Vertical North America, Inc. Nka Raizen North America, Inc. v. Vopak Terminal Deer Park, Inc.

Motion for Rehearing Denied; Motion for En Banc Reconsideration Denied as
Moot; Reversed and Remanded and Substitute Opinion filed September 21,
2017.
In The
Fourteenth Court of Appeals
NO. 14-15-01088-CV
VERTICAL NORTH AMERICA, INC. N/K/A RAIZEN NORTH AMERICA,
INC., Appellant
V.
VOPAK TERMINAL DEER PARK, INC., Appellee
On Appeal from the 61st District Court
Harris County, Texas
Trial Court Cause No. 2012-33666
SUBSTITUTE MEMORANDUM OPINION
We issued our opinion in this case on May 23, 2017. Thereafter, appellee
Vopak Terminal Deer Park, Inc. (“Vopak”) filed a motion for rehearing and motion
for en banc reconsideration. Appellant Vertical North America, Inc., n/k/a Raizen
North American, Inc. (“Vertical NA”) filed a response. We withdraw our previous
opinion, vacate our previous judgment, and issue this substitute opinion and
judgment. We deny Vopak’s motion for rehearing and deny as moot Vopak’s motion
for en banc reconsideration.
Vertical NA brings this appeal from an order in favor of Vopak dismissing
Vertical NA’s suit for want of jurisdiction. We reverse and remand.
Vertical NA, a Houston-based ethanol trader and distributor, entered into a
series of contracts with Vopak, a terminaling company that provides bulk tank
storage service. At the time those agreements were signed, Vertical NA was a
corporate subsidiary of Vertical UK LLP. On August 25, 2011, Vertical UK entered
into a Purchase and Sale Agreement (“PSA”), selling all shares of Vertical NA to
Raizen Trading LLP. Vertical NA filed suit against Vopak in June 2012 for breach
of contract and fraud. In July 2015, Vopak moved to dismiss the suit on the basis
Vertical NA lacked standing “because it does not own the claims it is asserting.” The
trial court granted Vopak’s motion and dismissed the suit for want of jurisdiction.
In its first issue, Vertical NA contends the trial court erred in concluding it
lacked standing. In the trial court, Vopak asserted Vertical NA lacked standing to
assert its claims because after execution of the PSA those claims were owned by
Vertical UK. Vertical NA countered that Vopak’s complaint was one of capacity
rather than standing. In the hearing on Vopak’s motion to dismiss, Vertical NA again
urged this argument, stating “there is a very serious issue as to whether this is a
question of standing or a question of capacity. . . . It’s an issue of capacity. And
they’ve long since waived their right to raise an issue of capacity.” In its brief,
Vertical NA notes that if the issue were treated as a question of capacity, rather than
standing, the trial court’s judgment must be vacated because Vopak did not file a
verified answer challenging Vertical NA’s capacity to bring this suit. See Tex. R.
Civ. P. 93.
2
A plaintiff must have both standing and capacity to bring a lawsuit. Austin
Nursing Ctr., Inc. v. Lovato, 171 S.W.3d 845, 848 (Tex. 2005). “A plaintiff
has standing when it is personally aggrieved, regardless of whether it is acting with
legal authority; a party has capacity when it has the legal authority to act, regardless
of whether it has a justiciable interest in the controversy.” Lovato, 171 S.W.3d at
848–49 (quoting Nootsie, Ltd. v. Williamson Cty. Appraisal Dist., 925 S.W.2d 659,
661 (Tex. 1996) (emphasis in the original)). A plaintiff may have capacity even if it
has no legally cognizable interest in the outcome of the case. AVCO Corp., Textron
Lycoming Reciprocating Engine Div. of AVCO Corp. v. Interstate Sw., Ltd., 251
S.W.3d 632, 649 (Tex. App.—Houston [14th Dist.] 2007, pet. denied).
A challenge to who owns a claim raises the issue of capacity, not standing,
and requires compliance with Rule 93, including the requirement to file a verified
pleading. Tex. R. Civ. P. 93(1); Pledger v. Schoellkopf, 762 S.W.2d 145, 145–46
(Tex. 1988) (concluding contention that corporation rather than plaintiff shareholder
owned fraud and tortious interference claims challenged capacity to sue and was
waived); Town Ctr. Mall, L.P. v. Dyer, No. 02-14-00268-CV, 2015 WL 5770583,
*3 (Tex. App.—Fort Worth Oct. 1, 2015, pet. denied) (mem. op.) (“[a] challenge to
who owns a claim raises the issue of capacity, not standing.”); Rhey v. Redic, 408
S.W.3d 440, 456 (Tex. App.—El Paso 2013, no pet.); Dakil v. Lege, 408 S.W.3d 9,
11 (Tex. App.—El Paso 2012, no pet.); Haase v. GIM Res., Inc., No. 01-09-00696-
CV, 2010 WL 3294247, *3 (Tex. App.—Houston [1st Dist.] Aug. 19, 2010, no pet.)
(mem. op.); Prostok v. Browning, 112 S.W.3d 876, 921 (Tex. App.—Dallas 2003),
aff’d in part, rev’d in part on other grounds, 165 S.W.3d 336 (Tex. 2005); Southwest
Indus. Inv. Co. v. Berkeley House Inv’rs, 695 S.W.2d 615, 617 (Tex. App.—Dallas
1985, writ ref’d n.r.e.) (appellant waived issue of whether plaintiff owned the
asserted contract claim by failing to comply with Rule 93). In Pledger, the plaintiff
3
was an individual shareholder who sued other shareholders of the same company.
Pledger, 762 S.W.2d at 145. The defendants contended the claims belonged to the
company, not to the individual plaintiff. Id. at 145–46. Although the Supreme Court
did not decide who owned the claims, it nonetheless held that the defendant’s
argument was foreclosed by their failure to comply with Texas Rule of Civil
Procedure 93(2). Id. at 146. Like the defendants in Pledger, Vopak is contending
that Vertical NA cannot assert claims that allegedly belong to someone else.
Although standing can never be waived, the issue of capacity to sue is waived
both at trial and on appeal if it is not challenged by a verified pleading. See Tex.
Ass’n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440, 445–46 (Tex. 1993); see also
Nootsie, 925 S.W.2d at 662. “The Texas Rules of Civil Procedure require that a
defendant challenging a plaintiff’s capacity to sue raise the matter by verified
pleading, if lack of capacity is not evident from the petition.” Intracare Hosp. N. v.
Campbell, 222 S.W.3d 790, 793 n. 2 (Tex. App.—Houston [1st Dist.] 2007, no
pet.)); Tex. R. Civ. P. 93. The defendant bears the burden to challenge a plaintiff’s
capacity to sue. Lovato, 171 S.W.3d at 853 n. 7; Intracare Hosp. N., 222 S.W.3d at
793 n. 2.
Vertical NA’s lack of capacity, if any, is not evident from its first amended
petition. The record does not reflect, and Vopak does not assert, that it satisfied the
requirements of Rule 93. Accordingly, we do not address that issue on its merits. See
Fitness Evolution, L.P. v. Headhunter Fitness, L.L.C., No. 05-13-00506-CV, 2015
WL 6750047, at *1, 18 (Tex. App.—Dallas Nov. 4, 2015, no pet.) (mem. op.).
Vopak’s sole challenge to Vertical NA’s standing was its lack of ownership
of the claims brought. Because Vopak’s ownership argument goes to capacity, not
standing, it does not raise a question of subject matter jurisdiction. See Prostok, 112
S.W.3d at 921.
4
Ultimately, whether Vopak’s argument that the claims are owned by Vertical
UK presents an issue of capacity or standing is not outcome determinative because
we conclude that Vertical NA retains a sufficient interest in the suit to confer
standing. Because standing is a component of subject matter jurisdiction and may be
raised at any time, we address the question of Vertical NA’s standing. See Tex. Ass’n
of Bus., 852 S.W.2d at 443. The question of standing centers on whether a party has
a sufficient relationship with the lawsuit so as to have a “justiciable interest” in its
outcome. Lovato, 171 S.W.3d at 848. The standing doctrine in Texas requires a real
controversy between the parties that will be actually determined by the judicial
declaration sought. Nootsie, 925 S.W.2d at 662 (citing Tex. Ass’n of Bus. 852 S.W.2d
at 443–44). A plaintiff has standing when it is personally aggrieved, Lovato, 171
S.W.3d at 848, or has a personal stake in the controversy. Nootsie, 925 S.W.2d at
661.
To determine Vertical NA’s standing, and hence the trial court’s jurisdiction,
we consider the facts alleged in the petition and any evidence submitted to the trial
court which is pertinent to the jurisdictional issue. See Tex. Natural Res.
Conservation Comm’n v. White, 46 S.W.3d 864, 868 (Tex. 2001). Vertical NA’s
pleadings claim that it was the party injured by Vopak’s alleged breach of contract
and fraud because it entered into a contractual relationship with Vopak in reliance
upon Vopak’s alleged misrepresentations. Vopak has not disputed that it entered into
contracts with Vertical NA. As the personally aggrieved party, Vertical NA has
standing to assert the claims against Vopak unless the record shows that it is
completely divested of any justiciable interest. See Lovato, 171 S.W.3d at 848; see
generally River Consulting, Inc. v. Sullivan, 848 S.W.2d 165, 169 (Tex. App.—
Houston [1st Dist.] 1992, writ denied) (“An assignee may maintain in its own name
any action that the assignor may have brought, and unless the assignor has retained
5
some right or interest therein, the assignor is precluded from bringing suit.”),
disapproved on other grounds by Formosa Plastics Corp. USA v. Presidio Eng’rs &
Contractors, Inc., 960 S.W.2d 41, 46 (Tex. 1998).
According to Vopak, Vertical NA is divested of any justiciable interest in the
claims because, by operation of the PSA, Vertical NA no longer “owns” the claims
it asserts in this suit. Vopak cites paragraph 6.6 of the PSA, which states:
6.6. Vopak Claim
(a) The Parties acknowledge that the Vopak Claim is excluded from the
Assets and that notwithstanding being a claim of VNA, Seller shall
continue to handle litigation, including bearing any and all costs in
connection therewith, and the benefit of such litigation, if any, shall
revert to the benefit of Seller, provided that the Seller shall keep the
Purchaser reasonably informed in relation to the Vopak Claim.
(b) Purchaser shall cooperate with Seller in connection with the
handling of the Vopak Claim and agrees to transfer to Seller any
proceeds in connection with the Vopak Claim within ten (10) days after
receipt (less any Tax suffered in connection therewith).
(c) Seller shall indemnify and hold Purchaser and VNA harmless
against all Losses and Expenses suffered, by either of them in
connection with the Vopak Claim.
We conclude, however, that the cited paragraph of the PSA does not divest
Vertical NA of all personal stake in the controversy. The PSA document transferred
the shares of Vertical NA from Vertical UK (the parent entity and seller) to Raizen
Trading (the buyer).1 Accordingly, following execution of the PSA, Vertical NA
retained its assets, including the present claim, and Vertical NA’s shares were owned
by a new parent company.
1
The PSA also transferred other assets not relevant to this appeal.
6
Paragraph 6.6 of the PSA documents the parties’ agreement regarding their
respective rights and obligations following the share sale with respect to the claim
against Vopak. The clause is significant both for what it enumerates and what it does
not. For example, in subpart (a), the parties agreed that the Vopak claim is a “claim
of [Vertical NA].” Subpart (a) also excludes the Vopak claim from the other assets
transferred by the PSA. Notably, neither paragraph 6.6 nor any other document in
the record contains language assigning Vertical NA’s claim against Vopak to
Vertical UK or anyone else.2 The PSA specifically contemplates assignments of
other contracts, but there is no document in our record demonstrating that Vertical
NA’s claim against Vopak was assigned. Paragraph 6.6 does not establish that
Vertical NA has lost all control to the extent that it can do nothing to defeat the rights
of Vertical UK. See Univ. of Tex. Med. Branch at Galveston v. Allan, 777 S.W.2d
450, 453 (Tex. App.—Houston [14th Dist.] 1989, no writ). To the extent it
constitutes a transfer of the Vopak claim in any respect, it is not a transfer of Vertical
NA’s whole interest but contemplates several qualifications, such as imposing duties
of cooperation and indemnity. Even in an instance of assignment, the assignor may
still bring suit if it “has retained some right or interest” in the claim. See River
Consulting, 848 S.W.2d at 169.
Vopak construes paragraph 6.6 as though the claims against Vopak were
“transferred to or kept by Vertical UK” such that Vertical NA no longer has a
2
An assignment generally means the transfer or setting over of property, or some right or
interest. Coffey v. Singer Asset Fin. Co., 223 S.W.3d 559, 570 (Tex. App.—Dallas 2007, no pet.).
In an absolute assignment, the assignor loses all control over the property assigned and can do
nothing to defeat the rights of the assignee. Id.; Univ. of Tex. Med. Branch at Galveston v. Allan,
777 S.W.2d 450, 453 (Tex. App.—Houston [14th Dist.] 1989, no writ). It is the act by which one
person transfers to another or causes to vest in another, his right or property or an interest therein,
and unless it is qualified in some way, it is a transfer of one’s whole interest. Twelve Oaks Tower
I, Ltd. v. Premier Allergy, Inc., 938 S.W.2d 102, 111–12 (Tex. App.—Houston [14th Dist.] 1996,
no writ) (emphasis in original).
7
justiciable or cognizable interest in the suit, but we do not agree that is an accurate
reading of the clause. As discussed, it does not transfer the claim to Vertical UK.
Instead, subpart (a) provides Vertical UK will “handle” the litigation, bear its costs,
and receive its benefits. However, as mentioned, Vertical UK’s receipt of benefits
resulting from the Vopak claim is conditioned upon Vertical UK keeping Raizen
Trading LLP “reasonably informed in relation to the Vopak Claim.” If that condition
does not occur or is breached, then a dispute may arise as to whether the benefit of
this litigation, if any, in fact reverts to Vertical UK.
Subpart (c) obliges Vertical UK to indemnify Raizen Trading and Vertical
NA against losses or expenses incurred as a result of the Vopak claim. It therefore
contemplates Raizen Trading’s and Vertical NA’s participation and cooperation3 in
the litigation of that claim. As a beneficiary of an indemnity obligation, Vertical NA
has a justiciable interest in determining its validity and effect, see AVCO Corp., 251
S.W.3d at 652, and consequently a justiciable interest in pursuing the claims against
Vopak.4
Taken as a whole, paragraph 6.6 of the PSA does not fully divest Vertical NA
of its entire interest in the Vopak claim. See River Consulting, 848 S.W.2d at 169;
Allan, 777 S.W.2d at 453. The reversion of benefits to Vertical UK is qualified,
rather than unconditional, upon Raizen Trading and Vertical NA’s “cooperation”
with the Vopak claim. Raizen Trading and Vertical NA may fund the litigation and
obtain a judgment in, or against, their favor. Thus Vertical NA is not “cut out” of the
3
Subpart (b) requires Raizen Trading, Vertical NA’s new parent entity, to cooperate with
Vertical UK and transfer to Vertical UK any proceeds from the Vopak claim. Subpart (b) expressly
contemplates the proceeds from the Vopak claim being first paid to someone other than Vertical
UK.
4
Vertical NA would have the right to enforce the indemnity provision even if it was not a
party to the agreement itself. See McCalla v. Ski River Dev., Inc., 239 S.W.3d 374, 380 (Tex.
App.—Waco 2007, no pet.).
8
Vopak claim. Paragraph 6.6 is distinguishable from an assignment clause that
operates to deprive a party of standing. See River Consulting, 848 S.W.2d at 169;
Commercial Structures and Interiors, Inc. v. Liberty Educ. Ministries, Inc., 192
S.W.3d 827, 830 n. 4 (Tex. App.—Fort Worth 2006, no pet.).5
We do not decide who “owns” the claims against Vopak; we hold merely that
Vertical NA retains sufficient justiciable interest in the claims so as to confer
standing and defeat Vopak’s motion to dismiss. See Lovato, 171 S.W.3d at 848.
Accordingly, the trial court erred in dismissing Vertical NA’s suit for lack of
standing.
For these reasons, we sustain Vertical NA’s first issue. The trial court’s order
is reversed and the cause remanded for further proceedings.
/s/ John Donovan
Justice
Panel consists of Justices Jamison, Donovan, and Jewell.
5
Even when an owner assigns all interest in a cause of action, he may still bring suit in a
representative capacity and with authority for the owner of the claim. See Duke v. Brookshire
Grocery Co., 568 S.W.2d 470, 472 (Tex. Civ. App.—Texarkana 1978, no writ).
9