Opinion ID: 536168
Heading Depth: 2
Heading Rank: 4

Heading: Applicability of 12 U.S.C. Sec. 1823(e)

Text: 19 FDIC's final argument is that 12 U.S.C. Sec. 1823(e) requires reversal of the district court's decision. Section 1823(e) provides that the rights and interests of the FDIC in assets acquired from a bank pursuant to its statutory duties cannot be diminished or defeated by agreements that do not meet certain requirements, including the requirement that the agreement be disclosed in bank records. 5 See generally Langley v. FDIC, 484 U.S. 86, 90-93, 108 S.Ct. 396, 400-02, 98 L.Ed.2d 340 (1987) (discussing scope of agreement under section 1823(e)). FDIC argues that Bracero, in neglecting to retrieve the mortgage note from Girod, lent itself to an unwritten agreement or scheme likely to mislead the FDIC. Under this alleged secret agreement, Girod was allowed to keep the note ostensibly as security for another loan, and thus mislead the bank examiners, and in exchange Girod agreed not to negotiate the mortgage note or demand payment on it. Since section 1823(e) protects the FDIC from such an agreement, FDIC contends that Bracero is estopped from defending on the ground that the mortgage note was cancelled. 20 The district court concluded that Bracero's failure to retrieve the note was due to good faith neglect on Bracero's part and that there was no secret agreement between Bracero and Girod. 694 F.Supp. at 1033, 1035, 1038. FDIC has not demonstrated that these determinations were clearly erroneous and we, therefore, must agree that FDIC has failed to establish the existence of any undisclosed agreement that would implicate section 1823(e). 21 Even if there were a secret agreement between Bracero and Girod, however, section 1823(e) would not entitle FDIC to recover on the note, because the note was discharged by the payment and cancellation of the underlying debt before FDIC ever obtained it. Since the note was invalidated by acts that were independent of the alleged secret agreement, the note was not an asset protected by section 1823(e). See Commerce Federal Savings Bank v. FDIC, 872 F.2d 1240, 1244-45 (6th Cir.1989) (the statute 'does not apply when ... the parties contend that no asset exists ... and that such invalidity is caused by acts independent of any understanding or side agreement.' ) (quoting FDIC v. Merchants National Bank of Mobile, 725 F.2d 634, 639 (11th Cir.), cert. denied, 469 U.S. 829, 105 S.Ct. 114, 83 L.Ed.2d 57 (1984)); Grubb v. FDIC, 868 F.2d 1151, 1158-59 (10th Cir.1989) (1823(e) is inapplicable where notes were voided before FDIC acquired them). See also Langley, 484 U.S. at 93-94, 108 S.Ct. at 402-03 (where instrument is rendered void, rather than merely voidable, before being acquired by FDIC, the instrument is not an asset protected by section 1823(e)). 6 22 Affirmed. Costs to appellee.