In Re Texas Dow Employees Credit Union v. the State of Texas ( 2024 )

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.
13