Full opinion text
INDEX OF CONTENTS INTRODUCTION.1246 FINDINGS OF FACT. 1247 Findings of Fact in IPC’s Case Against KCPL .1247 Findings of Fact in IPC’s and KCPL’s Case Against Iowa-Illinois.1254 Control of Peoples By Railways (Maine) and Power.1254 Liquidation and Dissolution of Power.1256 Liquidation and Dissolution of Railways (Delaware).1257 KCPL’s Acquisition of Peoples’ Assets .1259 Agency Relationship Between KCPL and Peoples .1261 Liquidation of Continental in 1949 .1262 CONCLUSIONS OF LAW. 1262 General Conclusions of Law.1262 Conclusions of Law Re: IPC’s CERCLA Claims Against KCPL.1264 Contract Language.1265 Extrinsic Evidence .1271 Conclusions of Law Re: IPC’s State Law Claims.1273 Conclusions of Law Re: Liability of Iowa-Illinois.1274 Iowa-Illinois as Successor to Railways (Delaware).1275 Continuation Theory.1276 Express/Implied Assumption of Liability .1278 De Facto Consolidation or Merger.1278 Piercing Peoples’ Corporate Veil.1279 Traditional Veil Piercing & Owner Liability.1279 Control & Operator Liability.1280 KCPL’s Status as Corporate Successor or Operator.1281 CONCLUSION.1281 ORDER.1282 APPENDIX A: Chart of Successorship Theories FINDINGS OF FACT, CONCLUSIONS OF LAW, AND ORDER DONALD E. O’BRIEN, Senior District Judge. INTRODUCTION This cause having come on for trial, the court, having heard and considered the evidence including the testimony of witnesses and the presentation of exhibits, and having heard and considered arguments of counsel, and being otherwise fully advised, now makes and enters herein the following Findings of Fact and Conclusions of Law. To summarize the outcome of the Court’s Findings of Fact and Conclusions of Law, the Court has ruled in favor of Interstate Power Company on its CERCLA claims against Kansas City Power & Light Company; ruled in favor of Interstate Power Company on its state law contribution claim (Count VII) against Kansas City Power & Light Company; ruled against Interstate Power Company on all of its other state law claims against Kansas City Power & Light Company; and ruled against Interstate Power Company and Kansas City Power & Light Company on their claims against Iowa-Illinois Gas & Electric Company. Before setting out its Findings of Fact and Conclusions of Law, the Court draws the readers attention to several abbreviations that are used frequently herein. Readers may also find it helpful to first examine APPENDIX A, which sets out the theories of corporate succession discussed herein. FINDINGS OF FACT Findings of Fact in IPC’s Case Against KCPL 1. This case involves a parcel of real property located at Delaware Avenue and Fifth Street, S.E., and abutting a waterway known as Willow Creek, in Mason City, Section 10 of Twp. 96 N., Range 20 W., Cerro Gordo County, Iowa (hereinafter referred to as the “Site”). 2. From about 1904 to 1952, a coal gasifi-cation plant, also referred to as a manufactured gas plant, existed on a portion of the Site. (IPC Exs. 2, 3,11,15, 21-27, 63-69, 73, 80-82; KCPL Ex. 50.) 3. From approximately 1904 until 1931, and then intermittently thereafter until 1948 at the latest, People’s Gas & Electric (hereinafter “People’s (Mason City)”) operated the manufactured gas plant at the Site. (IPC Exs. 2, 3, 4, 11, 15, 21-27, 63-69, 73, 80-82.) 4. A by-product of the coal gasification process utilized by that plant was coal tar or water gas tar. (Testimony of Michael Chase, Tr. 44; Scott Harkins, Tr. 14-33; KCPL Ex. 284.) 5. During the operation of the manufactured gas plant at the Site, coal tar was generated and stored at the site. (Testimony of Michael Chase, Tr. 7-10, 21-24.) 6. Constituent hazardous substances derivative from the coal tar generated and stored at the Site have also been found at the Site. (Testimony of Michael Chase, Tr. 8-9, 12; IPC Exs. 225, 447.) 7. From 1901 until October 1, 1906, the corporate owner-operator of the Site was Brice Gas & Electric Company, owned by Mr. W.E. Brice; from October 1, 1906 until April 1, 1913, the corporate owner-operator of the Site was Peoples Gas & Electric Company (hereinafter referred to as “Peoples”)', then owned by Mr. W.E. Brice. (IPC Exs. 1-4.) 8. In 1912 or 1913, Peoples was acquired by United Light & Railways Company, a Maine corporation with its principal offices in Grand Rapids, Michigan (said corporation hereinafter referred to as Railways (Maine)). (IPC Exs. 7, 8, 10.) 9. In 1923 or 1924, United Light & Power Company (Hereinafter referred to as “Power”), a Maryland corporation, was incorporated. (KCPL Ex. 702, Response of Iowa-Illinois to KCPL Request to Admit No. 3.) 10. On October 2, 1924, an article in. The Mason City Daily Globe Gazette, “Mason City Concern Part of Gigantic Consolidation of Electrical Companies,” announced that Peoples, along with other utility companies, would be consolidated with The United Light and Power Company. (IPC Ex. 16.) 11. In 1923, Power acquired all of Railways’ (Maine) assets, which included Peoples, and assumed all of its liabilities, and Railways (Maine) was then dissolved. (IPC Ex. 588-B.) 12. In April 1932, Power sold all of Peo- , pies’ stock to Power & Light Securities Company, a member of the United Light & Power holding company family, in exchange for $4,393,750. (IPC Exs. 54, 55.) 13. On or about April 4,1932, KCPL, also a member of the United Light & Power holding company family, agreed with Power & Light Securities Company to purchase the assets of Peoples in exchange for $4,393,750 and the assumption of Peoples’ liabilities. (KCPL Ex. 702, Response of Iowa-Illinois to KCPL Requests to Admit Nos. 7-11; IPC Exs. 29-34.) 14. On or about April 11, 1932, KCPL purchased the assets of Peoples for $4,393,-750 and the assumption of Peoples’ liabilities. (KCPL Ex. 15; KCPL Ex. 702, Response of Iowa-Ulinois to KCPL Requests to Admit Nos. 7-11, 13; IPC Exs. 29-31, 33, 34, 48, 75.) 15. In October of 1932, following KCPL’s purchase of Peoples’ assets, KCPL became the owner of one hundred percent of Peoples’ stock. (IPC Ex. 43(b), 44; KCPL Ex. 1, p. 2; Iowa-Ulinois Ex. 7.) 16. After KCPL’s purchase of Peoples’ assets in April 1932, Peoples continued to operate and manage the Site, and operate the gas manufacturing plant thereon, as KCPL’s agent under an agency agreement, for which Peoples was to receive $100.00 per year, and said operation continued under the name of Peoples’ Gas & Electric Company. (Iowa-Ulinois Ex. 1; IPC Ex. 75.) 17. Following KCPL’s purchase of Peoples in April 1932, the manufactured gas plant on the Site was operated on an experimental basis in 1933 producing water gas, some of which was for domestic use, and some water gas was manufactured at the Site in 1941. (IPC Exs. 65, 67.) 18. Peoples, as KCPL’s agent, continued to manage the Site from 1932 to 1950 when the agency agreement between Peoples and KCPL was terminated. (IPC Ex. 75.) 19. The $100.00 annual fee due Peoples under its agency agreement of April 1, 1932 with KCPL may not have been paid regularly, and was not paid at all in the later years of the life of the agency agreement. (KCPL Ex. 15, p. 1.) 20. The manufactured gas plant and gas holder at the Site, except for certain underground basins and cisterns that were buried and concealed from sight, were-removed in 1952 to provide for power plant use. (Testimony of Michael Chase; IPC Ex. 11, p. 27.) 21. During or following the removal of the manufactured gas plant at the Site, coal tar was left in underground storage or retention basins or cisterns; these basins or cisterns were filled and covered with dirt and debris from the old plant, and then covered over with dirt and some gravel, and these underground structures were not visible from the surface. (Testimony of Michael Chase, Tr. 27-28.) 22. In 1956, KCPL decided to sell the properties because the Iowa location was too remote and therefore difficult to manage for KCPL, an electric utility located in and around the Kansas City area, and because KCPL needed additional funds for expansion of electric generation capacity to serve KCPL’s primary service territories. (Testimony of A.J. Doyle, Tr. 84-87.) 23. In the sale, KCPL intended to sell its entire Iowa properties on operations, including all properties, whether real or personal, tangible or intangible, and all rights, interests, easements, and franchises in Iowa, and to withdraw from the state. (Testimony of A.J. Doyle, Tr. 94-94, 107.) 24. On January 4, 1957, KCPL officially solicited bids on the Mason City property. (KCPL Ex. 60, at 13-14.) 25. Numerous utilities in Iowa and Illinois submitted bids to purchase the Iowa properties, which represented an on-going utility property serving Mason City and surrounding areas with electric generation and transmission and gas distribution services. (IPC Ex. 83, Testimony of A.J. Doyle, Tr. 91.) 26. Before submitting its bid, IPC personnel and representatives from Middle West Services Company visited the Iowa properties and spoke with KCPL personnel about the properties. (KCPL Ex. 60 at 547-50; Testimony of A.J. Doyle, Michael Chase, Ken Kalahar.) 27. IPC’s Director of Production, Larry McNeil, who had responsibility for IPC’s own prior MGP operations, visited the Iowa properties and interviewed KCPL personnel. (Testimony of Ken Kalahar, Tr. 5-6; Earl Forslund, Tr. 55-56.) 28. KCPL personnel did not intentionally conceal any facts regarding the Mason City site at issue in this litigation as the prior MGP operations were not a topic of discussion. (Testimony of Ken Kalahar, Tr. 9-10.) 29. In 1956, prior to the official bidding and sales process, KCPL delivered to IPC, which was interested in acquiring KCPL’s utility business in northern Iowa, a report prepared by Ebasco Services Incorporated (hereinafter referred to as the “Ebasco Report”), which report described the property and business in Iowa which KCPL desired to seh. (IPC Ex. 11.) 30. At page 27, the Ebasco Report, as part of the section entitled “Electric Department Property,” states that “[i]n 1951-1952 the adjoining [to a steam-electric station] manufactured gas plant and holder were removed, releasing the space for power station use.” (IPC Ex. 11.) 31. The above-quoted reference at page 27 of the Ebasco Report is the only reference or mention in that report to a manufactured gas plant which had at one time existed on the Site. (IPC Ex. 11.) 32. At page 29 of the Ebasco Report, the section entitled “Gas Department Property” only mentions the peak shaving (propane) gas plant, and makes no mention of the manufactured gas plant which had at one time existed on the Site. (IPC Ex. 11.) 33. Michael Chase, IPC’s Vice-President, testified at trial that he understood the following language of the Ebasco Report, “[i]n 1951-1952 the adjoining manufactured gas plant and holder were removed, releasing the space for power station use,” to mean that the entire plant hád been removed, including any sub-surface coal tar storage basins or cisterns. (Testimony of Michael Chase, Tr. passim.) 34. Scott Harkins, KCPL’s expert witness, testified at trial that sub-surface coal tar storage basins or'cisterns were part of a manufactured gas plant and were not considered to be separate structures. (Testimony of Scott Harkins, Tr. 30-60.) 35. On February 11, 1957, IPC and KCPL entered into a contract (hereinafter referred to as the “Agreement”) by the terms of which KCPL agreed to sell and IPC agreed to purchase certain property in and around Mason City, Iowa. (IPC Ex. 86.) 36. The 1957 contract contained a base price determined by reference to the Iowa utility’s assets and liabilities as of September 1956, with adjustments to that price for current and accrued assets and liabilities to be effective as of 5:00 p.m. on the closing date, May 29, 1957, all as more fully set out in the contract. (IPC Ex. 86.) 37. The contract provided that the parties would, within 90 days from the date of closing, meet again to make a final determination of the base price adjustments. This was necessary because the Iowa properties constituted an on-going utility business, with constantly accruing assets, such as accounts receivable from continuing electric and gas deliveries to customers, as well as constantly accruing liabilities associated with natural gas deliveries from an interstate natural gas pipeline. (IPC Ex. 86; Testimony of A.J. Doyle, Tr. 95-98.) 38. The property which was the subject of the Agreement consisted of a public utility business, known as the Peoples’ Division of KCPL, and consisted of utility plants, land, and related personal property. (IPC Ex. 11; KCPL Ex. 60, pp. 590-595 (May 29, 1957 Bill of Sale).) 39. The property which was the subject of the Agreement was specifically referred to in the Agreement as the “Iowa Properties.” (IPC Ex. 86.) 40. The Iowa Properties were described at page 1, paragraph 1, of the Agreement as consisting of specific property “all of which is more fully described in a report prepared by Ebasco Services Incorporated dated October 1956, as subsequently revised.” (IPC Ex. 86.) 41. At page 13, paragraph 8(c), the Agreement states that, “[t]he Buyer [IPC] covenants and agrees with the Seller [KCPL] that the Buyer will take possession and control of the Iowa Properties at 5:00 p.m., Central Standard Time, on the Closing Date and that from and after such time the Buyer will assume and will indemnify the Seller against all liabilities and obligations of every kind and character whatsoever arising subsequent to the Closing Date as pertain to the business and operations of the Iowa Properties, including obligations and liabilities arising subsequent to the Closing Date on account of contracts and other commitments made by the Seller in the ordinary course of business prior to the Closing Date,' except any liability arising out of certain litigation now pending in the United States Court of Appeals for the Eighth Circuit, entitled First Iowa Hydro Electric Cooperation, et al. v. Iowa-Illinois Gas and Electric Company, et al., Civil Nos. 15548 and. 15549.” (IPC Ex. 86.) 42. Pursuant to the Agreement, on May-29, 1957, IPC purchased the Iowa Properties from KCPL. (IPC Ex. 60.) 43. As part of the closing documents relating to the May 29, 1957 purchase of the Iowa Properties, IPC and KCPL executed a General Bill of Sale, dated May 29, 1957. (KCPL Ex. 60, pp. 590-595.) 44. The General Bill of Sale describes the Iowa Properties as consisting of specific property “as the same exists as of the date hereof [May 29, 1957].” (KCPL Ex. 60, pp. 590-595.) 45. The General Bill of Sale also contains an indemnity provision, which provides as follows: PROVIDED, THAT the Buyer shall, and by its acceptance hereof does, assume and indemnify the Seller against all of the Seller’s liabilities and obligations of every kind and character whatsoever arising subsequent to the date hereof as pertain to the business and operations of the Iowa Properties, including obligations and liabilities arising subsequent to the date hereof on account of contracts and other commitments made by the Seller in the ordinary course of business prior to the date hereof, and, in particular, the Seller’s liabilities for gas and electricity purchased and unbilled prior to the date hereof, and all other current and accrued liabilities of the Seller as of the date hereof, including deferred credits to the extent they constitute liabilities and refundable contributions in aid of construction, all as related to the Iowa Properties and for which a credit adjustment to the purchase price hereof has been made by the Seller; and the Buyer shall, and by acceptance hereof does, assume the Seller’s obligations under its collective bargaining agreement dated October 17,1956, with Local Union No. 432 of the International Brotherhood of Electrical Workers, the Retirement Annuity Plan underwritten by The Equitable Life Insurance Society of the United States and contract dated July 28, 1939, as amended, the Group Life Insurance Plan with The Travelers Insurance Company, Hartford, Connecticut, dated February 5,1954, and effective January 1, 1954, as amended, and the Health and Accident Benefit Plan with Hospital Service, Inc. of Iowa under an enrolling agreement dated December 12, 1952. (KCPL Ex. 60, pp. 590-595.) 46. As previously mentioned, the Agreement provides that the base price for the sale of the Iowa Properties shall be adjusted to reflect, among other things, current and accrued liabilities of the Seller. (IPC Ex. 86, ¶ 4(a)(iv), p. 6.) 47. Current and accrued liabilities, as the term is used in the Agreement, are itemized and quantified in Exhibit A attached to the Agreement. (IPC Ex. 86, Ex. A.) 48. Exhibit A attached to the Agreement, and specifically the listing of current and accrued liabilities appearing thereon, makes no mention of a manufactured gas plant, coal tar or water gas tar, or of any liabilities arising from the manufactured gas plant or from any of the waste material produced by that plant. (IPC Ex. 86.) 49. In the Bill of Sale, the term “current and accrued liabilities” appears in the indemnity clause set forth therein. (KCPL Ex. 60, pp. 590-595.) 50. The Bill of Sale makes no mention of a manufactured coal gas plant, coal tar or water gas tar, or of any liabilities arising from the- manufactured coal gas plant or from any of the waste material produced by that plant; and no evidence was presented that KCPL ever named or listed the manufactured coal gas plant, coal tar or water gas tar, or of any liabilities arising from the manufactured coal gas plant or from any of the waste material produced by that plant, as “current and accrued liabilities.” (KCPL Ex. 60, pp. 590-595.) 51. The Bill of Sale of May 29, 1957, at page 3, under its description' of the “gas production facilities of the Seller [KCPL],” mentions only a “peak shaving [propane] gas plant ... located near the west city limits of Mason City.” (KCPL Ex. 60, p. 592.) 52. Unlike the 1957 IPC/KCPL transaction, when the assets of Peoples were sold to KCPL in 1932, the parties executed a Deed and Bill of Sale dated April 9, 1932 which specifically identified the manufactured gas plant, gas holders, and other appurtenances connected with the gas plant. (IPC Ex. 48, pp. 5, 6.) 53. The parties to the 1957 transaction did not specifically identify the manufactured gas plant, gas holders, and other appurtenances connected with the gas plant among the property to be conveyed because the plant and gas holders had been removed approximately five years prior to closing and were not a part of the Iowa Properties. (Testimony of Michael Chase; IPC Ex. 11, p. 27; IPC Ex. 86; KCPL Ex. 60, pp. 590-595.) 54. One of the closing documents included in KCPL Exhibit 60, at pages 313-315, is an “Index — List of Properties and Major Contracts Prepared For Use in Connection With The Sale Of PEOPLES’ GAS & ELECTRIC — A Division of Kansas City Power & Light-Mason City, Iowa To INTERSTATE POWER COMPANY.” 55. The above Index of properties (KCPL Ex. 60, pp. 313-315), describes the various utility plants being conveyed by KCPL to IPC, and nowhere mentions a manufactured gas plant or gas holder(s) located at the Site. 56. The only gas plant mentioned in the above Index of properties being conveyed by KCPL to IPC (KCPL Ex. 60, p. 315) is a “Propane-Air Peak Shaving Gas Plant ... located west of Mason City on highway between US Hwy 18 and la. Hwy 106.” 57. The above Index of properties (KCPL Ex. 60, pp. 330, et seq.), describes the various real properties being conveyed by KCPL to IPC, and in its description of the land at issue in this case, Item No. 9 on page 330 of KCPL Exhibit 60, nowhere mentions a manufactured gas plant or former manufactured gas plant located or previously located at the Site. 58. By contrast, the above Index of properties (KCPL Ex. 60, p. 332) does mention the existence of the propane plant in its description of the parcel of land (Item 21) on which such propane plant was located. 59. In a Certificate dated May 29, 1957, being part of the closing documents, KCPL, by its president and treasurer, stated that “the Iowa properties are free from litigation, claims or proceedings having a material adverse effect on the operation of said properties except as specifically disclosed to Interstate in writing prior to February 11, 1957.” (KCPL Ex. 60, p. 858.) 60. When IPC bought the Site in 1957, a portion of the Site where some if not all of the basins or cisterns were located underground was being used as a parking lot and the rest of the Site, as described by the plat contained in KCPL Exhibit 359, was vacant except for a remnant of a gas holder base which was being used as a retaining wall for an oil storage tank. (Testimony of Michael Chase, Tr. 26-28.) 61. On May 29, 1957, as part of the closing, KCPL assigned numerous franchises and easements to IPC, one of which, an Assignment of Franchise of Mason City gas operations (KCPL Ex. 60, pp. 634-635; IPC Ex. 140(b)) mentions the “manufacture, distribution, and vending of gas.” 62. As with many of the Assignments of franchises and easements signed by the parties pursuant to closing (IPC Exs. 139-149), the Assignment of Franchise of Mason City gas operations (KCPL Ex. 60, pp. 634-635; IPC Ex. 140(b)) contains an indemnity provision by the terms of which IPC assumed all liabilities and obligations arising subsequent to the date thereof as pertain to said Franchise and Ordinance, and IPC agreed to indemnify KCPL against all such liabilities and obligations. 63. Neither the above Assignment of Franchise nor the indemnity provision contained therein specifically refer to the operations of the manufactured gas plant at the Site. 64. The original Franchise which was the subject of the above Assignment of Franchise originated in 1939, long after natural gas had come to Mason City, and long after the manufactured gas plant at the Site had ceased producing for commercial reasons gas manufactured from coal. 65. The only “manufactured gas plant” in existence at or near Mason City in 1957 at the time of the execution of the above Assignment of Franchise was the peak shaving (propane) plant located near the west side of Mason City. 66. The Ordinance which was the subject of the above Assignment of Franchise, Ordinance No. 319 pertaining to gas in Mason City, expired in 1963, over twenty years prior to the discovery of the coal tar on the Site and over twenty years prior to the first EPA Consent Order. (KCPL Ex. 60, p. 339.) 67. No evidence has been presented which indicates that KCPL ever advised or notified IPC, prior to either IPC’s execution of the February 11, 1957 Agreement or the closing date of the sale of the Iowa Properties, that large quantities of coal tar were located underground at the Site. 68. In a handwritten memo authorized by B.F. Pickard, Chairman of the Board of KCPL, and presumably referring to conversations or communications with Mr. Kapp and Mr. Strickland of I.P.C., and others, on February 13, 1957, Mr. Pickard noted as follows: “KCPL representations and warranties to be true as of closing date — free from service, management, etc. contracts — free from litigation, claims, etc. except as disclosed in writing.” (KCPL Ex. 49, p. 3.) 69. On May 14, 1957, Clement F. Springer, attorney for IPC, sent a letter to C.A. Hummel, executive vice president of IPC, enclosing a copy of the property plats of all Mason City real estate to be conveyed at closing, as furnished to Mr. Springer in a copy of Robert Olson’s letter to M.L. Kapp, IPC’s president, dated May 9. (KCPL Ex. 50.) 70. One of the plats referred to in Mr. Springer’s May 14, 1957 letter (KCPL Ex. 50), Drawing CG-10, depicts at least a portion of the Site at issue in this litigation, and describes the same as “Former Site of Gas Plant.” That plat does not, however, show the location of the plant, does not indicate the existence of any underground structures including basins or cisterns, does not identify the plant as a coal gasification plant, and does not show any gas holders existing at the Site; rather, it shows several oil tanks, a pump house, tower, and storehouse. 71. There is no evidence which indicates that IPC or its attorneys ever had possession of the above plat (KCPL Ex. 50, Drawing CG-10) prior to May 9, 1957, or prior to the February 11, 1957 Agreement. 72. On May 29,1957, IPC took possession of the Iowa properties to “commence rendering to the public the same utility service theretofore rendered by KCPL.” (KCPL Ex. 60, at 557-58, 922-23.) 73. On May 29, 1957, Robert Olson, an officer of KCPL, wrote a letter to M.L. Kapp, president of IPC, referring to rate refunds which were expected to be received by KCPL from Northern Natural Gas Pipeline Co. for payments KCPL had made to Northern prior to closing, as to which refunds KCPL would be entitled to receive and retain. This letter also provides that as to any refunds which IPC might be required to pay to customers of Peoples because of possible overcharges relating to amounts refunded to KCPL from Northern, KCPL will reimburse IPC for those refunds. (IPC Ex. 95.) 74. On June 17, 1957, L.G. Hawkins, an employee of IPC, wrote a letter to R.O. Linville, controller of KCPL, responding to Mr. Linville’s request to IPC to provide KCPL with information concerning any damage claims against KCPL as to which there might be liability; and specifically describing, among others, a claim relating to a storm sewer explosion which occurred on November 23, 1956, prior to closing and prior to the February 11, 1957 Agreement. (IPC Ex. 99.) 75. On June 11, 1957, R.O. Linville, controller of KCPL, wrote what appears to be an in-house memo to C.E. Steele, copies to R.A. Olson and others, discussing bookkeeping problems created by the sale of the Iowa Properties to IPC. In that memo, Mr. Lin-ville stated that “[tjhere are certain claims still outstanding which ultimately should be settled by Kansas City Power & Light Company...”. (IPC Ex. 96.) 76. On August 2,1957, R.O. LinviUe, con-troUer of KCPL, wrote a letter to IPC, copy to Arthur J. Doyle, discussing the possibility that certain pre-closing use tax Hability may have arisen with respect to the construction of the peak shaving plant, and stating that this liabihty, if it develops, will be paid by KCPL. (IPC Ex. 109.) 77. On November 29, 1957, Charles Strickland, a former officer of KCPL and now an employee of IPC, wrote a letter to Robert Olson, an officer of KCPL, referring to the November 23, 1956 incident (presumably the explosion) and enclosing a cheek from KCPL to Travelers Insurance Company in the amount of $202.00 to reimburse Travelers for payments made on behalf of the injured party. (IPC Ex. 121.) 78. On September 5, 1957, Robert Olson, an officer of KCPL, wrote a letter to C.W. Edmunds, assistant treasurer of IPC, referring to certain unsettled claims which were the subject of pending lawsuits, and two other incidents involving explosions, and suggesting that KCPL would remain hable for these asserted and unasserted claims.- (IPC Ex. 119.) 79. On August 5, 1957, Michael Seltzer, an employee of KCPL, wrote a letter to E.F. Heekinger of the Iowa Income Tax Division, with copies to Olson and LinviUe, stating that while KCPL wül receive no further revenue from the Iowa properties sold, it would continue to have expense with respect to a number of pending lawsuits. (IPC Ex. 110.) 80. On June 17,1957, Robert A. Olson, an officer of KCPL, wrote a letter to Richard W. Turner of Mendes & Mount of New York, discussing an explosion and fire which occurred on April 4, 1956, at or in relation to KCPL’s utility property at Clear Lake, Iowa, which was part of the Iowa Properties conveyed to IPC in May of 1957. (IPC Ex. 101.) 81. In his letter of June 17, 1957, to Richard Turner of Mendes & Mount, Robert Olson stated that, with respect to the Iowa Properties, “[o]ur Company [KCPL] remains hable for unsettled claims for damages.” (IPC Ex. 101.) 82. In June of 1984, pursuant to easement rights granted by IPC to the City of Mason City, the City of Mason City was engaged in the excavation of a sewer Une on the Site. (Testimony of Michael Chase, Tr. 8.) 83. In June of 1984, during the City’s excavation of the sewer line on the Site, coal tar was discovered in the old basins or cisterns located underground at the Site, and coal tar was also discovered in areas adjacent to those basins or cisterns. (Testimony of Michael Chase, Tr. 8-11.) 84. The Iowa Department of Natural Resources, and later the United States Environmental Protection Agency (hereinafter referred to as the “EPA”), were notified of the existence of coal tar on the Site. (Testimony of Michael Chase, Tr. 12.) 85. FoUowing the discovery of the coal tar on the Site, IPC, under the direction and approval of the Iowa Department of Natural Resources, first pumped out some of the coal tar, and then excavated and removed more of it, and deposited the excavated coal tar in a waste püe on the site. (Testimony of Michael Chase, Tr. 9-26.) 86. The quantity of -coal tar pumped out, excavated, and removed by IPC from beneath the ground at the Site is estimated at between 1,000 and 1,500 gaUons. (Testimony of Michael Chase, Tr._) 87. No evidence was presented that prior to June 1984, IPC had actual knowledge of the existence of the coal tar which was discovered in June 1984 to have been present on the Site. (Testimony of Michael Chase, Tr. 28.) • 88. No evidence was presented that prior to June 1984, former KCPL employees ever advised IPC officers or management personnel that the coal tar which was -discovered in June 1984 had been present on the Site. 89. In 1985, the EPA became involved in the investigation and planned remediation of the contamination at the Site. (Testimony of Michael Chase, Tr. 12 — 26.) 90. In 1986, IPC entered into a Consent Order with the EPA by the terms of which IPC was to continue investigating the Site with a view toward ultimate remediation of the contamination at the Site. (IPC Ex. 225.) 91. Most of the investigative and pre-remediation work done by IPC at the Site pursuant to the 1986 Consent Order with the EPA was done by IPC’s consultant Eugene A. Hickok and Associates which later merged into J.M. Montgomery & Associates. (Testimony of Michael Chase, Tr. 15-17.) 92. On October 1,1991, a second Consent Order was executed by IPC and EPA, which Order mandates the continuing investigation and eventual remediation of the contamination at the Site. (IPC Ex. 447.) 93. Both the 1986 and 1991 Consent Orders find that hazardous substances as defined by CERCLA, including polynuclear aromatic hydrocarbons (“PAHs”) and related substances, cyanides, phenols, and light aromatic compounds (benzene, toluene, etc.), have been detected at the Site. (IPC Exs. 225, 447.) 94. Both the 1986 and 1991 Consent Orders further find that the soil and groundwater at the Site are contaminated with PAHs, volatile organic compounds, and cyanides, that the waste pile on the Site also contains these contaminants, and that the sediment of Willow Creek is contaminated with PAHs. (IPC Exs. 225, 447.) 95. Both the 1986 and 1991 Consent Orders further find that some or all of the hazardous substances present at the Site are actually or potentially carcinogenic, toxic to man and animals, soluble in water, volatile in the environment, and potentially absorbable in the soil. (IPC Exs. 225, 447.) 96. The Research Triangle Institute publication, “U.S. Production of Manufactured Gases — Assessment of Past Disposal Practices,” (KCPL Ex. 284), was prepared for use by the EPA, and was prepared under the supervision of KCPL expert witness Scott Harkins. 97. At pages 154 and 155 of the Triangle Report (KCPL Ex. 284), the Report cites from a number of publications and studies dating from the late 1890s to the early 1920s, which describe how even in the early decades of this century manufactured gas plant tar wastes were considered to give rise to possible nuisance conditions, pollution of soil and water, and other environmental problems. 98. On March 27, 1989, IPC sent a CERCLA Notice of Claim letter to KCPL formally notifying KCPL of the contamination condition at the Site and of the existence of the June 3,1986 EPA Consent Order, and demanding that KCPL reimburse IPC for its costs in connection with the contamination at the Site. (IPC Ex. 362.) 99. On May 21, 1989, this lawsuit was filed by IPC against KCPL, and was amended in 1990 to include IPC’s action against Iowa-Illinois. 100. As of February 1, 1992, IPC had expended approximately 1.42 million dollars with respect to the contamination condition at the Site, of which approximately $500,000 was for attorneys’ fees and costs. (Testimony of Michael Chase.) 101. Of the approximately $890,000 expended by IPC with respect to this Site, which is the approximate total of IPC’s expenses less attorneys’ fees and costs, approximately $271,000 was paid by IPC to EPA as reimbursement for EPA’s expenses incurred in investigating the Site. (Testimony of Michael Chase, Tr. 15.) Findings of Fact in IPC’s and KCPL’s Case Against Iowa-Illinois Control of Peoples by Railways (Maine) and Power 102. The court repeats and incorporates by reference herein Findings of Fact in IPC’s case against KCPL Nos. 1 through 11. 103. On April 1, 1913, Peoples entered into a written contract with Railways (Maine) by the terms of which Railways (Maine) was appointed General Manager of Peoples’ electric, gas and central heating plants in Mason City, and Railways (Maine), among other things, agreed: (1) “[t]o faithfully and diligently supervise, control, manage and finance the operations of [Peoples] and to give whatever time, attention, skill, energy, knowledge and ability during the life of [the] agreement that may be necessary for the proper carrying on, management, operation, extension, construction and financing of said properties and to promote in every way possible the welfare of [Peoples] and its properties;” (2) “[t]o superintend, and direct the keeping of all books and accounts of the Company [Peoples];” (3) “[t]o request, allow and permit such of its (Railways (Maine)) officers and employees to act as officers and directors of [Peoples],” without payment of salary by Peoples; (4) “[t]o employ local managers and other employees for [Peoples] ... and to use its own discretion in the hiring or discharging of such local managers and employees.” By the terms of such agreement, Railways (Maine) was to “have the entire supervision, control and management of all of the properties and books of [Peoples] ...”. (IPC Ex. 13.) 104. The April 1, 1913 Agreement between Peoples and Railways (Maine) was for a term of five years, and thereafter was to continue in effect on a year-to-year basis, subject to agreed cancellation provisions. (IPC Ex. 13.) 105. On October 8, 1917, Peoples and Railways (Maine) entered into another written management contract by the terms of which Railways (Maine) was appointed General Manager of Peoples, with full authority to “supervise, manage, and operate” Peoples. (IPC Ex. 13.) 106. The October 8, 1917 agreement between Peoples and Railways (Maine) contained similar language to that contained in the April 1,1913 contract, and was for a term of five years, with an optional renewal term of an additional five years, subject to agreed cancellation provisions. (IPC Ex. 13.) 107. On January 1, 1919, Peoples and Railways (Maine) entered into another written management contract by the terms of which Railways (Maine) agreed to “supervise and manage all of the properties of [Peoples]”. (IPC Ex. 13.) 108. The January 1, 1919 agreement between Peoples and Railways (Maine) contained similar language to that contained in the April 1, 1913 and October 8, 1917 contracts and was for a term of one year, renewable year-to-year, subject to agreed cancellation provisions. (IPC Ex. 13.) 109. On January 1, 1921, Peoples and Railways (Maine) entered into another written contract by the terms of which Railways (Maine) was appointed Contractor, with full authority to “do all necessary construction work in connection with the extensions, improvements or betterments of [Peoples’] property.” (IPC Ex. 13.) 110. On November 11, 1925, Peoples and Power entered into a written Agreement, “Providing for the Subjection of the Property of Peoples Gas and Electric Company to the Mortgages of the United Light and Power Company” (hereinafter referred to as the “Subjection Agreement”). (IPC Ex. 20.) 111. The Subjection Agreement states that as of November 11, 1925, all but fifteen shares of Peoples’ capital stock was owned by Power, and that Railways was the predecessor company of Power. (IPC Ex. 20.) 112. The Subjection Agreement further states as follows: The United Company [Power] from time to time in the past has supplied money required by the Peoples Company [Peoples] in order to make betterments, improvements and extensions of and additions to its properties and to render adequate public service, and the Peoples Company will require additional money for such purposes and is and will be unable to obtain on its own credit sufficient money therefor. The United Company is willing to supply to the Peoples Company the money required for such purposes, as needed, through the use of the credit of the United Company and the sale of its bonds issued under said First Lien and consolidated Mortgage, arid the Peoples Company desires that money for the purposes mentioned above shall be supplied to it through the use of the credit of the United Company and through the sale of such bonds. (IPC Ex. 20.) 113. On January 1, 1924, Peoples and United Light and Power Engineering & Construction Company, a Maryland corporation having its principal places of business in Grand Rapids, Michigan, and Davenport, Iowa, entered into three written contracts by the terms of which United Light and Power Engineering & Construction Company was appointed Contractor, with full authority to “do all necessary construction work in connection with the extensions, improvements or betterments of [Peoples’] property” (IPC Ex. 19); was appointed Engineer, with full authority to perform all engineering work “in connection with the extensions, improvements or betterments of [Peoples’] property” (IPC Ex. 19); was appointed Manager of Peoples’ property, with full authority to “supervise and manage all of the properties of [Peoples]”. (IPC Ex. 19.) 114. On September 1, 1931, Peoples and United Light and Power Engineering & Construction Company, a Maryland corporation, entered into a written Supplemental Agreement which affirmed the management contract of January 1,1924 between Peoples and United Light and Power Engineering & Construction Company, but modified the management fee arrangement between the parties. (IPC Ex. 19.) 115. United Light & Power Engineering & Construction Company was a subsidiary of Railways (Maine) and later a subsidiary of Power. (IPC Exs. 588-A, 588-C.) 116. At least by the year 1932, Power had become the owner of all of Peoples’ stock. (KCPL Ex. 702, Response- of Iowa-Illinois to KCPL Request to Admit No. 3.) Liquidation and Dissolution of Power 117. Iowa-Illinois was first incorporated in 1940, as a Peoples’ Light and Power Company, a company unrelated to Peoples’ (Mason City). In 1941, Peoples’ Light and Power Company’s name was changed to Iowa-Illinois Gas and Electric Company. (IPC Exs. 544, 546.) 118. On or about March 20, ■ 1941, the Securities and Exchange Commission (“SEC”) ordered the liquidation and dissolution of Power pursuant to Section 11 of the Public Utility Holding Company Act of 1935. (KCPL Ex. 702, Response of Iowa-Illinois to KCPL Request to Admit No. 28.) 119. Pursuant to the liquidation process required by the above-mentioned order of the SEC, Power sold the assets of nine of its subsidiaries to Iowa-Illinois. Peoples was not among the nine subsidiaries sold to Iowa-Illinois. (KCPL Ex. 702, Response of Iowa-Illinois to KCPL Request to Admit No. 29.) 120. The securities and indebtedness of the following companies were transferred to Iowa-Illinois: Cedar Rapids Gas Co., Fort Dodge' Gas & Electric Co., Iowa City Light & Power Company, Ottumwa Gas Company, Peoples’ Light Co., Peoples’ Power Co., TriCity Railway Co. (Illinois), Tri-City Railway Co. (Iowa), Moline-Rock Island Manufacturing Co. (KCPL Ex. 702, p. 16, ¶29.5.) 121. These utilities commonly were called the “First Lien Companies” because their assets and securities provided security for the First Lien and Consolidated Mortgage Bonds (the “first lien”), originally issued by Railways (Maine). (KCPL Ex. 702, p. 17, ¶ 29.c.) 122. Although the first hen initially was created by Railways (Maine), see KCPL Ex. 702, p. 17, ¶ 29.c, by 1941, Power had succeeded Railways (Maine) as the obligor on the first hen. (IPC Ex. 576, p. 6.) 123. Peoples’ securities and assets had secured the same obhgations until KCPL acquired Peoples’ assets. (KCPL Ex. 702, p. 17, ¶ 29.d.) 124. Power’s wholly-owned subsidiary Railways (Delaware) gave Iowa-Illinois $13,-375,000 in exchange for shares of Iowa-Ilh-nois stock. (IPC Ex. 575, p. 6; KCPL Ex. 12.) 125. Iowa-Illinois gave Power the $13,-375,000 from Railways (Delaware) and assumed the $16,000,000 outstanding amount of Power’s first hen and consohdated mortgage in exchange for all the stock of the nine operating subsidiaries. (IPC Ex. 575, p. 6; KCPL Ex. 12.) 126. Power transferred to Railways (Delaware), as a contribution to paid-in surplus, miscellaneous investments of $1.7 million, including the preferred stock and debentures of Railways (Delaware) and Continental, and all outstanding capital stock of another subsidiary, the United Light & Power Service Company (the “Service Company”). (KCPL Ex. 702, p. 17, ¶ 29.e; IPC Ex. 573, p. 13, 14; KCPL Ex. 12.) 127. Pursuant to the liquidation process required by the above-mentioned order of the SEC, and pursuant to a plan of liquidation approved by the United States District Court in Delaware, in about the mid-1940s Power was dissolved and its stock was exchanged for that of United Light and Railways Company, a Delaware corporation (hereinafter referred to as “Railways (Delaware)”), and Railways (Delaware) assumed the same position previously held by Power as the apex of the pyramid of the holding company system. (KCPL Ex. 702, Response of Iowa-Illinois to KCPL Request to Admit No. 29(g); IPC Exs. 587, 588, 588-D.) 128. Power thus held the common stock of Railways (Delaware) as its sole remaining asset. (IPC Ex. 573, p. 13, 14; KCPL Ex. 12.) 129. Railways (Delaware) assumed all of Power’s unpaid liabilities. (IPC Ex. 536, p. 2, ¶ 2.) 130. Power’s President and Secretary were the President and Secretary of Railways (Delaware) at the time of the dissolution. (IPC Ex. 573; p. 18.) 131. There is no evidence that these individuals did not remain officers of Railways (Delaware) after the dissolution. Liquidation and Dissolution of Railways (Delaware) 132. On or after May 24, 1949, Railways (Delaware) submitted to the SEC a plan for the liquidation of Railways (Delaware). (KCPL Ex. 702, Response of Iowa-Illinois to KCPL Request to Admit No. 31.) 133. The Plan for the liquidation of Railways (Delaware) first called for the recapitalization of Iowa-Illinois- by capitalizing surplus and issuing ten shares of stock for each share then outstanding. (KCPL Ex. 702, p. 21, ¶ 34.) 134. After the recapitalization, Iowa-Illinois had 1,904,003 shares of common stock outstanding. (IPC Ex. 578, p. 11, ¶ 10.) 135. Railways (Delaware) thereafter contributed $5,000,000 to KCPL in exchange for which KCPL issued to Railways (Delaware) additional shares of its common stock. (Id., p. 10, ¶ 12.) 136. Railways (Delaware) then sold its shareholders pro rata rights to purchase the KCPL stock. (Id., p. 10, ¶ 13.) 137. All cash received upon the sale of the rights and the KCPL stock was applied first to the Continental bank loan. (Id.) Any excess was to be applied to the other indebtedness of Railways (Delaware). (Id., p. 13, ¶¶ 11-12; IPC Ex. 583, pp. 8-9, 27, ¶ 15.) 138. Pursuant to the Plan of Liquidation of Railways (Delaware), Railways (Delaware) stock was exchanged for Iowa-Illinois stock, KCPL stock, St. Joseph Power & Light Stock, Iowa Power & Light stock, and Eastern Kansas Utilities, Inc. stock, and shareholders of Railways (Delaware) thus became shareholders of the five operating companies. (KCPL Ex. 702, Response to Iowa-Illinois to KCPL Request to Admit No. 41.) 139. All of Railways’ (Delaware) capital stock “was surrendered and cancelled pursuant to the Plan.” (KCPL Ex. 31, p. 2.) 140. Over 99 percent of Iowa-Illinois’ stock was distributed to Railways’ (Delaware) shareholders; the remainder was unclaimed, and was sold. (IPC Ex. 549, p. 3.) 141. Pursuant to the Plan of Liquidation of Railways (Delaware), Iowa-Illinois was to be the last subsidiary distributed from Railways (Delaware), and pursuant to such plan all of Railways’ (Delaware) cash remaining after payment of or provision for Railways’ (Delaware) debts, liabilities, expenses and distributions to its shareholders was to be contributed as paid-in surplus to Iowa-Illinois when it was determined by the board of directors that it was appropriate to do so. (KCPL Ex. 702, Response of Iowa-Illinois to KCPL Request to Admit No. 42.) 142. As shown on Exhibit D-6 to Railways’ (Delaware) “First Amendment to Application for Approval of Plan Providing for the Liquidation of [Railways (Delaware) ],” the estimated dividends from Iowa-Illinois for 1949 and the first half of 1950 would account for more than 50% of the total estimated income of the Railways (Delaware) holding company for that period. Exhibit D-6 also states: “This estimate of earnings is predicated upon various assumptions and estimates and should not be construed as a representation of future earnings.” No evidence was introduced indicating whether or not these projected earnings were ever realized. (IPC Ex. 570.) 143. The Plan allowed Iowa-Ulinois to assume Railways’ (Delaware) liabilities as a means of providing payment, at least to the extent of the cash contributions from Railways (Delaware): Provision may be made for the payment of debts, and liabilities, and expenses of [Railways (Delaware) ], Continental and the Service Company by the assumption thereof by Iowa-Illinois, provided that, without the express approval of the [SEC], the amount of debts, liabilities and expenses assumed by Iowa-Illinois pursuant to this paragraph shall not exceed the amount of cash contributed to such company. (KCPL Ex. 702, p. 26, ¶ 43; IPC Ex. 578, ¶ 18; IPC Ex. 523.) 144. At the conclusion of the dissolution, Railways’ accumulated cash, amounting to approximately $1,765 million, was contributed to Iowa-Illinois. (KCPL Ex. 38, p. 2.) 145. In a letter dated March 23, 1953, Iowa-Ulinois confirmed its intention to assume Railways’ (Delaware) liabilities: Iowa-Ulinois will assume the debts, liabilities and expenses of United Light & Railways up to the amount realized from the assets.... (IPC Exs. 523, 536.) 146. In its Order dated December 3, 1951, the SEC confirmed that Iowa-Illinois’ assumption of Railways’ (Delaware) liabilities would occur: Railways [Delaware] will, in the near future, transfer to [Iowa-Ulinois] the last major subsidiary divested, all of its remaining assets consisting for the most part of cash; and to the extent of the cash so transferred, [Iowo-Illinois] will assume the debts, liabilities and obligations of Railways as 'provided in the Plan. (KCPL Ex. 496, p. 1 (emphasis added); IPC Ex. 536.) 147. In compliance with the SEC-confirmed plan and pursuant to an Assumption Agreement entered into by Iowa-Ulinois and the trustee appointed on behalf of Railways (Delaware) (see infra para. 150), Iowa-Illinois assumed three specific liabilities of Railways (Delaware). Those liabilities were: (1) the liability of Railways (Delaware) to certain former employees; (2) the liability of Railways (Delaware), Continental, and Railways Service to W.I. Brown; and (3) the possible liability of Railways (Delaware) to Central Electric & Gas Company. (Iowa-Ulinois Ex. 34, p. 8-10.) 148. In the early 1950s, Iowa-Ulinois instituted an action in the Delaware Court of Chancery to ascertain with finality whether there were any unknown valid claims against or liabilities or expenses of Railways (Delaware). (KCPL Ex. 702, Response of Iowa-Ulinois to KCPL Request to Admit No. 46.) 149. In its application to the Delaware Court of Chancery Iowa-Illinois described itself as Railways’ “equitable stockholder and creditor.” (KCPL Ex. 702, Response of Iowa-Illinois to KCPL Request to Admit No. 47.) 150. In appointing a trustee for the dissolution of Railways, the Delaware court noted that Iowa-Ulinois was Railways’ “sole equitable stockholder.” (KCPL Ex. 702, Response of Iowa-Illinois to KCPL Request to Admit No. 48.) 151. The Chancery Court of Delaware appointed John Dern, a partner in the Chicago law firm of Sidley, Austin & Burgess, and a former director and president of Railways (Delaware) as trustee for the dissolution of Railways (Delaware). On August 24, 1954, Iowa-Ulinois and trustee John Dern executed an Assumption Agreement wherein Iowa-Ulinois agreed to assume specific debts and liabilities of Railways (Delaware). (KCPL Ex. 702, Response of Iowa-Illinois to KCPL Request to Admit No. 49, 50.) 152. Iowa-Illinois, outside of the Assumption Agreement, also succeeded to Railways’ (Delaware) (and Power’s) responsibility to the IRS for past tax years for the Power and Railways (Delaware) groups of companies. 153. Iowa-Illinois, outside the Assumption Agreement, assumed Railways’ (Delaware) and Continental’s liabilities under a contract with Columbus and Southern Ohio Gas & Electric Corporation. See KCPL Ex. 36, Agreement at 3. 154. Iowa-Illinois acquiesced in the payment, by Railways’ (Delaware) trustee, of expired liabilities to former stockholders of Power out of Railways’ (Delaware) funds. (IPC Exs. 532, 536, p. 2.) 155. After the payment of all tax claims, attorneys’ fees, and known liabilities of Railways (Delaware), Railways (Delaware) had remaining and possessed approximately $1,765,000 in cash and Treasury Bills. (KCPL Ex. 702, Response of Iowa-Illinois to KCPL Request to Admit No. 52.) In accordance with the Delaware Chancery Court’s Order of December 22, 1954, the Trustee distributed those moneys to Iowa-Illinois in final liquidation of Railways (Delaware). (KCPL Ex. 702, pp. 31-32, ¶ 53; KCPL Ex. 36, p. 6; IPC Ex. 559; KCPL Ex. 38, p. 2.) 156. In addition to receiving cash from Railways (Delaware), Iowa-Illinois, after the dissolution of Railways (Delaware), was entitled to receive approximately $420,000 in fed- • eral income tax refunds that were attributable to Railways (Delaware). (KCPL Ex. 702, Response of Iowa-Illinois to KCPL Request to Admit No. 54.) 157. After the commencement of the dissolution of Railways (Delaware), Railways (Delaware) designated Iowa-Illinois as the successor tax agent for the purposes of certain tax returns for certain of Railways’ (Delaware) affiliated groups of corporations. (KCPL Ex. 702, Response of Iowa-Illinois to KCPL Request to Admit No. 58.) Before December 1945, Power acted as the agent for the affiliated group of corporations. (KCPL Ex. 702, p. 33, ¶ 56.) After Power was dissolved, Railways (Delaware) was designated as successor agent for the affiliated group of companies for the purpose of tax returns. (KCPL Ex. 702, pp. 33-34, ¶57; KCPL Ex. 38, p. 1.) After Railways (Delaware) commenced its dissolution, Railways (Delaware) designated Iowa-Illinois as its successor agent. (KCPL Ex. 702, p. 34, ¶ 58; KCPL Ex. 38, p. 5; IPC Ex. 522.) 158. On or after December 22,1954, John Dern, the court-appointed trustee for the dissolution of Railways (Delaware), distributed the remaining cash assets of Railways (Delaware) to Iowa-Illinois, pursuant to an Order of the State of Delaware Chancery Court, dated December 22, 1954, and the dissolution of Railways (Delaware) was thereby completed. (KCPL Ex. 702, Response of Iowa-Illinois to KCPL Request to Admit No. 53.) 159. It is undisputed that Iowa-Illinois never directly owned or operated the Mason City site; never possessed or generated the hazardous substances found at the site; never transported hazardous substances to the site; never acquired any of the assets or stock of People’s Gas & Electric Company (“Peoples’ (Mason City)”), the company that allegedly caused the coal tar contamination; and never provided gas or electric services to the residents of Mason City, Iowa. 160. The Court repeats and incorporates by reference herein Findings of Fact in IPC’s Case against KCPL Nos. 20 through 24 and Nos. 72 through 91. KCPL’s Acquisition of Peoples’ Assets 161. The court repeats and incorporates by reference herein Findings of Fact Nos. 13-19 in IPC’s case against KCPL. 162. Peoples was incorporated in 1906 by two individuals who had established a coal gasification operation in Mason City in 1885. (KCPL Ex. 702, p. 3, ¶ 1; IPC Ex. 56, p. 1.) 163. In 1913, Railways (Maine) acquired the properties of Peoples. (KCPL Ex. 702, p. 3, ¶ 2; IPC Ex. 9, p. 2.) 164. In 1923 or 1924, Power, a Maryland corporation and the successor of Railways (Maine) acquired Peoples’ stock. (KCPL Ex. 702, p. 4, ¶ 3; IPC Ex. 9, p. 2; IPC Ex. 35.) 165. Another corporation, Railways (Delaware), became a wholly-owned subsidiary of Power. Railways (Delaware) was also a holding company. (IPC Ex. 573, p. 4; KCPL Ex. 702, p. 5, ¶ 5.) (IPC Ex. 573; KCPL Ex. 702, p. 4, ¶ 4.) 166. By 1932, Power owned Peoples and Railways (Delaware). (IPC Ex. 539, pp. 1, 3.) 167. Besides Railways (Delaware) and Peoples, Power owned nine “first tier” operating utilities, the assets from which Power used to form a new utility in 1940, later named Iowa-Illinois. As mentioned previously, Peoples was not one of the nine “first tier” companies. (IPC Ex. 573; pp. 3, 9; KCPL Ex. 702, p. 5 ¶6; KCPL Ex. 12.) 168. Power subjected all of Peoples’ assets to a mortgage that secured Power’s First Lien and Consolidated Mortgage Bonds. (KCPL Ex..702, p. 17, ¶29(d)). 169. In addition, Power and Peoples shared officers. For example, Mr. Heinke was Peoples’ secretary in 1932 and was Power’s vice president in 1932. (KCPL Ex. 2; IPC Ex. 539.) Mr. Chamberlain, who was Power’s president in 1929 (IPC Ex. 572, p. II000932), and was still member of Power’s executive committee in 1932 (IPC 542), was Vice President of Peoples in 1932. (IPC Ex. 540.) 170. At Power’s direction, Railways carried insurance on Peoples’ assets and operations,' even after KCPL purchased the assets. (KCPL Ex. 18.) 171. Railways (Maine), and later Power, through its subsidiary United Light & Power Construction Company, had contractual rights to manage and operate Peoples. (IPC Exs. 13, 19.) 172. The Power holding company group was dismantled under the Public Utility Holding Company Act, 15 U.S.C. § 79, et seq (1935) (Hereinafter PUHCA). (KCPL Ex. 702, p. 15, ¶ 28.) 173. PUHCA eliminated holding companies to counter the following practices, among others: a. securities are issued by a subsidiary holding company under circumstances which subject such company to the burden of supporting an overcapitalized structure ... b. subsidiary public utility companies are subjected to excessive charges ... or enter into transactions in which evils result from an absence of arm’s length bargaining or from restraint of free and independent competition ... c.control of subsidiary public-utility companies affects the accounting practices and rate, dividend and other policies of such companies.... 15 U.S.C. § 79a(b). 174. KCPL acquired the assets of Peoples on April 11, 1932, through the exercise of an option granted it by Power & Light Securities Company (“P & L”), a wholly-owned subsidiary of Power. (IPC Ex. 39; IPC Ex. 563; see also KCPL Ex. 702, p. 6, ¶ 7.) 175. Power created P & L solely-to transfer ownership of Peoples’ assets and stock. 176. Power first granted P & L an option pursuant to which P & L obtained the option to purchase all Peoples’ stock. (KCPL Ex. 702, p. 6, ¶8; IPC Ex. 560.) 177. KCPL and P & L executed an Option Agreement dated March 5, 1932, pursuant to which KCPL obtained the option to purchase all of Peoples’ assets in exchange for $4,393,750 and KCPL’s assumption of Peoples’ outstanding liabilities. (KCPL Ex. 702, p. 6, ¶ 9; IPC Ex. 39.) 178. To induce KCPL to exercise its option to purchase Peoples’ assets, Power delivered to KCPL a letter dated April 4, 1932, which stated: [W]e hereby agree in the event of the exercise of such option by you,.... to also indemnify you against any and all obligations and liabilities of People’s Gas & Electric Company which are not set forth in Exhibit “A” attached hereto and made a part hereof, or which may be incurred otherwise than in the ordinary course of business from April 1, 1932 to the date of conveyance. (IPC Ex. 47 (emphasis added).) 179. Exhibit “A” to the Power letter makes no mention of liabilities of the type IPC seeks to impose on KCPL in this action. (KCPL Ex. 702, p. 7, ¶ 10; IPC Ex. 47.) 180. On April 4, 1932, KCPL agreed to purchase Peoples’ assets. (KCPL Ex. 702, pp. 7-8, ¶ 11; IPC Ex. 563.) 181. On April 4,1932, P & L exercised its option and purchased Peoples’ stock from Power. (KCPL Ex. 702, p. 8, ¶ 12; IPC Ex. 46.) 182. KCPL exercised its option and P & L caused Peoples to convey all Peoples’ assets to KCPL. (KCPL Ex. 702, p. 13; IPC Ex. 563.) 183. KCPL accepted Power’s offer of indemnification with the following acknowledgment: We have exercised the option mentioned above given us by [P & L] and this will evidence our acceptance of your offer with regard to undisclosed liabilities of Peoples’ Gas & Electric Company, as set forth above. (IPC Ex. 47.) 184. Power’s Board of Directors then authorized the transaction. (IPC Ex. 33; KCPL Ex. 702, p. 9, ¶ 15.) 185. Power’s Board approved the conveyance of Peoples’ stock, the notification of the sale of stock and transfer, and the deposit of the transferred cash to reduce specific debt. (KCPL Ex. 702, p. 10, § 16; IPC Ex. 33.) 186. The cash and stock transfers occurred on April 11, 1932. See KCPL Ex. 702, p. 8, ¶ 12. 187. In a letter dated April 11, Peoples directed KCPL to pay $4,392,750 to P & L, rather than to Peoples. (KCPL Ex. 2.) 188. The same day, Power sold Peoples’ capital stock to P & L in exchange for $4,393,750; Peoples retained $1000 of the purchase price as its only asset. (KCPL Ex. 702, pp. 10-11, ¶ 17.) 189. In a letter dated May 19, 1932 to H.B. Munsell, Power formally delivered for cancellation its stock certificate No. 2, representing its 450 shares of Peoples’ common stock. (KCPL Ex. 5.) 190. According to a May 24, 1932 letter from H.B. Munsell to Chester C. Smith, stock certificate No. 3 was issued in the name of P & L, which then owned Peoples. (KCPL Ex. 7.) 191. By May 1932, P & L owned Peoples’ stock, although Peoples lacked Substantial assets. 192. Ownership of Peoples’ stock came to rest in Continental Gas & Electric Co. (“Continental”), which was a subsidiary of Railways (Delaware). (IPC Ex. 573.) The Agency Relationship Between KCPL and Peoples 193. As of April 1, 1932, Peoples and KCPL executed an agency agreement pursuant to which Peoples operated all of the assets purchased by KCPL. The agency agreement specifically vested KCPL with authority to “direct the policy of [Peoples’] in the operation and maintenance” of the Mason City site. (IPC Ex. 70, pp. 23, 75; KCPL Ex. 15, p. 1.) 194. Peoples had no business other than operating its former assets and received only a nominal sum for doing so. Id. 195. According to a July 1, 1949 memorandum from Robert Olson to Herbert Mun-sell, Peoples’ management personnel held no offices at KCPL. (KCPL Ex. 15.) 196. From all appearances, Peoples, a third-tier subsidiary of Power (owned by Continen