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In re Bullin

Court of Appeals of Texas, Tenth District

January 10, 2018

IN RE JERRY A. BULLIN, INDIVIDUALLY, CJB PARTNERS, LTD., AND ITS GENERAL PARTNER CJB PARTNERS MANAGEMENT, LLC, AND BRE GROUP, LTD IN RE TEXAS PRIVATE SCHOOLS FOUNDATION, INC. D/B/A ALLEN ACADEMY

         Original Proceeding

          Before Chief Justice Gray, Justice Davis, and Justice Scoggins.

          MEMORANDUM OPINION

          AL SCOGGINS Justice.

         In cause number 10-16-00271-CV, relators, Jerry A. Bullin, individually, CJB Partners, Ltd., and its general partner CJB Partners Management, LLC and BRE Group, Ltd. (collectively "Bullin"), contend that the trial court abused its discretion by ordering the production of adjusted-gross-income ("AGI") and taxable-income ("TI") figures for tax years 2008, 2012, and 2013. In a competing petition for writ of mandamus in cause number 10-16-00343-CV, relator, Texas Private Schools Foundation, Inc. d/b/a Allen Academy, contends that the trial court abused its discretion by denying its request to compel Bullin to produce AGI and TI figures for tax years 2009, 2010, and 2011.

         On original submission, we denied both petitions for writ of mandamus. See generally In re Bullin (In re Tex. Private Sch. Found., Inc.), Nos. 10-16-00271-CV & 10-16-00343-CV, 2017 Tex.App. LEXIS 7352 (Tex. App.-Waco Aug. 2, 2017, orig. proceeding) (mem. op.). However, since our denial of the mandamus petitions, the parties have filed motions for rehearing, as well as motions to transfer in-camera records from a previous mandamus petition involving the same parties. See generally In re Bullin, No. 10-15-00423-CV, 2016 Tex.App. LEXIS 2604 (Tex. App.-Waco Mar. 10, 2016, orig. proceeding) (mem. op.). In the current proceedings, the parties submitted records that included Bullin's heavily-redacted tax returns that did not reveal his AGI or TI for the relevant time periods. But, in the prior proceeding, the in-camera records contained Bullin's partially redacted tax returns that disclosed AGI, TI, and charitable-contribution figures, but redacted other information. Therefore, for the purpose of analyzing the motions for rehearing, we granted the parties' motions to transfer the in-camera records from the prior Bullin mandamus proceeding. And after reviewing the record, we grant Bullin's motion for rehearing, withdraw our memorandum opinion and judgments issued August 2, 2017, and substitute the following in their place. We conditionally grant Bullin's petition for writ of mandamus and dismiss as moot Allen Academy's petition for writ of mandamus.

         I. Applicable Law

         Mandamus relief is available only to correct a "clear abuse of discretion" when there is no adequate remedy by appeal. Walker v. Packer, 827 S.W.2d 833, 839 (Tex. 1992) (orig. proceeding). Clear abuse of discretion occurs when a trial court "reaches a decision so arbitrary and unreasonable as to amount to a clear and prejudicial error of law." Id. at 839 (citing Johnson v. Fourth Court of Appeals, 700 S.W.2d 916, 917 (Tex. 1985) (orig. proceeding)). When reviewing factual issues, the reviewing court may not substitute its judgment for that of the trial court. Id. at 839-40. Even if the reviewing court would have decided the issue differently, it cannot disturb the trial court's decision unless the decision if shown to be arbitrary and unreasonable. Id. at 840.

         The scope of discovery is much broader than the scope of admissible evidence. In re Exmark Mfg. Co., 299 S.W.3d 519, 528 (Tex. App.-Corpus Christi 2009, orig. proceeding); see In re Pilgrim's Pride Corp., 204 S.W.3d 831, 835 n.8 (Tex. App.-Texarkana 2006, orig. proceeding) ("Relevance should not be confused with admissibility. Admissibility is not required for information to be discoverable." (citing Tex.R.Civ.P. 192.3(a); Axelson, Inc. v. McIlhany, 798 S.W.2d 550, 553 (Tex. 1990))). Nevertheless, the determination of the scope of discovery is generally within the trial court's discretion. Dillard Dep't Stores, Inc. v. Hall, 909 S.W.2d 491, 492 (Tex. 1995). Discovery requests, however, must be reasonably tailored to include only matters that are relevant to the case. Texaco, Inc. v. Sanderson, 898 S.W.2d 813, 815 (Tex. 1995). When the trial court orders discovery exceeding the scope permitted by the rules of procedure, it abuses its discretion. In re CSX Corp., 124 S.W.3d 149, 152 (Tex. 2003) (orig. proceeding).

         Parties are entitled to seek discovery "regarding any matter that is not privileged and is relevant to the subject matter of the pending action." Tex.R.Civ.P. 192.3(a). Information is relevant if it tends to make the existence of a 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.

         Tax returns are treated differently than other types of financial records, as evidenced by the Texas Supreme Court's expressed "reluctance to allow uncontrolled and unnecessary discovery of federal income tax returns." Hall v. Lawlis, 907 S.W.2d 493, 494-95 (Tex. 1995) (citing Sears, Roebuck & Co. v. Ramirez, 824 S.W.2d 558, 559 (Tex. 1992) (per curiam)). This is because federal income tax returns are considered private and the protection of that privacy is of constitutional importance. Maresca v. Marks, 362 S.W.2d 299, 301 (Tex. 1962). The sacrifice of such privacy should be "kept to a 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." Id. Therefore, unlike when other types of financial information are sought, after a resisting party objects to the production of tax returns, the burden shifts to the party seeking to obtain the documents to show that the tax returns are both relevant and material to the issues in the case. El Centro del Barrio, Inc. v. Barlow, 894 S.W.2d 775, 779 (Tex. App.-San Antonio 1994, no writ); see Hall, 907 S.W.2d at 494.

         II. Discussion

         Here, Allen Academy sought AGI, TI, and charitable-contribution figures from Bullin's tax returns for the tax years 2008 through 2013. The purpose for the request was to show that "'notes' actually representing charitable donations were executed by Allen Academy at Bullin's request for his 'tax and accounting purposes' with no expectation of repayment." After a hearing, the trial court ultimately concluded that Allen Academy was entitled to the AGI, TI, and charitable-contribution figures from Bullin's tax returns for tax years 2008, 2012, and 2013, but not for tax years 2009, 2010, and 2011.[1] In his mandamus petition, Bullin argues that the trial court abused its discretion by requiring him to produce AGI and TI figures from his tax returns for tax years 2008, 2012, and 2013. In essence, Bullin contends that none of the AGI and TI figures for tax years 2008 through 2013 should be produced, whereas Allen Academy asserts that the figures should be produced for all of the relevant tax years.

         The mandamus record shows that Bullin contributed large sums of money to Allen Academy. Many of these contributions were initially loans, as documented by the numerous promissory notes contained in the mandamus record.[2] Allen Academy acknowledges that it executed promissory notes with Bullin; however, Allen Academy argues that it is not liable on the notes because Bullin expressed that he would later forgive the notes.

         A. The ...


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