This memorandum opinion was not selected for publi cation in the New Mexico Reports. Please see 1 Rule 12-405 NMRA for restrictions on the citation of unpublished memorandum opinions. Please 2 also note that this electronic memorandum opinion may contain computer-generated errors or other 3 deviations from the official paper version file d by the Court of Appeals and does not include the 4 filing date. 5
IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO 6
THE ESTATE OF RAY BISHOP and 7 PATRICIA BISHOP , 8 Plaintiffs-Appellees, 9

v. NO. 30,016 10
M. MARK MULHOLLAND and PATRICIA 11 MULHOLLAND, Husband and Wife and RUIDOSO 12 VENDING, INC., a New Mexico corporation, 13 Defendants-Appellants. 14
APPEAL FROM THE DISTRICT COURT OF LINCOLN COUNTY 15 Sandra A. Grisham, District Judge 16 Richard A. Hawthorne, P.A. 17 Richard A. Hawthorne 18 Ruidoso, NM 19 for Appellee 20 Charles E. Hawthorne 21 Ruidoso, NM 22 for Appellants 23
MEMORANDUM OPINION 24 VIGIL, Judge. 252 In this case we address whether subs tantial evidence supports the decision of 1 the district court to pierce the corporate veil of Ruidoso Vending, Inc., (RVI) with the 2 consequence that Mark and Patricia Mulholland (Defendant s) are personally liable for 3 a judgment obtained by Plaintiffs against RVI. We affirm. 4
BACKGROUND 5 The facts of this case start with a purchase of a food and beverage vending 6 machine business by RVI from Ray Bishop. RVI gave Mr. Bishop a promissory note 7 secured by the vending machines and business vehicles sold to it by Mr. Bishop. 8 After Mr. Bishop’s death, Plaintiffs (his estate and surviving spouse) brought suit 9 against RVI on the promissory note, and secured a judgment against RVI in the 10 amount of $102,062.11 and attorney fees in the amount of $17,012.15. The judgment 11 ordered RVI to deposit all income earned from its vending machines, minus the 12 commissions owed to shop owners and for gross receipts taxes, into its attorney’s trust 13 account for distribution to Plaintiffs by the district court. RVI did not deposit any 14 funds into its attorney’s trust account. 15 We subsequently affirmed the money judgment against RV I. In apparent 16 efforts to avoid paying the judgment, RV I filed a Chapter 11 bankruptcy proceeding 17 seeking a plan to “cram down” a settlement against Plaintiffs. The Chapter 11 trustee 183 refused the “cram down” plan and the Ch apter 11 proceeding was dismissed. RVI 1 then filed a Chapter 7 bankruptcy proceeding seeking to discharge the judgment, but 24 the Chapter 7 trustee refused to discharge th e debt. Plaintiffs then brought this action 1 to pierce the corporate veil of RVI and hold Defendants personally liable for the 2 money judgment. 3 A non-jury trial was held in which testimony was given by the personal 4 representative of Mr. Bishop’s estate and Defendants. Entered into evidence were 5 copies of the money judgment, Defendant s’ personal income tax returns, RVI’s 6 corporate tax returns, and checking account statements for RVI, Defendants, and an 7 account under the name of “M Mark Mulholland dba Ruidoso Vending.” Based on 8 the testimony and evidence, the district court found that: (1) RVI had functioned 9 under the domination and complete contro l of Mr. Mulholland for his personal 10 purposes; (2) Defendants operated RVI fo r the improper purpose of preventing 11 Plaintiffs from collecting on the money judgm ent by diverting RVI’s income into their 12 personal accounts; and (3) such operation of RVI was the sole and proximate cause 13 of Plaintiffs’ inability to collect the money judgment. Finding that the requirements 14 to pierce RVI’s corporate veil were satisfi ed, the district court entered a judgment 15 directing that Defendants are personally liable for the money judgment owed by RVI. 16 Defendants appeal. 175 DISCUSSION 1
Standard of Review 2 We review the district court’s factual findings for substantial evidence, and we 3 examine the application of those factual findings de novo to the district court’s 4 determination to pierce the corporate veil. See Garcia v. Coffman , 1997-NMCA-092, 5 ¶ 14, 124 N.M. 12, 946 P.2d 216 (stating that we examine the evid ence bearing on the 6 three factual requirements for piercing th e corporate veil in order to determine 7 whether substantial evidence supports the verdict); Benavidez v. Benavidez , 2006- 8 NMCA-138, ¶ 21, 140 N.M. 637, 145 P.3d 117 (s tating that we generally review a 9 district court’s factual findings for subs tantial evidence and its legal conclusions de 10 novo). 11 We are bound by the factual determinations of the district court unless those 12 findings are not supported by substantial evidence. See Segal v. Goodman , 115 N.M. 13 349, 353, 851 P.2d 471, 475 (1993) (stating that “facts found by the trial court will not 14 be disturbed by an appellate court if those factual findings are supported by substantial 15 evidence”). “Substantial evid ence is such relevant evid ence that a reasonable mind 16 would find adequate to support a conclusion.” Landavazo v. Sanchez , 111 N.M. 137, 17 138, 802 P.2d 1283, 1284 (1990). In reviewi ng for substantial evidence, “[t]he 18 question is not whether substantial eviden ce exists to support the opposite result, but 196 rather whether such evidence supports the result reached.” Las Cruces Prof’l Fire 1 Fighters v. City of Las Cruces , 1997-NMCA-044, ¶ 12, 123 N.M. 329, 940 P.2d 177. 2 “Additionally we will not reweigh the evid ence nor substitute our judgment for that 3 of the fact finder.” Id. 4
The District Court Did Not Err in Piercing the Corporate Veil 5 In general, we treat a corporation as being a legal entity separate from its 6 shareholders. Scott v. AZL Resources, Inc. , 107 N.M. 118, 121, 753 P.2d 897, 900 7 (1988). As such, a shareholder cannot beheld personally liable for a judgment 8 incurred by a corporation even if he or she is the sole shareholder of the corporation. 9 See S. Union Exploration Co. v. Wynn Exploration Co. , 95 N.M. 594, 600, 624 P.2d 10 536, 542 (Ct. App. 1981) (“A corporati on and a stockholder, even though that 11 stockholder be the owner of the vast majority of the stock, are separate entities.” 12 (internal quotation marks and citation omitted)); Scott Graphics, Inc. v. Mahaney , 89 13 N.M. 208, 211, 549 P.2d 623, 626 (C t. App. 1976) (“Normally the corporation is an 14 insulator from liability on claims of creditors. The fact that incorporation was desired 15 in order to obtain limited liability does not defeat that purpose.” (internal quotation 16 marks and citation omitted)). However, under special circumstances, courts may 17 disregard the legal status of the corporat e entity and pierce the corporate veil to hold 18 individual shareholders liable. AZL Resources, Inc. , 107 N.M. at 121, 753 P.2d at 197 900. Piercing of the corporate veil is an equitable remedy, id. , and three elements 1 must be proven: “(1) instrumentality or domination; (2) improper purpose; and (3) 2 proximate cause.” Garcia , 1997-NMCA-092, ¶ 10. We address each in turn. 3
A. There Is Substantial Evidence To Show That RVI Was Dominated 4 by Defendants to Serve Their Personal Purposes 5 New Mexico decisions refer to the first requirement of “instrumentality” or 6 “domination” as the alter ego doctrine. Harlow v. Fibron Corp. , 100 N.M. 379, 382, 7 671 P.2d 40, 43 (Ct. App. 1983). To satisfy the alter ego requirement, a corporation 8 must be dominated by its shareholders to th e extent that the corporation does not have 9 a will of its own but is solely the instrument used for the shareholders’ personal 10
purposes. See Mahaney , 89 N.M. at 211, 549 P.2d at 626 (stating that the 11 determination of alter ego describes situations where “the shareholders have so 12 manipulated the corporation to further their own individual interests that the identity 13 of the corporation has merged into its shareholders”); Harlow , 100 N.M. at 382, 671 14 P.2d at 43 (stating that it must be proven th at the “corporation wa s operated not in a 15 legitimate fashion to serve the valid goals and purposes of that corporation but that it 16 functioned under the dominati on and control and for the purposes of some dominant 17 party” (internal quotation mark s and citation omitted)). Im portant factors to consider 18 to determine alter ego include whether: (1) the shareholders ignored corporate 19 processes or formalities; (2) there is a commingling of corporate funds with the 208 shareholders’ funds to the benefit of the shareholders; and (3) there is 1 undercapitalization of the corporation. See Garcia ,1997-NMCA-092, ¶ 17; Harlow , 2 100 N.M. at 383, 671 P.2d at 44. The followi ng evidence is substantial to support the 3 district court’s finding that RVI was the alter ego of Defendants. 4 Prior to entry of the money judgment, Defendants deposited RVI’s income into 5 a checking account under its own name. Sometime after the money judgment was 6 entered, the account’s name was change d to “M Mark Mulholland dba Ruidoso 7 Vending Commission Account,” and we re fer to this account as the RVI account. 8 Around the same time, another account wa s opened called “M Mark Mulholland dba 9 Ruidoso Vending,” which we refer to as the doing-business account. The last account 10 relevant to this case is the joint personal bank account named “Mr. or Mrs. M. Mark 11 Mulholland,” which is Defendants’ personal account. All of the funds in these 12 accounts are from Defendants’ vending busin ess and no other sources of income. 13 Defendants were the only directors, shareholders, and officers of RVI, and they 14 governed all aspects of RVI’s business, including the corporation’s finances. RVI did 15 not have any bylaws to governits operations and no stock was formally issued. No 16 corporate formalities, such as directors meetings, shareholder meetings, or minutes of 17 any corporate acts or decisions, were heldor produced, and RVI did not have an 18 operating bank account in its own name since approximately a year after entry of the 199 money judgment. Defendants also failed to file RVI’s tax returns for the years of 1 1996-2005 until they were required to do so by the bankruptcy court in 2006, and no 2 tax returns were filed for RVI since that time. 3 In regard to commingling, Defendants continued to operatea vending business 4 as a sole proprietorship but with incomeand assets belonging to RVI without any 5 compensation to the corporation. The majo rity of RVI’s income derived since the 6 entry of the money judgment was transferre d into either Defendants’ personal account 7 or the doing-business account. Defendants tran sferred such income to pay for their 8 services and other business e xpenses, but they did not use RVI’s funds to benefit the 9 corporation’s interests by paying off the judgment entered against it in compliance 10 with the court order. De fendants also used RVI’s in come to pay personal loans, 11 including a truck titled to Mr. Mulholland individually which was used in his personal 12 business. Defendants did not prepare financial statements, inventory, or listings of the 13 locations where RVI had vending machines inorder to distinguish RVI’s assets from 14 Defendants’ alleged non-corporate business property. Defendants also failed to trace 15 the money deposited into Defendants’ personal account or the doing-business account 16 to their personal business at trial. 17 As to undercapitalization, Mr. Mulholland alleged that RVI is operating at a 18 loss, and RVI has filed for bankruptcy on three different o ccasions. In addition, the 1910 records reflect that only $8,354.41 was depos ited into RVI’s account for the year of 1 operation before trial. 2
B. There Is Substantial Evidence to Show That RVI Was Operated 3 for an Improper Purpose 4 The corporation must also be operated for an improper purpose. AZL 5 Resources, Inc. , 107 N.M. at 122, 753 P.2d at 901. An improper purpose occurs when 6 the corporation’s assets misrepresentedare to the detriment of creditors. See 7 Mahaney , 89 N.M. at 212, 549 P.2d at 627; see also AZL Resources, Inc. , 107 N.M. 8 at 122, 753 P.2d at 901 (stating that there must be a showing that the financial setup 9 of the corporation is a sham or caused an injustice as a result); Harlow , 100 N.M. at 10 383, 671 P.2d at 44 (stating that there is no showing of improper purpose when 11 commingling of the dominating parties’ funds with corporate funds results in the 12 supplying of money to the losing business of the corporation and not the parties taking 13 money or other assets from it). We de termine that the following evidence supports 14 the district court’s findings that RVI’s assets were misrepresented as being 15 Defendants’ personal asserts and that this was done so as to prevent collection of the 16 judgment by Plaintiffs. 17 Around the time of the suit on the note was initiated, income tax returns 18 reflected that RVI’s reported gross income was $204,000.00, and Defendants’ 19 reported gross income was approximately$34,000.00. After entry of the money 2011 judgment, around $53,000.00 was deposited into RVI’s account while the sum of 1 $264,060.00 was deposited intoDefendants’ personal account and $49,343.00 was 2 deposited into the doing-business account. The year following entry of the money 3 judgment, merely $8,354.41 was deposited into RVI’s account while $176,367.39 was 4 deposited into Defendants’ personal acc ount and $82,442.19 was deposited into the 5 doing-business account. 6 At trial, the district court told Mr. Mulholland that the above facts and figures 7 made it appear at if corporate funds were being taken from the RVI account and 8 reported as personal income. The district court further stated that a tracing of the 9 funds to personal assets as opposed to cor porate assets was important to Defendants’ 10 case. Mr. Mulholland was unable to provide a legitimate explanation for the 11 discrepancies in the accounts or to trace his alleged personal income to his sole 12 proprietor vending business other than$12,000-$16,000 from individually owed gum 13 ball machines. 1412 C. There Is Substantial Evidence to Show That the Domination of RVI for 1 Improper Purposes Proximately Caused Plaintiffs’ Injury 2 The last requirement to pierce the corporate veil is that the domination of the 3 corporation for an improper purpose must proximately cause injury to Plaintiffs. 4
Garcia , 1997-NMCA-092, ¶¶ 10, 24. It is undisputed that no funds have been 5 deposited into the trust account of RVI’s attorney. Defendants placed the funds 6 derived from RVI’s vending machines and income into Defendants’ personal account 7 and the doing-business account, and, thus, represented these corporate funds as 8 personal income. If Defendant s had appropriately identifie d the income derived from 9 RVI’s vending machines as corporate profit and, properly deposited the funds into 10 RVI’s attorney’s trust account as ordered, Plaintiffs woul d have been able to collect 11 the judgment and would not be injured. Therefore, these facts are sufficient to show 12 that Defendants’ representations of RVI’sfinances proximately caused Plaintiffs’ 13 injuries. 14 Defendants argue that piercing RVI’s veil is improper because Mr. Bishop 15 knew that he was dealing with a corporation when he entered into the agreement to 16 sell his vending business, and RVI was set up for a legitimate purpose. We are 17 unpersuaded. The contracting parties’ intent during the original transaction has no 18 bearing on the subsequent operation of RVI to evade collection of the money 19 judgment. In addition, to pierce the cor porate veil, New Mexico law does not require 2013 that a corporation be set up for a fraudulent purpose. However, its mismanagement 1 at any subsequent time may be used to es tablish evidence of an improper purpose and 2 an injustice that arose from the creation of the corporation. See AZL Resources, Inc. , 3 107 N.M. at 122, 753 P.2d at 901 (“There wa s no showing that the three resort 4 corporations were undercapitalized when inco rporated, that their financial setup was 5 only a sham or any injustice resulted from the setup.”); Mahaney , 89 N.M. at 212, 549 6 P.2d at 627 (stating that “should misman agement occur for fraudulent purposes or 7 result in injustice, then the cor porate entity will be disregarded”). 8 In sum, we conclude that there is s ubstantial evidence to support each of the 9 three requirements to pierce the corporat e veil and thus hold Defendants personally 10 liable for the money judgment. 11
CONCLUSION 12 For the foregoing reasons, the judgment is affirmed. 13
IT IS SO ORDERED. 14

______________________________ 15 MICHAEL E. VIGIL, Judge 1614 WE CONCUR: 1

______________________________ 2 RODERICK T. KENNEDY, Judge 3

______________________________ 4 TIMOTHY L. GARCIA, Judge 5