Roscower v. Bizzell

• Decision Date: 05 November 1930
• Docket Number: 107.
• Parties: ROSCOWER v. BIZZELL et al.
• Court: North Carolina Supreme Court

155 S.E. 558

199 N.C. 656

ROSCOWER v. BIZZELL et al.

No. 107.

Supreme Court of North Carolina

November 5, 1930

Appeal from Superior Court, Wayne County; Midyette, Judge.

Action by A. Roscower against George D. Bizzell and others. From a judgment in favor of defendants, plaintiff appeals.

Affirmed.

Right of action for mismanagement is asset of corporation, vesting upon insolvency, in receiver or assignee for benefit, first of creditors, second, of stockholders.

See also, 155 S.E. 560.

This is an action to recover of the defendants, officers and directors of the People's Bank & Trust Company, a corporation organized under the laws of this state, the sum of $2,000 damages sustained by plaintiff, a stockholder of said corporation, in the loss of his stock, and resulting from the insolvency of the People's Bank & Trust Company. In his complaint, plaintiff alleges that said insolvency was caused by the negligence and wrongful acts of defendants, as specifically alleged therein, in the performance of their official duties.

The action was heard on defendants' demurrer ore tenus to the complaint, for that the facts stated therein are not sufficient to constitute a cause of action, on which plaintiff is entitled to recover of the defendants.

The essential facts alleged in the complaint are as follows:

Prior to January 13, 1927, the People's Bank & Trust Company, a corporation organized under the laws of this state, was engaged in the banking business at Goldsboro, N.C. On or about said day, the said corporation closed its doors and ceased to do business. Thereafter, and prior to April 30, 1927, it was ascertained that the said People's Bank & Trust Company was insolvent.

On April 30, 1927, the People's Bank & Trust Company sold and transferred all its assets to the Wayne National Bank, of Goldsboro, N. C., for the purpose of its liquidation. It is now wholly insolvent, and its capital stock utterly worthless. By reason thereof, the plaintiff, as the owner of twenty shares of said capital stock, of the par value of $2,000, has sustained a loss in the sum of $2,000.

Defendants are now, and for some time prior to the date of its insolvency were, officers and directors of said People's Bank & Trust Company, and as such had entire control and management of its affairs. The insolvency of said People's Bank & Trust Company was caused by the negligence and wrongful acts of the defendants, as specifically alleged in the complaint, in the performance of their official duties.

The court was of opinion that the facts stated in the complaint are not sufficient to constitute a cause of action on which plaintiff is entitled to recover, and, in accordance with said opinion, sustained the demurrer, ore tenus, to the complaint.

From judgment sustaining the demurrer and dismissing the action, plaintiff appealed to the Supreme Court.

N. W. Outlaw and Hugh Dortch, both of Goldsboro, and L. I. Moore, of Newbern, for appellant.

Teague & Dees and D. H. Bland, all of Goldsboro, J. N. Smith, of Scotland Neck, and Kenneth C. Royall, J. Faison Thomson, and P. B. Edmundson, all of Goldsboro, for appellees.

CONNOR J.

The principle is well settled that "directors and managing officers of a corporation are deemed by the law to be trustees, or quasi trustees, in respect to the performance of their official duties incident to corporate management, and are therefore liable for either willful 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." This principle has been uniformly recognized, and consistently applied by this court. Minnis v. Sharpe, 198...