Case Name: Metalloid Company v. Luboil Refining Company, et al.
Court: Colorado Supreme Court
Jurisdiction: Colorado
Decision Date: 1929-01-21
Citations: 85 Colo. 146
Docket Number: No. 12,176
Parties: Metalloid Company v. Luboil Refining Company, et al.
Judges: 
Reporter: Colorado Reports
Volume: 85
Pages: 146–149

Head Matter:
No. 12,176.
Metalloid Company v. Luboil Refining Company, et al.
Decided January 21, 1929.
Mr. W. A. Alexander, Mr. Donald D. Keim, for plaintiff in error.
Mr. E. P. Hudson, for defendants in error.
Department Two.

Opinion:
Mr. Justice Butler
delivered the opinion of the court.
This is a suit by The Metalloid Company to foreclose a mortgage given by The Luboil Refining Company. Defendants in error Yonalt, Stiffler, Shell, Harris, and King, stockholders in The Luboil Refining Company, intervened and resisted the foreclosure. The judgment was in favor of the interveners.
The Luboil Refining Company, being indebted to The Metalloid Company in the sum of $686.41 on an open account, borrowed $500 from that company, and, pursuant to a resolution of the board of directors, the vice president and secretary of The Luboil Refining Company executed and delivered its promissory note for $1,186.41, payable to the order of The Metalloid Company, and also executed and delivered a mortgage to secure the payment of the note.
1. The Luboil Refining Company is a manufacturing corporation, and the mortgage covered its entire plant, and all the machinery incident to the production from such plant. There was no vote of the stockholders consenting to the mortgaging of the property; indeed, the matter was never considered at any meeting of the stockholders, nor was any stockholders' meeting called for that purpose.
Section 2263, C. L., provides: "The board of directors or trustees of a manufacturing corporation shall not have power to encumber the plant of such corporation, or the principal machinery incident to the production from such plant until the question shall have been submitted at a proper and legal meeting of the stockholders, and a majority of all the shares of stock shall have been voted in favor of such proposition; and any mortgaging or encumbering of such property, without such consent, shall be absolutely void, and the vote upon such proposition shall be entered on the minutes of the corporation; "
This provision is for the protection of the stockholders, and in a suit by them, a mortgage executed in violation of such provision will be declared void. Dillon v. Myers, 58 Colo. 492, 146 Pac. 268, Ann. Cas. 1916 C, 1032; Firestone Coal Co. v. McKissick, 24 Colo. App. 294, 134 Pac. 147. That being the situation in the present case, the trial court properly gave judgment for the intervening stockholders.
2. The fact that the directors who, at the directors' meeting, voted in favor of giving the mortgage, also owned stock does not validate the mortgage. As we said in Steele v. Gold Fissure G. M. Co., 42 Colo. 529, 534 (95 Pac. 349), "The members of the board only assumed to act in the capacity of directors." It also may be said, though we do not consider it a controlling circumstance, that the intervening stockholders were not directors and were not present at the directors' meeting.
3. The contention that the statute referred to is a private statute and cannot be relied upon because it was not pleaded, is without merit. It is not a private statute; it is one of which the courts of this state take judicial notice. •
4. Alva B. King, one of the five interveners, testified that John S. Beeler, vice president of The Luboil Refining Company, asked him "to sign an intervention," stating that "there was a mortgage that had been given and there was no stockholders' meeting." Prom this testimony counsel for The Metalloid Company draw the inference that there was "collusion" between the company and all the intervening stockholders, and argue that it follows, as a matter of law, that the stockholders are pre eluded from attacking the mortgage. The inference is hot justified by the facts, so it is not necessary for us to discuss the legal effect of such collusion where it is shown to exist.
The judgment is affirmed.
Mr. Chief Justice Whitford, Mr. Justice Burke and Mr. Justice Moore concur.