Braswell v. Pamlico Ins. & Banking Co

• Decision Date: 25 September 1912
• Citation: 75 S.E. 813,159 N.C. 628
• Court: North Carolina Supreme Court
• Parties: BRASWELL et al. v. PAMLICO INS. & BANKING CO. et al.

75 S.E. 813

(159 N.C. 628)

BRASWELL et al.

v.PAMLICO INS. & BANKING CO. et al.

Supreme Court of North Carolina.

Sept. 25, 1912.

1. Corporations (§ 320^*)—Actions Against Officers.

An action by a creditor or stockholder lies against officers, including directors, of a corporation, for losses resulting from their fraud or negligence, without first applying to the corporation to bring such action.

[Ed. Note.—For other cases, see Corporations, Cent. Dig. §§ 1426-1439; Dec. Dig. § 320.*]

2. Corporations (§ 320*) — Fraud of Officers—Evidence—Sufficiency.

Evidence held insufficient to show that officers of a corporation purchased and held stock in another corporation for their own personal ends and to the prejudice of their corporation.

[Ed. Note.—For other cases, see Corporations, Cent. Dig. §§ 1426-1439; Dec. Dig. § 320.*]

3. Corporations (§ 310*)—Directors — Liability to Corporation.

Directors of a corporation are not liable for loss to the corporation resulting from honest mistakes made in the exercise of their authority, or for mistakes of subordinate officers; they being merely required to use reasonable care and business judgment.

[Ed. Note.—For other cases, see Corporations. Cent. Dig. §§ 1352-1362; Dec. Dig. § 310.*]

Appeal from Superior Court, Edgecombe County; Carter, Judge.

y Action by M. C. Braswell and others against the Pamlico Insurance & Banking Company and others. Judgment of nonsuit, and plaintiffs appeal. Affirmed.

Bunn & Sprurll and Jacob Battle, all of Rocky Mount, for appellants.

G. M. T. Fountain & Son and M. C. Staton, all of Tarboro, for appellees.

BROWN, J. Complaint in this case embodies several alleged causes of action, and asks for quite a variety of relief, and might strictly be regarded as multifarious. As the plaintiffs, however, have abandoned all their causes of action but one, it is not necessary that we should consider the character of the complaint, especially as no such point is made by the defendant. We merely advert to it, in order that it may not be regarded as a precedent.

The cause of action upon which the plaintiffs now rely is founded in tort, and is based upon the allegation that the defendants Staton, Zoeller, and Cobb, officers and directors of the defendant bank, were guilty of fraud and negligence in the conduct of the business of the bank. It is settled that an action can be brought by a creditor or stockholder against the officers, including directors, of a corporation, for losses resulting from their fraud or negligence, without having first applied to the corporation to bring such action. Soloman v. Bates, 118 N. C. 311, 24 S. E. 478, 54 Am. St. Rep. 725; White v. Kincaid, 149 N. C. 415, 63 S. E. 109, 23 L. R. A. (N. S.) 1177, 128 Am. St. Rep. 663.

In furtherance of this allegation, the plaintiffs offer "to submit these issues: (1) Did the defendant corporation, under the control of the individual defendants, purchase, or continue to hold, the 175 shares of Tarboro Cotton Factory stock for their own personal ends and to the prejudice of the corporation? (2) If so, what damage has the corporation sustained? We are of opinion, upon a review of the evidence, that his honor properly sustained the motion to nonsuit. It appears that the defendants were stockholders in the Tarboro Cotton Factory, owning 150 shares together, and that the defendant bank owned 175 shares, which had been hypothecated by one Nash as collateral security for a debt of $12,000, upon which he had made default in payment. It also appears that the bank had acquired this stock in consideration of said debt, and that at the stockholders' meeting of the Cotton Factory this stock was generally voted by Mr. Cobb as cashier of the bank, who voted uniformly with the Statons, and they could not control the policy of the Factory without voting the shares of the bank. It appears, furthermore, that the Tarboro Cotton Factory owed the bank $35,000.

It is contended...