Thermopolis Northwest Electric Co. v. Ireland

• Decision Date: 06 March 1941
• Docket Number: No. 2204.,2204.
• Citation: 119 F.2d 409
• Parties: THERMOPOLIS NORTHWEST ELECTRIC CO. v. IRELAND.
• Court: U.S. Court of Appeals — Tenth Circuit

119 F.2d 409 (1941)

THERMOPOLIS NORTHWEST ELECTRIC CO. v. IRELAND.

No. 2204.

Circuit Court of Appeals, Tenth Circuit.

March 6, 1941.

Graddus R. Hagens, of Casper, Wyo. (William J. Wehrli, of Casper, Wyo., on the brief), for appellant.

Jackson M. Seawell, of Denver, Colo. (Dines, Dines & Holme, of Denver, Colo., Wilfrid O'Leary, of Cheyenne, Wyo., and Robert E. More, of Denver, Colo., on the brief), for appellee.

Before PHILLIPS, BRATTON, and HUXMAN, Circuit Judges.

BRATTON, Circuit Judge.

Grace M. Ireland, executrix of the last will and testament of Rufus J. Ireland, deceased, sued The Thermopolis Northwest Electric Company for an accounting and to recover upon a resolution of its board of directors indemnifying Ireland against certain losses. Plaintiff prevailed, and defendant appealed.

Hot Springs Electric Light & Power Company owned and operated a light and power plant at Thermopolis, Wyoming. In December, 1925, Ireland purchased the property of the company at a tax sale for $8,213.33, and a tax sale certificate was issued to him. In February, 1926, he caused Monument Hill Electric Company, a corporation, to be organized with an authorized capital stock of 2,000 shares of the par value of $100 each. The name of the corporation was later changed to Thermopolis Northwest Electric Company. Ireland transferred the tax sale certificate to the corporation and received therefor its note in the exact amount which he had paid for the certificate. The company issued 1997 shares of its stock to Ireland, and the remaining 3 shares to qualifying directors. In consideration for the stock issued to him, Ireland was to secure and did secure for the corporation a new franchise from the town, a contract to light the streets and alleys of the town, a certificate of convenience and necessity from the public service commission of the state, and a contract to obtain electric energy from Northwest Transmission Company. Ireland advanced to the company about $10,000 in cash and it went forward with the business. In October, 1926, the directors of the company adopted a resolution in this language:

"Whereas this corporation purchased from R. J. Ireland, in February, 1926, the old electric power plant, transmission lines, poles, equipment and other rights and properties formerly owned by the old Hot Springs Electric Light & Power Company, acquired by the said R. J. Ireland at a tax sale of said property;

"And Whereas it is claimed by certain parties interested in the old Hot Springs Electric Light & Power Company as stockholders or bondholders, or attorneys or representatives of such stockholders or bondholders, or some of them, that they or the corporation are entitled to recover from the said Ireland such property upon the payment to him of the amount paid by him for such property at such tax sale, together with legal interest thereon;

"And Whereas one Henry T. Clarke has heretofore brought suit in equity in the District Court of the United States for the District of Wyoming, against the Hot Springs Electric Light & Power Company, Wyoming Trust Company, a corporation, Monument Hill Electric Company, a corporation, Maurice Singer, R. J. Ireland and Paul A. Rothwell, which said suit is now pending and undetermined, and is known as No. 1659 in said court;

"And Whereas this corporation now owns all of the property and rights of said R. J. Ireland in and to any and all property and rights formerly owned by the Hot Springs Electric Light & Power Company, and should protect R. J. Ireland as well as itself in such ownership;

"Now, Therefore, Be It Resolved that this corporation, Monument Hill Electric Company, does hereby covenant and agree to indemnify and hold harmless R. J. Ireland from any and all liability incurred or assumed by him by reason of the sale by him to this corporation of the property and rights acquired by him at the tax sale of the property of the old Hot Springs Electric Light & Power Company.

"And Be It Further Resolved that this corporation hold the said R. J. Ireland harmless from any and all damages, expense, loss, or other liability which he may sustain by reason of the suit brought against him and this corporation and others by the said Henry T. Clarke, now pending in the United States District Court at Cheyenne.

"And Be It Further Resolved that in the event it shall be determined by any court of competent jurisdiction that the said R. J. Ireland must return to the Hot Springs Electric Light & Power Company, or to any stockholders or bondholders of such Company, any or all of the property acquired by him at the tax sale of said property and subsequently sold to this corporation, that this corporation shall return such property to the said R. J. Ireland for such purpose upon receipt of the amount of money paid by this corporation to the said R. J. Ireland for such property, together with interest thereon."

At the time of the adoption of the resolution, a suit was pending in the United States Court for Wyoming in which Henry T. Clarke, owner of certain bonds issued by Hot Springs Electric Light & Power Company, was plaintiff and Ireland and others were defendants. Clarke sought on behalf of himself and other bondholders to have the tax sale vacated, the transfer of the certificate set aside, and certain asserted rights of the bondholders protected and enforced. That suit was dismissed without prejudice and a very similar suit was subsequently instituted in the same court. It was determined in that action that the attempted tax sale was invalid, but that instead of setting aside all of the transactions which had preceded that determination, the bondholders should have judgment against Ireland and the Thermopolis Company in such sum as the court should find upon further hearing to be the value of the property and business of the Hot Springs Company. This court affirmed the decree, with a modification in respect to costs. Clarke v. Hot Springs Electric Light & Power Co., 10 Cir., 55 F.2d 612. The district court determined on the further hearing that the value of the property and business was $92,160; and that amount was on behalf of the Thermopolis Company paid into the registry of the court and distributed pro rata among the bondholders. The Hot Springs Company, and Thomas J. Cuff, trustee for owners of other bonds of the Hot Springs Company, filed a suit against Ireland in the supreme court of Nassau County, New York, in which recovery was sought for more than $200,000. Henry T. Clarke and John T. Clarke intervened in that action. Ireland appealed without avail from an adverse ruling upon his motion for summary judgment. Hot Springs Electric Light & Power Co. and Cuff v. Ireland, 241 App.Div. 738, 270 N.Y.S. 952. Shortly thereafter, Ireland died, and the executrix of his last will and testament subsequently compromised and settled that case as to Cuff for $20,000 in cash.

The court below found, among other things, that after the adoption of the resolution Ireland expended various amounts defending himself in the second Clarke suit, aggregating $12,108.19; that he also spent various amounts defending himself in the Cuff suit, and finally paid $20,000 to settle and compromise it; that the settlement suit was reasonable and advisable; that in the adoption of the resolution, the defendant intended to indemnify Ireland against such expenditures; and that each and all of such expenditures were reasonable, bona fide, and covered by the resolution. Judgment went for $59,288.29, being the aggregate of the expenditures in the two cases.

The finding of the court that in the adoption of the resolution it was the intention of the defendant to indemnify Ireland against expenditures of the kind made in the second Clarke suit and in the Cuff suit is challenged. It is contended that the resolution is clear and unambiguous; that it cannot be varied by parol...