September 16, 2014 – Steven Jones, D.O., Brant Bair, M.D. and Sanford David Schulhofer, D.P.M. and The Northern New Mexico Orthopaedic Center, P.C., No. 32,178

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IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO

Opinion Number:

Filing Date: _ September 16, 2014

NO. 32,178

STEVENJONES, D.O., BRANT BATR, MLD. AND
SANFORD DAVID SCHULHOFER, D.P.M. and
THE NORTHERN NEW MEXICO ORTHOPAEDIC

CENTER, P.C.,
Plaintiffs/Counter- Defendants/A ppellees,
V.

WAYNE K. AUGE, II, Individually and as Trustee
of the Covalent Global Trust U/T/I dated 12/1/08,

Defendant/Counter- Plaintiff/A ppellant.

APPEAL FROM THE DISTRICT COURT OF SANTA FE COUNTY
Raymond Z. Ortiz, District Judge

Law Office of Jane B. Y ohalem
Jane B. Yohalem
Santa Fe, NM

Jeffrey R. Brannen
Santa Fe, NM

for Appellees
Moody & Wamer, P.C.

Christopher M. Moody
Albuquerque, NM

Lorenz Law
Alice T. Lorenz,

Albuquerque, NM

for Appellant

1Though not a matter of particular substance in this case, we also reverse the
conclusion that a prima facie tort was committed.
OPINION
BUSTAMANTE, Judge.
{1} 	Appellees Steven Jones, D.O., Brant Bair, M.D., Sanford David Schulhofer,
D.P.M., and the Northern New Mexico Orthopaedic Center, P.C. (NNMOC) brought
suit against Wayne K. Augé, II, M.D. (Appellant) for fraud in the inducement,
misrepresentation, breach of contract, securities fraud, breach of fiduciary duty to
shareholders, breach of fiduciary duty to corporation, and prima facie tort after Jones,
Bair, and Schulhofer discovered that, unbeknownst to them, Appellant had included
in his shareholder employment agreement a deferred compensation clause that was
significantly different from—and more generous than—theirs. 	In the course of
discovery, 	Appellees 	also 	learned 	that 	Appellant 	had 	caused 	NNMOC 	to
overcompensate him by over $370,000. After a bench trial, the district court found
in favor of Appellees and awarded compensatory and punitive damages. Appellant
appeals. 	We affirm the judgment with the exception of one item of compensatory
damages that we remand for reconsideration.1

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PREFATORY MATTERS
{2} 	The district court entered 234 findings of fact and forty-five conclusions of law.
Appellant challenges fifty-nine of the findings of fact. In addition to the arguments
in his brief in chief, Appellant makes several new arguments in his reply brief. In
reviewing his arguments, we are guided by several principles of appellate review.
First, “[o]n appeal, a reviewing court liberally construes findings of fact adopted by
the fact finder in support of a judgment[.]” 	Toynbee v. Mimbres Mem’l Nursing
Home, 1992-NMCA-057, ¶ 16, 114 N.M. 23, 833 P.2d 1204. Second, “such findings
are sufficient if a fair consideration of all of them taken together supports the
judgment entered below.” Id. Third, “[w]e have long held that findings are sufficient
where they justify the judgment, though they intermingle matters of fact and
conclusions of law.” 	Watson Land Co. v. Lucero, 1974-NMSC-003, ¶ 5, 85 N.M.
776, 517 P.2d 1302. Fourth, appellate courts generally “do not address issues raised
for the first time in a reply brief, [unless] the arguments in [the a]ppellants’ reply brief
. . . are ‘directed only to new arguments or authorities presented in the answer brief.’ ”
Mitchell-Carr v. McLendon, 1999-NMSC-025, ¶ 29, 127 N.M. 282, 980 P.2d 65
(quoting Rule 12-213(C) NMRA (1999)). 	Fifth, “[w]e will not review unclear
arguments, or guess at what [an appellant’s] arguments might be.” Headley v. Morgan
Mgmt. Corp., 2005-NMCA-045, ¶ 15, 137 N.M. 339, 110 P.3d 1076.

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{3} 	Applying these principles, we decline to review Appellant’s arguments that
“[v]irtually all ‘overpayment’ from 2007 through 2009 resulted from . . . adding
depreciation to the expenses attributable to each shareholder” and that Appellees
failed to prove damages related to securities fraud, because they were first raised in
the reply brief. We also decline to address Appellant’s contentions that the district
court intermingled findings of fact and conclusions of law or other arguments, the
resolution of which would have no impact on the judgment.
{4} 	Rule 12-213(A)(3) requires appellants to provide “a summary of the facts
relevant to the issues presented for review.” New Mexico case law is clear that this
requirement compels appellants to set out a full summary of the pertinent evidence
admitted at trial, including the facts supporting the district court’s findings and
conclusions, and that this Court may decline review for failure to do so. 	See, e.g.,
Chavez v. S.E.D. Labs., 2000-NMCA-034, ¶ 26, 128 N.M. 768, 999 P.2d 412 (“[W]e
review substantial evidence claims only if the appellant apprises the Court of all
evidence bearing upon the issue, both that which is favorable and that which is
contrary to appellant’s position. Failure to do so may result in our deeming the issue
waived.” (citations omitted)), aff’d in part, rev’d in part, 2000-NMSC-034, 129 N.M.
794, 14 P.3d 532; see also Gish v. Hart, 1966-NMSC-028, ¶ 10, 75 N.M. 765, 411
P.2d 349. Rule 12-213(A)(3) reflects the standard of review we apply to challenges
to factual findings where “it is the supporting evidence, not that adverse to the finding,

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that ordinarily determines the issue.” Gish, 1966-NMSC-028, ¶ 10. Here, Appellant’s
summary of the evidence comes perilously close to being too one-sided for review.
We conclude that Appellant complied with the rule sufficiently to allow review. See
State v. Martinez, 1996-NMCA-109, ¶ 13, 122 N.M. 476, 927 P.2d 31 (stating that
non-compliance with Rule 12-213(A)(3) “does not require this Court to disregard an
issue when an appellant fails to comply with its provisions”). But we again urge all
counsel appearing before us to abide by the spirit and letter of the rule.
BACKGROUND
The Parties
{5} 	The NNMOC is a professional corporation of orthopaedic surgeons founded by
Appellant in 1998. Dr. Wise was an NNMOC shareholder from 1998 to 2008. Drs.
Jones, Bair, and Schulhofer joined NNMOC as shareholders in 2007, 2008, and 2009,
respectively. The shareholders each owned the same amount of stock in NNMOC.
Shareholder Agreements
{6} 	Jones, Bair, Schulhofer, and Appellant each signed a shareholder employment
agreement, a shareholder agreement, and a subscription agreement that collectively
set out their rights and obligations as shareholders of NNMOC. Because the terms of
the shareholder employment agreements are most at issue, we provide a summary of
their critical terms. Details about the other agreements are provided as needed in our
discussion.

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{7} 	The 	shareholder 	employment 	agreement 	governs 	the 	shareholders’
compensation, deferred compensation, and termination. 	Compensation for each
shareholder is based on each physician’s “direct physician gross revenue,” which is
defined as “all revenues collected by NNMOC on account of medical services
provided by Physician to NNMOC patients net of New Mexico gross receipts taxes.”
The compensation clause goes on to state that:
Physician shall be entitled to receive as compensation for all
services rendered by Physician under this Agreement during the term
hereof (“Physician’s Compensation”) an amount equal to:
the sum of:
(i) 	Direct Physician Gross Revenues, plus
(ii) 	a percentage of revenues collected by NNMOC on
account of Ancillary Services equal to the percentage
of the total common stock of NNMOC owned by
Physician,
less:
the amount of NNMOC’s overhead attributable to Physician.
{8} 	“Ancillary services” are defined as “x-rays, physical, occupational and other
therapy services, physician assistant services, soft goods, medications, cast supplies,
medical supplies, and other products or services not provided directly by Physician[.]”
{9} 	Under the compensation clause, each shareholder is paid a salary based on the
“anticipated amount of Physician’s Compensation.” In addition, “[a]t the end of each
quarter, if Physician’s Compensation exceeds the amount of Physician’s [s]alary

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during such quarter, the difference will be paid to Physician as additional salary.” The
parties referred to this payment as a “bonus.” If, on the other hand, the salary is more
than Physician’s Compensation for the quarter, each shareholder “will be liable to
repay NNMOC the difference between [the s]alary and Physician’s Compensation.”
The compensation clause is the same for all shareholders.
{10} 	In contrast to the compensation clause, Appellant’s deferred compensation
clause differs from that in Appellees’ shareholder employment agreements. 	The
deferred compensation clause in Appellees’ shareholder employment agreement
provides for payment of sixty percent of direct physician gross revenues for six
months after termination in compliance with the termination clause. 	Appellant’s
deferred compensation clause provides for eighty percent of direct physician gross
revenues for six months and twenty percent of ancillary services revenue for three
years after termination. This difference and, more importantly, how it came about,
forms the basis for Appellees’ fraud claims, as well as a portion of their breach of
fiduciary duty claims.
Procedural Background
{11} 	Appellees sued Appellant for fraud, misrepresentation, breach of contract,
securities fraud, breach of fiduciary duty to shareholders, breach of fiduciary duty to
corporation, and prima facie tort. 	They also sought declaratory judgment that the
deferred compensation clause in Appellant’s shareholder employment agreement is

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void to the extent it differs from that in Appellees’ shareholder employment
agreements. 	Appellant denied all claims and counterclaimed, alleging breach of
contract, minority shareholder oppression, breach of fiduciary duty, and tortious
interference with contract. 	He also requested “an accounting of the assets and
liabilities of NNMOC.”
{12} 	Just before trial, the district court granted Appellees’ motions for summary
judgment both with regard to the proper methodology for calculating the value of
NNMOC shares when a shareholder’s employment is terminated and the exclusion of
non-shareholder physician employee revenues from ancillary services revenue. 	It
denied summary judgment as to when Appellant had ceased being a shareholder and
whether Appellant’s deferred compensation clause violated 42 U.S.C. § 1395nn
(2012), which “prohibit[s] physicians from making referrals to, and prohibit[s]
laboratories from billing Medicare for, services ordered by physicians who have a
financial interest in the laboratory.” Atl. Urological Assocs., P.A. v. Leavitt, 549 F.
Supp. 2d 20, 22 (D.D.C. 2008). The parties proceeded to trial on all other issues.
{13} 	After a bench trial, the district court entered extensive findings of fact and
conclusions of law. 	In sum, the district court concluded, among other things, that
Appellant 	made 	knowing 	misrepresentations 	to 	Jones, 	Bair, 	and 	Schulhofer;
committed securities fraud by inducing them to become shareholders; fraudulently
induced Jones, Bair, and Schulhofer into signing the shareholder employment

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agreements; committed a continuing fraud and breached his fiduciary and other duties
to 	Appellees 	and 	NNMOC 	by 	knowingly 	overcompensating 	himself 	and 	by
concealing from Appellees that he had done so; breached his shareholder employment
agreement and shareholder agreement; and committed prima facie tort. It also found
that “all of the claims brought by [Appellant] in this matter [are] without merit” and
denied Appellant’s request for an accounting.
{14} 	The final judgment ordered Appellant to pay NNMOC $527,821.49 for his
negative balance with the corporation, which includes the amount Appellant was
overcompensated and the amount he failed to pay in overhead costs. Appellant was
also ordered to pay $72,936.32 for the negative value of his NNMOC shares. The
district court also awarded $1 million in punitive damages. Finally, the district court
granted Appellees’ request for declaratory relief that “Paragraph 8 of [Appellant’s]
[s]hareholder [e]mployment [a]greement is null and void to the extent it grants
deferred compensation to [Appellant] which is different than that set forth in
[Appellees’] deferred compensation provision[].”
{15} 	The district court based its conclusions of law and judgment on the findings of
fact, which reflect a pattern of self-dealing and misrepresentation made possible by
Appellant’s control of corporate records and financial matters. If the district court’s
findings of fact are supported by substantial evidence in the record, the judgment must
be affirmed.

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{16} 	The findings of fact reveal that Appellant founded NNMOC in 1998. In 2005,
after Appellee Jones became a non-shareholder employee, Appellant began talking to
him about becoming a shareholder in NNMOC. 	Jones decided to become a
shareholder based on Appellant’s representations that NNMOC would be a firm of
equals. 	Appellant, with the help of NNMOC’s attorney, prepared a form of
shareholder employee agreement. Appellant led Jones to believe that his shareholder
employment agreement was the same as Appellant’s with two exceptions: Appellant
did not have a non-compete clause, and he could be terminated for cause only. Jones
accepted the proposed shareholder employment agreement with the understanding that
both the current and deferred compensation provisions were identical to Appellant’s.
Jones signed his agreements on or about July 31, 2007.
{17} 	Unbeknownst to Jones, Appellant modified his shareholder employment
agreement within a month or two thereafter, putting in place a materially more
generous deferred compensation package for Appellant. Appellant never told Jones
about the changes he had instituted.
{18} 	Later, in 2008 and 2009, Appellant induced Appellees Bair and Schulhofer to
become shareholders of NNMOC in part by making the same representations he had
made to Jones concerning the compensation package. Appellant never showed his
shareholder employment agreement to Jones, Bair or Schulhofer. In fact, Appellant

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kept tight control of the corporate records as a whole, keeping them with him and not
making the records available at the offices of NNMOC.
{19} 	Jones, Bair, and Schulhofer did not discover that the deferred compensation
packages differed until January 2010. Appellant had approached them a few months
before with the idea of taking a leave of absence, and it was during the negotiations
for the terms of the leave that the difference was disclosed by NNMOC’s attorney.
After disclosure of the difference between the shareholder employment agreements,
negotiations for the leave of absence could not be successfully completed, and
Appellant resigned in November 2010.
{20} 	After his resignation, Appellees started this litigation seeking damages and a
declaration nullifying Appellant’s shareholder employment agreement to the extent
it was different from the other shareholder employment agreements with regard to
deferred compensation. In the course of discovery, Appellees learned that Appellant
had substantially overcompensated himself in 2008 and 2009 and had hidden the
overcompensation from his fellow shareholders, NNMOC’s external accountant, and
its internal practice manager. Appellant was able to hide the overpayments because
he maintained control of corporate finances—in particular the calculation of bonuses
under the shareholder employment agreements—to the exclusion of everyone else.
Appellant alone calculated the bonuses. 	Appellant controlled and kept in his
possession the paper files on which he reported his calculations and did not share them

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or his calculations with anyone. The overpayments in 2008 and 2009 amounted to
over $370,000, an amount which materially adversely affected his fellow shareholders
and NNMOC.
{21} 	Other pertinent findings of fact will be outlined as needed in the following
discussion.
DISCUSSION
{22} 	Appellant makes five main arguments: three relate to liability issues and two
relate to damages. As to liability, Appellant maintains that Appellees failed to prove
fraud and argues that a breach of fiduciary duty cannot be based on contractual duties.
Appellant also argues that the prima facie tort cannot be based on the same facts as
other torts. 	In relation to damages, he argues that the amount of compensatory
damages should be reduced and that the award of punitive damages was improper.
We begin with the liability arguments.
I. 	Liability
A. 	Fraud
{23} 	Appellant makes two arguments to the effect that Appellees failed to prove
fraud in the inducement or securities fraud. We address them in turn.
1. 	Voidness/Materiality
{24} 	Appellant argues that Appellees failed to prove fraud in the inducement or
securities fraud because his deferred compensation clause was void ab initio or

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because his representations about the clause were immaterial. Both arguments are
based on misinterpretations of the district court’s findings.
{25} 	Appellant’s position that the deferred compensation clause was void ab initio
rests on two of the district court’s conclusions. First, Appellant relies on the district
court’s use of the term “void ab initio” to argue that the deferred compensation clause
in Appellant’s agreement “never could have had any legal effect.” 	Appellant
overstates the significance of the district court’s use of the term. 	The referenced
conclusion states, “The language of [Appellant’s] [s]hareholder [e]mployment
[a]greement regarding his deferred compensation benefit based on a percentage of
ancillary services revenue is void ab initio because it violates [42 U.S.C. § 1395nn].”
(Emphasis omitted.) This language refers specifically to the provision in Appellant’s
agreement entitling him to a percentage of the ancillary services revenue for three
years after termination from NNMOC. 	It does not address the other portion of
Appellant’s deferred compensation clause that is different from the clauses in
Appellees’ agreements, i.e., the provision giving him eighty percent of direct
physician gross revenues. Thus, the district court concluded only that the ancillary
services revenue provision violated 42 U.S.C. § 1395nn and that only that provision
was void. It did not conclude that the entire clause was void ab initio.
{26} 	Second, 	Appellant 	points 	to 	the 	district 	court’s 	conclusion 	that 	“[t]he
[s]hareholder [e]mployment [a]greement of [Appellant] is not a valid contract between

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him and [NNMOC].” 	He directs us to AMX International, Inc. v. Battelle Energy
Alliance, LLC, a federal district court case, in which AMX sued Battelle, its client, for
tortious interference with contract after Battelle hired several AMX employees in spite
of the fact that the employees’ contracts with AMX included non-compete clauses
precluding them from working for AMX clients. 744 F. Supp. 2d 1087, 1089-90 (D.
Idaho 2010). Battelle argued that it could not have interfered with AMX’s contracts
with its employees because the contracts were unenforceable because the non-compete
clause was contrary to public policy. 	Id. at 1093. 	The court stated that although
“protection is extended against unjustifiable interference with contracts even though
the contract is voidable or unenforceable in an adversary proceeding[,] . . . this
protection does not extend to contracts void ab initio.” 	Id. (alteration, internal
quotation marks, and citation omitted). It concluded that “[c]ontracts that are void ab
initio are deemed never to have existed in the eyes of the law and cannot form the
basis for a tortious interference action.” Id. Having set out this rule, the court went
on to examine whether the non-compete clause in AMX’s contract was “void ab initio
or simply voidable.” Id. It concluded that because AMX’s non-compete clause was
unreasonably broad, it violated public policy and was, therefore, void ab initio. Id. at
1095. It concluded that “the contracts, which were unenforceable as written, cannot
support AMX’s action against Battelle for tortious interference with contract.” Id.

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{27} 	AMX is distinguishable from this case. 	While contract clauses that violate
public policy are void, i.e., “[o]f no legal effect[,]” Black’s Law Dictionary 1709 (9th
ed. 2009), where, as here, there is fraud in the inducement to enter into the contract,
the contract is merely voidable, i.e., “capable of being affirmed or rejected at the
option of one of the parties.” Id.; see McLean v. Paddock, 1967-NMSC-165, ¶ 10, 78
N.M. 234, 430 P.2d 392 (stating that “[w]here [fraud] is in the inducement, the
instrument is voidable,” not void), overruled on other grounds by Duke City Lumber
Co. v. Terrel, 1975-NMSC-041, 88 N.M. 299, 540 P.2d 229. 	When a contract or
clause is voidable, it remains in effect “until the fraud by which [the defrauded party]
had been induced to sign [is] discovered.” Gross, Kelly & Co. v. Bibo, 1914-NMSC-
085, ¶ 35, 19 N.M. 495, 145 P. 480. 	Thus, here, unlike in AMX and contrary to
Appellant’s position, the deferred compensation clause continued in full force and
effect until Appellees’ request for modification of it was granted by the district court.
{28} 	Finally, we interpret the district court’s conclusion that the agreement was “not
a valid contract” to incorporate both the district court’s determination that Appellant’s
deferred compensation clause was voidable and that it was in fact void at the request
of Appellees. See Golden Cone Concepts, Inc. v. Villa Linda Mall, Ltd., 1991-NMSC-
097, ¶ 8, 113 N.M. 9, 820 P.2d 1323 (“When a party is challenging a legal conclusion,
[we examine] whether the law correctly was applied to the facts, viewing them in a
manner most favorable to the prevailing party, indulging all reasonable inferences in

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support of the court’s decision, and disregarding all inferences or evidence to the
contrary.”). 	This interpretation is supported by the fact that Appellees’ complaint
sought modification of the deferred compensation clause, not avoidance of the entire
contract and the judgment orders only reformation of the clause, not rescission of the
entire contract.
{29} 	We turn next to Appellant’s contention that his representations about the
deferred compensation clause were immaterial. He argues that “a representation about
. . . [the deferred compensation clause], which was not intended to be enforced, cannot
support a fraud claim, because fraud requires clear and convincing proof that a
material fact was misrepresented or concealed.” 	Appellant relies on the district
court’s finding that “[Appellant] told . . . Bair that the [deferred compensation clause]
w[as] put in only as a safety net in the event that a new corporation . . . would be
formed by the [Appellees that did not include Appellant]. He assured . . . Bair that the
provision no longer applied.” Appellant interprets this statement as a finding that he
in fact did not intend to enforce the clause and characterizes it as a finding that the
deferred compensation clause was not a material term of the agreement. 	But this
finding merely reflects the district court’s determination that Appellant made certain
statements and does not indicate that the district court found that Appellant did not
actually intend to enforce the clause. 	Appellant’s reading would not be consistent
with the tenor of the district court’s findings about how the clause came into existence

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and the lengths Appellant went to hide its existence from his fellow shareholders and
the numerous findings that they in fact relied on his misrepresentations. Thus, the
finding has no bearing on the materiality of Appellant’s representations.
{30} 	Appellant also makes a cursory argument that, because the district court
concluded 	that 	execution 	of 	the 	later 	agreements 	“constitute[s] 	a 	corporate
modification of [Appellant’s] deferred compensation provision[,]” his deferred
compensation clause was not a material, enforceable term at the time Appellees signed
their shareholder employment agreements and, therefore, he could not have committed
fraud by misrepresenting it. 	This argument rests on the premise that Appellant’s
deferred compensation clause would never have been enforceable. 	But there is
nothing inherent about the shareholder employment agreements that would make
differing clauses necessarily unenforceable. 	In fact, Appellees did not raise any
arguments related to the other differences in the shareholder employment agreements.
Just as they agreed to those terms, it is possible that the parties might have agreed to
Appellant’s deferred compensation provision, or some variation of it, had he not lied
about it. Instead, it was because of Appellant’s misrepresentation of the terms that
Appellees challenged Appellant’s deferred compensation clause. 	The fact that the
district court concluded after trial that Appellant’s deferred compensation clause was
modified does not preclude a finding that Appellant’s misrepresentations about his
deferred compensation clause were material to Appellees when made. To treat them

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otherwise would be absurd: Appellees would be deprived of a remedy because they
proved that the clause should not be enforced.
{31} 	In sum, we conclude that the deferred compensation clause, with the exception
of the language contrary to 42 U.S.C. § 1395nn, was in full force and effect until it
was reformed and, therefore, was an adequate basis for Appellees’ fraud in the
inducement claim. We also conclude that neither Appellant’s statements about his
intent to enforce his deferred compensation clause nor the district court’s conclusion
that it was modified preclude a finding that Appellant’s deferred compensation clause
was a material term of his shareholder employment agreement.
2. 	Justifiable Reliance
{32} 	Appellant next argues that Appellees failed to prove fraud when they failed to
prove an essential element—that they justifiably relied on his representations.
Although he styles this argument as a challenge to the district court’s findings, several
of his assertions relate more to the legal significance of the district court’s findings
than to the findings themselves. For instance, Appellant maintains that “[w]here, as
here, the alleged misrepresentations were with respect to a document all [Appellees]
admitted they were told to read, justifiable reliance was absent as a matter of law.”
Appellant’s statement of the law is incorrect. Although “each party to a contract has
a duty to read and familiarize himself with the contents of the contract, each party
generally is presumed to know the terms of the agreement, and each is ordinarily

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bound thereby,” Ballard v. Chavez, 1994-NMSC-007, ¶ 8, 117 N.M. 1, 868 P.2d 646,
where a party acts in good faith and “in accordance with reasonable standards of fair
dealing[,]” id. (internal quotation marks and citation omitted), failure to do so does not
automatically preclude a finding of justifiable reliance. See Sisneros v. Citadel Broad.
Co., 2006-NMCA-102, ¶ 23, 140 N.M. 266, 142 P.3d 34 (holding that summary
judgment as to whether a party justifiably relied on the other party’s representations
when the first party failed to read the entire contract was improper where the
“[p]laintiff . . . produced evidence giving rise to factual inferences that could
reasonably support the determination that his failure to read the agreement was
justified by [the other party’s] conduct”). 	Furthermore, because “[a] fraudulent
misrepresentation is an intentional tort[,] . . . the plaintiff’s recovery is not barred by
his own negligence which has contributed to his loss.” Restatement (Second) of Torts
§ 545A cmt. a (1977). Finally, negligent reliance may be justified “when there is a
relation of trust and confidence between the parties or the defendant has made
successful efforts to win the confidence of the plaintiff and then takes advantage of
it to deceive him.” Id. cmt. b.
{33} 	The 	determination 	of 	whether 	a 	party’s 	reliance 	on 	the 	other 	party’s
representations was justified “is fact-specific and includes consideration of the
conduct of both parties.” 	Sisneros, 2006-NMCA-102, ¶ 22. Thus, we examine the
record to see whether the evidence supports the district court’s finding of justifiable

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reliance. See Varbel v. Sandia Auto Elec., 1999-NMCA-112, ¶ 18, 128 N.M. 7, 988
P.2d 317 (“A finding of fraud normally requires proof by clear and convincing
evidence.”). In doing so, we “view the evidence in the light most favorable to the
prevailing party, and . . . determine therefrom if the mind of the fact[]finder could
properly have reached an abiding conviction as to the truth of the fact or facts found.”
Duke City Lumber Co., 1975-NMSC-041, ¶ 5.
{34} 	Jones, Bair, and Schulhofer all testified that Appellant told them that the
shareholders 	of 	NNMOC 	would 	be 	equal 	partners 	and 	that 	the 	shareholder
employment agreements were the same with the exception of the termination and non-
compete clauses. 	They testified that these representations were critical to their
decisions to become shareholders in NNMOC. Jones’s conversations with Appellant
about the shareholder arrangements and the structure of the corporation had continued
over months or years. Jones considered Appellant a mentor and friend. Schulhofer
and Bair testified that Appellant did not tell them about the deferred compensation
clause in his agreement even when they questioned him about the agreements. Bair
testified that Appellant kept the corporate documents, including the shareholders’
agreements, in his possession, not at the NNMOC offices. And the practice manager
for NNMOC testified that no corporate documents were kept at the NNMOC offices.
Appellees first learned of the deferred compensation clause in Appellant’s agreement
in early 2010. This evidence is sufficient to support the district court’s findings that

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Appellees justifiably relied on Appellant’s representations about the shareholder
agreements.
{35} 	To the extent Appellant argues that, after becoming shareholders and officers
of NNMOC, Appellees breached their duty to properly oversee NNMOC and that
“their claims resulted in large part from their ongoing failure to meet their fiduciary
duties[,]” we are unpersuaded. 	Appellant relies on NMSA 1978, § 53-11-35(B)
(1987), which states that “[a] director shall perform his duties . . . in good faith, in a
manner the director believes to be in . . . the best interests of the corporation, and with
such care as an ordinarily prudent person would use under similar circumstances in
a like position.” He maintains that “[h]aving steadfastly ignored their duties of care
and oversight, . . . none of [Appellees] could establish justifiable reliance on
[Appellant’s mis]representation or non-disclosure” after they became officers of
NNMOC. But Appellant overlooks the remainder of Section 53-11-35(B)(1), which
provides that “a director shall be entitled to rely on . . . reports or statements, including
financial statements and other financial data, in each case prepared or presented by .
. . officers . . . of the corporation whom the director reasonably believes to be reliable
and competent in the matters presented[.]” Here, Appellant founded NNMOC and
was its president and treasurer for approximately nine years before Appellees became
shareholders. When Bair joined in 2008, Appellant became its treasurer and secretary.
Several witnesses testified that Appellant controlled NNMOC’s financial matters.

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Given this history, we conclude that the evidence supports the district court’s findings
that Appellees reasonably relied on Appellant’s representations and that these findings
support the district court’s conclusion that “[Appellees] had no duty to audit or
otherwise discover [Appellant’s] misdeeds.”
{36} 	Finally, Appellant argues that Appellees’ reliance on his representations was
obviated by clauses stating that the written agreements supersede all other agreements
and representations, including oral representations. 	For instance, the shareholder
employment agreement states,
This Agreement constitutes the entire agreement and understanding of
the parties with respect to the subject matter hereof, and supersedes all
prior oral or written agreements, arrangements, and understandings with
respect thereto. No representation, promise, inducement, statement[,] or
intention has been made by any party hereto that is not embodied herein,
and no party shall be bound by or liable for any alleged representation,
promise, inducement, or statement not so set forth herein.
{37} 	Appellant’s reliance on these clauses is misplaced because “in New Mexico
exculpatory clauses do not preclude liability.” 	Golden Cone Concepts, Inc., 1991-
NMSC-097, ¶ 6. 	A party fraudulently induced to enter into a contract “cannot be
precluded from seeking redress by a provision inserted in the contract by the party
perpetrating the fraud, designed to shut the mouth of the adverse party as to such
fraudulent representations which led up to the making of the contract.” Id. (internal
quotation marks and citation omitted) (holding that the district court correctly
permitted the plaintiff to proceed on its fraud and misrepresentation claims when the

22
contract included an exculpatory clause similar to that here). We conclude that the
clauses referenced by Appellant do not present a barrier to Appellees’ suit or
Appellant’s liability.
B. 	Breach of Fiduciary Duty
{38} 	Appellant argues that “the judgment based upon breach of fiduciary duty must
be reversed” because the district court’s findings of a breach of fiduciary duties were
based on Appellant’s failure to pay his share of overhead costs and the negative value
of his NNMOC shares, which, he maintains, are duties imposed by the shareholder
employment agreement and the shareholder agreement, respectively. He argues that
“breach of fiduciary duty claims cannot be based on contractual duties.”
{39} 	Appellant’s argument is both factually and legally flawed. First, the district
court’s findings related to Appellant’s breach of fiduciary duties to Appellees and
NNMOC are not based on Appellant’s failure to pay overhead or the negative share
value. 	Rather, the district court found that the fiduciary duty was breached when
Appellant (1) failed to inform Appellees of “bonuses paid by him to him without
appropriate basis”; (2) failed to inform Appellees of “material facts and information
relating to [NNMOC’s] business and financial affairs”; (3) “knowingly” submitted
incorrect information about his bonuses to Appellees at shareholder meetings; (4)
“knowingly and intentionally” paid himself bonuses “to the substantial economic
detriment of [Appellees] . . . as well as to [NNMOC] itself.” 	Thus, Appellant’s

23
position that the breach of fiduciary duty findings are based only on contractually-
imposed duties is not supported by the record.
{40} 	Second, this Court has held that a breach of duties imposed by contract may
also constitute a breach of the fiduciary duties of “loyalty, good faith, inherent
fairness, and the obligation not to profit at the expense of the corporation.” See Walta
v. Gallegos Law Firm, P.C., 2002-NMCA-015, ¶¶ 41, 46-47, 131 N.M. 544, 40 P.3d
449 (adopting the holding of Fought v. Morris, 543 So. 2d 167, 171 (Miss. 1989), and
stating that “breach of [a] shareholder agreement could also be a breach of [a]
fiduciary duty”). Although Appellant is correct in pointing out that not all breaches
of a contract are necessarily breaches of a fiduciary duty, determination of “whether
a breach of fiduciary duty has occurred will normally be a question of fact.” Walta,
2002-NMCA-015, ¶ 47. 	Since the district court resolved this question in favor of
Appellees and Appellant challenges the district court’s findings, we examine the
record for evidence supporting that determination. See Bagwell v. Shady Grove Truck
Stop, 1986-NMCA-013, ¶ 23, 104 N.M. 14, 715 P.2d 462 (stating that in reviewing
a district court’s factual determination for substantial evidence, “[t]he appellate court
. . . disregards all evidence and all inferences unfavorable to the [district] court’s
result”).
{41} 	We begin by defining “fiduciary duty.” “The duty between shareholders of a
close corporation is similar to that owed by directors, officers, and shareholders to the

24
corporation itself; that is, loyalty, good faith, inherent fairness, and the obligation not
to profit at the expense of the corporation.” Walta, 2002-NMCA-015, ¶ 41. In other
words, a fiduciary duty is “[a] duty of utmost good faith, trust, confidence, and candor
owed by a fiduciary (such as a . . . corporate officer) to the beneficiary (such as a . .
. shareholder)” and involves “a duty to act with the highest degree of honesty and
loyalty toward another person and in the best interests of the other person (such as the
duty that one partner owes to another).” Black’s Law Dictionary 581 (9th ed. 2009).
“An act that is detrimental to the interests of someone to whom a fiduciary duty is
owed[,] esp[ecially] an act that furthers the actor’s own interests” is a breach of
loyalty. Id. at 214. The common thread between these statements is the idea that a
fiduciary may not promote his interests above the interests of those to whom a duty
is owed.
{42} 	Based on this principle, we examine the record for evidence that Appellant
advanced his interests at the expense of Appellees or NNMOC. Under the substantial
evidence standard, we “indulge[] all reasonable inferences in support of the prevailing
party.” 	Las Cruces Prof’l Fire Fighters v. City of Las Cruces, 1997-NMCA-044,
¶ 12, 123 N.M. 329, 940 P.2d 177. 	We conclude that the evidence supports the
district court’s findings of breach.
{43} 	Two witnesses testified about the amount overpaid to Appellant. NNMOC’s
accountant conducted an audit of the compensation of shareholders. She discovered

25
that the amount paid to Appellant was “off” by “hundreds of thousands” of dollars.
Edward Street, an expert in “accounting, business valuation, review and analysis of
financial documents, and forensic accounting,” testified that he compared the amount
of compensation due to Appellant with the amount of compensation actually paid to
determine if Appellant had been overpaid. Based on this analysis, he concluded that
Appellant had been overpaid by $173,187.54 in 2007-2008, $199,233.83 in 2009, and
$185,424.89 in 2010, for a total of $557,846.47, which was adjusted to $527,821.49.
He also described the consequences of overpayment, stating, “if one of the doctors has
been overpaid by several hundred thousand dollars, other doctors have to be underpaid
by several hundred thousand dollars or the corporation has to be negative, has to
spend more money than, in total, it has earned. . . . So if somebody is drawing more
money than what is due them, it has to come from someplace else.”
{44} 	In addition, the evidence supports the district court’s finding that Appellant was
the only person calculating “bonus” payments to shareholders on the shareholder
allocation sheets that the shareholders used to track their compensation. 	Several
witnesses testified that Appellant was either in charge of or closely involved with the
generation of the shareholder allocation sheets. 	NNMOC’s external accountant
testified that she prepared the shareholder allocation sheets and gave them to
Appellant. 	She stated that she would enter “the breakdown of the income and the
allocation of the expenses” but not the bonuses on the draft allocation sheet and send

26
the sheet to Appellant. She and NNMOC’s internal practice manager both testified
that Appellant was their main point of contact for financial matters through early
2010. 	The internal practice manager never saw the allocation sheets prior to the
litigation. Bair and Schulhofer testified that Appellant brought a single copy of the
shareholder allocation sheets to meetings with the shareholders approximately
monthly and that Appellant would take the copy with him after the meetings. 	He
stated that “none of [the Appellees] had any active role in the finances until . . . 2010”
when Appellant stopped working at NNMOC. 	Schulhofer described Appellant as
“controll[ing]” the shareholder allocation sheets. 	We conclude that this evidence
supports the district court’s findings of breach of fiduciary duty based on Appellant’s
overcompensation.
{45} 	As to the findings of a breach of fiduciary duty based on Appellant’s failure to
inform Appellees of material facts related to NNMOC’s finances, such as his deferred
compensation clause, we conclude that the evidence also supports these findings.
Appellees testified about Appellant’s failure to inform them of the deferred
compensation clause in his shareholder employment agreement, as discussed above.
Appellant’s deferred compensation clause would provide him with eighty percent of
direct physician gross revenues and twenty percent of ancillary services revenue for
three years, in contrast to Appellees’ deferred compensation clause, which provides
them with only sixty percent of direct physician gross revenue for six months and no

27
income based on ancillary services revenue. Jones’s testimony supports an inference
that the effect of Appellant’s deferred compensation clause would be to reduce the
amount of ancillary services revenue for NNMOC and the other shareholders, contrary
to what they understood when they signed the agreement. Schulhofer testified that
having to pay Appellant according to his deferred compensation clause would be
devastating to NNMOC, and possibly to him personally as well, stating that if the
clause were valid “it[ would not be] in [his] interest to continue working. . . . So I
would resign, which would mean, I assume, a bankruptcy for the business, and
depending on the outcome of that, possibly a personal bankruptcy for myself to cover
whatever liabilities we didn’t meet.” 	This evidence supports the district court’s
findings to the effect that Appellant promoted his own interests to the detriment of
Appellees and NNMOC. 	We discern no error in the district court’s conclusions
related to breach of fiduciary duty.
C. 	Prima Facie Tort
{46} 	Appellant argues that the district court erred in concluding that “[Appellant]
committed a prima facie tort against [Appellees] and [NNMOC].” Appellees concede
that the facts on which the prima facie tort was based “duplicate[ Appellees’] fraud
and breach of fiduciary duty claims” and appear to agree that the district court’s
conclusion is, therefore, improper. We agree. See Guest v. Allstate Ins. Co., 2009-
NMCA-037, ¶ 33, 145 N.M. 797, 205 P.3d 844 (“New Mexico appellate courts have

28
held that where a plaintiff does not assert any separate factual basis to support its
prima facie tort claim, and the plaintiff's proof is susceptible to submission under
another tort, the action should be submitted to the jury on the other cause of action and
not as a prima facie tort claim”), aff’d in part, rev’d in part, 2010-NMSC-047, 149
N.M. 74, 244 P.3d 342. In Appellees’ complaint, the only facts alleged in support of
the prima facie tort claim were those “as set forth” in the fraud, securities fraud,
breach of fiduciary duty, and breach of contract claims. No separate factual basis for
the prima facie tort was established at trial. Thus, the district court’s conclusion as to
prima facie tort must be reversed. See Bogle v. Summit Inv. Co., LLC, 2005-NMCA-
024, ¶ 24, 137 N.M. 80, 107 P.3d 520 (holding that prima facie tort was not available
when “existing causes of action provided reasonable avenues to a remedy for the
asserted wrongful conduct”).
II. 	Damages
{47} 	We turn now to Appellant’s arguments as to the damages awarded. Appellant
argues that the amount of compensatory damages should be reduced and that punitive
damages were improperly awarded.
A. 	Compensatory Damages
{48} 	“Generally, we review findings regarding damages to determine whether they
are supported by substantial evidence.” Miller v. Bank of Am., N.A., 2014-NMCA-
053, ¶ 28, 326 P.3d 20, 	cert. granted, 2014-NMCERT-005, 326 P.3d 1112.

29
“Substantial evidence is that which a reasonable mind accepts as adequate to support
a conclusion.” Id. (internal quotation marks and citation omitted). We address each
of Appellant’s five arguments for reduction of the compensatory damages in the order
presented.
1. 	Overhead Expenses
{49} 	As discussed above, each shareholder’s compensation consists of the sum of
their direct physician gross revenues and ancillary services revenue less a portion of
NNMOC’s overhead costs. Hence, each shareholder is responsible for his or her share
of overhead expenses. Appellant argues that the compensatory damages award must
be reduced by $154,655.55 because he ceased being a shareholder in January 2010,
and thus he was no longer responsible for a portion of NNMOC’s overhead expenses.
Although Appellant does not dispute that he submitted a letter of resignation in
November 2010, he maintains that Appellees had agreed during negotiations over his
leave of absence to make his termination date retroactive to January 2010 if he did not
return to work after six months. Since he did not return to work, he contends that the
January termination date should apply.
{50} 	The district court found that Appellant’s status as a shareholder was terminated
on December 30, 2010, thirty days after Appellant submitted a letter of resignation,
and that his shareholder status was terminated as of that date pursuant to paragraph
7.1(d) of the shareholder employment agreement. It also found that Appellant “never

30
sought termination” during the leave of absence negotiations and that “[h]e did not
terminate those negotiations, or terminate his employment as he sought advantage in
the negotiation.” Hence, the district court implicitly rejected Appellant’s argument
that the parties had agreed to a termination date of January 2010. Based on the finding
of a termination date of December 2010, the district court found that Appellant
“continued to be responsible for his share of overhead” until that date. Finally, the
district court found that Appellant continued to receive a share of ancillary services
revenue and other revenue from NNMOC during the leave of absence negotiations.
Because Appellant challenges each of these findings, we review the record to
determine whether they are supported by substantial evidence. See Bagwell, 1986-
NMCA-013, ¶ 23.
{51} 	The heart of Appellant’s challenge to these findings is his contention that
Appellees agreed to make his termination date retroactive to January 2010 during the
leave of absence negotiations. We therefore address that issue first. Bair testified that
early in the negotiations Appellees proposed a termination date that would be
retroactive to the date the leave of absence began, rather than the date it ended. Bair
also testified, however, that in the course of negotiations Appellees reversed this
position and proposed that the termination date would not be retroactive. Finally, he
testified that no agreement on the terms of Appellant’s leave of absence was ever
reached. This testimony is supported by several exhibits admitted at trial, including

31
(1) an email sent to Bair by Appellant in March 2010 in which Appellant
acknowledges that agreement on the terms of the leave of absence had not been
reached and stating, “It may be best for me to resign”; (2) a letter sent on June 7, 2010,
in which Bair informed Appellant that NNMOC still considered him an employee of
the corporation and that he was still responsible for his share of overhead costs; and
(3) an email exchange in which Appellant acknowledges that the terms related to his
termination date had not been resolved as late as June 29, 2010. 	This evidence is
sufficient to support the district court’s finding that the parties did not agree to a
termination date in January 2010. Furthermore, since Appellant’s only argument as
to why the shareholder employment agreement’s termination provision does not apply
to him is that he had been terminated in January 2010, we conclude that substantial
evidence also supports the district court’s determination that that provision governed
Appellant’s termination.
{52} 	Turning to the district court’s determination that Appellant continued to receive
income through December 2010 and was responsible for a portion of overhead
expenses incurred during that time, we conclude that these findings are supported by
the record. 	Edward Street, Appellees’ forensic accounting expert, testified that a
portion of non-shareholder employee physician revenue and ancillary services revenue
had been allocated to Appellant in 2010 and that Appellant had received a salary of
over $30,000 in 2010. 	Street agreed with Appellees’ counsel that these payments

32
were pursuant to the shareholder employment agreement. He also agreed with counsel
that “so long as [Appellant is] employed, he has to pay his share of the overhead.”
Appellant’s shareholder employment agreement also requires that calculation of a
shareholder’s compensation must incorporate each shareholder’s portion of overhead
expenses. 	Thus, the terms of the shareholder employment agreement obliges
shareholders to cover their portion of NNMOC’s overhead expenses. We conclude
that there is substantial evidence in the record to support these findings.
{53} 	To the extent that Appellant maintains that the district court’s finding that he
was terminated in December 2010 is inconsistent with its finding that his share value
should be determined as of January 2010, we disagree. The employment termination
date is governed by paragraph 7 of the shareholder employment agreement, whereas
the date of valuation of the shares is governed by paragraph 6 of the shareholder
agreement. 	The shareholder agreement provides that “upon the occurrence of a
[t]riggering [e]vent, the [c]orporation shall redeem the shares of stock owned by the
[s]hareholder . . . upon the terms and for the purchase price set forth in [paragraph]
11.” 	Paragraph 	6(D) 	provides 	that 	“in 	the 	case 	of 	the 	termination 	of 	the
[s]hareholder’s employment,” the “triggering event” shall be “the earlier to occur of
(i) the date set forth in the [s]hareholder’s resignation . . ., or (ii) the last day on which
the [s]hareholder actually performs services for the [c]orporation.” The district court
found that the “triggering event” here was the date that Appellant stopped providing

33
services, which is the earlier of the two options stated in paragraph 6(D). 	Thus, it
treated the termination of employment as a condition antecedent to the triggering
event, which is consistent with the plain language of paragraph 6(D). We discern no
inconsistency in the district court’s findings as to the employment termination date
and the date for valuation of Appellant’s shares.
2. 	Inconsistent Accounting Treatment
{54} 	Appellant next argues that the district court’s findings based on Street’s
calculations of the damages are erroneous because Street handled a certain transaction
differently than the NNMOC board of directors did. 	Street testified that when
Schulhofer became a shareholder, he paid $137,500 for his shares. One-third of this
amount was allocated to each of the other shareholders (Appellant, Bair, and Jones)
on the shareholder allocation sheets. When Street examined the NNMOC financial
records and calculated the amounts paid to shareholders, he noted that stock purchase
payments should be treated as capital contributions to the corporation, rather than
income to shareholders. Accordingly, he reallocated $43,833.33 each from Appellant,
Bair, and Jones to NNMOC. According to Street, this adjustment had the effect of
reducing the amount NNMOC owed to Bair and Jones, whereas it increased the
amount Appellant owed to NNMOC because he was already running a deficit.
Street’s testimony supports the district court’s finding that reallocation of the stock

34
purchase payment of $137,500 “is required by sound accounting practices and
[principles.]”
{55} 	Appellant also argues that, because all of the shareholders had agreed to treat
the stock purchase payment as income years before Street examined NNMOC’s
financial records, that treatment cannot “form the basis for a finding of breach of
fiduciary duty” or breach of contract. After a careful review of the district court’s
findings, we conclude there is no finding or conclusion by the district court indicating
that it based its conclusions as to breach of contract or fiduciary duty specifically on
the way these funds were treated. Thus, we need not address this contention further.
3. 	Responsibility for Dr. Wise’s Negative Balance
{56} 	Appellant’s third argument against Street’s calculations is that the district court
erred in finding that “[Appellant] was responsible for, directed and/or intended the
entries reflecting his absorption of . . . Wise’s [who ceased being a shareholder at the
end of 2008] negative running balance and [Appellant] should be estopped from
repudiating that action.” 	Although the finding does not state the type of estoppel
invoked, the language of the district court’s finding evinces a reliance on the doctrine
of acquiescence, “a species of estoppel.” Scott v. Jordan, 1983-NMCA-022, ¶ 20, 99
N.M. 567, 661 P.2d 59. “[A]cquiescence arises where a person who knows that he is
entitled to . . . enforce a right neglects to do so for such a length of time that, under the
circumstances of the case, the other party may fairly infer that he has waived or

35
abandoned his right.” Id. (internal quotation marks and citation omitted). “Whether
the defense of acquiescence has been established is a factual issue which must be
decided under the facts existing in each case.” Id. ¶ 21.
{57} 	Here, according to the shareholder agreement, Wise’s negative balance could
have been borne by Appellant and Jones, who were the two shareholders at the time
Wise left NNMOC. 	Thus, Appellant was not obligated to allocate the balance to
himself. However, Appellees testified that the monthly shareholder allocation sheets,
including the one reflecting Wise’s negative balance, were completed and/or brought
to shareholder meetings by Appellant, and NNMOC’s accountant testified that
although she provided drafts of the allocation sheets to Appellant, Appellant
completed them. The allocation sheet in question was completed in early 2008, nearly
two years before Appellant stopped working at NNMOC in January 2010, and nearly
four years before trial. 	This evidence supports the district court’s finding that
Appellant was responsible for the allocation of Wise’s negative balance to himself and
that he failed to correct any error for nearly four years.
4. 	Improper Allocation of Jones’s Revenue
{58} 	Finally, Appellant argues that the compensatory damages award must be
adjusted because revenue generated by Jones before he was a shareholder was
improperly allocated to Jones by Street. He maintains that accounts receivable based
on Jones’s work as a non-shareholder employee physician should have been allocated

36
to Appellant and Wise, rather than credited to Jones as either direct physician gross
revenue or non-shareholder employee physician revenue. Appellant testified at trial
that the effect of this adjustment would be a reduction of $75,303 in the amount
Appellant owes in compensatory damages. Appellees argue that the amount allocated
to Jones on the shareholder allocation sheets by Street had already been adjusted to
exclude revenues generated by Jones before he was shareholder and, therefore, no
further adjustment is necessary.
{59} 	Under our standard of review of damages awards, we review the record and
affirm the district court’s findings as to the treatment of revenue attributed to Jones
if there is substantial evidence to support them. See Miller, 2014-NMCA-053, ¶ 28
(stating that damages awards are reviewed for substantial evidence). The district court
made only one finding of fact related to the allocation of revenues to Jones. 	That
finding states,
When . . . Jones executed his [s]hareholder [e]mployment
[a]greement, 	that 	[a]greement 	superseded 	his 	prior 	[e]mployment
[a]greement 	under 	the 	terms 	of 	his 	[s]hareholder 	[e]mployment
[a]greement and he is entitled to his proportionate share of all [a]ncillary
[s]ervices and [n]on-[s]hareholder [p]hysician revenues, there being no
limitation language in his [a]greement.
{60} 	This finding states only that Jones is entitled to a proportionate share of revenue
from ancillary services and non-shareholder employee physician services. It does not
address whether Jones was or was not credited with direct physician gross revenue

37
generated before he was a shareholder. This finding is supported by the text of the
shareholder employment agreement, in which we too find no language preventing the
allocation of those revenues to Jones. See Maestas v. Martinez, 1988-NMCA-020, ¶
15, 107 N.M. 91, 752 P.2d 1107 (“Where an issue to be determined rests upon the
interpretation of documentary evidence, an appellate court is in as good a position as
the trial court to determine the facts and draw its own conclusions.”).
{61} 	To the extent we might infer from the district court’s acceptance of Street’s
testimony as to the total amount Appellant owes NNMOC that it found that the
revenue allocated to Jones had already been adjusted to exclude revenue earned before
he was a shareholder, we conclude that the evidence does not support such a finding,
even viewed in the light most favorable to the judgment. See Weidler v. Big J Enters.,
Inc., 1998-NMCA-021, ¶ 30, 124 N.M. 591, 953 P.2d 1089 (“In reviewing a
sufficiency of the evidence claim, this Court views the evidence in a light most
favorable to the prevailing party and disregard[s] any inferences and evidence to the
contrary.” (alteration in original) (internal quotation marks and citation omitted)).
Street testified that NNMOC “may have made an adjustment” to exclude Jones’s non-
shareholder employee revenue from Jones’s compensation. He based his statement
that such an adjustment may have been made on his review, apparently on the witness
stand, of shareholder allocation sheets for the first six months that Jones was a
shareholder. In this review, he noted that the revenue allocated to Jones in the first

38
two months after becoming a shareholder was significantly less than that in the
following four months, and stated that “there is indication that the revenue reflected
. . . may have been adjusted based on the amounts [for the first two months] compared
to the subsequent [four months].” But Street also acknowledged that he “didn’t ask
or didn’t test that” question as part of his analysis and that he “[didn’t] know if
[NNMOC made] an adjustment.” 	This testimony is too speculative to amount to
substantial evidence.
{62} 	Nevertheless, we conclude that remand for recalculation is appropriate. Based
on the district court’s finding that Jones is entitled to a portion of non-shareholder
physician revenue, including that generated by him, we next examine the record for
evidence indicating that amount and whether he was properly credited with it. The
district court did not make an explicit finding as to the amount that should have been
allocated to Jones and, as discussed above, we cannot infer that the amounts shown
on the allocation sheets were adjusted properly. Confusingly, on the allocation sheets
admitted at trial, on which both Appellant and Street relied, the revenues allocated to
Jones are labeled as “direct physician revenue,” and there is no line item indicating
how much revenue was attributed to Jones from his services rendered as a non-
shareholder, although other non-shareholder physician revenues are identified by
physician name. Given that there is no specific finding as to the correct amount of
non-shareholder physician revenue that should have been allocated to Jones and that

39
“[a]s an appellate court, we will not originally determine the questions of fact[,]” we
remand for calculation of the amounts attributable to Jones’s direct physician revenue
and his portion of the non-shareholder physician revenue, including that generated by
him prior to becoming a shareholder. Guidry v. Petty Concrete Co., 1967-NMSC-048,
¶ 13, 77 N.M. 531, 424 P.2d 806.
5. 	Shareholder Approval of Bonuses
{63} 	Appellant next challenges the district court’s finding that there was no
“corroborating evidence or testimony to support [Appellant’s] contention that
[NNMOC] owed him any amount for loans, or that the other [s]hareholders agreed to
give him any bonus or other payment inconsistent with the . . . [s]hareholder
[e]mployment [a]greement.” Jones testified that “[u]nder no circumstances other than
those in the [shareholder e]mployment [a]greement have [the NNMOC shareholders]
ever okayed any bonus for any partner.” Bair testified to the effect that bonuses were
not given to shareholders just for doing a good job because “[t]hat’s not how the
corporation was set up.” He also stated that he never discussed with Appellant any
monies Appellant claimed were owed to him by NNMOC. Street testified that he did
not find any “loans for capital contributions made in 2008 reflected on the financial
statements for the year ended December 31, 2008, from [Appellant].” We conclude
that the district court’s finding is supported by substantial evidence.
B. 	Punitive Damages

40
{64} 	Appellant argues that “because not even nominal damages were awarded on the
fraud claims the punitive damages award is erroneous.” 	See UJI 13-1827 NMRA
(permitting a jury to award punitive damages “only if” it finds the plaintiff “should
recover compensatory [or nominal] damages.” (alteration in original)). 	We are
unpersuaded for two reasons: 	(1) punitive damages are appropriate when an actor
willfully breaches fiduciary duties and Appellant’s acts in overpaying himself fit that
category, and (2) Appellant’s argument is based on the faulty premise that money
damages are the only available remedies for fraud.
{65} 	First, New Mexico does not require a finding of fraud in the classical sense to
support a punitive damage award. See Akins v. United Steel Workers of Am., 2010-
NMSC-031, ¶ 28 n.3, 148 N.M. 442, 237 P.3d 744 (allowing punitive damages for
breach of duty of fair representation); Skeen v. Boyles, 2009-NMCA-080, ¶¶ 36-38,
146 N.M. 627, 213 P.3d 531 (allowing punitive damages for egregious breach of well-
sharing agreement). 	And it is settled in New Mexico that punitive damages are
available for breaches of fiduciary duties owed by and between shareholders in close
corporations. 	Walta, 2002-NMCA-015, ¶¶ 55-58. The most salient question to be
considered in any case in which punitive damages are requested is whether the actor
acted with a culpable mental state. Id. ¶¶ 57-58.
{66} 	Here, the district court made a number of relevant factual findings concerning
overpayments of bonuses to Appellant that Appellant does not challenge. The district

41
court found that Appellant maintained control of the financial aspects of NNMOC at
least until the beginning of 2010. Thus, Appellant alone determined the bonuses to
be paid to shareholders of NNMOC. 	His decisions were not subject to review by
NNMOC’s external accountant because of limitations he placed on her. Appellant
provided a single shareholder allocation sheet at meetings with the other shareholders,
and the single sheet was always retrieved by Appellant after the meeting. 	The
shareholder allocation sheets were not kept as part of the financial records of
NNMOC. 	Although the sheets were prepared in part by the NNMOC accountant,
Appellant adjusted the entries to and sometimes changed the format of the sheets
without input from her. These sheets were often inaccurate and misleading.
{67} 	In 2008 and 2009 Appellant gave himself bonuses that were in excess of and
not related to the amounts he had billed and collected from services provided. The
excess bonuses totaled approximately $370,000 by the end of 2009. 	The bonuses
were not approved by the other shareholders. In fact, the excess bonuses were not
discovered until Appellees’ forensic accounting expert found them during the
litigation.
{68} 	It is reasonable to infer from those findings of fact that Appellant knowingly
overpaid himself; that he used his control of corporate finances to do so; that he
intentionally and successfully hid the overpayments from his fellow shareholders and
NNMOC’s accountant; and that he was aware the overpayments were detrimental to

42
the economic health of NNMOC and his fellow shareholders. The district court came
to the same conclusion as evidenced by its findings and conclusions of law. 	The
picture painted by the Appellant’s self-dealing with regard to his excess bonuses
supports the district court’s conclusions that:
13. 	The actions of [Appellant] in regard to each of Jones, Bair[,] and
Schulhofer after becoming shareholders in [NNMOC] constitute
continuing fraud by [Appellant] on each of them and [NNMOC].
14. 	The actions of [Appellant] subsequent to Jones, Bair[,] and
Schulhofer becoming shareholders in [NNMOC] constitute a
breach of fiduciary duty by [Appellant] to each of them and
[NNMOC].
. . . .
17. 	[Appellant’s] misrepresentations 	to 	. 	. 	. 	Jones, 	Bair[,] and
Schulhofer constitute knowing misrepresentations to them and
[NNMOC].
. . . .
19. 	[Appellant] committed fraud and continuing fraud against . . .
Jones, Bair[,] and Schulhofer and [NNMOC].
20. 	[Appellant] breached his [f]iduciary duty to act with loyalty,
utmost good faith, and inherent fairness towards his fellow
shareholders and [NNMOC].
. . . .
24. 	[NNMOC] is a close corporation and the [s]hareholders owe each
other a fiduciary duty higher than the duty of good faith and fair
dealing imposed on all contractual relationships, which fiduciary
duty was breached by [Appellant].

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25. 	The fiduciary duty between [s]hareholders of a close corporation
to each other and to [NNMOC] is one of loyalty, good faith, . . .
inherent fairness[,] and the obligation not to profit at the expense
of [NNMOC], which fiduciary duty was breached by [Appellant].
These conclusions of law and their supporting factual findings obviously carry with
them the culpable mental state required to support an award of punitive damages.
{69} 	In addition, money damages are not the only remedy for fraud. Here, Appellees
requested declaratory judgment as to the deferred compensation clause. Specifically,
Appellees sought a statement that the deferred compensation clause in Appellant’s
shareholder employment agreement has no effect to the extent that it differs from the
deferred compensation clause in Appellees’ agreements. Thus, Appellees’ request
was not so much for a declaration of their “rights, status[,] and other legal relations”
but rather for modification of Appellant’s deferred compensation clause to match
theirs. See NMSA 1978, § 44-6-2 (1975). We conclude that the remedy sought was
an equitable one. A declaratory judgment action may sound in either law or equity.
An action for a declaratory judgment is sui generis, and whether
an action is to be treated as one at law or one in equity is to be
determined by the nature of the dispute. . . . [D]eclaratory judgment
actions, being statutory creatures, are neither inherently legal nor
inherently equitable but may depend upon equitable considerations. The
legal or equitable nature of a declaratory judgment proceeding is to be
determined by the pleadings, the relief sought, and the nature of each
case.
22A Am. Jur. 2d Declaratory Judgments § 2 (2004) (footnotes omitted). 	Because
Appellees sought not to avoid the obligations of Appellant’s agreement altogether but

44
to make his agreement congruent with theirs, their request falls squarely within the
definition of contract reformation, which is “[a]n equitable remedy by which a court
will modify a written agreement to reflect the actual intent of the parties, usu[ally] to
correct fraud or mutual mistake in the writing[.]” Black’s Law Dictionary 1394 (9th
ed. 2009). Reformation is a remedy for fraud. See Chromo Mountain Ranch P’ship
v. Gonzales, 1984-NMSC-058, ¶¶ 6, 9, 101 N.M. 298, 681 P.2d 724 (stating that
“reformation is the proper remedy for constructive fraud regarding a land sale
contract” and citing the Restatement (Second) of Contracts § 166 (1979)); Buck v.
Mountain States Inv. Corp., 1966-NMSC-090, ¶ 7, 76 N.M. 261, 414 P.2d 491 (“[A]
court of equity may grant reformation of a contract where . . . through mistake on the
part of one party and fraud . . . on the part of the other party, the written instrument
drafted to evidence a contract fails to express the real agreement and intentions of the
parties.”); Pacheco v. Martinez, 1981-NMCA-116, ¶ 32, 97 N.M. 37, 636 P.2d 308
(stating that reformation is an equitable remedy); Restatement (Second) of Contracts
§ 166 (1981) (“If a party’s manifestation of assent is induced by the other party’s
fraudulent misrepresentation as to the contents or effect of a writing evidencing . . .
an agreement, the court . . . may reform the writing to express the terms of the
agreement 	as 	asserted 	. 	. 	. 	if 	the 	recipient 	was 	justified 	in 	relying 	on 	the
misrepresentation[.]”). 	The district court granted Appellees’ request in the final
judgment.

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{70} 	Having concluded that Appellees were granted equitable relief, we next address
whether such relief may form the basis for an award of punitive damages and conclude
that it can. In Madrid v. Marquez, Mr. and Mrs. Madrid, an elderly couple, agreed to
transfer their home to their neighbor, Marquez, in exchange for his promise to care for
them and to let them live in the home rent free for the rest of their lives. 	2001-
NMCA-087, ¶ 2, 131 N.M. 132, 33 P.3d 683. After Marquez obtained the deed to the
Madrids’ home, he “began harassing, threatening, and intimidating the elderly and ill
couple and ultimately attempted to force the Madrids from their home.” Id. After a
bench trial, the district court ordered the deed rescinded or reformed such that the
Madrids would retain a life estate in the home with a remainder interest in Marquez.
Id. ¶ 1. It also awarded $20,000 in punitive damages. Id.
{71} 	On appeal, Marquez made the same argument that Appellant makes here, that
“punitive damages cannot be recovered without recovery of compensatory or nominal
damages.” 	Id. ¶ 3. 	While this Court agreed that “Marquez correctly state[d] the
general law of New Mexico regarding punitive damages,” it nevertheless held that
“justice is better served by allowing the award of punitive damages in those equity
cases where the conduct of the wrongdoer warrants [such] damages in order to deter
clearly 	unacceptable 	behavior.” 	Id. 	Under 	this 	so-called 	“modern
approach . . . [r]equiring an award of compensatory damages as a prerequisite to an
award for punitive damages is a technical rule that should not be applied blindly[.]”

46
Id. ¶ 8. 	Noting that the purpose of the rule requiring compensatory or nominal
damages “is that it first insures that some legally protected interest has been invaded
[and] prevents the assessment of punitive damages against one who may have caused
damage without legal injury[,]” this Court held that “[t]here is no reason why an
award of equitable relief may not fulfill this same function[.]” Id. (internal quotation
marks and citation omitted). 	Thus, where “[a] plaintiff [has] establish[ed] a cause of
action in equity and the wrongdoer’s misconduct [is] willful, wanton, malicious,
reckless, . . . or fraudulent and in bad faith” punitive damages are allowable to “do[]
complete justice.” Id. (internal quotation marks and citation omitted).
{72} 	Here, in awarding the equitable remedy of modification of Appellant’s deferred
compensation clause, the district court acknowledged the legal injury to Appellees due
to Appellant’s fraudulent misrepresentation. The next inquiry is whether the evidence
supports the district court’s findings that Appellant had a culpable state of mind
related to the fraud, which Appellant challenges. In addition to the evidence discussed
above related to Appellees’ reliance on Appellant’s representations, the evidence
supports an inference that Appellant not only knew about, but actively engineered a
better deferred compensation clause for himself than for the other shareholders. For
instance, there were several email exchanges in September 2007 between Appellant
and the NNMOC attorney, who was also Appellant’s personal attorney, in which the
attorney highlighted the differences between Appellant’s shareholder employment

47
agreement and Jones’s agreement. The fact that Appellant told Bair that he did not
intend to enforce the deferred compensation clause, but included it in his agreement
in case Appellees formed a different company without him indicates that he was aware
of the differences in the agreements at the time they were drafted. The evidence also
supports an inference that Appellant acted to hide the differences in the deferred
compensation clauses from Appellees. For example, although Schulhofer and Bair
asked Appellant about the terms of the agreements, Appellant did not tell them about
the deferred compensation clause in his agreement. 	Several people testified that
Appellant kept the corporate documents, including the shareholders’ agreements, in
his possession and that no corporate documents were kept at the NNMOC offices.
This evidence is sufficient to support the district court’s findings to the effect that
Appellant knowingly and intentionally misled Appellees about the shareholder
employment agreements.
{73} 	We conclude that, under Madrid, the equitable remedy provides an independent
basis supporting the award of punitive damages. The final judgment acknowledged
that Appellees established a cause of action in equity and the evidence supports a
finding of a culpable state of mind. Together, these elements are sufficient to support
an award of punitive damages. See id. Consequently, we affirm on this issue.
CONCLUSION

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{74} 	We affirm the district court’s judgment with two exceptions. For the reasons
stated above, the finding of a prima facie tort is reversed. 	As to the amount of
compensatory damages due to NNMOC, we affirm the district court’s findings as to
calculations of the damages in all respects except for the calculation and allocation of
non-shareholder employee revenue generated by Jones before he became an NNMOC
shareholder. We remand for recalculation of this amount.
{75} 	IT IS SO ORDERED.
MICHAEL D. BUSTAMANTE, Judge
WE CONCUR:
__________________________________
RODERICK T. KENNEDY, Chief Judge
__________________________________
LINDA M. VANZI, Judge