Warner v. Penoyer, 44 L.R.A. 761, 33 C. C. A. 222, 61 U. S. App. 372, 91 Fed. 587; Re National Bank [1899] 2 Ch. 629, 68 L. J. Ch. N. S. 634, 48 Week. Rep. 99, 81 L. T. N. S. 363, 15 Times L. R. 517; Dovey v. Cory [1901] A. C. 477, 6 B. R. C. 179, 70 L. J. Ch. N. S. 753, 50 Week. Rep. 65, 85 L. T. N. S. 257, 17 Times L. R. 732, 8 Manson, 346; Land Credit Co. v. Fermoy, L. R. 5 Ch. 763, 23 L. T. N. S. 439, 18 Week. Rep. 1089; Grimwade v. Mutual Soc. 52 L. T. N. S. 409; London Financial Asso. v. Kelk, L. R. 26 Ch. Div. 107, 53 L. J. Ch. N. S. 1025, 50 L. T. N. S. 492; Re Denham, L. R. 25 Ch. Div. 752, 50 L. T. N. S. 523, 32 Week. Rep. 487; Préfontaine v. Grenier, Rap. Jud. Quebec, 15 B. R. 143; Savings Bank v. Caperton, 87 Ky. 306, 12 Am. St. Rep. 488, 8 S. W. 885; Mason v. Moore, 73 Ohio St. 276, 4 L.R.A. (N.S.) 597, 76 N. E. 932, 4 Ann. Cas. 240; Thomas v. Taylor, 224 U. S. 73, 56 L. ed. 673, 32 Sup. Ct. Rep. 403; Jones Nat. Bank v. Yates, 240 U. S. 541, 557, 60 L. ed. 788, 799, 36 Sup. Ct. Rep. 429.

Directors are entitled, in the absence of substantial evidence to the contrary, to proceed on the assumption that the bank's employees are honest, and not to subject them to a system of espionage.

Scott v. Depeyster, 1 Edw. Ch. 513; Briggs v. Spaulding, 141 U. S. 162, 35 L. ed. 674, 11 Sup. Ct. Rep. 921; Warner v. Penoyer, 44 L.R.A. 761, 33 C. C. A. 222, 61 U. S. App. 372, 91 Fed. 590; Mason v. Moore, 73 Ohio St. 297, 4 L.R.A.(N.S.) 597, 76 N. E. 932, 4 Ann. Cas. 240; Ricker v. Hall, 69 N. H. 592, 45 Atl. 556; Préfontaine v. Grenier [1907] A. C. 111, 76 L. J. P. C. N. S. 4, 95 L. T. N. S. 623, 23 Times L. R. 27, 13 Manson, 401.

In the absence of an express vote or well-established usage, the president of a national bank has no greater powers or responsibilities than the other directors, except as he is the presiding officer at meetings of the board and of the stockholders, and is charged by statute with certain specific duties which are of no consequence in this case. With relation to the other directors, the president is simply primus inter pares.

United States v. Britton, 108 U. S. 193, 197, 27 L. ed. 701, 702, 2 Sup. Ct.

ton, 11 Serg. & R. 415; Putnam v. United States, 162 U. S. 687, 713, 40 L. ed. 1118, 1128, 16 Sup. Ct. Rep. 923; Commercial Nat. Bank v. First Nat. Bank, 97 Tex. 543, 104 Am. St. Rep. 879, 80 S. W. 601; First Nat. Bank v. Lucas, 21 Neb. 285, 31 N. W. 805; Montgomery Bank & T. Co. v. Walker, 181 Ala. 380, 61 So. 951.

On the other hand, the cashier of a bank is ordinarily its chief executive, and all matters connected with the details of its business, including the supervision of the employees and of the books, are properly intrusted to him.

Merchants' Nat. Bank v. State Nat. Bank, 10 Wall. 604, 649, 19 L. ed. 1008, 1019; Warner v. Penoyer, 44 L.R.A. 761, 33 C. C. A. 222, 61 U. S. App. 372, 91 Fed. 590; Baldwin v. Bank of Newbury, 1 Wall. 234, 240, 17 L. ed. 534, 535; Fleckner v. Bank of United States, 8 Wheat. 338, 360, 361, 5 L. ed. 631, 636; Security Sav. Bank v. Smith, 144 Iowa, 207, 122 N. W. 825; Arnold v. National Bank, 126 Wis. 366, 3 L.R.A. (N.S.) 580, 105 N. W. 828.

It is, of course, possible for the president of a bank to be made by the directors its executive head, and this is often the case with large banks in which the president devotes his whole time to the affairs of the bank, and receives a salary proportionate to the responsibilities thus assumed. But such a situation is to be sharply distinguished from the ordinary case of a small bank, whose president receives only a nominal compensation, if any, and is engaged primarily in other business. 5 Cyc. 463; Ex parte Rickey, 31 Nev. 100, 135 Am. St. Rep. 651, 100 Pac. 134; First State Bank v. Morton, 146 Ky. 294, 142 S. W. 694; Dunn v. Kyle, 14 Bush, 142; Prefontaine V. Grenier [1907] A. C. 101, 76 L. J. P. C. N. S. 4, 95 L. T. N. S. 623, 23 Times L. R. 27, 13 Manson, 401.

Whatever the measure of responsibility, neither Edwin Dresser nor any other director can be held liable for any damage not the proximate result of the acts or omissions complained of.

Atchison, T. & S. F. R. Co. v. Calhoun, 213 U. S. 1, 53 L. ed. 671, 29 Sup. Ct. Rep. 321; Milwaukee & St. P. R. Co. v. Kellogg, 94 U. S. 469, 24 L. ed. 256; Chicago, B. & Q. R. Co. v. Gelvin, L.R.A.1917C, 983, 151 C. C. A. 90, 238 Fed. 14; Briggs v. Spaulding, 141 U. S. 132, 151, 35 L. ed. 662, 670, 11 Sup. Ct. Rep. 924; Wallach v. Billings, 277 Ill. 218, L.R.A.1918A, 1097, 115 N. E. 382;

Warner v. Penoyer, 44 L.R.A. 761, 33 C. C. A. 222, 61 U. S. App. 372, 91 Fed. 591.

Upon any view of the case, the sum awarded the plaintiff by the decree of the circuit court of appeals was excessive.

Boyd v. Schneider, 65 C. C. A. 209, 131 Fed. 223; Allen v. Luke, 141 Fed. 694, s. c. 163 Fed. 1018; Curtis v. Phelps, 208 Fed. 577; Hadley v. Baxendale, 9 Exch. 341, 156 Eng. Reprint, 145, 2 C. L. R. 517, 23 L. J. Exch. N. S. 179, 18 Jur. 358, 2 Week. Rep. 302, 5 Eng. Rul. Cas. 502.

In a suit in equity the allowance of interest, like that of costs, is in the discretion of the court. Even if a decree

is affirmed in toto, interest is not to be added to the amount awarded by the original decree unless the mandate of the appellate court so provides, and that court may, if it sees fit, refuse to allow

interest.

V.

Consolidated Rubber Tire Co. Diamond Rubber Co. 232 Fed. 508; Hagerman v. Moran, 21 C. C. A. 242, 44 U. S. App. 636, 75 Fed. 97; Green v. Chicago, S. & C. R. Co. 1 C. C. A. 478, 6 U. S. App. 22, 49 Fed. 907.

The fact that a case is close, and that the appellant has not received any profit from the transactions in question, or acted in bad faith, but is charged' be cause of default on the part of another,

is sufficient to warrant the circuit court

of appeals in refusing to award inof appeals in refusing to award in

terest.

Hemmenway v. Fisher, 20 How. 255, 15 L. ed. 799; Merritt & C. Derrick & Wrecking Co. v. Morris & C. Dredging Co. 70 C. C. A. 356, 137 Fed. 780; Sargent v. American Bank & T. Co. 80 Or. 39, 154 Pac. 759, 156 Pac. 431; Winfield Mortg. & T. Co. v. Robinson, 89 Kan. 842, 132 Pac. 979, Ann. Cas. 1915A,

451.

This is true, a fortiori, if, as in the case at bar, the amount awarded by the decree of the district court is held to be excessive, and the plaintiff is not allowed to recover at all except upon grounds entirely different from those relied on by the district court. It is elementary that interest is not recoverable upon an unliquidated demand, and the plaintiff's claim in such a situation cannot be regarded as liquidated prior to the decision of the circuit court of appeals.

Illinois C. R. Co. v. Turrill, 110 U. S. 301, 28 L. ed. 154, 4 Sup. Ct. Rep. 5; Johnston v. Gerry, 34 Wash. 524, 76 Pac. 258, 77 Pac. 503; Gillespie v. Fulton

In any event, no interest can be allowed from the date when the decree was entered by the circuit court of appeals, since the plaintiff, as well as the defendant, Edwin Dresser, has appealed from that decree.

The Rebecca Clyde, 12 Blatchf. 403, Fed. Cas. No. 11,622; The Express, 8 C. C. A. 182, 11 U. S. App. 749, 59 Fed. 476; Skipwith v. Clinch, 2 Call (Va.) 253.

Mr. Albert E. Pillsbury argued the cause, and, with Mr. Arthur P. French,

filed a brief for David A. Barber:

Until the decree of the district court

in this case, for which there is no authority but that of the judge who made it, it had been the law in England and not liable for negligence in being de in this country that bank directors are ceived or defrauded by the secret crime the bank whose integrity they have no or criminal conduct of an employee of special occasion to distrust.

Ch. 763, 23 L. T. N. S. 439, 18 Week. Land Credit Co. v. Fermoy, L. R. 5 485, 6 B. R. C. 179, 70 L. J. Ch. N. S. Rep. 1089; Dovey v. Cory [1901] A. C. 753, 50 Week. Rep. 65, 85 L. T. N. S. 257, 17 Times L. R. 732, 8 Manson, 346; 76 L. J. C. P. N. S. 4, 95 L. T. N. S. Prefontaine v. Grenier [1907] A. C. 101, 623, 23 Times L. R. 27, 13 Manson, 401; Briggs v. Spaulding, 141 U. S. 132, 151, Warner v. Penoyer, 44 L.R.A. 761, 33 C. 35 L. ed. 662, 670, 11 Sup. Ct. Rep. 924; C. A. 221, 61 U. S. App. 372, 91 Fed. 587; Witters v. Sowles, 31 Fed. 1; Clews v. Bardon, 36 Fed. 617; Bailey v. Babcock, 241 Fed. 501; Williams v. Spensley, 163 C. C. A. 308, 251 Fed. 58; First Nat. Bank v. Noyes, 168 C. C. A. 543, 257 Fed. 593; Mason v. Moore, 73 Ohio St. 275, 4 L.R.A.(N.S.) 597, 76 N. E. 932, 4 Ann. Cas. 240; Scott v. Depeyster, 1 Edw. Ch. 515; Savings Bank v. Caperton, 87 Ky. 306, 12 Am. St. Rep. 488, 8 S. W. 885; Spering's Appeal, 71 Pa. 11, 10 Am. Rep. 684.

It hardly need be noted that the following cases in this court, which affirm under various conditions the liability of directors under U. S. Comp. Stat. §§ 9831 or 9685, for knowing or wilful violation of express provisions of the act. are not precedents for the present case, where no such violation is asserted or claimed:

Yates v. Jones Nat. Bank, 206 U. S. 158, 51 L. ed. 1002, 27 Sup. Ct. Rep.

638; Thomas v. Taylor, 224 U. S. 73, 56, L. ed. 673, 32 Sup. Ct. Rep. 403; Jones Nat. Bank v. Yates, 240 U. S. 541, 60 L. ed. 788, 36 Sup. Ct. Rep. 429; Chesbrough v. Woodworth, 244 U. S. 73, 61 L. ed. 1003, 37 Sup. Ct. Rep. 579; Corsicana Nat. Bank v. Johnson, 251 U. S. 68, ante, 141, 40 Sup. Ct. Rep. 82.

In the following cases the directors' liability is affirmed, on demurrer or on the merits, usually for knowing violation of the act, the cases of negligence at common law being comparatively few:

Robinson v. Hall, 12 C. C. A. 674, 25 U. S. App. 48, 63 Fed. 222; Prescott v. Haughey, 65 Fed. 653; Gibbons v. Anderson, 80 Fed. 345; Stearns v. Lawrence, 28 C. C. A. 66, 54 U. S. App. 532, 83 Fed. 738; Cockrill v. Abeles, 30 C. C. A. 223, 58 U. S. App. 648, 86 Fed. 505; Cooper v. Hill, 36 C. C. A. 402, 94 Fed. 582; Boyd v. Schneider, 65 C. C. A. 209, 131 Fed. 223; Rankin v. Cooper, 149 Fed. 1010; Allen v. Luke, 163 Fed. 1018; McKinnon v. Morse, 177 Fed. 576; Chesbrough v. Woodworth, 116 C. C. A. 465, 195 Fed. 875, s. c. 137 C. C. A. 482, 221 Fed. 912; Williams v. Brady, 221 Fed. 118, 232 Fed. 740; Freeman v. Jackson, 227 Fed. 688; Dudley v. Hawkins, 239 Fed. 386; McCormick v. King, 154 C. C. A. 439, 241 Fed. 737; Curtis v. Metcalf, 259 Fed. 961.

Mr. Clarence Alfred Bunker, in propria persona, argued the cause and filed a brief for Clarence Alfred Bunker and John D. Hardy:

The decision of the district court holding Richardson liable for Coleman's thefts could have been reached only by overruling Briggs v. Spaulding, 141 U. S. 132, 35 L. ed. 662, 11 Sup. Ct. Rep.

924.

See also Warner v. Penoyer, 44 L.R.A. 761, 33 C. C. A. 222, 61 U. S. App. 372, 91 Fed. 587.

Mr. Justice Holmes delivered the opinion of the court:

the administrator of Edwin Dresser, the president, cut down the amount with which he was charged, and refused to add interest from the date of the decree of the district court. 162 C. C. A. 541, 250 Fed. 525. Dresser's administrator and the receiver both appeal, the latter contending that the decree of the district court should be affirmed with interest and costs.

The bank was a little bank at Cambridge, with a capital of $100,000 and average deposits of somewhere about $300,000. It had a cashier, a bookkeeper, a teller, and a messenger. Before and during the time of the losses Dresser was its president and executive officer, a large stockholder, with an inactive deposit of from $35,000 to $50,000. From July, 1903, to the end, Frank L. Earl was cashier. Coleman, who made the trouble, entered the service of the bank as messenger in September, 1903. In January, 1904, he was promoted to be bookkeeper, being then not quite eighteen, but having studied bookkeeping. In the previous August an auditor employed on the retirement of a cashier had reported that the daily balance book was very much behind, that it was impossible to [527] prove the deposits, and that a competent bookkeeper should be employed upon the work immediately. Coleman kept the deposit ledger, and this was the work that fell into his hands. There was no cage in the bank, and in 1904 and 1905 there were some

small shortages in the accounts of three successive tellers that were not accounted for, and the last of them, Cutting, was asked_by_Dresser to resign on that ground. Before doing so he told Dresser that someone had taken the money, and that if he might be allowed to stay he would set a trap and catch the man, but Dresser did not care to do that, and thought that there was nothing wrong. From Cutting's resignation on October 7, 1905, Coleman acted as paying and receiving teller, in addition to his other duty, until November, 1907. During this time there were no shortages disclosed in the teller's accounts. In May, 1906, Coleman took $2,000 cash from the vaults of the bank, but restored it the next morning. In November of the same year he began the thefts that come into question here. Perhaps in the beginning he took the money directly. But as he ceased to have charge of the cash in November, 1907, he invented another way. Having a small

checks for the amount he wanted, exchange checks with a Boston broker, get cash for the broker's check, and, when his own check came to the bank through the clearing house, would abstract it from the envelop, enter the others on his book, and conceal the difference by a charge to some other account or a false addition in the column of drafts or deposits in the depositors' ledger. He handed to the cashier only the slip from the clearing house that showed the totals. The cashier paid whatever appeared to be due and thus Coleman's checks were honored. So far as Coleman thought it necessary, in view of the absolute trust in him on the part of all concerned, he took care that his balances should agree with those in the cashier's book.

[528] By May 1, 1907, Coleman had abstracted $17,000, concealing the fact by false additions in the column of total checks, and false balances in the deposit ledger. Then for the moment a safer concealment was effected by charging the whole to Dresser's account. Coleman adopted this method when a bank examiner was expected. Of course when the fraud was disguised by overcharging a depositor it could not be discovered except by calling in the pass books, or taking all the deposit slips and comparing them with the depositors' ledger in detail. By November, 1907, the amount taken by Coleman was $30,100, and the charge on Dresser's account was $20,000. In 1908 the sum was raised from $33,000 to $49,671. In 1909 Coleman's activity began to increase. In January he took $6,829.26; in March, $10,833.73; in June, his previous stealings amounting to $83,390.94, he took $5,152.06; in July, $18,050; in August, $6,250; in September, $17,350; in October, $47,277.08; in November, $51,847; in December, $46,956.44; in January, 1910, $27,395.53; in February, $6,473.97; making a total of $310,143.02, when the bank closed on February 21, 1910. As a result of this the amount of the monthly deposits seemed to decline noticeably and the directors considered the matter in September, but concluded that the falling off was due in part to the springing up of rivals, whose deposits were increasing, but was parallel to a similar decrease in New York. An examination by a bank examiner in December, 1909, disclosed nothing wrong to him.

In this connection it should be mentioned that in the previous semiannual examinations by national bank exam

iners nothing was discovered pointing to malfeasance. The cashier was honest and everybody believed that they could rely upon him, although in fact he relied too much upon Coleman, who also was unsuspected by all. If Earl had opened the envelops from the clearing house, and had seen the checks, or had examined the deposit [529] ledger with any care, he would have found out what was going on. The scrutiny of anyone accustomed to such details would have discovered the false additions and other indicia of fraud that were on the face of the book. But it may be doubted whether anything less than a continuous pursuit of the figures through pages would have done so except by a lucky chance.

The question of the liability of the directors in this case is the question whether they neglected their duty by accepting the cashier's statement of liabilities and failing to inspect the depositors' ledger. depositors' ledger. The statements of assets always were correct. A by-law that had been allowed to become obsolete or nearly so is invoked as establishing their own standard of conduct. By that a committee was to be appointed every six months "to examine into the affairs of the bank, to count its cash, and compare its assets and liabilities with the balances on the general ledger, for the purpose of ascertaining whether or not the books are correctly kept, and the condition of the bank in a sound and solvent condition." Of course, liabilities as well as assets must be known to know the condition, and, as this case shows, peculations may be concealed as well by a false understatement of liabilities as by a false show of assets. But the former is not the direc tion in which fraud would have been looked for, especially on the part of one who, at the time of his principal abstractions, was not in contact with the funds. A debtor hardly expects to have his liability understated. Some animals must have given at least one exhibition of dangerous propensities before the owner can be held. This fraud was a novelty in the way of swindling a bank, so far as the knowledge of any experience had reached Cambridge before 1910. We are not prepared to reverse the finding of the master and the circuit court of appeals that the directors should not be held answerable for taking the cashier's statement of liabilities to be as correct as the [530] statement of assets always was. If he had not been negligent without their knowledge it