“CAPACITY” OR “STANDING” IN A BREACH-OF-CONTRACT CASE, AND THE IMPORTANCE OF TIMELY FILING A VERIFIED DENIAL OF CAPACITY

John C. Flood of DC, Inc. v. SuperMedia, L.L.C.
Dallas Court of Appeals, No. 05-12-00307-CV (August 2, 2013)
Justices Lang, Myers (Opinion), and Evans
The Court of Appeals affirmed summary judgment for SuperMedia and against appellant Melville Davis, individually, on claims for breach of contracts Davis had signed as “CEO,” but without identifying the entity for which he was purporting to act. The opinion explores in detail the distinction between “capacity” and “standing” in a breach-of-contract case, and the operation of Rules 63 and 93 regarding verified denials of capacity and the time such a pleading must be filed.

SuperMedia sued various corporate entities, as well as Davis and another individual, for amounts allegedly owed for advertising services. The defendants denied that SuperMedia had capacity to sue, because it was not named in the contracts, and that the individual defendants were liable in their individual capacities. But they did not verify these denials as directed by TEX. R. CIV. P. 93. When SuperMedia moved for summary judgment, the defendants filed amended pleadings that included a verified denial on the morning of the summary judgment hearing. But defendants did not seek leave to do so. The trial court granted summary judgment to SuperMedia, reciting that it had considered all “pleadings timely filed.”

The Court of Appeals began by noting the “considerable difficulty in defining the relationship of the twin doctrines of capacity and standing.” Defendants here urged they were attacking SuperMedia’s standing, but the Court disagreed. Defendants, the Court observed, were attacking SuperMedia’s privity of contract with them, and held “that a challenge to a party’s privity of contract is a challenge to capacity, not standing”—i.e., it goes to the merits of the claim, rather than the court’s jurisdiction, and therefore requires a verified denial as specified in Rule 93. To reach this conclusion, the Court distinguished apparently inconsistent language in an earlier decision, OAIC Commercial Assets v. Stonegate Village, by noting that defendants in OAIC had expressly attacked standing by a plea to the jurisdiction of the trial court, something not done here. Further, the Court found, SuperMedia had standing in any event because it alleged it was “formerly known as” Idearc Media, the entity named in the contracts.

The Court then found fatal the defendants’ failure to plead verified denials of capacity at least seven days before “trial”—here, the summary judgment hearing—without leave of court. It rebuffed several efforts by defendants to skirt the requirements of Rules 63 and 93. First, the Court rejected defendants’ argument that the trial court had implicitly granted leave. When a court recites that it has relied on “all of the pleadings,” leave to file late can be inferred. But here the trial court order recited that it had relied only on the “pleadings timely filed,” and therefore the presumption of leave did not apply. Next, defendants argued the issues of plaintiff’s capacity and their own had been tried by consent. But their summary judgment briefing was not sufficiently specific to have required SuperMedia either to object or be held to have tried the issues of capacity by consent. Finally, defendants tried to invoke the exception in Rule 93 that capacity need not be verified where “the truth of such matters appear[s] of record.” Noting the “dearth of case law in Texas” dealing with this exception, the Court nevertheless found that the summary judgment record did not contain “uncontroverted or ‘unambiguous’” evidence that Davis was not liable in his individual capacity. That he had appended “CEO” after his signature on the contracts was insufficient to trigger the exception, especially given his failure to specify any entity for which he was purporting to act as “CEO.”

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