Court Opinion

ID: 2864403
Source: CourtListenerOpinion
Date Created: 2015-09-06 00:02:48.769396+00
Date Added: 2024-06-11T12:43:07.986696
License: Public Domain

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

                                     NO. 03-00-00006-CV

             TemPay, Inc. and Mastery Staffing LLC d/b/a Staff Masters; and
                            Arter & Hadden LLP, Appellants

                                               v.

                        TNT Concrete & Construction, Inc., Appellee

    FROM THE DISTRICT COURT OF TRAVIS COUNTY, 353RD JUDICIAL DISTRICT
        NO. 99-01629, HONORABLE ERNEST C. GARCIA, JUDGE PRESIDING

              Appellants TemPay, Inc. and Mastery Staffing LLC doing business as Staffmasters

(together “TemPay”) appeal from the district court’s summary judgment in favor of appellee, TNT

Concrete & Construction, Inc. (“TNT Inc.”). Appellant Arter & Hadden LLP (“Arter & Hadden”),

the law firm representing TemPay throughout the district-court proceedings, appeals the district

court’s award of sanctions in favor of TNT Inc. We will reverse the district court’s summary

judgment and award of sanctions and remand the case to that court for further proceedings.

                    FACTUAL AND PROCEDURAL BACKGROUND

              Between February 26 and October 21, 1998, TemPay provided financing, payroll, and

employment services to TNT Concrete Services & Construction (“TNT Concrete”), an

unincorporated entity. Tommy Tyson was the president of TNT Concrete and Alice Perez acted as

office manager. TNT Concrete failed to pay TemPay for services provided to TNT Concrete.
                 In November 1998, TNT Inc. was incorporated with Alice Perez as its president.

Tommy Tyson is an employee of TNT Inc.

                 In February 1999, TemPay sued TNT Inc. for recovery on its unpaid account originally

established with TNT Concrete.1 In April, Perez signed and filed a general denial on behalf of TNT

Inc. TemPay excepted to the answer on the basis that Perez was not a lawyer and thus could not

answer on TNT Inc.’s behalf. TNT Inc. obtained counsel, who answered for the corporation on July

1. In the meantime, TemPay served discovery requests on TNT Inc. in late June. The requests

included a notice of deposition instructing TNT Inc. to designate an individual to testify regarding

TNT Inc.’s dealings with Mastery Staffing.2 The discovery requests made no mention of TNT

Concrete. The deposition was requested for July 29. In a letter dated July 23 from TNT Inc.’s

attorneys to Arter & Hadden, TNT Inc. denied any dealings with TemPay, stating:

  1
       TemPay’s suit also asserted claims for breach of contract, quantum meruit, unjust enrichment,
“promissory estoppel,” and “restitution” and sought attorney’s fees and interest.
      2
          The instructions read:

          Pursuant to Texas Rule of Civil Procedure 199, TNT Concrete & Construction, Inc.
          (“the Deponent”) is to designate one or more individuals to testify on its behalf
          concerning the following matters: (1) all discussions between representatives of the
          Deponent and Mastery Staffing concerning the temporary employees and/or payroll
          services provided to TNT Concrete & Construction, Inc. by Mastery Staffing; (2) the
          terms and conditions of Deponent’s agreement with Mastery Staffing for temporary
          employees and/or payroll services; (3) the identity of all documents pertaining to
          temporary employees and/or payroll services provided to TNT Concrete &
          Construction, Inc. by Mastery Staffing, and; (4) the open account on which Mastery
          Staffing provided temporary employees and/or payroll services to TNT Concrete &
          Construction, Inc.

(Emphasis added.)

                                                   2
       We have no records of any kind that would reflect any business done between TNT
       [Inc.] and [TemPay], and we challenge you to produce a single invoice, a single
       contract, or a single correspondence between TNT [Inc.] and [TemPay] concerning
       anything. Rather, [TemPay] apparently did business with a man named Tommy
       Tyson, who did business under the name “TNT Services.”

               On July 27, TNT Inc.’s attorneys again wrote Arter & Hadden, responding to the June

discovery requests.3 The letter reflected TNT Inc.’s intention not to produce a witness for the

previously noticed deposition:

       You will note that, since there has never been any agreement or relationship of any
       kind between your client, Mastery Staffing, and the Defendant, TNT Concrete &
       Construction, Inc., we are unable to designate any witnesses with any knowledge of
       such an agreement or such a relationship for the deposition scheduled for this
       Thursday. As such, we will not be appearing at that deposition.

               On August 27, TemPay filed a motion to compel the appearance of a TNT Inc.

representative for deposition on September 23. See Tex. R. Civ. P. 215.1(b)(2)(A). In its motion,

TemPay asserted that it provided services to TNT Concrete and theorized that TNT Inc. “was created

as a scheme to avoid debts such as the one owed to [TemPay].” To support its theory, TemPay

alleged that TNT Inc. is managed by the same “corporate leadership” as TNT Concrete and both

entities have the same address, phone number, fax number, logo, and, with a slight exception, the

same letterhead. TNT Inc. was created within a few days after TemPay ceased to provide services

  3
        The letter indicates that it was accompanied by responses to (1) interrogatories, (2) requests
for admissions, production of documents, and “disclosure,” and (3) a notice of deposition. The
record before this Court does not contain the interrogatories, requests for admissions, or request for
“disclosure,” nor does it contain any responses thereto. The only discovery requests and responses
in the record are for the oral deposition of TNT Inc.’s representative and the production of
documents.

                                                  3
to TNT Concrete. TemPay further alleged that TNT Inc. was assuming the assets, but not the

liabilities, of TNT Concrete. As justification for compelling the requested deposition, TemPay

concluded, “Given the foregoing background information, [TemPay] noticed the deposition of TNT

[Inc.]’s corporate representative to learn more about the relationship between these two companies.”4

               On September 7, TNT Inc. responded, urging the court to deny TemPay’s motion and

seeking a protective order barring the deposition. At the same time, TNT Inc. filed a no-evidence

motion for summary judgment. See Tex. R. Civ. P. 166a(i). TNT Inc. obtained an October 7 hearing

date for its motion.

               TemPay responded to TNT Inc.’s motion and requested a continuance of the

summary-judgment hearing on the basis that TNT Inc. “has failed to allow adequate time for

discovery.” TemPay’s motion for continuance posited that

       a genuine issue of material fact exists as to whether TNT [Inc.]’s agreement with
       [TNT Concrete] included an assumption of liabilities, as well as a purchase of the
       TNT [Concrete] assets. If the necessary discovery in this case reveals facts that show
       TNT [Inc.] assumed the liabilities of the predecessor TNT entity, a genuine issue of
       material fact would exist, precluding TNT’s untimely summary judgment.
       Accordingly, this Court should continue this no-evidence summary judgment motion
       and allow these and other fact issues to be more fully discovered.5

  4
        Attached to the motion is an unsigned “Fiat” that indicates that TemPay may have requested
that the motion be heard on September 16.
  5
       Attached to the motion for continuance is an unsigned “Fiat” that indicates that TemPay may
have requested that the motion be heard on October 7.

                                                 4
(Footnote added.) The district court held a hearing on TNT Inc.’s motion for summary judgment on

October 7, as requested, and granted the motion by order signed November 5.6

               TemPay filed a motion for new trial; TNT Inc. subsequently filed a motion for

sanctions against Arter & Hadden for filing a frivolous lawsuit. See Tex. R. Civ. P. 320; Tex. Civ.

Prac. & Rem. Code Ann. § 10.001 (West Supp. 2001). The district court denied the motion for new

trial and ordered sanctions against Arter & Hadden.

               By three issues, TemPay appeals the district court’s grant of summary judgment and

denial of TemPay’s motion for new trial. Arter & Hadden appeals the district court’s award of

sanctions.

                                          DISCUSSION

Summary Judgment

               By its first issue, TemPay asserts five grounds on which it urges this Court to reverse

the district court’s summary judgment. Two of those grounds draw our attention to alleged error by

the district court in denying TemPay’s motion for continuance. TemPay sought a continuance of the

no-evidence summary-judgment hearing because an adequate time for discovery had not elapsed, see

Tex. R. Civ. P. 166a(i), and requested sufficient time “to secure discovery responses from TNT Inc.

which it required to defeat TNT Inc.’s no-evidence motion.” When a party contends that it has not

had an adequate opportunity for discovery before a summary-judgment hearing, it must file either an

   6
       The record does not specifically reflect that the district court either heard or disposed of
TemPay’s motion for continuance. However, the November 5 order granting TNT Inc.’s motion for
summary judgment contains a “Mother Hubbard” clause specifically denying all relief not granted in
the order. See Mafrige v. Ross, 866 S.W.2d 590, 590 n.1 (Tex. 1993) (“A Mother Hubbard clause
generally recites that all relief not expressly granted is denied.”).

                                                 5
affidavit explaining the need for further discovery or a verified motion for continuance. Tenneco Inc.

v. Enterprise Prods. Co., 925 S.W.2d 640, 647 (Tex. 1996). By filing a verified motion for

continuance, TemPay preserved its objection to the summary judgment.

                TemPay’s motion for continuance was filed “on the grounds that TNT [Inc.] has not

allowed adequate time for discovery, as expressly required under Texas Rule of Civil Procedure

166(a)” and, more specifically, based on its entitlement to take the deposition of TNT Inc.’s

corporate representative. TemPay clearly laid out the basis for its motion for continuance—TemPay

found the circumstances surrounding the creation of TNT Inc. suspicious and, if given more time,

would attempt to discover information about the incorporation of TNT Inc. and its relationship and

dealings with TNT Concrete.

                Granting or denying a motion for continuance is in the discretion of the trial court;

thus, a trial court’s ultimate decision in this regard is reviewed under an abuse-of-discretion standard.

Villegas v. Carter, 711 S.W.2d 624, 626 (Tex. 1986). A trial court abuses its discretion only when

it acts in an unreasonable and arbitrary manner, or when it acts without reference to any guiding

principles. Beaumont Bank, N.A. v. Buller, 806 S.W.2d 223, 226 (Tex. 1991); Downer v.

Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex. 1985). This Court may not reverse a

trial court’s ruling for an abuse of discretion merely because we may disagree with that decision.

Buller, 806 S.W.2d at 226; Downer, 701 S.W.2d at 242.

                Although appellate courts are properly hesitant to hold that a trial court abused its

discretion, we are mindful that the “ultimate 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.” Jampole v. Touchy, 673
S.W.2d 569, 573 (Tex. 1984). Indeed, the United States Supreme Court has noted that modern

                                                   6
discovery and pretrial procedures serve the useful purpose of “[making] a trial less a game of

blindman’s bluff and more a fair contest with basic issues and facts disclosed to the fullest practicable

extent.” United States v. Procter & Gamble Co., 356 U.S. 677, 682 (1958).

                Further, the function of summary judgment is not the deprivation of a party’s right to

a full hearing on the merits of any real issue of fact, but rather to “eliminate patently unmeritorious

claims and untenable defenses.” Casso v. Brand, 776 S.W.2d 551, 555 (Tex. 1989) (quoting City

of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 678 n.5 (Tex. 1979)); accord Swilley v.

Hughes, 488 S.W.2d 64, 68 (Tex. 1972); Gulbenkian v. Penn, 252 S.W.2d 929, 931 (Tex. 1952).

Although the Texas Supreme Court’s focus in amending the rules of civil procedure to provide for

no-evidence summary judgments was judicial economy, it balanced that goal with the safeguard that

nonmovants be entitled to an “adequate time for discovery.” See Thomas R. Phillips, Texas Supreme

Court Update, 60 Tex. B.J. 858, 861 (1997). Chief Justice Phillips noted, “Much erroneous

information about the operation and effects of the new rule [166a(i)] has been bandied about in the

legal press and at continuing legal education seminars . . . . The bench and bar should note that the

burden will never shift to the non-movant to establish a fact issue until there has been an adequate

opportunity for discovery . . . .” Id. Rule 166a(i)’s threshold encompasses an adequate time and

opportunity for discovery.

                In Jackson v. Fiesta Mart, Inc., 979 S.W.2d 68, 71 (Tex. App.SAustin 1998, no pet.)

we held that when a no-evidence motion for summary judgment is filed, the burden of raising a

genuine issue of material fact is on the nonmovant. However, we left for another day the issue of

defining an “adequate time for discovery” to be observed before such a motion may be considered.

Id. at 71 n.2. This case brings us to that day. TNT Inc. argues that TemPay has produced no

                                                   7
evidence of any agreement, contract, or account between them. TemPay responds that it has not had

adequate time to complete discovery. Issue is thus joined over Jackson’s open question, defining

“adequate.” See id.

               Whether a nonmovant has had an adequate time for discovery for purposes of Rule

166a(i) is “case specific.” McClure v. Attebury, 20 S.W.3d 722, 729 (Tex. App.SAmarillo 1999, no

pet.).7 Although some lawsuits that present only questions of law may require no or minimal

discovery, other actions may require extensive discovery. Id. An adequate time for discovery is

determined by the nature of the cause of action, the nature of the evidence necessary to controvert

the no-evidence motion, and the length of time the case has been active in the trial court. Specialty

Retailers, Inc. v. Fuqua, 29 S.W.3d 140, 145 (Tex. App.-Houston [14th Dist.] 2000,pet. denied).

A court may also look to factors such as the amount of time the no-evidence motion has been on file

and the amount of discovery that has already taken place.8 Id. Furthermore, a party should not be

able to abuse the discovery process, withhold key evidence from its opponents, and then use that lack

of evidence to win a judgment. Id. (citing Robert W. Clore, Texas Rule of Civil Procedure 166a(i):

A New Weapon for Texas Defendants, 29 St. Mary’s L.J. 813, 843 (1998) (asserting that a plaintiff

   7
       The drafters of rule 166a(i) anticipated that a “discovery period set by pretrial order should
be adequate opportunity for discovery unless there is a showing to the contrary.” Tex. R. Civ. P.
166a(i), cmt. (comment to 1997 change). In the case before us, the district court did not order a
discovery period.
   8
         Two other factors were noted by the court of appeals: whether the movant has requested
stricter time deadlines for discovery and whether the discovery deadlines in place are specific or
vague. Specialty Retailers, Inc. v. Fuqua, 29 S.W.3d 140, 145 (Tex. App.SHouston [14th Dist.]
2000, pet. denied). In this case, the district court did not set any discovery deadlines.

                                                 8
“who could show the defendant delayed discovery by failing to answer the plaintiff’s interrogatories

would likely be entitled to further discovery.”)).

               TemPay requested the deposition of a corporate representative of TNT Inc. before

TNT Inc. had joined issue with an adequate answer and before an attorney had appeared on TNT

Inc.’s behalf. Within a month, TNT Inc. refused to participate in the requested deposition. During

the next month, TemPay moved to compel the deposition. TNT Inc.’s response was to seek a

protective order barring the deposition and to move for summary judgment on the ground that

TemPay had produced no evidence of TNT Inc.’s liability. TemPay at once requested a continuance

of the summary-judgment hearing in order to complete discovery. The district court proceeded with

the hearing and granted TNT Inc.’s motion. From the time TNT Inc.’s answer was filed until the

district court granted TNT Inc.’s motion, TNT Inc. successfully resisted TemPay’s continuous

attempts to obtain the deposition of a corporate representative of TNT Inc.

               Contained in the record is a September 2, 1999 letter from TNT Inc.’s attorneys to

those of TemPay that states:

       I am in receipt of the Motion to Compel that you filed, and want to confirm our
       conversation of last Friday, August 27, 1999, in which I offered to make the
       individual employee or employees of my client with whom your client actually did
       business available for deposition. I also suggested that you change the categories in
       your request to pertain to information that my client might actually know something
       about. You summarily refused these offers, indicating that you for some inexplicable
       reason “don’t want to do that”.

(Emphasis added.) TNT Inc. argues that this indicates its willingness to provide a deponent and

TemPay’s continued persistence in suing the wrong party. TemPay has not responded to these

allegations. To the extent that the letter has relevance to the issues before us, we hold that it is

insufficient to show that TemPay was afforded an adequate opportunity for discovery. If there in fact

                                                     9
is a corporate representative or employee of TNT Inc. “with whom [TemPay] actually did business,”

we see no reason why that person could not have been made available in response to TemPay’s

original request. We further note that the “offer” of a corporate representative came only after

TemPay had sought an order of the district court compelling the production of such a witness and,

within a few days, TNT Inc. moved for a protective order to prevent TemPay’s requested deposition

altogether.

               Under these particular circumstances, TemPay has not been provided an adequate

opportunity to conduct discovery. We hold that the district court abused his discretion in failing to

grant TemPay’s motion for continuance and, therefore, we sustain TemPay’s first issue.9

Sanctions

               By three issues, Arter & Hadden appeals the district court’s assessment of sanctions

against it. The district court’s sanctions order is premised on the court’s acceptance of TNT Inc.’s

assertions that TemPay had sued the wrong party and that TNT Inc. had, by the September 2, 1999

letter, “offered to make the proper parties available” for deposition.

               Because we have held that TemPay should be allowed additional time within which

to complete discovery, we vacate the district court’s sanctions order without prejudice to the right

of TNT Inc. to reurge its motion for sanctions when discovery is completed.

   9
        Having sustained TemPay’s first issue on appeal, we need not address its remaining two
issues. See Tex. R. App. P. 47.1 (written opinion to be as brief as practicable).

                                                 10
                                          CONCLUSION

               We reverse the district court’s summary judgment, vacate the order for sanctions, and

remand this case to the district court for further proceedings not inconsistent with this opinion.

                                              Lee Yeakel, Justice

Before Justices Kidd, Yeakel and Powers*

Reversed and Remanded

Filed: January 25, 2001

Publish
*
    Before John E. Powers, Senior Justice (retired), Third Court of Appeals, sitting by
    assignment. See Tex. Gov’t Code Ann. § 74.003(b) (West 1998).

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