The Fifth Court revisited the borderline between “capacity” and “standing” in the context of a claim acquisition from bankruptcy in Obsidian Solutions, LLC v. KBIDC Investments, LLC, No. 05-19-00440-CV (July 30, 2021) (mem. op.).
Substantively, the Court reminded: “The issue of standing focuses on whether a party has a sufficient relationship with the lawsuit so as to have a ‘justiciable interest’ in its outcome; in contrast, the issue of capacity ‘is conceived of as a procedural issue dealing with the personal qualifications of a party to litigate.’ ... ‘When the issue involves capacity arising from a contractual right, “Texas law is clear, and this court has previously held numerous times, that a challenge to a party’s privity of contract is a challenge to capacity, not standing.”‘” (citations omitted, emphasis added).
Procedurally, the issue was tried by consent, even if the correct label was not applied. “[A]t trial, the issue of whether KBIDC bought the assets out of bankruptcy and which assets were purchased arose during KBIDC’s direct examination of Kent. ... The trial court listened to arguments from both sides on their interpretations of the APA before finding that the APA gave ‘authority to the Plaintiff for ... the advancement of this suit.’ Given the parties’ arguments and the trial court’s ruling, we conclude that capacity was tried by consent in the trial court.” (emphasis added).
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