Thursday, November 21, 2013

Paulek v. Isgar case brief

Paulek v. Isgar case brief summary
551 P.2d 213 (1976)

Plaintiff stockholder appealed an order of the District Court of LaPlata County (Colorado), which ruled in favor of defendants, officers, directors, and shareholders, in an action to refrain defendants from proceeding to consolidate their ditch company with another.

At a special meeting of the shareholders, 56 percent of the shares represented at the meeting voted to consolidate the two ditch companies under the existing articles of incorporation and bylaws of the one. Plaintiff commenced an action for himself and all other similarly situated stockholders to restrain defendants from proceeding to consolidate. Plaintiff contended that the trial court erred in its holding that series D stock of the one company could have been issued in exchange for water rights and other property of the other without amending its bylaws. The trial court held that there was a conflict between the articles and the bylaws relating to the series D stock, and concluded that the articles controlled.

Plaintiff argued that the series D stock could not have been issued until the bylaws were amended.


  • The court ruled that under Colo. Rev. Stat. § 7-5-109 (1973), where the bylaws conflicted with the articles of incorporation, the articles controlled and the bylaws were void. 
  • Even if the bylaws had to be amended, it was the directors, and not the stockholders, who had authority to Amendment The directors had the power to issue the series D stock as authorized by the articles.

The court affirmed the judgment in favor of defendants.

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