UVALDE ROCK ASPHALT COMPANY v. Loughridge
1968 Tex. LEXIS 314, 11 Tex. Sup. Ct. J. 268, 425 S.W.2d 818 (1968)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
A court abuses its discretion by granting a pre-trial discovery order that provides a party with the ultimate relief sought in the main action, especially when doing so deprives the opposing party of its right to a jury trial on a material disputed fact.
Facts:
- The Whites, shareholders in the Uvalde Rock Asphalt Company, made a written demand to inspect the company's books and records.
- In their demand, the Whites stated their purposes were to investigate a decline in profits, assist management, and generally protect their investment.
- Uvalde Rock Asphalt Company refused the request, stating in a letter that the Whites' purposes were not proper and inspection would not be in the best interest of the company or its stockholders.
- The Company alleged that the Whites' true, improper purposes were to gain a competitive advantage in a shared market and to harass the Company into either buying the Whites' stock at an inflated price or selling company assets at an inadequate price.
Procedural Posture:
- The Whites sued Uvalde Rock Asphalt Company in the trial court, seeking a writ of mandamus to compel inspection of corporate records.
- The Company filed an answer alleging improper purpose and made a demand for a jury trial on that issue.
- Prior to trial, the Whites filed a motion for discovery to inspect the company's books.
- The trial judge, Judge Loughridge, granted the Whites' motion for discovery.
- The Company (as Relators) sought a writ of mandamus from the Court of Civil Appeals to expunge the discovery order, but that court dismissed the petition for want of jurisdiction.
- The Company then filed an original mandamus proceeding in the Supreme Court of Texas, asking it to order the trial judge to set aside his discovery order.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does a trial court abuse its discretion by granting a shareholder's discovery motion to inspect a corporation's books and records when this discovery effectively provides the ultimate relief sought in the main lawsuit and denies the corporation its right to a jury trial on the disputed fact issue of the shareholder's 'proper purpose'?
Opinions:
Majority - Smith, Justice
Yes. A trial court abuses its discretion by granting a discovery order that deprives a party of a jury trial on a key fact issue by awarding the ultimate relief sought in the lawsuit. A shareholder's right to inspect corporate records under Art. 2.44 of the Texas Business Corporation Act is contingent upon having a 'proper purpose.' While mandamus is the correct procedural vehicle to enforce this right, it is a civil action subject to the rules of civil procedure, including the right to a jury trial. Here, the Company's answer raised a genuine issue of material fact regarding the Whites' purpose for the inspection. By demanding a jury, the Company was entitled to have that fact issue resolved by a jury. The trial court's discovery order, which granted the Whites access to virtually all the records sought in their mandamus petition, effectively gave them the total relief they were suing for, thereby nullifying the Company's right to a trial on the dispositive issue of proper purpose.
Analysis:
This decision establishes a critical limitation on the scope of pre-trial discovery, particularly in mandamus actions for shareholder inspection. It clarifies that discovery cannot be used as a procedural shortcut to obtain the ultimate remedy sought in the litigation, thereby circumventing a trial on the merits. The case reinforces that the 'proper purpose' requirement for shareholder inspection is a substantive, triable issue of fact, not merely a pleading formality. Consequently, when a corporation raises a credible factual dispute over a shareholder's motive, that issue must be resolved before a court can compel inspection, preserving the right to a jury trial on dispositive factual disputes.
