Brooks v. Utah Power & Light Co., 3140.

• Decision Date: 22 October 1945
• Docket Number: No. 3140.,3140.
• Citation: 151 F.2d 514
• Parties: BROOKS et al. v. UTAH POWER & LIGHT CO. et al.
• Court: U.S. Court of Appeals — Tenth Circuit

151 F.2d 514 (1945)

BROOKS et al. v. UTAH POWER & LIGHT CO. et al.

No. 3140.

Circuit Court of Appeals, Tenth Circuit.

October 22, 1945.

Edgar C. Jensen, of Salt Lake City, Utah (H. P. Thomas, of Salt Lake City, Utah, on the brief), for appellants.

Paul H. Ray, of Salt Lake City, Utah (Robert L. Judd, S. L. Quinney, and A. H. Nebeker, all of Salt Lake City, Utah, on the brief), for appellee Salt Lake City Lines.

Gerald Irvine, of Salt Lake City, Utah (Geo. R. Corey, of Salt Lake City, Utah, on the brief), for appellees Utah Power & Light Co. and Utah Light & Traction Co.

Before PHILLIPS, Circuit Judge, and RICE and SAVAGE, District Judges.

RICE, District Judge.

The appeal in this case is from a summary judgment in favor of the defendants. The motions for summary judgment, supported by affidavits, were directed against plaintiffs' Amended and Supplemental Complaint filed on October 18, 1944.

Plaintiffs in their Amended and Supplemental Complaint sought to accomplish two things: First, the cancellation of a contract of sale entered into on April 20, 1944, between two defendants, Utah Light and Traction Company, hereinafter referred to as Traction Company, and Salt Lake City Lines, hereinafter referred to as City Lines; second, an accounting from City Lines to Traction Company on account of the operation since July 13, 1944, of the property transferred under said contract.

From the pleadings and affidavits in support of motions for summary judgment, the following facts are established. Plaintiffs are residents of the State of Oregon, and each is a bona fide and actual stockholder and owner of preferred stock of defendant, Utah Power and Light Company, hereinafter referred to as Power Company, a corporation of the State of Maine, but qualified to transact business in the State of Utah. The defendant, Traction Company, is a Utah corporation with its principal place of business at Salt Lake City. Traction Company is a wholly owned subsidiary of Power Company. The directors of the two are, in many instances, the same, and the managing officers of the two are the same. Traction Company for many years owned and operated a street railway and bus transportation business in Salt Lake City. Power Company is a registered holding company under the provisions of the Public Utility Holding Company Act of 1935, 15 U.S.C.A. § 79 et seq., and subject to regulation and control thereunder by the Securities and Exchange Commission.

The stock of Power Company consists of 3,000,000 common shares, no par value, and 510,000 of authorized shares of preferred stock of which 249,526 have been issued and are outstanding. The 3,000,000 common shares were issued to one corporation, Electric Power and Light Company, a registered holding company (hereinafter referred to as Electric Company) of which Power Company is a subsidiary. This distribution of stock gave 92.3% of the voting strength of Power Company to Electric Company. In a hearing before the Securities and Exchange Commission begun by Power Company and its subsidiaries, but in which certain issues regarding reorganization were raised by the Commission, a finding was made that Power Company received no actual consideration for the common stock issued to Electric Company, and that no equity existed in favor of the common stock; that the voting control must pass to the preferred stockholders. An order was entered requiring a change in capitalization of Power Company pursuant to Section 11(b) (2) of the Public Utility Holding Company Act of 1935 in conformity with the provisions of the Commission's order. The Commission also stated in its opinion rendered on November 29, 1943, that the transportation properties of Traction Company were not retainable by Traction Company or Power Company, and in its order retained jurisdiction to require the Electric Company, Traction Company and Power Company to take such action as might be determined necessary or appropriate. The Board of Directors of Power Company were elected by the voting strength of the 3,000,000 shares of common stock issued to Electric Company.

On April 20, 1944, Traction Company, acting by its president pursuant to authority from its Board of Directors, entered into a contract with City Lines for the sale of the street railway and bus transportation system at an agreed price of Six Hundred Seventy-five Thousand Dollars ($675,000), the purchaser assuming the obligation of repairing the streets in the event of the removal of the electric railway lines. Traction Company was, at the time, operating upon the streets of Salt Lake City by virtue of a franchise. It also was the owner of a Certificate of Public Convenience and Necessity granted by the Public Service Commission of the State of Utah. In order to effect a transfer of the property, two things, not entirely in the control of either party to the contract, were necessary, to-wit: The approval of the sale and transfer of the Certificate of Public Convenience and Necessity by the Public Service Commission of the State of Utah, and approval by the Board of Commissioners of Salt Lake City of the transfer of the seller's franchise. The contract recognized and specifically provided that the sale was contingent upon both approvals being obtained. On April 25th the Board of Commissioners of Salt Lake City gave its approval. A joint application was filed by Traction Company and City Lines...