Pena v. Westland Development Co., Inc., 9676

• Citation: 1988 NMCA 52,761 P.2d 438,107 N.M. 560
• Decision Date: 07 June 1988
• Docket Number: No. 9676,9676
• Parties: Clara PENA, Barbara Page and Polecarpio Anaya, Plaintiffs-Appellants, Cross-Appellees, v. WESTLAND DEVELOPMENT CO., INC., a New Mexico Corporation, et al., Defendants-Appellees, Cross-Appellants.
• Court: Court of Appeals of New Mexico

Page 438

761 P.2d 438

107 N.M. 560

Clara PENA, Barbara Page and Polecarpio Anaya Plaintiffs-Appellants, Cross-Appellees, v. WESTLAND DEVELOPMENT CO., INC., a New Mexico Corporation, et al., Defendants-Appellees, Cross-Appellants.

No. 9676.

Court of Appeals of New Mexico.

June 7, 1988.

Certiorari Denied Aug. 4, 1988.

[107 NM 561] David C. Hughes, Hughes & Carver, P.C., Albuquerque, for plaintiffs-appellants, cross-appellees.

Ronald Segel, Sutin, Thayer & Browne, P.C., Albuquerque, for defendants-appellees, cross-appellants.

OPINION

BIVINS, Judge.

Plaintiff Clara Pena filed suit against defendant Westland Development Co., Inc. (Westland) following a shareholder election selecting Westland's board of directors. The trial court appointed a special master to tabulate the results and categorize challenges to a number of shareholder proxies. Following the special master proceedings, Barbara Page and Polecarpio Anaya were joined as plaintiffs on the trial court's own motion. After a nonjury trial, the trial court entered a judgment establishing the results of the election. Plaintiffs appeal from that judgment and Westland cross-appeals. Plaintiffs raise three claims of error and Westland four. We identity and discuss each issue after reciting the factual background. We affirm in part and reverse in part.

FACTS

Plaintiffs ran as a nonmanagement slate in the election that is the subject of this suit. The election was held on November 16, 1985, at a shareholders' meeting. Some shareholders cast ballots at the meeting, and others voted by proxy. The election was extremely close and both sides actively solicited votes. During the process of counting the ballots and proxies, disputes arose between the management faction and the nonmanagement faction. On December 4, 1985, Pena filed a complaint requesting a temporary restraining order to halt the counting of the votes, and the appointment of a special master to count the votes and deal with challenges to the ballots and proxies. The temporary restraining order was granted and a hearing held on December 5. Following the hearing, the trial court ordered the counting to continue, subject to certain conditions. More disputes arose and Pena asked for additional intervention by the trial court.

The trial court granted another temporary restraining order imposing additional conditions. Then, on January 3, 1986, the trial court appointed a special master to supervise the proceedings, tabulate the votes, and determine the existence of challenges to proxies or ballots. The special master held meetings on January 8, 13, 15, and 16. At these meetings, Pena and Westland raised a variety of challenges to the proxies. Neither side challenged any of the proxies on the basis that the signatures on the proxies were forgeries. By the end of the special master meetings, Pena and Westland had agreed that 966 nonmanagement proxies and 918 management proxies would not be challenged, and these proxies were segregated into a separate box.

On January 31, after the special master proceedings concluded, the trial court held a hearing to rule on the parties' objections to the various proxies. Following the January 31 hearing, the proxies and ballots were submitted to a private accounting firm to be counted. The parties were allowed to challenge the accounting firm's procedures and final tally.

Later in February, Westland asked the trial court to order Pena to pay the costs of the special master proceedings, including the accountant's fees. Westland maintained that since Pena had asked for the appointment of the special master, she should bear the cost. The trial court ordered Westland to pay the costs, but reserved ruling on who would ultimately be responsible for them.

In March, Westland moved to join Page and Anaya as plaintiffs. Westland wanted them to be available to help pay the costs if the trial court ordered Pena to pay them. The trial court denied the motion, but joined Page and Anaya as plaintiffs on its own motion, ruling that they would not be responsible for any costs incurred prior to the time of their joinder.

On April 29, Pena moved to allow a renewal of objections to proxies that had been uncontested. The basis of the motion was plaintiff's claim that since the conclusion of the special master proceedings, she had discovered that a number of the uncontested proxies contained forged signatures. The trial court denied Pena's motion, stating that there would be no reopening of the special master proceedings. Later, at trial, plaintiffs submitted offer-of-proof testimony that they had discovered the first forgery by accident, in early February; that they did not obtain copies of the proxies until early March, and only then were able to begin to investigate the signatures; and that they had uncovered enough forgeries to change the result of the election.

On May 15, Page and Anaya made their own motion to renew objections to the uncontested proxies on the same grounds as Pena's motion. This motion was also denied. The trial court ruled that Page's and Anaya's rights had been protected by Pena, and noted that Page had been present at many of the trial court proceedings and at the special master proceedings.

The trial was held on July 15, 1986. Most of the trial time was consumed with plaintiffs' offer of proof concerning the forged proxies. Plaintiffs presented witnesses who testified that the signatures on management ballots were not theirs. Plaintiffs also offered depositions of unavailable witnesses who said the same thing. Finally, plaintiffs offered Page's testimony regarding her lack of access to the proxies and the lack of knowledge that forgery might be a problem until after the special master proceedings ended.

The trial court entered judgment establishing the management slate as the winners of the election. The margin of victory between the management candidate with the least votes and the nonmanagement candidate with the most votes was less than 400 out of a total of almost 300,000 votes. A change of only 500 votes from management candidates to nonmanagement candidates would have elected two of the nonmanagement candidates. In addition to determining the results of the election, the trial court also held Westland responsible for the costs of the special master proceedings.

DISCUSSION

Trial Court's Refusal to Allow Plaintiffs to Challenge Allegedly Forged Proxies

Plaintiffs' initial contention is that they should have been allowed to challenge proxies that they had agreed, in the special master proceedings, not to challenge. They liken the situation to one in which a party enters into a stipulation that proves to be contrary to the facts, and argue that the trial court should have granted them relief from that stipulation. Page and Anaya argue, in addition, that they were not joined as parties until after the special master proceedings were concluded, and that they should not be bound by any stipulations entered into before they became parties. We need not address that issue because of our disposition of the first contention.

It is true that a court may set aside a stipulation if a mistake of fact is clearly shown, the mistake is material to the case, and the mistake could not have been avoided through the exercise of due care. See Ballard v. Miller, 87 N.M. 86, 529 P.2d 752 (1974); Marrujo v. Chavez, 77 N.M. 595, 426 P.2d 199 (1967). The decision as to whether a stipulation should be set aside is within the discretion of the trial court. Id. Thus, under plaintiffs' argument, the trial court's refusal to set aside the stipulation and allow them to challenge the "uncontested" proxies is reviewable only for an abuse of discretion.

While the argument regarding setting aside stipulations does seem to have some applicability to the situation at hand, we believe that a more apt analogy is a motion for a new trial based on newly-discovered evidence, or a Rule 60(B) motion (SCRA 1986, 1-060(B)) to set aside a judgment based on such evidence. A special master proceeding is a quasi-independent proceeding from the rest of the trial; for example, the trial court may only review the special master's findings of fact to determine whether they are supported by substantial evidence. State ex rel. Reynolds v. Niccum, 102 N.M. 330, 695 P.2d 480 (1985). The trial court may not set aside the special master's findings just to reweigh the evidence. Lopez v. Singh, 53 N.M. 245, 205 P.2d 492 (1949). This case involves evidence discovered after the conclusion of the proceeding, and plaintiffs are in effect asking to reopen that proceeding to change the result. The trial court acknowledged this when it denied their motion, by stating that it would not go back in and reopen the special master hearing. We will, therefore, apply the principles of review applicable to the denial of a motion for a new trial to the situation at hand. The result we reach would be the same regardless of which approach we utilize.

A motion for a new trial based on newly-discovered evidence is addressed to the trial court's discretion. Hill v. Burnworth, 85 N.M. 615, 514 P.2d 1312 (Ct.App.1973). Therefore, our review is limited to determining whether the trial court abused its discretion in refusing to allow plaintiffs to raise the forgery issue with respect to the unchallenged proxies.

The prerequisites for granting a motion for a new trial based on newly-discovered evidence are as follows: (1) the new evidence would probably change the result; (2) it has been discovered since the trial; (3) it could not have been discovered before trial through the exercise of due diligence; (4) it is material to the issues in the case; (5) it is not merely cumulative; and (6) it is not merely impeaching or contradictory. Mitchell v. Forster, 59 N.M. 226, 282 P.2d 708 (1955); Hill v. Burnworth.

It appears that the new evidence in this case would probably change the result, if it is accepted by the trial court. Plaint...