in Re: Arbor Holding Company

• Court: Court of Appeals of Texas
• Decided: July 11, 2002
• Docket: 01-01-00857-CV
• Status: Published

Opinion

Opinion issued July 11, 2002

In The

Court of Appeals

For The

First District of Texas

NO. 01-01-00857-CV

____________

IN RE ARBOR HOLDING COMPANY, INC., Relator

Original Proceeding on Petition for Writ of Mandamus

O P I N I O N

By petition for writ of mandamus, relator, Arbor Holding Company, Inc. (Arbor), challenges the trial court's August 7, 2001 post-judgment discovery order and its August 27, 2001 order denying Arbor's motion for severance. In three issues, Arbor argues the trial court erred in: (1) ordering the production of certain bank records to the real party in interest, The Cadle Company (Cadle), (2) refusing to grant Arbor's motion to sever, and (3) advising Arbor to file a mandamus proceeding rather than a direct appeal to challenge the trial court's orders.

We deny the petition.

Facts and Procedural Background

Cadle brought the underlying lawsuit to enforce a $375,000 agreed judgment against John C. Riddle (Riddle), which Cadle purchased from Sunbelt Savings, F.S.B. (Sunbelt). The 1991 judgment was originally entered in the United States Bankruptcy Court for the Southern District of Texas-Houston Division. After purchasing the judgment, Cadle registered it with the 189th Judicial District Court of Harris County in accordance with the Uniform Enforcement of Foreign Judgments Act. ⁽¹⁾

Arbor is a corporate subsidiary of the Elizabeth Marenfield 1986 Trust (the Trust) and is not a party to the lawsuit below. Riddle is the sole beneficiary of the Trust. As part of the proceeding to enforce its judgment, which Riddle has never satisfied, Cadle sought discovery of information regarding Riddle's assets. In his deposition, Riddle testified he works for Arbor, is a signatory on its checking account, and has written checks to himself from Arbor. Arbor purchased the house in which Riddle lives and pays the mortgage, property taxes, and homeowners' insurance premiums for the house. ⁽²⁾ Riddle also testified that Arbor makes the lease payments, and, occasionally, pays the insurance premiums, on a 1996 Jaguar and a 1999 Chevrolet Tahoe he uses as his personal vehicles. At the time of his deposition, Riddle had no employment contract or written job description for his consulting work for Arbor.

Pursuant to Rule 176 of the Texas Rules of Civil Procedure, ⁽³⁾ Cadle then subpoenaed the bank account statements, returned checks, and signature cards pertaining to Arbor from Compass Bank (Compass). Although Compass produced the records to counsel for Cadle, Arbor objected to their production, and counsel for Cadle placed them under seal without reviewing them. Cadle then filed a motion for in camera inspection and requested that the trial court review the records and order them to be produced. ⁽⁴⁾

The trial court granted Cadle's motion, in part, and ordered certain itemized records produced. The trial court subsequently denied Arbor's motion to sever the discovery dispute between Arbor and Cadle from the post-judgment proceedings pending between Cadle and Riddle.

Standard of Review

Mandamus is an extraordinary remedy and will issue only to correct a clear abuse of discretion or violation of a duty imposed by law when that abuse cannot be remedied by appeal. Jack B. Anglin Co., Inc. v. Tipps, 842 S.W.2d 266, 271 (Tex. 1992). A trial court abuses its discretion when it fails to analyze or apply the law correctly. Walker v. Packer, 827 S.W.2d 833, 840 (Tex. 1992).

Rule 621a of the Rules of Civil Procedure permits a successful party to initiate and conduct discovery to obtain information and aid in the enforcement of its judgment. Tex. R. Civ. P. 621a. As with pre-trial discovery orders, rule 621a orders "are not final or appealable in themselves." Collier Servs. Corp. v. Salinas, 812 S.W.2d 372, 375 (Tex. App.--Corpus Christi 1991, orig. proceeding). A party may seek appellate review of such an order by a petition for writ of mandamus to determine whether the trial court abused its discretion. See id.

Rule 41 of the Rules of Civil Procedure grants a trial court broad discretion to sever a lawsuit into separate causes. Tex. R. Civ. P. 41. A petition for writ of mandamus is the appropriate remedy for a party to seek appellate review of the issue of severance when there is no adequate remedy by appeal. Liberty Nat'l Fire Ins. Co. v. Akin, 927 S.W.2d 627, 629 (Tex. 1996). We will not disturb a trial court's decision to grant or deny a motion for severance, however, unless the court abused its discretion. Guar. Fed. Sav. Bank v. Horseshoe Operating Co., 793 S.W.2d 652, 658 (Tex. 1990).

Post-judgment Discovery

In its first issue, Arbor argues the trial court erred in ordering the production of its bank records to Cadle. As noted above, Cadle sought the records as part of its post-judgment discovery to attempt to locate and enforce its judgment against Riddle's assets.

Arbor contends the trial court erred because the assets of the Trust, as part of a valid spendthrift trust, are exempt from attachment, execution, and garnishment. See Tex. Prop. Code Ann. § 112.035 (Vernon Supp. 2002). Cadle contends information it has obtained through discovery has demonstrated the Trust is merely a sham.

We need not decide the merits of the arguments concerning the validity of the Trust to determine whether the trial court abused its discretion in ordering the production of the bank records. The rules governing and related to pre-trial discovery proceedings apply equally to post-judgment discovery. Tex. R. Civ. P. 621a. Discovery is generally permitted of any unprivileged information relevant to the subject of a lawsuit, whether it relates to a claim or defense of the parties. Tex. R. Civ. P. 192.3(a). As long as the information sought appears reasonably calculated to lead to the discovery of admissible evidence, it is not a ground for objection that the information sought will be inadmissible at trial. Id.

Cadle presented evidence establishing (1) Riddle's status as sole beneficiary of the Trust, (2) Arbor's status as a subsidiary of the Trust, (3) Riddle's employment relationship with Arbor, (4) Arbor's mortgage, insurance, tax, and automobile lease payments benefitting Riddle, and (5) Riddle's ability to write checks to himself on Arbor's account. Cadle then sought the production of Arbor's bank records in an attempt to locate Riddle's assets upon which to execute the judgment. The trial court ordered Arbor to produce specific documents "evidencing payments from Arbor to [Riddle] or deposits by [Riddle] into Arbor's account" as itemized in its order of August 7, 2001. The information sought by Cadle appears reasonably calculated to lead to the discovery of relevant and admissible evidence, namely, Riddle's assets, and is, therefore, discoverable. Given the evidence presented in the record, we conclude the trial court did not abuse its discretion in ordering the production of the bank records specified in the court's August 7, 2001 order.

Arbor also argues that the trial court erroneously enforced a federal subpoena in ordering the production of the bank records. This argument is without merit. The record clearly indicates Cadle sought production of the records pursuant to a valid subpoena issued pursuant to Rule 176. Tex. R. Civ. P. 176.

Arbor further contends, without citation to evidence or authority, that its bank records are confidential and should not be produced. As noted above, we conclude the trial court did not err in determining the records at issue are relevant and discoverable. In addition, in its August 7, 2001 order, the trial court specifically instructed the parties not to disclose the documents ordered produced to any person not a party to the underlying lawsuit.

Finally, Arbor asserts that the affirmative defenses of res judicata and the statute of limitations bar any attack by Cadle on the agreed judgment. Affirmative defenses must be pled and proven by the party asserting them. Tex. R. Civ. P. 94. Arbor was not a party to the agreed judgment at issue, is not a party to the underlying lawsuit, and does not have standing to assert an affirmative defense. Here, any such affirmative defenses may properly be asserted by Riddle, not Arbor.

We overrule Arbor's first issue.

Severance

In its second issue, Arbor argues the trial court erred in denying Arbor's motion to sever its discovery dispute with Cadle from the pending post-judgment proceedings between Cadle and Riddle.

As noted above, Rule 41 grants a trial court broad discretion to sever a lawsuit into separate causes. Tex. R. Civ. P. 41. A claim is properly severable if (1) the controversy involves more than one cause of action, (2) the severed claim is one that would be the proper subject of a lawsuit if independently asserted, and (3) the severed claim is not so interwoven with the remaining action that they involve the same facts and issues. Horseshoe, 793 S.W.2d at 658. When all the facts unquestionably require a separate trial or proceeding to prevent a manifest injustice, and the legal rights of the parties will not be prejudiced, the trial court must grant a severance. In re Ethyl Corp., 975 S.W.2d 606, 610 (Tex. 1998).

Here, there is no manifest necessity for a separate proceeding on the discovery dispute between Arbor and Cadle. Arbor is not a party to the suit, its involvement in the proceeding is limited to issues of discovery, and its objections to the discovery of its bank records would not properly be the basis of an independent lawsuit.

We conclude the trial court did not abuse its discretion in denying Arbor's motion for severance. We overrule Arbor's second issue.

Pursuit of Mandamus

In its third issue, Arbor argues that, at the hearing on Arbor's motion to sever, the trial court erroneously advised it to pursue a mandamus proceeding to challenge the court's rulings on the production of Arbor's bank records and the denial of the motion to sever.

An appeal may be taken only from a final judgment. Lehmann v. Har-Con Corp., 39 S.W.3d 191, 195 (Tex. 2001). A judgment is final for purposes of appeal if it disposes of all pending parties and claims in the record. Id. The orders Arbor complains of do not address or dispose of the pending issues between Cadle and Riddle and are, therefore, not appealable as final judgments. As noted above, mandamus is the appropriate remedy to seek appellate review of a trial court's post-judgment discovery order and an order granting or denying a motion for severance. See Akin, 927 S.W.2d at 629; see Collier, 812 S.W.2d at 375.

We hold the trial court did not abuse its discretion in advising Arbor, correctly, to pursue a mandamus proceeding if Arbor chose to seek appellate review of its orders. We overrule Arbor's third issue.

Cadle's Cross-Issue

In its response to Arbor's amended petition for writ of mandamus, Cadle argues, by "cross-issue," that it is entitled to all of the bank records it subpoenaed from Arbor, not just the specific records the trial court ordered produced, and urges this Court to modify the trial court's orders accordingly.

A party seeking extraordinary relief in an appellate proceeding must file a petition for writ of mandamus. Tex. R. App. P. 52.1. Cadle has not done so. In addition, the arguments in a party's response to a petition for writ of mandamus "must be confined to the issues or points presented in the petition." Tex. R. App. P. 524(d). Accordingly, we will not consider "cross-issues" raised by Cadle in its response to Arbor's petition for writ of mandamus.

Conclusion

We deny Arbor's petition for writ of mandamus.

Terry Jennings

Justice

Panel consists of Justices Hedges, Jennings, and Keyes

Do not publish. Tex. R. App. P. 47.

1.

See Tex. Civ. Prac. & Rem. Code Ann. § 35.003 (Vernon 1997).

2.

Riddle testified the house was purchased for approximately $450,000.

3.

Tex. R. Civ. P. 176.

4.

See Tex. Fin. Code Ann. § 59.006 (Vernon Supp. 2002).