By an Opinion delivered on April 17, 2025, the Second Court of Appeals – Fort Worth set its standard for verified denials under Rule 93 of the Texas Rules of Civil Procedure: Memorandum Opinion
Background: At the trial court level, a verified denial was filed within an answer to a counterclaim, asserting that the opposing party did not have capacity to seek relief for claims in the Texas lawsuit due to the opposing party’s failure to register as a foreign entity doing business in the State of Texas. During a hearing on various motions, the foreign entity argued it was not required to register with the Secretary of State in Texas, citing law of another state and the rules of agency. The trial court did not dismiss the entity from the suit at that time and the issue was addressed again at final trial. Therein, the corporate representatives for the entity testified the entity still had not registered with the Texas Secretary of State because they believed such action was not required. The trial court determined the entity lacked capacity due to its failure to register and entered a take-nothing judgment on the entity’s claims asserted via the entity’s principal agent.
Issue on Appeal: Rule 93 states that a pleading setting up certain matters must be verified by the complaining party. This includes a challenge to a party’s legal capacity to sue or other defect in the parties. By filing a verified pleading challenging something like a party’s capacity, that party’s capacity is then controverted. To overcome this, the challenged party bears the burden of proving at trial that the challenged party is entitled to recover in its respective capacity. A number of courts in Texas have expanded the standard for capacity challenges resulting from a failure to maintain registration with the Secretary of State, holding that the party asserting the defect must file a verified plea in abatement or otherwise seek abatement of the case to allow time for the defect with the Secretary of State to be fixed. Moreover, those courts held that a failure to seek abatement in a verified pleading would waive the issue of defective capacity on appeal. Until April 2025, the Second Court of Appeals – Fort Worth had not taken a stance on this issue.
Result: A properly filed verified denial in an answer shifts the burden to the challenged party, requiring the challenged party to show it can in fact recover in the lawsuit. Here, the Court of Appeals – Fort Worth determined that abatement of the suit was not the proper remedy and the parities were not required to seek abatement to preserve the issue of capacity on appeal. The Texas Business Organizations Code states that a foreign entity must register with the Secretary of State in order to conduct business in the State of Texas and to file suit in the State of Texas relating to such business activity–subject to certain exceptions. This rule likewise prevents an agent or representative of the foreign entity from asserting claims of the entity in the State of Texas where the entity is not properly registered. Accordingly, the Second Court of Appeals – Fort Worth respectfully disagreed with other courts in Texas, holding that Rule 93 was clear in what was expected of litigants on these issues.
Brittany Weaver and Kaitlyn Phillips not only argued this issue successfully at trial, but also protected the result on appeal and managed to obtain a result that clarified a murky issue for all litigants handling cases in this district. If you are facing a civil lawsuit and want legal representation that looks at your case from all aspects without backing down from tough issues, contact Yale, Weaver & Phillips.
