2018 New Mexico Statutes
Chapter 53 - Corporations
Article 15 - Business Corporations; Sale of Assets
Section 53-15-4 - Rights of dissenting shareholders.
A. Any shareholder electing to exercise his right of dissent shall file with the corporation, prior to or at the meeting of shareholders at which the proposed corporate action is submitted to a vote, a written objection to the proposed corporate action. If the proposed corporate action is approved by the required vote and the shareholder has not voted in favor thereof, the shareholder may, within ten days after the date on which the vote was taken or if a corporation is to be merged without a vote of its shareholders into another corporation any of its shareholders may, within twenty-five days after the plan of the merger has been mailed to the shareholders, make written demand on the corporation, or, in the case of a merger or consolidation, on the surviving or new corporation, domestic or foreign, for payment of the fair value of the shareholder's shares, and, if the proposed corporate action is effected, the corporation shall pay to the shareholder, upon the determination of the fair value, by agreement or judgment as provided herein, and, in the case of shares represented by certificates, the surrender of such certificates the fair value thereof as of the day prior to the date on which the vote was taken approving the proposed corporate action, excluding any appreciation or depreciation in anticipation of the corporate action. Any shareholder failing to make demand within the prescribed ten-day or twenty-five-day period shall be bound by the terms of the proposed corporate action. Any shareholder making such demand shall thereafter be entitled only to payment as in this section provided and shall not be entitled to vote or to exercise any other rights of a shareholder.
B. No such demand may be withdrawn unless the corporation consents thereto. If, however, the demand is withdrawn upon consent, or if the proposed corporate action is abandoned or rescinded or the shareholders revoke the authority to effect the action, or if, in the case of a merger, on the date of the filing of the articles of merger the surviving corporation is the owner of all the outstanding shares of the other corporation, domestic and foreign, that are parties to the merger, or if no demand or petition for the determination of fair value by a court has been made or filed within the time provided in this section, or if a court of competent jurisdiction determines that the shareholder is not entitled to the relief provided by this section, then the right of the shareholder to be paid the fair value of his shares ceases and his status as a shareholder shall be restored, without prejudice, to any corporate proceedings which may have been taken during the interim.
C. Within ten days after such corporate action is effected, the corporation, or, in the case of a merger or consolidation, the surviving or new corporation, domestic or foreign, shall give written notice thereof to each dissenting shareholder who has made demand as provided in this section and shall make a written offer to each such shareholder to pay for such shares at a specified price deemed by the corporation to be the fair value thereof. The notice and offer shall be accompanied by a balance sheet of the corporation, the shares of which the dissenting shareholder holds, as of the latest available date and not more than twelve months prior to the making of the offer, and a profit and loss statement of the corporation for the twelve-months' period ended on the date of the balance sheet.
D. If within thirty days after the date on which the corporate action was effected the fair value of the shares is agreed upon between any dissenting shareholder and the corporation, payment therefor shall be made within ninety days after the date on which the corporate action was effected, and, in the case of shares represented by certificates, upon surrender of the certificates. Upon payment of the agreed value, the dissenting shareholder shall cease to have any interest in the shares.
E. If, within the period of thirty days, a dissenting shareholder and the corporation do not so agree, then the corporation, within thirty days after receipt of written demand from any dissenting shareholder, given within sixty days after the date on which corporate action was effected, shall, or at its election at any time within the period of sixty days may, file a petition in any court of competent jurisdiction in the county in this state where the registered office of the corporation is located praying that the fair value of the shares be found and determined. If, in the case of a merger or consolidation, the surviving or new corporation is a foreign corporation without a registered office in this state, the petition shall be filed in the county where the registered office of the domestic corporation was last located. If the corporation fails to institute the proceeding as provided in this section, any dissenting shareholder may do so in the name of the corporation. All dissenting shareholders, wherever residing, shall be made parties to the proceeding as an action against their shares quasi in rem. A copy of the petition shall be served on each dissenting shareholder who is a resident of this state and shall be served by registered or certified mail on each dissenting shareholder who is a nonresident. Service on nonresidents shall also be made by publication as provided by law. The jurisdiction of the court shall be plenary and exclusive. All shareholders who are parties to the proceeding shall be entitled to judgment against the corporation for the amount of the fair value of their shares. The court may, if it so elects, appoint one or more persons as appraisers to receive evidence and recommend a decision on the question of fair value. The appraisers shall have such power and authority as specified in the order of their appointment or on an amendment thereof. The judgment shall be payable to the holders of uncertificated shares immediately, but to the holders of shares represented by certificates only upon and concurrently with the surrender to the corporation of certificates. Upon payment of the judgment, the dissenting shareholder ceases to have any interest in the shares.
F. The judgment shall include an allowance for interest at such rate as the court may find to be fair and equitable, in all the circumstances, from the date on which the vote was taken on the proposed corporate action to the date of payment.
G. The costs and expenses of any such proceeding shall be determined by the court and shall be assessed against the corporation, but all or any part of the costs and expenses may be apportioned and assessed as the court deems equitable against any or all of the dissenting shareholders who are parties to the proceeding to whom the corporation made an offer to pay for the shares if the court finds that the action of the shareholders in failing to accept the offer was arbitrary or vexatious or not in good faith. Such expenses include reasonable compensation for and reasonable expenses of the appraisers, but exclude the fees and expenses of counsel for and experts employed by any party; but if the fair value of the shares as determined materially exceeds the amount which the corporation offered to pay therefor, or if no offer was made, the court in its discretion may award to any shareholder who is a party to the proceeding such sum as the court determines to be reasonable compensation to any expert employed by the shareholder in the proceeding, together with reasonable fees of legal counsel.
H. Upon receiving a demand for payment from any dissenting shareholder, the corporation shall make an appropriate notation thereof in its shareholder records. Within twenty days after demanding payment for his shares, each holder of shares represented by certificates demanding payment shall submit the certificates to the corporation for notation thereon that such demand has been made. His failure to do so shall, at the option of the corporation, terminate his rights under this section unless a court of competent jurisdiction, for good and sufficient cause shown, otherwise directs. If uncertificated shares for which payment has been demanded or shares represented by a certificate on which notation has been so made is [are] transferred, any new certificate issued therefor shall bear similar notation, together with the name of the original dissenting holder of the shares, and a transferee of the shares acquires by such transfer no rights in the corporation other than those which the original dissenting shareholder had after making demand for payment of the fair value thereof.
I. Shares acquired by a corporation pursuant to payment of the agreed value therefor or to payment of the judgment entered therefor, as in this section provided, may be held and disposed of by the corporation as in the case of other treasury shares, except that, in the case of a merger or consolidation, they may be held and disposed of as the plan of merger or consolidation may otherwise provide.
History: 1953 Comp., § 51-28-4, enacted by Laws 1967, ch. 81, § 78; 1983, ch. 304, § 61.
Compiler's notes. — This section is derived from Section 81 of the ABA Model Business Corporation Act.
Cross references. — For definition of "shares", see 53-11-2D NMSA 1978.
The 1983 amendment, effective June 17, 1983, substituted "upon the determination . . . surrender of such certificates" for "upon surrender of the certificate or certificates representing the shares" near the end of the second sentence of Subsection A, substituted "corporation" for "corporations" preceding "domestic" near the middle of the last sentence of Subsection B, substituted "provided in this section" for "herein provided" near the middle of the first sentence of Subsection C, inserted "and, in the case of shares represented by certificates," near the end of the first sentence of Subsection D, substituted "certificates" for "certificate or certificates representing such shares" at the end of the first sentence of Subsection D, substituted "fails" for "shall fail" and substituted "provided in this section" for "herein provided" in the third sentence of Subsection E, deleted "shall be" preceding "specified" and inserted "on" preceding "an amendment" in the tenth sentence of Subsection E, inserted "to the holders of uncertificated shares immediately, but to the holders of shares represented by certificates" and substituted "certificates" for "the certificate or certificates representing such shares" in the eleventh sentence of Subsection E, substituted "ceases" for "shall cease" in the last sentence of Subsection E, substituted "deems" for "may deem" and "finds" for "shall find" in the first sentence of Subsection G, deleted "shall" preceding "exclude the fees," substituted "determines" for "may determine" and deleted "or experts" following "expert" in the second sentence of Subsection G, added the present first sentence of Subsection H, substituted "holder of shares represented by certificates" for "shareholder" and substituted "certificates" for "certificate or certificates representing his shares," and deleted "shall" preceding "otherwise directs" in the second sentence of Subsection H, and inserted "uncertificated" preceding "shares" and inserted "for which payment has been demanded or shares" following "shares" in the last sentence of Subsection H and made other minor changes.
Disgorgement of profits and punitive damages. — Where a shareholder representative breached his fiduciary duty under a shareholder agreement to dissenting shareholders; the dissenting shareholders did not suffer any damages; and the breach was not malicious, the dissenting shareholders were not entitled to disgorgement of profits and punitive damages in addition to the appraised fair value of their shares. The Peters Corp. v. N.M. Banquest Investors Corp., 2008-NMSC-039, 144 N.M. 434, 188 P.3d 1185, aff'g 2007-NMCA-065, 141 N.M. 632, 159 P.3d 1117.
Control premium not justified. — The court did not err in refusing to add a control premium to the value of dissenting shareholder's shares where although the dissenting shareholders were part of the control group in virtue of a shareholder's agreement, they were minority shareholders in the control group and within the corporation as a whole; pursuant to the shareholder agreement, the dissenting shareholders had delegated all decisions to one shareholder who was not a dissenting shareholder; under the shareholder agreement, each shareholder had a veto power over whether all signatory shareholders could purchase their pro rata part of shares before they were offered to a third party; and the fair value arrived at by the court did not impose any minority discount that required an off-set by a control premium. N.M. Banquest Investors Corp. v. The Peters Corp., 2007-NMCA-065, 141 N.M. 632, 159 P.3d 1117, aff'd, 2008-NMSC-039, 144 N.M. 188, 188 P.3d 1185.
Breach of fiduciary duty not an exception to exclusivity of the appraisal method. — Where a shareholder representative breached his fiduciary duty under a shareholder agreement to dissenting shareholders by failing to notify them that a controlling shareholder intended to sell its shares prior to sending out proxy material, while the shareholder representative did inform some other shareholders and the corporate board of directors, the breach did not fall outside the exclusivity of the appraisal remedy, for fraud or illegality. N.M. Banquest Investors Corp. v. The Peters Corp., 2007-NMCA-065, 141 N.M. 632, 159 P.3d 1117, aff'd, 2008-NMSC-039, 144 N.M. 188, 188 P.3d 1185.
The court may award compound interest on the fair value of dissenting shareholder shares. N.M. Banquest Investors Corp. v. The Peters Corp., 2007-NMCA-065, 141 N.M. 632, 159 P.3d 1117, aff'd, 2008-NMSC-039, 144 N.M. 188, 188 P.3d 1185.
Exclusive remedy. — In the absence of fraud or illegality, the statutory right to obtain an appraisal of the fair value of stock is the exclusive remedy against a corporation by a shareholder who dissents from a proposed merger. McMinn v. MBF Operating Acquisition Corp., 2006-NMCA-049, 139 N.M. 419, 133 P.3d 875, cert. granted, 2006-NMCERT-004, 139 N.M. 429, 134 P.3d 120, rev'd, 2007-NMSC-040, 142 N.M. 160, 164 P.3d 41.
No right to jury trial. — There is no statutory or constitutional right to a jury in a proceeding brought by a dissenting shareholder based on the right to an appraisal of the value of a dissenting shareholder's stock for stock valuation created by the legislature. Smith v. First Alamogordo Bancorp., Inc., 1992-NMCA-095, 114 N.M. 340, 838 P.2d 494, cert. denied, 114 N.M. 314, 838 P.2d 468.
Determination of pre-sale value. — In an action by a dissenting shareholder seeking a valuation of his stock, the court erred when it held that a pretrial statement regarding stock share value was binding on the parties and that the stipulation in the statement as to the value of the shares on the day the dissenting shareholder terminated his employment also stipulated the pre-sale value for purposes of application of this section. The court should have permitted defendants to introduce evidence on the value of the stock the day before the corporate sale. Morrow v. Cooper, 1991-NMCA-108, 113 N.M. 246, 824 P.2d 1048.
Section does not specify how shares valued. — This section does not specify the method by which the court should determine fair value of shares of dissenting stockholders. Tome Land & Improvement Co. v. Silva, 1972-NMSC-004, 83 N.M. 549, 494 P.2d 962.
Market value of stock is generally the base price at which a stock could be sold by a willing, informed seller to an informed, willing buyer. Tome Land & Improvement Co. v. Silva, 1972-NMSC-004, 83 N.M. 549, 494 P.2d 962.
Elements of valuation. — In arriving at the fair value of the shares of dissenting stockholders, courts have been almost unanimous in using a combination of three elements of valuation: (1) net asset value; (2) market value, and (3) investment or earnings value. Tome Land & Improvement Co. v. Silva, 1972-NMSC-004, 83 N.M. 549, 494 P.2d 962.
Use of appraisers. — The appraiser has discretion in determining market, asset and investment value of shares of dissenting stockholders, but the appraiser's valuation is then subject to review by the trial court to determine whether it is supported upon reasonable grounds and if the appraiser's valuation is not so supported, the trial court may substitute its own calculation of any or all of the factors. Tome Land & Improvement Co. v. Silva, 1972-NMSC-004, 83 N.M. 549, 494 P.2d 962.
Award of interest. — The statute places the awarding of interest within the discretion of the court, and the court did not abuse its discretion by awarding 6% interest because such conclusion is supported by substantial evidence. Tome Land & Improvement Co. v. Silva, 1972-NMSC-004, 83 N.M. 549, 494 P.2d 962.
When attorney's and expert's fees awarded. — Under this section, once the court determines that the fair value materially exceeds the amount which the corporation has offered for the shares, it may, in its discretion, award what it may determine to be reasonable compensation by way of expert fees and attorney's fees, but it may not award only expert fees and not attorney's fees if the shareholder has employed both an expert and an attorney in the proceeding. Tome Land & Improvement Co. v. Silva, 1972-NMSC-004, 83 N.M. 549, 494 P.2d 962.
Fee contract evidence of reasonable attorney's fee. — A contingent fee contract between dissenting shareholders and their attorney is properly admissible so long as its effect is limited to being simply an item of evidence having some probative value in resolving the issue of the amount of a reasonable attorney's fee to be allowed dissenters, to be weighed and taken into account with all of the other evidence bearing on that question. Tome Land & Improvement Co. v. Silva, 1973-NMSC-120, 86 N.M. 87, 519 P.2d 1024.
Fee awarded to dissenting shareholders. — Subsection G of this section provides not only that the amount of the fee is to be reasonable, but that it is to be awarded to the dissenting shareholders, not to their attorney. Therefore defendant is not entitled to credit for amounts paid or to be paid by dissenting shareholders to their attorney under contingent fee contract. Tome Land & Improvement Co. v. Silva, 1973-NMSC-120, 86 N.M. 87, 519 P.2d 1024.
No jurisdiction over fee paid to dissenters' attorney. — The trial court is without jurisdiction to fix the amount to be paid by dissenters to their attorney under contingent fee contract or pass upon the reasonableness of such amounts. Amount could be more than, the same as or less than the amount found by the court to be reasonable under the statute. Tome Land & Improvement Co. v. Silva, 1973-NMSC-120, 86 N.M. 87, 519 P.2d 1024.
Jurisdiction in judicial proceedings. — Subsection E prescribes venue, not jurisdiction and does not limit the jurisdiction for actions brought under this section to one judicial district only. Thus where defendants did not plead improper venue in an action brought by a dissenting shareholder in a county other than that where the corporation's registered office was located, defendants waived the issue and could not have the action dismissed on the alternative grounds of lack of jurisdiction. Morrow v. Cooper, 1991-NMCA-108, 113 N.M. 246, 824 P.2d 1048.
Law reviews. — For article, "1983 Amendments to the New Mexico Business Corporation Act and Related Statutes," see 14 N.M.L. Rev. 371 (1984).
For article, "Too Close for Comfort: Minority Shareholder Litigation Against Close Corporations after McMinn v. MBF Operating Acquisition Corp. and The Peters Corp. v. N.M. Banquest Investors Corp.," see 39 N.M. L. Rev. 319 (2009).
Am. Jur. 2d, A.L.R. and C.J.S. references. — 18A Am. Jur. 2d Corporations § 836; 19 Am. Jur. 2d Corporations §§ 2574, 2582 to 2586.
Who may assert invalidity of sale, mortgage, or other disposition of corporate property without approval of stockholders, 58 A.L.R.2d 784.
Timeliness and sufficiency of dissenting stockholder's notice of his objection to consolidation or merger and of his demand for payment for his shares, 40 A.L.R.3d 260.
Valuation of stock of dissenting stockholders in case of sale of corporate assets, 48 A.L.R.3d 430.
19 C.J.S. Corporations §§ 799 to 801.
