Opinion ID: 518167
Heading Depth: 2
Heading Rank: 3

Heading: National Bank Act Defense

Text: 12 Pioneer argues that Mackey failed to raise before the district court issues involving construction of the Pioneer board's by-laws and whether the board could have dismissed Mackey at pleasure if he had not been hired by the board. The general rule is that an issue will not be considered for the first time on appeal unless a party shows exceptional circumstances why the issue was not raised below. Taylor v. Sentry Life Ins. Co., 729 F.2d 652, 655-56 (9th Cir.1984). 13 It is clear, however, that Mackey presented these issues to the district court in oral argument. Whether the National Bank Act is a defense to Mackey's contract and tort claims is an issue squarely before this court.
14 A district court's grant of a motion for summary judgment is reviewed by the appellate court de novo. The general standard an appellate court applies in reviewing the grant of such a motion is the same as that applied by the district court initially under Fed.R.Civ.P. 56(c). Allen v. A.H. Robins Co., Inc., 752 F.2d 1365, 1368 (9th Cir.1985). Rule 56(c) states that summary judgment is proper when the pleadings and discovery, read in the light most favorable to the non-moving party, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. 15 The National Bank Act provides that a national banking association will have the power [t]o elect or appoint directors, and by its board of directors to appoint a president, vice president, 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 their places. 12 U.S.C. Sec. 24 (Fifth) (1982). This provision has been consistently interpreted to mean that the board of directors of a national bank may dismiss an officer without liability for breach of the agreement to employ. See, e.g., Rankin v. Tygard, 198 F. 795, 798-99 (8th Cir.1912); Kozlowsky v. Westminster Nat'l Bank, 6 Cal.App.3d 593, 596-97, 86 Cal.Rptr. 52, 54 (1970); Copeland v. Melrose Nat'l Bank of New York, 229 A.D. 311, 312, 241 N.Y.S. 429, 430 (App.Div.), aff'd, 254 N.Y. 632, 173 N.E. 898 (1930); Van Slyke v. Metropolitan Nat'l Bank, 155 Minn. 319, 193 N.W. 470, 471 (1923); 7 Michie on Banks and Banking ch. 15, Sec. 127, at 97 (1980 & Supp.1987). An agreement which attempts to circumvent the complete discretion of a national bank's board of directors to terminate an officer at will is void as against public policy. McGeehan v. Bank of N.H., 123 N.H. 83, 455 A.2d 1054, 1055 (1983) (per curiam); Kemper v. First Nat'l Bank in Newton, 94 Ill.App.3d 169, 49 Ill.Dec. 799, 801, 418 N.E.2d 819, 821 (1981); Copeland, 229 A.D. at 312, 241 N.Y.S. at 430. 16 Mackey does not dispute the fact that the bank could terminate him at will. 1 He questions, however, whether the bank discharged him in a manner established by the National Bank Act. Specifically, he claims that (1) since he was not an officer hired by the board, he could not be fired at will by the board, and (2) even if he could be fired by the board, the action of the executive committee was insufficient for that purpose. These arguments are unavailing. 17 First, it is clear that Mackey's position as Executive Vice President is an officer as described by the National Bank Act and, indeed, the position of vice president is also specified in the Act. 12 U.S.C. Sec. 24 (Fifth) (1982). Other cases where this provision of the Act was interpreted involved persons holding comparable positions. See Rohde v. First Deposit Nat'l Bank, 127 N.H. 107, 497 A.2d 1214, 1215 (1985) (vice president); McGeehan, 123 N.H. at 84, 455 A.2d. at 1054 (executive vice president); Copeland, 229 A.D. at 311, 241 N.Y.S. at 429 (vice president). Although one case, Wiskotoni v. Michigan Nat'l Bank-West, 716 F.2d 378, 387 (6th Cir.1983), held that a branch manager was not an officer within the meaning of Section 24 (Fifth), the distinction turned on whether an officer was appointed by the bank's board of directors. See also Mahoney v. Crocker Nat'l Bank, 571 F.Supp. 287, 290-91 (N.D.Cal.1983); McWhorter v. First Interstate Bank of Or., 67 Or.App. 435, 678 P.2d 766, 768, cert. denied, 297 Or. 272, 683 P.2d 92 (1984). Nevertheless, Pioneer's by-laws specify that the board of directors may appoint one or more vice-presidents. At the same time Bylaw 4.2 delegates the Board's authority to hire vice presidents to President Campbell. Wiskotoni requires only that the board hire bank officers either directly or indirectly through delegation. 716 F.2d at 387. Mackey was an officer hired indirectly by the Board of Directors and thus could be terminated at will. 2 18 Next, Mackey claims that the Executive Committee's action firing him was insufficient for the purposes of the National Bank Act. In order for Section 24 (Fifth) to be used as a defense, the termination must have been made by a bank board of directors. Mahoney, 571 F.Supp. at 290. Nevertheless, it has been recognized that a national bank's board of directors may assign the performance of their duties to an executive committee. See 12 C.F.R. Sec. 7.4425 (1987). Pioneer had done this through its board resolution of May 8, 1986. The Executive Committee later decided unanimously to terminate Mackey, and the full Board of Directors subsequently ratified that decision. CR 31, Exh. B, 1. Unlike the situation in McWhorter, 67 Or.App. at 439, 678 P.2d at 768-69, there is no question that Mackey's firing was accomplished by the Board of Directors, acting through its Executive Committee, ER 34, and not by the individual action of Pioneer's President. See also McWhorter v. First Interstate Bank of Oregon, 81 Or.App. 132, 135, 724 P.2d 877, 879 (1986) (later appeal in same case, where court held that bank failed to prove that power to fire officers had been delegated to president). 19 Since Mackey was both hired and fired by Pioneer's Board of Directors, the district court was justified in ruling that the National Bank Act raised a defense to both his contract and tort claims. Mackey argues, however, that while his contract claim would be subject to dismissal upon a finding that he served at the pleasure of the board, his tort claims would not be. The only case that supports Mackey's position, that a distinction is to be made between tort and contract claims under the National Bank Act, is Rohde v. First Deposit National Bank, 127 N.H. 107, 497 A.2d 1214 (1985). In that case, the New Hampshire Supreme Court ruled that [i]t does not necessarily follow, however, that because national banks are immune from liability for breach of officer employment contracts, they or their officers are also immune from tort claims arising out of their conduct during the negotiation of such contracts under theories of inducement or detrimental reliance. Id. at 109, 497 A.2d at 1216. Unfortunately, the New Hampshire Supreme Court did not cite any authority for this proposition, one that seems squarely to contradict other case law. E.g., Kemper, 94 Ill.App.3d at 170-71, 49 Ill.Dec. at 800-01, 418 N.E.2d at 820-21; Kozlowsky, 6 Cal.App.3d at 599-600, 86 Cal.Rptr. at 55-56 (where the court found a cause of action for interference with contractual relation against a national bank board member who acted without board authority). 20 Moreover, it would make little sense to allow state tort claims to proceed, where a former bank officer's contract claims are barred by Section 24 (Fifth). The effect would be to substitute tort for contract claims, thus subjecting the national bank to all the dangers attendant to dismissing an officer. 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. See Copeland, 229 A.D. at 312, 241 N.Y.S. at 430 (The intent of the statute was to place the fullest responsibility upon the directors by giving them the right to discharge such officers at pleasure.... It is idle to say that the statute merely gives the power to discharge the official, without the right to do so. The grant of the power carries with it the untrammeled right to its exercise, free from penalty.); Mahoney, 571 F.Supp. at 289 (citing Kozlowsky, 6 Cal.App.3d at 596, 86 Cal.Rptr. at 54; and Kemper v. Worcester, 106 Ill.App.3d 121, 62 Ill.Dec. 29, 31, 435 N.E.2d 827, 829 (1982) (allowing an action for tortious interference only upon showing that director acted without board authority in firing officer)). The district court was correct in granting summary judgment based on the defense offered by the National Bank Act.