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In re Treatment Equipment Co.

Court of Appeals of Texas, Second District, Fort Worth

July 23, 2019

In re Treatment Equipment Company, Janice V. Smith, and Bruce S. Smith, Relators

          Original Proceeding Trial Court No. PR-2014-00697-01

          Before Pittman, Bassel, and Womack, JJ.

          MEMORANDUM OPINION

          Dana Womack Justice

         I. Introduction

         In this original proceeding, relators Janice V. Smith, Bruce S. Smith, and Treatment Equipment Company (TEC) seek mandamus relief from an order compelling production of documents that the real party in interest first requested in a motion to compel instead of in a formal request for production. Because the trial court abused its discretion by ordering relators to respond to discovery that was not properly requested, we conditionally grant relief and order the trial court to vacate part of its June 3, 2019 order.

         II. Background

         Janice and Bruce Smith own TEC, a corporation that sells and services water treatment equipment. Michael Kilborn began working for TEC in 1986 as a salesperson. He worked for the corporation in this capacity until his death in August 2014. During Kilborn's employment, TEC paid him fifty percent of its profits from his sales upon the occurrence of certain "milestones," such as the equipment's actual delivery. Thus, Kilborn often did not receive his earned commissions until "months or even years after the commission was actually earned." TEC and Kilborn never signed a written employment agreement memorializing how his commissions were to be paid.

         After Kilborn's death, on September 11, 2014, real party in interest Phillip E. Romero, the independent executor of Kilborn's estate, emailed Janice, asking about the terms of Kilborn's commission arrangement. According to Romero, just two weeks later, on September 24, 2014, TEC informed at least one of its clients that it was "beginning the process of winding down" its operations and "would not be pursuing new sales" beginning October 31, 2014.[1]

         On July 30, 2018, Romero, in his capacity as the independent executor of Kilborn's estate, sued TEC and the Smiths individually for breach of contract and fraud. Romero alleged that TEC and both Smiths had breached Kilborn's oral employment agreement with TEC by failing to pay all of his earned commissions. Additionally, Romero alleged, in a section of the petition entitled "FRAUD/PIERCING OF THE CORPORATE VEIL," that TEC and the Smiths committed fraud by making promises to Kilborn about "the manner and means" by which his commissions would be payable, "knowing they would not honor the promises." He also alleged that TEC and the Smiths had misrepresented to him as executor the terms of the employment agreement, and what TEC still owed Kilborn, intending to deprive Kilborn's estate of assets. Finally, Romero alleged that the Smiths committed fraud by underfunding TEC, causing TEC to stop selling its goods, or both so that TEC could not meet its financial obligations to Kilborn and other former employees.

         During discovery, Romero propounded twenty-three requests for production. Relators provided documents responsive to the first fifteen requests but not the remaining eight requests, five of which are pertinent to this original proceeding:

REQUEST FOR PRODUCTION 18. For the time period January 1, 2012 to present, please produce credit and debit card and bank account statements for all accounts held in the name of or used by Defendants Bruce S. Smith and/or Janice V. Smith or their family members.
REQUEST FOR PRODUCTION 19. For the time period January 1, 2012 to present, please produce detailed expense ledgers or reports showing all expenses incurred by or reimbursed to Defendants Bruce S. Smith and/or Janice V. Smith or their family members.
REQUEST FOR PRODUCTION 20. For the time period January 1, 2012 to present, please produce Account Analysis for Defendants Bruce S. Smith and/or Janice V. Smith or their family members.
REQUEST FOR PRODUCTION 21. For the time period January 1, 2012 to present, please produce copies of checks or records/reports of all monies taken from a TEC [sic] or petty cash by Defendants Bruce S. Smith and/or Janice V. Smith or their family members.
REQUEST FOR PRODUCTION 22. For the time period January 1, 2012 to present, please produce any and all vehicles[2] owned or leased by TEC and used by Defendants Bruce S. Smith and/or Janice V. Smith or their family members.

         Relators raised the same objection in response to all five of these requests:

OBJECTION(S): Defendants object to this Request on relevance grounds, as it seeks countless documents immaterial to the claims and defenses asserted in this lawsuit. Defendants further object to this Request as overly broad and unduly burdensome, as the Request is not reasonably limited in time or scope to documents which could possibly evidence Plaintiff's entitlement to recover damages in this lawsuit. Defendants further object to this Request as unduly harassing and an impermissible fishing expedition.

         On May 14, 2019, Romero filed a motion to compel discovery, in which he alleged that relators had not timely responded to requests 18 through 22. But he did not ask the trial court to compel relators to produce documents in response to those requests. Explaining that he had "suggested" to relators that they "begin with production of the TEC bank and credit card statements and expand to other documents," he instead asked the trial court to compel production of the following ...


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