1 United States Court of Appeals,

Fifth Circuit.

No. 93-2718

Summary Calendar.

ROHM & HASS TEXAS, INC., Plaintiff-Counter Defendant-Appellee,

v.

ORTIZ BROTHERS INSULATION, INC., et al., Defendants,

Ortiz Brothers Insulation, Inc., Defendant-Counter PlaintiffCross Plaintiff-Appellant.

UNITED STATES of America, Defendant-Counter Plaintiff,

v.

THORPE PRODUCTS CO., Defendant-Counter Defendant-Cross DefendantAppellee,

and

Metrobank, N.A., Intervenor-Defendant Appellee.

Sept. 20, 1994.

Appeal from the United States District Court for the Southern

District of Texas.

Before JOLLY, WIENER and EMILIO M. GARZA, Circuit Judges.

WIENER, Circuit Judge:

In this appeal from an interpleader action, DefendantAppellant Ortiz Brothers Insulation, Inc. ("Ortiz") seeks review of

the district court's determination of the priority of payme nt to

defendants from the interpleaded funds (the "Fund"). Although

Ortiz itself continues to disavow any stake in the Fund, it urges

that it was injured financially by the priority determined by the

district court for distributing s hares in the Fund to Ortiz's

creditors. Ortiz insists that, as a result of the sequence of1 As of July 23, 1993, the day judgment was entered, the Fund

contained $193,603.70, which included principal plus interest.

2 distribution decreed by the court, Ortiz will be exposed to greater

liability if it should ever file for bankruptcy or have to

indemnify its officers for any payments that they might be required

to make personally to cover the c ompany's unpaid federal tax

obligations. We conclude that, as such injuries are merely

conjectural and hypothetical, they are insuff icient to establish

constitutional standing. We therefore dismiss this appeal.

I

FACTS AND PROCEEDINGS

This case concerns the se quence or priority of payments to

various creditors of Ortiz from $189,850.69, 1 which PlaintiffCounter Defendant Rohm & Hass Texas, Inc. ("Rohm") deposited into

the registry of the district court when Rohm convoked the instant

interpleader action. The Fund represents money concededly owed by

Rohm to Ortiz, one of Rohm's contractors, for labor and materials

supplied to a maintenance and repair project at a Rohm facility in

Deer Park, Texas.

After Rohm filed this suit, thre e of Ortiz's creditors made

competing claims to the Fund: (1) the IRS, claiming that Ortiz

owed a tax debt of $245,673.61; (2) Thorpe Products Co.

("Thorpe" ), a materialman claiming that Ortiz owed it $98,290.09

for supplies used in per forming the Rohm construction contract;

and (3) MetroBank, N.A. ("MetroBank"), a creditor with a perfected

security interest in $80,861.30 of Ortiz's collateral and accounts2 On August 26, 1993, the court ordered the Fund to be

distributed as follows: Thorpe's materialman's lien, $20,755.86 and $7,843.75 in attorney's fees; MetroBank's security interest, $80,861.30, $1,300.00 in interest, and $7,756.52 in attorney's fees; and the remainder of the fund, $75,086.27, was paid in partial satisfaction of Thorpe's trust fund claim of $77,534.23. As the distribution accounted for interest accrued only as of July 23, 1993, Thorpe and MetroBank were ordered to share the interest earned after that date in the ratio of 54/46.

3 receivable. Ortiz claimed no stake in the Fund, but argued that

the claim of the IRS was superior in rank to that of Thorpe. The

district court disagreed.

Rulin g on cross motions for summary judgment, the district

court ranked the IRS' claim last among the competing creditors. As

the Fund was insufficient to satisfy all superior claims (plus

attorney's fees), 2 the IRS took nothing.

After judgment was entered, both the IRS and Ortiz filed

notices of appeal; but subsequently the IRS successfully moved to

dismiss its appeal and no longer asserts a claim against the Fund.

Still asserting no claim to the Fund, Ortiz continues to argue that

the IRS' claim should be superior in rank to Thorpe's. MetroBank

and Thorpe have moved to dismiss Ortiz's appeal for lack of

standing.

II

ANALYSIS

A. S TANDARD OF R EVIEW

"In ruling on a motion to dismiss for want of standing, both

the trial and reviewing courts must accept as true all material

allegations of the complaint, and mus t construe the complaint in3 Warth v. Seldin, 422 U.S. 490, 501, 95 S.Ct. 2197, 2206, 45

L.Ed.2d 343 (1975).

4 See Boeing Co. v. Commissioner of Patents & Trademarks, 853 F.2d 878, 881 (Fed.Cir.1988) ("The issue of standing calls into question the power of the court to hear and decide a case, and it is impossible for a party to waive this requirement."); cf. Bumberger v. Insurance Co. of North Am., 952 F.2d 764, 766 (3rd Cir.1991) (stating that diversity jurisdiction of courts is not subject to waiver).

5 See FW/PBS, Inc. v. Dallas, 493 U.S. 215, 231, 110 S.Ct. 596, 607, 107 L.Ed.2d 603 (1990) ("The federal courts are under an independent obligation to examine their own jurisdiction, and standing "is perhaps the most important of [the jurisdictional] doctrines.' " (quoting Allen v. Wright, 468 U.S. 737, 750, 104 S.Ct. 3315, 3324, 82 L.Ed.2d 556 (1984) (alteration in original)); Mansfield, Coldwater & Lake Mich. Ry. v. Swan, 111 U.S. 379, 382, 4 S.Ct. 510, 511, 28 L.Ed. 462 (1884) ("[T]he first and fundamental question is that of jurisdiction, first of this court, and then of the court from which the record comes.").

6 See Diamond v. Charles, 476 U.S. 54, 68, 106 S.Ct. 1697, 1706, 90 L.Ed.2d 48 (1986). In Diamond, the Court stated,

Diamond's status as an intervenor below, whether permissive or as of right, does not confer standing sufficient to keep the case alive in the absence of the State on this Appeal. Although intervenors are considered parties entitled, among other things, to

4 favor of the complaining party." 3 We conclude that, even when

viewed in this most favorable light, Ortiz's asserted injuries are

insufficient t o give it standing to appeal the district court's

judgment.

B. S TANDING

Article III standing implicates the federal judiciary's power

to adjudicate dis putes; it can be neither waived 4 nor assumed. 5

Merely because a party appears in the district court proceedings

does not mean that the party automatically has standing to appeal

the judgment rendered by that court. 6seek review by this Court, an intervenor's right to continue a suit in the absence of the party on whose side intervention was permitted is contingent upon a showing by the intervenor that he fulfills the requirements of Art. III.

Id. (citations omitted); see also Boeing Co., 853 F.2d at 881 (rejecting argument that as parties failed to object to intervenors appearance below, the parties waived any objection to intervenor's standing to pursue an independent appeal); Nationwide Mut. Fire Ins. Co. v. Eason, 736 F.2d 130, 134 (4th Cir.1984) (plaintiff-interpleader that disclaimed interest in fund lacked standing to appeal ultimate disposition of fund); Libby, McNeill, & Libby v. City Nat'l Bank, 592 F.2d 504, 512 (9th Cir.1978) (finding that defendant in interpleader action lacked standing to appeal judgment that indirectly affected its pecuniary interests, but primarily impacted liability of another party).

7 Warth v. Seldin, 422 U.S. 490, 498, 95 S.Ct. 2197, 2204, 45 L.Ed.2d 343 (1975). As we find that Ortiz lacks constitutional standing to appeal, we do not reach—and therefore do not consider—any prudential limitations.

8 Id. at 498-99, 95 S.Ct. at 2204-05 (quoting Linda R.S. v. Richard D., 410 U.S. 614, 617, 93 S.Ct. 1146, 1148, 35 L.Ed.2d
536 (1973)).

9 See Morrison-Knudsen Co. v. Chg Int'l, Inc., 811 F.2d 1209, 1214 (9th Cir.1987) (noting that party may appeal to protect only

5 Whether a party has standing to appeal "involves both

constitutional limitations on federal-court jurisdiction and

prudential limitations on its exercise." 7

In its constitutional dimension, standing imports justiciability: whether the plaintiff has made out a "case or

controversy' between himself and the defend ant within the meaning of Arti cle III.... The Article III judicial power

exists only to redress or otherwise to protect against injury to the complaining party.... A federal court's jurisdiction therefore can be invoked only when the plaintiff himself has

suffered "some threatened or actual injury from the putatively illegal action.' 8

Accordingly, a party gene rally may not appeal a district court's

order to champion the rights of anothe r, 9 and even "[a]n indirectits own interests), cert. dismissed, 488 U.S. 935, 109 S.Ct. 358,

102 L.Ed.2d 349 (1988); see also Libby, McNeill, & Libby, 592 F.2d at 512 ("[A] party may only appeal to protect its own interests, and not those of a coparty."); Estate of Bishop v. Bechtel Power Corp., 905 F.2d 1272, 1276 (9th Cir.1990) (" "[A] party may only appeal to protect its own interests, not those of any other party.' " (quoting Bryant v. Technical Research Co., 654 F.2d 1337, 1343 (9th Cir.1981) (alteration in original))).

10 Morrison-Knudsen Co., 811 F.2d at 1214; see Estate of Bishop, 905 F.2d at 1276 (quoting Morrison-Knudsen Co. ).

11 O'Shea v. Littleton, 414 U.S. 488, 494, 94 S.Ct. 669, 675, 38 L.Ed.2d 674 (1974) (quotations omitted); accord NLRB v. Dredge Operators Inc., 19 F.3d 206, 213 (5th Cir.1994) (finding "speculative" scenario not ripe for review).

12 FW/PBS, Inc. v. Dallas, 493 U.S. 215, 231, 110 S.Ct. 596, 607, 107 L.Ed.2d 603 (1990) (citing McNutt v. General Motors
Acceptance Corp., 298 U.S. 178, 189, 56 S.Ct. 780, 785, 80 L.Ed.
1135 (1936)); see Boeing Co. v. Commissioner of Patents &
Trademarks, 853 F.2d 878, 880 (Fed.Cir.1988) ("In order to establish standing on appeal, [a putative appellant] must show that it has suffered some actual or threatened injury." (citing Gladstone, Realtors v. Village of Bellwood, 441 U.S. 91, 99, 99 S.Ct. 1601, 1607, 60 L.Ed.2d 66 (1979); Warth, 422 U.S. at 498-
99, 95 S.Ct. at 2204-05)).

6 financial stake in another party's claims is insufficient to create

standing on appeal." 10 In addition, "[t]he injury or threat of

injury must be both "real and immediate' not "conjectural' or

"hypothetical,' " 11 and the putative appellant shoulders the burden

of alleging facts sufficient to demonstrate that it is a proper

party to appeal. 12

C. O RTIZ ' S A LLEGED I NJURIES

Conceding tha t it claims no interest in the Fund, Ortiz

maintains that it nevertheless has standing to appeal the district

court order because the priority of distribution of the Fund among

Ortiz's creditors might affect Ortiz's liability should the company

eventually (1) file for bankruptcy, or (2) have to indemnify its13 Although in its brief Ortiz argues that it might be

required to indemnify its "officers," we note that the Texas statute to which Ortiz cites provides only for the

indemnification of "directors." See T EX .B US .C ORP

. A CT A NN . art. 2.02-1(E) (West 1994). For the purposes of our discussion, however, we will assume that Ortiz's officers also are directors or that they otherwise would be entitled to the protection of the

statute.

14 See 11 U.S.C. § 727 (1988).

15 See id. § 523(a).

16 See 26 U.S.C. § 6672(a).

7 officers if they should ever be required personally to pay on the

company's tax liability. 13

In particular, Ortiz explains that it is aggrieved by the

district court judgment's assigning the priority in which its

creditors are to be paid from the Fund, a s Ortiz's debt to one

creditor, Thorpe, is fully dischargeable in bankruptcy, 14 while its

debt to another, the IRS, is not. 15 Moreover, Ortiz raises the

inchoate possibility that the IRS could one day look to Ortiz's

off icers for payment of the tax debt. 1 6 And, according to Ortiz,

under Texas law the company is required to indemnify its officers

for personal liability for the company's taxes to the extent the

officers incur such liability while executing their duties. Ortiz

insi sts therefore that ultimately the company might have to

shoulder responsibility by way of indemnifi cation for any taxes

collected from company officers by the IRS. It follows, Ortiz

concludes, that the dist rict court judgment injured Ortiz

financially by assigning the IRS the lowest priority among

claimants to the Fund, thereby injuring Ortiz sufficiently to17 736 F.2d 130, 134 (4th Cir.1984).

8 confer standing to appeal. We consider each alleged injury in turn

to determine whether either i s sufficient to satisfy Article III

standing.

1. Liability in Bankruptcy

At the outset, it is important to analyze the precise nature

of the injury of which Ortiz complains. Ortiz does not state that

it has filed, will file, or even anticipates filing for bankruptcy.

Ortiz merely asserts that, as a result of the district court

judgment's ranking the IRS last among Fund claimants, the company

might be exposed to greater liability if it ever should elect to

declare bankruptcy or be placed i n bankruptcy involuntarily. We

are convinced, however, that Article III pretermits consideration

of such a conjectural and hypothetical injury on appeal—a

conclusion we reach based in large part on analogous decisions by

other federal courts of appeals.

In the first instance, it is not even clear whether, after

disavowing a stake in the Fund, Ortiz could allege any injury

sufficient to give it standing to appeal the sequence or priority

for distributin g the money to other defendants with recognized

claims to shares of the Fund. In N ationwide Mutual Fire Insurance

C o. v. Eason, 1 7 the Fourth Circuit held that a plaintiff

-interpleader who claimed no stake in a fund interpleaded into

bankruptcy court lacked standing to appeal the bankruptcy court's

distribution of the fund. In Nationwide, the money was deposited

into the registry of a bankruptcy court for the benefit of unpaid18 Id. As Article III is inapplicable to bankruptcy courts,

standing to appeal in a bankruptcy proceeding derived originally from statute, granting the right to appeal only to "persons aggrieved." In re El San Juan Hotel, 809 F.2d 151, 154 (1st Cir.1987); In re Malmart Mortgage Co., 166 B.R. 499, 501 (D.Mass.1994). Although the applicable statute has since been repealed, bankruptcy courts still limit appellate standing to those "aggrieved." El San Juan Hotel, 809 F.2d at 154; Malmart
Mortgage Co., 166 B.R. at 501.

To determine Article III standing, courts also look to whether the appellant was "aggrieved" by the district court

decision. See, e.g., ICC v. Holmes Transp., Inc., 983 F.2d 1122, 1125 n. 4 (1st Cir.1993) (" "To have standing to appeal, an appellant ordinarily must have been a party to the proceeding below, and have been aggrieved by the order appealed from....' " (quoting United States v. Little Joe

9 creditors of a grain dealer that had filed for bankruptcy. After

thus depositing the funds, the plaintiff-interpleader asked to be

dismissed from the action, but apparently never was. When six

months elapsed without any defendant responding to the action, the

court entered a default judgment against all defendants.

Subsequently, when the trustee of the bankrupt estate moved to

intervene in the interpleader action, alleging that the funds were

part of the estate, the plaintiff-interpleader asked that the funds

be returned to it instead. The bankruptcy court denied the

plaintiff-interpleader's request that the funds be returned, and

the plaintiff-interpleader appealed.

The Fourth Circuit held that the plaintiff-interpleader lacked

standing to appeal the distribution of the fund because it had

previously disavowed any stake in the money. The court noted that

"[a ]ny challenge to the disposition ultimately made by the

bankruptcy court must be by parties with the requisite stake in the

outcome." 18 Here we need not go so far, however, because, even ifTrawlers, Inc., 780 F.2d 158, 161 (1st Cir.1986)); Great

Am. Audio Corp. v. Metacom, Inc., 938 F.2d 16, 19 (2d Cir.1991) (per curiam) ("In order to have standing to appeal, a party must be aggrieved by the judicial action from which it appeals."); HCA Health Servs. v. Metropolitan Life Ins. Co., 957 F.2d 120, 124 (4th Cir.1992) ("An injury in fact is required for a party to be aggrieved for purposes of being able to appeal...."); Goldstein v. Andresen & Co., 465 F.2d 972, 973 n. 1 (5th Cir.1972) (per curiam) ("[O]nly a party aggrieved by a final judgment may appeal from it."); Estate of Bishop v. Bechtel Power Corp., 905 F.2d 1272, 1276 (9th Cir.1990) (" "To have standing to appeal, a party must be aggrieved by the district court's order.' " (quoting Bryant v. Technical Research Co., 654 F.2d 1337, 1343 (9th Cir.1981)).

19 592 F.2d 504, 512 (9th Cir.1978).

10 we assume arguendo that Ortiz might be able to allege an indirect

interest in the Fund sufficient to give it standing to appeal, it

has failed to do so.

As Ortiz disavows a direct stake in the Fund, any interest

that it asserts necessarily must be indirect. Indeed, injuries far

more direct than those here alleged by Ortiz have been found to be

too remote to satisfy standing for the purposes of Article III.

For example, in Libby, McNeill, & Libby v. City National Bank, 19 the

Ninth Circuit held that a defendant-appellant, City National Bank

("CNB"), lacked stand ing to appeal a district court's judgments

against a plaintiff-interpleader, Libby, McNeill, & Libby

("Libby"), even though those judgments reduced the amount of money

that CNB recovered from the interpleader fund.

Pursuant to a lending agreement, CNB had obtained a security

interest in the accounts receivable of Shanghai Instant Foods, Inc.

("Shanghai"), a company that produced packaged frozen meals for

Libby. The contract between Shanghai and Libby provided that11

Shanghai would produce meals according to Libby's specifi cations

and obtain ingredients and materials from suppliers either

recommended or approved by Libby.

Subsequent to enterin g into this contract, some suppliers

notified Libby that Shanghai had stopped paying for its deliveries,

and shortly thereafter, Shanghai filed for bankruptcy. While the

bankruptcy proceedings were pending, Libby commenced an

interpleader action in district court, depositing into the court's

registry the net sum it owed Shanghai and naming as defendants the

trustee in bankruptcy, various unpaid suppliers, and CNB.

CNB was the only defendant to allege an interest in the fund,

but some unpaid suppliers counterclaimed, alleging that Libby was

liable to them in contract for deliveries provided to Shanghai.

The district court found for the suppliers on their counterclaims,

but permitted Libby to offset the amount of these judgments against

Libby's obligation to Shanghai. As a result, the amount of money

in the interpleader fund was reduced by the sum of these offsets.

Libby did not appeal these adverse judgments.

As the sole beneficiary of the interpleaded fund, CNB sought

to appeal, inter alia, the suppliers' judgments against Libby. The

Ninth Circuit, however, held that CNB lacked stand ing to appeal

these adverse judgments, even though the amount of CNB's recovery

from the fund was reduced by the amount of these judgments. The

court expressly recognized that "this is not the simple case where

the outcome of the appeal can have absolutely no effect o n the

i nterests of the appellant," but noted that CNB nevertheless had20 Id. at 511 (emphasis added); see also Principal Mut. Life

Ins. Co. v. Cincinnati TV 64 Ltd. Partnership, 845 F.2d 674, 677 n. 1 (7th Cir.1988) ("The general rule is that a party may only appeal to protect its own interests, and not those of a nonparty or another party, unless the appellant has a direct financial stake in the appeal.").

21 Libby, McNeill, & Libby, 592 F.2d at 511 (quotations omitted).

22 See also Brown v. Ferro Corp., 763 F.2d 798, 803 (6th Cir.) (stating that stockholder lacked standing to file derivative suit challenging officer's severance agreement program as payments were contingent on change of control and change of control was not presently foreseeable), cert. denied, 474 U.S. 947, 106 S.Ct. 344, 88 L.Ed.2d 291 (1985); Solo Cup Co. v.
Federal Ins. Co., 619 F.2d 1178, 1189 (7th Cir.) (finding mere possibility that insurer might commence proceedings to contest coverage of insured is insufficient to create "controversy" within meaning of Article III), cert. denied, 449 U.S. 1033, 101 S.Ct. 608, 66 L.Ed.2d 495 (1980).

12 "no direct interest in the counterclaims of [other defendants]." 20

Recognizing that an appellant's interest "must be immediate and

pecuniary and not a remote consequence of the judgment," 21 the court

held that CNB lacked an appealabl e interest in the judgments

against Libby. In the instant case, Ortiz's asserted

injury—greater potential liability should it ever file for

bankruptcy—is far more attenuated than the injury claimed by CNB in

Libby. 22

2. Indemnification of Ortiz's Officers

O rtiz's other alleged injury is similarly speculati ve and

remote. Ortiz claims injury as a consequence of the court's

rankings because the company's federal tax debt was not reduced by

the amount in the Fund, given the court's assignment of the lowest

priority to the IRS. Ortiz does not dispute the existence or

amount of its debt to the IRS. Rather, Ortiz merely complains23 T EX .B US .C ORP

. A CT A NN . art. 2.02-1(E) (West 1994) ("A person

may be indemnified ... against ... penalties (including excise and similar taxes)...." (emphasis added)).

24 See FW/PBS, Inc. v. Dallas, 493 U.S. 215, 231, 110 S.Ct. 596, 607, 107 L.Ed.2d 603 (1990) ("It is a long-settled principle that standing cannot be "inferred argumentatively from averments in the pleadings,' but rather "must affirmatively appear in the record.' " (quotations omitted)); Mansfield, C. & L.M. Ry. Co.

v. Swan, 111 U.S. 379, 382, 4 S.Ct. 510, 511, 28 L.Ed. 462 (1884) (facts supporting Article III jurisdiction must "appea[r] affirmatively from the record").

25 See In re Malmart Mortgage Co., 166 B.R. 499, 502 (D.Mass.1994) (finding shareholder/officer of bankrupt company

13 that, should the IRS ever look past the company to its officers for

satisfaction of this tax debt, then these officers will be liable

for a larger amount; and, as Ortiz posits that Texas law requires

it to indemnify its officers under such circumstances, the company

will ultimately have to pay more in indemnification.

First, Ortiz misstates Texas law: Corporations are not

required to indemnify officers from such liability—they are merely

permitted to do so. 23 As Ortiz has not alleged that it took the

steps necessary to indemnify its officers, the record is devoid of

facts showing that the company would be legally responsible to

indemnify its officers for any ul timate liability they incur for

the corporation's tax debts. 24

Seco nd, as with its allegations of liability in bankruptcy,

even if we as sume arguendo that Ortiz would owe indemnity to its

officers, its argument is completely speculative. Ortiz presents

no evidence that the IRS has looked, anticipates looking, or even

could look to the corporatio n's officers to satisfy Ortiz's tax

debt. 25 In short, Ortiz has failed utterly to demonstrate that anylacked standing to appeal bankruptcy court's award of attorney's

fees from company's estate as excessive, because (1) there was no evidence that shareholder/officer was a "responsible party" with potential tax liability and (2) the IRS had not yet made demand for payment under § 6672). Cash v. United States, 961 F.2d 562, 565-66 (5th Cir.), cert. denied, --- U.S. ----, 113 S.Ct. 492, 121 L.Ed.2d 430 (1992), is not to the contrary. In Cash, we found that shareholders/officers of a corporation had standing to appeal the method by which the IRS levied the assets of their corporation. In that case—unlike here—the IRS already had looked to the shareholders/officers for payment, had determined them to be "responsible persons" who willfully failed to pay over withholding taxes, and had taken steps to collect the unpaid tax

debt.

26 As our decision that Ortiz lacks standing to pursue this appeal is conclusive, "there is an end of the matter" and we do not consider the merits of the appeal. International Longshoremen's & Warehousemen's Union v. Boyd, 347 U.S. 222, 223, 74 S.Ct. 447, 448, 98 L.Ed. 650 (1954).

14 action by the IRS against company officers is a real or immediate

likelihood or how such an action would adversely affect the company

in the least. Finally, we must note that Ortiz's concern regarding

indemnification rings hollow when even this remote possibility of

indemnification could not arise unless the company should fail to

pay its own tax debt in the first place. 26

III

CONCLUSION

As we find that Defendant-Appellant Ortiz has failed to allege

an injury sufficientl y real and immediate to satisfy the

requirements for standing under Article III, this appeal is

DISMISSED.