Wells Fargo Bank v. Superior Court (Wertz)

• Decision Date: 27 February 1990
• Docket Number: Nos. A046100,A046657,s. A046100
• Citation: 228 Cal.App.3d 288,267 Cal.Rptr. 49
• Court: California Court of Appeals Court of Appeals
• Parties: Previously published at 228 Cal.App.3d 288 228 Cal.App.3d 288, 119 Lab.Cas. P 10,877, 5 IER Cases 502 WELLS FARGO BANK, Petitioner, v. The SUPERIOR COURT of the City and County of San Francisco, Respondent. Barbara WERTZ, Real Party in Interest. WELLS FARGO BANK, Petitioner, v. The SUPERIOR COURT of the City and County of San Francisco, Respondent. Wilma BOTELHO et al., Real Parties in Interest.

Page 49

267 Cal.Rptr. 49

Previously published at 228 Cal.App.3d 288

228 Cal.App.3d 288, 119 Lab.Cas. P 10,877, 5 IER Cases 502

WELLS FARGO BANK, Petitioner, v. The SUPERIOR COURT of the City and County of San Francisco, Respondent.

Barbara WERTZ, Real Party in Interest.

WELLS FARGO BANK, Petitioner, v. The SUPERIOR COURT of the City and County of San Francisco, Respondent.

Wilma BOTELHO et al., Real Parties in Interest.

Nos. A046100, A046657.

Court of Appeal, First District, Division 3, California.

Feb. 27, 1990.

Rehearing Denied March 29, 1990.

Review Granted May 23, 1990.

Jean C. Gaskill, Thomas M. Peterson, Rebecca D. Eisen, James H. Quirk, Brobeck, Phleger & Harrison, San Francisco, for petitioner.

No appearance for respondent.

Cynthia Bernet-McGuinn, Law Offices of William L. Veen, John A. McGuinn, McGuinn, Hillsman & Palefsky, San Francisco, for real parties in interest.

BARRY-DEAL, Associate Justice.

The issue raised by these two petitions for writ of mandate is whether branch managers for Wells Fargo Bank, National Association (Wells Fargo), who were made vice president or assistant vice president and designated by Wells Fargo as "officers" of the bank, were "at will" or "at pleasure" employees for purposes of the National Bank Act (12 U.S.C. § 24 Fifth (hereafter Paragraph Fifth)). That paragraph authorizes a national banking association "[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." (Emphasis added.) We conclude that these employees were not "officers" with "at will" status because they were not appointed and dismissed by the board of directors of the bank.

We abbreviate the facts and procedures because the issue is one of law. Barbara Wertz, a branch manager for only a few months, was discharged in 1985 for her role in permitting an individual customer personally to negotiate a $300,000 check payable to Wells Fargo, drawn on the account of another customer, a corporation. The bank took a loss when the corporation complained about the use of money from its account and the individual was unable to repay withdrawals under the line of credit he secured with the funds.

Ms. Wertz brought an action for wrongful termination, claiming an implied agreement that she could be terminated only for cause. Wells Fargo moved for summary judgment on the ground that Ms. Wertz was an "officer" within the meaning of the National Bank Act and could be dismissed without a showing of cause. The court denied summary judgment. Wells Fargo's petition No. A046100 for writ of mandate followed.

At least 12 other Wells Fargo branch managers were discharged or induced to quit for poor performance during 1984 and 1985. (Throughout this opinion, various forms of words like "terminate," and "remove" will be used, somewhat inexactly, to refer both to discharging and inducing a plaintiff to quit or retire.) These 12 joined together in an action for wrongful termination against Wells Fargo. Again Wells Fargo moved for summary judgment based upon the National Bank Act. Again the court denied the motion. In its order denying the motion, the court relied upon its prior ruling in the Wertz case. Wells Fargo's petition No. A046657 for writ of mandate followed. Three plaintiffs remain in the two cases (Wilma Botelho, Thomas Moore, and Barbara Wertz), the others having settled their claims or having been dismissed by the court because they had released their claims.

Discussion

Under California law employment is presumed to be "at will" unless a specific duration is stated in the employment agreement, but an employee can overcome such presumption by proof of an agreement, express or implied, that he or she will be discharged only for good cause. (Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 675-682, 254 Cal.Rptr. 211, 765 P.2d 373; Pugh v. See's Candies, Inc. (1981) 116 Cal.App.3d 311, 320, 324-325, 171 Cal.Rptr. 917.) If, however, these plaintiffs are classified as "officers" under Paragraph Fifth and thus "at will" employees, state law is preempted by federal law despite any contrary understanding between employer and employee. (See Kozlowsky v. Westminster Nat. Bank (1970) 6 Cal.App.3d 593, 596-597, 86 Cal.Rptr. 52.) Thus, the key question is whether federal law dictates "at will" employment status for these plaintiffs.

Paragraph Fifth, adopted in 1864 (Act of June 3, 1864, ch. 106, § 8, 13 Stat. 99, 101), is part of the National Bank Act (12 U.S.C. § 24). It defines the corporate powers of national banking associations, including the power to make contracts, sue and be sued, prescribe bylaws, and exercise all incidental powers necessary to carry on the business of banking. Two of its ten "paragraphs" are pertinent here: "a national banking association ... shall have power-- ... [p] Fifth. To 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. [p] Sixth. To prescribe, by its board of directors, by-laws not inconsistent with law, regulating the manner in which its stock shall be transferred, its directors elected or appointed, its officers appointed, its property transferred, its general business conducted, and the privileges granted to it by law exercised and enjoyed."

Wells Fargo contends that plaintiffs are "officers" of the bank and are therefore subject to removal without cause. Wells Fargo points to its bylaws, which provide for election and appointment of officers: "The Bank shall have (i) a Chairman of the Board, (ii) a President and (iii) a Secretary. The Bank also may have, at the discretion of the Board of Directors, ... one or more Senior Vice Presidents, one or more Vice Presidents, one or more Assistant Vice Presidents, ... and such other officers as the Board may by resolution create.... The following officers shall be filled only pursuant to election by the Board of Directors: [12 officers are listed]. Other officers [including the assistant vice presidents involved in this action] may be appointed by the Chief Executive Officer or by any officer or committee whom he [or she] may authorize to perform this duty. All officers shall hold office at will, at the pleasure of the ... officer or committee authorized by the Chief Executive Officer to remove such officers, and may be removed at any time, with or without notice and with or without cause. No authorization by the Chief Executive Officer to perform such duty of appointment or removal shall be effective unless done in writing, signed by the Chief Executive Officer."

Wells Fargo presented evidence below that the chief executive officer delegated to executive vice presidents, who delegated to senior vice presidents, the authority to approve the removal or termination of any officers or employees within their groups or effect removals or terminations themselves. Further evidence showed that the remaining plaintiffs, each of whom held the title of assistant vice president, were removed by senior vice presidents under authority delegated by the executive vice president.

Plaintiffs in A046657 disputed the chain of delegation in some of the terminations. But more importantly, they and Ms. Wertz contended below and argue here that designation of these branch managers as "officers" by Wells Fargo and delegation of authority to hire and fire them does not make them "officers" within the meaning of Paragraph Fifth. The trial court accepted their argument, ruling that "officers" within the meaning of the National Bank Act should be construed to apply only to those who are appointed and dismissed by the bank's board of directors itself.

Wells Fargo contends that, contrary to the trial court's analysis, the National Bank Act "plainly permits national banks to allocate responsibility over business affairs through use of corporate bylaws. The appointment of officers is among the specific powers which may be regulated through use of national bank bylaws." (Emphasis omitted.) What Wells Fargo says is true; a national bank is permitted to adopt bylaws governing operation of the banking business. Like Wells Fargo's, these bylaws may designate the "officers" of the bank and may delegate authority to hire and fire these "officers." But Wells Fargo's analysis begs the question of whether by bestowing the title "officer" the bank may automatically bring an employee within the "at pleasure" employment clause of Paragraph Fifth.

The meaning of "officer" in Paragraph Fifth is critical. Is it open-ended, subject only to the definitions and delegations of authority contained in a particular national bank's bylaws? Or is the superior court correct that it is limited to those "officers" appointed directly by the board of directors? Is there some middle ground under which the court is required to analyze the duties and responsibilities of the employee to determine whether he or she is an "officer" within the meaning of the "at will" employment section?

The questions are significant. If Wells Fargo is correct, "at will" employment status has been conferred upon every bank employee designated by the bank as an "officer" and appointed by delegation of authority from the chief executive officer. In addition to many assistant vice presidents in the bank's headquarters, this probably includes all branch managers, many assistant branch managers, and perhaps certain loan officers and others. If plaintiffs are correct, the only "at will" employees are those appointed directly by the bank's board of directors, in this case the "Chairman of the Board, Vice Chairman of the Board, President, Vice...