Shore Chan DePumpo LLP and Edward Mandel v. Steven W. Thrasher d/b/a Thrasher

Shore Chan Depumpo LLP (SCD) and Edward Mandel appeal an order dismissing their

declaratory judgment suit against Steven W. Thrasher d/b/a Thrasher Associates, LLC for want

of jurisdiction. We conclude that Mandel lacks standing to file this lawsuit and the declaratory

judgment suit is an improper collateral attack. Accordingly, we affirm the trial court’s order

dismissing this case for want of jurisdiction.This case involves several lawsuits against different parties over a span of years. We

briefly describe the present lawsuit, then discuss the prior lawsuits and proceedings in more

detail. In 2013, SCD and Mandel filed this suit seeking a declaration that a final judgment and settlement agreement in two prior lawsuits prevent Thrasher from pursuing any action against

Mandel on any claim or cause of action that accrued before December 18, 2012. The prior

lawsuits were filed in 2009 and 2011 by Thrasher, an attorney, against attorneys who are now

members of SCD over alleged non-payment of referral fees and alleged fraudulent transfers (the

Referral-Fee Lawsuits). Mandel was not named as a party in these lawsuits.



The other lawsuits relevant to this appeal involve dealings between Thrasher and Mandel.

In 2005, Thrasher entered into a business venture with Mandel to develop an internet search

engine. They soon parted ways, and in late 2005 Mandel formed a new company to develop a

similar search engine. Mandel sued Thrasher in 2006 over the failed venture, and Thrasher filed

counterclaims against Mandel for fraud, breach of fiduciary duty, theft of trade secrets, and other

claims (the Trade Secret Lawsuit).

In January 2010, Mandel filed for Chapter 11 bankruptcy protection. Thrasher filed a

proof of claim in Mandel’s bankruptcy based on his counterclaims in the Trade Secret Lawsuit.

On September 30, 2011, the bankruptcy court overruled Mandel’s objections and allowed

Thrasher’s claims in the amount of $1 million against Mandel for theft of trade secrets, fraud,

and other claims. The federal district court affirmed the bankruptcy court decision on July 3,

2013.

Meanwhile, the Referral-Fee Lawsuits were mediated and the settlement agreement was

reached effective December 18, 2012. The settlement agreement includes a mutual release of all

claims “arising from or related to the events and transactions which are the subject matter of this

case.” The agreement also states that the mutual release “runs to the benefit of all clients,

members, attorneys, agents, employees, officers, directors, shareholders and partners of the

parties.”2 Mandel was a client of the attorneys who settled with Thrasher. However, he was not a

named party to the Referral-Fee Lawsuits and did not personally sign the settlement agreement.

After a dispute arose about the final terms of the settlement agreement, the 298th District Court

rendered a final judgment on May 16, 2013 (the Final Judgment) disposing of both lawsuits. The

Final Judgment found the settlement agreement, attached to the judgment, was binding and fully

enforceable “as to all persons or entities described/identified therein, regardless of whether their

signatures actually appear on the document.”

Back in the bankruptcy court, on July 10, 2013, Mandel filed an omnibus motion to

enforce the Final Judgment and settlement agreement from the Referral-Fee Lawsuits. Mandel

sought to dismiss Thrasher’s proof of claim matter, recently affirmed by the federal district court,

and three adversary proceedings3

relating to Thrasher’s claims. Mandel argued the Final

Judgment and settlement agreement released Thrasher’s claims because Mandel was a client of

SCD and Thrasher’s claims accrued before December 18, 2012. Sometime after filing the

omnibus motion, Mandel appealed Thrasher’s proof of claim matter to the Fifth Circuit. See In re

Mandel, 578 Fed. Appx. 376, 376 (5th Cir. 2014).

4

On September 12, 2013, the bankruptcy court granted in part and denied in part Mandel’s

omnibus motion. The bankruptcy court declined to make a ruling regarding the proof of claim

matter. As to the adversary proceedings, the bankruptcy court granted the omnibus motion to the



2

Italics indicate handwritten terms on the document.

3 These adversary proceedings sought to except Thrasher’s claims from discharge in bankruptcy and to

impose a constructive trust on Mandel’s shares in NeXplore Corporation.

4 The Fifth Circuit affirmed the liability findings of the federal district court and the bankruptcy court, but

remanded for the bankruptcy court to either conduct an evidentiary hearing on the issue of damages or to explain the

basis for its award. In re Mandel, 578 Fed. Appx. 376, 391 (5th Cir. 2014). The bankruptcy court issued a

memorandum opinion on remand explaining its award of $1 million to Thrasher against Mandel. In re Mandel, No.

10-40219, 2015 WL 5737173, at *9 (Bankr. E.D. Tex. Sept. 30, 2015). The bankruptcy court approved a settlement

between the trustee and Thrasher allowing Thrasher’s claim against the estate in the amount of $1 million. In re

Mandel, 2015 WL 5737173, at *1. The bankruptcy court addressed the issue of damages on remand because “[t]he

amount of compensatory damages may be relevant in the event the Court denies Mandel a discharge (11 U.S.C. §

727) or finds his debts to the claimants non-dischargeable in bankruptcy (11 U.S.C. § 523).” Id.



extent any relief sought in those proceedings was based on the subject matter of the Referral-Fee

Lawsuits, and denied it in all other respects. The bankruptcy court retained exclusive jurisdiction

over the discharge issues and refused to dismiss the adversary proceedings. The bankruptcy court

order states that it is “without prejudice to the ability of the parties to return to the state court, if

they so choose, about enforcement of the settlement agreement.”

Mandel and SCD filed this declaratory judgment suit on September 9, 2013. They alleged

that Thrasher continued to pursue claims against Mandel that accrued before the effective date of

the settlement agreement. Mandel and SCD requested a declaration that the “Final Judgment

prevents any and all Defendants from pursuing, lodging and/or maintaining any action in any

Court against Edward Mandel, Positive Software or Nexplore based upon any claim or cause of

action that accrued before December 18, 2012.”5

Mandel and SCD filed a motion for summary judgment and Thrasher filed a cross-motion

for summary judgment. At the hearing on the motions, the trial court concluded it lacked

jurisdiction because the parties sought clarification and interpretation of a another court’s

judgment. The trial court dismissed the case for want of jurisdiction. Mandel and SCD appeal.

A. Standing of Bankruptcy Debtor

Because Mandel is a debtor in a pending bankruptcy proceeding, we requested the parties

file letter briefs regarding our jurisdiction and Mandel’s standing. See Douglas v. Delp, 987

S.W.2d 879, 882 (Tex. 1999) (trustee has exclusive standing to assert claims belonging to

bankruptcy estate). Both parties filed letter briefs and we begin with the question of jurisdiction

and standing.



5

Positive Software Solutions, Inc. and NeXplore Corporation are corporations in which Mandel owns

shares or is an officer. Neither entity is a party to this lawsuit and they are not entitled to affirmative relief. See

Fuqua v. Taylor, 683 S.W.2d 735, 738 (Tex. App.–Dallas 1984, writ ref’d n.r.e.) (“Judgment may not be granted in

favor of a party not named in the suit as a plaintiff or a defendant.”); see also Mapco, Inc. v. Carter, 817 S.W.2d

686, 687 (Tex. 1991) (per curiam) (trial court erred by rendering judgment against entity never made a party).



Standing is a component of subject matter jurisdiction, cannot be waived, and may be

raised for the first time on appeal by the parties or by the court sua sponte. Tex. Ass’n of Bus. v.

Tex. Air Control Bd., 852 S.W.2d 440, 443 (Tex. 1993). Courts cannot address the merits of a

case without subject matter jurisdiction. Douglas, 987 S.W.2d at 882 (citing State Bar of Tex. v.

Gomez, 891 S.W.2d 243, 245 (Tex. 1994)). When we consider a party’s standing sua sponte, we

construe the petition in favor of the party, and if necessary, review the entire record to determine

if any evidence supports standing. Tex. Ass’n of Bus., 852 S.W.2d at 446. Subject matter

jurisdiction is a question of law, which we review de novo. Norris v. Brookshire Grocery Co.,

362 S.W.3d 226, 231 (Tex. App.—Dallas 2012, pet. denied).

Bankruptcy can affect a debtor’s standing to sue. “Section 541 of the Bankruptcy Code

provides that virtually all of a debtor’s assets, including causes of action belonging to the debtor

at the commencement of the bankruptcy case, vest in the bankruptcy estate upon the filing of a

bankruptcy petition.” Kane v. Nat’l Union Fire Ins. Co., 535 F.3d 380, 385 (5th Cir. 2008) (per

curiam); see also 11 U.S.C. § 541(a)(1) (2012) (property of estate includes “all legal or equitable

interests of the debtor in property as of the commencement of the case”); Martin, 343 S.W.3d at

888. Legal or equitable interests in property include causes of action of the debtor against third

parties. See Highland Capital Mgmt. LP v. Chesapeake Energy Corp. (In re Seven Seas

Petroleum, Inc.), 522 F.3d 575, 584 (5th Cir. 2008); In re Educators Group Health Trust, 25

F.3d 1281, 1283 (5th Cir. 1994) (term “all legal or equitable interests” defined broadly to include

causes of action).

Once a cause of action belongs to the bankruptcy estate and a trustee has been appointed,

“then the trustee has exclusive standing to assert the claim.” Educators Group Health Trust, 25

F.3d at 1284; Douglas, 987 S.W.2d at 882 (trustee has exclusive standing to assert claims

belonging to bankruptcy estate). The trustee, as the representative of the bankruptcy estate, is the –6–

real party in interest, and is the only party with standing to prosecute causes of action belonging

to the estate. 11 U.S.C. §§ 323, 541(a)(1); Kane, 535 F.3d at 385.

1. Pleadings and Evidence

The original petition in this case alleges the background of the Referral-Fee Lawsuits, the

settlement agreement, and the Final Judgment. It also alleges that Mandel was a client of SCD as

of the effective date of the settlement and that, by the terms of the settlement agreement,

Thrasher released all claims he had against Mandel as of the effective date. The petition alleged

that after the Final Judgment, Thrasher continued to assert claims against Mandel which accrued

before the effective date of the settlement. In his answer, Thrasher alleged that this action was

subject to Mandel’s pending bankruptcy proceeding. In an agreed motion for continuance, the

parties informed the trial court that Mandel filed bankruptcy in January 2010 and the bankruptcy

case was still pending. Thrasher asserted the bankruptcy court had exclusive jurisdiction over the

relief requested by Mandel. Mandel contended the bankruptcy case did not bar the declaratory

judgment action.

Mandel’s and SCD’s summary judgment evidence indicates that Mandel filed for

bankruptcy in 2010, Thrasher sued Mandel in the bankruptcy case, and the bankruptcy court

appointed a Chapter 11 trustee on June 8, 2012. Mandel testified in his affidavit that Thrasher

continued to pursue claims against Mandel in the bankruptcy court after the Final Judgment was

rendered.

2. Analysis

Mandel argues in his letter brief that he has standing to assert a cause of action based on

the Final Judgment and settlement agreement because that cause of action arose after the

commencement of his bankruptcy case and is not an asset of the bankruptcy estate. We disagree.

While the property of the estate includes all of a debtor’s assets at the commencement of the case, the property of the estate of an individual Chapter 11 debtor, such as Mandel, also

includes “all property of the kind specified in section 541 that the debtor acquires after the

commencement of the case but before the case is . . . converted to a case under Chapter 7.” 11

U.S.C. § 1115(a)(1) (emphasis added); In re Lively, 717 F.3d 406, 409 (5th Cir. 2013) (Congress

amended the Bankruptcy Code to include an individual Chapter 11 debtor’s post-petition

earnings and property acquisitions in the bankruptcy estate). “Causes of action that belong to the

debtor ‘at the time the case is commenced’ or that are acquired after commencement but before

conversion [to Chapter 7] are therefore property belonging to the estate.” In re Cantu, 784 F.3d

253, 257 (5th Cir. 2015) (concluding claim for bankruptcy malpractice accrued during Chapter

11 case before conversion to Chapter 7 and therefore claim belonged to bankruptcy estate, not

individual debtor).

The pleadings and evidence indicate that at the time this suit was filed, Mandel was a

Chapter 11 bankruptcy debtor and a Chapter 11 trustee had been appointed by the bankruptcy

court. The record also indicates that any claim Mandel may assert based on the Final Judgment

and settlement agreement was acquired after commencement of the bankruptcy case and before

conversion to Chapter 7.6 Therefore, that claim became property of the bankruptcy estate, and

trustee has exclusive standing to assert the claim. See 11 U.S.C. § 1115(a); Cantu, 784 F.3d at

257; Kane, 535 F.3d at 385; Douglas, 987 S.W.2d at 882.

We conclude the cause of action asserted by Mandel in this case was property of his

bankruptcy estate. Therefore, the trustee has exclusive standing to assert the claim. Kane, 535

F.3d at 385; Douglas, 987 S.W.2d at 882. Because the trustee did not assert this cause of action

and Mandel lacks standing to assert it, the trial court correctly determined—even though on a



6 The Final Judgment was signed May 16, 2013. The bankruptcy case was not converted to a Chapter 7

case until December 19, 2014. See In re Mandel, 2015 WL 5737173, at *1.



different basis—that it lacked subject matter jurisdiction over Mandel’s claim. We reject

Mandel’s arguments that he has standing to bring this lawsuit.7

B. Collateral Attack

A declaratory judgment is proper only if a justiciable controversy exists as to the rights

and status of the parties and the controversy will be resolved by the declaration sought. Bonham

State Bank v. Beadle, 907 S.W.2d 465, 467 (Tex. 1995); Texas Dep’t of Pub. Safety v. Moore,

985 S.W.2d 149, 153 (Tex. App.—Austin 1998, no pet.). “To constitute a justiciable

controversy, there must exist a real and substantial controversy involving genuine conflict of

tangible interests and not merely a theoretical dispute.” Beadle, 907 S.W.2d at 467 (quoting

Bexar–Medina–Atascosa Counties Water Control & Improvement Dist. No. 1 v. Medina Lake

Protection Ass’n, 640 S.W.2d 778, 779–80 (Tex. App.—San Antonio 1982, writ ref’d n.r.e.)).

A declaratory judgment action may not be used to collaterally attack, modify, or interpret

a prior judgment. Dallas Cty. Tax Collector v. Andolina, 303 S.W.3d 926, 930 (Tex. App.—

Dallas 2010, no pet.) (citing Martin v. Dosohs I, Ltd., 2 S.W.3d 350, 353–54 (Tex. App.—San

Antonio 1999, pet. denied); Cohen v. Cohen, 632 S.W.2d 172, 173 (Tex. App.—Waco 1982, no

writ)). “Collateral attacks on final judgments are generally disallowed because it is the policy of

the law to give finality to the judgments of the courts.” Browning v. Prostok, 165 S.W.3d 336,

345 (Tex. 2005). “A collateral attack is an attempt to avoid the binding force of a judgment in a

proceeding not instituted for the purpose of correcting, modifying, or vacating the judgment, but

in order to obtain some specific relief which the judgment currently stands as a bar against.” Id.



7 Mandel also contends the bankruptcy court order allowed the parties to return to state court about

enforcement of the Final Judgment. The order on the omnibus motion stated it was without prejudice to the parties

returning to state court about enforcement of the settlement agreement. However, the bankruptcy court expressly

denied Mandel’s request to dismiss the adversary proceedings and retained its exclusive jurisdiction to determine

issues relating to discharge. The order did not purport to confer jurisdiction on the state court to render a declaratory

judgment in this case. However, we need not decide the full extent of the bankruptcy court order, because, as

discussed in the next section, neither Mandel nor SCD have shown the trial court had jurisdiction to render the

declaratory judgment.–9–

at 346. Only a void judgment may be collaterally attacked. Id. A judgment is void only if the

court had no jurisdiction over the parties or property, no jurisdiction of the subject matter, no

jurisdiction to enter the judgment, or no capacity to act as a court. Id. A collateral proceeding that

does not assert a judgment is void for lack of jurisdiction is an impermissible collateral attack. Id.

Mandel and SCD argue they only seek to interpret the Final Judgment, not declare it

void. However, similar considerations are at play when a declaratory judgment is sought not to

declare an earlier judgment void, but to have a court merely “interpret” a prior judgment. See

Rapid Settlements, Ltd. v. SSC Settlements, LLC, 251 S.W.3d 129, 140 (Tex. App.—Tyler 2008,

orig. proceeding) (“Declaratory relief is not available for the interpretation of a prior judgment

entered by that or any other court.”); Martin, 2 S.W.3d at 354 (“[T]he use of a declaratory

judgment suit to interpret a judgment of the same or another court is an impermissible collateral

attack on the previous judgment.”); Cohen, 632 S.W.2d at 173 (“The utilization of a declaratory

judgment action is a collateral attack on the prior judgment and cannot be used for the purpose of

asking a trial court to interpret a prior judgment entered by that or any other court.”); Speaker v.

Lawler, 463 S.W.2d 741, 742–43 (Tex. Civ. App.—Beaumont 1971, writ ref’d n.r.e.) (“[A]

litigant cannot use [the declaratory judgments act] for the purpose of asking a trial court to

interpret a prior judgment entered by that or another court.”).

Suits seeking to interpret judgments of another court are barred even when the claimants

expressly state that they are not seeking to declare the prior order void or unenforceable, but

merely to clarify their rights under it. See Rapid Settlements, 251 S.W.3d at 140; Martin, 2

S.W.3d at 353. As the supreme court explained in Browning, while the subsequent action often

“contemplates relief other than revoking the [prior] order, it necessarily challenges the integrity

of the order and results in a review, perhaps a recalculation” of the matters at issue in the prior

suit. 165 S.W.3d at 346–47.–10–

Here, Mandel and SCD do not argue that the Final Judgment is void for any of the

recognized grounds that render a judgment void. Browning, 165 S.W.3d at 346. Therefore, “any

collateral attack is improper.” Id.; accord Andolina, 303 S.W.3d at 930. The declaratory

judgment sought by Mandel and SCD would reinterpret the Final Judgment to enjoin Thrasher

from pursuing any suit against Mandel on any claim that accrued before the effective date of the

settlement. They do not contend the 298th District Court lacked jurisdiction of the parties, the

property, the subject matter, or to render the Final Judgment, nor do they contend that court

lacked the capacity to act as a court. Thus, they are making an improper collateral attack on that

judgment. Browning, 165 S.W.3d at 346; Andolina, 303 S.W.3d at 931 (declaratory judgment

action seeking to declare that debtor could direct payment to unpaid real property taxes but not

personal property taxes was impermissible collateral attack on bankruptcy order that taxing

authorities retained their liens until paid in full).

Mandel and SCD argue the supreme court rejected the rule prohibiting use of the

declaratory judgment act to interpret prior judgments in Beadle. However, the supreme court

merely held the rule was inapplicable in that case:

Cases that deal with the question of whether a declaratory judgment may be used

to interpret another judgment are inapposite. There are entirely different

considerations at play. A suit to “interpret” a judgment is usually a guise to obtain

review or modification of a judgment outside of the appellate process or an

attempt to collaterally attack a judgment. See, e.g., Segrest v. Segrest, 649 S.W.2d

610, 611–12 (Tex. 1983) (disapproving use of a declaratory judgment as a tool to

collaterally attack a final divorce decree), cert. denied, 464 U.S. 894, 104 S. Ct.

242, 78 L. Ed. 2d 232 (1983). Neither of those situations is present here.

Beadle, 907 S.W.2d at 468. In Beadle, Bonham Bank did not seek a “declaration of the meaning

of either judgment.” Id. But here, Mandel and SCD are seeking a declaration of the meaning of

the Final Judgment and the rule against interpreting prior judgments applies.

Mandel and SCD contend in their reply brief that the trial court had jurisdiction because

the settlement agreement settled claims against “Mandel personally that were separate from the the

recognized grounds that render a judgment void. Browning, 165 S.W.3d at 346. Therefore, “any

collateral attack is improper.” Id.; accord Andolina, 303 S.W.3d at 930. The declaratory

judgment sought by Mandel and SCD would reinterpret the Final Judgment to enjoin Thrasher

from pursuing any suit against Mandel on any claim that accrued before the effective date of the

settlement. They do not contend the 298th District Court lacked jurisdiction of the parties, the

property, the subject matter, or to render the Final Judgment, nor do they contend that court

lacked the capacity to act as a court. Thus, they are making an improper collateral attack on that

judgment. Browning, 165 S.W.3d at 346; Andolina, 303 S.W.3d at 931 (declaratory judgment

action seeking to declare that debtor could direct payment to unpaid real property taxes but not

personal property taxes was impermissible collateral attack on bankruptcy order that taxing

authorities retained their liens until paid in full).

Mandel and SCD argue the supreme court rejected the rule prohibiting use of the

declaratory judgment act to interpret prior judgments in Beadle. However, the supreme court

merely held the rule was inapplicable in that case:

Cases that deal with the question of whether a declaratory judgment may be used

to interpret another judgment are inapposite. There are entirely different

considerations at play. A suit to “interpret” a judgment is usually a guise to obtain

review or modification of a judgment outside of the appellate process or an

attempt to collaterally attack a judgment. See, e.g., Segrest v. Segrest, 649 S.W.2d

610, 611–12 (Tex. 1983) (disapproving use of a declaratory judgment as a tool to

collaterally attack a final divorce decree), cert. denied, 464 U.S. 894, 104 S. Ct.

242, 78 L. Ed. 2d 232 (1983). Neither of those situations is present here.

Beadle, 907 S.W.2d at 468. In Beadle, Bonham Bank did not seek a “declaration of the meaning

of either judgment.” Id. But here, Mandel and SCD are seeking a declaration of the meaning of

the Final Judgment and the rule against interpreting prior judgments applies.

Mandel and SCD contend in their reply brief that the trial court had jurisdiction because

the settlement agreement settled claims against “Mandel personally that were separate from the bankruptcy estate, which means they were outside the bankruptcy court’s jurisdiction.” We

express no opinion about whether Thrasher could assert claims against Mandel personally while

the bankruptcy case remains pending.8 Regardless, there is no evidence in this record that

Thrasher is pursuing any claims against Mandel outside of the bankruptcy proceeding. The

evidence indicates all of Thrasher’s claims against Mandel are pending in the bankruptcy case—

the proof of claim litigation and the three adversary proceedings.

9 Furthermore, even if there was

evidence of such claims, the present declaratory judgment suit is a collateral attack on the Final

Judgment of the 298th District Court.

To the extent Mandel is relying on hypothetical claims Thrasher may assert against him

personally, there is no justiciable controversy. See Beadle, 907 S.W.2d at 467. Nor is there any

evidence indicating Thrasher pursued any claims against SCD after the date of the Final

Judgment. Absent any evidence of such claims, Mandel and SCD seek merely an advisory

opinion on an hypothetical dispute. See OHBA Corp. v. City of Carrollton, 203 S.W.3d 1, 6

(Tex. App.—Dallas 2006, pet. denied) (declaratory judgment act does not give courts power to

rule on hypothetical or contingent situations); Martin, 2 S.W.3d at 354 (declaratory judgment act

does not permit advisory opinions interpreting prior judgments).

We conclude Mandel lacks standing to present this declaratory judgment claim.

Furthermore, this declaratory judgment action is an improper collateral attack on the Final

Judgment. We overrule Mandel’s and SCD’s sole issue on appeal and affirm the trial court’s

order dismissing the case for want of jurisdiction.