Court Opinion

ID: 8986199
Source: CourtListenerOpinion
Date Created: 2022-11-27 11:46:59.061736+00
Date Added: 2024-06-11T17:10:47.442378
License: Public Domain

NATHANIEL R. JONES, Circuit Judge,
dissenting.
I agree with the majority that application of the D’Oench doctrine is not necessarily limited to cases brought by the FSLIC, and that the district court correctly granted Security’s motion to dismiss. I dissent, however, because of my belief that the majority’s opinion unnecessarily expands the protection afforded the FDIC under the D’Oench doctrine. In my view, that doctrine was only intended to apply to situations where the FDIC acquires an asset from a failed institution. As the plaintiffs had already paid back all the money they had borrowed, the FDIC did not acquire an “asset” for the purposes of D’Oench.
The majority broadens the scope of D’Oench to situations where the FDIC does not retain an interest in an asset. Its limits, however, should be recognized; otherwise, the burden on borrowers could become onerous and the powers of regulators more expansive. See generally Sontag, To Thrift Fraud Victims, Government Says ‘Tough Luck’, 13 Nat’l L.J. 3 (Sept. 24, 1990) (describing D’Oench as a “once-little-used doctrine ... applied to nearly every major S & L failure as myriad borrowers try to get out from under their debts.”).
I do not favor applying “the logic of D’Oench” to situations where the FDIC does not acquire an asset simply in order to protect the FDIC from liability. That an asset be acquired is a requirement frequently spelled out. The D’Oench decision itself spoke of “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[.]” 315 U.S. at 457, 62 S.Ct. at 679 (emphasis added). The Supreme Court’s most recent case dealing with 12 U.S.C. § 1823(e), which is the statutory version of D’Oench, stated that the policy behind section 1823(e) is “to allow federal and state bank examiners to rely on a bank’s records in evaluating the worth of the bank’s assets.” Langley v. Federal Deposit Ins. Corp., 484 U.S. 86, 91, 108 S.Ct. 396, 401, 98 L.Ed.2d 340 (1987) (emphasis added). See also Vernon v. Resolution Trust Corp., 907 F.2d 1101, 1107 (11th Cir.1990) (“[T]he D’Oench doctrine has been used to protect entities that have acquired assets of failed banks from the FSLIC.”) (emphasis added).
While the majority concedes that section 1823(e) contains an asset requirement, it yet argues that D’Oench can protect the FDIC even when it has no interest in an asset. Whatever the differences in scope between section 1823(e) and D’Oench, however, I remain unconvinced that D’Oench can bar a claim when the FDIC does not retain an interest in an asset of a failed institution. In any event, the majority argues that the FSLIC did have an interest in an asset; the asset being “a continuing interest in the entire loan agreement after the $200,000 was repaid.”
I would find that no asset was acquired because plaintiffs had paid back all of the money they borrowed from Commerce. Commerce Federal Savings Bank v. *342FDIC, 872 F.2d 1240, 1245 (6th Cir.1989) (in case involving section 1823(e) codification of D’Oench, “deed of trust was not an acquired asset of the FDIC, because [appellant] ... had satisfied all outstanding indebtedness.”)- Our decision in Commerce Federal was followed by the First Circuit in another section 1823(e) case. The First Circuit stated that:
even if there were a secret agreement between [the bank and its borrower], 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[.]
FDIC v. Bracero & Rivera, Inc., 895 F.2d 824, 830 (1st Cir.1990).
I would not apply D’Oench to bar plaintiffs’ claim in this case. Instead, the'merits of plaintiffs’ claims under the terms of the loan agreement should be addressed. I respectfully dissent.