Bates v. Dresser

• Decision Date: 17 December 1915
• Docket Number: 227.
• Citation: 229 F. 772
• Parties: BATES v. DRESSER et al.
• Court: U.S. District Court — District of Massachusetts

229 F. 772

BATES v. DRESSER et al.

No. 227.

United States District Court, D. Massachusetts.

December 17, 1915

Bates Nay & Abbott, of Boston, Mass., for plaintiff.

Clarence A. Bunker, of Boston, Mass., specially for Geo. E richardson.

A. E Pillsbury, of Boston, Mass., specially for David A. Barber.

Tyler &amp Young, of Boston, Mass., for defendant Geo. E. Richardson.

Robert M. Morse and Alger, Dean & Sullivan, all of Boston, Mass., for defendants, Edwin Dresser, Sumner Dresser, and Geo. W. Gale.

BINGHAM Circuit Judge.

This is a bill in equity, brought by the plaintiff, as receiver of the National City Bank of Cambridge, Mass., against the defendants, to recover the losses which the bank sustained through the defalcations of George W. Coleman, its bookkeeper, which took place during a period extending from November 24, 1906, to the close of the bank, February 21, 1910.

The plaintiff's claim of a right to recover is based upon the ground that the defendants, as president and directors of the bank, were bound to use due care and diligence in the management and supervision of its affairs, and that, through their negligence in this respect, they failed to discover Coleman's misconduct in season to prevent the whole or any part of the losses which the bank sustained during the three years and three months that Coleman's peculations were going on.

As there is no diversity of citizenship, and the ground of action is for a breach of their duties as directors at common law and in equity, federal jurisdiction depends upon the fact that the proceeding is brought by a receiver of a national bank in the course of winding up its affairs and is sanctioned by section 24, paragraph 16, of the Judicial Code of 1911. International Trust Co. v. Weeks (C.C.) 116 F. 898, 899; Weeks v. International Trust Co., 125 F. 370, 373, 60 C.C.A. 236; International Trust Co. v. Weeks, 203 U.S. 364, 27 Sup.Ct. 69, 51 L.Ed. 224; Auten v. United States National Bank, 174 U.S. 125, 141, 19 Sup.Ct. 628, 43 L.Ed. 920; Guarantee Co. v. Hanway, 104 F. 369, 44 C.C.A. 312; McCartney v. Earle, 115 F. 462, 53 C.C.A. 392. The question decided in the recent case of Herrmann v. Edwards, 238 U.S. 107, 112, 35 Sup.Ct. 839, 59 L.Ed. 1224, differs from the one under consideration, as that suit was not brought by a receiver in the course of winding up the affairs of a national bank, and jurisdiction, if it existed, was held to depend upon diversity of citizenship or the presence of a federal question.

On October 16, 1911, pursuant to an agreement of the parties, and under an order of the court, the case was sent to a special master, with directions 'to hear the parties and report to the court his findings of fact and rulings of law thereon. ' The order also contained the following provision:

'Any party to the suit shall have the right to a review and a determination by the court upon the evidence reported by the master. The master shall report to the court all the evidence bearing upon any question of fact which any party desires to be re-examined and found by the court, and such other portions of the evidence as may be material to any requests for rulings or other question of law which any party may desire to present to the court.'

The case has been heard by the master, and he has filed a report covering 94 typewritten pages, together with a book containing 597 pages of special findings, in addition to the general and special findings contained in his report, and he has made the figures of the expert showing the state of the depositors' ledger during the time the defalcations were taking place a part of the report. He has also reported all the evidence and exhibits in the case. He adopted this course, for the reason that there was no other practical way of complying with the court's order, in view of the great number of exceptions taken to facts which he found and refused to find, as the labor of separating out the evidence bearing on each particular question would be too great.

After finding many preliminary facts and stating much of the evidence bearing upon the conduct of the defendants, as president and directors, in the management and supervision of the bank, the master reached the conclusion that none of the defendants was negligent.

The plaintiff has excepted to the general finding and ruling of the master that the defendants were not negligent, as inconsistent with his other findings of fact, and as directly against the weight of the evidence. He has also excepted to the finding and ruling that the defendant Edwin Dresser was not guilty of actionable negligence, as inconsistent and wholly at variance with the master's special findings of fact, stating in detail wherein it is claimed to be inconsistent, and as against the weight of the evidence; and he has taken numerous other exceptions to special findings of fact and rulings of law.

At the hearing before me on the master's report, counsel for the defendants took the position (1) that the findings of fact made by the master were conclusive, or (2) that, if not conclusive, they were presumptively correct, and that the reservation of the right of review contained in the order of the court was not so broad as to render the master's findings advisory only. In support of the first proposition they rely on the case of Davis v. Schwartz, 155 U.S. 631, 15 Sup.Ct 237, 39 L.Ed. 289. That case does not seem to me to be in point, for the reason that there the order sending the case to the master contained no reservation of a rights of review. On the second proposition reliance is placed on the decision in Kimberly v. Arms, 129 U.S. 512, 9 Sup.Ct. 355, 32 L.Ed. 764. There the order sending the case to the master, as in this case, was by consent of the parties and directed the master 'to hear the evidence and decide all the issues between the parties and make his report * * * separately stating his findings of law and fact, together with all the evidence introduced before him, which evidence thereby shall become a part of the report, which report shall be subject to like exceptions as other reports of masters'; and it was held that the findings of the master should be 'treated as so far correct and binding as not to be disturbed unless clearly in conflict with the weight of the evidence upon which they were made.' In the recent case of Goldsmith Silver Co. v. Savage, 229 F. 623, . . . C.C.A. . . ., decided by the Court of Appeals for this Circuit December 10, 1915, the decision in Kimberly v. Arms was followed; the reservation of the right of review in the two cases being made in substantially the same language. In the present case it would seem that the parties and the court must have understood, from the language employed in the order, that findings of fact made by the master, which the parties did not ask to have re-examined by the court, should be regarded as conclusive; but the language, reserving the right of review as to findings which they did desire the court to re-examine, is so broad it would seem that the decision in Kimberly v. Arms must have been in the mind of the draftsman, and that he was seeking to provide for a more extended right of review than was held to be reserved in that case. For instance, the order directs the master to report all the evidence bearing on any question of fact which either party desired to have re-examined and found by the court, and provides that any party to the suit shall have the right to a review and a determination by the court upon the evidence reported by the master of any finding of fact or conclusion of law made by the master. But, however this may be, in the consideration of the case I shall regard the findings of the master as presumptively correct and to be sustained, except in so far as I regard them as clearly against the weight of the evidence, or it appears that his findings, general or special, are so inconsistent with one another that they cannot properly stand.

The National City Bank of Cambridge was organized in 1867. At the time of the defalcations Edwin Dresser was, and for many years prior thereto had been, the president and a director of the bank. He was also one of the largest stockholders and depositors. His account was an inactive one, and ran from $35,000 to $50,000. The defendants Gale and Sumner Dresser were directors for many years prior to Coleman's employment, and were such during the period covered by his defalcations. The defendants Barber and Richardson became directors in January, 1907, and remained in office to the close of the bank. July 30, 1903, Mr. Earl was chosen to succeed one Davis as cashier. Mr. Davis had been a director, and continued as director for a time after he ceased to be cashier. From the fall of 1903 to the spring of 1904 Albert B. Roaf acted as teller; from the spring of 1904 to February, 1905, Charles L. Bragg was teller; and from February, 1905, until October, 1905, Lewis W. Cutting was teller; from October, 1905, to November, 1907, Coleman acted as teller and bookkeeper; and from November, 1907, to the close of the bank Edward A. Paul was teller.

Coleman first came into the bank in July, 1903. He was then 17 years of age and was employed as messenger. He continued as messenger up to January 1, 1904, when he was made bookkeeper, which position he held from that time to the close of the bank, doing also the work of teller from October, 1905, to November, 1907, as above stated. Prior to entering the bank he had taken a course in Burdett's Business College and had graduated there. He received for his services, first $4 a week, then $8, $10, and later $12, the last sum being the highest compensation he received at any time.

After January, 1904, when Coleman became bookkeeper, one Lockhart was...