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(39 Sup.Ct.) "The board of directors of the bank, shall, at s rule for measuring the responsibility of dieach monthly meeting, or oftener, examine and rectors as to such violations, yet, it is exapprove all loans and discounts, and such ap- pressly pointed out in the opinion of the proval shall be recorded in a book to be kept court, that the act does not relieve such difor that purpose."

rectors from the common-law duty to be honSome of these by-laws were flagrantly dis- est and diligent, as is shown by the oath obeyed for years before the failure, and the which they are required to take "to diligentothers were observed in a manner so perfunc- ly and honestly administer the affairs of the tory as to amount to a disobedience of them. association" as well as not "to knowingly The three large loans complained of were violate or willingly permit the violation of never reported to the board of directors, ex- any of the provisions of this title"—the Nacept fragmentarily from time to time, when tional Bank Act (Act June 3, 1864, c. 106, 13 indistinguishably incorporated with other Stat. 99). overdrafts, although they were gradually

The rule thus announced would perhaps accruing during many months.

be applicable if the bill were limited to the When the bank failed its liabilities were charge of liability based solely upon the stat$273,719.14 and its assets, nominally $325,624.- utory prohibition of excessive loans, for it is 12, from which, assuming that the stock- reasonably clear that Bowerman did not have holders' liability was not included in them actual knowledge of the making of the loans, (as to which the record is not clear), there or of anything else connected with the conwas realized about $220,000, thus showing a duct of the bank. He deliberately avoided shrinkage of approximately $100,000 in the acquiring knowledge of its affairs and *wholly resources of a bank with a capital and sur- abdicated the duty of supervision and control plus of $60,000.

which rested upon him as a director. The District Court, with the full record The National Bank Act imposes various before it, found the aggregate of the three specific duties on directors, other than those excessive loans at the time the bank failed imposed by the common law, and it is obto be $35,700. Each of these loans was made viously possible that a director may neglect up by allowing unsecured overdrafts to ac- one or more of the former, and not any of cumulate over a considerable period of time the latter, or vice versa. For example, in and then permitting them to be converted this case we have the gross negligence of the into unsecured notes.

appellant, in failing to discharge his comWithout going more into the details, there mon-law duty to diligently administer the can be no doubt that the business of the affairs of the bank, made the basis for the bank was surrendered wholly to the presi- contention that he did not “knowingly” viodent and cashier, and was grossly mismanag- late his statutory duty by permitting the exed after January, 1910, in utter disregard cessive loans to be made. While the statute of the national banking laws and of the by- furnishes the exclusive rule for determinlaws of the association, and that this mis- ing whether its provisions have been violated management was of such a charac*ter that or not, this does not prevent the application even slight care in the discharge of his duo of the common-law rule for measuring violaties as a director must have led Bowerman, tions of common-law duties. And there is an experienced banker, to discover the trend no sound reason why a bill may not be so of the management and to have prevented framed that, if the evidence fails to establish the greater part, if not all, of the losses statutory negligence, but establishes commonwhich resulted in the faHure.

law negligence, a decree may be entered ac[1-3] The appellant relies chiefly upon the cordingly, and thus the necessity for a resort assignment of error that there is no evidence to a second suit avoided. in the record to show that he knowingly The bill in this case is given, as we have consented to the making of the three loans in seen, this broader scope, and contains the excess of the limit imposed by R. S. § 5200 charge of statutory as well as coinmon-law (Comp. St. § 9761), and therefore he argues negligence on appellant's part, resulting in that under the rule prescribed in Yates v. the loss complained of. Such pleading was Jones National Bank, 206 U. S. 158, 27 Sup. accepted as proper practice in Briggs V. Ct. 638, 51 L. Ed. 1002; and Jones National Spaulding, 141 U. S. 132, 142, 165, 11 Sup. Ct. Bank v. Yates, 240 U. S. 542, 36 Sup. Ct. 429, 924, 927 (35 L. Ed. 662) in which a bill thus 60 L. Ed. 788; the decree of the Circuit "framed upon the theory of a breach by the Court of Appeals holding him liable is er- defendants as directors of their common-law roneous and should be reversed.

duties as trustees of a financial corporation While the cited cases hold that, in a suit and of breaches of special restrictions and for damages against national bank directors, obligations of the national banking act" was based solely upon a violation of duty im- under consideration by this court, and, upon posed by the National Bank Act, it is not a full review of the decisions, the rule for enough to show a negligent violation of the determining the common-law liability of diact, but that something more, in effect an rectors of such banks was twice stated, once intentional violation, must be shown to justi- on page 152 of 141 U. S., on page 931 of 11 fy a recovery, and that this is the exclusive 'Sup. Ct. (35 L. Ed. 662):

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"In any view the degree of care to which affairs of the bank, is equally clear; and that these defendants were bound is that which ordi. Bowerman, when guilty of neglect in both of narily prudent and diligent men would exer- these respects, did not exercise the diligence cise unde: similar circumstances, and in deter, which prudent men would usually exercise mining that the restrictions of the statute and in ascertaining the condition of the business the usages of business should be taken into account. What may be negligence in one case of the bank, or a reasonable control and may not be want of ordinary care in another, supervision over its affairs and officers, is and the question of negligence is, therefore, ulti- likewise beyond discussion. He cannot be mately a question of fact, to be determined shielded from liability because of want of under all the circumstances.”

knowledge of wrongdoing on his part, since And again, in the final summing up, on tention in the discharge of his voluntarily as

that ignorance was the result of gross inatpage 165 of 141 U. S., on page 935 of 11 Sup.

sumed and sworn duty. Ct. (35 L. Ed. 662):

Bowerman was a banker, and the letter, “Without reviewing the various decisions on from which we have quoted, written to the the subject, we hold that the directors must ex-president of the bank which failed, shows he ercise ordinary care and prudence in the administration of the affairs of a bank, and that what was necessary for the safe conduct of

so understood the business of banking, and this includes something more than officiating as figureheads. They are entitled under the law it, that even slight care on his part in the to commit the banking business as defined, to discharge of his duty as a director must have their duly authorized officers, but this does not discovered and arrested what he himself absolve them from the duty of reasonable super- characterized as a hazardous manner of convision, nor ought they to be permitted to be ducting its affairs. He was a man of such shielded from liability because of want of knowl- importance and reputation that the use of edge of wrongdoing, if that ignorance is the his name must have contributed to securing result of gross inattention."

the confidence of the community and of *de In an earlier case, Martin v. Webb, 110 positors for the bank, and it would be a reU. S. 7, 15, 3 Sup. Ct. 428, 433 (28 L. Ed. 49) proach to the law to permit his residence at it was said:

a distance from the location of the bank, a "Directors cannot, in justice to those who condition which existed from the time he deal with the bank, shut their eyes to what is first assumed the office of director, to serve going on around them. It is their duty to use as an excuse for his utter abdication of his ordinary diligence in ascertaining the condition common-law responsibility for the conduct of its business and to exercise reasonable con- of its affairs and for the flagrant violation trol and supervision of its officers. They have of his oath of office when it resulted in loss something more to do than from time to time,

to others. to elect officers of the bank, and to make declaration of dividends. That which they ought, by

[4] It is argued that the decree of the Cirproper diligence, to have known as to the gener- cuit Court of Appeals should be reversed, and al course of business in the bank, they may be the cause remanded for a new trial for the presumed to have known in any contest between reason that the trial in the District Court the corporation and those who are justified by was on the theory that only the charge of the circumstances in dealing with its officers statutory liability was involved and to be upon the basis of that course of business.”

met by the appellant, and that he should This latter statement of the rule is made have an opportunity to produce evidence, if in a case dealing only with borrowers from he desires, on the issue of common-law llathe bank, but there is no *good reason why bility. it should not be applied for the protection of

At his peril the appellant put the construcdepositors and stockholders.

tion on the pleadings which, for the reasons While the rule as thus formulated in stated in this opinion, was erroneous. The Briggs v. Spaulding, supra, has been thought suit was in equity, and he was charged with by some state courts of ast resort to be notice that the decision of the trial court an understatement of the law of the duty of was subject to review on both the law and bank directors, it is amply broad, without the facts, and, although he was present in restatement, for the disposition of the case court during the trial, he neither took the before us.

stand to testify in his own behalf nor ofThat ordinarily prudent and diligent men, fered any evidence upon the question of his accepting election to membership in a bank liability. The interests represented by the directorate, would not willfully absent them- receiver are entitled to consideration, as well selves from directors' meetings for years to- as those of the appellant, and the contention gether, as Bowerman did, cannot be doubted; cannot be allowed. that a director who never makes, or causes

[5, 6] It is also urged that the appellant to be made, any examination whatever of the resigned his office as director some time be books or papers of the bank to determine its fore the bank failed, and that the decree of condition, and the way in which it is being the Circuit Court of Appeals renders him conducted, does not exercise ordinary care liable for transactions after his resignation. and prudence in the management of the The only showing on this subject in the

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(39 Sup.Ct.) record is the averment in appellant's answer , Compensation Law provides an extensive that he was not a director of the bank after scheme for compensating injured employés, basabout the 1st day of July, 1910, and that ed on the novelty, wisdom, and policy of the he refused to qualify when notified of his acts, cannot be considered by the courts; that re-election in January, 1911. These allega- being a matter for the Legislature. tions must be deemed denied under the 2. MASTER AND SERVANT 11 REGULA. thirty-first equity rule (198 Fed. xxvii, 115 TION-LIABILITY FOR INJURIES TO SERVANT. C. C. A. xxvii). The only evidence in the The rules of law governing employers' rerecord on the subject is the oath of office sponsibility for injuries to employés arising in taken by appellant in January, 1910, and the course of the employment may be altered by testimony of the receiver that the letter from the Legislature in public interest; such rules the appellant to the president of the bank,

as the fellow servant rule and the doctrine of from which we have quoted, was the only assumption of risk being subject to change. letter from him which he found, among the 3. CONSTITUTIONAL LAW Cm105 VESTED papers which came into his possession as

RIGHTS-WHAT CONSTITUTE. receiver, bearing on the mismanagement of No person has a vested right, entitling him the bank, and that letter was written after to have unchanged the existing rules of law the failure. Section 5145 of the Revised concerning an employer's responsibility for perStatutes (Comp. St. § 9693) provides that di- sonal injury or death of an employé. rectors shall hold office for one year and un-. 4. MASTER AND SERVANT 11 · REGULAtil tþeir successors are elected and have qual- TION-LIABILITY FOR INJURIES. ified. In the absence of evidence that the If the changes are not arbitrary and unappellant resigned or refused to qualify reasonable, liability may be imposed on an when re-elected in January, 1911, we must employer without fault for injury or death of agree with the Circuit Court of Appeals in

an employé arising in the course of the em

ployment. the conclusion reached, with the full record before it, that he continued to be a director 5. CONSTITUTIONAL LAW 245 EQUAL “from the organization of the bank until the

PROTECTION OF LAWS-EMPLOYERS' LIABILreceiver took charge."

ITY Аст. Other claims of error, chiefly technical,

The Arizona Employers' Liability Act, enhave been pressed upon our attention, and acted pursuant to Const. Ariz, art. 18, which have all been considered and found to be designated specified employments as inherently without substantial merit. Conduct such as ployer for accidental injury or death of em

dangerous, and imposed liability on the emthis appellant was so palpably guilty of is ployés not caused by their own negligence, is not to be weighed in the scales of an apothe- not, though it changed the common-law rules as cary. The decree of the Circuit Court of to liability of masters, invalid, as denying to Appeals must be

them the equal protection of the law, in violaAffirmed.

tion of Const. Amend. 14.

6. CONSTITUTIONAL LAW 301-DUE PROMr. Justice MCKENNA and Mr. Justice

CESS OF LAW-EMPLOYERS' LIABILITY, MCREYNOLDS dissent.

In view of the interest of the state in the welfare of its citizens, the Arizona Employers' Liability Act, which makes employers in speci

fied occupations designated as inherently dan(250 U. S. 400)

gerous, liable for the accidental injury or death ARIZONA COPPER CO., Limited, v.

of servants not themselves negligent, regard

less of the employer's fault, is not invalid, as HAMMER. No. 20.

depriving employers of their property without SAME V. BRAY. No. 21.

due process of law, in violation of Const.

Amend. 14. RAY CONSOL. COPPER CO. v. VEAZEY. 7. CONSTITUTIONAL LAW Cm18 UNCONNo. 232.

STITCTIONALITY OF STATUTE BURDEN OF INSPIRATION CONSOL. COPPER CO. V.

PROOF.
MENDEZ. No. 332.

Those attacking the Arizona Employers'

Liability Act on the ground that it is in violaSUPERIOR & PITTSBURG COPPER CO. tion of Const. Amend. 14, have the burden of V. TOMICH. No. 334.

demonstrating that it is clearly unreasonable

and arbitrary, so as to bring it within the con(20 and 21, Argued Jan. 25, 1918. 232, Argued

stitutional inhibitions. Jan. 28, 1918. 332, Argued April 25, 1919. 334, Submitted April 24, 1919. Decided June 8. CONSTITUTIONAL LAW Onw301-DUE PRO9, 1919.)

OF LAW-DEPRIVATION OF PROPERTY

WITHOUT 1. CONSTITUTIONAL LAW Ow70(3) PROV- The Arizona Employers' Liability Act, pro

INCE OF COURTS—WISDOM OF LEGISLATIVE viding that employés in occupations designated ACTS.

as inherently dangerous, who are injured withAttacks on the Arizona Employers' Liabili- out their own negligence, may recover the proxty Act, which with the Workmen's Compulsory | imate damages resulting from the injury, to

For other cases see same topic and KEY-NUMBER 10 all Key-Numbered Digests and Indexes

CESS

error.

be assessed by a jury, is not invalid, as de- , so that an injured workman may recover for priving employers of their property without pain suffered, does not render the act invalid, due process of law, on the ground that the dam- for pain is as much a part of the workman's loss ages were unlimited, for the act, as construed as the loss of a limb or other member, and, while by the highest Arizona court, limited recovery the actual pain may not be shifted, it may be to the actual damages, and the fact that dam- compensated for. (Per Mr. Justice Holmes, ages were to be assessed by a jury is certainly Mr. Justice Clarke, and Mr. Justice Brandeis.) no ground for asserting a denial of due process

The Chief Justice, Mr. Justice McKenna, Mr. of law.

Justice McReynolds, and Mr. Justice Van De9. CONSTITUTIONAL LAW E 42 RIGHT TO vanter dissenting. RAISE CONSTITUTIONAL QUESTION. An employer cannot question the validity

In Error to the District Court of the Unitof the Arizona Employers' Liability Act, on ed States for the District of Arizona. the ground that damages awarded an injured employé, or the representatives of a deceased

In Error to the Supreme Court of the employd, are not distributed by installment State of Arizona. payments.

Action by Joseph B. Hammer against the 10. CONSTITUTIONAL LAW m42 PERSONS Arizona Copper Company, Limited. There ENTITLED TO RAISE.

was a judgment in the United States DisThe constitutionality of the Arizona Em- trict Court for plaintiff, and defendant brings ployers' Liability Act is not open to attack on

Action by Richard Bray against the grounds that might possibly arise, but which Arizona Copper Company, Limited. There do not affect the employers who were question was a judgment for plaintiff in the United ing its constitutionality.

States District Court, and defendant brings 11. CONSTITUTIONAL LAW E38 VALIDITY | error. Action by Dan Veazey against the

OF STATUTE POSSIBILITY OF IMPROPER Ray Consolidated Copper Company. There CONSTRUCTION.

was a judgment for plaintiff in the United As the Arizona Employers' Liability Act, States District Court, and defendant brings making employers liable though without fault,

error. Action by Ceferino Mendez against imposes liability only for accidental injuries the Inspiration Consolidated Copper Compaattributable to inherent dangers of the occupa

ny. A judgment for plaintiff was affirmed tion, it cannot be deemed unconstitutional, on the theory that it might be extended by con- by the Supreme Court of Arizona (19 Ariz. struction to nonhazardous industries, for

is 151, 166 Pac. 278), and defendant brings erobvious that employers in such industries are

ror. Action by Frank Tomich, sometimes in little danger from the act.

known as Frank Thomas, against the Supe

CONSTI12. CONSTITUTIONAL LAW 38

rior & Pittsburg Copper Company. A judg. TUTIONALITY OF STATUTE-POSSIBILITY OF

ment for plaintiff was affirmed by the SuIMPROPER CONSTRUCTION BY STATE COURTS. preme Court of Arizona (19 Ariz. 182, 165

The As the highest court of Arizona has con

Pac. 1101), and defendant brings error. strued the Employers' Liability Act to limit cases were consolidated in the Supreme recovery to compensatory damages, it cannot Court, and the judgments for the several be assumed, where its constitutionality was plaintiffs affirmed. questioned in the federal Supreme Court, that its benefits might be extended in case of death Cases Nos. 20 and 21: claims to those not nearly related to or de- Messrs. Ernest W. Lewis, of Phænix, Ariz., pendent on the deceased employé, etc., for it John A. Garver, of New York City, and Wilwould be improper for the Supreme Court to liam C. McFarland, of Douglas, Ariz., for assume that the state court would place such

plaintiff in error. a construction on the act as to render it obnox

Messrs. Frank E. Curley, of Tucson, Ariz., ious to the federal Constitution.

L. Kearney, of Clifton, Ariz., and Frank 13. CONSTITUTIONAL LAW ww249, 305—DUE H. Hereford, of Tucson, Ariz., for defendants PROCESS OF LAW-EQUAL PROTECTION OF

in error. LAWS-ELECTION OF REMEDIES.

Though an Arizona employé, who suffers Case No. 232: injuries, has an election, and may proceed either

Messrs. William H. King, of New York under the Employers' Liability Act, if he is not city, and Alex Britton, Evans Browne, and guilty of negligence, or, if guilty, under the F. W. Clements, all of Washington, D. C., Workmen's Compulsory Compensation Law, or, if the employer is at fault, under the common

for plaintiff in error. law, relieved of certain defenses, such right of

Mr. Edward W. Rice, of Globe, Ariz., ami. election does not deprive employers of their cus curiæ. property without due process of law, or deny them the equal protection of the law, in viola- | Case No. 332: tion of Const. Amend. 14.

Messrs. Edward W. Rice, of Globe, Ariz., 14. MASTER AND SERVANT 11-VALIDITY

and Harvey M. Friend, of Washington, D. C., OF REGULATIONS-LIABILITY ACT.

for plaintiff in error. That the Arizona Employers' Liability Act

Mr. Graham Foster, of New York City, for allows compensation to be made as in tort cases, defendant in error.

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

(39 Sup.Ct.) Case No. 334:

! course of, such employment is caused in whole, Mr. C. T. Knapp, of Bisbee, Ariz., for plain- or in part, or is contributed to, by a necessary

risk or danger of such employment, or a necestiff in error.

sary risk or danger inherent in the nature Mr. Samuel Herrick, of Washington, D. C., thereof, or by failure of such employer, or any for defendant in error.

of his or its officers, agents, or employé, or

employés, to exercise due care, or to comply *Mr. Justice PITNEY delivered the opinion with any [law?] affecting such employment: of the Court.

Provided, that it shall be optional with said In each of these cases, a workman in a employé to settle for such compensation, or hazardous industry in the state of Arizona, retain the right to sue said employer as prohaving received in the course of his employ

vided by this Constitution.” ment a personal injury through an accident due to a condition or conditions of the occu

Pursuant to section 7 the Employers' Liapation, not caused by his own negligence or bility Law was enacted (chapter 89, Laws so far as appears by that of his employer or 1912, Reg. Sess.; Arizona Rev. Stat. 1913, others, brought action under the Employers' pars. 3153-3162); pursuant to section 8 a Liability Law of Arizona, and recovered com

Workmen's Compulsory Compensation Law pensatory damages against the employer as

was enacted (chapter 14, Laws 1912, 1st Spec. certained upon a consideration of the na- Sess.; Arizona Rev. Stat. 1913, pars. 3163 ture, extent, and disabling effects of the in- et seq.). jury in each particular case. And the ques

In two of the present cases the former law tion is raised whether the statute referred

was sustained by the Supreme Court of Arito, as applied to the facts of these cases, is zona against attacks based upon the Fourrepugnant to that provision of the Four-teenth Amendment. Inspiration Consol. Copteenth Amendment which declares that no per Co. v. Mendez, 19 Ariz. 151, 166 Pac. 278, state shall deprive any person of life, liberty, 1183; Superior & *Pittsburg Copper Co. v. or property without due process of law, nor Tomich, 19 Ariz. 182, 165 Pac. 1101, 1185. deny to any person within its jurisdiction the In the other three cases it was sustained by equal protection of the laws.

the United States District Court for that Article 18 of the Constitution of the state

district. And the resulting judgments in of Arizona is entitled “Labor,” and contains, favor of the injured workmen are brought among others, the following sections:

under our review by writs of error. “Section 4. The common-law doctrine of fel- assail the wisdom and policy of the act be

[1] Some of the arguments submitted to us low servant, so far as it affects the liability cause of its novelty, because of its one-sided of a master for injuries to his servant resulting effect in depriving the employer of defenses from the acts or omissions of any other seryant or servants of the common master is forever while giving him (as is said) nothing in reabrogated.

turn, leaving the damages unlimited, and “Section 5. The defense of contributory negli- giving to the employé the option of several gence or of assumption of risk shall, in all remedies, as tending not to obviate but to cases whatsoever, be a question of fact and promote litigation, and as pregnant with danshall, at all times, be left to the jury.

ger to the industries of the state. With such “Section 6. The right of action to recover considerations this court cannot concern itdamages for injuries shall never be abrogated, self. Novelty is not a constitutional objecand the amount recovered shall not be suwject tion, since under constitutional forms of to any statutory limitation.

“Section 7. To protect the safety of employés government each state may have a legislative in all hazardous occupations, in mining, smelt- body endowed with authority to change the ing, manufacturing, railroad or street railway law. In what respects it shall be changed, transportation, or any other industry the Legis- and to what extent, is in the main confided lature shall enact an employers' lia*bility law, to the several states; and it is to be presumby the terms of which any employer, whether ed that their Legislatures, being chosen by individual, association, or corporation shall be the people, understand and correctly appreliable for the death or injury, caused by any ciate their needs. The states are left with a accident due to a condition or conditions of wide range of legislative discretion, notwithsuch occupation, of any employé in the service of such employer in such hazardous occupation, standing the provisions of the Fourteenth in all cases in which such death or injury of Amendment; and their conclusions respectsuch employé shall not have been caused by the ing the wisdom of their legislative acts are negligence of the employé killed or injured. not reviewable by the courts.

“Section 8. The Legislature shall enact (2-4) We have been called upon recently to workmen's compulsory compensation law ap- deal with various forms of workmen's complicable to workmen engaged in manual or me- pensation and employers' liability statutes. chanical labor in such employments as the Lego Second Employers' Liability Cases, 223 U. S. islature may determine to be especially dan: 1, 47-53, 32 Sup. Ct. 169, 56 L. Ed. 327, 38 gerous, by which compulsory compensation shall be required to be paid to any such workman by L. R. A. (N. S.) 44; New York Central R. R. his employer, if in the course of such employ. Co. v. White, 243 U. S. 188, 196, et seq., 37 ment personal injury to any such workmen Sup. Ct. 247, 61 L. Ed. 667, L. R. A. 1917D, from any accident arising out of, and in the 1, Ann. Cas. 1917D, 629; Hawkins v. Bleak

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