## Facts

- In October 1957, Hyman and Sophie Yaker contracted to buy 80 acres and certain water rights for $15,000, paying $500 down and executing a note for the $14,500 balance.
- In October 1958, Intermountain Development Corporation was incorporated; the only shareholders/directors were the Yakers and Dora Moscow.
- In December 1958, the Yakers sold about 49 acres to Intermountain for 2,500 shares of Intermountain stock (par value $10/share) plus Intermountain’s assumption of the $14,500 contract balance and certain development costs.
- The Yakers retained about 31 acres and the water rights while receiving stock and shifting the remaining purchase and development obligations to Intermountain.
- In December 1958, the then-owners approved the corporation’s purchase; in January 1959, the 2,500 shares were issued to the Yakers.
- In April and May 1959, William Goldie purchased Intermountain shares; Reuben Mutnick and Lewis Kern later became shareholders.
- Plaintiffs alleged the 49 acres were assigned an excessive value, constituting fraud on the corporation and fraud on them individually in connection with their stock purchases.
- The trial court found fraud, entered relief adjusting rights between Intermountain and the individual defendants, and also awarded (or conditionally required) damages to plaintiffs individually.
- Defendants appealed, contesting derivative standing and the sufficiency of findings supporting individual fraud damages.

## Issues

1. Whether later-acquired shareholders may maintain a derivative action challenging a transaction approved and set in motion before they became shareholders, even if later steps of performance occurred after they acquired shares.
2. Whether the trial court’s findings were sufficient to support an award of damages to plaintiffs as individuals for alleged fraud directed at them personally.

## Decision

- The Supreme Court of New Mexico reversed.
- Plaintiffs lacked standing to maintain the derivative action because they were not shareholders at the time of the challenged transaction—when the corporation committed to the purchase and fixed its material terms.
- The award of individual damages was reversed because the findings did not establish the elements of individual fraud and resulting personal damages.
- The case was remanded with directions consistent with the opinion.

## Legal Principles

- A shareholder generally cannot sue derivatively for corporate transactions occurring before the shareholder acquired stock; derivative standing requires ownership at the time of the complained-of transaction.
- For contemporaneous ownership, the relevant “transaction” occurs when the corporation commits to the challenged deal (e.g., approval/contract on the material terms), not when later ministerial or executory steps are completed.
- Individual fraud damages require specific findings supporting the elements of fraud (including misrepresentation or concealment, reliance, causation, and damages) as to the individual plaintiffs; a finding of corporate injury does not alone support personal damages.

## Conclusion

The court applied the contemporaneous ownership rule to bar a derivative challenge to a land purchase approved before plaintiffs became shareholders and separately reversed individual fraud damages because the findings did not establish fraud directed at, relied on by, and damaging to the plaintiffs in their personal capacities.


Goldie v. Yaker, 432 P.2d 841 (N.M. 1967)