Bates v. Dresser

251 U.S. 524 (1920)

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Bates v. Dresser

United States Supreme Court
251 U.S. 524 (1920)

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Facts

Edwin Dresser (defendant) was the president of a bank. During Dresser’s tenure, the bank employed a man named Coleman who, between the years of 1903 and 1910, stole several hundred thousand dollars from the bank. Coleman concealed his theft by clever manipulation of the bank’s ledger and by deceiving the bank’s cashier. Neither the cashier nor any bank examiner ever detected any wrongdoing, and the bank’s directors accordingly relied on the cashier’s and the examiners’ reports that all deposits and assets were properly accounted for. Dresser, in contrast to the directors, was personally involved in the bank’s daily operations. Dresser was at the bank every day and had constant access to the bank’s ledger. Additionally, Dresser was informed of suspicious activity by bank employees on two occasions. The first occasion was in 1905, when a teller informed Dresser that he believed somebody was stealing money. The second occasion was in 1908, when another employee told Dresser of the suspicious disappearance of a package containing $150. The employee told Dresser that he had suspicions about Coleman specifically, citing evidence that Coleman’s lifestyle exceeded what Coleman could afford on his salary. In both instances, Dresser declined to investigate. The bank eventually went into receivership, and the receiver (plaintiff) sued Dresser and the bank’s directors to recover the amounts stolen by Coleman under the theory that the losses were attributable to Dresser’s and the directors’ violation of their duty to monitor the bank’s affairs. A master originally held that Dresser and the directors were not personally liable. The district court reversed and held both Dresser and the directors liable. The circuit court ruled that only Dresser could be held personally liable. Both Dresser and the receiver appealed to the Supreme Court.

Rule of Law

Issue

Holding and Reasoning (Holmes, J.)

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