in Re: Stanley J. Williams, Jr. and Dena Williams

NUMBER 13-10-00277-CV

COURT OF APPEALS

THIRTEENTH DISTRICT OF TEXAS

CORPUS CHRISTI - EDINBURG
________________________________________________________

IN RE: STANLEY J. WILLIAMS, JR. AND DENA WILLIAMS
____________________________________________________________

On Petition for Writ of Mandamus.
____________________________________________________________

OPINION

Before Chief Justice Valdez and Justices Benavides and Vela
Opinion by Chief Justice Valdez

Relators, Stanley J. Williams Jr. (“Jay”) and Dena Williams, seek a writ of

mandamus directing the Honorable Jaime Palacios, Judge of the County Court at Law

Number 2 of Hidalgo County, Texas, to vacate his orders: (1) overruling relators’

objections to discovery requests propounded by real party in interest, G.J. Palmer Jr.; (2)

denying relators’ motion for reconsideration; and (3) requiring relators to answer Palmer’s

discovery requests by May 10, 2010. We conditionally grant the writ, in part, and deny the
writ in part.1

I. BACKGROUND

The dispute in this matter pertains to a challenge filed by Palmer regarding the net

worth of SJW Property Commerce, Inc. (“SJW”) and Property Commerce Development

Company (“PCDC”), companies in which Jay serves as president. On April 26, 2007, a jury

concluded that SJW and PCDC had committed various business torts, including tortious

interference with existing contracts, breach of fiduciary duty, and fraud, against Palmer

involving the development of property for retail purposes at the northeast corner of 10th

Street and Trenton in McAllen, Texas. See SJW Prop. Commerce, Inc. v. Sw. Pinnacle

Props., Inc., 314 S.W.3d 166, 173-79 (Tex. App.–Corpus Christi 2010, no pet.). The jury

assessed actual and exemplary damages against SJW and PCDC exceeding $3 million,

which included $709,587 in compensatory damages. Id. at 172. On February 7, 2008, the

trial court entered its final judgment adopting the jury’s findings. Id. at 182-83.

Shortly after judgment, SJW and PCDC filed affidavits of net worth and cash

deposits to supersede the judgment. In particular, SJW deposited $10,000 into the trial

court’s registry, asserting that this amount was greater than or equal to fifty percent of

SJW’s net worth as of March 10, 2008. See TEX . R. APP. P. 24.2(a)(1). In support of its

net worth assertion, SJW included audited financial statements and an affidavit executed

by Larry Reader, a certified public accountant licensed in Texas, who averred that SJW’s

1
On May 10, 2010, m ovants, Jay and Dena W illiam s, as well as co-m ovants, SJW Property
Com m erce, Inc. and Property Com m erce Developm ent Com pany, Inc., filed a rule 24.4 m otion in the cause
num ber for the underlying causes of action, appellate cause num ber 13-08-00268-CV, asserting argum ents
that are virtually identical to those m ade in this m andam us. Because we address relators’ com plaints in this
original proceeding, we DENY relators’ rule 24.4 m otion. See In re Sm ith, 192 S.W .3d 564, 567-68 (Tex.
2006) (orig. proceeding) (per curiam ) (analyzing rule 24.4 m otions challenging net worth affidavits and the
sufficiency of cash deposits m ade in lieu of supersedeas bond as petitions for writ of m andam us); see also
Isern v. Ninth Court of Appeals, 925 S.W .2d 604, 605-07 (Tex. 1996) (orig. proceeding) (reviewing by
m andam us a trial court’s order perm itting the judgm ent debtor to post alternate security to supersede
execution of the judgm ent).

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net worth was $15,498. With respect to PCDC, Reader averred that PCDC’s net worth

was $2,878. In any event, PCDC deposited $5,000 into the trial court’s registry.

On March 14, 2008, Palmer filed a contest pursuant to Texas Rule of Appellate

Procedure 24.2(c)(2), challenging SJW and PCDC’s affidavits of net worth. See id. at R.

24.2(c)(2). Palmer believed that the net worth of both SJW and PCDC was once much

higher than described in the affidavits and that many of the assets previously owned by

SJW and PCDC had been transferred to other entities to avoid paying the judgment.

Subsequently, Palmer propounded discovery requests on various directors, officers, and

employees of SJW and PCDC. On January 27, 2009, Palmer served Jay with post-

judgment written discovery.2 Jay objected to Palmer’s discovery request and filed a motion

for protection and a motion to strike. In this filing, Jay asserted that Palmer’s discovery

request invaded his “personal, constitutional, and property rights” and was, among other

things, overly broad, harassing, and irrelevant, especially considering that Jay was not a

named party to the underlying lawsuit.

In response to Jay’s motions, Palmer filed a motion to compel and a motion for

injunctive relief. In his motion to compel, Palmer contended that Jay failed to provide

numerous categories of documents, including, among other things, “[t]he name and

address of each business in which Jay Williams owns an interest that is involved in real

estate development, leasing or sales”; “[a]ll schedules showing allocation of expenses from

Property Commerce Management Company to SJW Property Commerce”; broker

2
W ithin his discovery requests to Jay, Palm er requested the production of Jay’s incom e tax returns
as well as those of his wife, Dena. Palm er also requested “canceled checks, bank statem ents, check-stub
records, and other banking records” pertaining to Jay and Dena and any interests that Jay and Dena m ay
have in real or personal property. Based on the record before us, these appear to be the only references
m ade to Dena. Dena was first nam ed as a party to this m atter in this petition for writ of m andam us. In any
event, both parties focus their argum ents in this m atter on Jay’s involvem ent rather than Dena’s. And, none
of Palm er’s discovery requests specifically ask for inform ation from Dena herself; instead, Palm er seeks
inform ation about assets in which Jay has an interest, including those held jointly by Jay and Dena.

3
compensation agreements with Clay Trozzo, Chad Moss, and Jay Williams, all brokers for

SJW 3; and “Property Commerce Management Company bank statements, income

statements, balance sheets, cash flow statements, Articles of Incorporation, service

agreements, corporate documents, tax returns, list of employees, contractors, brokers,

agents and service providers, and a description of business activities 2003 to current.”4

In his motion for injunctive relief, Palmer alleged that, shortly after the jury rendered its

verdict, SJW and PCDC, in May and June 2007, created several new sister corporations

(Property Commerce JW, Inc.; Property Commerce CT, Inc.; Property Commerce

Brokerage, Inc.; Property Commerce Leasing, Inc.; and Property Commerce Williams, Inc.)

that operate under the trade name of “Property Commerce.” Palmer further alleged that

these new companies were created so that SJW and PCDC could transfer assets to avoid

paying the February 7, 2008 final judgment. Palmer’s allegation was premised on SJW

and PCDC’s representation that they were “very near bankruptcy” and their alleged refusal

to provide accurate information regarding the financial health of the companies.

On July 22, 2009, the trial court conducted a hearing on Palmer’s motions. After

hearing arguments, the trial court granted Palmer’s motion to compel and overruled Jay’s

objections to Palmer’s discovery requests. Jay was ordered to produce “full and complete

answers to [Palmer’s discovery] requests without objection and shall produce all

documents requested within twenty . . . days” of October 30, 2009, the date the trial court

3
As noted in a previous opinion related to this m atter, Trozzo and Jay are brothers-in-law and work
very closely together in the business of real estate developm ent. See SJW Prop. Commerce, Inc. v. Sw.
Pinnacle Props., Inc., 314 S.W .3d 172, 173 (Tex. App.–Corpus Christi 2010, no pet.). Trozzo, in particular,
worked as a broker for SJW in the underlying m atter involving the developm ent of real estate at the
intersection of 10th Street and Trenton in McAllen. Id. at 173-79. Jay, on the other hand, “owns and controls
SJW and PCDC.” Id. at 173 n.1.

4
Although this m atter involves num erous com panies, it appears from the record before us that
Property Com m erce Managem ent Com pany is a com pany related to SJW and PCDC.

4
signed the order. The trial court also ordered Jay to produce bank statements for an “S.

Jay Williams Investments” account and overruled Jay’s objections to Palmer’s first set of

post-judgment interrogatories.

In response to the trial court’s October 30, 2009 order, SJW and PCDC filed a

motion for reconsideration arguing, among other things, that: (1) Palmer’s net worth

discovery was premature and improper because there had not been an alter ego finding

in the matter; (2) there was no evidence that Jay is the alter ego of SJW or PCDC; (3)

more than 6,000 pages of documents had already been produced, which accurately

demonstrated the cash flows between SJW, PCDC, and other companies; and (4) the

order was unreasonable because it would take more than twenty days to produce the

documents requested by Palmer.

The trial court conducted a hearing on SJW and PCDC’s motion for reconsideration.

On April 26, 2010, the trial court signed an order denying SJW and PCDC’s motion for

reconsideration and ordering SJW and PCDC to comply with the October 30, 2009 order

by May 10, 2010.

On May 10, 2010, Jay and Dena Williams filed a petition for writ of mandamus

accompanied by an emergency motion requesting that this Court stay the trial court’s

October 30, 2009 and April 26, 2010 orders. We granted the Williamses’ emergency

motion and stayed the enforcement of the trial court’s orders. We also requested that

Palmer file a response to the Williamses’ petition. Palmer filed a response to the

Williamses’ petition, and the Williamses filed a reply to Palmer’s response.

II. STANDARD OF REVIEW

Mandamus is an “extraordinary” remedy. In re Sw. Bell Tel. Co., L.P., 235 S.W.3d

5
619, 623 (Tex. 2007) (orig. proceeding); see In re Team Rocket, L.P., 256 S.W.3d 257,

259 (Tex. 2008) (orig. proceeding). In order to obtain mandamus relief, the relator must

show that the trial court clearly abused its discretion and that the relator has no adequate

remedy by appeal. In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 135-36 (Tex. 2004)

(orig. proceeding); see In re McAllen Med. Ctr., Inc., 275 S.W.3d 458, 462 (Tex. 2008)

(orig. proceeding). A trial court abuses its discretion if it reaches a decision so arbitrary

and unreasonable as to constitute a clear and prejudicial error of law, or if it clearly fails to

correctly analyze or apply the law. In re Cerberus Capital Mgmt., L.P., 164 S.W.3d 379,

382 (Tex. 2005) (orig. proceeding) (per curiam); Walker v. Packer, 827 S.W.2d 833, 839

(Tex. 1992) (orig. proceeding). To satisfy the clear abuse of discretion standard, the relator

must show that the trial court could “‘reasonably have reached only one decision.’” Liberty

Nat’l Fire Ins. Co. v. Akin, 927 S.W.2d 627, 630 (Tex. 1996) (quoting Walker, 827 S.W.2d

at 840).

Historically, mandamus was treated as an extraordinary writ that would issue “only

in situations involving manifest and urgent necessity and not for grievances that may be

addressed by other remedies.” Walker, 827 S.W.2d at 840. Now, however, in some

extraordinary circumstances, whether a clear abuse of discretion can be adequately

remedied by appeal depends on a careful analysis of the costs and benefits of interlocutory

review. In re McAllen Med. Ctr., Inc., 275 S.W.3d at 462. “An appellate remedy is

‘adequate’ when any benefits to mandamus review are outweighed by the detriments.” In

re Prudential Ins. Co. of Am., 148 S.W.3d at 136. The supreme court further stated that:

Mandamus review of significant rulings in exceptional cases may be
essential to preserve important substantive and procedural rights from
impairment or loss, allow the appellate courts to give needed and helpful
direction to the law that would otherwise prove elusive in appeals from final
judgments, and spare private parties and the public the time and money

6
 utterly wasted enduring eventual reversal of improperly conducted
proceedings.

Id.

III. APPLICABLE LAW

A. Texas Rule of Appellate Procedure 24

Pursuant to rule 24.1 of the rules of appellate procedure, a judgment debtor may

supersede a judgment or, in other words, suspend enforcement of a judgment by (1) filing

with the trial court clerk a written agreement with the judgment creditor for suspending

enforcement of the judgment; (2) filing with the trial court clerk a good and sufficient bond;

(3) making a deposit with the trial court clerk in lieu of a bond; or (4) providing alternate

security ordered by the trial court. See TEX . R. APP. P. 24.1; see also Tex. Custom Pools,

Inc. v. Clayton, 293 S.W.3d 299, 305 (Tex. App.–El Paso 2009, no pet.). When the

judgment is for money, as is the case here, the amount of the bond, deposit or security

must equal the sum of the compensatory damages awarded in the judgment, interest for

the estimate duration of the appeal, and costs awarded in the judgment. TEX . R. APP. P.

24.2(a)(1); see TEX . CIV. PRAC . & REM . CODE ANN . § 52.006(a) (Vernon 2008). However,

the amount must not exceed the lesser of fifty percent of the judgment debtor’s current net

worth or twenty-five million dollars. See TEX . R. APP. P. 24.1(a)(1); TEX . CIV. PRAC . & REM .

CODE ANN . § 52.006(b); see also Clayton, 293 S.W.3d at 305.

Texas Rule of Appellate Procedure 24.2(c) sets forth the procedure for determining

a party’s net worth. TEX . R. APP. P. 24.2(c). A judgment debtor who provides a bond,

deposit, or security under rule 24.2(a)(1)(A) in an amount based on the debtor’s net worth

must simultaneously file an affidavit that states the debtor’s net worth and states complete,

detailed information concerning the debtor’s assets and liabilities from which net worth can

7
be ascertained. TEX . R. APP. P. 24.2(c)(1); see Clayton, 293 S.W.3d at 305. The affidavit

is prima facie evidence of the judgment debtor’s net worth. TEX . R. APP. P. 24.2(c)(1).

A judgment creditor may file a contest to the judgment debtor’s affidavit of net worth.

Id. at R. 24.2(c)(2). Net worth is calculated as the difference between the party’s total

assets and total liabilities, as determined by generally accepted accounting principles

(“GAAP”).5 Clayton, 293 S.W.3d at 305 (citing G.M. Houser, Inc. v. Rodgers, 204 S.W.3d

836, 840 (Tex. App.–Dallas 2006, no pet.); Ramco Oil & Gas, Ltd. v. Anglo Dutch (Tenge)

L.L.C., 171 S.W.3d 905, 915 (Tex. App.–Houston [14th Dist.] 2005, no pet.)). “When a

judgment creditor files a contest to the judgment debtor’s affidavit of net worth, the trial

court must hold a hearing.” In re Smith, 192 S.W.3d 564, 568 (Tex. 2006) (orig.

proceeding) (per curiam). At the hearing on the judgment creditor’s contest, the judgment

debtor has the burden of proving net worth. TEX . R. APP. P. 24.2(c)(3); see Clayton, 293

S.W.3d at 305. The trial court is required to issue an order that states the debtor’s net

worth and states with particularity the factual basis for that determination. TEX . R. APP. P.

24.2(c)(3); see In re Smith, 192 S.W.3d at 568; Clayton, 293 S.W.3d at 305. The trial court

is also authorized to enjoin the judgment debtor from “dissipating or transferring assets to

avoid satisfaction of the judgment.” Clayton, 293 S.W.3d at 305 (citing TEX . R. APP. P.

24.2(d)). On the motion of a party, an appellate court may review the sufficiency or

excessiveness of the amount of security. Id. (citing TEX . R. APP. P. 24.4(a); TEX . CIV. PRAC .

& REM . CODE ANN . § 52.006(d); G.M. Houser Inc., 204 S.W.3d at 840). Here, the dispute

pertains to discovery regarding Palmer’s challenges to SJW and PCDC’s net worth

5
The Houston Court of Appeals further clarified, in Enviropower LLC v. Bear, Stearns & Co., Inc., that
“the correct m easure of a com pany’s net worth for the purpose of setting a supersedeas bond under section
52.006 of the Texas Civil Practice and Rem edies Code and Rule 24 of the Texas Rules of Appellate
Procedure is the com pany’s current assets m inus current liabilities at the tim e the bond is set.” 265 S.W .3d
1, 5 (Tex. App.–Houston [1st Dist.] 2008, pet. denied).

8
affidavits and the sufficiency of SJW and PCDC’s cash deposits in lieu of supersedeas

bond.

B. Discovery

Ordinarily, the scope of discovery is within the discretion of the trial court. Dillard

Dept. Stores, Inc. v. Hall, 909 S.W.2d 491, 492 (Tex. 1995) (orig. proceeding) (per curiam).

A trial court’s ruling that requires production of information beyond what our procedural

rules permit is an abuse of discretion. In re Dana Corp., 138 S.W.3d 298, 301 (Tex. 2004)

(orig. proceeding) (per curiam) (citing Texaco, Inc. v. Sanderson, 898 S.W.2d 813, 815

(Tex. 1995) (orig. proceeding) (per curiam)); see Hall, 909 S.W.2d at 492 (providing that

the scope of discovery is largely within the discretion of the trial court); see also In re

Brewer Leasing, Inc., 255 S.W.3d 708, 711 (Tex. App.–Houston [1st Dist.] 2008, orig.

proceeding) (citing In re CSX Corp., 124 S.W.3d 149, 152 (Tex. 2003) (orig. proceeding)

(per curiam)). If an appellate court cannot remedy a trial court’s discovery error, then an

adequate appellate remedy does not exist. In re Dana Corp., 138 S.W.3d at 301 (citing

Texaco, 898 S.W.2d at 815; Walker, 827 S.W.2d at 839). Thus, “[m]andamus review is

proper for discovery that is ‘well outside the proper bounds.’” In re Brewer Leasing, Inc.,

255 S.W.3d at 711 (citing In re Am. Optical Corp., 988 S.W.2d 711, 713 (Tex. 1998) (orig.

proceeding) (per curiam)).

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. See TEX . R. CIV.

P. 192.3(a); see also In re Am. Optical Corp., 988 S.W.2d at 713 (providing that although

the scope of discovery is broad, requests must show a reasonable expectation of obtaining

information that will aid the dispute’s resolution and may not be used as a fishing

expedition). As long as the information sought appears reasonably calculated to lead to

9
the discovery of admissible evidence, it is not a ground for objection that the information

sought will be inadmissible at trial. See TEX . R. CIV. P. 192.3(a) (providing that the ambit

of discovery is broad and permits parties to seek discovery “regarding any matter that is

not privileged and is relevant to the subject matter of the pending action”), (b) (“A party may

obtain discovery of the existence, description, nature, custody, condition, location, and

contents of documents . . . that constitute or contain matters relevant to the subject matter

of the action.”); see also In re Spence, No. 2-09-392-CV, 2010 Tex. App. LEXIS 4884, at

*6 (Tex. App.–Fort Worth June 21, 2010, orig. proceeding) (“The rules governing discovery

do not require as a prerequisite to discovery that the information sought be admissible

evidence; it is enough that the information appears reasonably calculated to lead to the

discovery of admissible evidence.”). Information is relevant if it tends to make the

existence of fact that is of consequence to the determination of the action more or less

probable than it would be without the information. TEX . R. EVID . 401; see In re Brewer

Leasing, Inc., 255 S.W.3d at 712.

When a judgment debtor is uncooperative with reasonable discovery concerning the

judgment debtor’s net worth, the trial court may take appropriate steps, such as compelling

responses and issuing sanctions, to ensure that discovery is completed before the hearing

on the judgment creditor’s contest. In re Smith, 192 S.W.3d at 579 (citing Arndt v. Farris,

633 S.W.2d 497, 499-500 (Tex. 1982)).

IV. PALMER ’S DISCOVERY REQUESTS AND JAY’S RESPONSES

In their petition for writ of mandamus, the Williamses argue that Palmer is not

entitled to such information because Palmer has not secured an alter ego finding; Palmer

has not complied with Texas Rule of Civil Procedure 205; and Palmer’s discovery requests

are “overly broad” and irrelevant. Specifically, they argue that their personal financial

10
documents are not discoverable because: (1) Jay’s status as president of SJW does not,

by itself, make him a party to the litigation and that compliance with the discovery rules

regarding non-parties is mandatory, see TEX . R. CIV. P. 205.16; (2) the trial court abused

its discretion by failing to limit Palmer’s discovery to only that which is reasonable and

relevant to the issues in this case; and (3) the trial court abused its discretion by ordering

the production of an enormous amount of information within twenty days. Palmer responds

by arguing that the trial court’s order is correct because: (1) the evidence indicates that Jay

“is part of a scheme to avoid bonding and paying the judgment”; (2) Palmer was not

required to prove alter ego before securing discovery; (3) Jay is subject to SJW and

PCDC’s control, and therefore, Palmer complied with rule 205.1, see id.; (4) the information

requested is relevant and not overly broad; and (5) Jay has had sufficient time to produce

the requested information, especially given that production was first ordered in October

2009.

1. Alter Ego and Control

We first address Jay’s contentions involving the absence of an alter ego finding in

the record and rule 205.1 of the rules of civil procedure. In overruling Jay’s objections to

Palmer’s discovery requests and granting Palmer’s motion to compel, the trial court did not

issue any findings of fact or conclusions of law to support its rulings. In reviewing a trial

court’s decision where no findings of fact or conclusions of law are filed or requested, we

will imply all necessary findings of fact to support the trial court’s decision. See Pharo v.

Chambers County, 922 S.W.2d 945, 948 (Tex. 1996); see also Gonzalez v. Villarreal, 251

6
Texas Rule of Civil Procedure 205.1 provides that “[a] party m ay com pel discovery from a
nonparty—that is, a person who is not a party or subject to a party’s control— only by obtaining a court order
. . . or by serving a subpoena . . . a request for production of docum ents and tangible things under this rule.”
T EX . R. C IV . P. 205.1 (em phasis added).

11
S.W.3d 763, 775 (Tex. App.–Corpus Christi 2008, pet. dism’d w.o.j.) (citing Cadle Co. v.

Ortiz, 227 S.W.3d 831, 834 (Tex. App.–Corpus Christi 2007, pet. denied)). The trial court’s

decision must be affirmed if it can be upheld on any legal theory that finds support in the

evidence. Worford v. Stamper, 801 S.W.2d 108, 109 (Tex. 1990); see Doe v. Tarrant

County Dist. Attorney’s Office, 269 S.W.3d 147, 152 (Tex. App.–Fort Worth 2008, no pet.).

As noted earlier, the trial court granted Palmer’s motion to compel the Williamses

to provide the financial information requested in Palmer’s requests for production and

accompanying interrogatories and overruled Jay’s objections to Palmer’s discovery

requests. To the extent that the supreme court in In re Smith suggested that an alter ego

and/or control finding is necessary to compel discovery from a non-party not subject to

Texas Rule of Civil Procedure 205.1, we conclude that the trial court implicitly determined

that Jay, as president of SJW, was either under the control of SJW, a named party in the

underlying lawsuit, or it implicitly found that Jay was an alter ego of SJW.7 The record in

the underlying case is replete with evidence that Jay is the president of SJW; that he

participates heavily in the management of SJW; and that he was a key player in the

underlying case where the jury concluded that SJW committed fraud, breach of fiduciary

duty, and other business torts against Palmer.8 Because there is evidence in the record

7
At the July 22, 2009 hearing, counsel for Palm er adm itted that “you [the trial court], at som e point,
are going to have to decide whether or not— whether or not this— Jay W illiam s, Jr. is the alter ego of these
com panies. . . . But again, this issue is, is Jay W illiam s, Jr. the alter ego. I have to— we have to prove this
to you.”

8
The Texas Suprem e Court has stated that “‘[a]lter ego applies when there is such unity between [the]
corporation and the individual that the separateness of the corporation has ceased . . .’ [;] an alter ego finding
is relevant to the determ ination of the judgm ent debtor’s worth.” In re Smith, 192 S.W .3d at 568 (quoting
Castleberry v. Branscum, 721 S.W .2d 270, 272 (Tex. 1986)). The Castleberry court noted that:

[A]lter ego is only one of the bases for disregarding the corporation fiction: where a
corporation is organized and operated as a m ere tool or business conduit of another
corporation.

Alter ego applies when there is such unity between the corporation and the individual

12
that Jay was subject to the control of SJW and PCDC, rule 205.1 is not applicable. See

TEX . R. CIV. P. 205.1. We find evidence in the record to support the trial court’s implicit

control and/or alter ego findings.9 To hold otherwise would be to abrogate the governing

standard that the trial court’s decision must be affirmed if it could be upheld under any legal

theory finding support in the record. See Worford, 801 S.W.2d at 109; see also Doe, 269

S.W.3d at 152.

Nevertheless, the Texas courts have held that:

Texas law does not require that a prima facie showing be made before a trial
court can exercise its discretion to order the production of documents
relevant to a damage claim asserted by the plaintiff in a plaintiff’s pleadings.
With respect to the discovery on net worth, our Supreme Court held in
Lunsford v. Morris, 746 S.W.2d 471, 473 (Tex. 1988) that:

“Our rules of civil procedure and evidence do not require similar
practices [i.e., that a prima facie right to punitive damages be established or
delaying the production until the jury hears evidence sufficient to submit a
punitive damage issue] before net worth may be discovered. Absent a
privilege or specifically enumerated exemption, our rules permit discovery of
any ‘relevant’ matter; thus there is no evidentiary threshold a litigant must
cross before seeking discovery.”

In re Garth, 214 S.W.3d 190, 194 (Tex. App.–Beaumont 2007, orig. proceeding) (quoting

Lunsford v. Morris, 746 S.W.2d 471, 473 (Tex. 1988); see In re House of Yahweh, 266

that the separateness of the corporation has ceased and holding only the corporation liable
would result in injustice. It is shown from the total dealings of the corporation and the
individual, including the degree to which corporate form alities have been followed and
corporate and individual property have been kept separately, the am ount of financial interest,
ownership and control the individual m aintains over the corporation, and whether the
corporation has been used for personal purposes. Alter ego’s rationale is: if the
shareholders them selves disregard the separation of the corporate enterprise, the law will
also disregard it so far as necessary to protect the individual and corporate creditors.

721 S.W .2d at 272 (internal citations om itted).

9
W e note that the Texas Suprem e Court has explicitly stated that the trial court’s im plicit control
and/or alter ego finding “m ay not be used to enforce the judgm ent against the unnam ed [party] or any other
nonjudgm ent debtor, but only to determ ine the judgm ent debtor’s net worth for purposes of Rule 24.” In re
Smith, 192 S.W .3d at 568-69. Thus, the trial court’s im plicit control and/or alter ego finding m ay not be used
by Palm er to collect on the judgm ent from the W illiam ses personally absent any other findings. See id.

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S.W.3d 668, 673 (Tex. App.–Eastland 2008, orig. proceeding); In re W. Star Trucks US,

Inc., 112 S.W.3d 756, 763 (Tex. App.–Eastland 2003, orig. proceeding); Al Parker Buick

Co. v. Touchy, 788 S.W.2d 129, 131 (Tex. App.–Houston [1st Dist] 1990, orig. proceeding).

While the case law in this area is sparse and not entirely clear, it may be that Palmer was

not required to prove that Jay was under the control or was the alter ego of SJW and

PCDC so long as the evidence Palmer requested is relevant and necessary to the matters

in this case. Regardless, under either analysis, we must analyze the propriety of the trial

court’s orders compelling Jay to comply with Palmer’s discovery requests.

2. Palmer’s Discovery Requests

The record reflects that Palmer served his first set of post-judgment requests for

production on Jay, which contained thirteen requests for information. Jay responded to

Palmer’s production requests on February 25, 2009, asserting numerous objections to

each and every production request made by Palmer. Palmer’s production requests are as

follows:

• In his first request for production, Palmer requested that Jay and Dena provide
“[c]opies of your income tax returns, with all attachments, and those of your spouse
for the last five years”;

• In his second request for production, Palmer sought “canceled checks, bank
statements, check-stub records, and other banking records pertaining to [Jay’s]
financial affairs and those of [Dena’s] for any account on which you have signatory
authority within the past four years”;

• Palmer’s third request for production sought “[c]opies of all books, record[s], and
financial statements kept or issued by [Jay] for the last four years”;

• In his fourth production request, Palmer requested that Jay produce all records
pertaining to any ownership interest Jay or Dena had in real or personal property for
the past four years;

• The fifth production request asked Jay to produce all documents referencing any
income received by Jay for the last four years;

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• The sixth production request asked Jay for the names and addresses of all persons
or entities to which SJW has given a financial statement in the last five years;

• The seventh production request sought any documentation that Jay may have
regarding the sale, purchase, or conveyance of any real or personal property made
by Jay within the last five years;

• In his eighth production request, Palmer sought all documents that reference “any
and all cash in any account owned or claimed by [Jay] held or deposited with any
bank or other financial institution”;

• By his ninth production request, Palmer asked for all documents referencing any
“assets held in trust, in an estate, or in any other name or capacity in which [Jay]
may claim or have an interest”;

• The tenth production request sought all documents referencing any other assets
that Jay has or had an interest in the last five years;

• In his eleventh production request, Palmer requested that Jay produce all
documents pertaining to any liabilities that Jay may have that has not already been
disclosed;

• The twelfth production request pertained to “[a]ll documents that evidence safe-
deposit boxes, lock boxes, and storage facilities of any kind to which SJW Property
Commerce, Inc. has access”; and

• The final production request asked Jay to produce any documents to which Jay
referred in his answers to Palmer’s interrogatories.

To each of Palmer’s requests for production, Jay objected to the requests as overly broad,

burdensome, harassing, an inappropriate request served upon a non-party to the lawsuit,

and an unconstitutional invasion of his privacy.

In addition to his thirteen requests for production, Palmer also tendered nineteen

interrogatories, to which Jay lodged identical objections as made to each of Palmer’s

production requests. The interrogatories inquire about the following:

• Jay’s net worth and an inventory of every asset and liability included in the net worth
calculation;

• Any ownership or leasehold interest Jay has in any real property;

• Information about any liens, mortgages, or any other encumbrances on real

15
 property owned by Jay;

• The date of purchase, purchase price, and amount of equity in any homes owned
by Jay;

• Information about any vehicles owned by Jay;

• Specific information, including present balance and authorized signatures, on any
checking and savings accounts that Jay maintains;

• Information about “any stocks, bonds, or other securities of any class in any
government, governmental agency, company, firm[,] or corporation”;

• Any claims for money against others, including judgments, personal loans, or other
notes;

• The location of any safe-deposit boxes or other depositories for securities, cash,
and other valuables;

• Information about conveyances of land or assets by sale, gift, or otherwise to others
within the past three years;

• Any ownership interests Jay may have in any businesses;

• Information about accounts receivables for the past two years in which Jay may
have an interest;

• Information about any transactions Jay may have had with Dena or other family
members involving “a transfer, conveyance, assignment, or other disposition of any
. . . real or personal property in the past five years”;

• Any debts that Jay may have;

• Any payments made to creditors within the past two years;

• Any interest that Jay may have in pension plans, retirement fund, or profit-sharing
plans; and

• Information about the source of the income listed on Jay’s IRS tax returns and other
information pertaining to the tax returns;

3. Income Tax Returns

The thrust of Palmer’s discovery requests is to ascertain the net worth of SJW and

PCDC for the years immediately preceding the trial court’s February 7, 2008 final judgment

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until now by tracing the alleged transfer of assets by Jay to other companies and to his

personal accounts. In ascertaining net worth, Palmer seeks information regarding the

assets and interests held by Jay in real and personal property and other financial records

created or held by Jay. We must determine whether the information sought by Palmer is

relevant and material to the determination of SJW and PCDC’s net worth. Among the

information requested by Palmer of the Williamses is income tax returns filed by Jay and

Dena for the past five years. With respect to federal income tax returns, the Texas

Supreme Court has long cautioned that:

Subjecting federal income tax returns of our citizens to discovery is
sustainable only because the pursuit of justice between the litigants
outweighs protection of their privacy. But sacrifices of the latter should be
kept to the minimum, and this requires scrupulous limitation of discovery to
information furthering justice between the parties which, in turn, can only be
information of relevancy and materiality to the matters in controversy.

Maresca v. Marks, 362 S.W.2d 299, 301 (Tex. 1962) (orig. proceeding); see Hall v. Lawlis,

907 S.W.2d 493, 494 (Tex. 1995) (orig. proceeding) (per curiam) (concluding that income

tax returns are discoverable to the extent that they are relevant and material to issues

presented in the lawsuit); Sears, Roebuck & Co. v. Ramirez, 824 S.W.2d 558, 559 (Tex.

1991) (orig. proceeding) (per curiam) (concluding that the issuance of mandamus was

“guided by our reluctance to allow uncontrolled and unnecessary discovery of federal

income tax returns”); In re Garth, 214 S.W.3d at 193 (“Because tax returns do not

necessarily show an individual’s net worth, a tax return is not automatically discoverable.”)

(citing Chamberlain v. Cherry, 818 S.W.2d 201, 205-06 (Tex. App.–Amarillo 1991, orig.

proceeding) (stating that income tax returns are not necessarily indicative of net worth

because they only show income for each year for which the returns are filed)).

Once an objection to the production of federal income tax returns is asserted, unlike

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the production of other financial records, the party seeking discovery of the tax returns

bears the burden of demonstrating relevance and materiality. See El Centro del Barrio,

Inc. v. Barlow, 894 S.W.2d 775, 779 (Tex. App.–San Antonio 1994, orig. proceeding)

(citing Maresca, 362 S.W.2d at 300).

Federal income tax returns are not material if the same information can be obtained

from another source. See id. at 780; see also Cherry, 818 S.W.2d at 206 (“[W]hen

financial statements accurately revealing a defendant’s net worth are available, income tax

returns are simply not relevant.”). This limitation requires the requesting party to show that

the relevant information sought through the returns cannot be obtained from another

source. See El Centro del Barrio, 894 S.W.2d at 780 (citing Kern, 840 S.W.2d at 738).

Based on our review of the record, we cannot say that Palmer has met his burden

of proving that the Williamses income tax returns are relevant and material to the

determination of SJW’s net worth. See Maresca, 362 S.W.2d at 300; see also El Centro

del Barrio, Inc., 894 S.W.2d at 779; Cherry, 818 S.W.2d at 206. As noted above, an

income tax return reflects that amount of income received by a party during the given tax

year. See In re Garth, 214 S.W.3d at 193; Cherry, 818 S.W.2d at 205-06. It appears that

such information can be obtained from other sources requested by Palmer, including his

requests for Jay’s “books, record[s], and financial statements” for the past four years and

“[a]ll documents that constitute or refer in any way to any income received by you for the

last four years.” See El Centro del Barrio, 894 S.W.2d at 780; see also Cherry, 818

S.W.2d at 206. Because evidence of Jay’s income received for the last several years can

be obtained from other sources, we conclude that Palmer has not proven himself entitled

to production of the Williamses personal income tax returns. See Wal-Mart Stores, Inc.

v. Alexander, 868 S.W.2d 322, 331 (Tex. 1993) (Gonzalez, J., concurring) (“[T]rial courts

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should not allow discovery of private financial records, such as tax returns, when there are

other adequate methods to ascertain net worth, such as audited financial reports or W-2

statements.”); Ramirez, 824 S.W.2d at 559; see also El Centro del Barrio, 894 S.W.2d at

780; Cherry, 818 S.W.2d at 206. As such, the trial court abused its discretion in ordering

the Williamses to produce these documents.10 See In re Dana Corp., 138 S.W.3d at 301;

In re Am. Optical Corp., 988 S.W.2d at 713; see also In re Brewer Leasing, Inc., 255

S.W.3d at 711.

4. Other Financial Records

While we have concluded that the trial court abused its discretion in ordering the

Williamses to produce their personal income tax returns to Palmer, we hold that the trial

court did not abuse its discretion in requiring the Williamses to produce other records and

documentation of their personal finances in ascertaining the net worth of SJW and PCDC.

The general rule in financial records production cases is that the burden on the discovery

of financial records lies with the party seeking to prevent production. Peeples v. Honorable

Fourth Supreme Judicial Dist., 701 S.W.2d 635, 637 (Tex. 1985) (orig. proceeding); see

Kern v. Gleason, 840 S.W.2d 730, 735-37 (Tex. App.–Amarillo 1992, orig. proceeding)

(applying the general to production of financial records). Further, we must keep in mind

that the purpose of discovery is to seek the truth so that disputes may be decided by what

the facts reveal, not by what facts are concealed. See In re Colonial Pipeline Co., 968

S.W.2d 938, 941 (Tex. 1998) (orig. proceeding).

The Texas Supreme Court has held that “in cases in which punitive or exemplary

10
W e are m indful that our opinion is based solely on the record before us, and we express no opinion
regarding whether, after additional discovery, the tax returns could be shown to be m aterial. See Kern v.
G leason, 840 S.W .2d 730, 735 (Tex. App.–Am arillo 1992, no writ) (noting that if an alternate source of
inform ation proves to be incom plete, a renewed request for incom e tax returns could be m ade); see also In
re Brewing Leasing, Inc., 255 S.W .3d 708, 716 n.3 (Tex. App.–Houston [1st Dist.] 2008, orig. proceeding).

19
damages may be awarded, parties may discover and offer evidence of a defendant’s net

worth.” Lunsford, 746 S.W.2d at 473; see In re Jacobs, 300 S.W.3d 35, 40 (Tex.

App.–Houston [14th Dist.] 2009, orig. proceeding) (“A defendant’s net worth is relevant in

a suit involving exemplary damages.”); see also TEX . CIV. PRAC . & REM . CODE ANN . §

41.003(a) (Vernon Supp. 2009) (authorizing exemplary damage awards in various causes

of action, including fraud). Here, the jury awarded Palmer with more than $2 million in

punitive damages against SJW. In our previous opinion, we concluded that such damages

were recoverable based on the causes of action brought by Palmer, and we held that the

jury’s punitive damages awarded was supported by legally and factually sufficient

evidence. See SJW Prop. Commerce, Inc., 314 S.W.3d at 198-99; see also In re Garth,

214 S.W.3d at 194. Moreover, in this dispute, Palmer alleges that Jay and SJW have

transferred money and assets out of SJW in order to reduce the net worth of the company

to essentially make SJW judgment-proof. Based on these circumstances, we conclude

that, with the exception of the Williamses personal income tax returns, the financial

information that Palmer seeks to obtain through post-judgment discovery is highly relevant

and material to determining the net worth of SJW, especially considering: (1) that the jury

concluded that SJW committed fraud, breach of fiduciary duty, and other business torts

against Palmer; (2) that the trial court, in arriving at its orders in this case, implicitly

concluded that Jay was under the control of SJW or was an alter ego of SJW; and (3) the

substance of Palmer’s allegations in this dispute.

5. The Relevancy and Breadth of Palmer’s Discovery Requests

In any event, the Williamses argue that their personal financial information is not

relevant to the calculation of SJW and PCDC’s net worth. Further, the Williamses assert

that Palmer’s discovery requests are overly broad in that they are “unlimited in time or go

20
back four to five years,” which no longer reflects Jay’s current net worth. However, we are

not persuaded by the Williamses’ relevancy and broadness arguments because Palmer

alleges that Jay has systematically moved money and assets from SJW and PCDC to

other shell corporations and to other individuals as commissions from the date that the

original petition in the underlying case was filed—December 2, 2003—to the present. See

SJW Prop. Commerce, Inc., 314 S.W.3d at 179. Thus, the scope of Palmer’s discovery

requests needed to be broad so as to trace the purported moving of assets and money that

allegedly occurred over the course of several years by representatives by SJW and PCDC

in preparation for a possible negative jury verdict in the underlying case.

The Williamses also appear to complain about language included by Palmer in his

discovery requests that he sought to discover “all” financial records in the care, custody,

or control of Jay. The Williamses argue that Palmer’s usage of the term “all” renders his

requests overly broad. We disagree.

The supreme court has recently noted that “[d]iscovery is a tool to make the trial

process more focused, not a weapon to make it more expensive. Thus[,] trial courts ‘must

make an effort to impose reasonable discovery limits.” In re Allstate County Mut. Ins. Co.,

227 S.W.3d 667, 668 (Tex. 2007) (per curiam) (quoting In re CSX Corp., 124 S.W.3d at

152). Further, “an order that compels overly broad discovery well outside the bounds of

proper discovery is an abuse of discretion for which mandamus is the proper remedy.” In

re Graco Children’s Prods., Inc., 210 S.W.3d 598, 600 (Tex. 2006) (per curiam). “A central

consideration in determining overbreadth is whether the [discovery] request could have

been more narrowly tailored to avoid including tenuous information . . . .” In re CSX Corp.,

124 S.W.3d at 153. Comment 1 to Texas Rule of Civil Procedure 192 states that “[w]hile

the scope of discovery is quite broad, it is nevertheless confined by the subject matter of

21
the case and reasonable expectations of obtaining information that will aid resolution of the

dispute.” TEX . R. CIV. P. 192 cmt. 1. In addition, the Texas Supreme Court has repeatedly

admonished that discovery may not be used as a fishing expedition. K Mart Corp. v.

Sanderson, 937 S.W.2d 429, 431 (Tex. 1996) (orig. proceeding) (per curiam); Hall, 909

S.W.2d at 492; Texaco, Inc., 898 S.W.2d at 815. Requests that are overly broad

encompass time periods or activities beyond those at issue in the case or, in other words,

matters of questionable relevance. See In re Alford Chevrolet-Geo, 997 S.W.2d 173, 180

n.1 (Tex. 1999) (orig. proceeding); see also In re Jacobs, 300 S.W.3d at 44. Nevertheless,

the scope of discovery is a matter of trial-court decision. In re CSX Corp., 124 S.W.3d at

152.

The mere existence of the language “any and all” does not violate the specificity

requirements of discovery as long as the request is further restricted to a particular type

or class of documents. See Chamberlain v. Cherry, 818 S.W.2d 201, 204 (Tex.

App.–Amarillo 1991, orig. proceeding). Here, Palmer does use the term “all” frequently in

his discovery requests. For example, Palmer requested “[a]ll canceled checks, bank

statements, check-stub records, and other banking records pertaining to [Jay’s] financial

affairs and those of [Dena’s] for any account on which [Jay has] signatory authority within

the past four years.” While the use of the term “all” in this request appears to be quite

broad, the request is restricted to a class of documents and is further restricted by a date.

Each of the discovery requests in which Palmer utilizes the term “all” is restricted by a date

or a class or type of documents. Thus, we conclude that Palmer’s discovery requests are

not overly broad and are relevant to the trace the purported transferring of money and

assets to deflate the net worth of SJW and PCDC so as to inhibit Palmer from collecting

on his judgment against the companies.

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 To the extent that the Williamses argue that they have a constitutional right to

privacy with respect to their personal financial records, we note that the United States

Supreme Court has held that there are no constitutional rights to privacy affected by

disclosure of banking records or in personal financial records. See United States v. Miller,

425 U.S. 435, 442 (1976) (involving the subpoena of banking records served on a third-

party); Miller v. O’Neill, 775 S.W.2d 56, 59 (Tex. App.–Houston [1st Dist.] 1989, no writ)

(providing that despite the inevitable intrusion, discovery of financial records is permitted

and is not an invasion of privacy); see also In re Manion, No. 07-08-00318-CV, 2008 Tex.

App. LEXIS 6813, at **6-7 (Tex. App.–Amarillo, Sept. 11, 2008, no pet.). Financial

statements and deposit slips contain information that is voluntarily conveyed to banks and

exposed to bank employees in the ordinary course of business. Miller, 425 U.S. at 442.

Likewise, checks are not confidential communications, but rather negotiable instruments

used in commercial transactions. Id. Based on this authority, we find the Williamses’

privacy argument to be in contravention of the governing policy consideration that the trial

court does not abuse its discretion by ordering the production of personal financial

documents that are relevant and material to prove net worth. See Lunsford, 746 S.W.2d

at 473; see also In re Brewer Leasing, Inc., 255 S.W.3d at 712; In re Garth, 214 S.W.3d

at 194; Delgado v. Kitzman, 793 S.W.2d 332, 333 (Tex. App.–Houston [1st Dist.] 1990,

orig. proceeding); O’Neill, 775 S.W.2d at 59. Accordingly, we find the Williamses privacy

arguments to be without merit.

Regarding the Williamses argument that the trial court should have limited discovery

to “the time the bond is set,” see Enviropower LLC v. Bear, Stearns & Co., Inc., 265

S.W.3d 1, 5 (Tex. App.–Houston [1st Dist.] 2008, pet. denied), we once again note that

Palmer alleges that representatives of SJW and PCDC transferred money from SJW and

23
PCDC over the course of several years in an effort to avoid paying the February 7, 2008

final judgment in favor of Palmer. Therefore, in order to prove that the affidavits depicting

SJW and PCDC’s net worth are incorrect and that the cash deposits in lieu of supersedeas

bond are insufficient, Palmer must trace the purported transferring of assets to and from

the companies that allegedly dates back to at least 2007. Given the circumstances of this

case, we hold that Palmer’s discovery requests spanning several years is relevant in

proving Palmer’s allegations that SJW and PCDC’s net worth is inaccurate at the time the

cash deposits in lieu of supersedeas bond were made because of the purported fraudulent

transfers. See TEX . BUS. & COM . CODE ANN . §§ 24.001-.013 (Vernon 2009) (codifying the

“Uniform Fraudulent Transfer Act”).

Finally, we disagree with the Williamses’ argument that the trial court abused its

discretion by requiring them to produce documents and respond to interrogatories within

an unreasonable amount of time. In support of their contention, the Williamses cite to

Texas Rule of Civil Procedure 176.7, which states that “[i]n ruling on objections or motions

for protection, the court must provide a person served with a subpoena an adequate time

for compliance . . . .” TEX . R. CIV. P. 176.7. Here, Jay was not served with a subpoena to

produce the information requested, and, as noted earlier, the record establishes that Jay

is subject to the control of SJW and PCDC. Thus, Jay does not fall within the ambit of rule

176.7. See id. Jay does not cite any other authority to support this contention. The record

reflects that Palmer served Jay with post-judgment discovery on January 27, 2009. The

record also reflects that the trial court, after conducting a hearing on Palmer’s motion to

compel on July 22, 2009, ordered Jay to produce the requested information within twenty

days of when the trial judge signed the order, which occurred on October 30, 2009. Jay

has had ample time to produce the requested information. Furthermore, it is of no

24
consequence that Jay filed a motion for reconsideration of the trial court’s October 30,

2009 order. Jay is not free to ignore the trial court’s October 30, 2009 order simply

because he filed an unsuccessful motion for reconsideration. Based on the foregoing, we

conclude that the trial court’s ordering of Jay to produce the requested information within

twenty days of October 30, 2009, was not unreasonable; thus, the trial court did not abuse

its discretion.

V. CONCLUSION

In sum, we conclude that the trial court abused its discretion in ordering the

Williamses to produce their personal income tax returns. On the other hand, we hold that

the trial court did not abuse its discretion in ordering the Williamses to produce other

personal financial information that Palmer requested. We LIFT our stay order of May 10,

2010, and conditionally grant the Williamses’ petition for writ of mandamus as it pertains

to the income tax returns. We deny their petition for writ of mandamus in all other

respects. We are confident that the trial court will modify its October 30, 2009 and April

26, 2010 orders to reflect that Palmer has not proven himself entitled to the Williamses’

personal income tax returns. The writ will issue only if the trial court fails to comply with

this opinion.

___________________
ROGELIO VALDEZ,
Chief Justice

Delivered and filed the
23rd day of September, 2010.

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