Gordon v. . Pendleton

AdaMS, J. We are informed that the present action was instituted after the plaintiff had ineffectually requested the banking department of the Corporation Commission to bring suit against the defendants for delinquency in the discharge of their duties. Proof of the demand-and refusal is not clearly set out in the record but we are told that the action was not dismissed for the reason that the demand had not been made. In the briefs, as in the oral argument, only one question is debated: that is, whether the plaintiffs’ evidence is of sufficient probative force to call for the verdict of a jury. If it is not, the plaintiffs’ counsel, while insisting upon its sufficiency, eommendably indulges the-“hope that the judgment below will be affirmed.” It is an established principle that.the directors and managing officers of a corporation, though ordinarily not responsible for mere errors of judgment or slight omissions, are to be considered and dealt with as trustees, or quasi-trustees, in respect to their corporate management, and in proper cases may be held liable for loss or depletion of the company’s assets due to their wilful or negligent failure to perform their official duties. Ham v. Norwood, 196 N. C., 762; Corporation Commission v. Bank, 193 N. C., 113; Besseliew v. Brown, 177 N. C., 65. It is said in the case last cited that when they accept these positions of trust they are expected and required to give them the care and attention that a prudent man should exercise in like circumstances and charged with a like duty; that if there is a breach of legal duty in this respect, causing a loss of the company’s assets, the corporation may sue; and that in case of insolvency the action may be maintained by the receiver. The appeal raises the question whether the evidence with its legitimate inferences reveals such disregard of this principle as reasonably requires a reversal of the judgment. The chief assault of the plaintiffs is directed to the defendants’ alleged official delinquency in making loans that were unauthorized and unsecured and in permitting a reserve deficiency. We have endeavored to analyze the evidence in reference to these matters and have concluded that the plaintiffs’ position cannot be maintained. A detailed statement of the exhibits would involve intricate calculations and would serve no useful purpose. For this reason we restrict the opinion to a statement of the result of our investigation. *244 With respect to the loans, the defendants have accepted the plaintiffs’ statement that the total direct liability of the directors, their families and corporations, was $111,071, and that the endorsements amounted to $102,428.98. The plaintiffs contend that some of these loans were made without good collateral or ample security in breach of C. S., 221 (n) and that others were in excess of the amount which the bank was authorized to lend under C. S., 220(d). The defendants admit that the sum $111,071 represents the direct liabilities, but they contend that the indirect obligations of $102,428.98 involve many duplications which, when properly considered, reduce the aggregate obligations of the defendants to an amount but slightly in excess of the sum stated as their direct obligations; and, further, that the estimated financial worth of the defendants exceeds $800,000. The defendants further contend that if no allowance be made for the duplication and the total obligations be measured by the reduced amount of the capital stock (reduced from $250,000 to $125,000) and a few loans according to this standard were in excess of the legal limit, still the loans were made before the capital stock was reduced, and after the reduction every effort consonant with sound banking was made to curtail the loans. As a result, they say, no loan exceeded the limit at the time it was made. The defendants admit that through inadvertence they made some loans that were unauthorized but insist that upon request of the bank examiner the error was corrected. We do not see that the plaintiffs’ position is materially aided by his contention in reference to the reserve deficiency. Upon an inspection of the record we find no convincing or satisfactory evidence that the alleged negligent acts of the defendants resulted in any pecuniary loss either to the bank or to the plaintiffs. The judgment is therefore Affirmed.