Court Opinion

ID: 6697095
Source: CourtListenerOpinion
Date Created: 2022-07-20 21:55:44.243873+00
Date Added: 2024-06-11T16:01:17.276486
License: Public Domain

CoNNOR, J.,
dissenting: No answer was filed to tbe verified complaint in tbis action by either of tbe defendants, C. Oettinger, T. Y. Moseley or E. M. Taylor. Tbe defendants, L. L. Oettinger, H. E. Moseley and F. 0. Dunn filed a joint answer to tbe complaint in which they admit tbe material allegations upon which plaintiff prays judgment against all tbe defendants. In their answer they allege facts which they contend constitute a defense to plaintiff’s action. Tbe defendant, Mrs. Myrtie A. Tull, executrix of Henry Tull, deceased, formally adopted tbe answer of her codefendants as her answer to tbe complaint. Plaintiff filed a reply to tbe answer in which be denied tbe allegations of tbe answer upon which tbe answering defendants rely to defeat plaintiff’s recovery. These answering defendants, other than Mrs. Myrtie A. Tull, executrix, filed a rebutter to tbe reply, in which they admitted tbe material facts set out in- tbe reply, and reiterate tbe allegations of their answer.
Upon tbis state of tbe pleadings plaintiff moved for judgment by default final against defendants, 0. Oettinger, T. Y. Moseley and F. M. Taylor, for want of an answer, and against tbe answering defendants for that no facts are alleged in their pleadings, which constitute a defense to plaintiff’s cause of action as set out in bis complaint.
Tbis motion was allowed, and judgment was rendered accordingly that plaintiff recover of all tbe defendants tbe sum of $96,168.53, tbis being seven-eighths of tbe total amount paid by plaintiff in discharge of tbe notes set out in tbe complaint, upon which plaintiff and defendants were jointly liable as sureties and which plaintiff bad paid, upon demand of tbe holders of tbe notes, after their maturity, and after default by tbe maker, who bad become insolvent. Provision is made in tbe judgment that tbe cause be retained, in order that if it shall hereafter appear that any of tbe defendants is insolvent, and for that reason plaintiff is unable to collect by execution .the amount for which such defendant is liable by reason of tbe judgment, such other orders and *486judgments may be made and rendered herein as may be necessary and proper for the protection of the rights of plaintiff and of the defendants and each of them to the end that proper contribution may be had from all the defendants.
To this judgment the answering defendants excepted. They only have appealed from the judgment to this Court. Their codefendants, who filed no answer, make no complaint of the judgment. As to them the judgment is final.
In the court below the answering defendants demurred ore tenus to the complaint, for that the complaint does not state facts sufficient to constitute a cause of action. This demurrer was overruled and said defendants excepted. Their first assignment of error is based upon this exception. I concur in the opinion of the Court that this assignment of error cannot be sustained.
Plaintiff and defendants were stockholders of the Kinston Knitting Mills, a corporation engaged in business in the city of Kinston, N. C. They had endorsed various notes, aggregating a large amount, executed by the corporation, for money borrowed to enable the corporation to carry on its business. They were each and all interested in the success of the corporation as stockholders. It is not denied that as such endorsers, by special agreement, they were liable as sureties on the notes, without priority, the one over the other. Lancaster v. Stanfield, 191 N. C., 340; Dillard v. Mercantile Co., 190 N. C., 225; Gillam v. Walker, 189 N. C., 189.
These notes had been renewed from time to time. On 27 February, 1927, at a meeting of the board of directors of the said corporation, consisting of plaintiff, C. E. Harvey, and of defendants, C. Oettinger, L. L. Oettinger, E. M. Taylor, T. V. Moseley, H. E. Moseley, and C. E. Dunn, a resolution was adopted, reciting that the corporation “notwithstanding the best efforts and judgment of its officials and directors,” was unable to meet its indebtedness, and directing that the officers of the corporation take steps at once to have a receiver appointed for the corporation. Thereafter a receiver was appointed, and the holders of the notes, which were endorsed by plaintiff and defendants, called upon the said endorsers' to pay said notes. Defendants failed to pay said notes, or any part of same; plaintiff thereupon paid the notes, and has brought this action against defendants, his cosureties, for contribution.
The appellants resist recovery by plaintiff upon their allegation that the corporation was rendered insolvent, and thereby unable to pay its indebtedness, including said notes, by the wrongful conduct of plaintiff, its president (1) in that plaintiff, in breach of his duties as president, absented himself from his office, for four months, during which *487time be was traveling in Europe, and (2) in that plaintiff, in breach of his duties as president, failed to procure further extensions of the notes upon which he and defendants were liable as sureties. Defendants allege that they endorsed said notes, and thereby became liable as sureties, upon their assurance that plaintiff would faithfully perform his duties as president, and would use his personal credit to procure extension of said notes. All of the defendants, except Mrs. Myrtie A. Tull, executrix, were directors of the corporation; defendant E. 0. Dunn was first vice-president, and defendant H. E. Moseley second vice-president of the corporation.
I am of the opinion that if all the facts alleged in the answer and rebutter of the answering defendants be established, such facts do not constitute a cause of action upon which these defendants could recover of plaintiff, and that they therefore do not constitute any defense to this action in behalf of these appellants. The cause of action, if any, arising upon the facts alleged in the answer and rebutter can be maintained only by the corporation or by the receiver. The damages, if anyj resulting from the breach of his duti,es by plaintiff, as president of the corporation, are assets of the corporation, and should be administered for the benefit of the corporation, its creditors and all its stockholders. I think the law as stated in Douglass v. Dawson, 190 N. C., 458, is applicable to these facts. This case does not, in my opinion, fall within the principle of Bane v. Powell, 192 N. C., 387. The distinction between these two cases has been clearly stated in the recent opinion of this Court in Wall v. Howard, ante, 310. These cases deal with actions against directors of insolvent banks, but the principles of law upon-which they were decided are applicable to actions involving the conduct of officers and directors of corporations other than banks.
The result of this decision, it seems to me, is that three out of seven directors of the Kinston Emitting Mills are permitted to set up as a defense to a cause of action, upon which they are personally liable, facts which constitute a cause of action, upon which the corporation or its receiver alone is entitled to recover. Defendants who filed no answer- and against whom a final judgment has been rendered in this action, upon the facts alleged are as much entitled to maintain this defense as the answering defendants. Neither of them is so entitled, in my opinion; only the corporation which has sustained damages by reason of the wrongful acts of plaintiff, its president, or its receiver, may maintain an action upon the facts relied upon by these defendants. I do not think that their pleadings can be justly construed as alleging any contract or agreement by the plaintiff with these defendants, as individuals. Plaintiff as president owed certain duties to the corporation; for damages *488resulting from a breach of these duties, if any, he is manifestly liable only to the corporation. The general allegations that plaintiff agreed to finance the corporation, by means of his personal credit — without regard to any limit as to amount or as to time, or as to conditions that might arise in the future, and that he failed to comply with this agreement, are not sufficient, in my opinion, to give rise to a cause of action in behalf of the defendants against him, or to constitute a defense to his action against them for contribution. He cannot be held liable to them, either in law or in equity upon these allegations.
Defendants, who are officers and directors of the corporation, owed a duty to the corporation, its stockholders and creditors, with respect to the matters upon which they rely for defense in this action which is brought against them as individuals. They allege that for four months the plaintiff, as president, failed to perform his official duties, and that the corporation thereby suffered damages. It does not seem that they ought to be permitted, in law or in equity, to set up as a defense in this action the breach by the plaintiff of his duties as president when necessarily it appears that they knew, of such breach and took no steps to prevent it.
I cannot concur in the decision made by the. Court of the question presented by this appeal. In my opinion there is no error in the judgment of the Superior Court, and it should be affirmed.