in Re Wythe II Corporation

• Court: Court of Appeals of Texas
• Decided: October 22, 2009
• Docket: 09-09-00450-CV
• Status: Published

Opinion

In The

Court of Appeals

Ninth District of Texas at Beaumont

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NO. 09-09-00450-CV

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IN RE WYTHE II CORPORATION

Original Proceeding

MEMORANDUM OPINION

This is an original proceeding arising out of post-judgment discovery propounded to relator Wythe II Corporation. The discovery requests were submitted by John D. Stone, real party in interest, in the context of questions concerning the sufficiency of a cash deposit in lieu of a supersedeas bond and a motion for sanctions. We granted a temporary stay of discovery pending our action on the petition for mandamus. Tex. R. App. P. 52.10(b). Mandamus relief is available if a trial court abuses its discretion and there is no adequate appellate remedy. In re CSX Corp., 124 S.W.3d 149, 151 (Tex. 2003) (citing Walker v. Packer, 827 S.W.2d 833, 839 (Tex. 1992)).

Wythe sued certain insurance entities. The defendants settled with Wythe for $1,975,000. Stone, Wythe's attorney in the suit, filed an intervention to enforce his alleged right to 40 percent of Wythe's settlement. The settlement proceeds were deposited into the registry of the court. The trial court entered a judgment in favor of Stone against Wythe. In an August 28, 2009 order, this Court issued a temporary stay of enforcement of the judgment below, but also permitted "other trial court proceedings (including any discovery and [a scheduled sanctions hearing])." On October 1, 2009, this Court suspended the enforcement of the judgment during the pendency of the appeal.

Stone sought to depose four relatives of Waleed Khan, president of Wythe, along with an accountant and certain corporations. The trial court denied Wythe's motion to quash. Wythe filed a mandamus petition asking that the trial court be directed to vacate its orders permitting Stone to seek the discovery, and to enter an order on Stone's sanctions motion without further hearings. Wythe's petition also asks this Court to issue a writ of injunction restraining Stone from pursuing any further discovery pending appeal.

Stone argues he is entitled to discovery in his pursuit of sanctions against Wythe. ⁽¹⁾

We conclude that, when necessary, limited discovery as part of a sanctions hearing is within the trial court's discretion to permit. The discovery requests must conform to the rules of discovery. See Tex. R. Civ. P. 192.4 (limitations on scope of discovery).

The usual rules governing the scope of pre-trial discovery apply in the post-judgment context. See Tex. R. Civ. P. 621a. Generally, the scope of discovery is within the trial court's discretion. Dillard Dep't Stores, Inc. v. Hall, 909 S.W.2d 491, 492 (Tex. 1995). The discovery requested must be reasonably calculated to lead to the discovery of admissible evidence. Tex. R. Civ. P. 192.3(a). If the trial court orders discovery that exceeds the parameters allowed by the rules of procedure, the trial court abuses its discretion. Texaco, Inc. v. Sanderson, 898 S.W.2d 813, 815 (Tex. 1995).

Discovery requests must be reasonably tailored and include only matters relevant to the case. See In re Am. Optical Corp., 988 S.W.2d 711, 713 (Tex. 1998). "Fishing" for evidence is not permitted. K Mart Corp. v. Sanderson, 937 S.W.2d 429, 431 (Tex. 1996). In addition, discovery may not be used to impose unreasonable expenses on the other party. In re Alford Chevrolet-Geo, 997 S.W.2d 173, 180-81 (Tex. 1999).

Here, Wythe argues the discovery requests amount to "Rambo" tactics and a "fishing expedition." Each notice of intent to take deposition upon written questions contains a subpoena duces tecum with at least 52 production requests, some of which contain multiple subparts, and most of which require the production of multiple documents. Some requests have limited time frames (five years); others have none. Each deposition upon written questions contains over 70 questions, many with multiple subparts. Production request number 66 in one subpoena duces tecum states as follows:

Produce all documents that reflect any business that Makas Management, Inc. transacted on behalf of Wythe II Corporation. This includes, but is not limited to, contracts, invoices, bids, construction invoices, building permits, receipts for payments made on Wythe II Corporations's benefit or account, payroll, tax returns, correspondence to third parties, correspondence to Wythe II Corporation, checks, money orders, cash receipts, accounting ledgers, accounts receivable, accounts payable, documents provided for the bankruptcy of December 29, 2009 and all schedules, documents produced to be incorporated in the schedules, all documents that reflect transactions between Wythe II Corporation and any or the alleged investors, owners, or officers, and any document that is a loan document that reflects the amount of money that is claimed by Makas Management, Inc. to be owed to it by Wythe II corporation.

As exemplified by number 66, the scope of the production requests (through the subpoena duces tecum) is overly broad. It is the burden of the party seeking discovery to comply with the rules and to narrowly tailor his requests. See In re Sears, Roebuck and Co., 146 S.W.3d 328, 333 (Tex. App.--Beaumont 2004, orig. proceeding); see also Tex. R. Civ. P. 192.4 (limitations on scope of discovery). "'Reasonable' discovery necessarily requires some sense of proportion." In re Allstate County Mut. Ins. Co., 227 S.W.3d 667, 670 (Tex. 2007). Discovery requests relating to the sanctions motion are overly broad and are not narrowly tailored.

Stone also argues he should be able to conduct discovery on the sufficiency of the cash deposit in lieu of the supersedeas bond. In the October 1, 2009 order, we held that the cash deposited in the registry of the trial court served as sufficient security in lieu of a bond. See Tex. R. App. P. 24.1(a)(3); Olney Sav. & Loan Ass'n v. Trinity Banc Sav. Ass'n, 885 F.2d 266, 273-74 (5th Cir. 1989). Stone argues the funds may be encumbered in some way, and he is entitled to discovery to explore that possibility. He refers to Khan's testimony alleging Wythe owes money to relatives or other corporations. However, when a judgment debtor deposits cash in the registry of the court to supersede the judgment, "the funds cease to be assets of the judgment debtor." Resolution Trust Corp. v. Chair King, Inc., 827 S.W.2d 546, 548, 551 (Tex. App.--Houston [14th Dist.] 1992, no writ) (citing Olney Sav. & Loan Ass'n, 885 F.2d at 273, and Grubb v. Fed. Deposit Ins. Corp., 833 F.2d 222, 226 (10th Cir. 1987)). Discovery concerning the cash on deposit with the court is not warranted in this case.

We conditionally grant the writ of mandamus and direct the trial court to vacate its order denying Wythe's motion to quash. We further direct the trial court to reconsider, in light of this opinion, the scope of permissible discovery relating to the sanctions motion. The temporary stay of discovery is lifted. All other relief (temporary or otherwise) requested by the parties in this mandamus proceeding and not granted herein, is denied. The writ will issue only if the trial court fails to comply with this opinion.

PETITION CONDITIONALLY GRANTED.

PER CURIAM

Submitted on October 19, 2009

Opinion Delivered October 22, 2009

Before McKeithen, C.J., Gaultney and Kreger, JJ.

1. Wythe argues Stone "waived sanctions by failing to timely move for them." Because Stone alleges sanctionable conduct occurring after the judgment (while the trial court retained plenary power), there is no waiver as to that conduct. We therefore need not address in this proceeding whether waiver occurred as to other conduct.