Mardula v. Rancho Dominguez Bank, B085724

Citation51 Cal.Rptr.2d 63,43 Cal.App.4th 790
Decision Date15 March 1996
Docket NumberNo. B085724,B085724
CourtCalifornia Court of Appeals
Parties, 96 Cal. Daily Op. Serv. 1814, 96 Daily Journal D.A.R. 3051 John J. MARDULA, Jr., Plaintiff and Appellant, v. RANCHO DOMINGUEZ BANK and Daniel Roberts, Defendants and Respondents.

William Rehwald, and Rehwald Rameson Lewis & Glasner, Woodland Hills, for Plaintiff and Appellant.

Daniel Roberts, in propria persona, and Theodore K. Roberts, and Roberts & Roberts, Los Angeles, for Defendants and Respondents.

BRETT KLEIN, Associate Justice. *

John J. Mardula, Jr., appeals from an order of dismissal, entered after a demurrer was sustained, without leave to amend, to both claims pleaded in his complaint against respondents Rancho Dominguez Bank and Daniel Roberts. The appeal presents a question not yet decided by a California or federal court: whether section 24 of the National Bank Act (12 U.S.C. § 24) which provides that all officers of a national bank serve at the pleasure of its board of directors, precludes enforcement of a bank's written agreement that its president will receive severance pay if discharged without cause. We hold the severance pay agreement is enforceable.

I.

The complaint alleged the following facts. Rancho Dominguez Bank, a national bank, hired plaintiff in 1992 as President/Chief Executive Officer, at an annual salary of $100,000. Plaintiff's ten-page employment agreement provided that plaintiff could be fired at any time without cause, but if he were--and if he had by then served for at least one year--he would receive severance pay equal to six months' salary. In 1994 the bank's board of directors fired plaintiff but refused to pay him severance pay exceeding one month's salary. In one count, plaintiff sought to collect the agreed-on severance pay. In the second count, plaintiff accused the bank and Roberts (a director) of tortiously denying "the existence of a lawful contract."

The basis of the demurrer was a provision of the National Bank Act of 1864, 12 U.S.C. § 24, which provides that a national bank's officers may be dismissed at the pleasure of its board of directors. 1 Respondents contend the contractual provision for severance pay is unenforceable because irreconcilable with the federal statute. We agree with plaintiff, however, that there is no inconsistency between the statute and a contract provision for a reasonable amount of severance pay.

II.

The case reports are replete with decisions, based on section 24, that the firing of an officer of a national bank by its board of directors cannot be a wrongful act. One such case, Aalgaard v. Merchants Nat. Bank, Inc. (1990) 224 Cal.App.3d 674, 686-695, 274 Cal.Rptr. 81, thoroughly surveyed the field, and it would serve no purpose to repeat or update what was said there. We note only that the cases demonstrate that section 24, and similar provisions covering employees of Federal Reserve Banks (12 U.S.C. § 341) and federally chartered thrift institutions (12 U.S.C. § 1432(a)) bar covered officers or employees from claiming that their discharge constituted (a) breach of a written employment contract (e.g., Kemper v. First Nat. Bank (Ill.App.1981) 94 Ill.App.3d 169, 49 Ill.Dec. 799, 418 N.E.2d 819 [bank president fired without cause before end of one-year term] ); (b) breach of an oral promise of continued employment (e.g., Mueller v. First Nat. Bank of the Quad Cities (C.D.Ill.1992) 797 F.Supp. 656, 660 [fired executive vice-president claimed breach of an oral agreement to employ him until he found another job] ); (c) breach of an implied agreement for continued employment (e.g., ibid. [fired executive vice-president also claimed breach of a contract implied from provisions in the employee handbook] ); (d) breach of the implied covenant of good faith and fair dealing (e.g., Aalgaard, supra, 224 Cal.App.3d at pp. 689-692, 274 Cal.Rptr. 81); (e) breach of a state law principle forbidding discharge on grounds that contravene public policy (Inglis v. Feinerman (9th Cir.1983) 701 F.2d 97, 99 [vice-president of Federal Home Loan Bank of San Francisco claimed, inter alia, that he was fired for "his insistence that the Bank conform its practices to federal law"] ); and (f) violation of state antidiscrimination statutes (e.g., Ana Leon T. v. Federal Reserve Bank of Chicago (6th Cir.1987) 823 F.2d 928, 931 [employee claimed she was fired in violation of state law forbidding employment discrimination based on national origin]; but see Moodie v. Federal Reserve Bank of New York (S.D.N.Y.1993) 831 F.Supp. 333, 336-337). They do not, however, appear to bar claims that the discharge violated federal antidiscrimination statutes. (E.g., Mueller v. First Nat. Bank of the Quad Cities, supra, 797 F.Supp. 656, 660-663 [ADEA and ERISA claims not barred]; In re Sweeney (Bkrtcy.N.D.Ohio 1990) 113 B.R. 359, 364 [bankruptcy discrimination claim not barred]; Scott v. Federal Reserve Bank of New York (S.D.N.Y.1989) 704 F.Supp. 441, 447-448 [Title VII claim not barred]; compare Bollow v. Federal Reserve Bank of San Francisco (9th Cir.1981) 650 F.2d 1093, 1100 [rejecting claim that age discrimination statute creates entitlement to continued employment at bank].)

These cases implement a forceful public policy that a nationally chartered bank must be free to remove and replace its officers at will. Westervelt v. Mohrenstecher (8th Cir.1896) 76 Fed. 118, 122, explained this policy well: "[I]t 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." So did Aalgaard v. Merchants Nat. Bank, Inc., supra, 224 Cal.App.3d 674, 689, 274 Cal.Rptr. 81: "[A]t the heart of this inviolable dismissal provision is a linkage with public policy protecting the financial stability and fiscal integrity of banks by making it beyond the powers of bank directors to enter into any contract restricting their ability to respond expeditiously to financial threats posed by bank officers." The policy is one of long standing; the "at pleasure" language has been in the statute for 131 years. (Act of June 3, 1864, ch. 106, § 8, 13 Stat. 101.)

III.

The question before us in this case, however, is not whether plaintiff's discharge from employment was a wrongful act; plaintiff agrees it was not. Rather, the question is whether section 24 renders unenforceable the parties' bargain concerning severance pay.

In Wells Fargo Bank v. Superior Court (1991) 53 Cal.3d 1082, 282 Cal.Rptr. 841, 811 P.2d 1025, the plaintiffs were discharged by bank officials other than the board of directors. The court held that section 24 does not authorize at-will termination unless the termination is effected by the board of directors itself. 2 Although this decision is not on point, respondent bank relies heavily on the following remark found in our Supreme Court's opinion: "It has been established for almost a century that section 24 preempts all state law causes of action by a bank officer for breach of an employment agreement. [Citations] We are aware of no decision to the contrary...." (53 Cal.3d at pp. 1087-1088, 282 Cal.Rptr. 841, 811 P.2d 1025.) The cases cited were Mackey v. Pioneer Nat. Bank (9th Cir.1989) 867 F.2d 520, 524-526, and Westervelt v. Mohrenstecher, supra, 76 Fed. 118. Neither of the two cited cases involved a claim for severance pay. (Nor did Wells Fargo Bank itself.)

In Mackey, the bank's executive vice-president claimed he was hired by the bank president and wrongfully fired by the executive committee of the board of directors; he conceded that if it was the board of directors who had hired him and fired him, he could be fired at will, but contended that section 24, while barring his contract claim, would not affect his tort claims. (867 F.2d at pp. 524-525.) The court ruled that he was an officer hired and fired by the board of directors, and held that section 24 barred his tort claims. The court observed that section 24 "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." (Id. at p. 524.)

Westervelt presented a much different issue: whether a bond given to ensure the fidelity of the bank's cashier expired automatically at the end of the cashier's initial one-year term of office. The court held the bond remained in effect until the cashier was removed from office or resigned. It observed that under section 24, the cashier's term in office was not defined by the successive one-year periods for which the bank appointed him, but rather by a continuing tenure, subject to instantaneous removal at the pleasure of the board of directors.

Several other cases, in California and elsewhere, contain similar broad language to the effect that section 24 preempts all breach of contract claims. But these cases did not involve severance pay, with the exception of six cases we will discuss below. An example is Cox v. First Nat. Bank (1935) 10 Cal.App.2d 302, 305, 52 P.2d 524, which contains a statement that a term contract with a national bank's cashier "is void and does not prevent his removal at any time by the board of directors. It will not support an action for damages for discharge nor permit recovery of salary accruing after such discharge." This statement did not bear on any issue in the case, however; the court's ruling was that the evidence was insufficient to sustain the discharged cashier's factual assertion that while still employed he accrued vacation time and was paid less than the salary fixed by the board of directors.

An interpretive ruling by the U.S. Comptroller of the Currency, codified in the Code of Federal Regulations, provides that the board of...

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6 cases
  • Peatros v. Bank of America
    • United States
    • California Court of Appeals Court of Appeals
    • December 31, 1998
    ...of good faith and fair dealing, and claims of tortious discharge in violation of public policy. (Mardula v. Rancho Dominguez Bank (1996) 43 Cal.App.4th 790, 797, 51 Cal.Rptr.2d 63; Lavelle v. BankAmerica Corp. (1998) 66 Cal.App.4th 1368, 78 Cal.Rptr.2d The principle question posed by this a......
  • Peatros v. BANK OF AMERICA NT & SA
    • United States
    • California Supreme Court
    • January 10, 2000
    ...Wells Fargo Bank v. Superior Court, supra, 53 Cal.3d at p. 1089, 282 Cal.Rptr. 841, 811 P.2d 1025; Mardula v. Rancho Dominguez Bank (1996) 43 Cal.App.4th 790, 793-794, 51 Cal.Rptr.2d 63; Aalgaard v. Merchants Nat. Bank, Inc. (1990) 224 Cal.App.3d 674, 689, 274 Cal.Rptr. 81; Mackey v. Pionee......
  • Marques v. Bank of America
    • United States
    • California Court of Appeals Court of Appeals
    • November 19, 1997
    ...section 24 discharge.") (Wells Fargo, supra, 53 Cal.3d at p. 1104, 282 Cal.Rptr. 841, 811 P.2d 1025.) As noted in Mardula, supra, 43 Cal.App.4th at page 793, 51 Cal.Rptr.2d 63, federal courts have considered the preemptive effect of federal dismissal-at-pleasure provisions (see ante, fn. 2)......
  • Lavelle v. BankAmerica Corp.
    • United States
    • California Court of Appeals Court of Appeals
    • September 29, 1998
    ...The case law supports this concession. (Marques, supra, 59 Cal.App.4th at p. 363, 69 Cal.Rptr.2d 154; Mardula v. Rancho Dominguez Bank (1996) 43 Cal.App.4th 790, 793, 51 Cal.Rptr.2d 63 [noting that section 24, Fifth and similar provisions do not bar claims that the discharge violated federa......
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1 books & journal articles
  • Related State Torts
    • United States
    • James Publishing Practical Law Books Litigating Employment Discrimination Cases. Volume 1-2 Volume 1 - Law
    • May 1, 2023
    ...clear that laws like the National Bank Act do not preempt federal anti-discrimination statutes. See Mardula v. Rancho Dominguez Bank , 43 Cal. App. 4th 790, 793, 51 Cal. Rptr. 2d 63, 64 (1996) (holding that the National Bank Act and similar provisions covering Federal Reserve Bank employees......

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