Court Opinion

ID: 9666616
Source: CourtListenerOpinion
Date Created: 2023-08-24 01:22:45.714944+00
Date Added: 2024-06-11T18:15:31.472709
License: Public Domain

STOVER, Judge,
dissenting.
I am persuaded that the Jones Country claims were barred by the doctrine of D’Oench, Duhme & Co. v. Federal Deposit Ins. Corp., 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 (1942) and 12 U.S.C. § 1823(e) (1988). I would sustain Bluebonnet’s first point of error and reverse and render this ease. D’Oench, Duhme and the federal statute and its progeny provide an objective test to evaluate the worth of banks’ assets without being concerned that an asset of the bank (note) is encumbered by some unrecorded agreement. Such assurances promote confidence, order, stability and substance in the examination of the fiscal soundness of a bank and assure accurate assessment of the fiscal condition of the bank based on its books. To depart from an objective test and proceed into the questionable uncertainty and unpredictability of the subjective or factfinding inquiry, in my judgment, would be elusive and ultimately detrimental to the process. I, therefore, respectfully dissent and would urge that the case be reversed and rendered.
Because of the vast amount of writing on this subject I feel it appropriate to limit this dissenting opinion basically to the rulings of the United States Supreme Court and the *881United States Court of Appeals, Fifth Circuit.
In Langley v. Federal Deposit Ins. Corp., 484 U.S. 86, 108 S.Ct. 396, 98 L.Ed.2d 340 (1987), the Supreme Court discussed D’Oench, Duhme as a precursor of § 1823(e). The Court declared that § 1823(e) was a matter of strict statutory construction. The Supreme Court affirmed the Fifth Circuit’s opinion in Langley1. The Fifth Circuit followed Langley with Beighley v. Federal Deposit Ins. Corp., 868 F.2d 776, 784 (5th Cir. 1989), applying the objective test.
Again in 1990, the Fifth Circuit in Bell & Murphy & Assoc, v. Interfirst Bank Gateway, N.A., 894 F.2d 750, 752-754 (5th Cir.), cert, denied, 498 U.S. 895, 111 S.Ct. 244, 112 L.Ed.2d 203 (1990) followed the objective test and held that a successor bank (bridge bank) could assert D’Oench, Duhme and § 1823(e) defenses:
The Supreme Court examined the statutory scheme that created the FDIC and concluded that it evidenced a “federal policy to protect ... [the FDIC] and the public funds which it administers, against misrepresentations as to ... the assets in the portfolios of the banks which ... [the FDIC] insures or to which it makes loans.” D’Oench, Duhme, 315 U.S. at 457, 62 S.Ct. at 679.
The Supreme Court of the United States and the Fifth Circuit cases that have been reviewed are indicative of the fact that strict statutory construction, looking to the common law of D’Oench, Duhme when construing the statute, applies in determining whether or not there is (1) a written agreement encumbering an asset, (2) executed contemporaneously by the bank and borrower, (3) approved by senior bank officials (4) appearing in the records whereby a bank examiner would be made aware of a “side agreement” that alters the terms of a facially unqualified obligation 2. It is concluded from our research of the cases from the Supreme Court in Langley through the Fifth Circuit Court that the question of whether there is a written agreement wherein the bank is to perform services or obligations outside of a normal loan transaction must be determined as a matter of law. Fair v. NCNB Texas Nat. Bank, 733 F.Supp. 1099, 1104-1105 (N.D.Tex.1990) applies the matter of law standard.
As stated in Bowen v. Federal Deposit Ins. Corp., 915 F.2d 1013, 1016 (5th Cir.1990), D’Oench, Duhme bars the use of unrecorded agreements. “Simply put, transactions not reflected on the bank’s books do not appear on the judicial radar screen either.” Id.
Looking at this transaction on May 7,1987 contemporaneously with the making of the loan (which is the standard required by Langley), there is no written agreement executed by the bank and borrower for the bank to act as an agent in procuring the insurance for Jones Country. There is no approval by any senior bank official or loan committee that the bank act in such capacity. There is only a facially unqualified obligation executed in a normal banking transaction wherein the bank is lending money for a borrower to acquire casualty insurance required by the bank for financing of loans on motor vehicles.
The facts involving this case are unusual. For one thing, this is not a suit by the FDIC to collect a note. Instead, this is a ease wherein the borrower is seeking affirmative action some five and a half years after a banking transaction took place (after such passage of time, miraculously there remained in the bank files records of the transaction). Moreover, the borrower paid off the obligation to Home Savings without assertion of failure of consideration of the note prior to acquisition by the bridge bank (Bluebonnet). In addition, the principal loan officer who handled the transaction is deceased.
There is a significant distinction between an agreement to loan money for the purpose of procuring insurance and an agreement to procure such insurance. Only the former is reflected in the written documentation. It is the quality of papers present not the quantity that controls the transaction. There is no *882written agreement executed by the bank under proper authority to procure insurance.
Even if one accepted as true appellee’s statement that “Home Savings and/or Sel-man undertook to obtain insurance for Ap-pellee and as part of the parties’ entire bargain,” all that would exist is an unqualified note which is, in fact, subject to undisclosed conditions not specifically memorialized. This is in direct violation of statute and prohibited by D’Oench, Duhme. Langley, supra. There is nothing in writing that Home Savings obligated itself to procure the policy on behalf of its customer. The transaction as documented in Home Savings’ records is simply a loan conducted as a regular banking transaction.
In Bowen v. Federal Deposit Ins. Corp., 915 F.2d at 1016-1017, Justice Goldberg joined by Justices Gee and Williams of the Fifth Circuit addressed the issues raised by D’Oench, Duhme and eloquently expressed the opinion of this writer on the subject matter:
The lack of a malfeasance requirement makes D’Oench, Duhme a sharp sword and sturdy shield indeed. What is the purpose of such imposing armaments? Fundamentally, D’Oench attempts to ensure that FDIC examiners can accurately assess the condition of a bank based on its books. The doctrine means that the government has no duty to compile oral histories of the bank’s customers and loan officers. Nor must the FDIC retain linguists and cryp-tologists to tease out the meaning of facially-unencumbered notes. Spreadsheet experts need not be joined by historians, soothsayers, and spiritualists in a Lewis Carroll-like search for a bank’s unrecorded liabilities. Perhaps mindful of the fate that befell the Baker, whose search for the Snark ended with his own disappearance, D’Oench, Duhme seeks to ensure that a bank’s assets do not “softly and suddenly vanish away.” [See L. Carroll, The Hunting of the Snark, Fit the Third and Fit the Eighth (i.e., verses 3, 8) (1876).]
The dangers of a contrary policy should be obvious. Today, stable financial institutions sometimes seem as elusive as the Snark. Unrecorded agreements — those rooted in the loose soil of casual transactions as much as those that spring from the malodorous loam of outright fraud— are a threat to the ecology of the banking system that we can ill-afford. To check the growth of these hardy perennials. D’Oench forces borrowers to bear the risk that their unorthodox plants will bear no fruit. Those who till these soils may not shift the cost of their peculiar agronomy to the FDIC, the bank’s depositors and unsecured creditors, and the taxpayers and depositors who fund the FDIC. See Bell & Murphy, 894 F.2d at 753, 754; F.D.I.C. v. McClanahan, 795 F.2d 512, 516 (5th Cir. 1986); First State Bank v. City and County Bank, 872 F.2d 707, 715 (6th Cir.1989).
As to the Bowens’ malfeasance requirement, we would decline to adopt it even in the absence of precedent. Adulterating D’Oench, Duhme would amount to abandoning a bedrock protection for the uncertainty of quick-clay, a seemingly stable substance notorious for its rapid liquefaction. The firm resolution we provide today would collapse into an uncertain and fact-bound inquiry, soon to be followed by a landslide of “good faith” claims against the FDIC. We are not willing to remake the topography of the banking system in such a fashion. Nor, apparently, is Congress, which has directed the courts to void unrecorded agreements against the interests of FDIC-Receiver without regard to malfeasance. See FIRRE Act, supra note 3 (recent amendments to D’Oench’s statutory counterpart, 12 U.S.C. § 1823(e)). Accordingly, we reaffirm our earlier holdings: the D’Oench, Duhme doctrine is applicable even in the absence of malfeasance.
I would reverse and render. Being in the minority, I respectfully dissent.

. See Federal Deposit Ins. Corp. v. Langley, 792 F.2d 541 (5th Cir.1986).

. One writer in Real Property, 47 SMU L.Rev. 1549, 1577 (1994), opines that the Fifth Circuit has not expressly adopted the use of the "reasonably prudent loan examiner" standard.