7 N.M. 297
N.M. Ct. App.2015Background
- NNMOC shareholders Appellant Wayne K. Augé, II, M.D. and Appellees Jones, Bair, Schulhofer, and NNMOC sued for fraud, misrepresentation, breach of contract, securities fraud, breach of fiduciary duties, and prima facie tort based on a more generous deferred compensation clause Appellant included for himself.
- Appellees alleged Appellant induced them to sign shareholder agreements under false premises about equal terms and concealed a more favorable deferred compensation for himself.
- Discovery revealed Appellant overcompensated himself by over $370,000 in 2008–2009 and controlled corporate records to hide it.
- The district court found fraud, securities fraud, fiduciary breaches, and prima facie tort, and awarded compensatory and punitive damages, plus declaratory relief invalidating the discrepant clause.
- Trial court ordered repayment of overpayments and reformation of Appellant’s clause; the judgment was affirmed in part and remanded for recalculation of Jones’s pre-shareholder revenue allocations.
- The appellate court reversed the prima facie tort finding and remanded for Jones revenue recalculation; overall affirmance with remand for damages adjustment on Jones’s pre-shareholder revenues.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Fraud established by inducement/securities fraud | Appellees relied on Appellant’s misrepresented deferred clause | Deferred clause voidable or immaterial | Fraud proven; remand for Jones revenue allocation considered |
| Breach of fiduciary duty grounded in self-dealing | Appellant breached loyalty and failed to inform material facts | Contract duties cannot support fiduciary breach | Breach of fiduciary duty proven; upheld |
| Prima facie tort viability | Separate tort independent of fraud | Claims duplicative of fraud and fiduciary duties | Prima facie tort reversed |
| Damages and punitive damages | Compensatory damages appropriate; punitive damages warranted | Nominal damages only; punitive damages improper | Compensatory damages affirmed with Jones recalculation on non-shareholder revenue; punitive damages affirmed; declaratory equitable relief affirmed |
Key Cases Cited
- Walta v. Gallegos Law Firm, P.C., 2002-NMCA-015 (N.M. Ct. App. 2002) (fiduciary duty and breach claims)
- Golden Cone Concepts, Inc. v. Villa Linda Mall, Ltd., 1991-NMSC-097 (N.M. Sup. Ct. 1991) (exculpatory clauses do not bar fraud remedies; contract reform permissible)
- Gish v. Hart, 1966-NMSC-028 (N.M. Sup. Ct. 1966) (rule on submission of substantial evidence)
- Madrid v. Marquez, 2001-NMCA-087 (N.M. Ct. App. 2001) (equitable relief can support punitive damages under Madrid framework)
- Pacheco v. Martinez, 1981-NMCA-116 (N.M. Ct. App. 1981) (contract reform and fraud)