Title: Squaw Mountain Cattle Co. v. Bowen

State: wyoming

Issuer: Wyoming Supreme Court

Document:

Squaw Mountain Cattle Co. v. Bowen1991 WY 12804 P.2d 1292Case Number: 90-86, 90-87Decided: 02/06/1991Supreme Court of Wyoming
 
 
SQUAW 
MOUNTAIN CATTLE COMPANY, a Wyoming Corporation; 

Springer 
Jones; and Donna Jones,

 Appellants (Defendants),

 

v.

 

Pat BOWEN; 
Bernard Raymond McGuire, Sr., Irrevocable Trust, Bernard Raymond McGuire, Jr. 
and Thomas Michael McGuire, Trustees; and Burnett Ranches, a Wyoming 
Partnership, acting by and through Two Bar-Muleshoe Water Company, a Wyoming 
Corporation, 

Appellees 
(Plaintiffs).

 

Pat BOWEN; 
Bernard Raymond McGuire, Sr., Irrevocable Trust, Bernard Raymond McGuire, Jr. 
and Thomas Michael McGuire, Trustees; and Burnett Ranches, a Wyoming 
Partnership, acting by and through Two Bar-Muleshoe Water Company, a Wyoming 
Corporation, 

Appellants 
(Plaintiffs),

 

v.

 

SQUAW 
MOUNTAIN CATTLE COMPANY, a Wyoming Corporation;

 Springer Jones; and Donna Jones, 

Appellees 
(Defendants).

 
 

Appeal from 
the District 
Court 
of 
Platte 
County, Edward 
Grant, J.

 

Thomas S. 
Smith and Kathleen A. Hunt of Smith (argued), Stanfield & Scott, 
Laramie, for appellants in No. 90-86 and appellees 
in No. 90-87.

 

Rex E. 
Johnson and D.N. Sherard (argued), Wheatland, for appellees in No. 90-86 and appellants 
in No. 90-87.

 

Before 
URBIGKIT, C.J., and THOMAS, CARDINE, MACY and GOLDEN, JJ.

 

CARDINE, 
Justice.

 

[¶1]  The minority shareholders in the Two 
Bar-Muleshoe Water Company (Muleshoe) brought this derivative action against the 
corporation's majority stockholder and president, Springer Jones, his wife and 
their ranch corporation, Squaw Mountain Cattle Company, for converting corporate 
assets. The action resulted from Jones causing the bulk of a $1.25 million 
settlement from litigation to be distributed to himself and his relatives. The 
trial court found generally in the minority shareholders' favor, but declined to 
assess punitive and exemplary damages. Both parties appeal.

 

[¶2]  We affirm in all respects.

 

[¶3]  The defendants below, appellants in case 
no. 90-86, bring the following issues:

 

"1. Were 
Appellant Springer Jones' actions relating to the conduct of litigation properly 
within his explicit and inherent authority as President of Two 
Bar?

"2. Were 
the settlement negotiations improperly categorized by the trial court as `lost 
corporate opportunities'?

"3. Was the 
March 25, 
1988, Wheatland 
Irrigation District resolution improperly categorized by the trial court as a 
completed settlement offer which should have been submitted to the Two Bar 
board?

"4. Should 
the Appellees have been prevented from modifying the distribution formula of the 
settlement agreement of January 3, 
1989, by reason 
of the doctrine of estoppel, waiver and/or laches?"

 

[¶4]  The plaintiffs below, appellants in case 
no. 90-87, raise this issue:

"Considering 
the actions and conduct of Defendants, did the District Court commit error when 
it refused to assess punitive and exemplary damages against said 
Defendants?"

 

FACTS

 

[¶5]  The Two Bar-Muleshoe Water Company owned 
the land underlying Wheatland Irrigation District Reservoir No. 2. Wheatland 
Irrigation District (Wheatland) and its predecessor had leased the land from 
Muleshoe and its predecessor since 1900. Wheatland delivered irrigation water 
from the reservoir to Muleshoe shareholders as consideration for the lease. 
Stock in Muleshoe entitled the shareholders to water rights to one acre of land 
for each share of stock owned. The Squaw Mountain Cattle Company owned 
approximately 59 percent of the shares in Muleshoe. The Squaw Mountain Cattle 
Company (Squaw 
Mountain) is 
wholely owned by Springer Jones and his relatives. Jones is president of both 
Squaw 
Mountain and 
Muleshoe.

 

[¶6]  Litigation over the parties' rights and 
obligations in the lease has spanned many years. See, e.g., Anderson v. Wyoming 
Development Co., 60 Wyo. 417, 154 P.2d 318 (1944), and State ex rel. Squaw 
Mountain Cattle Co. v. Wheatland Irrigation District, 728 P.2d 172 (Wyo. 1986). 
In May of 1983, Muleshoe stockholders and directors adopted a resolution 
authorizing Jones to bring legal action in Muleshoe's name against Wheatland to 
enforce the terms of the lease. The resolution also allowed Jones to seek 
damages for crop losses on Squaw 
Mountain acreage 
which allegedly resulted from Wheatland's failure to deliver water before and 
after Wheatland's normal irrigation season. The suit was filed on 
June 14, 
1983 with 
Squaw 
Mountain and 
Muleshoe listed as plaintiffs. Wheatland responded to the suit by filing a 
counterclaim asserting eminent domain to gain ownership of the land underlying 
the reservoir.

 

[¶7]  In 1985, Jones met with the trustees of 
Wheatland to discuss settling the case. At that time, Jones contended the land 
underlying the reservoir was worth approximately $1.5 million. Wheatland moved 
to drop its counterclaim in 1987, but Jones resisted the motion and never shared 
this information with other Muleshoe shareholders. In February of 1988, 
Wheatland offered a settlement that included paying Muleshoe $55,000 a year in 
perpetuity for the land. The offer was not accepted. In March of 1988, Wheatland 
offered $1 million for the land under the reservoir and $250,000 to 
Squaw 
Mountain to settle 
the case. Wheatland's counsel communicated this offer to Jones' counsel in April 
1988. Jones never shared this offer with the Muleshoe shareholders. Instead, on 
August 31, 
1988, Jones 
presented the settlement as Wheatland offering to pay $1,051,500 to Jones and 
his relatives for "physical and emotional stress, embarrassment and loss of 
reputation" caused by the dispute; $116,000 to Muleshoe for the land under the 
reservoir; with the remaining funds going to pay 
Squaw 
Mountain's past due 
water assessments. Jones and his advisors had formulated this distribution of 
the funds themselves. Wheatland had not offered the payments as stated by Jones. 
The Wheatland manager believed that the $1.25 million was going to be 
distributed as contained in the March 1988 resolution. Jones, nevertheless, told 
the other Muleshoe members that Wheatland was behind this distribution. Although 
suggested by Jones in discussions with Muleshoe stockholders as a reason for the 
settlement offer, none of the proposals to settle jeopardized the Muleshoe 
members' water rights. These rights had been adjudicated and were appurtenant to 
land owned by the individual Muleshoe shareholders.

 

[¶8]  No action was taken at the August 31 
meeting. At a September 
9, 1988 meeting, 
Muleshoe's board of directors voted to reject the settlement offer. Springer 
Jones then voted Squaw 
Mountain's 59 
percent of the outstanding shares in favor of the settlement and declared it 
accepted. Jones signed the settlement agreement on September 15 as president of 
both Squaw 
Mountain and 
Muleshoe. Shortly after the settlement by Jones, this suit was brought by 
Muleshoe against Jones and Wheatland. Jones counterclaimed seeking damages from 
Muleshoe for conspiracy, intentional interference with contract, abuse of 
process and malicious prosecution. Wheatland was dismissed from the case with 
prejudice upon stipulation after it deposited the amount of the settlement that 
Muleshoe could recover.

 

[¶9]  Following a bench trial, the court found 
in favor of Muleshoe upon its claims and against appellants upon the 
counterclaims. The court found that Jones was acting as Muleshoe's agent and, as 
such, had an obligation to act in Muleshoe's best interests, and that Jones had 
appropriated for himself a benefit intended for Muleshoe as principal. It 
declined to assess punitive or exemplary damages against Jones.

 

DISCUSSION

 

I. Jones' 
Authority as President of Muleshoe in the Wheatland Irrigation District 
Litigation.

 

[¶10]  A corporation's bylaws and any 
resolutions adopted by the corporation's board of directors in accordance with 
the bylaws determines the extent of the president's authority. W.S. 17-1-142 
(1977 Repl.) (repealed January 1, 
1990, by Wyo. 
Sess. Laws 1989, Ch. 249, §§ 3 and 6), see W.S. 17-16-841 (1989 Repl.). Jones 
contends that he had full and complete authority as Muleshoe president to settle 
the Wheatland litigation in the manner attempted. We find no basis in either 
Muleshoe's bylaws or the resolution to support Jones' contention.

 

[¶11]  Muleshoe's bylaws contain a single 
sentence setting out the power of the president.

 

"The 
President shall preside at all meetings of the directors and members and shall 
have general charge and control over the affairs of the corporation subject to the board of directors." 
(emphasis added)

 

The May 30, 
1983 resolution adopted by the Muleshoe board of directors authorized Jones to 
"take such legal action, on behalf of the Company, as is in his sole and 
absolute discretion deemed necessary, against Wheatland Irrigation District * * 
*."

 

[¶12]  First, the resolution authorized Jones 
to take such legal action as he deemed necessary - there was not specific 
authority to settle that action for any amount and in any manner he chose. 
Second, under Muleshoe's bylaws, the directors have no authority to enter into a 
contract for the sale of corporate assets without written consent of a majority 
of the stockholders. When this resolution was adopted, no such shareholder 
consent was granted. Thus, the resolution could not have granted Jones the power 
to sell the land under the reservoir because the directors did not have the 
authority to grant him this power. The directors are agents of the corporation. 
Beadle v. Daniels, 362 P.2d 128, 130 (Wyo. 1961). As 
agents, the directors must act within the scope of their authority. Snearly v. 
Hockett, 352 P.2d 230, 233 (Wyo. 
1960).

 

[¶13]  Jones is also unable to look to the 
September 9 shareholder vote as authorizing or ratifying the settlement. While 
it is true that Squaw 
Mountain voted its 
59 percent of the outstanding shares in favor of accepting the settlement, that 
vote alone was insufficient to permit the corporation to sell the land under the 
reservoir. The land underlying the reservoir amounted to substantially all the 
assets of the corporation. The sale proposed under the settlement was not in the 
regular course of business. Under the statute in effect at the time, a 
resolution allowing the sale would have required a two-thirds majority vote of 
the Muleshoe stockholders. W.S. 17-1-502 (1977 Repl.) (repealed January 1, 
1990, by Wyo. 
Sess. Laws 1989, Ch. 249, §§ 3 and 6). The number of shares held by 
Squaw 
Mountain and the 
only shares voted in favor of the sale fell more than 100 shares short of 
constituting a two-thirds majority. The attempted sale as part of the settlement 
distribution by Jones of the Muleshoe land underlying the Wheatland reservoir, 
therefore, was unsanctioned by the requisite number of shareholders.

 

II. The Settlement as a "Corporate 
Opportunity."

 

[¶14]  In his second issue, Jones asserts that 
the trial court characterized the settlement as a "corporate opportunity" and 
that this was improper. In Jones' brief, it is stated that "[e]ither Springer 
Jones is one of the shrewdest land negotiators around, or there is more to that 
preliminary proposal than meets the Appellees' eyes." The argument to support 
this contention is hypertechnical and is presented for the first time in this 
appeal. The question of misappropriation of a "corporate opportunity" was not 
raised below nor was it litigated. Appellees' complaint does not allege a 
misappropriation of a "corporate opportunity." Nor do we find any indication 
that the trial court based its decision on this or even used the phrase 
"corporate opportunity" in its findings. Whether Jones' argument has merit, 
therefore, is something we will not pursue, for we do not address issues raised 
for the first time on appeal. Matter of Estate of McCue, 776 P.2d 742, 745 
(Wyo. 
1989).

 

[¶15]  We have considered that perhaps Jones' 
contention concerning error in applying the corporate opportunity doctrine is 
rooted in the following statement made by the trial court:

 

"I see 
nothing particularly incongruous about the minority shareholders in the Two Bar 
Muleshoe Company believing that the offer of $1 million for their asset is a 
fair offer and should be accepted but taking considerable issue when someone 
decides that although the million dollars was a fair price, the proceeds will be 
paid to someone else."

 

This 
statement relates not to the "corporate opportunity doctrine" but the general 
duties of corporate loyalty and fiduciary responsibility. Corporate officers and 
directors have a fundamental duty of loyalty and fiduciary responsibility to 
their corporation. Lynch v. Patterson, 701 P.2d 1126, 1132 
(Wyo. 1985); 
Beadle, 362 P.2d  at 130. The "corporate opportunity doctrine" is one aspect of 
the loyalty requirement. See 3 W. Fletcher, Fletcher Cyclopedia of Corporations 
§ 861.1 (1986). Our application and discussion of this doctrine has been quite 
limited. See, e.g., Farrell v. Hursh Agency, Inc., 713 P.2d 1174 (Wyo. 1986); 
and see Gelb, Corporate Disloyalty - A Wyoming Case and the ALI Project, 21 Land 
& Water L.Rev. 111 (1986). This is not an appropriate case to consider the 
doctrine.

 

[¶16]  Jones testified he was trying to do what 
he thought was best for the Squaw Mountain Cattle Company, not Muleshoe, when he 
decided to distribute $1,051,500 to himself and his relatives. The court found 
that Jones breached duties of loyalty and fiduciary responsibility to Muleshoe. 
We agree with the trial court that the record supports Jones' breach of these 
duties.

 

III. Jones' 
Duty to Share Information Concerning Wheatland's March 1988 Resolution with the 
Muleshoe Board.

 

[¶17]  Jones contends Wheatland's March 1988 
resolution was not a bona fide offer and, therefore, he was not obligated to 
share information about it with the Muleshoe Board. It is immaterial whether 
this constituted an offer because his failure to disclose this information 
amounted to a breach of his fiduciary duty.

 

[¶18]  As a fiduciary, Jones had a duty to 
faithfully and honestly represent Muleshoe. Lynch, 701 P.2d 1126; Walter v. 
Moore, 700 P.2d 1219, 1224 (Wyo. 1985). As 
we stated in Voss Oil Co. v. Voss, 367 P.2d 977, 979 
(Wyo. 
1962):

 

"[W]hen it 
is shown that an officer has acted both for himself and for the corporation, the 
burden is cast upon him to show that the transaction was open, fair, and 
honestly made and that he did not profit to the disadvantage of the corporation. 
One of the tests of `fairness' in transactions of this kind is whether there has 
been full disclosure."

 

The 
objective of this requirement is "to prevent insiders from using special 
knowledge which they may have to their own advantage and to the detriment of 
stockholders." Lynch v. Vickers Energy Corp., 383 A.2d 278, 281 (Del. 
1977).

 

[¶19]  Jones does not dispute that he failed to 
disclose this information to the Muleshoe shareholders and directors. This lack 
of candor by itself amounts to a breach of his duty. However, he went so far as 
to attempt to hide it from them by falsely placing the responsibility on 
Wheatland for determining that the bulk of the settlement money should go 
directly to Jones and his relatives. We find no merit in his claim that he had 
no duty to disclose this information because he contends it was not a bona fide 
offer. That contention does not excuse his breach any more than it explains his 
deception in dealing with the shareholders and directors.

 

IV. 
Estoppel, Waiver and Laches.

 

[¶20]  Estoppel, waiver and laches are 
affirmative defenses which must be pleaded. Murphy v. Stevens, 645 P.2d 82, 93 
(Wyo. 1982); 
Wood v. Trenchard, 550 P.2d 490, 493 (Wyo. 1976). 
Equitable estoppel is applied to prevent an injury arising from actions or 
declarations which are acted upon in good faith and which would be inequitable 
to retract. Roth v. First Security Bank of Rock 
Springs, 684 P.2d 93, 96 (Wyo. 1984). It 
is applied to prevent fraud, actual or constructive, and to promote the ends of 
justice. Garlach v. Tuttle, 705 P.2d 828, 829 
(Wyo. 1985). 
Waiver is the intentional relinquishment of a known right. Ranger Insurance Co. 
v. Cates, 501 P.2d 1255, 1259 (Wyo. 1972). 
Laches is a form of equitable estoppel based on a unreasonable delay by a party 
in asserting a right. Murphy, 645 P.2d  at 91.

 

[¶21]  The appellees authorized Jones to pursue 
the litigation in the corporation's name. Jones contends that because they were 
not involved personally in the matter, one of these three affirmative defenses 
should be available. What Jones ignores is that he engaged in this litigation as 
the appellees' agent. In order for an agent to successfully assert estoppel 
against a principal, more than a showing that the principal allowed the agent to 
operate in the manner the principal expected is necessary. King v. Bankerd, 55 
Md. App. 619, 
465 A.2d 1181 (1983). Once the principal learns of actions by the agent against 
the principal's interest, the principal has a duty to take action. Towle v. 
Norbest Turkey Growers 
Assoc., 275 F.2d 196, 202 (9th Cir. 1960). Estoppel may be asserted if a 
principal acquiesces in an agent's self-dealing. Gutting v. Jacobson, 184 
Neb. 402, 167 N.W.2d 762, 765 (1969).

 

[¶22]  The appellees learned of Jones' 
self-dealing in August of 1988 when he presented to them the settlement offer 
skewed in his favor. Upon learning of this, they did not acquiesce but took 
immediate action to correct the self-dealing by filing this suit. Estoppel and 
laches are not available, for Muleshoe shareholders did not acquiesce or 
unreasonably delay in asserting their claim. Lacking a showing of either of 
these, it follows that the plaintiffs exhibited no intention to waive their 
rights.

 

V. Punitive 
and Exemplary Damages.

 

[¶23]  On cross-appeal, the appellees argue 
that the trial court "commit[ted] error when it refused to assess punitive and 
exemplary damages" against the appellants. There must be a showing of clear 
abuse of discretion for us to reverse a trial court's determination regarding 
the award of punitive damages. Cates v. Daniels, 628 P.2d 862, 868 
(Wyo. 1981). 
Appellants acknowledge that the award of punitive or exemplary damage is within 
the discretion of the trial court. However, they urge us to find that the trial 
court abused its discretion.

 

[¶24]  We review most questions concerning a 
trial court's abuse of discretion by asking "`whether the court could reasonably 
conclude as it did.'" Oien v. State, 797 P.2d 544, 550 
(Wyo. 1990), 
quoting Noetzelmann v. State, 721 P.2d 579, 583 
(Wyo. 1986). If 
we find that it could, we will uphold the trial court's exercise of discretion. 
Oien, supra.

 

[¶25]  Punitive damages or exemplary damages 
are for the purpose of publicly condemning some notorious act or inaction, 
punishing a defendant and serving as a warning and deterrent to others. Sinclair 
Oil Corp. v. Columbia Casualty Co., 682 P.2d 975, 978 
(Wyo. 1984). We 
have used the terms "punitive damages" and "exemplary damages" separately to 
refer to this concept. See, e.g., id.; Danculovich v. Brown, 593 P.2d 187, 191 
(Wyo. 1979). The 
terms have an identical meaning and can be used interchangeably. See Black's Law 
Dictionary 390 (6th ed. 1990).

 

[¶26]  We have said with respect to a party's 
entitlement to punitive damages that

"There is 
no right in any party to punitive damages. Phrased in another manner, which 
would dictate the same result, an award of such damages is optional or solely in 
the discretion of the fact finder." Mader v. Stephenson, 552 P.2d 1114, 1115 
(Wyo. 1976) 
(citations omitted).

 

In Weaver 
v. Mitchell, 715 P.2d 1361, 1370 (Wyo. 1986), we 
stated:

 

"We have 
approved punitive damages in circumstances involving outrageous conduct, such as 
intentional torts, torts involving malice and torts involving willful and wanton 
misconduct." See also Mayflower Restaurant Co. v. Griego, 741 P.2d 1106, 1115 
(Wyo. 
1987).

 

[¶27]  In this case, the egregiousness of the 
defendant's conduct does not justify substituting our judgment for that of the 
trial court. In Cates v. Daniels, 628 P.2d  at 867-68, the trial court found that 
the realtor defendants had failed to remit the proceeds from a sale of property 
of the plaintiffs. Wyoming statute 
33-28-114 provided for punitive damages "as may be determined by the court" in 
such situations. The trial court did not award punitive damages, and we found no 
abuse of discretion. We cannot say that the circumstances here are more 
egregious than those in Daniels, nor can we say that the trial court could not 
reasonably conclude as it did under the circumstances. There was, therefore, no 
abuse of discretion, and we affirm the order of the trial court denying punitive 
damages.

 

[¶28]  Having responded to the issues raised 
and finding no error, the judgment entered is,

 

[¶29]  Affirmed.