{ "id": 1598969, "name": "Lloyd C. SCOTT and Annette Scott, individually and as shareholders of the Ladron Corporation, a New Mexico corporation, Plaintiffs-Appellees, v. James R. WOODS and Patricia V. Woods, Defendants-Appellants", "name_abbreviation": "Scott v. Woods", "decision_date": "1986-08-07", "docket_number": "No. 8149", "first_page": "177", "last_page": "188", "citations": [ { "type": "official", "cite": "105 N.M. 177" }, { "type": "parallel", "cite": "730 P.2d 480" } ], "court": { "name_abbreviation": "N.M. Ct. App.", "id": 9025, "name": "Court of Appeals of New Mexico" }, "jurisdiction": { "id": 52, "name_long": "New Mexico", "name": "N.M." }, "cites_to": [ { "cite": "89 N.M. 474", "category": "reporters:state", "reporter": "N.M.", "case_ids": [ 2863188 ], "weight": 2, "opinion_index": 0, "case_paths": [ "/nm/89/0474-01" ] }, { "cite": "605 F.2d 519", "category": "reporters:federal", "reporter": "F.2d", "case_ids": [ 1444693 ], "weight": 2, "opinion_index": 0, "case_paths": [ "/f2d/605/0519-01" ] }, { "cite": "101 N.M. 408", "category": "reporters:state", "reporter": "N.M.", "case_ids": [ 1586481 ], "weight": 2, "opinion_index": 0, "case_paths": [ "/nm/101/0408-01" ] }, { "cite": "86 N.M. 141", "category": "reporters:state", "reporter": "N.M.", "case_ids": [ 2825763 ], "weight": 2, "year": 1974, "opinion_index": 0, "case_paths": [ "/nm/86/0141-01" ] }, { "cite": "96 N.M. 340", "category": "reporters:state", "reporter": "N.M.", "case_ids": [ 1577354 ], "weight": 2, "opinion_index": 0, "case_paths": [ "/nm/96/0340-01" ] }, { "cite": "61 N.M. 277", "category": "reporters:state", "reporter": "N.M.", "case_ids": [ 5317469 ], "weight": 2, "year": 1956, "opinion_index": 0, "case_paths": [ "/nm/61/0277-01" ] }, { "cite": "341 So.2d 818", "category": "reporters:state_regional", "reporter": "So. 2d", "case_ids": [ 9685462 ], "opinion_index": 0, "case_paths": [ "/so2d/341/0818-01" ] }, { "cite": "310 N.Y.S.2d 55", "category": "reporters:state", "reporter": "N.Y.S.2d", "year": 1970, "pin_cites": [ { "parenthetical": "where sole relief requested was a money judgment, right to a jury trial was stated" } ], "opinion_index": 0 }, { "cite": "62 Misc.2d 889", "category": "reporters:state", "reporter": "Misc. 2d", "case_ids": [ 1215511 ], "year": 1970, "pin_cites": [ { "parenthetical": "where sole relief requested was a money judgment, right to a jury trial was stated" } ], "opinion_index": 0, "case_paths": [ "/misc2d/62/0889-01" ] }, { "cite": "456 N.E.2d 224", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1983, "opinion_index": 0 }, { "cite": "74 Ill.Dec. 722", "category": "reporters:state", "reporter": "Ill. Dec.", "year": 1983, "opinion_index": 0 }, { "cite": "119 Ill.App.3d 136", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 3627996 ], "year": 1983, "opinion_index": 0, "case_paths": [ "/ill-app-3d/119/0136-01" ] }, { "cite": "621 P.2d 270", "category": "reporters:state_regional", "reporter": "P.2d", "case_ids": [ 10441744 ], "year": 1980, "opinion_index": 0, "case_paths": [ "/p2d/621/0270-01" ] }, { "cite": "623 F.Supp. 889", "category": "reporters:federal", "reporter": "F. Supp.", "case_ids": [ 3819983 ], "opinion_index": 0, "case_paths": [ "/f-supp/623/0889-01" ] }, { "cite": "437 N.Y.S.2d 401", "category": "reporters:state", "reporter": "N.Y.S.2d", "year": 1981, "opinion_index": 0 }, { "cite": "80 A.D.2d 909", "category": "reporters:state", "reporter": "A.D.2d", "case_ids": [ 3231088, 3236841, 3233087 ], "year": 1981, "opinion_index": 0, "case_paths": [ "/ad2d/80/0909-01", "/ad2d/80/0909-03", "/ad2d/80/0909-02" ] }, { "cite": "705 P.2d 443", "category": "reporters:state_regional", "reporter": "P.2d", "case_ids": [ 10412592 ], "year": 1985, "opinion_index": 0, "case_paths": [ "/p2d/705/0443-01" ] }, { "cite": "104 N.M. 523", "category": "reporters:state", "reporter": "N.M.", "case_ids": [ 1594872 ], "weight": 2, "opinion_index": 0, "case_paths": [ "/nm/104/0523-01" ] }, { "cite": "80 N.M. 773", "category": "reporters:state", "reporter": "N.M.", "case_ids": [ 5355445 ], "weight": 2, "year": 1969, "pin_cites": [ { "page": "776" }, { "page": "909" } ], "opinion_index": 0, "case_paths": [ "/nm/80/0773-01" ] }, { "cite": "760 F.2d 27", "category": "reporters:federal", "reporter": "F.2d", "case_ids": [ 22846 ], "weight": 2, "opinion_index": 0, "case_paths": [ "/f2d/760/0027-01" ] }, { "cite": "103 R.I. 60", "category": "reporters:state", "reporter": "R.I.", "case_ids": [ 3062568 ], "weight": 2, "year": 1967, "opinion_index": 0, "case_paths": [ "/ri/103/0060-01" ] }, { "cite": "68 L.Ed.2d 298", "category": "reporters:federal", "reporter": "L. Ed. 2d", "year": 1981, "opinion_index": 0 }, { "cite": "101 S.Ct. 1979", "category": "reporters:federal", "reporter": "S. Ct.", "year": 1981, "opinion_index": 0 }, { "cite": "451 U.S. 910", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 6209920, 6210884, 6211141, 6210407, 6209610, 6211639, 6209079, 6211353, 6209338, 6208861 ], "year": 1981, "opinion_index": 0, "case_paths": [ "/us/451/0910-05", "/us/451/0910-07", "/us/451/0910-08", "/us/451/0910-06", "/us/451/0910-04", "/us/451/0910-10", "/us/451/0910-02", "/us/451/0910-09", "/us/451/0910-03", "/us/451/0910-01" ] }, { "cite": "636 F.2d 16", "category": "reporters:federal", "reporter": "F.2d", "case_ids": [ 627292 ], "opinion_index": 0, "case_paths": [ "/f2d/636/0016-01" ] }, { "cite": "487 F.Supp. 999", "category": "reporters:federal", "reporter": "F. Supp.", "case_ids": [ 4140222 ], "opinion_index": 0, "case_paths": [ "/f-supp/487/0999-01" ] }, { "cite": "328 N.E.2d 505", "category": "reporters:state_regional", "reporter": "N.E.2d", "weight": 3, "year": 1975, "pin_cites": [ { "parenthetical": "stockholders in a close corporation owe one another the same fiduciary duty as that owed by one partner to another in a partnership" }, { "page": "579-80" } ], "opinion_index": 0 }, { "cite": "367 Mass. 578", "category": "reporters:state", "reporter": "Mass.", "case_ids": [ 3869369 ], "year": 1975, "pin_cites": [ { "parenthetical": "stockholders in a close corporation owe one another the same fiduciary duty as that owed by one partner to another in a partnership" } ], "opinion_index": 0, "case_paths": [ "/mass/367/0578-01" ] }, { "cite": "30 F.Supp. 163", "category": "reporters:federal", "reporter": "F. Supp.", "case_ids": [ 4217044 ], "year": 1939, "opinion_index": 0, "case_paths": [ "/f-supp/30/0163-01" ] }, { "cite": "342 F.2d 796", "category": "reporters:federal", "reporter": "F.2d", "case_ids": [ 874901 ], "opinion_index": 0, "case_paths": [ "/f2d/342/0796-01" ] }, { "cite": "611 P.2d 392", "category": "reporters:state_regional", "reporter": "P.2d", "case_ids": [ 10446473 ], "year": 1980, "opinion_index": 0, "case_paths": [ "/p2d/611/0392-01" ] }, { "cite": "369 U.S. 469", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 6168796 ], "weight": 4, "year": 1962, "pin_cites": [ { "page": "477-78" } ], "opinion_index": 0, "case_paths": [ "/us/369/0469-01" ] }, { "cite": "359 U.S. 500", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 6167389 ], "weight": 3, "year": 1959, "opinion_index": 0, "case_paths": [ "/us/359/0500-01" ] }, { "cite": "642 F.2d 397", "category": "reporters:federal", "reporter": "F.2d", "case_ids": [ 1197242 ], "opinion_index": 0, "case_paths": [ "/f2d/642/0397-01" ] }, { "cite": "91 P. 724", "category": "reporters:state_regional", "reporter": "P.", "year": 1907, "pin_cites": [ { "parenthetical": "where right to damages is merely incidental and dependent upon plaintiff's right to an injunction, the court may assess damages already sustained; if the action is brought primarily for the recovery of a money judgment, it is triable by a jury" } ], "opinion_index": 0 }, { "cite": "14 N.M. 245", "category": "reporters:state", "reporter": "N.M.", "case_ids": [ 204479 ], "year": 1907, "pin_cites": [ { "parenthetical": "where right to damages is merely incidental and dependent upon plaintiff's right to an injunction, the court may assess damages already sustained; if the action is brought primarily for the recovery of a money judgment, it is triable by a jury" } ], "opinion_index": 0, "case_paths": [ "/nm/14/0245-01" ] }, { "cite": "99 N.M. 788", "category": "reporters:state", "reporter": "N.M.", "case_ids": [ 1584554 ], "weight": 2, "year": 1983, "opinion_index": 0, "case_paths": [ "/nm/99/0788-01" ] }, { "cite": "90 F.R.D. 313", "category": "reporters:specialty", "reporter": "F.R.D.", "case_ids": [ 3912029 ], "opinion_index": 0, "case_paths": [ "/frd/90/0313-01" ] }, { "cite": "32 N.Y.U.L.Rev. 980", "category": "journals:journal", "reporter": "N.Y.U. L. Rev.", "year": 1957, "opinion_index": 0 }, { "cite": "65 Nw.U.L.Rev. 697", "category": "journals:journal", "reporter": "Nw. U. L. Rev.", "year": 1970, "opinion_index": 0 }, { "cite": "81 Yale L.J. 112", "category": "journals:journal", "reporter": "Yale L.J.", "year": 1971, "opinion_index": 0 }, { "cite": "32 A.L.R.4th 1111", "category": "reporters:specialty", "reporter": "A.L.R. 4th", "year": 1984, "opinion_index": 0 }, { "cite": "270 S.C. 691", "category": "reporters:state", "reporter": "S.C.", "case_ids": [ 2162290 ], "weight": 2, "year": 1978, "opinion_index": 0, "case_paths": [ "/sc/270/0691-01" ] }, { "cite": "396 U.S. 531", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 11336091 ], "weight": 7, "year": 1970, "pin_cites": [ { "page": "537-38" }, { "page": "737-38" }, { "page": "542-43" }, { "page": "740" } ], "opinion_index": 0, "case_paths": [ "/us/396/0531-01" ] }, { "cite": "6 N.M. L.Rev. 57", "category": "journals:journal", "reporter": "N.M. L. Rev.", "year": 1975, "pin_cites": [ { "page": "58, 69-70" } ], "opinion_index": 0 } ], "analysis": { "cardinality": 1506, "char_count": 39588, "ocr_confidence": 0.779, "pagerank": { "raw": 1.1057794903218679e-07, "percentile": 0.5695245166803161 }, "sha256": "d0a764e665bd65a17b293cd8f52d8b45c73d2f28aa81867c44c311f223429af4", "simhash": "1:472bf9a6443e8df0", "word_count": 6479 }, "last_updated": "2023-07-14T20:20:30.820213+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [ "ALARID and GARCIA, JJ., concur." ], "parties": [ "Lloyd C. SCOTT and Annette Scott, individually and as shareholders of the Ladron Corporation, a New Mexico corporation, Plaintiffs-Appellees, v. James R. WOODS and Patricia V. Woods, Defendants-Appellants." ], "opinions": [ { "text": "OPINION\nMINZNER, Judge.\nDefendants James R. and Patricia V. Woods, husband and wife, appeal jury verdicts of $250,000 in favor of plaintiff Ladr\u00f3n Corporation and $200,000 in favor of plaintiffs Lloyd C. and Annette Scott, husband and wife. Their appeal raises the question of whether, under the New Mexico Constitution, a party may demand a jury trial on legal issues arising in a stockholder\u2019s derivative suit, and, if so, whether plaintiffs\u2019 derivative suit included issues to which the right of jury trial attached. We conclude that the trial judge erred in denying the Woods\u2019 motion to sever or, in the alternative, for separate trial because plaintiffs\u2019 claim on behalf of the corporation asked the court for equitable relief on equitable grounds; we hold, further, that the judgments must be set aside, and the cause remanded for a new trial.\nBackground\nIn 1981, the Scotts and the Woods decided to purchase and operate a liquor package store and lounge known as the Roadrunner Lounge, in Socorro, New Mexico. They also decided to use Ladr\u00f3n Corporation, which had been created by the Woods but never funded, to acquire title. Each of the individuals received equal shares of stock in Ladr\u00f3n, assumed a corporate office, and became a member of the board of directors. The Roadrunner Lounge was located next to the Scotts\u2019 auto parts store.\nLadr\u00f3n borrowed $200,000 from the First National Bank of Belen and $130,000 from the First National Bank of Socorro. The Scotts and the Woods personally guaranteed the indebtedness. Ladr\u00f3n then purchased the property on which the Roadrunner was located, paying $60,000 for the buyer\u2019s interest and assuming a balance of $60,000 due the seller, S.E. Gutierrez, and acquired an initial inventory for $140,000.\nFrom late 1981 to the end of 1982, the record indicates the parties participated in an informal management arrangement. The board of directors never met, and Mr. Woods and Mr. Scott discussed and resolved problems as they arose. During this period, responsibility for the books, a central issue at trial, shifted several times. The package store opened on November 17, 1981, and the lounge opened on December 11, 1981 under a full-time manager and an assistant manager.\nMrs. Scott, who kept the auto parts store books, set up the first books and initially did the bookkeeping. In January 1982, she relinquished the books to the Woods\u2019 adult son, Peter. He may have delivered them to Mrs. Woods. In March 1982, the full-time manager was replaced by his assistant, Jon Jaramillo; there was evidence at trial of friction between Jaramillo and Mrs. Woods, and in April, Mr. Woods advised her to stay away from the Roadrunner. After Peter returned to school in the fall of 1982, Mr. Scott agreed to pick up the daily cash register tapes, Mr. Woods said he would pay the bills, and they hired a bookkeeper to do tax reports and payroll. It is clear that Mrs. Woods also did some bookkeeping; an accountant, who was interested in selling computer equipment, sold her a small computer and allowed Ladr\u00f3n to use his larger one. Mr. Scott testified that he and Mr. Woods discussed selling the Roadrunner in November. Nothing was decided.\nIn mid-January 1983, Mr. Scott learned from Jaramillo that suppliers had placed the Roadrunner Lounge on a cash Basis. On further inquiry, Jaramillo determined that the corporation owed eighty or ninety thousand dollars to different suppliers, and the debts were six months old. When approached, Mr. Woods said that the corporation had forty to sixty thousand dollars available; he also said he would pay the outstanding bills.\nIn addition to this financial emergency, other problems in operating the business soon surfaced. The informal management arrangement proved ineffective.\nThe record indicates that sometime in the spring of 1983, the Scotts told the Woods that they no longer wanted to participate in management, and there was further discussion of selling the business. In April 1983, Mr. Scott discontinued picking up the cash register tapes; Jaramillo took over this task. In May 1983, Mrs. Woods took over operation of the package store, and Jaramillo was restricted to operating the bar. He and Mrs. Woods continued to have difficulties working together; he quit in July 1983. Peter replaced him in the bar, and Mrs. Woods became manager. She did the bookkeeping with assistance from the accountant. In July or August 1983, the Roadrunner was listed for sale at approximately $450,000. The best offer received was $360,000. Mr. Scott testified that he rejected the offer on Mr. Woods\u2019 advice.\nMore financial and management difficulties surfaced after the business was listed for sale. The informal management arrangement now failed.\nThe First National Bank in Socorro brought suit against the Scotts and the Woods in October 1983 on their 1981 guaranty. The Scotts hired an attorney, who made a formal request for access to the corporate records, and the board of directors held its first formal meeting in November 1983. At that meeting, which the Woods secretly taped, the Scotts expressed satisfaction with Mrs. Woods\u2019 management, and she continued operating the business. There was evidence at trial, however, that the Scotts made their statements only because Mr. Woods privately begged Mr. Scott to do so. Peter became manager in December 1983. In January 1984, the Internal Revenue Service notified Ladr\u00f3n that taxes were due for the periods ending June 30, 1982 and December 31, 1982.\nThe Scotts and the Woods settled the bank suit in February 1984, but the Scotts themselves sued in March. The Scotts\u2019 complaint contained six counts. With respect to all counts but the first, plaintiffs claimed compensatory and punitive damages as provided in the ad damnum clause. In the first count, plaintiffs asked that a receiver be appointed and for various injunctions. The first count appears to be a claim brought primarily on behalf of the corporation, but it also alleges grounds for dissolution. See generally NMSA 1978, \u00a7 53-16-16(A) (Supp.1986) (authorizing the district court to liquidate corporate assets in an action by a shareholder). The sixth count is a claim brought only on behalf of the Scotts. The other counts appear to have been brought on behalf of Ladr\u00f3n, as well as the Scotts. Under the Scotts\u2019 theory of the case, the Woods had injured the corporation by various kinds of misconduct and, in injuring the corporation, had injured the Scotts individually.\nThe Woods answered. They also counterclaimed on behalf of themselves and Ladr\u00f3n. Under the Woods' theory of the case, the Scotts had abandoned management of the corporation, failed to participate in additional capitalization as agreed, and otherwise breached fiduciary duties. Additionally, the Woods claimed breach of a partnership agreement between Mr. Woods and Mr. Scott.\nThe trial court appointed a receiver on April 10. He found no books and records, only a few records of cash balances in 1982 and a bar inventory. There were several checkbooks, which were not current. By calling creditors, he determined that forty or fifty thousand dollars was due different distributors. On April 11, the accountant who had helped Mrs. Woods in 1982 and 1983 was appointed as co-receiver, and the court ordered an inventory.\nThe relationship among the parties and members of their family grew progressively worse. At one point, the Socorro police arrested Peter for interfering with the receivers, and he in turn sued the original receiver and the Scotts\u2019 lawyer. On May 14, the trial court relieved the accountant as receiver. The court also entered a preliminary injunction enjoining the parties from \u201ccontacting, threatening or harassing one another, or the agents and family members of the parties * * In May 1984, Peter purchased the seller\u2019s interest in the Gutierrez real estate contract. He also purchased the note owed the First National Bank of Belen, although the date is not certain. After the receivership ended, he sought to foreclose on the real estate contract. He also sued the Scotts on the Belen bank note. The present suit came to trial about the time Peter attempted to retake the underlying property under the real estate contract.\nThe Woods consistently objected to a jury trial of the issues relating to the claims made on behalf of Ladr\u00f3n. Prior to trial, they moved to sever, or try separately, the issues raised by the suit on behalf of Ladr\u00f3n; they argued that plaintiffs were not entitled to a jury trial of those issues because they raised equitable issues or because plaintiffs had asked for equitable relief. Plaintiffs argued that they were entitled to a jury trial on all issues because they had either raised legal claims, asked for damages, or raised factual issues. The trial court denied the motion.\nThe trial court permitted evidence that Mrs. Woods had made trust fund money available to Peter at the time he acquired the Gutierrez\u2019 interest and that his father assisted him in acquiring the Belen bank\u2019s interest. The trial court refused to permit Peter\u2019s counsel to testify about Peter\u2019s reasons for foreclosing on the real estate contract. The Woods objected to both rulings, claiming that they should have been permitted to establish their lack of involvement in Peter\u2019s activities. At this point, plaintiffs\u2019 counsel argued to the court that the evidence admitted concerning Peter\u2019s conduct was relevant on the issue of his parent\u2019s fraud. The record does not indicate whether the evidence was admitted with respect to the corporate claim or claims, claims made on behalf of the Scotts individually, or both.\nThe Woods submitted requested findings of fact and conclusions of law. None were entered; rather, the trial court instructed the jury on issues related to the first, second, third and sixth counts. The trial court denied defendants\u2019 request for special interrogatories.\nThe jury returned a verdict in favor of Ladr\u00f3n, finding by special interrogatory that there were grounds for dissolution and liquidation. They also returned a verdict for the Scotts, which included $50,000 punitive damages. The Woods moved for remittitur or, in the alternative, for a new trial, claiming error in denying their pretrial motion, instructing the jury, and in admitting evidence.\nDiscussion\nThe Woods contend that all of the issues relating to the derivative action should have been decided by the court; because the equitable nature of a derivative action controls, there is no constitutional right to a jury trial. They also claim that the trial court erred in instructing the jury to determine whether Ladr\u00f3n should be dissolved.\nPlaintiffs initially suggest that the New Mexico Business Corporation Act authorizes a jury trial in a shareholder\u2019s derivative action. See NMSA 1978, \u00a7 53-11-47 (Repl.Pamp.1983). This statute, however, does not answer the appellate issues, although it affects a shareholder\u2019s right to bring derivative suits on behalf of the corporation. See generally Wellborn and Barker, 1975 Amendments to the New Mexico Business Corporation Act, 6 N.M. L.Rev. 57, 58, 69-70 (1975).\nRelying on Ross v. Bernhard, 396 U.S. 531, 90 S.Ct. 733, 24 L.Ed.2d 729 (1970), plaintiffs also contend that the issues they raised on behalf of Ladron are legal rather than equitable and, because there are factual issues underlying the right to dissolution, the trial court properly submitted all the claims they raised on behalf of the corporation to the jury. In Ross v. Bernhard, the United States Supreme Court said:\n[Wjhere equitable and legal issues are joined in the same action, there is a right to jury trial on the legal claims which must not be infringed either by trying the legal issues incidental to the equitable ones or by a court trial of a common issue existing between the claims. The Seventh Amendment question depends on the nature of the issue to be tried rather than the character of the overall action.\n396 U.S. at 537-38, 90 S.Ct. at 737-38. In that case, the Court held these principles were applicable to a shareholder\u2019s derivative action.\nRoss v. Bernhard involved damages for injuries sustained by the corporation as a result of allegedly excessive brokerage commissions authorized by the directors. The Court further observed:\n[W]e have no doubt that the corporation\u2019s claim is, at least in part, a legal one. The relief sought is money damages. There are allegations in the complaint of a breach of fiduciary duty, but there are also allegations of ordinary breach of contract and gross negligence. The corporation, had it sued on its own behalf, would have been entitled to a jury\u2019s determination, at a minimum, of its damages against its broker under the brokerage contract and of its rights against its own directors because of their negligence. Under these circumstances, it is unnecessary to decide whether the corporation\u2019s other claims are also properly triable to a jury.\n396 U.S. at 542-43, 90 S.Ct. at 740. (emphasis added).\nAs the Woods contend, however, Ross v. Bernhard relies on the right to jury trial protected by the seventh amendment. In this case, the question is the scope of the right to jury trial protected by the state constitution. See N.M. Const, art. II, \u00a7 12. Although the seventh amendment governs the right to trial by jury in federal courts, it does not control the right to jury trial in state courts. Pelfrey v. Bank of Greer, 270 S.C. 691, 244 S.E.2d 315 (1978). See generally D. Dobbs, Remedies \u00a7 2.6 (1973).\nThe Woods\u2019 contentions raise three appellate issues, which the parties have addressed somewhat differently. These issues are: (1) whether the right to jury trial in New Mexico attaches to legal issues arising in a derivative suit, (2) whether the derivative action on behalf of Ladr\u00f3n and the prayer for dissolution included issues triable to a jury, and (3) whether reversible error occurred at trial. We address each issue separately.\n1. Right to Jury Trial in a Shareholder\u2019s Derivative Suit\nThe result in Ross v. Bernhard has not yet been adopted by many state courts. See generally 32 A.L.R.4th 1111 (1984). The result has been criticized as historically and analytically unsound. See Note, Ross v. Bernhard; The Uncertain Future of the Seventh Amendment, 81 Yale L.J. 112 (1971); Note, Jury Trial in a Stockholders\u2019 Derivative Suit, 65 Nw.U.L.Rev. 697 (1970). We recognize that the result rests on a legal fiction that is not consistent with the historical development of the derivative suit, see generally Prunty, The Shareholders\u2019 Derivative Suit: Notes on its Derivation, 32 N.Y.U.L.Rev. 980 (1957), and that it introduces a new complexity, illustrated by this appeal, which creates practical problems for the trial court.\nDeveloped as a corrective for managerial abuse when minority shareholders had been wrongfully deprived of an effective voice, the derivative suit was recognized on the theory that a breach of trust had occurred, which the shareholders were entitled to remedy, and on the principle that the remedy was enforcement in equity of a corporate right of action. Once the shareholder was allowed to proceed on behalf of the corporation, the equity court entertained the entire proceeding; it was not necessary to identify ,and separate the claims made on behalf of the corporation. Ross v. Bernhard introduces a new complexity; under that decision, each claim asserted on behalf of the corporation must be evaluated separately. See Camrex (Holdings) Ltd. v. Camrex Reliance Paint, 90 F.R.D. 313 (E.D.N.Y.1981). Yet, prior to Ross v. Bernhard, the derivative action had been treated as a unitary suit. Consequently, prior case law provides uncertain guidance to the trial judge who must evaluate the individual claims made on behalf of the corporation.\nNevertheless, Ross v. Bernhard clearly extends the use of the jury trial on the principle that extension is desirable. That principle has been recognized by our supreme court. See Evans Financial Corp. v. Strasser, 99 N.M. 788, 664 P.2d 986 (1983).\nIn addition, the result gives the trial court useful flexibility in managing and resolving disputes by emphasizing substance rather than form. Cf. Mogollan Gold and Copper Co. v. Stout, 14 N.M. 245, 91 P. 724 (1907) (where right to damages is merely incidental and dependent upon plaintiff\u2019s right to an injunction, the court may assess damages already sustained; if the action is brought primarily for the recovery of a money judgment, it is triable by a jury). Under the three-part test approved in Ross v. Bernhard, the trial court identifies issues for jury determination by taking into account the nature of the underlying claim, as well as its historical origins, and the practical limitations of the jury or, as more commonly stated, the trial court considers a three-prong test: (1) premerger custom, (2) remedy sought, and (3) abilities and limitations of juries. Cf. United States v. State of New Mexico, 642 F.2d 397 (10th Cir.1981) (applying federal law in a diversity action and recognizing a right to jury trial in a suit for declaratory and injunctive relief and recovery of taxes). Thus, the nature of the issues to be tried and the trial court\u2019s contemporary capacity to grant relief become more significant than the terminology used in the complaint or past practice when courts of equity were separate from courts of law.\nIn fact, Ross v. Bernhard applied the earlier, flexible analysis expressed in Bear con Theatres, Inc. v. Westover, 359 U.S. 500, 79 S.Ct. 948, 3 L.Ed.2d 988 (1959), and extended in Dairy Queen v. Wood, 369 U.S. 469, 82 S.Ct. 894, 8 L.Ed.2d 44 (1962). In the former case, the Court refused to allow the order in which issues arose to control a party\u2019s right to a jury trial. After that decision, \u201cit is no longer enough to say that an action was conceived in equity and was always brought in that court; the \u2018nature of the issue\u2019 presented is the determinative factor. Yet, the nature of issue is almost always determined by surrounding circumstances and the manner in which they are presented.\u201d Note, 65 Nw.L.Rev. at 706-07. In the latter case, the Court noted that \u201cthe constitutional right to trial by jury cannot be made to depend upon the choice of words used in the pleadings.\u201d 369 U.S. at 477-78. The former case was cited with approval and applied in Evans Financial Corp. v. Strasser.\nFor these reasons, we adopt the rule of Ross v. Bernhard. Under New Mexico\u2019s constitutional provision for jury trials, if a shareholder\u2019s derivative suit raises legal claims or issues as to which the corporation is entitled to a jury trial, those claims or issues should be tried to a jury on demand. As to other issues, triable to the court, the trial court must make findings of fact and enter conclusions of law even if an advisory jury is used, see Romrell v. Zions First Nat. Bank, N.A., 611 P.2d 392 (Utah, 1980), or otherwise place the appellate court in a position to pass upon the issues raised on appeal. See Mallory v. Citizens Utilities Co., 342 F.2d 796 (2nd Cir.1965). Where legal and equitable issues have been joined, the trial court must determine the mode and order of trial consistent with the rules articulated in Beacon Theatres, Inc. v. Westover and Dairy Queen v. Wood. See Ford v. C.E. Wilson & Co., 30 F.Supp. 163 (D.Conn., 1939).\n2. Whether the Scotts\u2019 Suit on Behalf of Ladr\u00f3n Raised Issues Triable by Jury\nWe have assumed that plaintiffs\u2019 claims on behalf of Ladr\u00f3n present, at least in part, a derivative action rather than an action seeking relief on the basis of a fiduciary duty owed the Scotts, as nonmanaging stockholders, by the managing stockholders. Cf. Donahue v. Rodd Electrotype Co. of New England, Inc., 367 Mass. 578, 328 N.E.2d 505 (1975) (stockholders in a close corporation owe one another the same fiduciary duty as that owed by one partner to another in a partnership). We based our assumption on the form of the complaint, the parties\u2019 theories at trial, and the arguments on appeal. Id. at 579-80, 328 N.E.2d at 508 n. 4. For the reasons that follow, our conclusion does not depend on the correctness of that assumption.\nPlaintiffs argue that because they sought, on behalf of Ladr\u00f3n, money damages for breach of fiduciary duty, fraud, negligence and conversion, there was a right to a jury trial on all issues raised by their suit. That is not the meaning of Ross v. Bernhard; the right to a jury trial does not follow from the terminology employed in the complaint. Rather, the analysis articulated in Beacon Theatres and applied in Ross v. Bernhard shifted the question before the trial court \u201cfrom the presence of a basis for equitable relief to the presence of a legal issue.\u201d 5 J. Moore, W. Taggert & J. Wicker, Moore\u2019s Federal Practice 1138.-16[2] (2d ed. 1985). The critical inquiry is whether a right to jury trial has been established by the party making the demand.\nThe question before the trial court in this case was whether plaintiffs had identified a legal issue with respect to claims made on behalf of the corporation. See generally Gartenberg v. Merrill Lynch Asset Management, Inc., 487 F.Supp. 999 (S.D.N.Y.1980), mandamus denied sub. nom., In re Gartenberg, 636 F.2d 16 (2d Cir.1980), cert. denied, 451 U.S. 910, 101 S.Ct. 1979, 68 L.Ed.2d 298 (1981). A claim for money damages must be a valid one. See Rowell v. Kaplan, 103 R.I. 60, 235 A.2d 91 (1967).\nThe existence of common issues of fact does not mean that the entire lawsuit should be tried to a jury. Rather, joining a legal with an equitable claim gives the plaintiff a right to have common issues of fact decided by a jury and can provide a right to have the legal claims tried first. In re Evangelist, 760 F.2d 27 (1st Cir.1985).\nPlaintiffs claimed the existence of a deadlock, illegal, oppressive and fraudulent acts, misapplication and waste of assets and asked the court to order dissolution and liquidation. This claim seeks an equitable remedy on equitable grounds. See generally 19 Am.Jur.2d Corporations \u00a7 2782 (1986). The trial court, in its discretion, orders dissolution on a proper showing. Id. In a similar case, the supreme court referred to the court\u2019s power as that which \u201cis necessary to do justice to all involved.\u201d See Prager v. Prager, 80 N.M. 773, 776, 461 P.2d 906, 909 (1969).\nThis claim should not have been submitted to the jury. The decision it requires is often made only after consideration of alternative forms of relief. These include purchase of plaintiffs\u2019 shares, partition and reorganization. See generally McCauley v. McCauley, 104 N.M. 523, 724 P.2d 232 (Ct.App.1986). In addition, the nature of a claim for dissolution is such that the trial court must determine the propriety of dissolution. See Stefano v. Coppock, 705 P.2d 443 (Alaska 1985).\nPlaintiffs also sought damages for negligent and intentional mismanagement and for fraud. Because the substance of the facts alleged in this case are critical in analyzing the remedy sought, we have reviewed the allegations in light of the instructions. Cf. Seneca v. Novaro, 80 A.D.2d 909, 437 N.Y.S.2d 401 (1981), On these facts, we must separate plaintiffs\u2019 theories of liability from their damages claims. Cf. Rodgers v. Eighty Four Lumber Co., 623 F.Supp. 889 (D.C.Pa.1985) (holding statutory damages provided for copyright infringement to be equitable in nature).\nPlaintiffs\u2019 claim of negligence on behalf of Ladr\u00f3n was submitted on the basis of failure to keep a proper set of books and waste of assets; the claim of intentional mismanagement was submitted to the jury on the basis of refusing access to financial records, harassment of employees so that they quit, conversion or misappropriation, failure to keep proper books, and waste. These are claims that the directors breached fiduciary duties that arose from their status either as de facto managers or as controlling shareholders. See Alaska Plastics, Inc. v. Coppock, 621 P.2d 270 (Alaska 1980). Cf. Camrex (Holding) Ltd. v. Camrex Reliance Paint (claim against directors based on loss due to breach of corporate contract stated legal claim for jury trial). Thus, the standard against which the claimed misconduct must be measured arose from their relationship with the Scotts rather than from the terms of a contract or the standards appropriate in finding tortious conduct. See Jaffe Commercial Finance Co. v. Harris, 119 Ill.App.3d 136, 74 Ill.Dec. 722, 456 N.E.2d 224 (1983). This presented an equitable ground for relief. See Seneca v. Novaro.\nSimilarly, plaintiffs claimed that the Woods acted fraudulently toward Ladr\u00f3n. The jury was instructed that they should find fraud if they determined that:\n(1) the Defendants failed to keep a proper set of books and records of LaDron Corporation;\n(2) Defendants refused to allow Plaintiffs to have access to the financial records of LaDron Corporation;\n(3) Defendants misapplied and wasted assets of LaDron Corporation;\n(4) Defendants converted to their own use money and assets owned by LaDron Corporation;\n(5) Defendants made secret unauthorized withdrawals of LaDron Corporation assets;\n(6) Defendants, or either of them, provided funds to their son, Peter Woods, which enabled Peter Woods to purchase the owner\u2019s interest in the so-called S.E. Gutierrez real estate contract and which allowed Peter Woods to attempt to foreclose Plaintiffs\u2019 and LaDron Corporation\u2019s interest in the Roadrunner Lounge property;\n(7) Defendants, or one of them, provided funds to their son, Peter Woods, which enabled Peter Woods to purchase from the First National Bank of Belen the promissory note owed by LaDron Corporation and all collateral thereon, including the personal guarantees of the Plaintiffs, and which enabled Peter Woods to file suit against Plaintiffs on such guarantees.\nThese instructions, with the exception of the last two, are essentially the same ones asserted in support of the claim of intentional mismanagement.\nThese instructions are all generally based on the equitable theory of a breach of fiduciary duty and, since they do not identify legal claims separately, do not satisfy plaintiffs\u2019 obligation to identify claims or issues triable to the jury. See In re Evangelist. Plaintiffs sought to prove wrongful dealing with corporate property. To the extent a claim was stated on behalf of the corporation, it was a claim of misconduct by a fiduciary to be analyzed by the court. See generally IV J. Pomeroy, Equity Jurisprudence \u00a7 1095 (S. Symons 5th ed.1941) (the kinds, forms, and methods by which such wrongful acts may be committed and recognized in equity are practically unlimited in number and variety). Because judges are not business experts, courts have been reluctant to substitute their judgment for that of the board of directors. Alaska Plastics v. Coppock. In view of this principle, expressed in the business judgment rule, we cannot say plaintiffs identified a legal issue as to liability on behalf of Ladr\u00f3n.\nThis case arose from a close friendship between Mr. Scott and Mr. Woods, which deteriorated as the business relationship in which they had invested substantial money and energy proved unsuccessful. The record indicates that emotions at trial were high, and there was considerable mutual mistrust and bitterness. As the trial court noted, it was never clear whether Ladr\u00f3n was a corporation or a partnership. Plaintiffs contended that all of the Woods\u2019 acts were done with a view to gaining an unfair advantage over plaintiffs and to cause injury to plaintiffs and to Ladron Corporation itself. We have assumed, for purposes of this appeal, that a derivative suit was stated, rather than a claim as individual shareholders. Whether viewed as a derivative claim, or an individual one, having joined legal and equitable claims, plaintiffs failed to identify either common issues of fact or legal issues with respect to liability.\nAs to money damages, the trial court refused an instruction based on revenues lost as a result of Mrs. Woods\u2019 conduct toward or in front of customers. Thus, plaintiffs\u2019 claim for money damages was based on a claim that sums not shown to be legitimate corporate expenses, sums shown received but not deposited, and expenditures not supported by receipts should be repaid. We view this claim as a claim for restitution based on a proper accounting. It is a claim for equitable, rather than legal, relief. Compare Fedoryszyn v. Weiss, 62 Misc.2d 889, 310 N.Y.S.2d 55 (1970) (where sole relief requested was a money judgment, right to a jury trial was stated) and Rizzo v. Saltmarsh, Cleaveland and Gund, 341 So.2d 818 (Fla.App.1977) (although plaintiff sought damages, the claim in effect sought to establish a fiduciary relationship, a partnership, and obtain an accounting, which involved extensive or complicated accounts).\nWe conclude that plaintiffs failed to demonstrate, either in their complaint or the instructions, an issue or claim, on behalf of the corporation, that was triable to the jury within the meaning of Ross v. Bernhard. The next question is the existence and extent of reversible error.\n3. Whether Reversible Error Occurred\nIn this case, defendants challenged the judgment and verdict as to Ladr\u00f3n, the order of dissolution, and the judgment and verdict as to the Scotts. For the sake of clarity, we discuss separately the disposition as to Ladr\u00f3n and the disposition as to the Scotts.\na. The Judgment and Verdict as to Ladr\u00f3n and the Order of Dissolution\nDefendants preserved error under NMSA 1978, Civ.P.Rules 21 and 42(b) (Repl.Pamp.1980), when they moved to sever or try separately, and under NMSA 1978, Civ.P.Rule 52(B) (Repl.Pamp.1980), when they requested findings of fact and conclusions of law and objected to the instructions on the corporation\u2019s claim. Under Rule 42(b), a separate trial is appropriate, if necessary to avoid prejudice. The decision to grant such a motion is a matter within the sound discretion of the trial court, not to be disturbed in the absence of an abuse of discretion. Mendenhall v. Vandeventer, 61 N.M. 277, 299 P.2d 457 (1956). In exercising this discretion, however, the trial court was required to analyze the issues presented by plaintiffs\u2019 derivative action, there being no claim at trial or on appeal that the Scotts lacked the right to sue as shareholders. See Alaska Plastics v. Coppock.\nThe trial court did not enter findings of fact and conclusions of law to sustain the judgment in favor of the corporation. In the absence of a legal issue, the jury was advisory. Under these circumstances, the judgment in favor of the corporation may not stand. Mallory v. Citizens Utilities Co.; Romrell v. Zions First Nat. Bank, N.A. The error is the equivalent of an abuse of discretion.\nOn remand, plaintiffs will have another opportunity to identify any legal issues for which a jury trial is required. If such issues are identified, the trial court will need to determine the appropriate sequence at trial. See Evans Financial Corp. v. Strasser. See generally 9 C. Wright & A. Miller, Federal Practice and Procedure \u00a7 2338 (1971).\nWith respect to the order of dissolution, the jury was instructed to determine whether dissolution was appropriate, apparently on the theory that there were issues of fact common to the other claims. Instruction No. 2, based on NMSA 1978, UJI Civ. 3.3 (Repl.Pamp.1980), provided in part:\nThe Plaintiffs, Lloyd C. Scott and Annette Scott ask to have LaDron Corporation dissolved and the assets of LaDron Corporation liquidated. In order for LaDron Corporation to be dissolved and its assets sold and liquidated, the plaintiffs have the burden of proving any of the following elements:\n(1) the directors of LaDron are deadlocked in the management of the corporate affairs and the shareholders are unable to break the deadlock and that irreparable injury to the corporation is being suffered or is threatened, by reason thereof; or\n(2) the acts of the directors or those in control of the corporation are illegal, oppressive or fradulent; or\n(3) the corporate assets are being misapplied or wasted.\nThe plaintiffs contend that all of these elements have occurred but the occurrence of any one of the above elements, if proved, establishes that LaDron Corporation should be dissolved and that its assets should be sold and liquidated at the future direction of the Judge.\nThis instruction does not use the jury as an advisory jury. The trial court did not enter findings of fact and conclusions of law to support the order dissolving the corporation pursuant to the jury finding. See generally McCauley v. McCauley. That order also must be reversed. See Romrell v. Zions First Nat. Bank, N.A.; Romell v. Kaplan.\nb. The Judgment and Verdict as to the Scotts\nThe Woods contend that the verdict in favor of the Scotts individually is not supported by substantial evidence or, in the alternative, that it must be reversed as excessive. This issue was preserved by motion for directed verdict. The Scotts concede that the actual amount of damages was not proved but, relying on Wirth v. Commercial Resources, Inc., 96 N.M. 340, 630 P.2d 292 (Ct.App.1981), argue no greater specificity was required. The Woods also contend that various instructions and evidentiary rulings to which they objected were erroneous, prejudiced the jury, and caused or contributed* to an excessive award. For the following reasons, we hold that reversible error occurred with respect to the second judgment.\nThe jury was instructed on seven acts, as evidence to be considered in finding for either Ladr\u00f3n or the Scotts on the basis of fraud or deceit. That instruction is reproduced above in subsection 2. All of these acts occurred after Ladr\u00f3n was operating the Roadrunner and concerned the corporate management. The instruction on damages to the Scotts individually does not state elements associated with a claim of fraud.\nWe conclude that the claim of fraud was actually included in the claim made on behalf of Ladr\u00f3n. We have held that the claim made on behalf of Ladr\u00f3n should not have gone to the jury. Consequently, two theories of liability to the Scotts as individuals were submitted to the jury, although only one was appropriate. The jury returned a general verdict. The instructions on damages were not sufficient to clarify the jury\u2019s obligation. Under these circumstances, the judgment in favor of the Scotts must be reversed, and the cause remanded for a new trial. See Gerety v. Demers, 86 N.M. 141, 520 P.2d 869 (1974).\nWith respect to the sufficiency of the evidence of liability on the claim of emotional distress, the instructions advised the jury that plaintiffs might recover if they proved that defendants \u201cintentionally or recklessly acted in an extreme or outrageous manner.\u201d Because the instructions on liability presented alternative theories, the jury was permitted to find liability on various kinds of misconduct, some of which did not present legal issues, rather than equitable claims. Under these circumstances, appellate review of the evidence would not be appropriate. We do not give advisory opinions, and the scope of this tort is still evolving. See Trujillo v. Puro, 101 N.M. 408, 683 P.2d 963 (Ct.App.1984).\nFinally, with respect to damages, under the jury instructions, the Woods\u2019 liability to Ladr\u00f3n was hopelessly blended with their liability to the Scotts individually. Plaintiffs\u2019 counsel argued to the jury that he had proved misconduct toward Ladr\u00f3n, which in turn harmed the Scotts individually, but the instructions on damages failed to separate the elements of injury to Ladr\u00f3n from the elements of injury to the Scotts individually. This created a potential for double recovery. Cf. Clappier v. Flynn, 605 F.2d 519 (10th Cir.1979) (holding error occurred when judgment was awarded under common law claim for negligence as well as civil right claim; double recovery precluded when alternative theories seeking same relief are tried together). Although defendant did not specifically claim error on this basis at trial, we hold the issue was preserved by their motion for a new trial, as well as their objections to the instructions and their motion to sever. See id.\nA verdict is excessive if the evidence, viewed in the light most favorable to the winning party, does not provide substantial support for the amount awarded or if there is an indication of passion, prejudice, partiality, undue influence, or a mistaken measure of damages on the part of the fact-finder. Gonzales v. General Motors Corp., 89 N.M. 474, 553 P.2d 1281 (Ct.App.1976). In this case, the instructions on liability and the instructions on damages not only created a potential for double recovery, they also provided a mistaken measure of damages.\nThe instructions on liability provided alternative theories for recovery on the same facts; instructions on damages insufficiently limited plaintiffs to a single recovery. In fact, the instructions on damages to the Scotts individually included a sum for obligations they incurred which Ladr\u00f3n could have paid if managed properly. The instruction on damages due the corporation had, however, already stated separate claims for lost revenues and lost profits.\nIn closing argument, plaintiffs\u2019 counsel suggested that the jury could award Ladr\u00f3n as much as $350,000 in compensatory damages for the Woods\u2019 misconduct in managing the business and that they could award the Scotts as much as $100,000 in damages for the emotional distress they had suffered. The compensatory damages awarded to Ladr\u00f3n, together with the compensatory damages awarded the Scotts, were twenty times the amount of actual damages proved and argued to the jury. In addition, the sum awarded the Scotts approximated the sum awarded Ladr\u00f3n. Under these circumstances, even if the jury\u2019s decision as to liability could be sustained, the verdict could not. See Gonzales v. General Motors Corp.\nConclusion\nPlaintiffs have asked for an award of damages for a frivolous appeal. They claimed that all but one issue was based on sufficiency of the evidence and abuse of discretion and that the remaining issue is based on an outmoded distinction between law and equity. In short, they claim the Woods\u2019 appeal is groundless and made in bad faith for purposes of delay. In view of our disposition, the request is denied.\nWhile this case was pending, defendants moved to remand for an evidentiary hearing on a motion under NMSA 1978, Civ.P. Rule 60(b) to set aside the judgment. The motion was made after the case had been submitted to a panel and a- decision on the merits had been reached but prior to the time the opinion had been filed. In view of the decision, the motion to remand is moot.\nThe verdict in favor of Ladr\u00f3n Corporation and the order for dissolution is reversed, and the cause is remanded for further proceedings not inconsistent with this opinion. The verdict as to liability in favor of the individual plaintiffs, including the award of compensatory and punitive damages, is reversed and the cause is remanded for a new trial. The Woods shall recover their appellate costs.\nIT IS SO ORDERED.\nALARID and GARCIA, JJ., concur.", "type": "majority", "author": "MINZNER, Judge." } ], "attorneys": [ "Keith S. Bum, Norman E. Todd, Keith S. Burn, P.A., Linda S. Bloom, Las Cruce?, for plaintiffs-appellee.", "Quincy D. Adams, Adams & Foley, P.C., Kenneth S. McDaniel, Albuquerque, for defendants-appellants." ], "corrections": "", "head_matter": "730 P.2d 480\nLloyd C. SCOTT and Annette Scott, individually and as shareholders of the Ladron Corporation, a New Mexico corporation, Plaintiffs-Appellees, v. James R. WOODS and Patricia V. Woods, Defendants-Appellants.\nNo. 8149.\nCourt of Appeals of New Mexico.\nAug. 7, 1986.\nCertiorari quashed Nov. 25, 1986.\nKeith S. Bum, Norman E. Todd, Keith S. Burn, P.A., Linda S. Bloom, Las Cruce?, for plaintiffs-appellee.\nQuincy D. Adams, Adams & Foley, P.C., Kenneth S. McDaniel, Albuquerque, for defendants-appellants." }, "file_name": "0177-01", "first_page_order": 217, "last_page_order": 228 }