Braswell v. Morrow
| Decision Date | 31 January 1928 |
| Docket Number | 432. |
| Citation | 141 S.E. 489,195 N.C. 127 |
| Parties | BRASWELL v. MORROW et al. |
| Court | North Carolina Supreme Court |
Appeal from Superior Court, Union County; Oglesby, Judge.
Action by M. L. Braswell, receiver, against R. A. Morrow and others. Judgment for plaintiff, and defendants appeal. Reversed.
"Covenant not to sue" joint tort-feasor does not release other tort-feasors, and in that respect differs from a "release."--
The plaintiff was duly appointed receiver of the Perpetual Building & Loan Association in August, 1923. The defendants Morrow, Lee, and Houston were the directors of said building and loan association. S. O. Blair was a director, and died before the suit was brought, and his administrators are also defendants.
The plaintiff alleged that the Perpetual Building & Loan Association had for many years been engaged in the business of a building and loan association under the provision of the laws of North Carolina. B. C. Ashcraft was a director of the association at the time of his death, which occurred about November 11, 1921. For many years prior to his death Mr Ashcraft had been secretary and treasurer of the association. Paragraph 4 of the complaint is as follows:
"That the defendants as hereinbefore set out, intrusted and turned over the entire management of the association to B C. Ashcraft, whom they elected and annually reelected as secretary and treasurer of said association, and although they had, or by the exercise of ordinary care and prudence could have at any time had, information by the most superficial examination into the affairs of the association that the said secretary and treasurer was persistently pursuing a policy in the maturing of the stock of the association that would inevitably result in its insolvency took no action to remedy the situation, but permitted the said secretary to continue the maturing of stock before it had reached maturity until the assets of the corporation were so depleted that its stock was valueless, and a receivership to wind up its affairs necessary."
Paragraph 5 of the complaint is as follows:
"That the defendants knew, or by the exercise of ordinary care and prudence in the performance of their duties as directors should have known, that the secretary and treasurer was maturing the stock of the association before it reached par, that is, paying out $100 on each share of stock at the end of a period of time insufficient for it to have reached said value by the payment of the weekly dues of the stockholder, and although this action on the part of the secretary and treasurer was repeatedly called to the attention of the defendants in the annual audits of the affairs of the association by the auditors and accountants employed to perform such service, the defendants, by this gross neglect of their duties and other acts of negligence and inattention to the affairs of the association as will be hereinafter set out, permitted the association to become insolvent, and the stockholders and creditors thereof to suffer loss and sustain damages as will be hereinafter more fully alleged."
Subsequent allegations of the complaint allege that the defendants, as directors of said association, failed to hold or attend meetings as required by law and the by-laws, "but permitted the entire business of the association to be managed, controlled, and supervised by the secretary and treasurer, without any restraint or direction whatever from the directors." It was further alleged that the defendants, as directors, failed to require the treasurer to give a bond or to annually examine his books or to require him to keep a proper set of books, and that said defendants negligently and carelessly permitted the secretary and treasurer to make loans on inadequate security and to fail to collect accrued interest upon loans made by the association.
It further appears from the record that on the 12th day of December, 1923, the plaintiff receiver instituted an action against Scott-Charnley & Co., alleging in substance that the said Scott-Charnley & Co. were employed by the building and loan association to audit its books from time to time, and that said auditors carelessly and negligently failed to make a proper audit or to submit an accurate report of the condition of the association, and that "the officers and directors of said association, having no special training in work of this character, relied upon the correctness of the several reports made to them of the books by the defendant, as they had a right to do." In the complaint the plaintiff asked for $13,000 damage against Scott-Charnley & Co., which was the amount of the loss sustained by the association. After the suit against the present defendants was instituted, the plaintiff, as receiver, settled with Scott-Charnley & Co. for the sum of $1,043.
On the 14th day of March, 1924, the plaintiff, as receiver of the Perpetual Building & Loan Association, brought a suit against Mary B. Ashcraft as administratrix of B. C. Ashcraft. No complaint was ever filed in this suit, but on the 21st day of May, 1924, Mary B. Ashcraft, administratrix of B. C. Ashcraft, paid to the plaintiff, as receiver, the sum of $1,250 and took from him a release as follows:
The receiver was examined as a witness. He testified that he presented a claim against the estate of Mr. Ashcraft, composed of various clerical errors made by him as secretary and for payment of installments that were entered on passbooks but not recorded in the secretary's office. He further testified that the whole claim was denied by the Ashcraft estate. On cross-examination the receiver said:
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