Opinion ID: 2210624
Heading Depth: 1
Heading Rank: 6

Heading: Recent Authority.

Text: A. Kasal. In a very recent case, the eighth circuit court of appeals revisited the issue on facts similar to Krause and reached the same result. See FDIC v. Kasal, 913 F.2d 487, 490 (8th Cir.1990) (Heany, J., dissenting on other grounds). The court relied on its rationale in Krause. Id. at 490. In addition the court cited in support of its holding the D'Oench, Duhme common law doctrine. Id. at 491 (citing D'Oench, Duhme & Co. v. FDIC, 315 U.S. 447, 456-62, 62 S.Ct. 676, 678-82, 86 L.Ed. 956, 961-65 (1942)) (debtor is estopped from asserting secret side agreements regarding the instrument in question). See also Oehlert, 252 N.W.2d at 730-32 (applying common law doctrine of D'Oench, Duhme ). Interestingly, the court addressed a contention that several commentators have recently criticized the broad reach of section 1823(e) and the D'Oench, Duhme doctrine. Kasal, 913 F.2d at 492; see, e.g., Note, Borrower Beware: D'Oench, Duhme and Section 1823 Overprotect the Insurer When Banks Fail, 62 S.Cal.L.Rev. 253, 318-19 (1988) (courts have lost sight of the equitable roots of ... the D'Oench, Duhme doctrine ... and have expanded greatly the protection afforded the bank insurer); Langley v. FDIC: FDIC SuperpowersA License to Commit Fraud, 1989 Ann.Rev. Banking L. 558, 580 (describing Langley as endors[ing] a policy redistributing the cost of bank failures from the taxpayers to individuals whose liability may be significant). Acknowledging the result in the case may appear harsh or inequitable, the court felt it was constrained by both the statute and federal common law to reject appellant's defense of payment, since that defense is based upon secret unwritten side agreements never entered in the records of the bank. Kasal, 913 F.2d at 492. B. Willow Tree. We also have had occasion to consider section 1823(e) and the D'Oench, Duhme doctrine codified in that section. See Willow Tree Investments, Inc. v. Wagner, 453 N.W.2d 641, 642-44 (Iowa 1990). In Willow Tree the FDIC purchased from a failed bank a note and mortgage covering farmland. The FDIC sold the note and mortgage to a third party who sued the makers of the note. The makers claimed they had an oral agreement with the bank. According to the makers they agreed to sell their farmland except for the homestead. Any proceeds from the sale would serve as a complete satisfaction of the note, leaving the homestead free and clear of the mortgage. The third party purchaser did not dispute this agreement but asserted that section 1823(e) protected the third party against the agreement. The district court agreed and sustained the third party's motion for summary judgment. Id. at 641-42. We agreed with the district court's ruling. We noted the defendants conceded that their oral agreement did not meet the requirements of section 1823(e). The only issue was whether the protection afforded to the FDIC against such agreements extended to third-party purchasers from the FDIC. Id. at 643-44. We thought that a failure to extend [such] protection would undermine the statutory purposes of facilitating the continuance of normal banking operations and protecting the depositors and creditors of insolvent banks. Id. at 644. We think this holding is consistent with the reasoning and result reached by the eighth circuit court of appeals in Virginia Crossings, Krause, and Kasal.