Opinion ID: 1142705
Heading Depth: 3
Heading Rank: 2

Heading: Negligence of Gray's Superior Officers

Text: Undaunted, Gray presses us that the losses in issue were caused or contributed to by USB's senior management. If Gray was negligent, so too were his superiors who acted or failed to act on behalf of USB. If Gray was reckless, so were these experienced executives and directors for USB. A major factual premise of the point is that Gray was an unsuspecting underling whom USB placed in a position beyond his abilities. As he puts it in his brief: On July 2, 1984, at 35 years of age, Gray was placed in charge of the USB branch bank at Olive Branch acquired by it from [BOM] on that date... . At the time, he was the youngest of the branch managers in any of the ten branches in the USB system. While a college graduate, he had majored in accounting. He had one Freshman course in Banking. Unlike other managers of USB banks, he had not attended or graduated from the three-year Louisiana State University School of Banking. At the time he was placed in charge of Olive Branch by USB, he had approximately two years of bank lending experience, while other USB branch managers had on average some eighteen years of experience, all with USB. Most of the work experience of Gray after leaving college was in the bank accounting area which did not involve the making or assessing of the quality of bank loans. We find this theme trailing along on practically every page thereafter. Gray goes on to charge he was negligently supervised by USB senior executives, and that his prior experience and the conduct of his seniors with USB led him to think he was doing fine in his post-July 2, 1984, capacity. The premise is fundamentally flawed. The duty of care the law devolves upon a corporate officer states an objective standard general in scope. Offenses may not be excused by any alleged inexperience or lack of skill and training as a loan officer. 3A Fletcher, Cyclopedia of Corporations, § 1060, p. 1061, (1986 Rev.); 18B Am.Jur.2d, Corporations, § 1727, p. 580 (1985). Nor does it matter Gray's offenses occurred during the early days of his new service, before USB's ninety-day probationary period had expired. The law of corporate governance provides no incompetence defense to officers called to account on their duty of care. Perhaps the notion may be captured in the phrase assumption of risk. One who seeks corporate office assumes the risk he may not be up to the job. The law does not allow that a person may seek and accept corporate office and, upon charge of default, plead he was not qualified for the job and that the corporation should never have hired him in the first place. Gray charges that senior vice president Edward P. Peacock, III, had oversight responsibilities for the Branch and was substantially neglectful in that regard. He points particularly to the $300,000.00 letter of credit issued for the benefit of Piecara's Mirage Construction in July of 1984. Gray did discuss the matter with Peacock, and it appears uncontradicted each used his $150,000.00 loan authority to issue the letter of credit. The same obtains with the Bigelow and LK & R credits. Gray reminds us the details of these credits were a part of the Branch's open records and reports which were surely read and approved by Clarksdale. This may be so, but it may not belie the fact that Gray was the officer who initiated these credits, was most familiar with their details, and without whose sanction no funds would have been released. The short answer is, it is no defense to the charge that Gray breached his duty of care owed USB in this and other matters, that Peacock or someone else may also have breached a duty owed USB. [9] Nor is there a contributory negligence defense to a corporate officer's breach of the duty of care. Neither may he defend on grounds other officers with superior authority negligently failed to detect or deter his defaults. This is not a case where a superior officer ordered Gray to extend the bad credits that have spawned this suit. It is not even a case  with one exception  where he claims his superior knew or should have known what he was doing before the fact and did not stop him. If we understand his plea, Gray is saying, after the fact, his superiors knew or should have known of the loans he was making and didn't criticize him. But by then the horse was gone. Within Gray's first six weeks of service as USB's Branch president, most of the damage was done.