"What duty does tbe law impose upon directors of a business corporation ?

Tbis 'cause was considered by tbis Court upon a former appeal reported in 198_N. C., p,, 364, 151 S. E., .735. Tbe decision establishes tbe proposition that a cause of action was properly alleged against tbe directors of tbe company wbo were parties to tbe suit.

There was much evidence introduced as to many transactions involving false representations! and fraudulent devices in issuing bonds or notes purporting to be secured by first mortgage on real estafe, extending over a period of several years. That is to say, a borrower would secure a loan of a certain sum of money and execute a deed of trust or mortgage upon bis property. Tbe notes evidencing tbe loan would be sold by tbe real estate company to various purchasers. Tbe borrower would make payments to tbe real estate company from time to time as required by tbe contract. Before tbe loan was fully discharged tbe real estate company would approach tbe borrower and represent to such borrower that it was necessary to refinance tbe loan, and tbe borrower would issue other notes and secure tbe same by a mortgage or deed of trust upon bis property, with tbe understanding and agreement that tbe former notes would be returned to him marked paid. Tbe real estate company would sell tbe second issue of notes to various purchasers, omitting and neglecting to pay off tbe balance due on tbe first loan, and thus there would be duplicate and sometimes triplicate issues of notes upon tbe same property.

Tbe plaintiffs contend that by virtue of tbe fact that tbis practice and custom bad been in existence for many years, tbe defendants, as directors of tbe corporation, while not personally participating in such fraudulent schemes and practices, were nevertheless charged with constructive notice of the methods of doing business and the various misappropriations of money.

*303 Directors are not guarantors of the solvency of a corporation, nor are they insurers of the honesty and integrity of the officers and agents. Neither are they required to personally supervise all the details of business transactions. The general rule of liability imposed- by law was thus expressed in S. v. Trust Co., 192 N. C., 246, 134 S. E., 656: “Directors and managing officers of a corporation are deemed by the law to be trustees, or gitasi-trustees, in respect to the performance of their official duties incident to corporate management and are therefore liable for either wilful or negligent failure to perform their official duties.” . . . To the same tenor is the principle announced in Caldwell v. Bates, 118 N. C., 323, 24 S. E., 481, where the Court declared “that the directors are liable for gross neglect of their duties, and mismanagement— though not for errors of judgment made in good faith — as well as for fraud and deceit.”

The trial judge expressed the measure of liability as follows: “It was the duty of the directors to exercise due care to prevent frauds and wrongs from being practiced upon those who dealt with the corporation in the ordinary course of its business. It was their duty to exercise a degree of care that a reasonably prudent man as the director of a corporation would have exercised under like or similar circumstanc.es and charged with like duty, the degree of care an ordinarily discreet business man would give to his own affairs. . . . The directors are liable if they suffer the corporate property to be lost by gross inattention to the duties of their trust and are not relieved of liability because they have no actual knowledge of wrong doing if that ignorance is the result of gross negligence.”

Ordinarily, of course, directors would not be charged with notice by virtue of desultory, occasional .or disconnected acts of mismanagement or fraudulent transactions, but in cases where mismanagement and fraud has been persistently and continuously practiced for substantial periods of time a jury must determine whether the directors, in the exercise of that degree of care which the law imposes, should have known of such practices and that persons dealing with the corporation would be injured thereby.

The Court is of the opinion that there was sufficient evidence to be submitted to the jury, and consequently the judgment must be affirmed.

No error.