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Maresca v. Marks

Supreme Court of Texas · 1962 · Civil Procedure

Civil ProcedureDiscoveryMandamusRule 167income tax returnsdiscoveryrelevancymateriality

Facts

Marks was employed by relators as manager of two corporations and was to receive a weekly salary plus 3% of net profits. After his employment ended, he sued for 3% of net profits during his employment, moving expenses, the value of the use of his automobile, and exemplary damages for fraud and deceit. Under Rule 167, Marks sought production of the individual relators' personal federal income tax returns and the corporations' tax reports. The trial judge examined the returns and ordered the entire returns produced, even though portions of them contained matters such as charitable contributions, medical expenses, taxes paid, and other private information that were irrelevant to the pleaded dispute.

Issue

Whether a trial court clearly abuses its discretion by ordering discovery of entire income tax returns, including plainly irrelevant and immaterial information, rather than separating and protecting the irrelevant portions. Also, whether mandamus is available to correct that discovery order.

Rule

Income tax returns are not wholly privileged and may be discovered only to the extent their contents are shown to be relevant and material to the matters in controversy. A trial court must separate the relevant and material portions from the irrelevant and immaterial portions, and failure to exercise that limiting discretion is arbitrary action correctable by mandamus because post-appeal relief is inadequate once privacy has been invaded.

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In a wage dispute filed in Dallas, Lena Ortiz claims that Prairie Lantern Catering promised her 4% of the company's quarterly net profits. She moves under the discovery rules for production of owner Nolan Pierce's entire personal federal income tax returns for two years, and the trial judge orders full production because the returns might contain some information bearing on business income.

If Nolan seeks extraordinary relief before trial, what is the strongest argument that the discovery order should be set aside?

Explanation. The majority rule is that income tax returns are not wholly privileged, but they are discoverable only to the extent relevant and material to the matters in controversy. Ordering entire returns produced simply because some portions may bear on the issues fails to apply the required limitation and invades protected privacy beyond what justice requires.