Braswell v. . Morrow

BeogdbN, J. The determinative question of law is this: Does a formal release of one director of a building and loan association, who was also secretary-treasurer and general manager thereof, discharge the other directors from liability for failure to perform their official duties ? The law is: “Directors and managing officers of a corporation are deemed by the law to be trustees, or gmwi-trustees, in respect to the performance of their official duties incident to corporate management, and are therefore liable for either wilful or negligent failure to perform their official duties. Therefore, if there is a loss of the corporation’s assets, caused and brought about by the negligent failure of its officers to perform their duties, the corporation, or its receiver, in case of insolvency, can maintain an action therefor.” “However, the officers of a corporation are not, as a rule, responsible for mere errors of judgment, nor for slight omissions from which the loss complained of could not have reasonably resulted.” S. v. Trust Co., 192 N. C., 246; Besseliew v. Brown, 177 N. C., 65. A careful perusal of the complaint in this cause will disclose that the loss sustained by the corporation resulted from two primary causes: (a) The negligent failure of Ashcraft, the secretary and treasurer, and a director of the corporation, to properly perform his official duties, in that he was placed in sole and exclusive control of the management of the corporation, and carelessly and negligently failed to keep proper records or to make a proper accounting, and particularly that he carelessly and negligently matured the stock of the corporation which ultimately produced insolvency, (b) That the directors carelessly and negligently failed to supervise or restrain the said secretary and treasurer or to require the proper performance of his official duties. It is apparent from the complaint that both Ashcraft and the other directors failed to perform positive duties imposed by law. Therefore, they cooperated in bringing about insolvency. Hence they are joint tort-feasors. This was the status of the parties when the plaintiff, receiver, brought a suit against the estate of Ashcraft, and this was also the status of the parties when the plaintiff executed and delivered for a valuable consideration the release of the estate of Ashcraft. The release states that the money is received “in full settlement of all claims of whatsoever nature and kind that the Perpetual Building and Loan Asso *131 ciation bas against tbe said estate.” Tbis language is comprehensive and inclusive. Tbe plaintiff insists tbat tbe release covered only items due by Asbcraft to the corporation as secretary and treasurer, arising from errors made by bim and collections which be bad not turned over to the corporation, but the paper-writing, upon its face, purports to cover .“all claims of whatsoever nature and kind.” This language not only includes amounts collected by Asbcraft and not accounted for, but also his liability as a director for negligent failure to perform bis official duties. This Court has declared in Howard v. Plumbing Co., 154 N. C., 224, tbat: “It is well settled that a release of one or more joint tort-feasors executed in satisfaction for an injury is a discharge of them all, on the ground that the party can have but one satisfaction for bis injury.” Brown v. Louisburg 126 N. C., 701; Burns v. Womble, 131 N. C., 173; Smith v. R. R., 151 N. C., 479; Gregg v. Wilmington, 155 N. C., 23; Sircey v. Rees’ Sons, 155 N. C., 296. The legal effect of a formal release is quite different from a covenant not to sue. A covenant not to sue one joint tort-feasor or one coobligor does not have tbe effect of releasing other tort-feasors or coobligors. Sandlin v. Ward, 94 N. C., 496; Mason v. Stephens, 168 N. C., 370. Therefore, when tbe plaintiff, as receiver, released Asbcraft for a valuable consideration, tbis release, under tbe law, inures to tbe benefit of tbe other directors, and tbe plaintiff is not entitled to recover. The plaintiff contends, however, that the suit brought by him against the estate of Ashcraft was intended to charge Ashcraft as secretary and treasurer in failing to account for money which be bad received and failed to pay into the treasury. As no complaint was filed, this fact does not appear from the record; but, conceding that the plaintiff intended the suit against Ashcraft to cover such items alone, the fact remains that the release given contains language which covers all liability, whether arising upon contract or tort. Tbe plaintiff relies upon Besseliew v. Brown, 177 N. C., p. 65. Tbis case involved the mismanagement of a building and loan association. It appeared that the secretary, who bad been entrusted with complete charge and management of the company, bad embezzled over $12,000 of the assets, thus causing insolvency. The directors bad accepted a mortgage for $6,000 of the shortage and thereafter canceled this mortgage upon receipt of the sum of $3,000. No question of a formal release was involved in the ease. Indeed, Holce, J., in referring to accepting $3,000 in payment of a mortgage debt of $6,000, said: “Tbis may have been a mere error of judgment on their part, or it may have been the best course to take under the circumstances presented, but we fail to see bow it could inure to the protection of defendants, except in reduction of the damages, if any, that may be shown against them, and this effect is allowed *132 it in the complaint.” It also appears in the Brown case, supra, that the directors themselves settled with Hammond, the defaulting secretary. Certainly, joint tort-feasors cannot relieve themselves from liability by making a settlement with or releasing one of their own number. In the present case the release was executed by the receiver, who was an officer of the court and charged with the duty of protecting the interests of stockholders and creditors. The case of Slade v. Sherrod, 175 N. C., 346, relied upon by the plaintiff, is not applicable for the reason that there were two separate and distinct causes of action involved, and the release, upon its face,-purported to settle only one of said causes of action, leaving the other to be determined according to law. Upon the whole record, and after a careful consideration of the merits of the appeal, we are of the opinion that the plaintiff is not entitled to recover. Reversed.