Motion Denied and Order filed February 22, 2018

In The

Fourteenth Court of Appeals

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NO. 14-17-00848-CV

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IN THE MATTER OF THE MARRIAGE OF CONNIE SUE DILICK AND 

MATTHEW GERARD DILICK

On Appeal from County Court at Law No. 1

Galveston County, Texas

Trial Court Cause No. 14-FD-2582

ORDER

This order concerns the motion to substitute filed by Jay H. Cohen, 

individually and as trustee of the JHC Trust I and JHC Trust II (“Cohen”). Cohen 

seeks to substitute himself as a party to this appeal in place of appellant Ron 

Sommers, Bankruptcy Chapter 7 Trustee (“the Trustee”) to litigate on behalf of three 

limited partnerships (“the Partnerships”). Cohen filed the motion “for himself, the 

trusts, and derivatively as 80% limited partner of [the Partnerships] on behalf of the 

Partnerships.” Appellee Matthew Dilick opposes the motion and requests sanctions. 

The Trustee responded to the motion at our request; he does not oppose the motion.

We deny the motion without prejudice, and we deny Dilick’s motion for sanctions.
2

BACKGROUND

This appeal has a complicated history.1It arises from a divorce proceeding, 

but it does not concern the divorce.

A. The Partnerships 

Dilick and Cohen formed the Partnerships2to commercialize several tracts of 

land Cohen owned. Cohen transferred the land to the Partnerships so the land could 

be developed to generate income. 

Cohen or one of his trusts holds an 80% interest in each Partnership as a 

limited partner, and Dilick or entities he controls hold the remaining 20% — roughly 

19% as a limited partner and 1% as the sole general partner.3

B. Cohen sues Dilick

Cohen sued Dilick and others in 2010 in Harris County (“the Harris County 

Suit”), alleging Dilick improperly used Partnership assets for personal gain. Cohen 

asserted primarily derivative claims brought on the Partnerships’ behalf. In turn, the 

Partnerships, through their general partners, asserted counterclaims against Cohen 

and third-party claims against others. The case wended on for years as parties and 

claims were added and dropped. 

C. Partnerships declare bankruptcy

In November 2014, two months before the scheduled trial date in the Harris 

 

1 The complete record has not been filed. The facts recited in this order are taken from the 

parties’ briefing and exhibits regarding the motion to substitute. 

2 The Partnerships are: (1) Alabama & Dunlavy, Ltd.; (2) Flat Stone II, Ltd.; and (3) Flat 

Stone, Ltd. The ends of the Partnerships’ names in the record vary between “LLC” and “Ltd.” The 

judgment on appeal and the notice of appeal use “Ltd.,” so that is how we will refer to those entities 

in this order.

3

In one Partnership, the 19% is split roughly equally between Dilick and a third party not 

relevant to this appeal.
3

County Suit, the Partnerships filed voluntary petitions for Chapter 7 bankruptcy in 

the United States Bankruptcy Court for the Southern District of Texas. Sommers 

was appointed as bankruptcy trustee for the Partnerships. Soon after, one of the 

defendants in the Harris County Suit removed that suit to the United States District 

Court for the Southern District of Texas on the basis of the bankruptcy proceeding.

The Trustee soon sought and obtained a declaratory judgment from the 

bankruptcy court that he owned all the claims asserted by the Partnerships in the 

Harris County Suit. As a result of that judgment, the Trustee owned Cohen’s 

derivative claims against Dilick, the Partnerships’ counterclaims against Cohen, and 

the Partnerships’ third-party claims. 

D. Trustee sues Dilick and Cohen

The Trustee then filed an adversary proceeding in the bankruptcy case against 

Dilick, Cohen, and many others. In later filings, he described the crux of Dilick’s

alleged wrongdoings as “pillaging” each Partnership, either by skimming from loans 

to that Partnership or stealing from the proceeds of the sale of the Partnership’s real 

property, and using the ill-gotten gains for his personal benefit. Cohen, according to 

the Trustee, “thwarted and disrupted” one Partnership’s use of its real property by

prohibiting or undermining negotiations for development of that property. The 

Trustee also alleged Cohen improperly continued to collect rent from tenants in the 

apartment building located on the property.

The Trustee asserted numerous causes of action, including breach of fiduciary 

duty, breach of contract, defalcation, civil theft, conversion, fraud, fraudulent 

transfer, conspiracy, and equitable claims. In addition to several equitable remedies, 

the Trustee sought actual and exemplary damages. 
4

E. The Dilicks’ divorce suit

1. The Trustee intervenes in the Dilicks’ divorce suit

Shortly before the Partnerships declared bankruptcy, Dilick’s then-wife sued 

him for divorce. In order to minimize the divorce’s potential negative effect on the 

collectability of a judgment in the adversary proceeding, the Trustee intervened in 

the divorce suit in April 2015. The petition in intervention stated:

Property owned by [the Partnerships] is included in the community 

property subject to this divorce proceeding and Matthew Dilick’s 

separate property, if any. This property includes real estate and funds 

in excess of $10 million and assets acquired subsequent to the illegal 

transfer of funds to himself and the marital estate from [the Trustee].

. . .

The purpose of this suit is to preserve these millions of dollars and the 

real property itself so that it is not wrongfully divided as if it were part 

of the marital estate.

The Trustee alleged Dilick used the Partnerships’ properties as collateral to 

obtain loans of approximately $34 million, deals he characterized as “insider 

transactions” subject to the Texas Uniform Fraudulent Transfers Act (“TUFTA”). 

See Tex. Bus. & Com. Code Ann. § ch. 24 (West 2015). He sought constructive 

trusts, resulting trusts, injunctive relief, and attorneys’ fees. 

Mr. and Mrs. Dilick filed separate answers to the petition in intervention. In 

his second amended answer, Mr. Dilick sought attorneys’ fees under the TUFTA. 

See id. § 24.013.

In his briefing in this court, Dilick says the Trustee maintained throughout the 

case that he was not asking the divorce court to determine Dilick’s liability with 

respect to the Partnerships; that determination would be made by the bankruptcy 

court in the adversary proceeding. Instead, the Trustee sought only to have the 
5

divorce court place constructive and resulting trusts on certain assets in the marital 

estate or Dilick’s separate property so that if the Trustee obtained a favorable

judgment in the adversary proceeding, he could collect on that judgment.

2. The Trustee settles with Mrs. Dilick and nonsuit his claims

In late March 2017, the Trustee sought the bankruptcy court’s approval of a 

settlement he reached with Mrs. Dilick. He filed a notice of nonsuit of his claims in 

the divorce proceeding the following week. Though the settlement was with Mrs. 

Dilick only, the nonsuit applied to the Trustee’s claims against both her and Dilick.

The divorce court signed an order dismissing the Trustee’s claims without prejudice 

on April 7, 2017. Dilick’s claim against the Trustee for attorneys’ fees remained. 

The bankruptcy court approved the settlement on April 19, 2017.

3. Divorce court orders Trustee to pay Dilick’s attorneys’ fees

On July 17, 2017, the divorce court signed an order awarding Dilick his 

attorneys’ fees under the TUFTA:

IT IS THEREFORE ORDERED, ADJUDGED, AND DECREED 

THAT Respondent Matthew Gerard Dilick have judgment against 

Intervenor Ron Sommers, Chapter 7 Bankruptcy Chapter 7 Trustee for 

Flat Stone, Ltd.; Flat Stone II, Ltd.; and Alabama & Dunlavy, Ltd. for 

the attorneys’ fees awarded herein.

The order awards roughly $123,000 in attorneys’ fees, $25,000 of which is 

contingent upon the outcome of any appeal.

The divorce court signed the final decree of divorce on July 31, 2017, at which 

time the judgment against the Trustee for attorneys’ fees became final. The Trustee 

timely moved for a new trial; his motion was denied by written order. On October 

26, 2017, the Trustee filed his notice of appeal, beginning the appeal before us.
6

F. Partnerships become solvent and bankruptcies are dismissed

In early August 2017, the Trustee moved to dismiss the bankruptcy 

proceedings as to all three Partnerships. The motion reported that, as a result of 

various transactions, two of the three Partnerships had regained solvency, and the 

total dollar amount of outstanding claims against the Partnerships had decreased 

drastically. 

The bankruptcy court granted the motion and signed an order on November 

3, 2017, dismissing the three bankruptcy proceedings. According to the Trustee, the 

dismissal became effective on November 9, 2017, and became a final order on 

November 17, 2017.

G. Dilick moves to dismiss the appeal, and Cohen moves to substitute 

himself as appellant

On November 10, 2017, Dilick filed a motion to dismiss this appeal for lack 

of jurisdiction. He asserts the Trustee’s authority to act for the Partnerships ended 

when the bankruptcies were dismissed. As a result, he contends, the Trustee lacks 

standing, and the appeal must be dismissed. 4

A few days later, Cohen filed this motion seeking to substitute himself as 

appellant to litigate on behalf of the Partnerships in place of the Trustee. He contends 

a limited partner may “bring an action in court on behalf of the limited partnership 

to recover a judgment in favor of the limited partnership” if the general partner—

here, Dilick or entities he controls—refuses to do so. Tex. Bus. Orgs. Code Ann. 

§ 153.401 (West 2012). Cohen also asserts substitution is permitted under 

unspecified “principles of equity.” Alternatively, Cohen asks us to abate the appeal

so he may “seek such order or judgment from the [bankruptcy court], or the [federal 

 

4 Dilick also sought dismissal for lack of prosecution based on the Trustee’s failure to pay 

the appellate filing fee. See Tex. R. App. P. 5.
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district court], as the Court may believe is necessary to clarify or declare Cohen’s 

rights to defend the Partnerships from” the judgment in favor of Dilick for his 

attorneys’ fees. 

ANALYSIS

Substitution of parties who are not public officers is authorized by Texas Rule 

of Appellate Procedure 7.1. Subsection (b) governs substitution for reasons other 

than death of the party:

If substitution of a party in the appellate court is necessary for a reason 

other than death, the appellate court may order substitution on any 

party’s motion at any time.

Tex. R. App. P. 7.1(b).

I. Is substitution necessary?

Rule 7.1(b) expressly authorizes the court of appeals to order substitution 

when substitution is necessary. Substitution is necessary to avoid dismissal if the 

appellant lacks standing. 

Standing is a component of subject matter jurisdiction. Douglas v. Delp, 987 

S.W.2d 879, 882 (Tex. 1999); Tex. Ass’n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 

440, 443 (Tex. 1993). If the party pursuing the case lacks standing, the court lacks 

subject matter jurisdiction to hear the case. See Austin Nursing Ctr., Inc. v. Lovato, 

171 S.W.3d 845, 849 (Tex. 2005); Douglas, 987 S.W.2d 882. 

Filing a bankruptcy petition creates a bankruptcy estate. 11 U.S.C. § 541(a); 

Douglas, 987 S.W.2d at 882. Once the petition is filed, all the debtor’s assets, 

including legal claims, become part of the bankruptcy estate. Douglas, 987 S.W.2d 

at 882; Bailey v. Barnhart Interest, Inc., 287 S.W.3d 906, 909 (Tex. App.—Houston 

[14th Dist.] 2009, no pet.). The bankruptcy trustee has exclusive standing to 

prosecute such a claim; the debtor lacks standing to do so. Douglas, 987 S.W.2d at 
8

882 (holding debtor’s claims must be dismissed for lack of jurisdiction because 

debtor lacked standing to assert them); Bailey, 287 S.W.3d at 913 (same).

This case presents a different question, though: does a bankruptcy trustee lose

standing to prosecute a claim or appeal after the bankruptcy is dismissed? Cohen, 

Dilick, and the Trustee say yes. The Trustee cites Sommers v. Sandcastle Homes, 

Inc., 521 S.W.3d 749 (Tex. 2017), a supreme court opinion in an appeal arising from 

a separate part of the Harris County Suit. In that appeal, Sommers substituted for 

Cohen as appellant after the Partnerships declared bankruptcy. Id. at 752. The 

supreme court held Sommers had standing to prosecute the appeal. Id. at 752–53.

But, in Sandcastle Homes, the trustee substituted for the debtor after bankruptcy was 

declared but before it concluded, as in Douglas and Bailey. Here, the question is 

whether a debtor’s limited partner may substitute for the trustee after the bankruptcy 

is dismissed.

The parties have not directed us to any authority for the proposition that a 

bankruptcy trustee lacks standing to pursue an appeal of a judgment signed when the 

trustee did have standing (i.e. before the bankruptcy was dismissed). Our research 

has not revealed any such authority. 

We need not decide the standing issue, because we must deny the motion 

regardless of the Trustee’s standing. If the Trustee has standing, then we deny the 

motion because substitution is not necessary.5If the Trustee lacks standing, as the 

parties contend, then we deny the motion because Cohen is not authorized to 

substitute for the Trustee.

 

5 Rule 7.1(b) provides, “If substitution . . . is necessary . . . , the appellate court may order 

substitution . . . .” Tex. R. App. P. 7.1(b). We express no opinion as to whether we may order 

substitution only if substitution is necessary or whether we are required, rather than permitted, to 

order substitution if substitution is necessary.
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II. Cohen is an improper substitute

Generally, only a party to the judgment may appeal. In re Lumbermens Mut. 

Cas. Co., 184 S.W.3d 718, 723 (Tex. 2006) (orig. proceeding); City of San Benito v. 

Rio Grande Valley Gas Co., 109 S.W.3d 740, 754–55 (Tex. 2003). Because the 

judgment is against the Trustee as a representative of the Partnerships, we assume 

for the sake of argument that the Partnerships are parties to the judgment.

Cohen wants to pursue this appeal in his capacity as a limited partner on behalf 

of the Partnerships:

Cohen wishes to defend the Partnerships from the erroneous trial court 

judgment for attorney’s fees in favor of Dilick and from the final 

judgment. Dilick does not want to defend the Partnerships; he wants the 

money and seeks to have this appeal dismissed. Dilick owns and 

controls the entities that are the general partners of the Partnerships and 

will not cause them to prosecute this appeal from the judgment against

the Partnerships and in favor of Dilick.

Accordingly, we consider whether Cohen may prosecute the appeal for the 

Partnerships’ benefit as a limited partner.

6

A. Cohen lacks authority to prosecute the appeal for the Partnerships

An individual stakeholder has no right to recover personally for harms done 

to the legal entity. Siddiqui v. Fancy Bites, LLC, 504 S.W.3d 349, 360 (Tex. App.—

Houston [14th Dist.] July 26, 2016, pet. denied). Courts have applied this doctrine 

to conclude limited partners lack standing to assert claims individually when the 

claim belongs to the entity. E.g., id. at 361–62; BJVSD Bird Family P’ship, L.P. v. 

Star Elec., L.L.C., 413 S.W.3d 780, 785–86 (Tex. App.—Houston [1st Dist.] 2013, 

no pet.); Hall v. Douglas, 380 S.W.3d 860, 873 (Tex. App.—Dallas 2012, no pet.). 

 

6 Although the introduction to Cohen’s motion says he is filing “for himself” as well as for 

the Partnerships, the body of the motion makes clear he believes his standing is based on his status 

as a limited partner.
10

Even though the injuries to the partnership may diminish the value of the limited 

partner’s interest, the limited partner still lacks standing to sue for those injuries. 

BJVSD, 413 S.W.3d at 785–86; Hall, 380 S.W.3d at 873.

We have applied the same principle in analyzing appellate standing. Spates v. 

Office of Attorney General, 485 S.W.3d 546, 550–51 (Tex. App.—Houston [14th 

Dist.] 2016, no pet.). Spates owed back child support. Id. at 549. When Prodigy 

Services, LLC, a limited liability company of which Spates was the sole member, 

sued another entity for breach of contract, the Attorney General of Texas intervened, 

requesting a charging order be entered against Prodigy. Id. at 548–49. The charging 

order would direct Prodigy to pay any funds due Spates directly to the Attorney 

General until the child support debt was paid. Id. at 549. The trial court signed a 

charging order, and Spates and Prodigy appealed. Id. at 550. We held Spates lacked 

standing to appeal because he was not a party to the charging order, and his 

membership in Prodigy did not, without more, give him standing. Id. at 550–51.

Spates controls this case. Cohen is not a party to the attorneys’ fees judgment 

against the Trustee. His status as limited partner does not vest him with standing to 

appeal on behalf of the Partnerships. Further, nothing in the partnership agreements

attached to the parties’ briefing appears to confer authority on Cohen to sue on the 

Partnerships’ behalf. He lacks standing to prosecute the appeal for the Partnerships’ 

benefit.

Cohen relies on section 153.401 of the Business Organizations Code as 

support for his authority to continue this appeal. That section states:

RIGHT TO BRING ACTION. A limited partner may bring an action 

in court on behalf of the limited partnership to recover a judgment in 

the limited partnership’s favor if:

(1) all general partners with authority to bring the action have 

refused to bring the action; or
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(2) an effort to cause those general partners to bring the action is not 

likely to succeed.

Tex. Bus. Orgs. Code Ann. § 153.401.

The statute expressly allows a limited partner to sue on behalf of the limited 

partnership to “recover a judgment in the limited partnership’s favor.” Id. No such 

judgment exists in this case. Cohen has not directed us to, and we have not located, 

a case in which a court relied on section 153.401 to allow a limited partner to 

prosecute the appeal of a judgment against a limited partnership.

B. The doctrine of virtual representation does not apply

We next consider whether Cohen has standing to pursue the Partnerships’ 

appeal under the doctrine of virtual representation, an exception to the rule that only 

a party to the judgment may appeal. City of San Benito, 109 S.W.3d at 754–55. 

Under that doctrine, an appellant is a “deemed party” if the following three 

conditions are met: (1) the appellant is bound by the judgment; (2) the appellant’s 

“privity of estate, title, or interest appears from the record”; and (3) there is an 

identity of interest between the appellant and a party to the judgment. Id. (quoting 

Motor Vehicle Bd. v. El Paso Indep. Auto Dealers Ass’n, 1 S.W.3d 108, 110 (Tex. 

1999)). We conclude the doctrine of virtual representation does not apply because

the first condition is not satisfied: Cohen is not bound by the judgment.

A defining characteristic of a limited partnership is that its limited partners 

are generally not liable for the partnership’s obligations. Tex. Bus. Orgs. Code Ann. 

§ 153.102(a). There are two exceptions to that rule: (1) if the limited partner is also 

a general partner; and (2) if, in addition to the exercise of the limited partner’s rights 

and powers as a limited partner, the limited partner participates in the control of the 

business. Id. If the second exception is satisfied, the limited partner is liable only to 

a person who transacts business with the limited partnership reasonably believing, 
12

based on the limited partner’s conduct, that the limited partner is a general partner.

Id. § 153.102(b). 

Based on our review of the exhibits to the parties’ briefing, neither of the two 

exceptions applies in this case. First, Cohen and his trusts are limited partners only; 

they are not also general partners. Second, neither party suggests Cohen participated 

in the control of the Partnerships’ business. Even if he did, he would be liable to only 

a person who transacted business with the Partnerships and who reasonably believed 

Cohen to be a general partner. Assuming Dilick is a “person who transacted 

business” with the Partnerships, he could not have reasonably believed Cohen to be 

a general partner—as a partner himself, he knows the makeup of the Partnerships.

C. “Equity” is not a basis for substitution 

Cohen contends, and the Trustee appears to agree, it would be unfair to leave 

the fate of this appeal to the Dilick-controlled general partners because the general 

partners have no interest in reversing a judgment in favor of Dilick. The Trustee cites 

In re Great Northern Energy, Inc., 493 S.W.3d 283 (Tex. App.—Texarkana 2016, 

orig. proceeding), in support of that contention. 

Great Northern Energy involved a judgment in favor of Circle Ridge (CR) 

and against Great Northern Energy (GNE). Id. at 285–86. CR obtained a postjudgment turnover order that required GNE to turn over its assets to CR, including 

a counterclaim GNE was pursuing against CR in a federal lawsuit. Id. at 286. The 

court of appeals held trial court abused its discretion in including the counterclaim 

in the turnover order. Id. at 291. By requiring GNE to surrender its counterclaim 

against CR to CR—who of course would not pursue that counterclaim— the trial 

court denied GNE its right to fully litigate and determine the value of its 

counterclaim. Id. at 290. Further, if it could not assert the counterclaim, GNE would 

reportedly lose a strategic benefit in its position with respect to the other parties in 
13

the federal suit. Id. at 292. The court of appeals suggested requiring turnover of the 

counterclaim violated public policy. Id. at 291. 

Great Northern Energy is distinguishable from this case because GNE’s 

standing was not in dispute. GNE was ordered to turn over assets, and it had standing 

to seek review of that order. By contrast, the order on appeal is not directed to Cohen. 

It is directed to the Trustee in his representative capacity of the Partnerships. 

Cohen and the Trustee may be correct that Dilick will not cause the 

Partnerships to appeal the judgment against them. But that fact does not allow us to 

create standing where it does not exist. State v. Naylor, 466 S.W.3d 783, 791 (Tex. 

2015).

III. No reason to abate

There is no reason to abate this appeal. Cohen is free to attempt to obtain any 

order he wants from the bankruptcy court or the federal district court while this 

appeal is pending. We will, however, hold Dilick’s motion to dismiss for 30 days.

IV. Sanctions are not appropriate

Dilick asks us to sanction Cohen because Cohen’s motion was “not supported 

by any proper legal authority” and “filed purely in an attempt to delay the payment 

of the attorneys’ fees owed to Mr. Dilick.” He asserts sanctions are appropriate under 

Texas Civil Practice and Remedies Code chapter 10 and Texas Rule of Appellate 

Procedure 45.

Dilick cites no authority that Texas Civil Practice and Remedies Code chapter 

10 applies to a motion filed in the court of appeals. Nor does he cite authority that 

Texas Rule of Appellate Procedure 45, which permits us to award damages to the 

prevailing party for a frivolous appeal, authorizes sanctions for a frivolous motion

filed during the pendency of an appeal. 
14

In any event, this appeal is not frivolous. It was initiated by the Trustee, a 

party to the judgment. Neither is Cohen’s motion to substitute frivolous. He cited 

the limited partnership derivative action statute and urged us to conclude it allows a 

limited partner to appeal a judgment on behalf of the limited partnership when the 

general partner has no incentive to prosecute such an appeal. Although we decline 

to make that conclusion, his request that we do so is not frivolous.

CONCLUSION

We deny Cohen’s motion to substitute and his request that we abate the 

appeal. We deny Dilick’s motion for sanctions. We will hold Dilick’s motion to 

dismiss for 30 days.

PER CURIAM

Panel consists of Justices Boyce, Jamison, and Brown.