The second exhibit is a three-year commercial lease dated April 1, 1998 and titled "PIER 39 LIMITED PARTNERSHIP LEASE[,] MODA JEWELRY, Space B-18," in which the Abuzaids are collectively defined as "Tenant." The third exhibit is a certified copy of the June 2006 default judgment against appellant. The fourth exhibit is a one-page chart that appellee and her attorney described as a "cash flow analysis of the earnings of all six stores." The chart appears to summarize gross income, expenses, and net profits for the years 1997, 1999, and 2000 for six businesses identified as "Alamo Flags/Pier 39," "Alamo Flags Int.," "Alamo Flags of Carmel," "Americana," "Simply Monterey," and "Moda Jewelry." Appellee testified that she and her attorney created the chart using California sales tax returns. Next, appellee testified that she knows how to run the stores at issue, and that they are gift shops that were started by her father and have been in her family for many years. Her attorney then asked her to choose which three stores she wanted:
Q. Ma'am, I'm going to ask you the 24,000-dollar question. Which of the three stores do you want?
A. Flags America Pier 39, in San Francisco, Alamo Flags International of Monterrey, in Monterrey, California, and Simply Monterrey in Monterrey, California.
Finally, appellee's attorney testified about appellee's attorneys' fees and appellee rested. During the trial, appellee did not identify in her testimony or other evidence any specific property owned by the partnership, nor did she submit any evidence concerning the partnership's obligations, or lack of obligations, to creditors.
After trial, the trial court signed a final judgment in favor of appellee. That judgment purported to dissolve the partnership and distribute certain assets to appellee:
The Court, based upon the pleadings, evidence and argument of Counsel finds that the partnership between Fayzia [sic] Abuzaid and Joe Abuzaid is hereby dissolved, and IT IS SO ORDERED.
As distibution [sic] of the partnership assets the Court awards to Fayzia [sic] Abuzaid:
That business known as Alamo Flags a/k/a Flags America, Pier 39, San Francisco California, including the leasehold estate, furnishings and fixtures, inventory, appliances, signs, the goodwill of the business, the telephone number, all valuable papers and records, all cash on hand and accounts receivable.
That business known as Alamo Flags International of Monterey, 700 Canary [sic] Row #P, Monterey, California, including the leasehold estate, furnishings and fixtures, inventory, appliances, signs, the goodwill of the business, the telephone number, all valuable papers and records, all cash on hand and accounts receivable.
That business known as Simply Monterey, 685 Cannery Row #107, Monterey, California including the leasehold estate, furnishings and fixtures, inventory, appliances, signs, the goodwill of the business, the telephone number, all valuable papers and records, all cash on hand and accounts receivable.
And Joe Abuzaid his [sic] hereby divested of all right, title and interest in and to said businesses, AND IT IS SO ORDERED.
Issues on Appeal
In his first four issues appellant argues that appellee did not plead, and the evidence was legally and factually insufficient to prove, the necessary elements to trigger a winding up of a partnership and a distribution of partnership property. In his fifth issue appellant argues that the judgment does not conform to the petition. In his sixth and seventh issues appellant argues that the trial court abused its discretion when it denied his motion for new trial.
Analysis
We address appellant's first and third issues first because those issues challenge the legal sufficiency of the evidence and are dispositive of the appeal.
In a nonjury case where no findings of fact or conclusions of law are requested by the parties or filed by the trial court, the judgment implies all findings of fact necessary to support it. Johnson v. Oliver, 250 S.W.3d 182, 186 (Tex.App.-Dallas 2008, no pet.). But if the appellate record includes a reporter's and clerk's record, those implied findings are not conclusive and may be challenged for legal and factual sufficiency for the first time on appeal. Id.; see also Tex. R. App. P. 33.1(d). When an appellant challenges the legal sufficiency of the evidence to support a finding on which it did not have the burden of proof at trial, it must demonstrate on appeal that no evidence exists to support the adverse finding. Johnson, 250 S.W.3d at 186.
In connection with his first four issues, appellant contends that to the extent that a partnership was created by the June 2006 default judgment, it is a de facto partnership governed by the Texas Revised Partnership Act (TRPA). In his first issue appellant argues that the evidence is legally insufficient to support the trial court's judgment because there is no evidence of any event that would allow a court to issue a decree that would trigger a winding up of the partnership business under the TRPA. In his third issue appellant argues that the evidence is legally insufficient to support the trial court's judgment distributing partnership property to appellee because there is no evidence of the partnership's property or debts at the time of the judgment. In response to appellant's first four issues, appellee does not address whether the TRPA applies, nor does she address the substance of appellant's issues. Instead, appellee's sole argument in response to appellant's first four issues is that those issues are "waived" because they were not raised in appellant's motion for new trial. However, in a nonjury case, "a complaint regarding the legal and factual sufficiency of the evidence . . . may be made for the first time on appeal in the complaining party's brief." Tex. R. App. P. 33.1(d).
The TRPA was enacted in 1993 and replaced the Texas Uniform Partnership Act. Act of May 31, 1993, 73rd Leg., R.S., ch. 917, § 1, 1993 Tex. Gen. Laws 3887, 3893. The TRPA governs partnerships formed on or after January 1, 1994, and other existing partnerships that elected to be governed by it. Tex. Rev. Civ. Stat. Ann. art. 6132b-11.03(a) (Vernon Supp. 2008). In 2003, the Texas Business Organizations Code (TBOC) replaced the TRPA. Act of May 29, 2003, 78th Leg., R.S., ch. 182, § 1, 2003 Tex. Gen. Laws 267, 592-93. The TBOC governs partnerships formed on or after January 1, 2006, and other partnerships that elect to be governed by it. Tex. Bus. Orgs. Code Ann. §§ 1.002(2), 402.001(a) (Vernon 2008). On January 1, 2010, the TRPA will expire, and the TBOC will apply to all Texas partnerships, regardless of their formation date. Tex. Rev. Civ. Stat. Ann. art. 6132b-11.05.
Because appellant asserts that the TRPA applies without dispute from appellee, and the record does not demonstrate otherwise, we will apply the TRPA. Under the TRPA, a partner may apply for a judicial decree that triggers a winding up of the partnership business. See Tex. Rev. Civ. Stat. Ann. art. 6132b-8.01(e). And once a judicial decree has triggered a winding up of the partnership business, the property of the partnership must first be applied to discharge any obligations to creditors, and any surplus must be applied to pay in cash the net amount distributable to partners in accordance with their respective distribution rights. Id. art. 6132b-8.06.
Under article 6132b-8.01(e), a partner may apply for one of the following judicial decrees:
(1) the economic purpose of the partnership is likely to be unreasonably frustrated;
(2) another partner has engaged in conduct relating to the partnership business that makes it not reasonably practicable to carry on the business in partnership with that partner; or
(3) it is not otherwise reasonably practicable to carry on the partnership business in conformity with the partnership agreement.
In this case, although appellee asked the trial court to "dissolve" the partnership and the judgment purported to "dissolve" the partnership, appellee did not submit any evidence of an event that would allow a court to issue a decree that would trigger a winding up of the partnership business under the TRPA. See id. art. 6132b-8.01(e). Likewise, although the judgment purported to distribute specific partnership property to appellee, appellee did not submit any evidence to demonstrate that the partnership currently owned any property-including the property identified in the judgment. Moreover, appellee did not submit any evidence of the partnership's obligations, or lack of obligations, to creditors. Consequently, based on the record in this case, we conclude that the evidence was legally insufficient to support the trial court's judgment. Cf. Cauble v. Handler, 503 S.W.2d 362, 364 (Tex.Civ.App.-Fort Worth 1973, writ ref'd n.r.e.) (in suit brought by administrator of deceased partner's estate against surviving partner in partnership governed by uniform partnership act, administrator had burden to prove market value of partnership assets as of date of dissolution); Johnson v. Braden, 286 S.W.2d 671, 672 (Tex.Civ.App.-San Antonio 1956, no writ) (in ordinary action for partnership accounting and dissolution under uniform partnership act, entire property of partnership is converted into cash and used to discharge debts, advances, and charges, before surplus, if any, is divided).
In its comments about the enactment of the TRPA, the 1993 bar committee explains that one of the "Main Changes" from the predecessor Texas Uniform Partnership Act is that the term "dissolution" is "not used" in the TRPA to describe the termination of a partnership. Tex. Rev. Civ. Stat. Ann. art. I cmt. The committee's comments further explain that the TRPA instead "uses the term 'event requiring a winding up.'" Id. art. 6132b-8.01 cmt.
We sustain appellant's first and third issues. We do not address appellant's remaining issues because our resolution of those issues would not change the disposition of this appeal. Tex. R. App. P. 47.1.
Conclusion
We conclude that the evidence is legally insufficient to support the trial court's judgment. Consequently, we reverse the trial court's judgment and render judgment that appellee take nothing on her claims against appellant.