Opinion ID: 653233
Heading Depth: 2
Heading Rank: 1

Heading: Guarantee

Text: 23 The DeLongs contend that Alaska National agreed to release them from their guarantee with respect to the $200,000 line of credit. They claim that the bank acknowledged that they would not guarantee the loan in the July 24 memorandum to file and the July 28 letter it sent to them. They further assert that, even though they sought to add a condition to the terms that were outlined in the July 28 letter, they acquiesced in them orally during their discussions with the bank and, by signing the letter and returning it in October, they effectively exercised their option to discontinue the guarantee. 24 Even if it is assumed that the DeLongs' oral representations to the bank and October correspondence are indicative of an agreement with the bank, a highly questionable proposition, the agreement is not a defense to the FDIC's action to collect on the note. 25 The enforceability of a guarantee against the FDIC is a question of federal, not state, law. 12 U.S.C. Sec. 1819(b)(2)(A). Suits in which the FDIC is a party are deemed to arise under the laws of the United States. FDIC v. Zook Bros. Constr. Co., 973 F.2d 1448, 1450 (9th Cir.1992). Thus, the DeLongs may only assert their defense that they had a binding agreement that served to release them from the guarantee if federal law permits it. 26 In D'Oench, Duhme & Co. v. FDIC, 315 U.S. 447 (1942), the Supreme Court articulated a common law rule designed to implement a federal policy to protect [the FDIC], and the public funds which it administers, against misrepresentations as to the securities or other assets in the portfolios of the banks which [the FDIC] insures or to which it makes loans. Id. at 457. The Court held that a borrower may not assert an undisclosed agreement with a bank to defeat the FDIC's interest in a note: 27 The test is whether the note was designed to deceive the creditors or the public authority, or would tend to have that effect. It would be sufficient in this type of case that the maker lent himself to a scheme or arrangement whereby the banking authority on which [the FDIC] relied in insuring the bank was or was likely to be misled. 28 Id. at 460. 29 Congress has codified the common law D'Oench doctrine in 12 U.S.C. Sec. 1823(e). See Falk v. Mt. Whitney Sav. & Loan Ass'n, 983 F.2d 156, 160 (9th Cir.1993). 10 Courts have interpreted section 1823(e) in light of the D'Oench doctrine, and vice versa. See, e.g., Langley v. FDIC, 484 U.S. 86, 92-93 (1987); Falk, 983 F.2d at 160; In re Century Centre Partners Ltd. v. FDIC, 969 F.2d 835, 838 (9th Cir. Nov. 5, 1992), cert. denied, 113 S.Ct. 2997 (U.S. June 21, 1993). 30 In Zook Brothers, the Ninth Circuit considered the effect of a continuing guarantee for a loan to Zook Brothers Construction signed by Louise Zook. The guarantee remained in the bank's files after the credit agreement was amended and new notes were taken, even though Louise Zook had not consented to the new arrangements. Louise Zook claimed that because she had not consented to material alterations in the credit agreement, she was released from the 1980 guarantee by operation of Illinois law. The court rejected Zook's argument, holding that both Sec. 1823(e) and D'Oench, Duhme barred the defense. Federal law requires enforcement of the guaranty because the FDIC under D'Oench and Sec. 1823(e) is entitled to rely on documents in a loan file, and there is no basis for Zook's defenses based on state law as they depend on inferences contravening the guaranty which are raised, and may be proved, only by reference to documents which do not meet the requirements of Sec. 1823(e). 973 F.2d at 1453; see also FSLIC v. Gemini Management, 921 F.2d 241, 246 (9th Cir.1990) (D'Oench, Duhme barred counterclaims and affirmative defenses based on an unsigned letter from bank because letter was not a clear and explicit bilateral obligation). 31 The D'Oench doctrine controls here. The DeLongs may not rely upon their alleged oral acceptance of the bank's terms to defeat the FDIC's interest in their guarantee. As for the documents they have produced concerning their negotiations with the bank, although it appears that Alaska National intended to release the DeLongs from their guarantee with respect to the line of credit provided certain conditions were met, no executed agreement ever made its way into the bank's files. Thus the guarantee remained in effect. 32 The DeLongs rely on an exception to the D'Oench doctrine first articulated by the Ninth Circuit in FDIC v. Meo, 505 F.2d 790 (9th Cir.1974). In Meo, the court considered the plight of a borrower who executed a promissory note to a bank in exchange for shares of the bank's common stock that the bank never issued. The court declined to apply D'Oench, Duhme to bar Meo's defense of failure of consideration, reasoning that he was innocent of any wrongdoing and had not been negligent in failing to rectify the bank's error since he had no knowledge of it. Id. at 792-93. 33 Meo is not apposite. There was no mistake here, just a belated attempt by the DeLongs to alter the terms of their obligation. Although they argue that the bank was negligent in failing to memorialize their supposed acquiescence in the proposed terms of the release in its records, this is not the sort of negligence contemplated by Meo. As this circuit has recently explained, a borrower who fails to ensure that the terms of the loan are explicitly incorporated into the obligation where opportunity to do so exists is guilty of 'negligence'  and cannot invoke the Meo exception. Century Centre, 969 F.2d 835, 838. 34 Howell v. Continental Credit Corp., 655 F.2d 743 (7th Cir.1981), the other case cited by the DeLongs, does not help them either. Howell is a Seventh Circuit case and not binding in this circuit. In any event, it is distinguishable. In Howell, the FDIC sought to enforce its rights against a borrower under certain leases that had been assigned to a failed bank as part of a loan transaction. The borrower claimed that the leases were invalid because the third-party lessor had failed to perform in accordance with their terms. The court held that because the leases ... involved clearly manifest[ed] the bilateral nature of the lessee's and lessor's rights and obligations, D'Oench, Duhme did not bar the borrower's defense, which arose directly and explicitly from the provisions of the leases which were in the bank's files. 655 F.2d at 743. Here, by contrast, the bank did not fail to perform under any of the provisions of the guarantee. Thus, the defense the DeLongs attempt to assert does not arise from the face of the guarantee. 35 Because the DeLongs' defenses to liability are all premised on extrinsic evidence that may not be used to defeat the FDIC's interest in the guarantee, the district court did not abuse its discretion in rejecting them. Nor did it abuse its discretion in denying appellants' request for a continuance to develop them.