Court Opinion

ID: 6563456
Source: CourtListenerOpinion
Date Created: 2022-07-20 19:17:39.176535+00
Date Added: 2024-06-11T15:56:37.602790
License: Public Domain

On Petition for Rehearing.

Per Curiam.

In stating reasons why appellant cannot complain of the order of the court in requiring him to produce certain books of account we should have said, in substance, instead of the language employed, that erroneous interlocutory orders which do not prejudice the rights of the party against whom made, are insufficient to reverse a cause on appeal. The original opinion has been so corrected.
It was not necessary to consider the cases cited by counsel for appellant from the court of appeals •and this court, which it is claimed hold that directors, when secured by the corporation they reperesent, have all the rights of creditors in enforcing their security. No question calling for a discussion of this proposition is presented. Appellant was not the mortgagee, and that is why it was stated in the original opinion, he had no personal interest to protect . ■ True, he was a co-endorser with the mortgagee of notes on account of which the mortgage was given to the latter as indemnity, but this was an immaterial fact, and therefore, not mentioned, because appellant was simply a bidder at a sale conducted for the benefit of another under a chattel mortgage to which he was not a party. It would have been more nearly accurate, as well as sufficient, to have said that appellant was not a party.to the mortgage, *161and the .opinion has been corrected in this respect.
At the original hearing onr attention was called to the fact that appellant, was ■ a co-endorser with the mortgagee of the company notes- and that the mortgage was given to indemnify them on account of such endorsement. And by reason of this personal liability it was then argued that appellant in dealing with his company might, to some extent at least, relieve himself of the duty which ordinarily is imposed upon a director of a corporation. But in the original briefs of. appellant .we do not find advanced some of the legal propositions which counsel, appearing for. the first time in support of this petition, now contends should be applied to the case, .because of that circumstance; we therefore decline to consider them. —Morgan v. King, supra.
The chattel mortgage has neither been ignored -nor impeached; but on the contrary, it is. upheld. Appellant has not been deprived of his purchase,, or of any money advanced on that account, but is sim.ply held responsible for the direct profits growing out of the transaction. This conclusion, based as it is upon, the particular facts in this case, does not in any manner conflict with any previous decisions of either the court of appeals or of this court, and' is abundantly .supported by authorities from other states. In fact, counsel for appellant in their briefs concede this to be. the law in other jurisdictions. They say: “There is only one theory and we concede that that theory exists in some states, namely, that by virtue of the fiduciary capacity of a director to a corporation, he is absolutely prohibited from bidding at a sale of the property of the corporation, even though it be sold at a judicial sale, or under a mortgage, or any other lien, unless he pays the full value of the property, to which an appeal- eould be made to in any way jeopardize the rights- of Fishel in this transaction.’-’
*162In addition to what has already been said we deem it proper to comment upon the assertion of learned counsel for appellant that by this decision we are, without directly saying so, yet in effect, overturning a long line of decisions of this court and our court of appeals. The cases particularly referred1 to are Crymble v. Mulvaney, supra, and West v. The Hanson Produce Company, 6 Colo., App., 467. In the Crymble case a sale of the corporate property to a director was upheld as against the creditor. But it appeared that the sale was for an adequate consideration and in that particular, as well as in the character of the action, that case materially differs from the one at bar.
In the West case the only point actually decided, and the only one involved, was that an insolvent corporation might apply its property to the payment of its just debt to a creditor, and thus prefer the latter. In the course of the opinion the writer said: “The great weight of modern authority is to the effect that, as individuals, the officers of a corporation can loan it money, or legally, in any other proper way, become its creditors and deal with it in the same manner as with an outsider. If such is the law, — and it seems to be where there is no statutory prohibition, — it logically follows that the right to become a creditor carries with it all the rights of a creditor, and authorizes the corporation to prefer the officer if it sees fit. ’ ’
Upon the parts of this excerpt which we have italicized appellant bases his contention. And it is to be said that if the law is as there declared he ought to prevail, for the record shows that his every act in this transaction is covered by that declaration, and apparently he relied upon its protection. That these observations are dicta the facts as stated in the opinion abundantly show. That being true, *163they are not authority as precedents, and if good at all, are so because they commend themselves to the judicial judgment But that our position may not be misunderstood, we say that had such a doctrine been necessarily included in the decision made, we would not follow it It goes beyond anything this court has decided It is not good morals or good law. It is not necessary here to lay down a general rule to govern a director in all possible dealings with his company. We have upheld this transaction to the extent of holding valid the chattel mortgage; but we say that when a director buys at such a foreclosure sale he acts at his peril, for he then has a duty to his company to discharge, and' if he buys for less than the property of the corporation is worth he must respond to it and its creditors.
If in previous decisions of this court or the court of appeals anything contrary to this doctrine has been announced, it must give way. The cases cited in the opinion from this court foreshadow the doctrine herein declared, and it is well to recall to. the profession that this court, as at present constituted, adheres to the principles therein enunciated, and is not disposed to adopt the rule, which has been subject to much criticism, apparently sanctioned, though not authoritatively declared, in the West case, and for which appellant so strenuously contends.

Petition for rehearing denied.

Mr. Justice Steele not participating.