In Texas, NCSLT collection suits are always brought in the trust's name, and statutory trusts are considered to have capacity to sue as an exception to the general rule that a trust must sue through a trustee. National Collegiate Student Loan Trusts are formed under and governed by Delaware law.
The Delaware Statutory Trust Act expressly states that a trust formed under it "may sue and be sued" § 3804 Legal proceedings (a). Some attorneys for student loan defendants nevertheless raise "capacity to sue" as a defense, citing Texas caselaw for the proposition that a trust must sue through its trustee. The defense is unlikely to hold up on appeal.
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| Example of Answer in Debt Suit that raises the capacity to sue defense |
Under Texas law, capacity to sue is distinct from right to sue as assignee, and requires a verified denial to be properly asserted in a defendant's pleading.
A plaintiff must have both standing and capacity to bring a lawsuit. Coastal Liquids Transp., L.P. v. Harris County Appraisal Dist., 46 S.W.3d 880, 884 (Tex.2001). 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, whereas the issue of capacity "is conceived of as a procedural issue dealing with the personal qualifications of a party to litigate." See Austin Nursing Ctr., Inc. v. Lovato, 171 S.W.3d 845, 848 (Tex. 2005)/
A challenge to standing to sue is not subject to the same requirement as a challenge to capacity and may even be raised for the first time on appeal. See Gillespie v NCSLT 2005-3 (Tex.App.- Fort Worth June 29, 2017) (concluding that trust failed to establish its standing to sue on the student loan note.)
A plaintiff must have both standing and capacity to bring a lawsuit. Coastal Liquids Transp., L.P. v. Harris County Appraisal Dist., 46 S.W.3d 880, 884 (Tex.2001). 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, whereas the issue of capacity "is conceived of as a procedural issue dealing with the personal qualifications of a party to litigate." See Austin Nursing Ctr., Inc. v. Lovato, 171 S.W.3d 845, 848 (Tex. 2005)/
A challenge to standing to sue is not subject to the same requirement as a challenge to capacity and may even be raised for the first time on appeal. See Gillespie v NCSLT 2005-3 (Tex.App.- Fort Worth June 29, 2017) (concluding that trust failed to establish its standing to sue on the student loan note.)
"Although the Gillespies did not clearly raise this particular standing argument in the trial court, standing is a component of subject-matter jurisdiction that may be raised for the first time on appeal and is reviewed de novo as a question of law. See Rolen v. LVNV Funding, LLC, No. 2-09-304-CV, 2010 WL 1633402, at *1 (Tex. App.-Fort Worth Apr. 22, 2010, no pet.) (mem. op.)
LOUISIANA COURT OF APPEALS OPINION
NATIONAL COLLEGIATE STUDENT LOAN TRUST 2006-3,
v.
TRIONA M. POOLE, WALTER POOLE.
Court of Appeal of Louisiana, Fifth Circuit.
ON APPEAL FROM THE TWENTY-FOURTH JUDICIAL DISTRICT COURT, PARISH OF JEFFERSON, STATE OF LOUISIANA, NO. 760-625, DIVISION "C", HONORABLE JUNE B. DARENSBURG, JUDGE PRESIDING.
APPEAL DISMISSED.
Brian D. Roth, Matthew M. McCluer, COUNSEL FOR PLAINTIFF/APPELLANT, NATIONAL COLLEGIATE STUDENT LOAN TRUST 2006-3.
William G. Cherbonnier, Jr., COUNSEL FOR DEFENDANT/APPELLEE, WALTER POOLE.
Panel composed of Judges Fredericka Homberg Wicker, Hans J. Liljeberg, and Marion F. Edwards, Judge Pro Tempore.
FREDERICKA HOMBERG WICKER, Judge.
FHW HJL MFE
Plaintiff-appellant, the National Collegiate Student Loan Trust 2006-3 ("NCSLT"), seeks review of the trial court's judgment sustaining an exception of no right of action filed by defendant-appellee, Walter Poole, dismissing NCSLT's action against defendant with prejudice. Upon consideration of the parties' joint motion to dismiss the appeal, we hereby grant the parties' motion and dismiss the appeal.
On May 6, 2016, NCSLT filed suit against Triona and Walter Poole[1] to collect on a student loan debt in the amount of $27,166.92. NCSLT filed into the record an "Affidavit and Verification of Account" executed by an employee of Transworld Systems, Inc., the designated custodian of records concerning the education loans at issue, attesting that National Collegiate Funding, LLC sold, assigned, and transferred defendants' student loans to plaintiff, NCSLT on September 28, 2006.
Poole subsequently filed an exception of no right of action, claiming that NCSLT lacked the procedural capacity to file suit and contended rather that the trustee for NCSLT must file suit on its behalf. Poole relied upon La. C.C.P. art. 699, which provides that, "the trustee of an express trust is the proper plaintiff to sue to enforce a right of the trust estate." Poole argued that NCSLT lacks the capacity to file suit in its own right and must, pursuant to La. C.C.P. art. 699, file suit through its trustee.[2]
On January 27, 2017, the trial court issued a judgment sustaining Poole's exception of no right of action but allowing NCSLT time to amend its petition to name the trustee as the plaintiff in accordance with La. C.C.P. art. 699 and La. R.S. 9:2222. After NCSLT failed to amend its petition within the time provided in the trial court judgment, Poole sought to have the suit dismissed. On March 8, 2017, the trial judge took judicial notice that more than 10 days had elapsed since the signing of the January 27, 2017 judgment, and dismissed NCSLT's petition against Poole with prejudice. This timely appeal followed.
On January 27, 2017, the trial court issued a judgment sustaining Poole's exception of no right of action but allowing NCSLT time to amend its petition to name the trustee as the plaintiff in accordance with La. C.C.P. art. 699 and La. R.S. 9:2222. After NCSLT failed to amend its petition within the time provided in the trial court judgment, Poole sought to have the suit dismissed. On March 8, 2017, the trial judge took judicial notice that more than 10 days had elapsed since the signing of the January 27, 2017 judgment, and dismissed NCSLT's petition against Poole with prejudice. This timely appeal followed.
On appeal, NCSLT contends that Delaware law should apply under the facts of this case and that, under Delaware law, NCLST is a business trust with the substantive and procedural capacity to file suit on its own behalf. NCSLT thus asserts that it is not subject to La. C.C.P. art. 699's requirement that an "express trust" file suit through its named trustee. Poole responds that Louisiana's Code of Civil Procedure sets forth the procedural means by which an entity may sue or be sued in Louisiana courts and that, under La. C.C.P. art. 699, the named trustee must file suit on NCSLT's behalf.
On the morning that this matter was docketed for oral argument, NCSLT forwarded correspondence to this Court, informing the Court that the parties had reached a compromise and would not be present for oral argument on that date. Subsequently, the parties filed a joint motion to dismiss the appeal. Upon consideration of the parties' joint motion, we hereby grant the parties' motion and dismiss this appeal.
APPEAL DISMISSED
[1] On November 30, 2016, the trial court issued a default judgment against Triona Poole in the total amount of $27,166.92, reserving all rights against Mr. Walter Poole, defendant herein. That judgment is not before this Court.
[2] La. C.C.P. art. 699 provides: Except as otherwise provided by law, the trustee of an express trust is the proper plaintiff to sue to enforce a right of the trust estate.
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