NATIONAL SURETY CORPORATION, Relator, v. The Honorable John F. DOMINGUEZ, Judge of the 93rd Judicial District Court, Respondent.
No. 13-86-029-CV.
Court of Appeals of Texas, Corpus Christi.
June 19, 1986.
Rehearing Denied Aug. 29, 1986.
715 S.W.2d 67
Richardson also requests that our opinions in this case be published. We grant that request and order the original opinion and this opinion published.
Except for granting the request to publish the opinions, Richardson‘s motion for rehearing is overruled.
Richard McCarroll, Demaris Gullekson, Brown, Maroney, Rose, Barber & Dye, Austin, for relator.
Before NYE, C.J., and SEERDEN and KENNEDY, JJ.
OPINION
SEERDEN, Justice.
National Surety Corporation, relator, filed this mandamus proceeding against the Honorable John F. Dominguez, judge of the 93rd Judicial District Court of Hidalgo County, Texas. Relator requests us to order the trial court to vacate its order of January 13, 1986, requiring relator to produce 200 documents for discovery in cause C-572-85-B, First National Bank of Mercedes v. National Surety Corporation. Relator contends that all of the documents are exempt from discovery within the meaning of
The underlying lawsuit giving rise to this mandamus was filed by First National Bank of Mercedes against relator on a banker‘s blanket bond issued by relator to the bank. Relator received notice of the initial claim on July 11, 1980. It involved transactions between the bank, a corporate customer, La Sara Grain Company (La Sara), and a corporate officer who misapplied corporate funds between 1975 and 1979. Litigation between La Sara, its officer and the bank was concluded in May, 1984, with the bank held liable to La Sara. Relator denied the bank‘s claim under its bond on December 21, 1984.
At the outset, we must determine whether relator has met the procedural burden which will entitle it to consideration of its request for mandamus.
In Peeples v. Fourth Supreme Judicial District, 701 S.W.2d 635 (Tex.1985), the Supreme Court set the guidelines to be followed by a party seeking to exclude documents from the discovery process. The party must: 1) specifically plead the particular privilege or immunity claimed; 2) request a hearing on its motion; and 3) tender the documents for an incamera inspection. These requirements were met. A hearing was then conducted concerning the claimed privileges. The parties submitted briefs to the trial court concerning the discoverability of the documents, and the trial court considered the evidence presented at the hearing, the arguments, the briefs and the authorities, and it inspected the documents and ruled them all to be discoverable. Relator contests this ruling now before this Court.
Having determined that the procedural requirements of Peoples were met, we now must determine the validity of the trial court‘s ruling. It is axiomatic that mandamus will issue only to correct a clear abuse of discretion or the violation of a duty imposed by law when there is no other adequate remedy by law. Johnson v. Fourth Court of Appeals, 700 S.W.2d 916 (Tex.1985); State v. Walker, 679 S.W.2d 484, 485 (Tex.1984). The burden of proof to establish the existence of a privilege rests on the one asserting it. Jordan v. Court of Appeals for the Fourth Supreme Judicial District, 701 S.W.2d 644 (Tex.1985); Peeples v. Fourth Court of Appeals, 701 S.W.2d 635 (Tex.1985); Giffin v. Smith, 688 S.W.2d 112, 114 (Tex.1985).
Relator points to Maryland American General Insurance Co. v. Blackmon, 639 S.W.2d 455 (Tex.1982), as an analogous case holding that the documents are privileged. The Blackmon case does have a similar fact situation which involved a bank suing an insurance company on its blanket bond. It also involved the same privileges involved in our case, and the court held the privileges applied. However, Blackmon is silent about the date from which the privilege begins to be effective. This is a central problem in our case.
* * * * * *
d ... any communication passing between agents or representatives or the employees of any party to the action
where made subsequent to the occurrence or transaction upon which the suit is based and made in connection with the prosecution, investigation or defense of the claim or the investigation of the occurrence or transaction out of which the claim has arisen.
To come under this exemption from discovery the rule plainly states that the communication must:
- pass between agents, representatives or employees of a party or
- pass between a party and his agents, representatives or their employees.
Each of the communications ordered produced met one or the other of these conditions. In addition, the communication must be:
A. made subsequent to the occurrence or transaction upon which the suit is based, and
B. 1) made in connection with the prosecution, investigation or defense of the claim, or
2) the investigation of the occurrence or transaction out of which the claim has arisen.
The phrases referred to above as B 1 and 2 clearly do not refer to the same subject matter. The phrase in B 1, “made in connection with the prosecution, investigation or defense of the claim,” refers to the same subject as A, “made subsequent to the occurrence or transaction upon which the suit is based,” and the phrase in B 2 refers to an earlier event, the occurrence out of which the claim, listed as A, has arisen.
Using this analysis, it is clear that the occurrence upon which the suit is based was the denial of the bank‘s claim under its bond. This occurred on December 21, 1984. The occurrence or transaction out of which that claim arose was the claim by La Sara against the bank. This claim was made in July, 1980.
In order to be exempt from discovery under
The documents under consideration dated before December 21, 1984, the date of the occurrence or transaction out of which the suit arises, are, therefore, not exempt from discovery under this rule and the trial court did not abuse its discretion in ordering discovery of these documents. However, the documents dated after December 21, 1984, are exempt from discovery unless the exemption has been waived. The evidence shows that relator has not waived his right to protect the exempt documents from discovery.
Next, we must determine whether the trial court abused its discretion by refusing to hold that some of the documents were exempt from discovery by virtue of the lawyer-client privilege.
Under
The purpose of the attorney-client privilege is to promote unrestrained communication and contact between an attorney and client in all matters in which the attorney‘s professional advice or services are sought, without fear that these confidential communications will be disclosed by the attorney, voluntarily or involuntarily, in any legal proceeding. West v. Solito, 563 S.W.2d 240 (Tex.1978). In determining whether the communication is confidential, it is appropriate to look at the circumstances surrounding the communication. Hayes v. Pennock, 192 S.W.2d 169, 174 (Tex.Civ.App.—Beaumont 1945, writ ref‘d n.r.e.).
In addition, the documents numbered 190 through 200, those dated after December 21, 1984, are exempt from discovery under the provisions of
We conditionally grant relator‘s petition for writ of mandamus; however, the writ will not issue if the trial court amends its discovery order to conform with this opinion.
NYE, C.J., files a concurring opinion.
KENNEDY, J., files a dissenting opinion.
NYE, Chief Justice, concurring.
I agree with the majority‘s conclusion that National Surety‘s denial of the claim is the operative occurrence in this discovery case, and that documents made prior to that occurrence are discoverable. I also agree with the dissent that
- was the communication made among a party and its agents?
- was it made subsequent to the occurrence or transaction upon which the suit is based?
- was the subject of the communication connected to the prosecution, investigation, or defense of the claim or to the investigation of the occurrence or transaction out of which the claim has arisen?
There is no serious dispute in this mandamus proceeding about questions (1) and (3). We are concerned with the second question here: how far into the history of dealings between parties to a lawsuit may one of the parties keep its internal communications secret?
In Texas Employers’ Insurance Association v. Fashing, 706 S.W.2d 801 (Tex.App.—El Paso 1986), an employee was discharged after filing two worker‘s compensation claims. In his wrongful discharge suit against his employer, he sought discovery of the investigative files of the compensation carrier. The carrier resisted, the
This case is similar, though the question is closer. The surety company‘s denial of the claim on the bond triggered the lawsuit, not the malfeasance of the bank officer almost ten years before that, as the dissent maintains. The malfeasance is merely an element of proof in this suit on the bond.
An insurance policy is at issue in this case, with the unique relationship between insurer and insured. When a person buys a contract of insurance, he has the insurer‘s promise to pay certain amounts upon the occurrence of certain events. In the normal scheme, there is no dispute between them until the insurer denies a claim for loss. After this, the insured files a lawsuit, not when the loss occurs. Before this, discovery should be allowed.
Where the dealings between the parties are complex and protracted, as in this case, the time determination which a trial court must make, based on statutory construction of
KENNEDY, Justice, dissenting.
I agree with the majority‘s position that
- a communication passing between agents or representatives or the employees of any party to the action or communications between any party and his agents, representatives or their employees,
- that communication must be made subsequent to the occurrence or transaction upon which the suit is based, and
- that communication must be made in connection with:
- the prosecution, investigation or defense of the claim or
- the investigation of the occurrence or transaction out of which the claim has arisen.
The second prong of this Rule establishes a time factor—the date, based on the occurrence or transaction, that determines when communications are exempt from discovery. The first and third prongs are subject-matter factors; i.e., the exemption applies to communications amongst certain persons (prong 1) and about certain matters (prong 3).
I disagree with the majority‘s interpretation of what constitutes an “occurrence or transaction upon which the suit is based.” The bank officer‘s malfeasance occurred between 1975 and 1979. The litigation involving the officer‘s malfeasance concluded in May, 1984. Relator denied the bank‘s claim under its bond on December 21, 1984. The majority concludes that the denial of the claim on December 21, 1984, is the occurrence or transaction upon which the suit is based. I disagree.
The Supreme Court stated in Maryland American General Insurance Co. v. Blackmon, 639 S.W.2d 455, 457-58 (Tex.1982):
The protection of a party‘s right to defend a suit brought against him is the essence of the proviso in
Rule [166b(3)(d) ] 1, and the privilege exists so long as that right exists. Regardless of the other reasons which might justify the use of this information, it would be impossible to limit the prejudicial effect of disclosure on [the Surety‘s] right to defend the contract cause of action.
In order for First National Bank of Mercedes to recover under its contract cause of action, the Bank must prove its officer was dishonest and that such dishonesty caused losses within the terms of the bond. Id. at 457. Therefore, it follows that the officer‘s malfeasance is the occurrence or transaction upon which the suit is based. The surety‘s denial of the claim is not the basis for liability under the contract. The dishonest act provides the basis for liability, if any.
The majority‘s opinion causes illogical consequences.2 In Maryland American the surety was joined as a defendant in the initial lawsuit claiming dishonesty. The matters sought to be discovered were identical to those before us. The Supreme Court held that the communications were exempt from discovery and would remain so for as long as the surety‘s liability on the bond remains undetermined. Id. at 458. The majority‘s opinion, in the instant case, allows the bank to lay back, either by refusing to include the surety as a defendant or by failing to make a claim, and effectively whittle away those communications exempt from discovery. However, the surety‘s exclusion from the initial suit does not absolve its liability. The surety‘s liability on the bond remains undetermined, regardless of whether it has denied the claim or not.
The El Paso Court of Appeals recently ruled on the
The exemption under
ON MOTION FOR REHEARING
NYE, Chief Justice, concurring.
Since my concurring opinion was handed down in this cause, the Supreme Court has
Under this analysis, the date the investigative privilege attaches in this case is still the date the claim was denied. The surety company‘s long-delayed denial of the bank‘s claim was the final preliminary step to the filing of this lawsuit. Before that event, the surety company and its insured were on the same side of the underlying liability question. After the claim was denied, though, there was good cause for the surety company to believe that the bank would file suit. A person who has been paying premiums all along and then ends up with no coverage will presumably file suit if that person wants to get any benefit from its policy.