COUILLARD V. BANK OF N.M., 1976-NMCA-034,
89 N.M. 179, 548 P.2d 459 (Ct. App. 1976)
CASE HISTORY ALERT: affected by
1994-NMSC-078
Mildred I. COUILLARD,
Plaintiff-Appellant,
vs.
BANK OF NEW MEXICO, Defendant-Appellee.
COURT OF APPEALS OF NEW MEXICO
1976-NMCA-034, 89 N.M. 179, 548 P.2d 459
Jim D. Wiseman, Orville C. McCallister,
Steven R. Fairchild, Albuquerque, for plaintiff-appellant.
Ray H. Rodey, Robert L. Schwartz, Rodey,
Dickason, Sloan, Akin & Robb, P.A., Albuquerque, for defendant-appellee.
SUTIN, J., wrote the opinion. HERNANDEZ
and LOPEZ, JJ., concur.
{1} Plaintiff appeals from a
directed verdict in favor of the Bank of New Mexico on the issue of punitive
damages arising out of the acts and conduct of Melvin Amerson, Jr., manager of
the Coronado branch and also assistant vice-president of the parent bank. We
affirm.
A. Facts Most Favorable to Plaintiff
{2} Amerson had been employed
by the Bank of New Mexico for ten years. In 1970, he was promoted to manager of
the Coronado branch, and, at about the same time, he became an assistant
vice-president of the parent bank.
{3} As branch manager,
Amerson was in complete charge of personnel hiring and firing, loans and
collections. His authorization covered loans up to $7,500.00. As assistant
vice-president, Amerson was the highest ranking executive at the Coronado
branch, and the Bank of New Mexico did not tell him how to run this branch
bank. However, he did not sit on any policy making committee nor on the board
of directors, nor on the senior management committee of the bank.
{4} In June, 1971, Gordon E.
Couillard, plaintiff's husband, entered into a home improvement loan agreement
with the Bank of New Mexico and procured credit life insurance. The transaction
was handled by Amerson at the Coronado branch.
{5} Approximately a year
later, Couillard passed away. Plaintiff asked Amerson if there was credit life
insurance on the loan and he said that her husband refused to buy the
insurance. Amerson requested payment of the loan. On August 3, 1972, plaintiff
gave Amerson a check in the sum of $5,218.61 in payment of the loan. About six
weeks to two months later she received the note, marked "paid", and
put it away.
{6} Later, while plaintiff
happened to be in the bank, Amerson told her he had a surprise for her, a check
for $1,088.00 which plaintiff states he said was "just pennies
{*181} from heaven.... It's yours and just
don't ask any questions."
{7} Thereafter, in February,
1973, plaintiff examined the note and discovered that her husband had procured
credit life insurance. She approached Amerson and he told her that her husband
had cancelled the insurance but he could not find the check he had given to her
husband in repayment of the premium. Plaintiff was unable to contact Amerson
thereafter.
{8} Amerson had executed a
cashier's check to Couillard in the sum of $206.67 which he backdated to June
3, 1971, the date the loan was made. He had typed on this check "Refund on
CL Premium not used." This check remained in the file. It was a false
document.
{9} After plaintiff paid off
the loan on August 3, 1972, the Bank of New Mexico filed a claim with the
insurance company. Amerson held plaintiff's check until August 11, 1972, when
he let the check clear plaintiff's account. On August 24, 1972 (the date the
note was marked paid), Amerson learned of the insurance claim when he received
payment of Couillard's loan from the insurance company.
{10} Amerson's explanation of
his wrongful conduct follows: He executed a cashier's check made payable to the
Bank of New Mexico in the sum of $5,218.61, the same amount as plaintiff's
check. He kept the original and a copy and sent a copy of the cashier's check
to the proof department. This came out as an asset of the Bank of New Mexico.
{11} Amerson used the
cashier's check to keep three bad loans current until he could trace the people
and recover the loans. As loans were made current, the balance of the cashier's
check would be used to execute another cashier's check. This process continued
until he exhausted the $5,218.61, and he never located the people to whom he
had made bad loans. He undertook this procedure for fear of losing his job.
{12} Plaintiff never
contacted anyone else at the Bank of New Mexico concerning the status of this
transaction and no one else at the bank was aware of it. The bank first knew of
this transaction when it was served with a summons. Amerson was called in and
told that his employment would be terminated or he could resign. No senior
officer of the bank ratified, authorized or participated in the Couillard
transaction.
{13} Plaintiff's motion for
partial summary judgment against the Bank of New Mexico was granted, and
plaintiff was awarded judgment in the sum of $5,563.90, the principal amount
prayed for plus interest, and this was paid in full.
{14} At the close of
plaintiff's case, the trial court directed a verdict for Bank of New Mexico on
the issue of punitive damages because "there was no participation,
ratification or authorization by the Bank of New Mexico." Judgment was
entered.
{15} After the trial of the
case, judgment was entered against Amerson for punitive damages based upon a
verdict of the jury.
C. Bank of New Mexico was not subject to punitive damages.
{16} The sole issue on appeal
is whether the tortious conduct of Amerson can give rise to an issue of fact
for the jury on a claim for punitive damages against the Bank of New Mexico.
{17} The rule is well
established in New Mexico that the principal, or master, is liable for punitive
or exemplary damages
only in cases where the principal or master has in
some way authorized, participated in or ratified the acts of the agent or servant,
which acts were wanton, oppressive, malicious, fraudulent or criminal in
nature.
{19} Not liable for punitive
damages are:
Sanchez v. Securities Acceptance Corp.,
{*182}
57 N.M. 512,
260 P.2d 703 (1953);
Miera v. George, 55 N.M. 535,
237
P.2d 102 (1951);
Stewart v. Potter, 44 N.M. 460,
104 P.2d 736 (1940);
Loucks
v. Albuquerque National Bank, 76 N.M. 735,
418 P.2d 191 (1966);
Fredenburgh
v. Allied Van Lines, Inc., 79 N.M. 593,
446 P.2d 868 (1968).
{20} However, these cases
have not reached the problem with which we are confronted. None of the New
Mexico cases discussed the liability of a principal for the wrongful acts of an
agent or servant like Amerson who was a branch manager and an officer of a
national bank. This is a matter of first impression in New Mexico.
{21} In
Loucks v.
Albuquerque National Bank, supra, a vice-president of the bank was a party
defendant involved in wrongfully dishonoring checks. The court merely said that
intemperate remarks of the vice-president were not sufficient to support a
claim for punitive damages. The court did not determine whether a sufficient punitive
damage claim against the vice-president would be imputed to the bank.
{22} In
Bank of New Mexico
v. Rice, supra, the Supreme Court spoke only in terms of the acts of an
official of the bank, and held the bank liable for compensatory and punitive
damages because the official acted maliciously toward the Rice Corporation.
{23} In
Jones v. Citizens
Bank of Clovis, supra, the Supreme Court spoke only in terms of the acts of
the bank and held the bank liable for punitive damages.
{24} Stewart v. Potter, supra,
is the leading case on punitive damages in New Mexico. It favored the rule
observed in the case of
Lake Shore & Michigan Southern Railway Co. v.
Prentice, 147 U.S. 101, 13 S. Ct. 261, 37 L. Ed. 97 (1893). Plaintiff
relies on dictum in that case. It reads:
The president and general manager, or, in his absence, the
vice-president in his place, actually wielding the whole executive power of the
corporation, may well be treated as so far representing the corporation and
identified with it that any wanton, malicious or oppressive intent of his, in
doing wrongful acts in behalf of the corporation to the injury of others, may
be treated as the intent of the corporation itself.... [Emphasis added]
[147 U.S. at 114, 13 S. Ct. at 265].
{25} Amerson, as vice-president
of the parent bank, did not actually wield the whole executive power of the
parent bank. Amerson had limited power to loan money. He had no policy making
power. He was subject to the power and control of the board of directors of the
parent bank. He was the highest executive officer of the branch bank. What is
the relationship between a parent bank and its branch?
{26} Bank of New Mexico is a
state bank. For assistance, we turn to the definition of branch bank set forth
in § 48-2-16(B), N.M.S.A. 1953 (Repl. Vol. 7).
B. Branch banks shall be operated as branches of and under
the name of the parent bank, and under the control and direction of the board
of directors and executive officers of the parent bank.
{27} "A branch is not a
separate corporation or legal entity but is an office or agency operated by the
legal entity which operates the main bank. It has no separate board of
directors or capital structure, its deposits are pooled with those of the main
bank, and its loan limits are based on the main bank's capital structure."
In re Application of Kenilworth State Bank, 49 N.J. 330, 230 A.2d 377,
380 (1967).
{28} A national bank
"branch" is defined as "any branch bank, branch office, branch
agency, additional office, or any branch place of business located in any
State... at which deposits are received, or checks paid, or money lent."
12 U.S.C.A. § 36(f). The purpose of the statute is to place national and state
banks on a basis of competitive equality insofar as branch banking is concerned.
First National Bank v. Dickinson, 396 U.S. 122, 90 S. Ct. 337, 24 L. Ed.
2d 312 (1969).
{29} The term
"branch" creates the relationship of principal and agent between the
parent organization and the branch.
{*183} It
may have a separate and distinct identity for some purposes in dealing with
third persons.
Dean v. Eastern Shore Trust Co., 159 Md. 213, 150 A. 797
(1930); 10 Am. Jur.2d Banks § 326 (1963); 9 C.J.S. Banks and Banking § 55
(1938). But as between the parent bank and the branch, the employees of the branch
are employees of the parent bank. "The action or inaction of the branch
bank is the action or inaction of the parent bank."
Guaranty Bank &
Trust Co. v. Town of Amite City, 64 So.2d 502, 505 (La. App.1953). Branch
bank business and policies are subject to the supervision and control of the
parent bank. It is an instrumentality by which the parent bank carries on its
business.
Sokoloff v. National City Bank, 130 Misc. 66, 224 N.Y.S. 102
(1927), aff'd 223 App. Div. 754, 227 N.Y.S. 907, aff'd 250 N.Y. 69, 164 N.E.
745 (1928).
{30} The emphasized words in
Lake
Shore & Michigan Southern Railway Co., supra, when applied to state or
national bank branches, do not support plaintiff's contention. It is clear that
Amerson did not actually wield the whole executive power of the parent bank.
The fact that he was the highest executive officer of the bank
at the
Coronado branch did not transshape the branch into an entity such as a
parent bank. Furthermore, the wrongful acts of Amerson committed against
plaintiff were not done "in behalf of the corporation to the injury of
others," and we cannot say that his acts "may be treated as the
intent of the corporation itself." [147 U.S. at 114, 13 S. Ct. at 265].
{31} Plaintiff also relies on
Fredenburgh, supra, in which the court said:
It was not shown that the agents, who perhaps acted
maliciously or recklessly, were themselves to be fairly considered executive
in character, see Winkler v. Hartford Acc. & Indem. Co., 66 N.J.
Super. 22, 168 A.2d 418 (1961);.... [Emphasis added] [79 N.M. at 598, 446 P.2d
at 873].
{32} Plaintiff contends this
statement "expanded the guidelines for determining the exemplary liability
of the principal". She relies on
Winkler, cited therein. We
disagree on two grounds: (1) "executive in character" has been
interpreted to mean that Amerson "had no superior, was subordinate to no
higher corporate officer, so that his actions were tantamount to those of the
board of directors."
Petition of Den Norske Amerikalinje A/S, 276
F. Supp. 163, 179 (U.S.D.C. Ohio 1967). This definition reaches the proportions
of
Lake Shore & Michigan Shore Railway Co., supra, and Amerson did
not fall into this category. (2) Amerson was not acting on behalf of the bank.
It has been held that where an officer of the bank, or agent, acts wrongfully
on
behalf of the bank, the bank may be liable for punitive damages.
First
Nat. Bank v. Stewart, 204 Ala. 199, 85 So. 529 (1920). See, also,
Deposit
Guaranty Bank & Trust Co. v. Silver Saver Stores, 166 Miss. 882, 148
So. 367 (1933); 9 C.J.S. Banks and Banking § 365b.
{33} Plaintiff has cited
strong authority to support her position. See,
Stroud v. Denny's Restaurant,
Inc., 532 P.2d 790 (Or. 1975). We mention this case because it does not
refer to or seem to follow
Gill v. Selling, 125 Or. 587, 267 P. 812, 58
A.L.R. 1556 (1928) cited in
Stewart v. Potter, supra.
Stroud
says:
A majority of courts have adopted the rule that, if a servant
has committed a tort within the scope of his employment so as to render the
corporation liable for compensatory damages, and if the servant's act is such
as to render him liable for punitive damages, then the corporation is likewise
liable for punitive damages. [Citations omitted] [532 P.2d at 793].
{34} We recognize the
existence of a conflict of authority, 19 C.J.S. Corporations § 1286 b, but we
can find no support for the
Stroud rule in New Mexico, nor do we find it
applicable to banking institutions.
{*184} {35} The century old controversy in the courts over
punishment of the principal or master by payment of punitive damages rests upon
a philosophical concept. Should an innocent principal or master pay the penalty
for failure to exercise closer control of its agents? New Mexico has said
"No", following the rule that a bank shall not be punished for the
fraud or tort of an officer who manages a branch bank, unless this officer
represents the whole executive power of the parent bank, or the parent bank is
in some way connected with the fraud or tort of the officer by authorization,
participation in, or ratification thereof.
{36} The judgment is
affirmed.
HERNANDEZ and LOPEZ, JJ., concur.