Opinion ID: 540346
Heading Depth: 2
Heading Rank: 1

Heading: The D'Oench, Duhme Doctrine.

Text: 9 The appellants concede that the D'Oench, Duhme doctrine bars their claim that the promissory note was extinguished in a transaction involving Tex-Star, because the transaction was not documented in RepublicBank's records. They argue instead that the D'Oench, Duhme doctrine violates their rights under the fifth amendment by depriving them of valuable property--their defense to liability on the note--without just compensation or due process of law. We disagree. 10 The D'Oench, Duhme doctrine is a common law rule of estoppel precluding a borrower from asserting against the FDIC defenses based upon secret or unrecorded 'side agreements' that alter[ ] the terms of facially unqualified obligations. Bell & Murphy & Assoc. v. Interfirst Bank Gateway, N.A., 894 F.2d 750, 753 (5th Cir.1990). Even borrowers who are innocent of any intent to mislead banking authorities are covered by the doctrine if they lend themselves to an arrangement which is likely to do so. Id. at 753-54. The doctrine thus favors the interests of depositors and creditors of a failed bank, who cannot protect themselves from secret agreements, over the interests of borrowers, who can. Id. at 754. 11 In this case, the appellants were in a position to protect themselves by ensuring that the alleged Tex-Star transaction was adequately documented in RepublicBank's records. They failed to do so. Because the absence of documentation was likely to mislead banking authorities as to the value of the Campbell Leasing note, the appellants are estopped from asserting against the FDIC and NCNB any claims relating to the Tex-Star transaction. Id. 12 The D'Oench, Duhme doctrine does not deprive the appellants of property without just compensation. The appellants have simply deprived themselves of certain defenses to liability by failing to protect themselves in the manner required by the D'Oench, Duhme doctrine. See United States v. Locke, 471 U.S. 84, 107-08, 105 S.Ct. 1785, 1799, 85 L.Ed.2d 64 (1985) (upholding a federal provision extinguishing mineral interests for failure to make a timely annual filing). The government has never been required to compensate [property owners] for the consequences of [their] own neglect. Texaco, Inc. v. Short, 454 U.S. 516, 530, 102 S.Ct. 781, 792, 70 L.Ed.2d 738 (1982). 13 Nor have the appellants been denied due process. The D'Oench, Duhme doctrine is a federal common law rule of general applicability that was established long before the appellants' claims arose. Because the appellants had a reasonable opportunity both to familiarize themselves with [its] general requirements and to comply with those requirements, due process has been satisfied. Locke, 471 U.S. at 108, 105 S.Ct. at 1799. We conclude that the D'Oench, Duhme doctrine does not violate the takings clause or the due process clause of the fifth amendment. 14