In Re Texas Dow Employees Credit Union v. the State of Texas

• Court: Court of Appeals of Texas
• Decided: March 26, 2024
• Docket: 13-24-00053-CV
• Status: Published

Opinion

NUMBER 13-24-00053-CV

COURT OF APPEALS

THIRTEENTH DISTRICT OF TEXAS

CORPUS CHRISTI – EDINBURG

IN RE TEXAS DOW EMPLOYEES CREDIT UNION

ON PETITION FOR WRIT OF MANDAMUS

MEMORANDUM OPINION Before Chief Justice Contreras and Justices Benavides and Tijerina Memorandum Opinion by Justice Tijerina1

By petition for writ of mandamus, Texas Dow Employees Credit Union (TDECU)

contends that the trial court2 abused its discretion by denying TDECU’s motion for

protection and compelling the disclosure of non-party financial information under the

Uniform Commercial Code (UCC), adopted in the Texas Business and Commerce Code,

1 See TEX. R. APP. P. 52.8(d) (“When denying relief, the court may hand down an opinion but is

not required to do so. When granting relief, the court must hand down an opinion as in any other case.”); id. R. 47.4 (distinguishing opinions and memorandum opinions). 2 This original proceeding arises from trial court cause number 23-H-0320 in the 23rd District Court

of Matagorda County, Texas, and the respondent is the Honorable Ben Hardin. See id. R. 52.2. without following the procedures required by the Texas Finance Code. See TEX. BUS. &

COM. CODE ANN. § 9.210 (allowing a debtor to request an accounting, list of collateral, or

statement of account from a secured party); TEX. FIN. CODE ANN. § 59.006 (governing the

discovery of customer records from a financial institution). We conditionally grant the

petition for writ of mandamus.

I. BACKGROUND

In its original petition, TDECU filed suit against “John Doe” for conversion and

declaratory judgment. TDECU asserted that it holds a lien on a 2004 CARR,3 VIN

16F62B5R341Dl 1724 (the ‘‘Vehicle”) which was sold to Randolph Alexander. According

to the petition, the Texas Department of Motor Vehicles had advised TDECU that an

applicant had applied for bonded title regarding the Vehicle. According to TDECU, the

applicant for title, Doe, “is unknown at this time,” but TDECU had requested additional

information regarding Doe’s identity. TDECU asserted that the “application for bonded title

is wrongful and is inconsistent with TDECU’s rights as lienholder and its superior interest

in the Vehicle.” TDECU asserted causes of action for conversion and declaratory

judgment. In terms of its conversion damages, TDECU asserted that it had been injured

“in the amount of the fair market value of the Vehicle,” or $46,150.00. TDECU sought

declaratory relief stating that it has a superior interest in the Vehicle, and it requested

attorney’s fees under the declaratory judgment act. See TEX. CIV. PRAC. & REM. CODE

ANN. § 37.009. TDECU subsequently filed an amended petition against real parties in

interest Stephen Lee LaBar and Colleen Marie LaBar raising substantially identical

3 The title for the Vehicle indicates that the “MAKE OF VEHICLE” is CARR and its “BODY STYLE”

is “CT,” which is a camping trailer. See https://www.txdmv.gov/sites/default/files/form_files/VTR-249.pdf (last visited Mar. 13, 2024).

2 claims. The LaBars filed an answer, an amended answer, and a second amended answer

to TDECU’s claims including a general denial, a verified denial, various affirmative

defenses, and counterclaims. They asserted, inter alia, that they had been misidentified

and that Alexander was the correct party to the suit.

On October 23, 2023, TDECU filed a “Motion for Protection from Discovery.”

According to this motion and its exhibits, the LaBars’ counsel had emailed counsel for

TDECU “requesting a copy of the loan documents and payments at issue with [Alexander]

that show he still owes $47,000.00 since [the LaBars] were told by [Alexander] that there

was no lien on the RV when they purchased it from him. These should have been

disclosed . . . .” In response, counsel for TDECU advised the LaBars’ counsel “that the

production of customer records of a financial institution is governed by Texas Finance

Code § 59.006 which provides the statutory process for a party to request the same during

discovery.” The LaBars’ counsel subsequently sent correspondence to TDECU stating:

Pursuant to Texas Business & Commerce Code Section § 9.210, a request is again made for the 1) documents that support your claim(s) of money owed in the amount of $46,150.00, 2) the original loan documents between TDECU and [Alexander], 3) all payments made towards [the] original loan and loan balance, and 4) any documents in which [TDECU] attempted to collect any money owed it by [Alexander]. You have fourteen (14) days to produce all documents requested per Texas Business & Commerce Code.

Counsel for TDECU responded by reiterating its position that the production of the

requested documents was governed by the finance code and that the business and

commerce code did not apply because it “pertains to a debtor’s request for information.”

Counsel for TDECU requested the LaBars’ counsel to advise if their requests would be

withdrawn or if it should proceed with a motion for protection. The LaBars’ counsel did not

respond. Ultimately, TDECU requested the trial court to grant its motion for protection

3 from discovery on the basis that the LaBars had not complied with the requirements of

the finance code.

The LaBars subsequently filed a “Response to Motion for Protection and Motion to

Compel [TDECU’s] Response to Mandatory TRCP 194.1(B) Document Disclosure.” The

LaBars stated that they purchased the Vehicle in good faith from Alexander, who advised

them that “he had good title and that there were no liens or claims on the vehicle.” They

asserted that, “In an effort to avoid costly filings and attorney’s fees, [the LaBars’] attorney

requested documents regarding their complaint against [TDECU] via email,” yet TDECU

had failed to produce the documents “despite the legal requirements” of Texas Rule of

Civil Procedure 194.2. See TEX. R. CIV. P. 194.2. The LaBars contended that they

constituted debtors under the auspices of the business code and asked, if considered

otherwise, “why are they being sued?” The LaBars sought to compel TDECU to produce

loan documents between TDECU and Alexander; payment records or spreadsheets

regarding payments made towards the original loan; loan balance documents;

correspondence with Alexander regarding the debt or lien; and documents, demand

letters, pleadings, lawsuits and judgments in which TDECU attempted to collect the

money owed by Alexander.

The trial court held a hearing on these competing motions.4 On December 19,

2023, the trial court signed an order denying TDECU’s motion for protection. The order

4 The LaBars correctly note that TDECU’s petition for writ of mandamus lacks a properly authenticated transcript of any relevant testimony from any underlying proceeding, including any exhibits offered in evidence, or a statement that no testimony was adduced in connection with the matter complained.” TEX. R. APP. P. 52.7(a)(2). Neither the LaBars, TDECU, nor the text of the trial court’s order suggest that the trial court’s hearing was evidentiary in nature. Given that the matter at hand presents a question of law, we do not conclude that this omission is fatal to TDECU’s request for relief. See id. R. 2. In other words, based on the specific circumstances of this case, TDECU has nevertheless furnished a record that is sufficient to support its claim for mandamus relief, and we overlook this omission. See Walker, 827 S.W.2d 833, 837 (Tex. 1992) (orig. proceeding).

4 states that the “motion should be denied because [the LaBars] are ‘debtors’ under the

provisions of the Texas Business and Commerce Code § 9.210, so Texas Finance Code

§ 59.006 does not apply.”

This original proceeding ensued. By one issue, TDECU asserts that the trial court

erred by “denying protection from discovery of a non-party consumer’s financial records

without requiring adherence to Texas Finance Code § 59.006 and compelling the

discovery under Texas Business & Commerce Code § 9.210.” This Court requested and

received a response to the petition for writ of mandamus from the LaBars. The LaBars

assert that “TDECU is subtly asking the Court to substitute its judgment for the trial court

as to a factual issue underlying its ruling”—that the LaBars were “debtors”—and that we

should not “disturb this determination.” The LaBars further contend that Texas Rules of

Civil Procedure 194.1 and 194.2 provide authority for the production. See TEX. R. CIV. P.

194.1, 194.2. In this context, the LaBars assert that “TDECU never availed itself of a

protective opportunity—the trial court conducting an in camera review[—]before turning

the documents over to the LaBars.” They contend that an in camera review “would have

allowed TDECU to protect itself from any concerns as to turning over records.” TDECU

filed a reply to the LaBars’ response further asserting that finance code § 59.006

preempts § 9.210 of the UCC.

II. MANDAMUS

Mandamus is an extraordinary and discretionary remedy. See In re Allstate Indem.

Co., 622 S.W.3d 870, 883 (Tex. 2021) (orig. proceeding); In re Garza, 544 S.W.3d 836,

840 (Tex. 2018) (orig. proceeding) (per curiam); In re Prudential Ins. Co. of Am., 148

S.W.3d 124, 138 (Tex. 2004) (orig. proceeding). The relator must show that (1) the trial

5 court abused its discretion, and (2) the relator lacks an adequate remedy by appeal. In re

USAA Gen. Indem. Co., 624 S.W.3d 782, 787 (Tex. 2021) (orig. proceeding); In re

Prudential Ins. Co. of Am., 148 S.W.3d at 135–36; Walker v. Packer, 827 S.W.2d 833,

839–40 (Tex. 1992) (orig. proceeding).

A trial court abuses its discretion when its decision is arbitrary, unreasonable, and

without reference to guiding principles, or if it fails to analyze the law correctly or apply

the law correctly to the facts. In re Allstate Indem. Co., 622 S.W.3d at 875–76. We may

not substitute our judgment for the trial court’s judgment regarding factual matters that

are committed to the trial court’s discretion; however, the trial court has no discretion in

determining what the law is or applying the law to the facts, even when the law is not

settled. In re Shipman, 540 S.W.3d 562, 565–66 (Tex. 2018) (orig. proceeding) (per

curiam). Thus, under an abuse of discretion standard, we defer to the trial court’s factual

determinations if they are supported by the evidence, but we review the trial court’s legal

determinations de novo. Haedge v. Cent. Tex. Cattlemen’s Ass’n, 603 S.W.3d 824, 827

(Tex. 2020) (per curiam).

We determine the adequacy of an appellate remedy by balancing the benefits of

mandamus review against the detriments. In re Acad., Ltd., 625 S.W.3d 19, 32 (Tex.

2021) (orig. proceeding); In re Essex Ins., 450 S.W.3d 524, 528 (Tex. 2014) (orig.

proceeding) (per curiam); In re Prudential Ins. Co. of Am., 148 S.W.3d at 136. “Mandamus

review of significant rulings in exceptional cases may be essential to preserve important

substantive and procedural rights from impairment or loss.” In re Acad., Ltd., 625 S.W.3d

at 32 (quoting In re Prudential Ins. Co. of Am., 148 S.W.3d at 136). An appeal from a trial

court’s discovery order is not adequate if the appellate court would not be able to cure the

6 trial court’s error on appeal. In re Millwork, 631 S.W.3d 706, 714 (Tex. 2021) (orig.

proceeding) (per curiam). Further, when “discovery takes place under an improper order,

the error cannot be rectified on appeal.” Id.; see, e.g., In re Berry, 578 S.W.3d 173, 182

(Tex. App.—Corpus Christi–Edinburg 2019, orig. proceeding) (“Mandamus is proper here

because the [deposition] order is not permitted by the Texas Rules of Civil Procedure and

because any discovery undertaken pursuant to the order cannot be undone.”).

III. LAW

The parties disagree regarding which law governs TDECU’s obligation to produce

the requested documents.5 The LaBars rely on the rules pertaining to discovery and the

UCC. The Texas Rules of Civil Procedure require a party to respond to requests for

disclosure without the necessity of a request. See TEX. R. CIV. P. 191.1. The duty to

disclose extends to “information and material,” see id. R. 194.1(a), and requires the

production of documents that the responding party has in its possession, custody, or

control that it may use to support its claims or defenses. See id. R. 194.2(b)(6). Unless

otherwise agreed or ordered, the responding party must make its initial disclosures within

thirty days after filing its first answer or making its first appearance. See id. R. 194.2(a).

Under the UCC provisions that pertain to secured transactions, a “debtor” may

make a request to a secured party for, as relevant here, an accounting. TEX. BUS. & COM.

CODE ANN. § 9.210(a)(2). If a debtor makes a request for an accounting, the recipient is

expected to respond to a request within fourteen days after receipt of the request. Id.

5 Neither TDECU nor the LaBars argue that any other state or federal law applies. See, e.g., 12

U.S.C.A. §§ 3401–3423 (comprising the Right to Financial Privacy Act). We note, in this regard, that § 59.006 is deemed a procedural rather than substantive rule. See British Intern. Ins. v. Seguros La Republica, S.A., 200 F.R.D. 586, 594 (W.D. Tex. 2000) (concluding that § 59.006 “cannot take precedence over federal discovery rules regarding post-judgment discovery and compliance with subpoenas”).

7 § 9.210(b), (c), (d), (e). A debtor is entitled to a response for a request for an accounting

without charge during any six-month period, but thereafter, “[t]he secured party may

require payment of a charge not exceeding $25 for each additional response.” Id.

§ 9.210(f). An official comment to § 9.210 explains the purpose of this section as follows:

Requests by Debtors Only. A financing statement filed under Part 5 may disclose only that a secured party may have a security interest in specified types of collateral. In most cases the financing statement will contain no indication of the obligation (if any) secured, whether any security interest actually exists, or the particular property subject to a security interest. Because creditors of and prospective purchasers from a debtor may have legitimate needs for more detailed information, it is necessary to provide a procedure under which the secured party will be required to provide information. On the other hand, the secured party should not be under a duty to disclose any details of the debtor’s financial affairs to any casual inquirer or competitor who may inquire. For this reason, this section gives the right to request information to the debtor only. The debtor may submit a request in connection with negotiations with subsequent creditors and purchasers, as well as for the purpose of determining the status of its credit relationship or demonstrating which of its assets are free of a security interest.

Id. cmt. 3; see Prosper Fla., Inc. v. Spicy World of USA, Inc., 649 S.W.3d 661, 671 (Tex.

App.—Houston [1st Dist.] 2022, no pet.) (stating that “official UCC comments . . . are not

legally binding, [but] they are persuasive authority concerning interpretation of the

statute’s language”). The UCC’s limitation of the right to make requests under this section

to “the debtor” represents “an attempt to accommodate the legitimate interests of creditors

of, and prospective purchasers from, the debtor while limiting the intrusion upon the

secured party and the debtor if the secured party were under a duty to disclose details of

the debtor’s financial affairs to any casual inquirer or competitor who may inquire.” 66

TEX. JUR. 3d Secured Transactions § 115 (2024).

TDECU, in contrast, contends that discovery of the requested documents is

governed by § 59.006 of the finance code. This section, entitled “Discovery of Customer

8 Records,” expressly states that “[t]his section provides the exclusive method for

compelled discovery of a record of a financial institution relating to one or more customers

but does not create a right of privacy in a record.” TEX. FIN. CODE ANN. § 59.006(a). Under

this section, a financial institution shall produce a record in response to a request “only”

if served with the request not later than the 24th day before the date that compliance with

the request is required and the requesting party pays the financial institution’s reasonable

costs of compliance. Id. § 59.006(b)(1), (2). Further, if the customer is not a party to the

proceeding, the requesting party must give notice to the customer and request the

customer’s written consent. Id. § 59.006(c). If the customer does not give written consent,

the requesting party may file a motion seeking an in camera inspection of the requested

records “as its sole means of obtaining access” to the records. Id. § 59.006(d). The court

may then inspect the requested records to determine their “relevance to the matter” and

can order redaction of those portions that it “determines should not be produced.” Id.

Further, the court “shall enter a protective order preventing the record that it orders

produced” from disclosure to non-parties to the proceeding and from being “used for any

purpose other than resolving the dispute before the tribunal.” Id. If the financial institution’s

customer is a party to the proceeding, the customer bears the burden of preventing or

limiting the financial institution’s response to a record request. Id. § 59.006(e). The

financial institution may not be required to produce records under this section before the

later of the twenty-fourth day after the date of receipt of the record request, the fifteenth

day after the date of receipt of a customer consent to disclose a record, or the fifteenth

day after a court orders production after an in camera inspection. Id. § 59.006(f). The

9 court’s ruling under this section is not a final order and is not subject to interlocutory

appeal. Id. § 59.006(g).

IV. ANALYSIS

The correct interpretation of a statute is a matter of law, which we review de novo.

Sirius XM Radio, Inc. v. Hegar, 643 S.W.3d 402, 406 (Tex. 2022). “It is well settled that

we are required to follow the plain meaning of a statute.” Freeman v. JI Specialty Servs.,

Inc., 505 S.W.3d 14, 20 (Tex. App.—Texarkana 2016, pet. denied); see Equistar Chems.,

LP v. ClydeUnion DB, Ltd., 579 S.W.3d 505, 524 (Tex. App.—Houston [14th Dist.] 2019,

pet. denied). The finance code expressly states that § 59.006 “provides the exclusive

method for compelled discovery of a record of a financial institution.” TEX. FIN. CODE ANN.

§ 59.006(a) (emphasis added). Black’s Law Dictionary defines “exclusive” in relevant part

as “[l]imited to a particular person, group, entity, or thing.” Exclusive, BLACK’S LAW

DICTIONARY (11th ed. 2019). Thus, examining the plain meaning of the statute, compliance

with § 59.006 is the only method to obtain the compelled discovery of customer records

from a financial institution. See TEX. FIN. CODE ANN. § 59.006(a). By its terms, the finance

code excludes the possibility that such discovery could be had by virtue of other methods.

See id.

We examine the interaction between the provisions of the finance code and the

rules of civil procedure. When a rule of procedure conflicts with a statute, “the statute

prevails.” Johnstone v. State, 22 S.W.3d 408, 409 (Tex. 2000) (per curiam) (explaining

that a limited exception to this rule applies when “the rule has been passed subsequent

to the statute and repeals the statute”); see TEX. GOV’T CODE ANN. § 22.004(a) (providing

that procedural rules “may not abridge, enlarge, or modify the substantive rights of a

10 litigant”); In re Geomet Recycling LLC, 578 S.W.3d 82, 87–88 (Tex. 2019) (orig.

proceeding) (stating that “procedural rules cannot authorize courts to act contrary to a

statute”). Moreover, the civil practice and remedies code specifically explains that “[c]ivil

discovery of a customer record maintained by a financial institution is governed by

[§] 59.006, Finance Code.” TEX. CIV. PRAC. & REM. CODE ANN. § 30.007. Thus, the

statutory provision in the finance code regarding compelled discovery of customer records

belonging to a financial institution prevails over the rules of procedure regarding

discovery. See id.; TEX. FIN. CODE ANN. § 59.006; Enviro Prot., Inc. v. Nat’l Bank of

Andrews, 989 S.W.2d 454, 455 (Tex. App.—El Paso 1999, no pet.) (construing the former

version of TEX. CIV. PRAC. & REM. CODE ANN. § 30.007 and concluding that the specific

statutory provision for seeking discovery of a financial institution’s customer record

“governs over other more general rules of civil procedure,” thus, a subpoena that failed

to comply with the statute “never possessed the authority of law”).

We turn our attention to the LaBars’ assertion that the trial court has made a factual

finding that they are “debtors,” and are thus entitled to request an accounting under

§ 9.210 of the UCC, and that we are required to give deference to this finding. See TEX.

BUS. & COM. CODE ANN. § 9.210. Given the official comment to this section and related

scholarly analysis, we doubt that “debtor” as used in this specific section is intended to

include subsequent purchasers such as the LaBars. See id. cmt. 3 (titled “Requests by

Debtors Only” and stating that “this section gives the right to request information to the

debtor only” as distinguished from creditors and subsequent purchasers); 66 TEX. JUR.

3d Secured Transactions § 115 (2024). We further note that the trial court’s finding was

made in conjunction with construing a statute, which is subject to de novo review, and in

11 such a case we give no deference to the trial court’s finding. See Sirius XM Radio, Inc.,

643 S.W.3d at 406. In any event, we need not reach this issue. The finance code provides

the exclusive procedure for obtaining customer records from a financial institution, and

this is so regardless of whether the LaBars constitute “debtors” for purposes of the UCC’s

provision regarding a request for an accounting. See TEX. FIN. CODE ANN. § 59.006(a). In

other words, the LaBars’ status has no bearing on our analysis. And, even if we were to

conclude otherwise and decide that we must reconcile two apparently conflicting statutory

provisions, we would determine that § 59.006 of the finance code constitutes a special

statutory provision which would control over the more general request for an accounting

provided by § 9.210. See TEX. GOV’T CODE ANN. § 311.026; see also TEX. BUS. & COM.

CODE ANN. § 1.103 cmt. 3 (providing that other statutes may be controlling, even though

they conflict with the UCC, “where the other statute was specifically intended to provide

additional protection to a class of individuals engaging in transactions covered by the

[UCC]”).

We conclude that the trial court erred by denying TDECU’s motion for protection

and by requiring TDECU to provide the requested documentation when the provisions of

the finance code were not followed. See TEX. FIN. CODE ANN. § 59.006(a). Considering

the facts and circumstances of the case, we further conclude that TDECU lacks an

adequate remedy at law to address this error. See In re Millwork, 631 S.W.3d at 714; In

re Berry, 578 S.W.3d at 182. We sustain the sole issue presented in this original

proceeding.

12 V. CONCLUSION

The Court, having examined and fully considered TDECU’s petition for writ of

mandamus, the LaBars’ response, the reply, and the applicable law, is of the opinion that

TDECU has met its burden to obtain relief. Accordingly, we lift the stay previously imposed

in this case, we conditionally grant the petition for writ of mandamus, and we direct the

trial court to vacate its December 19, 2023 order denying the motion for protection and to

proceed in accordance with this memorandum opinion. Our writ will issue only if the trial

court fails to promptly comply.

JAIME TIJERINA Justice

Delivered and filed on the 26th day of March, 2024.