80R251 ATP-D

By: Elkins H.B. No. 1417

A BILL TO BE ENTITLED

AN ACT

relating to foreclosure on a limited partner's partnership interest.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 153.256, Business Organizations Code, is amended to read as follows:

Sec. 153.256. PARTNER'S PARTNERSHIP INTEREST SUBJECT TO CHARGING ORDER [CHARGE IN PAYMENT OF JUDGMENT CREDITOR]. (a) On application [to a court] by a judgment creditor of a partner or other owner of a partnership interest or of the partner's or owner's assignee, a [the] court having jurisdiction may[:

[(1)] charge the partnership interest of the judgment debtor to satisfy the judgment [partner or other owner with payment of the unsatisfied amount of the judgment, with interest;

[(2) appoint a receiver for the debtor partner's share of the partnership's profits and other money payable or that becomes payable to the debtor partner with respect to the limited partnership; and

[(3) make other orders, directions, and inquiries that the circumstances of the case require].

(b) To the extent that the partnership interest is charged in the manner provided by Subsection (a), the judgment creditor has only the right to receive any distribution to which the judgment debtor would otherwise be entitled in respect [rights of an assignee] of the partnership interest.

(c) A charging order constitutes a lien on the judgment debtor's [The] partnership interest [charged may be:

[(1)redeemed at any time before foreclosure; or

[(2) in case of a sale directed by the court, and without constituting an event requiring winding up, purchased:

[(A) by one or more of the general partners with separate property of any general partner; or

[(B) with respect to partnership property, by one or more of the general partners whose interests are not charged, on the consent of all general partners whose interests are not charged and a majority in interest of the limited partners, excluding limited partnership interests held by a general partner whose interest is charged].

(d) The entry of a charging order is the [remedies provided by Subsection (a) are] exclusive remedy by which a judgment creditor of a partner or of a partner's assignee may satisfy a judgment out of the judgment debtor's partnership interest [of other remedies that may exist, including remedies under laws of this state applicable to partnerships without limited partners].

(e) This section does not deprive a partner or a partner's assignee of a right under exemption laws with respect to the judgment debtor's partnership interest.

(f) A creditor of a partner or of a partner's assignee does not have the right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, the property of the limited partnership.

SECTION 2. Section 7.03, Texas Revised Limited Partnership Act (Article 6132a-1, Vernon's Texas Civil Statutes), is amended to read as follows:

Sec. 7.03. RIGHTS OF JUDGMENT CREDITOR. (a) On application [to a court of competent jurisdiction] by a judgment creditor of a partner, [or] of any other owner of a partnership interest, or of the partner or owner's assignee, the court may charge the partnership interest of the judgment debtor to satisfy the judgment [partner or other owner with payment of the unsatisfied amount of the judgment, with interest, may then or later appoint a receiver of the debtor partner's share of the partnership's profits and of any other money payable or that becomes payable to the debtor partner with respect to the partnership, and may make all other orders, directions, and inquiries that the circumstances of the case require]. To the extent that the partnership interest is charged in this manner, the judgment creditor has only the right to receive any distribution to which the judgment debtor would otherwise have been entitled in respect [rights of an assignee] of the partnership interest.

(b) A charging order constitutes a lien on the judgment debtor's [The] partnership interest [charged may be redeemed at any time before foreclosure or, in case of a sale directed by the court, may be purchased without a dissolution being caused:

[(1) with separate property of any general partner, by any one or more of the general partners; or

[(2) with respect to partnership property, by any one or more of the general partners whose interests are not charged, on the consent of all general partners whose interests are not charged and a majority in interest of the limited partners, excluding limited partnership interests held by any general partner whose interest is charged].

(c) The entry of a charging order is the [remedies provided by Subsection (a) of this section are] exclusive remedy by which a judgment creditor of a partner or of a partner's assignee may satisfy a judgment out of the judgment debtor's partnership interest [of others that may exist, including remedies under laws of this state applicable to partnerships without limited partners].

(d) This section does not deprive any partner or partner's assignee of the benefit of any exemption laws applicable to the judgment debtor's [that partner's] partnership interest.

(e) A creditor of a partner or of a partner's assignee does not have the right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, the property of the limited partnership.

SECTION 3. The changes in law made by this Act apply only to the rights of a judgment creditor of a judgment rendered on or after September 1, 2007. The rights of a judgment creditor of a judgment rendered before that date are governed by the law in effect when the judgment was rendered, and the former law is continued in effect for that purpose.

SECTION 4. This Act takes effect September 1, 2007.