Torres v. Montano

CourtNew Mexico Court of Appeals
DecidedFebruary 20, 2012
Docket30,207
StatusUnpublished

This text of Torres v. Montano (Torres v. Montano) is published on Counsel Stack Legal Research, covering New Mexico Court of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Torres v. Montano, (N.M. Ct. App. 2012).

Opinion

This memorandum opinion was not selected for publication in the New Mexico Reports. Please see Rule 12-405 NMRA for restrictions on the citation of unpublished memorandum opinions. Please also note that this electronic memorandum opinion may contain computer-generated errors or other deviations from the official paper version filed by the Court of Appeals and does not include the filing date.

1 IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO

2 PATRICIO TORRES, individually 3 and derivatively on behalf of 4 MONTAÑO/TORRES, LLC,

5 Plaintiff-Appellant,

6 v. NO. 30,207

7 ISIDRO E. MONTAÑO and 8 EVELYN N. MONTAÑO,

9 Defendants-Appellees.

10 APPEAL FROM THE DISTRICT COURT OF VALENCIA COUNTY 11 Camille Martinez Olguin, District Judge

12 Kelley Law Offices 13 Cody K. Kelley 14 Charlotte L. Itoh 15 Albuquerque, NM

16 for Appellant

17 James Lawrence Sánchez Trial Lawyer, P.C. 18 James Lawrence Sánchez 19 Belen, NM

20 for Appellees 1 MEMORANDUM OPINION

2 CASTILLO, Chief Judge.

3 This suit involves a dispute over a family carwash business in Los Lunas, New

4 Mexico. We must decide whether the majority owners properly dismissed their

5 former son-in-law from the limited liability company in which they were the

6 remaining members. We agree with the district court that the actions of the majority

7 owners were not in breach of their fiduciary responsibilities and that there was no

8 basis for the imposition of equitable remedies. While we acknowledge that sixteen

9 months passed between trial and judgment, there is no basis to overturn the verdict on

10 this ground. Accordingly, we affirm.

11 BACKGROUND

12 The following is a summary of the evidence presented during the bench trial of

13 this case. In January 2003, Patricio Torres (Torres) and his wife, Cynthia Torres

14 (Cynthia), formed a limited liability company, Montaño/Torres, LLC (Company), with

15 Cynthia’s parents, Isidro and Evelyn Montaño (the Montaños) for the purpose of

16 opening a carwash in Los Lunas. Each family member held a 25 percent interest in

17 the Company and agreed to contribute services toward its operation, though the

18 specific type of services and number of hours to be worked were not specified at first.

19 Patricio and Cynthia downloaded a standard business form from the Internet to guide

2 1 the functioning of the business. Cynthia tailored it to fit the Company, and all four

2 members signed the documents, including the operating agreement (Operating

3 Agreement). Each member contributed $25,000 in start-up capital. The Company

4 secured a bank loan, backed by the Montaños’ credit, with each member responsible

5 for one-quarter of that liability. At the time of Torres’s severance from the Company,

6 the loan balance was $440,000. When the business first opened, the Montaños

7 combined to work in the carwash 100 hours per week, maintaining the carwash and

8 taking care of the bookkeeping. Torres, who had a full-time job outside the business,

9 averaged about 24 hours of work per month, usually coming in after work on

10 Mondays, Wednesdays, Fridays, and working every other weekend. He also was on

11 call around the clock, via cell phone, in case a machine malfunctioned. Nonetheless,

12 the Montaños urged Torres to improve his work habits and put in more hours in order

13 to balance the workload among members.

14 Patricio and Cynthia split up shortly after the business was launched and

15 divorced in August 2003. After the divorce, the Montaños sided at first with Torres

16 over their daughter and, at his request, would give him between $1,000 and $2,000 per

17 month on a quarterly basis, totaling $18,336 in 2004 and $20,394 in 2005. The

18 Montaños claim that the money did not come from the proceeds of the carwash but

19 rather from their personal funds, even though the money would sometimes be

3 1 transferred in envelopes marked “distribution” or “distrib.” Torres said he considered

2 them distributions, but he never reported them as income. Torres also made capital

3 contributions of between $6,000 and $6,500 during that time, as did the Montaños.

4 In October 2004, Cynthia transferred her 25 percent interest in the Company to

5 the Montaños, giving them a 75 percent share of the business—or a super-majority

6 stake—and leaving Torres with the remaining 25 percent share of the Company.

7 Around June 2006, the parties began negotiating a buyout of Torres’s 25 percent share

8 by the Montaños. At one point, the parties agreed that the Montaños would pay

9 Torres $150,000 for his share, but the deal fell through when Torres balked at

10 providing a receipt to the Montaños for the first $100,000 that was to be paid in cash.

11 As negotiations broke down, the Montaños grew frustrated with the discrepancy in

12 work hours and sought to codify the work responsibilities of the Company members.

13 Using their majority voting power per the original Operating Agreement, the

14 Montaños added an amendment specifying that each member was required to work

15 at the carwash 100 hours per month between the hours of 8:00 a.m. and 8:00 p.m. and

16 that each member was required to fill out daily time sheets; the amendment also

17 provided a detailed list of tasks to be performed by all members on a regular basis.

18 A member could be expelled with 30 days’ notice for failure to perform the required

19 work hours. The Montaños notified Torres of the amendment by letter on September

4 1 11, 2006. In the ensuing weeks, Torres refused to document his hours and failed to

2 work the required hours. The Montaños sent Torres weekly accountings of his hours

3 worked and detailing the shortages. They then voted on October 11, 2006, to remove

4 Torres as a member of the Company.

5 Before that removal, Torres, on September 11, 2006, filed this action for

6 dissolution of the Company and an accounting; breach of duty of good faith and fair

7 dealing; and breach of fiduciary duty. Torres also sought the appointment of a

8 receiver for the Company. He later amended his complaint based on prima facie tort

9 and equitable relief for unjust enrichment. The Montaños counter-claimed alleging

10 malicious abuse of process.

11 The district court held the trial on April 8 and 9, 2008, and it issued findings of

12 fact and conclusions of law on July 30, 2009, and a final judgment on December 17,

13 2009. The district court found that the Montaños acted reasonably in amending the

14 Operating Agreement and in removing Torres as a member of the Company, and the

15 court refused to consider an equitable remedy. The court denied the Montaños’

16 counterclaim. The Montaños do not appeal. Torres appeals and argues that the

17 district court erred in finding that the Montaños acted reasonably and in rejecting his

18 equitable relief. He also claims that the district court abused its discretion in taking

19 almost 16 months between the end of the trial and the time it issued its findings of fact

5 1 and conclusions of law.

2 DISCUSSION

3 The Montaños Breached No Fiduciary Duty in Amending the Agreement and in 4 Voting to Remove Torres

5 Torres characterizes himself as an oppressed minority member of the Company

6 and accuses the Montaños of abusing their super-majority power and squeezing him

7 out of the business in violation of their duty of good faith and fair dealing under

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