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Alarcon v. Velazquez

Court of Appeals of Texas, Fourteenth District

May 31, 2018


          Panel consists of Chief Justice Frost and Justices Boyce and Jamison.

          On Appeal from the 270th District Court Harris County, Texas Trial Court Cause No. 2006-51822


          Martha Hill Jamison, Justice.

         Appellants Alejandro Vivanco Alarcon, as executor for the estate of Araceli Alarcon Velazquez, deceased, Marie Eugenie Alarcon Velazquez, and Robert Blaauw as receiver for Zalinco Corporation, N.V. and Ocana Corporation, N.V., appeal from a take-nothing judgment signed after the trial court determined that Mexican law applied to all claims appellants asserted against appellee, Gabriel Alarcon Velazquez. In two issues, appellants contend the trial court erred when it concluded that Mexican law applied to all of their claims. Finding no error, we affirm.


         This long-running litigation arises out of a family dispute involving three siblings, two sisters and a brother, all citizens and lifetime residents of Mexico. A fourth sibling is not involved in this litigation. One of the sisters, Araceli Alarcon Velasquez, passed away after the litigation started and is represented by Alejandro Vivanco Alarcon, ancillary executor of her estate. For ease of reference, we refer to the family appellants collectively as "the sisters."

         The sisters allege that in 1981 their father set up two corporations in Curacao, [1] Zalinco Corporation, N.V. and Ocana Corporation, N.V., for the benefit of all siblings. The sisters contend that the father gave each child a 25 percent interest in each corporation. They further allege that their father charged Gabriel, as the oldest sibling, with managing the corporations for the benefit of all. The two corporations established bank accounts with a New York City bank. The original capitalization for each corporation was $6, 000. Establishing these bank accounts was the only activity undertaken by the corporations.

         ATC Corporate Services (Curacao), N.V. was appointed managing director of the two corporations. The sisters allege, however, that ATC did not manage the two corporations. They contend Gabriel controlled the corporations through a general power of attorney. The sisters assert that Gabriel, using his general power of attorney, looted the corporations of their assets by ordering the New York bank to send millions of dollars to other bank accounts, including his own personal accounts, around the world and throughout the United States, including Texas. The sisters allege that Gabriel spent the corporations' money for his own personal benefit, including paying expenses related to his yacht, the purchase of a vacation home, and the purchase of condominiums in New York.

         According to the sisters, Gabriel assured them he was properly investing the family's assets, including the assets of the two corporations, for the benefit of all of the siblings. The sisters assert they relied on these allegedly false representations for years. The sisters also allege that Gabriel withheld information from them and from ATC.

         The sisters contend that Gabriel established the base of operations for the corporations and his own misuse of the corporations' assets in Houston, Texas. In support of their contention that Houston was the site of Gabriel's base of operations, the sisters emphasize the undisputed fact that Gabriel used an apartment located in Houston as the mailing address for the corporations' New York bank accounts. They also allege that Gabriel retained personal attorneys, accountants, and others in Houston using corporate money. They further allege that he used the corporations' resources to make personal investments in Houston real estate and in a Houston day-trading operation.

         The corporations' stock originally was held by two nominal shareholders, both selected by Gabriel. The sisters acquired fifty percent of the stock in each of the corporations in 2004.[2] Litigation between the siblings began in Curacao that same year. The primary issues in the Curacao litigation were (1) ownership of the two corporations, and (2) an accounting of the corporations' assets. In 2004, the Curacao court determined that the sisters were the owners of fifty percent of the stock of the two corporations. In 2007, the Curacao court dissolved the two corporations and appointed appellant Robert Blaauw the receiver for both corporations. Blaauw had the authority to do everything necessary to liquidate the two companies. In that effort, Blaauw requested an accounting from Gabriel, but Gabriel refused to comply. Blaauw then sought a court order requiring Gabriel to comply, and, in 2011, the Curacao court granted that request, ordering Gabriel to render an accounting and to produce supporting documentation. In 2013, the Curacao court found that the two corporations were not conducting any business, their activities were limited to holding bank accounts in various countries, but not in Curacao, and Blaauw concluded "they had a so-called 'dormant status.'"

         The sisters filed suit against Gabriel in Harris County, Texas in 2006. Blaauw, as receiver for the two corporations, joined the lawsuit against Gabriel in 2010. Appellants asserted numerous claims against Gabriel, including (1) breach of informal fiduciary duty, (2) fraud, (3) breach of fiduciary duty, (4) conversion, (5) fraudulent transfer, (6) "money had and received/unjust enrichment, " (7) violations of the Texas Theft Liability Act, and (8) a suit for an accounting.[3] In the event the trial court determined that Texas law did not apply to some or all their claims, appellants asserted in the alternative claims under Cuaracao statutory law that Gabriel breached his duty of reasonableness and fairness to all parties involved in the corporations, his duty to properly manage the corporations, and his duty to render an accounting to justify his actions while he controlled the corporations. All of appellants' claims grow out of Gabriel's alleged (1) misuse of the two corporations' assets, (2) misrepresentations regarding his alleged misuse of the corporations' assets, and (3) failure to disclose his alleged misdeeds.

         Gabriel eventually filed an amended motion asking the trial court to apply Mexican law to all claims asserted by appellants, and the trial court granted that motion. The trial court's decision came on the eve of trial and after it had previously rejected motions asserting that Mexican law applied. After the trial court determined that Mexican law applied to all of appellants' claims, the parties signed an agreement under Texas Rule of Civil Procedure 11 that (1) all of appellants' claims were time-barred by Mexican law, (2) Gabriel would non-suit his counterclaims, and (3) appellants reserved the right to appeal the trial court's choice-of-law determination. This resulted in a final take-nothing judgment signed by the trial court. This appeal followed.


         I. Blaauw has standing to pursue the Curacao corporations' claims.

         Appellants raise two issues on appeal challenging the trial court's determination that Mexican law applies to their respective claims. Before reaching the merits of appellants' issues, we first must address Gabriel's assertion, raised in a conditional cross-appeal, that Blaauw does not have standing to pursue the corporations' claims because he was appointed receiver by a Curacao court. See State v. Naylor, 466 S.W.3d 783, 805 (Tex. 2015) (appellate courts have affirmative duty to confirm jurisdiction exists).

         Standing, a component of subject-matter jurisdiction, is a constitutional prerequisite to maintaining suit under Texas law. Tex. Ass'n. of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440, 444-45 (Tex. 1993); Concerned Cmty. Involved Dev., Inc. v. City of Houston, 209 S.W.3d 666, 670 (Tex. App.-Houston [14th Dist.] 2006, pet. denied). Standing requires that there exist a real controversy between the parties that will actually be determined by the judicial declaration sought. Sammons & Berry, P.C. v. Nat'l Indem. Co., No. 14-13-00070-CV, 2014 WL 3400713, at *3 (Tex. App.-Houston [14th Dist.] July 10, 2014, no pet.) (mem. op.) (citing Nootsie, Ltd. v. Williamson Cnty. Appraisal Dist., 925 S.W.2d 659, 662 (Tex. 1999)). Only the party whose primary legal right has been breached may seek redress for the injury. Nauslar v. Coors Brewing Co., 170 S.W.3d 242, 249 (Tex. App.-Dallas 2005, no pet.). Without a breach of a legal right belonging to a specific party, that party has no standing to litigate. Cadle Co. v. Lobingier, 50 S.W.3d 662, 669-70 (Tex. App.-Fort Worth 2001, pet. denied). Standing cannot be waived and can be raised for the first time on appeal. Tex. Ass'n. of Bus., 852 S.W.2d at 444-45. When reviewing standing on appeal, we construe the petition in favor of the plaintiff and, if necessary, review the entire record to determine whether any evidence supports standing. Id. at 446. Whether a party has standing to bring a claim is a question of law reviewed de novo. Mayhew v. Town of Sunnyvale, 964 S.W.2d 922, 928 (Tex. 1998).

         Gabriel relies on very old cases, the most recent issued in 1921, for the proposition that an appointed receiver's authority to pursue claims for a dissolved corporation does not cross the borders of the appointing court.[4] Having reviewed the cases cited by Gabriel, as well as more recent caselaw addressing foreign receiver standing, it is clear that the law has changed and as a result, Gabriel's cases are no longer authoritative. We conclude instead that Blaauw, a receiver appointed by a Curacao court, has standing to pursue the corporations' claims through the application of comity principles. See K.D.F. v. Rex, 878 S.W.2d 589, 593 (Tex. 1993) ("Comity is a doctrine grounded in cooperation and mutuality. United States courts defer to the sovereignty of foreign nations according to principles of international comity.").

         Texas will extend comity by recognizing the laws and judicial decisions of another state, unless the foreign state declines to extend comity to Texas or sister states under the same or similar circumstances. Id. at 593-94. Comity has been applied to receivers appointed by foreign courts. See Massi v. Holden, No. 09-1821, 2011 WL 6181258, at *4 (D. Minn. Dec. 13, 2011) ("There is a long and consistent precedent of deferring to receivership orders issued by a properly-instituted court of a foreign country that has jurisdiction, even when they are not final judgments."); BCCI Holdings (Luxembourg), Societe Anonyme v. Khalil, 20 F.Supp.2d 1, 4 (D. D. C. 1997) ("The recognition of liquidators or trustees appointed by foreign courts to act as receivers empowered to sue or be sued on behalf of insolvent corporations is neither unusual nor contrary to federal law."). Indeed, at least one court has extended comity specifically to a receiver appointed by a Netherlands Antilles court. See In re Colorado Corp., 531 F.2d 463, 468-69 (10th Cir. 1976) (holding that it was an abuse of discretion for trial court to deny comity to receiverships created by Luxembourg and Netherlands Antilles courts). Because there is nothing in the record indicating that Curacao, part of the Netherlands Antilles, has not extended comity to Texas in the past, nor that accepting the Curacao court's appointment of Blaauw as the receiver of the two corporations would violate Texas public policy, we conclude that Blaauw has standing to pursue the corporations' claims in Texas.[5] See K. D. F., 878 S.W.2d at 595 ("In the absence of a clear indication to the contrary, we will treat Kansas as a cooperative jurisdiction. Texas will extend comity to the law of a cooperative jurisdiction so long as that law does not violate Texas public policy."); AutoNation, Inc. v. Hatfield, 186 S.W.3d 576, 580 n.4 (Tex. App.-Houston [14th Dist.] 2005, no pet.) ("Because the real party in interest was unable to show that Kansas would not extend comity, the court treated Kansas as a cooperative jurisdiction and determined that Texas should extend comity to Kansas provided Kansas law does not violate Texas public policy.").

         II. The trial court did not err when it decided that Mexican law applied to all claims raised by appellants.

         In two issues appellants challenge the trial court's ruling that Mexican law applied to all of the claims asserted in their lawsuit against Gabriel. Because appellants asserted many of the same causes of action, and filed a single brief in which they collectively addressed their issues on appeal, we address both issues together.

         A. Standard of review and applicable law

         The issue of which state's law to apply is a question of law for the court to decide. Greenberg Traurig of New York, P.C. v. Moody, 161 S.W.3d 56, 70 (Tex. App.-Houston [14th Dist.] 2004, no pet.). We therefore review the trial court's decision de novo. Id.

         A court must make a conflict-of-law decision only when a case is connected with more than one state and the laws of those states differ on points in issue. Id. at 69. The parties to this appeal established the existence of a conflict and we must determine if the trial court erred when it decided that Mexican law, rather than Texas or Curacao law, control. Id. at 70.

         Texas courts use the "most significant relationship" test found in the Restatement (Second) of Conflicts of Laws to decide choice-of-law issues.[6] Id. Under that test, a court considers which state's law has the most significant relationship "to the particular substantive issue to be resolved." Hughes Wood Prods., Inc. v. Wagner, 18 S.W.3d 202, 205 (Tex. 2000). The Restatement methodology requires a separate conflict-of-laws analysis for each issue in a case. Greenberg Traurig, 161 S.W.3d at 70. Appellants' claims in this case can be placed into two groups: general torts (claims related to Gabriel's alleged misuse of the corporations' assets) and fraud-based claims (claims related to Gabriel' alleged misrepresentations and his alleged failure to disclose his alleged misdeeds). Three sections of the Restatement apply here.

         Section 6(2) of the Restatement sets out general factors relevant to the choice-of-law question:

(a) the needs of the interstate and international systems,
(b) the relevant policies of the forum,
(c) the relevant policies of other interested states and the relative interests of those states in the determination ...

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