porations, and testified that the practice of banks, so far as he knew, all over the country, was to a large extent to carry on the business through their executive officers, especially where these officers held a majority of the stock; that when he purchased his stock he believed this bank was being conducted by its duly authorized officers, and his judgment was that his duty as a director was discharged if he attended the meetings to which he was summoned, performed such duties as were specifically required of him, and gave such advice as was asked from him; that his summers were spent upon his farm in the country; that in 1882 he was 72 years of age; that he was in a measure retired from business, so that he gave very little attention to the affairs of his own bank, but was ready to give any advice or suggestions when called upon for that purpose upon any special matters; that for many years it had been the practice in the corporations in which he was a director to treat him as an advisory director, and not as a director occupied in the daily management of their affairs; and that he accepted the position upon the understanding that he should occupy this relation. * * * He further stated that he never received or expected to receive any compensation or benefit from the bank as a director; that Lee was the owner of a large majority of the stock; that, as is customary in such cases, Lee had assumed, to a large extent, the management and control of the bank, with the knowledge of the other directors, and with the knowledge of the stockholders of the bank, and most, if not all, of the depositors therein; and upon information and belief "that long before he became a stockholder of said bank, and up to the time he became such stockholder, and while he was such stockholder, it was understood by all persons having dealings with the said bank that the said Lee practically administered the affairs thereof, as its chief executive officer." * The losses which it is claimed rendered it insolvent, and for the recovery of which losses this action was instituted, occurred by reason of the discounting by Lee of the paper of persons engaged with him in outside business and speculations, who were not adequately responsible for their engagements. The vice in the situation lay, not in the reports nor in the books, upon their face, but in the unreliability of the bills receivable. Were these defendants guilty of negligence in allowing Lee to remain in charge of the bank? * * * It appears that Lee went into the employment of this bank in 1868, being then 18 years old, and so remained until April 14, 1882, occupying in succession the positions of messenger boy, bookkeeper, teller, assistant cashier, cashier, vice president, and president. * * His general character was good, his reputation for integrity and financial capacity excellent, and he possessed the confidence of his fellow-citizens. Upon the 10th of January, 1882, he was the owner of two-thirds of the stock of the bank, and had apparently a greater interest than any other per son in seeing that its affairs were so managed that its capital would remain unimpaired. * * * We think no jury would have been justified in finding defendants guilty of negligence in retaining Lee in the management of the bank. * * * * * * But it is contended that defendants should have insisted on meetings of the board of directors. Here, again, it should be observed that even trustees are not liable for the wrongful acts of their co-trustees unless they connive at them or are guilty of negligence conducive to their commission, and that Lee and Vought had long been * * * 1463 directors. It is shown that for 14 years the affairs of the bank had been left wholly with the president and cashier, and that from the 10th of January to the stoppage of the bank the business was done as it had always been done. No bonds had been required of the officers for at least 14 years. No meetings were held by the board of directors except the annual meeting and meetings to declare dividends, or on some special occasion. All this was not as it should have been, and ought not to be countenanced; but the facts have an important bearing on the question whether Spaulding and Johnson should be held liable because they did not at once endeavor to change the entire methods of doing business, and enter upon an exhaustive investigation of the assets. Would ordinarily prudent and diligent men have done so under similar cirumstances? It is not so much a question of holding meetings as of examination, searching and thorough; an overhauling of the bills receivable, and the detection of the uncollectible indebtedness which rendered the bank insolvent. * * * Would it not have been the exercise of an extraordinary degree of care if these defendants had insisted within the first 90 days upon making such an examination? Certainly it cannot be laid down as a rule that there is an invariable presumption of rascality as to one's agents in business transactions, and that the degree of watchfulness must be proportioned to that presumption. * * * It must be remembered that in cases turning upon questions of fact in order to reverse, we must be prepared to hold that the findings were not justified, and this we cannot do, taking into consideration all the facts contained in this voluminous record, which we have attempted thoroughly to explore. The turning point, so far as defendants Spaulding and Johnson are concerned, (and we include with them Francis E. Coit,) is whether under all the circumstances they were guilty of negligence, producing any of the losses in question, not affirmatively, but because they did not prevent them; and this depends upon whether they should have made an examination of the books and assets of the bank, and whether, if they had, that would have enabled them to discover such a condition of affairs as would have resulted in placing the bank in liquidation, and whether thereby some of the losses would have been averted. Without reviewing the various decisions on the subject, we hold that directors must exercise ordinary care and prudence in the administration of the affairs of a bank, and that this includes something more than officiating as figure-heads. They are entitled under the law to commit the banking business, as defined, to their dulyauthorized officers, but this does not absolve them from the duty of reasonable supervision, nor ought they to be permitted to be shielded from liability because of want of knowledge of wrongdoing, if that ignorance is the result of gross inattention; but in this case we do not think these defendants fairly liable for not preventing loss by putting the bank into liquidation within 90 days after they became directors, and it is really to that the case becomes reduced at last. For the reasons given, the decree will be affirmed. HARLAN, J., (dissenting.) Mr. Justice GRAY, Mr. Justice BREWER, Mr. Justice BROWN, and myself are unable to concur in the opinion and judgment of the court. But we are of opinion that, under the evidence, the defendants Elbridge G. Spaulding, Francis E. Coit, and W. H. Johnson became respectively liable for such of those losses as could have been prevented by proper diligence upon their part as di rectors. It would serve no useful purpose to refer in detail to all the evidence establishing their dereliction of duty. In our opinion, the proof is clear and convincing that a considerable part of the amount lost to the bank, and therefore to its stockholders and depositors, could have been saved if they had exercised such care in the supervision and management of the bank's business as men of ordinary diligence exercise in respect to their own business. In fact, those gentlemen, while they were directors, had no knowledge whatever of what was being done by Lee in the conduct of the bank. They took his word that all was right, and gave no attention whatever to the management of its business. Their eyes were as completely closed to what he did from day to day in directing the affairs of the bank, as if they had deliberately determined not to see and not to know how he controlled its business. * * * * * * In the case of Mr. Spaulding there are absolutely no circumstances of a mitigating character. He was learned in the law, and had large experience in banking. He accepted the position of director to accommodate Lee, and without any examination of the condition of the bank. Lee told him the bank was all right; and upon that, and that alone, he rested with implicit confidence. Having taken the oath .required by the statute, that he would, so far as the duty devolved upon him, diligently and honestly administer the affairs of the association, and having ascertained that the executive officers were in charge of the bank, performing the duties belonging to their respective positions, he did not, he says, "go any further." Under such circumstances, and as he interpreted the national banking act, he felt himself "relieved from any specified duty.' It is plain from the evidence that if, with his long experience in banking business, he had given one hour, or at the utmost a few hours' time, in any week while he was director, to ascertain how this bank was being managed, he would have discovered enough that was wrong and reckless to have saved the association, its stockholders and depositors, many, if not all, the losses thereafter occurring. Upon his theory of duty, the only need for directors of a national bank is to meet, take the required oath to administer its business diligently and honestly, turn over all its affairs to the control of some one or more of its officers, and never go near the bank again, unless they are notified to come there, or until they are informed that there is something wrong; and when it is ascertained that these officers, or some of them, while in full control, have embezzled or recklessly squandered the assets of the bank, the only comfort that swindled stockholders and depositors have is the assurance, not that the directors have themselves diligently administered the affairs of the bank, or diligently supervised the conduct of those to whom its affairs were committed by them, but that they had confidence in the integrity and fidelity of its officers and agents, and relied upon their assurance that all was right. No bank can be safely administered in that way. Such a system cannot be properly characterized otherwise than as a farce. It cannot be tolerated without peril to the business interests of the country. SECTION 12.-RIGHTS AND LIABILITIES OF PARTIES WITH RESPECT TO TRANSFERS OF STOCK NATIONAL SAFE DEPOSIT, SAVINGS & TRUST CO. OF THE (Supreme Court of the United States, 1913. 229 U. S. 391, 33 Sup. Ct. 818, 57 L. Ed. 1241.) Mr. Justice DAY delivered the opinion of the court. * * * This case is in this court upon writ of error to the judgment of the court of appeals of the District of Columbia affirming the judgment of the supreme court of the District of Columbia in an action brought by the plaintiff in error, hereinafter called the bank, against the defendant in error, for the alleged conversion of certain shares of stock. The case was tried upon an agreed statement of facts, from which it appears: The plaintiff in error has been doing a general banking business in the city of Washington, including the making of loans to its customers on promissory notes secured by stock collateral, and to a limited extent, the buying and selling of stock for its customers and occasionally for itself. On March 12, 1903, the bank made a loan to one T. M. Kelley of $12,500, for which he gave his promissory note, payable on demand, and deposited with the bank certain stock certificates of the Mergenthaler Linotype Company as collateral security. Each of the certificates stood in the name of T. M. Kelley, and on its face recited that it was transferable by him, in person or by proxy, only upon the books of the company upon surrender of the certificate, and each upon its back contained an assignment with power of attorney to transfer the stock upon the books of the company, signed in blank by Kelley, whose signature was duly attested. One Willard H. Myers had been in the continuous employ of the bank for over twenty years, and had committed no acts inconsistent with his duty to the bank, and was trusted as a faithful employee. During the last ten years of his employment he had been general bookkeeper and assistant note teller, a part of his duties being to receive and enter upon the cash book of the bank the payment of loans by customers, and to procure from one of the officers of the bank and deliver to such customers the collateral security pledged for the loans, it being usual, in the ordinary course of business, for the bank to thus deliver certificates to him upon his request. He had no authority and it was not a part of his employment to dispose of, by sale, pledge, or otherwise, any stock held as collateral by the bank, or owned by it or any of its customers. On May 26, 1904, Myers requested the secretary of the bank to procure from the vault where such securities were kept the certificates deposited by Kelley, whereupon the secretary delivered the certificates to Myers, in the usual course of business, for the purpose of having them returned to Kelley, similar requests having been made by Myers prior thereto. Kelley had not paid the loan or asked for the delivery of the stock, and Myers made no entry in the cash book. The day following, May 27th, Myers delivered two of such certifi cates to the cashier of the defendant in error, a stock broker, for sale on his account, and at the request of the cashier, as was the usual custom where the signatures of the assignor and attesting witness are unknown, Myers, as a further identification of such signatures, signed his name to the attestation clause of the assignment. The defendant in error being out of the city, the certificates were turned over to another broker, by whom they were on that day sold on the Washington stock exchange, and on the same day Myers received the check of the defendant in error for the proceeds of the sale, which he subsequently cashed. Myers did not represent to the cashier of the defendant in error that he was selling the stock for the bank, or that he was acting for it in any way, or indicate that he did not own the stock, nor did the defendant in error or his cashier know or have cause to suspect that the stock did not belong to Myers. The stock was sold, however, without the knowledge or consent of the bank or Kelley. By the custom of banks, brokers, and others dealing in stock, which custom was known to the bank, the possession of stock certificates assigned in blank and attested, as were the certificates here in controversy, has been recognized, in the absence of knowledge or cause of suspicion to the contrary, as evidence of ownership or of authority to sell, pledge, or otherwise deal with such certificates as the owner might do. Certain of the other certificates deposited by Kelley were disposed of by Myers, some in like manner, through the defendant in error, for which Myers received the proceeds, others being hypothecated with the American Security & Trust Company, while the rest were surrendered by Myers to the authorities. In this case conflicting legal principles are invoked and relied upon. For the defendant in error the familiar principle "that where one of two innocent persons must suffer by the acts of a third, he who has enabled such third person to occasion the loss must sustain it” is advanced. The plaintiff in error invokes the principle that where the owner of property, such as stock certificates, has lost it by the criminal or fraudulent act of another, the owner, not voluntarily or negligently conferring upon such another the indicia of ownership or apparent title, cannot be deprived of his property by the attempted transfer of title to a third person for value, no matter how innocent the purchaser may be of knowledge of the crime or fraud by which the property was acquired. In this case the diligence of counsel has called to the attention of the court many cases more or less applicable to the facts herein involved. We will not stop to pass them in review. It is enough to say that they have been attentively considered. Stock certificates are a peculiar kind of property. Although not negotiable paper, strictly speaking, they are the basis of commercial transactions large and small, and are frequently sold in open market as negotiable securities are. In First Nat. Bank v. Lanier, 11 Wall. 369, 377, 20 L. Ed. 172, 174, this court said: "Stock certificates of all kinds have been constructed in a way to invite the confidence of business men, so that they have become the basis of commercial transactions in all the large cities of the country, and are sold in open market the same as other securities. Although neither in form or character negotiable paper, they approximate to it as nearly as practicable. Whoever in good faith buys the stock, and produces to the * * * |