* District Judge of the Western District of Louisiana, sitting by designation. United States Court of Appeals,

Fifth Circuit.

No. 92-7584.

ALEXANDRIA ASSOCIATES, LTD., a Florida Limited Partnership and Anthony J. LaSala,

Plaintiffs-Appellants, Cross-Appellees,

v.

The MITCHELL COMPANY, an Alabama General Partnership and Mitchell Equities, a Florida

General Partnership, Defendants-Appellees, Cross-Appellants.

Sept. 24, 1993.

Appeal from the United States District Court for the Southern District of Mississippi.

Before WIENER and EMILIO M. GARZA, Circuit Judges, and LITTLE * , District Judge.

WIENER, Circuit Judge:

We are called upon once again to delineate the boundaries of the D'Oench, Duhme doctrine.

Plaintiffs-Appellants, Alexandria Associates, Ltd., a limit ed partnership, and Anthony J. LaSala, one

of its general partners (jointly "Alexandria"), appeal the district court's grant of summary judgement,

dismissing their securities fraud and common law tort claims a gainst Defendants-Appellees, The

Mitchell Company, an Alabama general partnership, and Mitchell Equ it ies, a Florida general

partnership (jointly, the "Mitchells"), as barred by the D'Oench, Duhme doctrine. Concluding that

D'Oench does not apply to the instant non-banking transa ct io ns, which were sales of partnership

interests in real estate development partnerships, we reverse and remand.

I

FACTS AND PROCEEDINGS

This case comprises four non-bank parties involved in several non-bank ing transactions

consisting of the purchases and sales of partnership interests in real estate ventures. The essence of

Alexandria's assertions is that the Mitchells made misrepresentations regarding those sales, and that

the interests sold were securities within the contemplation of the federal securities laws. The operable1 The Mitchells moved for summary judgement on the contention that Alexandria and LaSala's

claims were barred by D'Oench, Duhme —the central issue of this appeal. The Mitchells also

moved for summary judgement on the contention that the partnership interests were not

securities. The district court found that there was a genuine issue of material fact as to the

securities issue and denied the motion. Alexandria Associates, Ltd. v. Mitchell Co., 800 F.Supp.

1412, 1417 (S.D.Miss.1992). As we generally do not have jurisdiction to consider the denial of a

motion for summary judgement, we express no opinion on the securities issue. E.g., Landry v.

G.B.A., 762 F.2d 462, 464 (5th Cir.1985) (dismissing appeal for want of appellate jurisdiction

when jurisdiction is based on denial of a motion for summary judgement).

2 To be an ordinary or general partnership in Florida and Alabama (the states of domicile for

the Mitchell partnerships) a partnership cannot have any limited partners. To qualify as an entity

that can have limited partners the entity must, inter alia, include Limited or Ltd. in the partnership

name. See A LA .C ODE § 10-9A-1 et seq., F LA .S TAT . ch. 620.101 et seq.

3 The parties vigorously contest whether the partnership interests acquired by Alexandria were

limited or general. At this stage of the litigation that question is not crucial, so we do not address

it.

4 In addition to the partnership interests here at issue, Saint eventually sold an apartment

complex and warehouse to Alexandria in fee. facts, for purposes of this appeal, 1 are as follows.

The Mitchells are ordinary or general partnerships—that is, they are not limit ed partnerships. 2

All partners are corporations, each of which is a wholly owned subsidiary of Altus Real Estate. When

the instant transactions occurred, Altus Real Estate was a wholly owned subsidiary of Altus Bank.

It was not until 1991, after Altus Bank failed and went into receivership, that the Resolution Trust

Corporati on ("RTC") established Altus Federal Savings Bank ("Altus FSB") and, as receiver of Altus

Bank, transferred the stock of Altus Real Estate to Altus FSB. Thus the multi-tiered organizational

structure on the defense side of this litigation is: (a) Altus FSB (as successor to Altus Bank and not

a party herein) is the parent corporati on of Altus Real Estate (also not a party herein); (b) Altus Real

Estate in turn is the parent corporati on of each corporate partner of the Mitchells, the two ordinary

partnerships which are Defendants-Appellants herein; (c) the Mitchells in turn were partners in each

of the limit

ed partnerships that (i) owned one of the subject apartment projects, and (ii) was an entity

in which Alexandria purchased a partnership interest. 3

In 1986, John Saint, president of each corporate sub-subsidiary which in some combination

controlled the Mitchell partnerships, contacted LaSala in an effort to sell partnership interests in the

limited partnerships owned by the Mitchells to Alexandria. 4 Each of these limited partnerships had5

Alexandria Associates, Ltd. v. Mitchell Co., 800 F.Supp. 1412 (S.D.Miss.1992).

6 Walker v. Sears, Roebuck & Co., 853 F.2d 355, 358 (5th Cir.1988). been formed to build, own, and manage a particular apartment complex. Alexandria eventually

purchase d t he contested interests in those partnerships, making cash down payments totaling

$400,000. The remaining balance of the purchase price of each interest thus acquired by Alexandria

was financed with a non-recourse loan from the Mitchells secured by a mortgage on the real estate

of the limited partnership in which such interest was purchased.

Alexandria intended to syndicate it self and sell shares to investors. It planned to use the

proceeds to pay off the pur chase loan indebtedness. But Alexandria was unable to confect the

syndication, so it could not service its mortgage debts according to their tenor. When the loans fell

into default, the Mitc hells foreclosed. As a result, Alexandria lost its entire $400,000 investment.

The foreclosures o ccurred in November, 1988, and Alexandria filed suit against the Mitchells in

December, 1988. In March, 1992,—over three years after suit was filed and at a time shortly after

Altus FSB succeeded Altus Bank—the Mitchells mo ved fo r summary judgement, contending that

Alexandria's claims were barred by the D'Oench, Duhme doctrine and its statutory counterpart, 12

U.S.C. § 1823(e). The Mitchells advanced the theory that, as the purported misrepresentations were

not in writing, they were "secret agreements" under D'Oench so that Alexandria's claims that were

grounded in those misrepresentations were barred. Even though the transactions in question involved

a partnership owned by subsidiaries of a subsidiary of Altus FSB and even though none among Altus

FSB, Altus Real Estate, the RTC, the FSLIC, or the FDIC ever i ntervened to assert D 'Oench or

FIRREA, the district court concluded that D'Oench applied to the Mitchells and entered summary

judgement for them. 5 Alexandria timely appealed.

II

STANDARD OF REVIEW

We review the district court's grant of summary judgement by "reviewing the record under

the same standards which guided the district court." 6 A grant of summary judgement is proper when7 Celotex Corp. v. Catrett, 477 U.S. 317, 323-25, 106 S.Ct. 2548, 2552-54, 91 L.Ed.2d 265

(1986); see F ED .R.C IV .P. 56(c).

8 Walker, 853 F.2d at 358.

9 Financial Institutions Reform, Recovery, and Enforcement Act of 1989, Pub.L. No. 101-73,

103 Stat. 183 (codified at 12 U.S.C. § 1811 et. seq. (1991)).

10 In Garrett v. Commonw ealth Mortgage Corp. of America, 938 F.2d 591, 595 (5th Cir.1991)

we found it unnecessary to determine whether subsidiaries may properly assert defenses available

under the D'Oench doctrine. We continue to find it unnecessary to decide this issue to resolve the

present case.

11 Texas Refrigeration Supply, Inc. v. FDIC, 953 F.2d 975, 979 (5th Cir.1992). no genuine issue of material f a ct exists that would necessitate a trial. 7 In determining whether the

grant was proper, all fact questions are viewed in the light most favorable to the nonmo vant

.

Questions of law, however, are decided de novo. 8

III

ANALYSIS

Alexandria asserts three alternative grounds t o challenge the district court's holding that

D'Oench, Duhme bars their claims. First, they argue that D'Oench does not apply to non-banking

transactions such as these, invo lving the ordinary commercial sale of interests in real estate ventures.

Second, Alexandria asserts that, even assuming arguendo that D'Oench could be applicable to these

types of transactions under other circumstances, D'Oench does not apply when such transactions are

conducted by a third generation, non-banking subsidiary. Finally, Alexandria insists that the common

law D'Oench doctrine has been preempted by FIRREA, 9 and that FIRREA's reach does not extend

to transactions of the nature here involved. As we agree with Alexandria's first contentio n—t hat

D'Oe n ch does not apply to non-banking transactions invo lving the ordinary commercial sale of

partnership interests in real estate development ventures—we need not and therefore do not address

Alexandria's alternative arguments. 10

A. Policies Underlying the D'Oench Doctrine

This court has previously noted that D'Oench is "an arguably harsh rule" 11 that is "expansive12 Bow en v. FDIC, 915 F.2d 1013, 1015 (5th Cir.1990).

13 Kilpatrick v. Riddle, 907 F.2d 1523, 1524 (5th Cir.1990), cert. denied sub. nom., Rogers v.

FDIC, 498 U.S. 1083, 111 S.Ct. 954, 112 L.Ed.2d 1042 (1991).

14 Porras v. Petroplex Savings Ass'n, 903 F.2d 379, 379 (5th Cir.1990).

15 E.g. Thigpen v. Sparks, 983 F.2d 644, 649 (5th Cir.1993); Texas Refrigeration Supply, 953

F.2d at 979.

16 484 U.S. 86, 108 S.Ct. 396, 98 L.Ed.2d 340 (1987).

17 Id. at 91, 108 S.Ct. at 401; see also Bow en v. FDIC, 915 F.2d 1013, 1016 (5th Cir.1990)

(stating same).

18 Langley, 484 U.S. at 92, 108 S.Ct. at 401.

19 Texas Refrigeration Supply, 953 F.2d at 979; Kilpatrick v. Riddle, 907 F.2d 1523, 1529

(5th Cir.1990). and perhaps startling in its severity." 12 We have applied D'Oench to bar, inter alia, claims of fraud

under the federal securities law, 13 and we have al lo wed successors in interest to the federal bank

regulatory agencies to invoke the protecti ons of D'Oench. 14 The essence of these protections is that

D'Oench bars enforcement of "agreements" against federal banking agencies unless those agreements

have been approved contemporaneously by the bank's board or loan committee and recorded in the

bank's written records. 15

The Supreme Court in Langley v. FDIC 1 6 voiced a twofold justification for invoking the

"arguably harsh" bar of D'Oench. The L angley Court found the recordation requirement justified

because it allo ws federal and state bank examiners to rely exclusively on the bank's records in

evaluating the worth of the bank's assets. 17 The Court found just ificat ion for the a pproval

requirement in its assurance of "mature consideration of unusual loan transactions b y senior bank

officials." 18 We have articulated a third justification for D 'Oench: that, among the bank's borrowers

creditors, and depositors, the borrowers are the ones who should bear the risk of loss because they

are better situated than either the creditors or the depositors of federally insured institutions to protect

themselves in regards to agreements made with such institutions. 19

B. D'Oench and Non-banking Transactions

The consistent focus of D'Oench 's protecti on has always been on banking transactions20 See Thigpen, 983 F.2d at 649 (commenting that the statutory D'Oench doctrine relates to

banks in their capacity as banks and refusing to extend this doctrine to include a bank's sale of an

asset in a non-banking transaction); Bowen, 915 F.2d at 1016-17 (discussing importance of

D'Oench in relation to the evaluation of bank transactions and protection of federally insured bank

assets); see also, OPS Shopping Center, Inc. v. FDIC, 992 F.2d 306, 310-11 (11th Cir.1993)

(distinguishing between claims based on whether they are predicated on a banking or a

non-banking transactions).

21 E.g., Porras, 903 F.2d at 649 (loans for a construction project).

22 Bowen, 915 F.2d at 1013-14 (holding that D'Oench bars claims based on the breach of a

promise to lend).

23 See Thigpen, 983 F.2d at 649 (noting that D'Oench is not a "meat-axe" for avoiding debts

incurred in the ordinary course of business).

24 983 F.2d 644 (5th Cir.1993).

25 Id. at 645. engaged in by federally insured institutions. 20 We have construed the concept of banking transactions

broadly, ranging from the typical loan agreement 21 to promises to lend. 22 In so doing, however, we

have recognized that the D'Oench doctrine is not transactionally infinit e: It is not a limitless, per se

guarantee of victory by federal banking agencies and their successors in interest. 23

In Thigpen v. Sparks 24 we defined one limit of the D'Oenc h do ct rine which is particularly

germane to the instant appeal. There the appellant, Sparks, purchased a wholly-owned trust company

from BancTexas. The chairman of BancTexas falsely represented to Sparks that the trust company's

charter had been maintained "in good standing" without interruption. Yet when Sparks eventually

attempted to sell the trust company he found that he could not because its charter had been revoked

temporarily for non-payment of f ranchise taxes. He therefore sued BancTexas under a breach of

warranty claim. Like Altus Bank here, BancTexas became insolvent during the pendency of the suit,

and the FDIC was appointed receiver. But in T higpen it was the FDIC that moved for and was

granted summary judgement on the theory that Sparks' claim was an "agreement" barred under the

FIRREA provision that incorporated the statutory version of the D'Oench doctrine. 25

Reversing the distri ct court i n T higpen, we concluded that § 1821(d)(9)(A) of FIRREA

incorporated the limitations expressed in § 1823(e), the statutory enactm ent of the D 'Oench26 Id. at 648-49.

27 The relevant language of § 1823(e) states that it applies to: "[Any] agreement which tends to

diminish or defeat the interest of the Corporation in any asset acquired by it under this section or

section 1821 if this title ...". 12 U.S.C. § 1823(e).

28 Thigpen, 983 F.2d at 649.

29 Id.

30 We recognize the possibility that a regulatory agency serving as conservator or receiver, or a

successor financial institution, engaged in liquidating assets of a failed or troubled institution

might dispose of such assets and be within the scope of D'Oench, but that is not what happened

here.

31 We have stated previously that the common law and statutory D'Oench doctrines have been

virtually interchangeable in our jurisprudence. Texas Refrigeration Supply, 953 F.2d at 979 n. 3. doctrine, 26 noting that § 1823(e) states expressly that it applies to the acquisition of an asset. 27 We

also commented on the problems inherent in adopting a construction of FIRREA that would include

within its ambit any and all agreements regardless of their nature, subject matter, or circumstances.

We reasoned that inclusion of non-banking transactions within the coverage of § 1823(e) and § 1821

could lead to absurd results. For example, each ordinary trade creditor of a bank wo uld find it

necessary to have its purchase order or other contract documents approved by the bank's directors

and recorded in the Board's minutes if such creditor was to avoid potential uncollectibility under

D'Oench. 28 Thus, we held in T higpen that the statutory incarnations of the D'Oench doctrine do not

apply to a bank's disposition of an asset in a non-banking transaction. 29 It follows that if D 'Oench

does not apply to the bank itself, then surely it does not apply to subsidiaries of the bank's non-bank

subsidiaries!

Thigpen and the policies underlying the D'Oench doctrine mandate a like result in the present

case. The Mitchells were engaged in the ordinary commercial sale of non-bank assets—partnership

interests in real estate development ventures. These sales assuredly were non-banking transactions;

banks simply do not engage in the sale of partnership interests in real estate development ventures

in the ordinary course of banking business. 30 The fact that t hese were sales by a third generation

non-banking subsidiary, thereby implicat ing the jurisprudential version of the D'Oench doctrine, fails

to distinguish this case from Thigpen. 31And as we note above, this case provides a poor vehicle to justify extending the jurisprudential

D'Oench doctrine beyond the statutory one.

32 Again, it is unnecessary to determine whether FIRREA preempts—or supplants—the

jurisprudential D'Oench doctrine. Cf. In re NBW Commercial Paper Litigation, No. 90-1755,

1992 WL 73135 at 6-9 (D.D.C. March 11, 1992) (concluding that FIRREA does not preempt the

common law D'Oench doctrine).

33 Unlike those prior cases in which we extended D'Oench to fill in the interstices in the

relevant statutes in order to provide protection to entities such as assignees of the FDIC, see

Porras, 903 F.2d at 381, or to protect the FDIC, et al. from affirmative claims based on banking

transactions, see Bowen, 915 F.2d at 1015-16, this case would require us to extend D'Oench to include a virtually unlimited and undefinable category of transactions if, like the district court, we

were to accept the Mitchells' invitation thus to give virtually unlimited reach to the tentacles of

D'Oench. Moreover, even if we assume for the sake of this discussion that FIRREA allows the extension

of the jurisprudential version of the D'Oen ch doctrine beyond the limits of the statutory one, 3 2 we

discern no reason to do so in the present case. 33 The purposes of neither the recordation nor approval

requirements of D'Oench would be furthered by including non-banking transactions within the aegis

of the doctrine. The substantial volume of information regarding areas of commerce outside the bank

examiners' expertise or cognizance, generated day by day in myriad non-banking transactions, would

simply overwhelm the bank's officers and directors; besides, such information would not be likely to

aid the examiners in evaluating miscellaneous non-banking assets of the tro ubled bank. Requiring

bank boards or loan committees to consider, approve, and record every transaction entered into by

a bank—and especially by entities held by the bank as investment s or subsidiaries—would make

virtually impossible the performance by officers and directors of their upper level management and

policymaking functions, not the least of which is deciding constantly whether and on what terms to

grant loans.

Finally, we seriously question whether a third party involved in a no n-banking

transaction—particularly a transaction with subsidiaries of a subsidiary suc h as the ones at issue

here—would be in a better position than depositors or creditors of that bank to protect themselves

by mandating board consideration and recordati on in the bank's minutes. Commercial expectations

simply do not include the belief that eve ry agreement with a bank (much less with its

sub-sub-subsidiaries) must be scrutinized, approved, and recorded by the bank's executive committee34 Cf. Sunbelt Savings, FSB Dallas v. Montross, 923 F.2d 353, 357 (5th Cir.1991) (concluding

that extending the federal holder in due course doctrine to non-negotiable instruments would

defeat the reasonable commercial expectations of the makers). or board. 34

IV

CONCLUSION

The Mitchells effort to invoke D'Oench as a bar to any judicial consideration whether they

engaged in fraud in connection with the sale of partnership interests in rea l estate devel opm ent

partnerships constitutes overreaching in the extreme, and is thus misdirected. Our recent decision

in Thigpen has foreclosed any appeal to a statutory D'Oench bar under FIRREA, and we can find no

reason to extend the venerable jurisprudential version of D'Oe nch to cover the same type of

transaction, particularly when as here su ch t ransactions are engaged in by a third generation

subsidiary. As we conclude that D'Oench does not apply to such non-banking transactions under

circumstances such as those here under review, invo lving the sale of partnership interests in real estate

development partnerships, we reverse the district court's grant of summary judgement and remand

for trial on Alexandria's secur it ies fraud and common law tort claims. In so doing we imply no

prediction as to the ultimate determination of those claims on their merits.

REVERSED and REMANDED.