Paulek v. Isgar
Colorado Court of Appeals
551 P.2d 213 (1976)
H.H. Ditch Co. (H.H.) held a special shareholder meeting to consider merging Short Line Ditch Co. (Short Line) with H.H. H.H.’s shareholders approved the consolidation by a majority vote. H.H. issued D series stock as compensation for Short Line’s assets and water rights. H.H.’s bylaws only provide for A, B, and C series stock, but the articles of incorporation allow D series stock to be issued. The bylaws also state that any amendment to the bylaws requires approval of two-thirds of the shareholders at any meeting, but the articles of incorporation vest authority over bylaws in the board of directors. Victor A. Paulek filed suit on behalf of himself and similar shareholders (plaintiffs) against Isgar and other corporate officers and shareholders of H.H. (defendants) seeking to block the consolidation. The trial court ruled in favor of the defendants. The plaintiffs appealed to the Colorado Court of Appeals.
Rule of Law
Holding and Reasoning (Berman, J.)