Opinion ID: 1120784
Heading Depth: 3
Heading Rank: 1

Heading: Statutory language, history and purpose

Text: Wells Fargo seeks an expansive construction of the other officer language in section 24; plaintiffs advocate a narrow one. Congress referred to other officers without restriction, qualification, or definition. No case cited to us supplies a precise definition of the term. It is our task to assign a meaning to the term that comports with the language, history, and purpose of the statute. Congress passed the National Bank Act in 1864. The Act was commonly known as the National Currency Act when first enacted. Its name was changed to The National Bank Act in 1874. (12 U.S.C. § 38.) Although legislative history for the Act is sparse, commentators have identified three primary objectives of Congress: (1) to develop a national currency; (2) to provide a financial market for Civil War bonds issued by the Union; and (3) to develop national banks as depositories of government funds. (Symons, The Business of Banking in Historical Perspective (1983) 51 Geo.Wash.L.Rev. 676, 699; Miller, The Future of the Dual Banking System (1987) 53 Brooklyn L.Rev. 1, 13.) These goals were accomplished long ago: we have an exclusively national currency; the Civil War ended more than a century ago; and national banks have long served as federal depositories. As a practical matter, the question of whether a branch manager is a bank officer can therefore have no effect on these original purposes. It is, however, not at all probable that this provision [(section 24)] of the national bank act was inserted without purpose or consideration. ( Westervelt v. Mohrenstecher, supra, 76 Fed. 118, 122.) [T]he power to dismiss a bank officer at will reflects the Congressional mandate to establish an independent national system in order to maintain the stability of, and promote the welfare of, national banks. ( Alegria v. Idaho First Nat. Bank (1986) 111 Idaho 314 [723 P.2d 858, 860].) As the court commented in Westervelt, one of the earliest cases to consider the at-pleasure dismissal provision in the Act: Observation and experience alike teach that it is essential to the safety and prosperity of banking institutions that the active officers, to whose integrity and discretion the moneys and property of the bank and its customers are intrusted, should be subject to immediate removal whenever the suspicion of faithlessness or negligence attaches to them. (76 Fed. at p. 122, italics added.) More recent authority confirms this statement of purpose and the broad dismissal powers that accompany it: The purpose of the provision in the National Bank Act was to give those institutions the greatest latitude possible to hire and fire their chief operating officers, in order to maintain the public trust. ( Mackey, supra, 867 F.2d at p. 526, italics added.) Nineteenth-century case law likewise supports a broad construction of the term officer. As the Supreme Court said in an early case: The officers of the bank are held out to the public as having the authority to act, according to the general usage, practice and course of business; and their acts, within the scope of such usage, practice and course of business, would, in general, bind the bank, in favor of third persons possessing no other knowledge. ( Minor v. Mechanics' Bank (1828) 26 U.S. (1 Pet.) 46, 70 [7 L.Ed. 47, 57]; see also Farmers and Mechanics' Bank of Kent Co. v. Butchers and Drovers' Bank (1857) 16 N.Y. 125, 130-131; Merchants' Bank v. State Bank (1870) 77 U.S. (10 Wall.) 604, 650 [19 L.Ed. 1008, 1020]; Morse, A Treatise on the Law Related to Banks and Banking (1870) pp. 142-143.) The broad concept of officer reflected in these cases is also illustrated in the common usage of the term in the banking industry. Munn's Encylopedia of Banking and Finance (7th ed. 1973), a standard banking text in publication from 1924 to 1973, contains the following description of other officers: The larger the bank, the more likely there will be such additional officers as comptroller, auditor, trust officer, and functional vice presidents in charge of particular divisions, with assistant officers in these categories. ( Id., at p. 107.) Under the topic of Bank Organization, an earlier edition of the text (3d ed. 1941) lists the usual bank officers as a president, one or more vice-presidents, a cashier and, in large banks, a number of assistant cashiers, and perhaps a comptroller. ( Id., at p. 67.) A more recent text describes a general banking practice favoring large numbers of officers with the title of vice-president who perform important banking functions under authority ultimately conferred by the bank's board of directors: Depository institutions, and especially commercial banks, are notorious for their proliferation of vice-presidents.... Given the diversity of duties and functions that may be assigned to a vice-president, there is no uniformity with respect to the scope of the officer's inherent authority, as is virtually the case with the president. Generally, a vice-president has whatever express authority may be conferred by the board. (Malloy, The Corporate Law of Banks (1988) § 3.2.5, p. 229; see also 10 Am.Jur.2d, Banks, § 133, p. 131 [A vice president is one of the executive officers of a bank, and it is patent that the directors of a bank may expressly confer upon such officer legitimate powers within the scope of the banking business. Beyond this, the powers of a vice president are not subject to an inclusive rule precisely defining what such officer may or may not do in the absence of express authority.].) Wells Fargo's chairman and chief executive officer testified to his understanding of officer as used in the banking industry. He stated that the term officer was a broad one, signifying no more than that the officeholder possessed some degree of authority to sign bank documents such as cashier's checks, money orders, etc. As he described it: [W]hen you became eligible to sign bank documents ... that is when you were designated an officer of the bank. His views in this regard are confirmed by the California Bankers' Association, appearing as amicus curiae. As the association observes: Bank officers are those in positions of special trust. While officers have varying levels of authority and responsibility depending on their particular positions, one thing they all have in common is the ability to sign documents which legally bind the bank. (Italics added.) (See United States v. Occi Co. (E.D.Wis. 1984) 580 F. Supp. 645, 646 [implying an officer is a bank official empowered to execute a mortgage assignment on behalf of the bank].) Like other corporate officers, bank officers are the vehicles through which the bank engages in transactions and performs legal acts; in this sense, the officers are the bank. (See 18B Am.Jur.2d (rev.) Corporations, § 1342, pp. 253-254 & fn. 22 [It is the nature of a person's position in relation to the corporation that determines whether he was an officer or an employee.... The officers function as the corporation, while a mere agent in most instances is only an employee.].) (2b) In view of the language and purpose of section 24 and the history and practice of the banking industry, a bank officer within the meaning of section 24 possesses the following attributes: First, he or she holds an office created by the board of directors and listed in the bank's bylaws. (§ 24, Fifth and Sixth.) Second, he or she is appointed by the board of directors, either directly or pursuant to a delegation of board authority set forth in the bylaws. (§ 24, Fifth; Wiskotoni v. Michigan Nat. Bank-West (6th Cir.1983) 716 F.2d 378, 387 [branch manager not appointed and dismissed by board of directors was not other officer].) Third, he or she has the express legal authority to bind the bank in its transactions with borrowers, depositors, customers, or other third parties by executing contracts or other legal instruments on the bank's behalf. ( Minor v. Mechanics' Bank, supra, 26 U.S. (1 Pet.) at p. 70 [7 L.Ed. at p. 57].) Fourth, his or her decisionmaking authority, however it might be limited by bank rule or policy, relates to fundamental banking operations in such a manner as to affect potentially the public's trust in the banking institution. ( Westervelt v. Mohrenstecher, supra, 76 Fed. at p. 122; Mackey, supra, 867 F.2d at p. 526.) If a particular bank employee holds a position possessing these features, he or she may be viewed as the bank itself in the eyes of third parties. Such an employee is an officer and serves at the pleasure of the board of directors. As persons holding the office of vice-president and serving as branch managers, plaintiffs were other officers within the meaning of section 24. Their officer positions were created by the board and referred to in the bank's bylaws; there is no dispute they had the authority to deal with third parties and bind the bank in third party transactions by executing contracts and instruments. For example, the record reveals plaintiffs could commit the bank to unsecured loans in the form of overdrafts in specified amounts ranging from $10,000 to $250,000. In addition, one of the plaintiffs was dismissed because of alleged misfeasance in authorizing the negotiation and creation of instruments resulting in a $300,000 loss to the bank. Finally, a branch manager who oversees and supervises the branch bank operations engages in and supervises transactions involving large sums of money which could affect the integrity of the bank and the public trust reposed in it. Such a person is the bank in a significant way in the eyes of customers and third parties. (See Rutherford v. Rideout Bank (1938) 11 Cal.2d 479, 484-485 [80 P.2d 978, 117 A.L.R. 383] [bank held liable for fraudulent acts of its manager because his position conferred potential power to handle mortgage transaction on behalf of bank]; Graddon v. Knight (1956) 138 Cal. App.2d 577, 583 [292 P.2d 632] [vice-president and branch manager had ostensible authority to procure insurance in connection with building loan].) Our reasoning in this regard is supported by the decision of the Idaho Supreme Court in Alegria v. Idaho First Nat. Bank, supra, 723 P.2d 858. The court affirmed a summary judgment in favor of a national bank and against its former assistant branch manager in his action for wrongful discharge, rejecting the assistant branch manager's argument that he was not an other officer. It observed the purpose of the Act is to maintain the stability of, and promote the welfare of, national banks. Noting the significant banking transactions within the assistant branch manager's control (including authority to make unsecured loans up to $25,000, to document loans, and to supervise the day-to-day operations of the branch), the court held he was an officer who served at the pleasure of the bank's directors. ( Id., at p. 860.) So it is with plaintiffs in this case.