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Bates v.

Dresser
 Dresser’s position was different. He was in the bank
FACTS: daily. He had access to the books at all
times. He knew of shortages and apparent
 Dresser was the president of a small bank in unexplained declines in deposits, yet he failed to make
Cambridge. The bank had only a few employees, and any attempt to discover the reasons behind these
defendant supervised all the work that was done. peculiar events.
 One of the employees, Coleman, was promoted from  The continued losses were his fault because
messenger to bookkeeper in 1904. the warnings that he had should have led him to
 From 1904 until 1907, there were several small investigate. Had he investigated, the losses may have
shortages in the bank and indications that an employee been eliminated because he may have discovered the
was stealing. There was no indication, however, that reason behind them.
Coleman was dishonest.  Dresser, as president, was much closer to the
 In 1907, Coleman began using his access to the books operation of the bank than the directors. He was there
to cover up the thefts he was making. He did this by every day, and he supervised the actual operation of
altering the records in such a way that the only way he the bank.
could be caught was to examine the deposit record of  This the directors didn’t do; therefore, Dresser’s
all the deposits. position exposed him to the warning signs, while the
 During this time, defendant had several indications that directors were not exposed and, therefore, he was
someone at the bank was a thief. He never attempted personally liable while the directors were not.
to ascertain who the thief was or to examine the books,
even though he had the opportunity to do so.

ISSUE:
 Did the failure to take affirmative action to discover the
thief amount to a breach of duty to the corporation?

RULING:
 Yes, as far as the president is concerned, but not
regarding the directors. The directors acted reasonably
by relying on the information given to them. They had
no reason to believe that there were any irregularities
in the bank records.