No. 89-257

INTHE SUPREME COURTOF THE STATEOF MONTANA
1989

STATEOF MONTANA, 

### ex rel., FIRST RANK SYSTEM,FIRSTBANKWEST GREAT FALLS,and JOHN REICHEL, Relators,-vsTHE DISTRICT COURT OF THE EIGHTH JUDICIAL DISTRICTOF THE STATEOF MONTAbJA, IN AND FOR THE COUNTY OF CASCADE,THEHONORABLE NATALLEN, Presiding Judge,and ROBERTM. PANC ICH

### , Respondents.

ORIGINAL PROCEEDING:

COUNSEL OF RECORD:

ForRelators: StephenD. Bell & Keith Strong;Dnrsey & Whitney, Billings, Montana

For Respondent: Ralph L. Herriott, Billings, Montana Walter M. Hennessey, Butte,Montana ~illiam L. Baillie,GreatFalls,Montana GeneB. Daly,Helena,Montana

Submitted: September 

### 5, 1989 Decided: November 28, 1989

0 Filed:

### Justice Fred J. Weber delivered the Opinion of the Court.

Relators First Bank System, First Rank West Great Falls, and John Reichel seek a writ of supervisory control from this Court following an order entered in the District Court for the Eighth Judicial District, Cascade County. In exercising our power of supervisory control,we vacate the lower court's order and remand for further proceedings. The issues presented for our revieware: 1. 

### Did the District Court err in granting summary judgment in favor of plaintiff on the issue of liability? 2. 

### Is supervisory control appropriate when the District Court granted summary judgment despite the presence of numerous factual issues? Relators are the named defendants in a civil action brought by Robert Pancich, a former employee of First Bank West Great Falls. First Bank System is the parent corporation of First Bank West, and John Reichel was the Managing Director of the Western Montana Region of First Bank System at the time pertinent to this lawsuit. Mr. Reichel had also been elected a member of First Bank West's Board of 

### Directors. The incident giving rise to the present controversy occurred in 1983. 

### In that year the Office of the Comptroller of the Currency (OCC) investigated First Bank West Great Falls and determined that it was engaged in "unsafe and unsound" banking practices. An affidavit by Mr. Reichel states that the deficiencies existing in the bank at that time included "ineffectiveness of some existing management personnel, high operating expenses, financial imbalance, unnecessary expenses, and inefficient use of resources." After the reportby the OCC, onAugust 12, 1983, 

### Mr. Reichel terminated Mr. 

### Pancich's employmentaspresident of the bank.

### Prior to termination, Mr. Reichel contacted four members of the bank board, recommending that Mr. Pancichbe terminated. Six days later,onAugust 18, 1983, during a specialmeeting of the board of directors, a new president was elected. During a regular meeting of theboard, on September 15, 1983, the board unanimously accepted a letter of resignation from Mr. Pancich. The affidavitby Mr. Reichel states that of the bank's board of directors, nine members were eligible to vote on decisions involving employment termination, one of whom was himself. Affidavits by the four members whom Mr. Reichel contacted state that prior to the August 12 

### terminationMr. Reichel discussed with them the need for a new president because of the Bank's serious financial setbacks. The affidavit of each of these four members states, "I

### concluded and agreed that Robert M. Pancich should be terminated from his employment at the Bank.'' Affidavits by three other members of the board state that prior to the termination, each of these three individualshad formed the opinion that the bank needed new leadership. All nine members of the board state by affidavit that onAugust 18, 1983,each attended a special meeting of the board during which each concurred in the termination of Mr. Pancich. The affidavits further state that at this meeting each member voted to elect a successor toMr. Pancich. These affidavits are uncontradicted. SubsequentlyMr. Pancichbrought suit against the Bank, itsparent corporationand Mr. Reichel individually,allegina wrongful termination and breach of an implied covenant of good faith and fair dealing. Initially defendantsmoved for summary judgment,which

was denied by the District Court. Following denial of this motion, on December 7, 1987,defendantsapplied to this Court for a writ of supervisory control which was denied on twogrounds: (1)thattheDistrictCourt's orderdenying summary judgment was interlocutory; and (2) that relators had an adequate remedy by appeal from the final judgment. A year later plaintiff moved for summary judgment on the issue of liability. Plaintiff's motion was granted by the District Courtwithout explanationoraccompanying memorandum. Defendants moved the lower court to reconsider its order or to certify to this Court pursuant to Rule 54(b), M.R.Civ.P. This motion also was summarily denied. The District Court then seta date fortrialon the issueof damages. I Did theDistrictCourt erringranting summary judgment infavorof plaintiff on the issueof liability? In our analysis, we begin by emphasizing that summary judgment isonly appropriatewhen there areno genuine issues of material factand themoving partyisentitledtojudgment

as a matter of law. Rule 56(c)

## , M.R.Civ.P. Any inferences tobe drawn from the factualrecordmust be resolved infavor of the party opposing summary judgment. Simmons v. Jenkins (1988),750 P.2d 1067, 45 St.Rep. 328. Defendants contend that the court granted summary judgment based on an incorrectassumption thatthedenial of defendants' motion for summary judgment entitledplaintiff to summary judgment in his favor. Defendants' original motion for summary judgment was based upon the fact thatFirstBank Westisa nationalbank governed by theNational Bank Act, 12 U.S.C. § 21, et seq. Defendants' claimed that this statute preempts statelaw, and thatpursuant to 12U.S.C. § 24(5),a national banking association has the power to appoint a president and to dismiss an officer "at pleasure." The District Court denied defendant's motion by simply stating:

### IT IS 

### ORDERED that said motion is overruled and denied for the reason that a discharge is not ratifiable by the board after defendants executed the discharge of plaintiff and for the further conflicts in the admissible evidence revealed in defendants' Answers to Interrogatories #40, #SO, #58,#70,#73,and #74,and others.

While we do not rule on this denial of summary judgment, we point out that it containsneither a factual nor a 

### legal analysis. A 

### year later plaintiff moved for summary judgmenton the issueof liability. In this motion plaintiff contended that the court's denial of defendants' motion for summary judgment entitled plaintiff to summary judgment in his favor. Defendants contend that the court erroneously granted plaintiff's motion on this basis. While we cannot ascertain the court's reason for its decision,we do emphasize that summary judgment is not a decision on the merits. A denial of summary judgment is simply a decision that there are factual issues. As stated by one authority: [Tlhedenial of summary judgment does not preclude either party from raising at trial any of the issuesdealt with on the motion. This is because the denial of summary judgment is not decision on the merits; it simply is a decision that there is a material factual issue to he tried. 10 Wright, Miller & 

### Kane, Federal Practiceand Procedure, S 

### 2712 at p. 587. While the District Co.urtls determination on defendants' motion for summary judgment was made a year earlier, and is not binding on the present motion, we point out that the District Court concluded that therewere factual disputes. If there were material factual disp,utes,neither plaintiff nor defendant were entitled to summary judgment. Defendants also contend that the court erroneously granted summary judqment since genu-ine issues of 

### materialfact remain as to each of plaintiff's allegations,and as to defendants'affirmativedefenses. In the petition for a writ of supervisory control, defendants list the following as issues involving factual determinations:

(a) Whether the court improperly removed from jury consideration the issue of whether there was a breach of an implied covenant of qood faith and fair dealing when numerous affidavits described a fair and honest reason for the discharge from employment;

(b) Whether an alleqed failure to meet the requirementsof a federalpreemption defenseprovides grounds for summary ruling that the implied covenant of good faith and fair dealingwas breached or wrongful discharge occurred;

(c) Whether mere discharge from employment, without more, entitled respondent to summary iudgment on the issue of liability for breach of implied covenantofgood faith and fairdealing;

(dl Whether denial of relators' summary judgment motion, without more, entitled respondent to entry of summary judgment;

(e) Whether the Bank's parent corporation is subiect to liability for breach of implied covenant, based on discharge of its subsidiary's employee, when respondent offered no proof that the corporate form was used as a subterfuge to perpetrate fraud, justify wrong, or defeat public convenience;

(f) Whether a director of a corporation is subject to personal liability when his acts were clearly taken in furtheranceof corporate purpose.

In reviewing the applicable law, we emphasize the following standards. The covenant of good faith and fair dealing does not arise unless the employee has been given objective manifestations of job security. Dare v. Montana PetroleumMarketing Co. (1984),212 Mont. 274, 687P.2d 1015.Even if the covenant is implied in the relationship, it is not breached if the employerhad a fair and honest or legitimate business reason for the discharge. Barrett v. ASARCO, Inc. (Mont.1988), 763 P.2d 27, 45 St.Rep. 1865. In the present case defendants claim that Mr. Pancich

was an at-will employee in that he had no objective manifestations of continued employment. They allege therefore that the covenant of good faith and fair dealing may not even apply to the termination. Additionally, the uncontradicted affidavits identify the OCC's determination that thebank was engaged in unsound banking practices as a fair and honest business reason for the discharge. The District Court had these affidavits for review prior to granting summary judgment. The affidavitsclearly raise genuine issues of material fact. Further, the District Court had reviewed interrogatories and had expressly stated that there were conflicts in the evidence. It isclear that plaintiff establishedno basis fromwhich the court could conclude that as a matter of law Mr. Pancich was wrongfully discharged and the covenant was breached. We conclude that genuine issues of material fact exist relative to the issues of wrongful discharge and breach of the covenant of good faith and fair dealing,precluding summary judgment. Additionally, there remain genuine issues of material fact regarding defendants' affirmative defense that the Banking Act insulates them from liability. Through uncontested affidavits, defendants present evidence supporting their position that the termination ofMr. Pancich had prior authorizationby theboard. They alsopresent facts indicating that the termination was ratified by the board, both at the special meeting of August 18 where a new president was elected, and again at the September 15 meeting where each member voted to accept Mr. Pancich's letter of resiqnation.

### Although plaintiff contends thatMr. Reicheldid nothave the authority to discharge Mr. Pancich, the plaintiff failed to support this contentionby affidavitor otherwise. In response to Justice Sheehy's dissent, we note that while defendantsdo argue that cases interpreting the Ranking Act would allow them this defense,we conclude that this is simply one more area in which issues of fact remain. We further point out that whether discharge "at pleasure" is available to defendants is only relevant to one of their defenses. Even if itwere determined that the dischargewas not authorized, or that ratification was not effective, this does not establish liability. It only eliminates that particular defense. The issue presently before this Court is 

### only whether summary judgment against all defendants on the issue of liability was proper. The argument in regard to the Banking Act does not dispose of that issue. We also agree with defendants' contention that plaintiff has failed to present facts from which it may be concluded that, as a matter of law, the parent corporation of First Bank West is liable for breach of the covenantof good faith and fair dealing, or that Mr. Reichel is personally liable in this suit. Meridian Minerals Co. v. Nicor Minerals, Inc. (1987),228Mont. 274, 

### 742P.2d 456, (parent corporation not a participant in action of subsidiary unless corporate form is used as subterfuge); 

### Bottrell v. American Bank (1989), 773 P.2d 694, 46 

### St.Rep. 561, (actionsof bank officersprotected by corporate shield from personal liability). Genuine issues ofmaterial fact remainonthese issues. Because of the numerousgenuine issuesofmaterial fact

on each of the above issues, we conclude that the District Court's grant of summary judgment was manifestly incorrect.Is supervisory control appropriate when the District Court granted summary judgment infavor of Plaintiff despite thepresence of numerous factual issues? This Court discussedtheroleof s.upervisorycontrol in State ex re1 Whiteside v. District Court (1900), 24 Mont. 539, 562-63, 63 P. 395, 400, as follows:

It has its own appropriate functions, and, without undertaking to define particularly what these functions are, we think one of them is to enable this court to control the course of litigation in the inferiorcourtswhere thosecourts areproceedingwithin their jurisdiction, but by a mistake of law, orwillful disregard of it, aredoing a gross injustice, and thereisno appeal, ortheremedy by appeal is inadequate. Under such circumstances, the case being exigent, no relief could he granted under the other powers of thisCourt, and a denial of a speedy remedy wo.uldbe tantamount toa denial of justice. Casesmay arisealsowhere some relief couldbe granted under some one of theother original writs named, but such relief would not be complete and adequate because of some error which could not be corrected by means of the limited functions of the particular writ, while the supervisory power is unlimited in the means at our disposal foritsappropriate exercise.

This Court may accept supervisory control pursuant to Rule 17, M.R.App.P., when due appeal isan inadequate remedy. In applying this standard we have repeatedly stated that a writmay issue toprevent extended and needless litigation:



# .. . This Court willnonetheless acceptjurisdiction to protect First Bank from participating in needless ligigation, a purpose forwhich a 

### writof supervisory control is intended: 

### "



# . . . it is in the nature of a summary appeal--a shortcut--to control thecourse of litigationinthetrialcourt



# . . . and may be employed toprevent extended and needless litigation." (Citationsomitted.)First Bank v. Fourth ~udicial Dist. Court (1987), 227 Mont. 515, 519, 737P.2d 1132, 1134. We also issued thewrit in ContinentalOil v. ElksNat. Foundation (Mont. 1989), 767 P.2d 1324, 46 St.Rep. 121, to correct a partial summary judgment order, and in Great Western Sugar Co. v. District Court (1980), 188 Mont. 1, 778 P.2d. 272, the writ issued to prevent needless litigation where the district court had refused to dismiss a defendant whose affirmativedefense clearlyallowed dismissal. Appellate review of an interlocutory order by the district court is not favored because of this Court's reluctance to intervene in district court decisions and because there normally is an adequate remedyby appeal, State ex rel. Guar. Ins. v. District Court (Mont. 1981), 634 P.2d 648, 38 St.Rep. 1682. However, issuance of an extraordinary writ is discretionary, 16 Wright, Miller and Kane, Federal Practice and Procedure,

### 5 3932atp. 187,and this Court has previously accepted review in an appropriate case. See, e.g., State - 

### - ex rel. Burlington Northern v. Dist. Ct. (Mont. 1989), 779 P.2d 885, 46 St.Rep. 1625 (writ issued because an order placed a party at a significant disadvantage in litigating the merits of a case); ~uiper v. Dist. Court of Eighth Judicial Dist. (Mont. 1981), 632 P.2d 694, 38 St.Rep. 1288 (writ issued to determine whether district courtproperly granted a protective order); Jaap v. District Court of Eighth Judicial Dist. (Mont. 1981), 623 P.2d 1389, 38 St.Rep. 280 (writ issued where district court exceeded its jurisdiction by allowing defendant's attorney to privately interview plaintiff'sphysicians). A caseby case analysis must be employed in determining whether supervisory control should be accepted. State ex rel. Deere and Co. v. District Court (1986), 224Mont.. 384, 730 P.2d 396.

### The record here establishes genuine issues of material fact regardingthe liability of each of three separate defendants. It ispremature to allowa trial ondamages as to any
one or all three of the defendants under that circumstance. Such a trial on damages becomes needless and expensive litigation. The attendant publicity of such a trial on damages and its adverse effect upon defendants is not easily calculated. We conclude that the order of the District Court was

was manifestly incorrect and created problems sufficiently burdensome to the defendants to require this Court to take supervisorycontrol. We 

### conclude that supervisory control is appropriate to prevent needless and potentially damaging litigation. We vacate the District Court's order of summary judgment and remand for further proceedings consistent with this opinion.



### We Concur: H

,/ ' 1 Ir 7- 

### HdnorableHenry-le, ReHarrisonJustice R. C. McDonough dissenting.

I would deny the writ. Relators here have an adequate remedy by appeal. 1 

# @&%zd4zd7d JusticeJustice JohnC. Sheehy,dissenting:

The first mistake of the majority is its unwarranted interference with the ~istrictCourt's interlocutory order forwhich, ifwrong, there is a complete and speedy remedyby appeal. The second mistake of the majority is, having determined to interfere, themembers have failed to interpret properly the applicable law relating to the discharcre of a bank officer. Had they properly interpreted the law, they had then discovered that there was no genuine issue of material factbefore the DistrictCourt. It should have piqued the interestof themajority that in all of the briefs filed by the banks, there is not a single whisper of contention that Pancich was an at-will employee. It should further have piqued the interest of the majority that in all of the briefs filed by the banks, there is not a single reference to federal law or federal cases bearing on the discharge of a bank officer,although in this

case thebanks involved are national associations. Had their interest been piqued, they should first have looked at the provisions of 12U.S.C. § 24,which relates to the discharge of bank officers. The statute provides that a nationalbank has thepower: FIFTH. To elect or appoint directors, and by its board of directors to appoint a president, vz presideyt, cashier, and other officers, define their duties, require bonds of them and fix the penalty thereof,-dismiss such officers or 

### any of them at pleasure, and appoint others to fill 

## in -- their places. (Emphasisadded.)
The effect of 12 U.S.C. § 

### 24was discussed in McWhorter

v. First Interstate Bank (0r.App. 1986), 724 P.2d 877, 879, wherein it was contended that the president of a nationalbank had authority to dismiss a bank officer. The Oregon court said: Thedifficultywith defendant's argument is that we are concerned here with the delegation of a specific statutory duty, not simply with the managerial powers thatnormally accompany a general conferralof authority in the articles orbylaws of a corporation. Section 24 (Fifth) explicitly confers the responsibility for the hiring and dismissal of officers on the board of directors. Other provisions of the national banking laws make it clear that Congress knows how to manifest its intent about what powers are exercisable only by the board and what powers may 

### be exercised by subordinate entities. See, 

### e.g. 12 U.S.C. 

### 5 24 

### .- (Seventh) ("board of directors or duly authorized officer or agents").

We consider that premise to be incorrect,because the authority to hire and fire the officers of national banks is not simply amatter of corporate organization; it is a matter which Congress has deemed sufficiently important to regulate by statute and to entrust to the highest decision making entity in the corporate structure 

# . . . InMahoney v. CrockerNat'l Bank (N.~ist.cal,1983), 571 F.Supp. 287, discharged national bank officers brought suit against the bank based on the federalAge ~iscriminationin Employment Act. The bank sought to interpose the defense that because itwas a nationalbank, its bank officers served at pleasure under the National 

### an king Act, 12 U.S.C., section 24. The appeals court held that because the plaintiff bank officershad not been dischargedby thebank's board of directions, nor by an officer empowered by the by-laws to discharge bank officers, the defense of at-will employmentwas not available to thebank, since the dismissal of the bank officers

### was not done in a manner authorized bythe National 

### ank king Act, 12 U.S.C., section 24. Mahoney, 571F.Supp. at 290-291. In this case, one member of the majority has concluded that because in Mahoney the bank sought to use the National Banking Act in defense, the provisions of the Act are available only to banks as a defense, and that plaintiffs cannot rely on those same provisions to prove an improper discharge. On that basis the member of themajority refuses to acknowledge the right of a dischargedbank officer to rely

on the procedures established by Congress for the hiring and firing of bank officers in 12U.S.C., section 24, saying the Act is only available to a bank as a matter of defense. There is no way for me to explain that rationale: Clearly, it seems to me, while it is true that under the National 

### ank king Act, abank officer is an at-will employee,under the

sameAct,his dismissal can only be by the board of directors in concert, or by someone authorized in the by-laws to dismiss the bank officer. Any other kind of dismissal is against law and gives rise to liability. In this case, the discharge of ~ancichwas by John Reichel,and not by theboard of directors. Attempt wasmade by the bank to show that the board of directors ratified the discharge. Under the cases, they are not helped by that attempt. It is old law and undisputed to this date that the assent of the individual members of the board, acting separately and singly, and not when acting as a unit, is not the assent of the bank, and is not binding on the bank. ~irst Nat. Bank v. Drake (Kan. 1886), 11 

### P. 445, 447. In ~iskotoniv. ~ichigan Nat. Rank-West (6th ~ir. 1983)

## , 716, F.2d 378, 387, the federal courtheld that an attemptby the board of directors to ratify the president's action in terminating an officer did not satisfy the statutory requirement that officers of a national bank be dismissed byan action of the bank's board of directors. Ratification therefore is impossible. The Oregon court recognized the authority of ~iskotoni and refused to recognize an attempted ratification of a discharge by the board of directors after the fact. McWhorter v. ~irst InterstateBank (0r.App. 1986), 724 P.2d 877, 879. In the light of those decisions and the plain statutory language of 12 U.S.C. $ 24 (~ifth),the ~istrict Courtwas eminently correct in holding: IT IS ORDERED that said motion is overruled and denied for the reason that a discharge is not ratifiable by the board after defendants executed the discharge ofplaintiff 

# ... There is no legal requirement that a district court in ordering summary judgment should express reasons or give a legal analysis as referred to in the majority opinion. We have suggested that such be done but if the district court does not do so, this Court is not excused from its duty to examine the law to determine if the summary judgment is proper. In this case, an examination of the applicable law shows that the orderof the district courtwas correct. The legal situation in this case boils down to this: John Reichel, as the regional managing director of the western Montana region of FirstBank System,or as a director of the bank, in discharging Robert M. Pancich from the presidency of ~irst Bank West,Great Falls, acted completely against a Congressional statute. It is not relevant in this situation that First Bank West might otherwisehave had good

cause to discharge the president. If it had such cause, it could only act through its board of directors. Reichel plainly tortiously interfered with the contractual relation between Pancich and his bank. A violation of a federal statute with respect to discharge is certainly a breach of the 

### implied covenant of good faith and fair dealing---ifexpected compliance with federal statutes is not inherent in

a national bank officer, what importance can we attach to

mere personnel brochures upon which we have previously supported implied covenants? Public policy ordained by Congress through its national banking laws requires that an officer be discharged only by the board of directors of a national bank. When public policy has been violated in connection with a wrongful discharge, a cause of action arises. Keneally v. Orgain (1980), 186 Mont. 1, 5-6, 606 P.2d 127, 129. Moreover, there isnobasis for the contention that John Reichel has no personal liability in thismatter. He is the person who violated the congressional statute. Under the National BankingAct he had no authority to remove Pancich as

a bank officer. The order of the District Court fixing liability for awrongful dischargeupon the defendantReichel

was eminentlyproper in this case. There is further no basis to contend that a question of fact exists as to the liability of First Bank System. In discharging ~ancich, ~eichel was acting as the agentof ~irst Bank System. A corporation is liable for the wrongful acts of its agents when the agents are acting in the course and scope of their employment. ~irst Bank System is responsible forReichel'swrongful acts. The foregoing applicable law convinces me that there is no genuine issue ofmaterial fact as to the liability of the defendants and that the ~istrictCourt properly ordered summary judgment on that point. Even if 

### I were not so convinced, however, I would still not grant supervisory control because such action is a plain interference with the District Court proceedings from which there is complete, adequate and speedy remedy by appeal. Themajority cites a number of cases inwhichwe granted summary judgmentbut thatsimply glosses over what is occurring here, a direct interloping into the district court process on improvident grounds. I am outraged at the effect on the ~istrict Court proceedings. The District Court, after granting partial summary judgment had fixed trial of the cause for September 29, 1989. This Court vacated that trial setting, acting through its majority. In their exorbitant worry over "needlessand expensive litigation" and "attendant publicity" the majority here have made the district court trials more expensive and burdensome, and necessarily increased the expense of the litigation--quite needlessly, in view of the law. The same thing happened recently in State ex rel. Burlington Northern v. ~istrict Court (Mont. 1989)

### , -P.2d



## , 46 St.Rep. 1625. There, an injured railroad worker lost his trial setting by the action of this Court. It is too late to rectify the loss of a trial setting in the case at bar but we should at least refuse supervisory control.

Justice William E. Hunt, Sr.:

I concur in the dissent of Justice Sheehy.