JUDGMENT AGAINST MEMBERS OF DEFUNCT LLC REVERSED ON RESTRICTED APPEAL

Haynes v. Gay
Dallas Court of Appeals, No. 05-17-00136-CV (February 8, 2018)
Justices Lang-Miers (Opinion linked here), Fillmore, and Stoddart

Ken Carroll

In something of a rarity, the Dallas Court of Appeals reversed and rendered judgment on a restricted appeal. Gay sued the Hayneses for breach of contract. The justice court dismissed the Hayneses, but entered judgment against Skygroup, LLC—a by-then-defunct LLC that was the party to the contract at issue, and of which the Hayneses were members. Gay appealed the Hayneses’ dismissal to the county court at law. The Hayneses did not appear for the trial de novo, and the county court rendered judgment against them. The Hayneses filed a restricted appeal under TEX. R. APP. P. 30. After observing that all the procedural boxes had been ticked for a proper restricted appeal, the Dallas Court of Appeals reversed.

In a restricted appeal, reversible error must be “apparent on the face of the record,” which includes “all papers on file in the appeal, including the clerk’s record and any reporter’s record.” Nevertheless, the “scope of review” is the same as in an ordinary appeal. It extends to “the entire case” and “includes review of legal and factual insufficiency claims.”

Here, the evidence at trial—on the face of the record—unequivocally established that Skygroup, LLC was the contracting party and that the breaches of contract occurred before Skygroup forfeited its charter. Under TEX. BUS. ORGS. CODE § 101.114, the Hayneses were not liable for the LLC’s debts and obligations incurred before its demise—including the breach of its contract with Gay. As members of the LLC, they could be liable only for its debts created or incurred after its charter was forfeited, under TEX. TAX CODE § 171.255(a). Even though Skygroup’s charter lapsed before trial and judgment, the appeals court concluded that the date of contract or breach, rather than the date of judgment, established the date of the debt at issue for purposes of §§ 101.114 and 171.255(a). So, the Court reversed and rendered judgment for the Hayneses.