United Park City Mines Co. v. Greater Park City Co.

• Citation: 870 P.2d 880
• Decision Date: 23 August 1993
• Docket Number: No. 900306,900306
• Parties: UNITED PARK CITY MINES COMPANY, a Delaware corporation, Plaintiff and Appellant, v. GREATER PARK CITY COMPANY, a Utah corporation; Deer Valley Resort Company, a Utah limited partnership; Royal Street of Utah, a Utah corporation; Royal Street Development Company, a California corporation; Atlantic Richfield Company, a Delaware corporation, formerly The Anaconda Company, a Montana corporation; ASARCO, Incorporated, a New Jersey corporation; Morgan Guaranty Trust Company of New York, a New York corporation; Fidelity Bank of Philadelphia, a Pennsylvania corporation; Greater Properties, Inc., a Delaware corporation; Park Properties, Inc., a Delaware corporation; Alpine Meadows of Tahoe, Inc., a California corporation; and Royal Street Land Company, a Utah corporation, Defendants and Appellees. Wells Fargo Bank, N.A., Intervenor.
• Court: Supreme Court of Utah

Page 880

870 P.2d 880

UNITED PARK CITY MINES COMPANY, a Delaware corporation Plaintiff and Appellant, v. GREATER PARK CITY COMPANY, a Utah corporation; Deer Valley Resort Company, a Utah limited partnership; Royal Street of Utah, a Utah corporation; Royal Street Development Company a California corporation; Atlantic Richfield Company, a Delaware corporation, formerly The Anaconda Company, a Montana corporation; ASARCO, Incorporated, a New Jersey corporation; Morgan Guaranty Trust Company of New York, a New York corporation; Fidelity Bank of Philadelphia, a Pennsylvania corporation; Greater Properties, Inc., a Delaware corporation; Park Properties, Inc., a Delaware corporation; Alpine Meadows of Tahoe, Inc., a California corporation; and Royal Street Land Company, a Utah corporation, Defendants and Appellees Wells Fargo Bank, N.A., Intervenor.

No. 900306.

Supreme Court of Utah.

Aug. 23, 1993.

Rehearing Denied Nov. 9, 1993.

David K. Watkiss, Perrin R. Love, David B. Watkiss, Carolyn Cox, Salt Lake City, for United Park City Mines Co.

Gordon Strachan, Park City, James A. Boevers, Salt Lake City, for Greater Park City Co. and Alpine Meadows of Tahoe, Inc.

Gary F. Bendinger, Richard W. Giauque, Wendy A. Faber, Salt Lake City, for Deer Valley Resort Co., Royal Street of Utah, Royal Street Land Co., and Royal Street Development Co.

Richard D. Burbidge, Stephen B. Mitchell, Salt Lake City, and Howard L. Edwards, Los Angeles, CA, for Atlantic Richfield Co. and Anaconda Co.

Merlin O. Baker, Jonathan A. Dibble, Keith A. Kelly, Salt Lake City, for ASARCO, Inc.

Randy L. Dryer, Elisabeth R. Blattner, Salt Lake City, and Philip C. Potter, Donald N. Dirks, New York City, for Morgan Guar. Trust, Fidelity Bank of Philadelphia, Greater Properties, Inc., Park Properties, Inc.

Michael F. Jones, Salt Lake City, for Wells Fargo Bank.

HOWE, Associate Chief Justice:

Plaintiff United Park City Mines (UPCM), a Delaware corporation, appeals from a summary judgment dismissing all of its claims against all defendants except Greater Park City Company (GPCC). The trial court directed the entry of a final judgment as to the dismissed claims, making them appealable under rule 54(b), Utah Rules of Civil Procedure.

THE PARTIES

UPCM, a public company with more than five thousand shareholders, is a successor of several mining companies that operated mines in and around Park City, Utah. It has not actively mined its properties since 1982 but asserts that it could in the future. Defendant The Anaconda Company is a mining corporation which merged with Atlantic Richfield Company (ARCO) in 1977. Defendant ASARCO is also a mining corporation. From 1953 to 1985, Anaconda and ASARCO were controlling shareholders of UPCM, and each elected two directors (usually their employees) to the seven-member board of directors. ¹ GPCC is a corporation which has operated the Park City Ski Resort and developed land since 1971. From 1971 to 1975, GPCC was a closely held corporation owned by UPCM and by defendants Royal Street Development Company (RSDC), Morgan Guaranty Trust Co. (Morgan), Fidelity Bank of Philadelphia (Fidelity), and Unionamerica. As will be later explained, GPCC became a wholly owned subsidiary of defendant Alpine Meadows of Tahoe, Inc. (AMOT), in 1975. Nicholas Badami is the president of AMOT and became the chairman of GPCC. The following defendants, collectively referred to as Royal Street, are related entities owned or controlled by Edgar Stern: Deer Valley Resort Company (Deer Valley) is a limited partnership which operates the Deer Valley Ski Resort; Royal Street of Utah (RSU), a corporation, is the general partner of Deer Valley; Royal Street Land Company (Land) is a corporation engaged in the ski resort and land development business which owns virtually all of the stock of RSU, has effective control over RSU, and through RSU has control over Deer Valley. RSDC is a corporation which is the affiliate and alter ego of Deer Valley, RSU, and Land. RSDC was a shareholder of GPCC from 1971 to 1975 and operated GPCC during that period under a management agreement.

Defendants Morgan and Fidelity are corporations engaged in banking. Defendants Greater Properties, Inc. (GPI), and Park Properties, Inc. (PPI), are corporations wholly owned by Morgan and Fidelity on behalf of certain commingled pension trusts of which Morgan and Fidelity are trustees. GPI and PPI were incorporated by Morgan-Fidelity in 1975 to receive a percentage of ski-lease income generated by GPCC at the Park City Ski Resort and to own the ski-resort base facility. Intervenor Wells Fargo Bank has loaned money to Royal Street, and its loans are secured by mortgages on certain real and personal property.

FACTS

Over the years, UPCM acquired mining properties with vast acreage and water rights in and around Park City, including the Deer Valley area. It began developing the surface of the land in the early 1960s. Park City Ski Resort, then known as Treasure Mountain Resort, opened in late 1963 with base and summit facilities, chair lifts, and a gondola. Also, a nine-hole golf course was developed adjacent to the base facilities. The operations continued to grow each year, but additional development was required to establish Park City as a destination resort.

In 1970, Edgar Stern of Royal Street made a proposal to Anaconda and ASARCO to expand the development of UPCM's resort properties. Stern proposed a partnership in which UPCM would contribute the land and water, including its existing Park City ski operations and resort properties. Royal Street would manage and develop the resort and find a third partner to contribute capital. For tax reasons, the parties formed a closely held corporation instead of a partnership. Thus, GPCC was formed.

In 1971, a series of land and water agreements and land leases were executed (collectively referred to as the 1971 agreements). In those agreements, UPCM sold Park City Ski Resort to GPCC, along with all of the base facilities and other personal property, 4200 acres of development property, and water rights. The selling price was $6,126,000 payable over time. UPCM also leased nearly 6000 acres for ski runs to GPCC for twenty years with a twenty-year extension for a rental based on a percentage of ski-lift revenues. In return, UPCM received the right to participate in the growth of the ski resort as GPCC's major shareholder and senior creditor.

Throughout much of 1972, 1973, and 1974, GPCC experienced financial problems. UPCM charges that Royal Street committed management errors, including overexpansion, negligent construction practices, construction cost overruns, and unsound debt/equity ratios, which, when combined with rising interest rates, generated substantial book losses for GPCC. By the summer of 1974, GPCC was highly leveraged and unable to service its growing debt, then in excess of 20 million dollars.

In early 1975, GPCC failed to make substantial payments due UPCM under the 1971 agreements. UPCM was entitled under the cross-default provisions to terminate all of the agreements and take possession of the resort facilities and all other unconveyed properties covered by the agreements. Instead, UPCM restructured the agreements through a series of amendments entered into in 1975. UPCM continued to sell its properties and water rights for the 1971 prices but with extended payments. UPCM gave up its major equity interest in GPCC and extended the ski leases for two additional twenty-year terms. At a special stockholders' meeting held October 7, 1975, the restructuring was approved. A proxy statement explaining the proposal had been mailed to each stockholder prior to the meeting. As will be hereafter more fully discussed, six stockholders wrote the board expressing concern over the adequacy of the information in the proxy statement and questioning the fairness of the proposal to UPCM.

In August 1985, Anaconda and ASARCO sold their stock in UPCM. New management took control and one year later instigated this lawsuit. In 1988, an amended complaint named Anaconda and ASARCO as defendants. UPCM contends that prior to 1985, Anaconda and ASARCO controlled the board of directors by electing a majority of the board. It asserts that all of the directors were their employees, former employees, attorneys, bankers, and other persons who, due to contractual and historical relationships with Anaconda and ASARCO, did not act independently for the best interests of UPCM. UPCM alleges that once new management arrived, apparent violations of the 1975 restructured agreements by GPCC and Royal Street led to an investigation of the circumstances surrounding their making.

The amended complaint charges that Anaconda and ASARCO, as controlling shareholders of UPCM in 1975, breached their fiduciary duties to UPCM by causing it to give up, for grossly inadequate consideration, its valuable interests in the ski operations and development properties to protect and concentrate on their interests in Park City Ventures. The latter was a joint venture formed in 1970 by Anaconda and ASARCO to mine UPCM's properties. Anaconda and ASARCO caused UPCM to lease to Park City Ventures all of its mining property and equipment, with Anaconda and ASARCO receiving two-thirds of the net mining profits. It is not suggested that either Anaconda or ASARCO secretly profited in any way by the 1975 restructuring.

UPCM further alleges that Royal Street and Morgan-Fidelity owed fiduciary duties to UPCM as co-shareholders with UPCM in GPCC and breached those duties by obtaining unfair advantage over UPCM in the 1975 restructuring. Finally, it is alleged that GPCC and AMOT, to their financial advantage, aided and abetted the fiduciary duty breaches by Anaconda, ASARCO, Royal Street, and Morgan-Fidelity.

The amended complaint contains twelve claims for relief. The first and second claims seek damages from Anaconda and ASARCO for breaches of their fiduciary duties of loyalty,...