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Walta v. Gallegos Law Firm, P.C.

New Mexico Court of Appeals
40 P.3d 449 (2001)

Written by Rose VanHofwegen, JD

Facts

Minority shareholder Mary Walta (plaintiff) sued the Gallegos Law Firm, P.C. (GLF) and its controlling majority shareholder, J.E. “Gene” Gallegos (defendants) after Gallegos essentially terminated Walta and grossly undervalued her shares for buyout purposes. GLF was a close corporation with five attorney-shareholders. Walta worked for GLF for four years before disagreements over GLF’s finances began. Gallegos said he planned to dissolve GLF and buy out all the shareholders while secretly offering all but Walta continued employment. GLF had a shareholder agreement in its bylaws that entitled departing shareholders to book value for their vested shares, calculated by totaling GLF’s assets and subtracting liabilities as of the departure date. Gallegos omitted GLF’s accounts receivable and used a valuation date several months before Walta left the firm to calculate the value of Walta’s shares as only $20,000—the amount she paid for them. Gallegos’s own expert concluded Walta’s vested shares were worth much more because GLF had accounts receivable of $657,989, bringing the total value of her stock to $62,550. The jury awarded Walta that amount for breach of the shareholder agreement, plus $100,000 against Gallegos for breaching fiduciary duties. Gallegos appealed.

Rule of Law

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Holding and Reasoning (Bustamante, J.)

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