Source: https://law.justia.com/cases/federal/appellate-courts/F2/987/685/240619/
Timestamp: 2019-10-19 07:53:38
Document Index: 129279612

Matched Legal Cases: ['§ 12', '§ 1823', '§ 1823', '§ 12', '§ 1823', '§ 1823', '§ 1823', '§ 1823']

Oklahoma Radio Associates, an Oklahoma General Partnershipof J. Patrick Collins and Greg L. Armstrong; J. Patrickcollins, an Individual; and Greg L. Armstrong, Anindividual, Plaintiffs-appellants, v. Federal Deposit Insurance Corporation, As Receiver Forcitizens National Bank and Trust Company, Defendant-appellee, v. Magnolia Broadcasting Company, Inc., Third-party Defendant-appellant, 987 F.2d 685 (10th Cir. 1993) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › Tenth Circuit › 1993 › Oklahoma Radio Associates, an Oklahoma General Partnershipof J. Patrick Collins and Greg L. Armstron...
Oklahoma Radio Associates, an Oklahoma General Partnershipof J. Patrick Collins and Greg L. Armstrong; J. Patrickcollins, an Individual; and Greg L. Armstrong, Anindividual, Plaintiffs-appellants, v. Federal Deposit Insurance Corporation, As Receiver Forcitizens National Bank and Trust Company, Defendant-appellee, v. Magnolia Broadcasting Company, Inc., Third-party Defendant-appellant, 987 F.2d 685 (10th Cir. 1993)
U.S. Court of Appeals for the Tenth Circuit - 987 F.2d 685 (10th Cir. 1993) March 12, 1993
A July 16, 1985, letter from Osborne to Armstrong was relied on by plaintiffs below in response to the FDIC counterclaim. This letter is said to show agreement for renewal of the $175,000 ORA note on a 60-month basis with a series of one year notes. See Part III, infra. The plaintiffs further rely on the loan application dated June 28, 1985, for the $175,000 loan to ORA as showing the bank's agreement for renewal of the ORA notes by the application's statement referring to maturity of the first note: " [a]t the 90 day maturity monthly payments of $4,000 (P & I) will begin which represents a 5 year or 60 month amortization." Doc. 70, Exh. 2 to Exh. A, Osborne Aff. Osborne's affidavit states that he caused the letter agreement and the loan application to be placed in the ORA file at Citizens Bank. The plaintiffs also insist that Osborne orally promised to roll any remaining amount due on the Magnolia note into the ORA note after the first year, in conjunction with the main agreement to renew.
On October 15, 1985, the ninety-day ORA note was renewed. The new note provided for payments in the sum of $4,000 per month. The note also stated that " [a]ll payments [are] to be applied first to accrued interest and then to principal, with outstanding principal balance plus unpaid accrued interest due on or before 8-15-86." The new ORA note had a block captioned heading saying "maturity date" under which the words "on demand no later than 8-15-86" appeared.
Doc. 78 (order of 2/22/89) at 8 (citing D'Oench, Duhme & Co. v. FDIC, 315 U.S. 447, 62 S. Ct. 676, 86 L. Ed. 956 (1942)). The judge also said that:
The district court concluded that " [a] deception occurs when a bank tends to appear to its examiners to have committed its cash assets for a one year period, such as in the present case, when in reality it has a written or oral side agreement that obligates the cash assets for five years." Id. at 10. The court noted that "ORA is a completely innocent party" but indicated that this status was "irrelevant." Id. Accordingly, the court held that ORA was estopped by D'Oench from raising the renewal agreement as a defense to the FDIC's claim for payment of the note on its stated maturity date.
Separately, as to the Magnolia note, the district judge held that, "Any alleged oral agreements of waiver, rollover or renewal are simply ineffective against FDIC as they are [also] barred by estoppel." Id. at 14 (citing D'Oench) .
The applicable standards of review are well settled. Our review of the district court's grant of summary judgment is de novo. Eaton v. Jarvis Prod. Corp., 965 F.2d 922, 925 (10th Cir. 1992). Summary judgment is proper if the record shows that "there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). Additionally, " [w]e view the evidence and draw any inferences in a light most favorable to the party opposing summary judgment." Eaton, 965 F.2d at 925. Moreover, the moving party has the burden of showing that it is entitled to summary judgment as a matter of law. Ewing v. Amoco Oil Co., 823 F.2d 1432, 1437 (10th Cir. 1987). Once this burden is carried, however, the non-movants must go beyond the pleadings and by their affidavits, depositions, and the like show the existence of a genuine issue for trial. See Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S. Ct. 2548, 2553, 91 L. Ed. 2d 265 (1986).
To properly analyze ORA's claims, we must first review the origin and development of the D'Oench doctrine. In D'Oench, the FDIC sued the maker of a $5,000 demand note payable to Belleville Bank and Trust Company. The FDIC acquired the note as collateral for a loan to Belleville to facilitate the assumption of Belleville's liabilities by another bank. After the FDIC initiated suit, the maker presented receipts for the note which indicated that there was an understanding between the maker and the bank that the note would not be called for payment. The original note was executed by the maker to enable Belleville Bank to cover up losses the bank suffered on defaulted bonds that the maker had earlier sold to the bank. As a result, the note prevented bank examiners from discovering the default on the bonds. In furtherance of the scheme, the note maker agreed to make interest payments on the note, later to be refunded, to allow the bank to keep it "as live paper." Id., 315 U.S. at 454, 62 S. Ct. at 678.
The Supreme Court recognized that § 12B of the Federal Reserve Act evidenced a federal policy "to protect [the FDIC], a federal corporation, from misrepresentations made to induce or influence the action of [the FDIC], including misstatements as to the genuineness or integrity of securities in the portfolios of banks which it insures or to which it makes loans." Id. at 459, 62 S. Ct. at 680. Accordingly, the Court said that if the secret agreement asserted in D'Oench were allowed as a defense, the maker of the note would be enabled to defeat the purpose of the statute "by taking advantage of an undisclosed and fraudulent arrangement which the statute condemns and which the maker of the note made possible." Id. at 461, 62 S. Ct. at 681. The breadth of the D'Oench doctrine is indicated by the Court's illustrations and comments that follow:
D'Oench, 315 U.S. at 459, 62 S. Ct. at 680 (quoting Mount Vernon Trust Co. v. Bergoff, 272 N.Y. 192, 5 N.E.2d 196, 197 (1936)).
Despite the force of the estoppel doctrine thus developed to protect the FDIC,1 D'Oench "has not been read to mean that there can be no defenses at all to attempts by the FDIC to collect on promissory notes." FDIC v. McClanahan, 795 F.2d 512, 515 (5th Cir. 1986). Indeed, D'Oench was held inapplicable in an FDIC suit on a note where the borrower was a completely innocent party and a victim of failure of consideration by a bank's misconduct; the borrower had not lent himself to any scheme or arrangement by which the banking authority was or was likely to be misled. FDIC v. Meo, 505 F.2d 790, 792 (9th Cir. 1974). Moreover, D'Oench was held unavailable as a defense where the FDIC sought to enforce leases which facially manifested bilateral obligations; the obligor, which was required to purchase equipment by the lease terms, failed to do so and this failure of consideration was held to be an arguable defense, precluding summary judgment based on D'Oench estoppel. Howell v. Continental Credit Corp., 655 F.2d 743, 746 (7th Cir. 1981); see also FDIC v. Wright, 942 F.2d 1089, 1097 n. 9 (7th Cir. 1991) ("Courts have recognized that, when a writing manifesting bilateral obligations appears in the bank's records, D'Oench does not aid banking authorities.") (emphasis in original); FSLIC v. Two Rivers Associates, Inc., 880 F.2d 1267, 1275 (11th Cir. 1989) ("If however, the records of a bank evidence all the obligations of the bank, the regulating authority will not be deceived. Thus, D'Oench does not bar the assertion of defenses based on a bilateral obligation which appears in the bank's records.").2
The record thus shows a genuine issue of material fact concerning the FDIC's D'Oench estoppel theory. The estoppel theory was an avoidance or affirmative defense to ORA's reliance on the asserted bilateral obligations of the parties, one that the FDIC was required to plead affirmatively. Fed. R. Civ. P. 8(c). The FDIC had the burden to make a showing on its D'Oench estoppel theory. FDIC v. Meo, 505 F.2d at 792; see also Paul v. Monts, 906 F.2d 1468, 1474 (10th Cir. 1990) ("Estoppel is an affirmative defense upon which the defendant has the burden of proof."). As the non-moving party, ORA properly went beyond the pleadings and by Osborne's affidavit and the depositions, designated specific facts showing that there is a genuine issue for trial on the D'Oench estoppel issue--the presence vel non of the Osborne letter in Citizens' loan file. Celotex Corp. v. Catrett, 477 U.S. at 324, 106 S. Ct. at 2553. At trial on this genuine issue of fact, if it is found that an agreement to renew the ORA note was manifest in the Citizens' Bank files, then ORA will have established that D'Oench estoppel does not apply.3
We agree with this second argument of ORA that the summary judgment based on D'Oench was in error. It is true, as noted by the Fifth Circuit in FDIC v. McClanahan, 795 F.2d at 515, that the Supreme Court felt so strongly about the need to promote the D'Oench policies that it indicated the estoppel rule would apply even in cases where the maker of an instrument was "very ignorant and ill-informed of the character of the transaction [,]" D'Oench, 315 U.S. at 458-59, 62 S. Ct. at 680 (quoting Rinaldi v. Young, 92 F.2d 229, 231 (D.C. Cir. 1937), and "may not have intended to deceive any person" and where "creditors may not have been deceived or specifically injured." Nevertheless, as noted earlier, McClanahan observed that D'Oench has not been read to mean there can be no defenses at all to attempts by the FDIC to collect on promissory notes. McClanahan itself recognized the force of the reasoning in FDIC v. Meo, 505 F.2d at 792, that D'Oench estoppel should not apply where the maker was "wholly innocent" and was "not negligent in failing to discover the manner in which the stock order was actually executed." See D'Oench, 315 U.S. at 474, 62 S. Ct. at 687 ("The [FDIC] would succeed only to the rights which the bank itself acquired where ordinary and good-faith commercial transactions are involved.") (Jackson, J., concurring).
In Agri Export Co-op. v. Universal Savings Association, 767 F. Supp. 824, 832 (S.D. Tex. 1991), D'Oench was held inapplicable in a case where the plaintiff "did nothing that can be construed as participation in any type of scheme or arrangement whereby banking authorities were likely to be misled. There were no 'secret' or 'side' agreements of any kind, much less of a nature that would mislead banking authorities." In In re Kanterman, 97 B.R. 768, 776 (Bankr.S.D.N.Y.), aff'd, 108 B.R. 432 (S.D.N.Y. 1989), D'Oench was held inapplicable and the FDIC's motion for summary judgment was denied for like reasons. The court concluded that "estoppel, in the absence of a secret agreement, turns on whether the defendant was wholly innocent and not reckless."4 But see FSLIC v. Gordy, 928 F.2d 1558, 1567 n. 14 (11th Cir. 1991) (Meo holding based on an outdated understanding of the D'Oench doctrine). We have considered Gordy, but cannot agree that Langley v. FDIC, 484 U.S. 86, 108 S. Ct. 396, 98 L. Ed. 2d 340 (1987), which focused on § 1823(e), requires the rejection of Meo.
We feel that Langley supports this second argument of ORA that the summary judgment against ORA based on the D'Oench estoppel rule was not proper. Langley was decided under § 1823(e) as adopted in 1950. It held that Congress meant "agreement" in the statute to include more than promises to perform future acts; "agreement" also covers a condition to payment of a note, including the truth of an express warranty. Id. at 96, 108 S. Ct. at 403. However, the Langley Court considered the breadth of the D'Oench doctrine in construing the statute. Langley quoted from D'Oench's statement of the test for application of the estoppel, i.e., "when the maker 'lent himself to a scheme or arrangement whereby the banking authority was likely to be misled.' " Langley, 484 U.S. at 92, 108 S. Ct. at 402 (quoting D'Oench, 315 U.S. at 460, 62 S. Ct. at 681) (emphasis added in Langley) . Thus it is proper for ORA to argue that it had not lent itself to a scheme or arrangement by which the banking authority "was or was likely to be misled [,]" and that therefore the district court erred in applying the D'Oench estoppel.
Here, the FDIC points to no persuasive evidence in the summary judgment record to show that ORA lent itself to any scheme or arrangement that misled or was likely to mislead the banking authority. On the other hand, the affidavit of Mr. Osborne, submitted by ORA in opposition to the FDIC motion for summary judgment, directly denied any bad faith conduct and instead indicated only "ordinary and good-faith commercial transactions." D'Oench, 315 U.S. at 474, 62 S. Ct. at 687 (Jackson, J., concurring).5 Moreover, in the deposition of Ms. Northcutt, the FDIC liquidation assistant, there are clear statements that there was no reason to believe that ORA or Magnolia were involved in any wrongdoing in their transactions, nor was there any reason to believe ORA or Magnolia were careless or negligent in the transactions. Ms. Northcutt said she found a loan application dated in 1985 for ORA in the files. Doc. 70, Exh. C at 14, 20, 26.
Eight years after D'Oench, Congress withdrew § 12B from the Federal Reserve Act, expanding and enacting it separately as the Federal Deposit Insurance Act, Pub. L. 967, 64 Stat. 873 (81st Cong., 2d Sess.1950) (FDIA).6 On August 9, 1989, during the pendency of this appeal, § 1823(e) was amended by the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, Pub. L. No. 101-73, 103 Stat. 183 (1989) (FIRREA). Among its important provisions, FIRREA changed the language of § 1823(e) to include protection for the FDIC and the Resolution Trust Corporation as receiver of any depository institution.
We are not persuaded. The argument for retroactivity of FIRREA so as to make the FDIC as receiver the beneficiary of the strict procedural requirements is not supported by our recent opinions. In DeVargas v. Mason & Hanger-Silas Mason Co., Inc., 911 F.2d 1377, 1389-1393 (10th Cir. 1990), we declined to apply retroactively provisions of the Civil Rights Restoration Act of 1987 so as to invalidate the district court's summary judgment denying recovery under provisions of the Rehabilitation Act of 1973. We reviewed the retroactivity principles applied by the Supreme Court and concluded that the most recent decision, Bowen v. Georgetown University Hospital, 488 U.S. 204, 109 S. Ct. 468, 102 L. Ed. 2d 493 (1988), should be followed. We concluded that where congressional intent on retroactivity is clear, it governs. 911 F.2d at 1390. We followed the presumption applied in Bowen that a statute is deemed to be effective only for the future unless a contrary intent appears. 911 F.2d at 1392.
We are persuaded that we should here apply our most recent retroactivity decision in DeVargas and hold that FIRREA does not, as to the strict and categorical requirements of § 1823(e), apply retroactively to the commercial transactions involved here which were entered into several years before the enactment of FIRREA. The parties have not directed us to any legislative history which would indicate clear congressional intent on the question of retroactivity of § 1823(e). We have found only one statement, and it militates against retroactivity.7 There appears to be a consensus among the courts that clear indications on retroactivity cannot be found in the legislative history. See FDIC v. Wright, 942 F.2d 1089, 1095 (7th Cir. 1991); FDIC v. Dalba, No. 89-C-712-S, 1990 WL 43750 at * 3 (W.D. Wis. Feb. 27, 1990); FDIC v. Cherry, Bekaert & Holland, 129 F.R.D. 188, 192 (M.D. Fla .1989).8 In another context, we have held that limitations provisions of FIRREA should not be applied retroactively so as to revive claims which were already barred by state law when the FSLIC (later the FDIC) was appointed receiver, FDIC v. Regier Carr & Monroe, 1993 WL 43761 (10th Cir. 2/17/93) (No. 92-7109).9
As the Supreme Court stated in Langley, "one who signs a facially unqualified note subject to an unwritten and unrecorded condition upon its repayment has lent himself to a scheme or arrangement that is likely to mislead the banking authorities [.]" Id., 484 U.S. at 93, 108 S. Ct. at 402. Magnolia is thus clearly estopped under D'Oench to rely on the oral agreement. Accordingly, we affirm the district court's grant of summary judgment to the FDIC on the Magnolia note and its accompanying guarantees by Collins and Armstrong.
We review the district court's order for an abuse of discretion. White v. American Airlines, Inc., 915 F.2d 1414, 1425 (10th Cir. 1990). F.R.Civ.P. 60(b) provides, in part:
Although the respondent in D'Oench was the FDIC in its corporate capacity, the Court heavily relied on Deitrick v. Greaney, 309 U.S. 190, 60 S. Ct. 480, 84 L. Ed. 694 (1940), as the basis for the estoppel principle developed. Because Deitrick involved the FDIC as receiver, it has been held that the common law rule of D'Oench also applies to the FDIC as receiver. See FDIC v. McClanahan, 795 F.2d 512, 514 n. 1 (5th Cir. 1986). We agree with this reasoning.
The FDIC relies on FDIC v. Plato, 981 F.2d 852 (5th Cir. 1993), in support of its position on D'Oench. That opinion does contain an alternative ground of decision applying D'Oench because the promissory note found by FDIC auditors there made no reference to a related document relied on. Id. at 857. However, the opinion also pointed out that the letter of credit applications relied on by the obligors there had no "cross-reference to any promissory note. Indeed, the extensive boilerplate language appears to constitute a discrete bilateral contract between the applicant and the bank; no promissory note is contemplated by its terms." 981 F.2d at 856. The court noted that the "only nexus between the promissory note and security agreement, on the one hand, and the application and letter of credit, on the other hand, is a parol agreement between [the bank and the buyers]...." Id. (emphasis in original)
Thus the basic facts in FDIC v. Plato are in sharp contrast with those in our case. Here the letter confirming the agreement to renew the initial ORA note specifically says " [t]he initial note in the amount of $175,000.00 [of] Oklahoma Radio Associates is a ninety (90) day note with interest only due at maturity." This letter, signed by Citizens' Senior Vice President Osborne, was dated the same day as the original July 16, 1985, note of ORA, which was executed by ORA as the obligor, and which was in the exact amount of $175,000 in the letter, with maturity on demand no later than October 15, 1985, and with interest payable at maturity. The links between the documents here were thus clear and numerous, unlike the situation in FDIC v. Plato.
Several commentators agree. See C. Goforth, Criticizing the Financial Insurance Agencies' "Superpowers", 22 Ariz.St.L.J. 195, 205-06 (1990) ("Various cases have demonstrated that when an obligor is wholly without fault ... the D'Oench doctrine does not operate to bar such defenses even against the FDIC.") (citing Meo); J. Platt and R. Darby, A Primer on the Special Rights and Immunities of the Federal Deposit Insurance Corporation, 11 Okla.City Univ.L.Rev. 683, 703 (1986) (" [I]n order for an obligor to be estopped to assert a claim or defense under [D'Oench ], it must have engaged in some culpable conduct, however slight."); Note, Borrower Beware: D'Oench, Duhme and Section 1823 Overprotect the Insurer When Banks Fail, 62 S.Cal. L. Rev. 253, 289 (1988) ("The Meo opinion provides an excellent example of the proper manner in which a court should examine conduct of the borrower to determine whether that conduct created an estoppel.")
These three opinions applied FIRREA retroactively under the analysis in Bradley v. School Board of City of Richmond, 416 U.S. 696, 94 S. Ct. 2006, 40 L. Ed. 2d 476 (1974). As noted earlier, we elected instead to follow the Bowen analysis in our DeVargas opinion
Cf. United States v. Taliaferro, 979 F.2d 1399, 1403 (10th Cir. 1992) (FIRREA provision making longer federal criminal statute of limitations apply retroactively to criminal offense committed before enactment of FIRREA did not violate Ex Post Facto Clause). In other instances we have declined to rule on the retroactivity of some provisions of FIRREA where the result would have been the same under FIRREA or existing federal common law. Castleglen, Inc. v. RTC, 984 F.2d 1571 (10th Cir. 1993); Dababneh v. FDIC, 971 F.2d 428, 434 (10th Cir. 1992)