Opinion ID: 2253153
Heading Depth: 2
Heading Rank: 1

Heading: Legal Sufficiency of the Guarantee

Text: O'Malley first argues that the guarantee never formed part of the Dine loan transaction. He argues that he left the guarantee with Bekta, to be used only if Dine could not get the loan otherwise. In support of his argument, O'Malley relies on bank records that do not refer to a guarantee. O'Malley contends that it was insufficient for the FDIC to merely show that a document called a guarantee existed in the bank files. As the appellate court noted, O'Malley's argument is very similar to an argument rejected in Powers, 576 F.Supp. 1167. In Powers, the FDIC sued to enforce a guarantee. Although Powers acknowledged signing the guarantee, he argued that he had never agreed to let the bank use the guarantee. When Powers signed the document, he left the remainder of the document blank, to be completed later. The FDIC later found the guarantee among the bank's files. Powers introduced affidavits to prove that the guarantee was not executed in connection with the underlying loan. The court, however, barred Powers' defenses under section 1823(e), finding that Powers relied on an unwritten understanding to undermine a facially sufficient guarantee. Other courts have barred unwritten understandings arising under similar circumstances. See, e.g., Wright, 942 F.2d 1089 (note maker was barred from asserting that notes found in bank files were not intended to be used until bank approved a line of credit); Federal Deposit Insurance Corp. v. McClanahan (5th Cir.1986), 795 F.2d 512 (the defendant recklessly signed a document in blank and thereby lent himself to a scheme that permitted the misrepresentation of assets); Adams v. Madison Realty & Development, Inc. (3d Cir.1991), 937 F.2d 845 (investors who signed unconditional promissory notes could not raise fraud in the inducement as a defense); Federal Deposit Insurance Corp. v. Gardner (S.D.Miss.1985), 606 F.Supp. 1484 (note maker could not assert agreement between bank president and note maker that bank would look solely to a third party for payment of the note). Ultimately, O'Malley's argument is based on an understanding between O'Malley and Bekta that the guarantee would only be used if Dine could not get the loan on his own. O'Malley signed the guarantee, he left it with a bank director, the FDIC found the guarantee in the files, and O'Malley now argues that the guarantee would not be used unless certain circumstances arose. O'Malley's argument is based on the existence of an unwritten understanding that does not meet the statutory requirements. Once the FDIC found the guarantee in the bank records, it did not have to disregard the facially sufficient guarantee simply because other bank records did not refer to it. See Bowen v. Federal Deposit Insurance Corp. (5th Cir. 1990), 915 F.2d 1013, 1016 (the FDIC has no duty to compile oral histories of the bank's customers and loan officers and need not retain linguists and cryptologists to tease out the meaning of facially-unencumbered notes); Armstrong v. Resolution Trust Corp. (1993), 157 Ill.2d 49, 191 Ill.Dec. 46, 623 N.E.2d 291 (the borrowers could not avoid section 1823(e) by inferences drawn from bank records); see also Federal Deposit Insurance Corp. v. O'Neil (7th Cir.1987), 809 F.2d 350, 353-54; Federal Deposit Insurance Corp. v. Zook Brothers Construction Co. (9th Cir. 1992), 973 F.2d 1448, 1453; Beighley v. Federal Deposit Insurance Corp. (5th Cir. 1989), 868 F.2d 776, 783-84.