Court Opinion

ID: 7796458
Source: CourtListenerOpinion
Date Created: 2022-08-01 00:22:18.11337+00
Date Added: 2024-06-11T16:28:27.826172
License: Public Domain

Motion for Rehearing Denied; Memorandum Opinion of April 19, 2022
Withdrawn; Petition for Writ of Mandamus Conditionally Granted; and
Substitute Memorandum Opinion filed July 26, 2022.

                              In The

                Fourteenth Court of Appeals

                         NO. 14-21-00337-CV

 IN RE BREITBURN OPERATING LP, SUCESSOR-IN-INTEREST TO
 QRE OPERATING, LLC, BREITBURN MANAGEMENT COMPANY,
 LLC, BREITBURN ENERGY PARTNERS, LP, QR ENERGY, LP, AND
        MAVERICK NATURAL RESOURCES, LLC, Relators

                    ORIGINAL PROCEEDING
                      WRIT OF MANDAMUS
                         133rd District Court
                        Harris County, Texas
                  Trial Court Cause No. 2015-47031

             SUBSTITUTE MEMORANDUM OPINION
        On June 18, 2021, relators Breitburn Operating LP, sucessor-in-interest to
QRE Operating, LLC, Breitburn Management Company, LLC, Breitburn Energy
Partners, LP, QR Energy, LP, and Maverick Natural Resources, LLC (collectively,
“Breitburn”) filed a petition for writ of mandamus in this court. See Tex. Gov’t Code
Ann. § 22.221; see also Tex. R. App. P. 52. In the petition, relator asks this court to
compel the Honorable Jaclanel McFarland, presiding judge of the 133rd District
Court of Harris County, to set aside her May 20, 2021 order directing Breitburn to
deposit over $13.4 million dollars into the registry of the court. We conditionally
grant the petition.1

                                            BACKGROUND

        In June 1983, the Louisiana Land and Exploration Company (“LLEC”)
created the LL&E Trust (the “Trust”). LLEC and the Trust then created the LL&E
Royalty Partnership (the “Partnership”). The Trust had a 99% interest in the
Partnership and LLEC had a 1% interest and was the managing general partner. The
Partnership was formed for the purpose of receiving and holding the overriding
royalty interests, receiving proceeds from the overriding royalty interests, paying the
liabilities and expenses of the Partnership, and disbursing remaining revenues to the
Trust and managing general partner.

        On June 28, 1983, LLEC entered into substantially identical agreements
known as “Conveyance Overriding Royalty Interests” (collectively, the

        1
          We deny the motion for rehearing filed by real party in interest Roger D. Parsons, in his Capacity
as Trust of the LL&E Royalty Trust, withdraw our memorandum dated April 19, 2022, and issue this
substitute opinion.
                                                     2
“Conveyance”), which varied only in the interests covered, with the Partnership.
One of the oil and gas properties in which LLEC owned mineral interests at the time
of the Conveyance was the Jay Field, which is located in Alabama and Florida. The
assignor that owns the working interest in the Jay Field, is responsible for overseeing
the operation of the Jay Field, and sells oil and gas from the Jay Field. LLEC, as
assignor, conveyed to the Partnership, as assignee, the right to receive “Net
Proceeds,” as defined in the Conveyance associated with LLEC’s mineral interests.
Net Proceeds are the proceeds net of Production Costs, which are associated with
maintaining the Jay Field. Production Costs are deducted from the Gross Proceeds.

      Through a series of acquisitions, ConocoPhillips Company became LLEC’s
successor as managing general partner of the Partnership. Quantum Resources
Management, LLC purchased the working interests in the Jay Field in December
2006 and became the operator of the Jay Field in April 2007. In 2012, Quantum
Resources transferred its working interests operations in the Jay Field to QRE
Operating, LLC, the subsidiary of QR Energy, LLC. Thereafter, on November 19,
2014, QR Energy merged into and became a subsidiary of Breitburn Energy
Partners, LLP. Thus, Breitburn Operating LP (“Breitburn”) became the assignor and
the operator of the Jay Field and acquired a working interest in the Jay Field.

      From 1983 to 2006, LLEC paid the Partnership over $300,000,000 in Net
Proceeds from the Jay Field, which averaged a little over $13,000,000 a year. The
Partnership has not received any payments under the Conveyance nor has the
assignor paid any money to the Partnership since 2008.

                                          3
      The Conveyance allows the assignor to set aside funds for future costs or
“Special Costs,” which include such as items as the estimated costs of plugging and
abandoning wells on the property and estimated future capital expenditures on the
property. Such Special Costs are not born by the Partnership, but by Breitburn, the
assignor. The assignor may put the funds to cover the Special Costs into a Special
Cost Escrow Account pursuant to the Conveyance. The Conveyance provides that
“Assignor may, in its sole discretion, elect to refrain from actually placing funds in
escrow but nevertheless calculate and pay amounts attributable to the Overriding
Royalty Interest as if funds had been placed in escrow . . . .”

      On April 14, 2014, counsel for the Trust wrote Quantum Resources
Management and QR Energy (collectively, “Quantum”).2 The Trust questioned
Quantum’s failure to pay the Trust “tens of millions of dollars in royalties due to the
Trust under the terms of the parties’ written agreements,” noting that the last
recurring overriding royalty interest payment occurred prior to April 2007 and a
single nonrecurring payment was made in September 2008. The Trust alleged that
Quantum was making payments to the Special Cost Escrow Account instead of
making its contractually obligated royalty payments to the Trust.

      The Trust alleged that Quantum had breached the Conveyance by (1) refusing
to make the overriding royalty interest payments to the Trust for over seven years,
(2) increasing the amount of the Special Cost Escrow Account by approximately $40
million in the previous three years, while refusing to make any royalty payments to

      2
          In the correspondence, counsel does not refer to the Trustee but the Trust instead.
                                                 4
the Trust, and (3) holding the Special Cost Escrow Account funds in an internal
Quantum account rather than with an independent escrow agent.                The Trust
demanded that Quantum (1) pay the Trust its portion of the Special Cost Escrow
account (50% of the total balance), (2) begin making monthly overriding royalty
interest payments to the Trust, and (3) transfer the entirety of the balance of the
Special Cost Escrow account from the internal Quantum account to an account
controlled by an independent escrow agent. The Trust concluded by suggesting that
the parties meet to discuss the issues raised in the letter, or it would pursue its legal
rights.

          Quantum’s counsel responded to the Trust’s April 14, 2014 correspondence
and asserted that Quantum had complied with each of the provisions of the
Conveyance. Quantum stated that the Jay Field, as recognized in the Trust’s
correspondence, was shut down in the latter part of 2008 and through 2009.
Quantum averred that the shutdown was not because of an intent to avoid its
obligations to the Trust under the Conveyance but instead was necessitated due to
crude oil prices being significantly below the operating cost of the Jay Field on a per
barrel basis.

          Moreover, according to Quantum, capital improvements were made in 2009
so that the Jay Field would again operate profitably. Quantum asserted that the
success of such improvements was evidenced by the continued increase in
production and revenue. Quantum stated the Trust’s portion of capital improvement
was contributed by Quantum. This created an Excess Production Cost balance and
the Trust would begin receiving royalty payments once the Excess Production Cost
                                           5
balance was paid down. Quantum agreed that an independent escrow agent should
be used to steward the Special Cost Escrow account and, therefore, established an
account at Wells Fargo Bank with a deposit of $18,051,909.

      In October 2014, the Trust filed a complaint in the United States District Court
for the Eastern District of Michigan against Quantum, alleging breach of the
Conveyance, fraud, statutory conversion, breach of fiduciary duty, and violation of
the Racketeer Influenced and Corrupt Organizations Act, seeking injunctive relief,
and the appointment of a receiver over the financial operations of the Jay Field. On
July 15, 2014, the federal court dismissed the Trust’s complaint for lack of subject
matter jurisdiction.

      On August 12, 2015, Quantum filed a petition for declaratory judgment
against Roger D. Parsons, in his capacity as Trustee of the Trust. The purpose of the
declaratory judgment action is to determine the rights and obligations arising from
the Conveyance to which Quantum and “the LL&E Royalty Trust (the “Texas
Trust”) are parties.”

      About six months later, on February 16, 2016, Parsons filed an original
counterclaim and third-party petition, alleging that Quantum and its successor,
Breitburn, had breached the Conveyance for failure to properly calculate and pay net
proceeds.

      Quantum and Breitburn filed for Chapter 11 bankruptcy in the United States
Bankruptcy Court for the Southern District of New York on May 15, 2016. Parsons
requested that the bankruptcy court lift the automatic bankruptcy stay to pursue the

                                          6
underlying case. On April 14, 2017, the bankruptcy court granted relief from the
stay to allow the Texas courts to determine the rights of the parties under the
Conveyance.

      On September 13, 2019, Parsons filed a third amended answer, amended
counterclaim and amended third-party petition against Quantum, adding
ConocoPhillips as a party. Parsons alleged that ConocoPhillips, as general partner
of the Partnership, had not taken any steps to protect the royalty interests or ensure
compliance with the contractual terms of the Conveyance. On December 20, 2019,
Breitburn filed a second verified amended answer, asserting that “The Trust is not
entitled to recover in the capacity in which it sues.”

      On April 12, 2021, Breitburn notified the Partnership that it intended to
withdraw the funds in the Wells Fargo account and close the account effective April
15, 2021. Breitburn explained that the amount in the Wells Fargo account was
funded to an amount of money that equaled 50% of the Special Costs Escrow
Account at the time it was created. The account balance, which was $19,085,585.38,
exceeded the 50% amount of the Special Costs Escrow Account of $14,811,984.78.
Therefore, Breitburn was withdrawing funds from the Wells Fargo account to
reimburse itself for Special Costs it previously had incurred and to reconcile the
balance in the Wells Fargo account to an amount equal to 50% of the Special Costs
Escrow Account balance.

      Parsons filed an emergency application for an order compelling the deposit of
the Wells Fargo account into the court’s registry or, alternatively, for a temporary
restraining order prohibiting Breitburn from liquidating or drawing down the
                                           7
account. After a hearing on April 29, 2021, at which counsel for Parsons and counsel
for Breitburn were present, the trial court signed a temporary restraining order and
show cause order, prohibiting Breitburn from liquidating or drawing down the Wells
Fargo account.

       On May 12, 2021, Parsons filed an application for an order compelling the
deposit of the Special Cost Escrow into the court’s registry or, alternatively, for a
temporary injunction prohibiting Breitburn from liquidating or drawing down the
account. The trial court held a hearing on the application on May 14, 2021, and
orally announced that it was ordering Breitburn to deposit $13,400,000 into the
court’s registry and granting the temporary injunction, The trial court signed the
order on May 20, 2021.3 Breitburn deposited the $13,400,000 into the registry of
the court of May 27, 2021.

       In this mandamus proceeding, Breitburn asks this court to compel the trial
court to vacate its May 20, 2021 order for deposit into the registry of the court.
Breitburn brings three issues: (1) the Trust does not have the capacity to recover the
funds in the court’s registry; (2) none of the disputed funds were proceeds from the
sale of oil and gas; (3) the trial court did not satisfy the requirements for ordering a
pretrial deposit. Because the first issue is dispositive, we do not address the second
or third issues.

       3
          In the same order, the trial court issued a temporary injunction prohibiting Breitburn from
closing, liquidating, or depleting the Wells Fargo account. The temporary injunction is not part of
the mandamus proceeding but is pending in an appeal in case number 14-21-00310-CV.
                                                 8
                               STANDARD OF REVIEW

      To obtain mandamus relief, a relator generally must show both that the trial
court clearly abused its discretion and that the relator has no adequate remedy by
appeal. In re Dawson, 550 S.W.3d 625, 628 (Tex. 2018) (orig. proceeding) (per
curiam); In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 135‒36 (Tex. 2004) (orig.
proceeding). A trial court clearly abuses its discretion if it reaches a decision so
arbitrary and unreasonable as to amount to a clear and prejudicial error of law or if
it clearly fails to analyze the law correctly or apply the law correctly to the facts. In
re H.E.B. Grocery Co., L.P., 492 S.W.3d 300, 302‒03 (Tex. 2016) (orig. proceeding)
(per curiam); In re Cerberus Capital Mgmt. L.P., 164 S.W.3d 379, 382 (Tex. 2005)
(orig. proceeding) (per curiam). Orders compelling a prejudgment deposit into the
registry of the court are properly reviewed on mandamus because a relator does not
have an adequate remedy by appeal. In re Warrior Energy Servs. Corp., 509 S.W.3d
110, 118‒19 (Tex. App.—14th Dist.] 2020, orig. proceeding).

                                      ANALYSIS

Abuse of Discretion

      When all the dust settles from all the various acquisitions, transfers,
assignments, and mergers, we are left with a relatively simple business structure.
The LL&E Royalty Partnership has two partners: (1) the LL&E Royalty Trust, a
non-managing general partner; and (2) ConocoPhillips, the managing general
partner. Parsons is the trustee of the LL&E Royalty Trust.

                                           9
        Breitburn contends that Parsons lacks capacity to pursue the Special Account
Escrow funds. Instead, without conceding that any party other than Breitburn is
entitled to the funds, Breitburn asserts that only the Partnership, which is the
assignee under the Conveyance, has capacity to sue for the funds.

        A party has capacity when it has the legal authority to act, regardless of
whether it has a justiciable interest in the controversy. Nootsie, Ltd. v. Williamson
Cty. Appraisal Dist., 925 S.W.2d 659, 661 (Tex. 1996). The issue of capacity “is
conceived as a procedural issue dealing with the personal qualifications of a party to
litigate.” Austin Nursing Ctr., Inc. v. Lovato, 171 S.W.3d 845, 848 (Tex. 2005)
(internal quotation marks & citation omitted).

        The Partnership is not a party to the case. Parsons’s counterclaim made clear
that he was the party seeking damages.                 Parsons listed himself as
“Defendant/Counter-Plaintiff/Third Party Plaintiff” in his counterclaim and third-
party petition and repeatedly referred to himself as the party bringing claims against
Breitburn, among others, and seeking damages. Parsons alleged the following, in
part:

               3.13. This case involves the breach of certain contractual and
        fiduciary duties owed to the LL&E Trust with respect to the LL&E
        Trust’s real property interests. The Counter-Defendant and Third-Party
        Defendants conspired to, among other things, refuse to pay certain oil
        and gas royalties owed to the LL&E Trust, refuse to give a proper
        accounting of amounts due and owing to the LL&E Trust, and
        manipulated charges and estimates to devalue and defund the LL&E
        Trust’s royalty interests.
                                    *     *      *
                                          10
       3.27. LL&E Trust holds an enforceable property interest in the
Escrowed Funds and other ongoing royalties payable to LL&E Trust
under the Conveyance as proceeds of the Conveyance, and/or the
Debtor Defendants are holding the Escrowed Funds and other ongoing
royalties payable to LL&E Trust under the Conveyance in an express,
constructive, or resulting trust, or otherwise for the benefit of LL&E
Trust. . . .
                             *     *      *

       3.51. LL&E Trust, Breitburn and Quantum dispute their
respective rights and obligations under the Conveyance Agreement,
and as to the Escrowed Funds and other ongoing royalties payable to
LL&E Trust for its property interests as transferred in the Conveyance
Agreement. LL&E Trust seeks a declaratory judgment that LL&E
Trust’s rights are as set forth in the pleading above, based on the facts
of this case, applicable law as applied to those facts, and/or equitable
principles (including but not necessarily limited to principles of
estoppel).
       3.52. Specifically, and without limiting the foregoing, LL&E
Trust requests that this Court find: 1) by conveying to LL&E Trust the
net overriding royalty interests, the Conveyance Agreement conveyed
real property interests to LL&E Trust while also providing for
contractual rights and duties as to the management of those property
interests; 2) the Escrowed Funds are LL&E Trust’s property and
properly payable to LL&E Trust as the property interest holder and not
as an unsecured creditor; and 3) that other ongoing royalties payable to
LL&E Trust for its property interests under the Conveyance are LL&E
Trust’s property and properly payable to it as the property interest
holder and not as an unsecured creditor.

                             *     *      *

      3.5. As a result of Quantum and Breitburn’s breach of their
contractual obligations with respect to LL&E Trust’s real property
                                   11
         interests, LL&E Trust sustained injuries and damages that were the
         natural, probable, and foreseeable consequence of the breaches. LL&E
         Trust hereby seeks its actual damages, attorneys’ fees and expenses,
         court costs, and pre-judgment and post-judgment interest.

         In his application for deposit into the court’s registry and temporary injunction
Parsons asserted that he was bringing the application in his capacity as trustee of the
Trust:

         Defendant ROGER D. PARSONS, solely in his capacity as trustee of
         the LL&E ROYALTY TRUST (“Parsons” or the “LL&E Trust”),
         submits this application for an order compelling deposit of the Special
         Escrow into the Court’s registry . . . .
         In joint stipulations, Parsons and Breitburn agreed that the parties would not
“dispute the factual statements” listed in the stipulations for purposes of the
application for a temporary injunction and for deposit into the court’s registry.
Significantly, Parsons agreed to the following as to the Partnership:

               9. On June 28, 1983, LLEC entered into substantially identical
         agreements with the LL&E Royalty Partnership, each entitled
         “Conveyance of Overriding Royalty Interests,” with each Conveyance
         varying only by the interests covered, but not by any material terms (the
         “Conveyances”).

               10. Under the terms of the Conveyances, LLEC, as Assignor,
         conveyed to the LL&E Royalty Partnership, as Assignee, the right to
         receive “Net Proceeds” (as defined in the Conveyance) associated with
         LLEC’s mineral interests.

                                      *      *     *

                                            12
            12. From 1983 to 2006, the Assignor paid the LL&E Royalty
      Partnership over $300,000,000 in Net Proceeds from the Jay Field at an
      average of a little over $13,000,000 a year.
                                     *     *      *

          16. Since 2008, the Assignor has not paid any money to the
      LL&E Royalty Partnership.

                                     *     *      *

           18. The LL&E Royalty Partnership has not received any
      payments under the Conveyances since 2008.

      As an initial matter, Parsons argues that Breitburn did not properly verify that
he lacks capacity to recover the funds in the court’s registry. Specifically, Parsons
asserts that the affidavit attached in support of Breitburn’s verified answer is not
sufficient because it does not verify any of the facts alleged as to Parsons and the
Trust as true and correct and it is not based on personal knowledge. Therefore,
according to Parsons, Breitburn has waived its capacity defense.

      Rule 93 requires that a pleading, which alleges that the plaintiff does not have
the legal capacity to sue or is not entitled to recover in the capacity in which it sues,
must be verified unless the truth of such matters appear of record. Tex. R. Civ. P.
93; Sixth RMA Partners, L.P. v. Sibley, 111 S.W.3d 46, 56 (Tex. 2003); Pledger v.
Schoellkopf, 762 S.W.2d 145, 146 (Tex. 1988) (per curiam). A party who fails to
raise the issue of capacity in the trial court may not raise it for the first time on
appeal. Ray Malooly Trust v. Juhl, 186 S.W.3d 568, 571 (Tex. 2006) (per curiam);
Sixth RMA Partners, L.P., 111 S.W.3d at 56; Nootsie, Ltd., 925 S.W.2d at 662;

                                           13
Harrison v. Reiner, 607 S.W.3d 450, 459 (Tex. App.—Houston [14th Dist.] 2020,
pet. denied).

      Breitburn responds that it properly verified its capacity-defense. Breitburn
further contends that, if its capacity-defense had not been verified, the issue was tried
by consent. Issues subject to pleading requirements, such as verified denials, may
be tried by consent. Highland Credit Opportunities CDO, L.P. v. UBS AG, 451
S.W.3d 508, 516 (Tex. App—Dallas 2014, no pet.); 1 Lincoln Fin. Co. v. Am. Family
Life Assur. Co. of Columbus, No. 02-12-00516-CV, 2014 WL 4938001, at *3 (Tex.
App.—Fort Worth Oct. 2, 2014, no pet.) (mem. op.) (citing Roark v. Stallworth Oil
& Gas, Inc., 813 S.W.2d 492, 495 (Tex. 1991); Basic Capital Mgmt., Inc. v. Dynex
Com. , Inc., 348 S.W.3d 894, 899 (Tex. 2011)). Unpleaded claims or defenses that
are tried by express or implied consent of the parties are treated as if they had been
raised by the pleadings. Roark, 813 S.W.2d at 495. The party who allows an issue
to be tried by consent and fails to raise the lack of pleading before submission of the
case cannot later raise the pleading deficiency for the first time on appeal. Id.

      At the hearing, Parson’s counsel stated with respect to capacity:

             And to address the capacity argument, you will hear and there is
      evidence that the Trustee asked the managing partner, Conoco, to take
      care of this. And they did nothing. But it is a general partnership. And
      a general partner, any general partner, can sue on behalf of the
      partnership if it is necessary. And that is exactly what’s in this case and
      that dispenses basically with the standing argument.

Parsons never objected to any lack of pleadings by Breitburn on its capacity
argument. Parsons had an opportunity to object to the any lack of pleading of

                                           14
capacity, but instead, addressed the merits of the defense. Cf. Basic Capital Mgmt.,
Inc., 348 S.W.3d at 899 (holding where capacity was raised in cross-motions for
summary judgment, there was no longer any need for verified pleading); Via Net v.
TIG Ins. Co., 211 S.W.3d 310, 313 (Tex. 2006) (per curiam) (holding where non-
movant raised discovery rule for first time in response to motion for summary
judgment that was based on statute of limitations, movant could object to failure to
plead discovery rule or respond on merits and try issue by consent); Edwards v. Fed.
Nat’l Mortg. Ass’n, 545 S.W.3d 169, 177‒78 (Tex. App.—El Paso 2017, pet. denied)
(holding that defendant’s challenge to execution of document was tried by consent
where plaintiff did not complain about defendant’s failure to challenge execution of
document in verified answer, but instead raised defense in response to motion for
summary judgment). Therefore, here, the issue of capacity was tried by consent.

      A Texas Partnership is “an entity distinct from its partners. Am. Star Energy
& Minerals Corp. v. Stowers, 457 S.W.3d 427, 429 (Tex. 2015) (quoting Tex. Bus.
Orgs. Code § 152.056). “As an independent entity, a partnership may enter into
contracts in its own name, may own its own property, and may sue and be sued in
its own name.” Id. (citing Tex. Bus. Orgs. Code § 152.101; Tex. R. Civ. P. 28).
“Partnership property is not property of the partners.” Tex. Bus. Orgs. Code
§ 152.101; see also Siller v. LPP Mortg., Ltd., 264 S.W.3d 324, 329 (Tex. App.—
San Antonio 2008, no pet.) (“[I]f the property was, in fact, partnership property, it
could not be considered property of the individual partners.”). “A ‘partnership’ is
not an interest in any specific partnership property. Instead, it is the partner’s right
to receive his distributive share of the profits and surpluses of the partnership.”

                                          15
Stanley v. Reef Secs., Inc., 314 S.W.3d 659, 664 (Tex. App.—Dallas 2010, no pet.).
In Texas, a cause of action accruing to the partnership is partnership property and a
partner may not bring suit on such cause of action. See Cates v. Int’l Tel. & Tex.
Corp., 756 F.2d 1161, 1173, 1176 (5th Circ. 1985) (applying rule to general
partnership).

      Parsons acknowledges that a general partnership in Texas may file a claim on
its own behalf under the Texas Business Organizations Code, but argues that there
is no statute or common law rule holding that only the partnership, and not the
partners, may pursue the rights of the partnership. Instead, according to Parsons, the
common law rule in Texas is that general partners are proper parties to pursue the
rights of a general partnership. See, e.g., Eagle Props., Ltd. v. Texas Commerce
Bank, No. 08-00-00118-CV, 2000 WL 1268185, *1 (Tex. App.—El Paso Sept. 7,
2000, no pet.) (mem. op., not designated for publication) (stating that “[a] partner
may bring suit on behalf of a partnership”).

      Parsons argues that, as long as all of the general partners are parties to a
lawsuit, then any of the partners may pursue a claim for the general partnership. See
Allied Chem. Co. v. DeHaven, 824 S.W.2d 257 (Tex. App.—Houston [14th Dist.]
1992, no writ). In Allied Chemical Company, DeHaven, Novak, Phillips, and Reams
were partners of Maglon Partnership. Id. at 260. DeHaven sued Maglon, Novak,
Phillips, Reams, Allied, Gambrell, and others for fraud and conspiracy in the breach
of a contract. Id. Allied asserted that DeHaven lacked standing “to sue on behalf
of Maglon,” the partnership. Id. at 264 (emphasis added). The court observed that
DeHaven was a Maglon partner at all relevant times relating to the transaction that
                                         16
formed the basis of the lawsuit. Id. The court stated that “[a]lthough a partnership
has standing to file suit in its own name, Tex. R. Civ. P. 28, the common law rule
that all partners can bring suit themselves on behalf of the partnership is still in
force.” Id. (emphasis added). The court explained that the purpose for the common
law rule was to protect third parties from multiple lawsuits and judgments. Id.
Therefore, the facts that DeHaven was the plaintiff and Reams, Phillips, Novak, and
Maglon were defendants were irrelevant and the common law rule was satisfied
because all partners were parties to the suit. Id.

        Parsons argues that nothing in the Texas Business Organizations Code limits
or restricts Allied’s holding that any general partner may pursue a claims for a
general partnership if all partners are parties to the suit. Breitburn argues that the
legislature’s statutory scheme has replaced the common law rule.

        Parsons’s reliance on Allied is misplaced and it is not necessary to decide
whether the common law rule has been abrogated by statutes enacted subsequent to
the Allied decision.4 In Allied, the court specifically explained that the common law
rule was “that all partners can bring suit themselves on behalf of the partnership is
still in force.” Id. (emphasis added). Here, Parsons never pleaded that he, as trustee
of the Trust, which was a partner in the Partnership, was bringing any claims on
behalf of the Partnership.

        4
          Allied was decided in 1992; in 1993, the Legislature enacted the Texas Revised Uniform
Partnership Act (“TRPA”). The Texas Supreme Court in In re Allcat Claims Service, L.P., 356 S.W.3d
455 (Tex. 2011) (orig. proceeding), noted that the TRPA “unequivocally embrace[d] the entity theory of
partnership by specifically stating . . .that a partnership is an entity distinct from its partners.” Id. at 464.
Although there is a question of whether Allied is still good law, it is not necessary to reach that decision.
                                                       17
      We conclude that Breitburn established the affirmative defense of capacity
and, therefore, the trial court abused its discretion by ordering Breitburn to deposit
the disputed funds into the court’s registry.

No Adequate Remedy by Appeal

      Having concluded that Breitburn established the trial court’s abuse of
discretion, we must determine whether Breitburn has an adequate remedy by appeal.

      Courts are to assess the adequacy of an appellate remedy by balancing the
benefits of mandamus review against the detriments. In re Team Rocket, L.P., 256
S.W.3d 257, 262 (Tex. 2008) (orig. proceeding). Because this balancing depends in
large measure on the circumstances presented, courts look to principles rather than
simple rules that treat cases as categories. In re McAllen Med. Ctr., Inc., 275 S.W.3d
458, 464 (Tex. 2008) (orig. proceeding). Whether an appeal amounts to an adequate
remedy depends heavily on the circumstances. In re Garza, 544 S.W.3d 836, 840
(Tex. 2018) (orig. proceeding) (per curiam). Mandamus review may be necessary
to prevent the loss of substantive or procedural rights. In re Reece, 341 S.W.3d 360,
374 (Tex. 2011) (orig. proceeding).

      Interlocutory review of a prejudgment order to deposit funds into the court’s
registry is not available, and the order itself will cease to be of effect once a judgment
is rendered. Warrior Energy Servs. Corp., 599 S.W.3d at 118‒19. Any appeal of
such an order after judgment would become moot. Id. at 119. Therefore, “[a] party
ordered to deposit funds during the pendency of the lawsuit would not only be
deprived of the use of its funds, but would be precluded from challenging the trial

                                           18
court’s order by appeal.” Id. (quoting In re G-M Water Supply Corp., No. 12-16-
00223-CV, 2016 WL 6873181, at *3 (Tex. App.—Tyler Nov. 22, 2016, orig.
proceeding) (mem. op.)). Breitburn would lose a substantial right—the right of the
use of its funds—if it could not challenge the deposit order until after a decision in
an appeal from a final judgment. We conclude that Breitburn does not have an
adequate remedy by appeal.

                                   CONCLUSION

      We hold that the trial court abused its discretion by ordering Breitburn to
deposit the $13.4 million into the registry of the court and Breitburn does not have
an adequate remedy by appeal. Accordingly, we conditionally grant Breitburn’s
petition for writ of mandamus and direct the court to vacate its May 20, 2021 order.
We are confident the trial court will act in accordance with this opinion. The writ of
mandamus shall issue only if the court fails to do so.

                                   PER CURIAM

Panel consists of Justices Bourliot, Poissant, and Wilson.

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