Court Opinion

ID: 4407788
Source: CourtListenerOpinion
Date Created: 2019-06-18 17:00:32.427454+00
Date Added: 2024-06-11T14:52:46.222524
License: Public Domain

FILED
                                                                      United States Court of Appeals
                      UNITED STATES COURT OF APPEALS                          Tenth Circuit

                             FOR THE TENTH CIRCUIT                            June 18, 2019
                         _________________________________
                                                                          Elisabeth A. Shumaker
                                                                              Clerk of Court
 CADLEROCK III, LLC, an Ohio limited
 liability company,

       Plaintiff - Appellant,

 v.                                                         No. 18-6171
                                                     (D.C. No. 5:16-CV-01071-F)
 DUSTIN WHEELER,                                            (W.D. Okla.)

       Defendant - Appellee.
                      _________________________________

                             ORDER AND JUDGMENT*
                         _________________________________

Before BRISCOE, BALDOCK, and BACHARACH, Circuit Judges.
                   _________________________________

      The Supreme Court’s decision in D’Oench, Duhme & Co. v. FDIC, 315 U.S.
447 (1942), and its statutory counterpart, 12 U.S.C. § 1823(e), bar certain defenses

against claims by the Federal Deposit Insurance Corporation (FDIC) and its

transferees. Cadlerock III, LLC, an FDIC transferee, sued Dustin Wheeler to enforce

his personal guarantees of certain loans issued by The Bank of Union (the Bank)

before it failed and its assets were acquired by the FDIC. Following a bench trial, the

      *
        After examining the briefs and appellate record, this panel has determined
unanimously to honor the parties’ request for a decision on the briefs without oral
argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore
submitted without oral argument. This order and judgment is not binding precedent,
except under the doctrines of law of the case, res judicata, and collateral estoppel. It
may be cited, however, for its persuasive value consistent with Fed. R. App. P. 32.1
and 10th Cir. R. 32.1.
district court held that D’Oench and § 1823(e) do not apply to Wheeler’s defense that

the Bank had agreed to release his guarantees. The court therefore entered judgment

in Wheeler’s favor on Cadlerock’s claim. Exercising jurisdiction under 28 U.S.C.

§ 1291, we reverse the district court’s judgment and remand for entry of judgment in

favor of Cadlerock.

I.    Background1

      During their marriage, Dustin Wheeler and his former wife, Shana Wheeler,

owned two businesses: a Chevrolet dealership (Wheeler Chevrolet) and a mobile

home rental and sales business (Wheeler Rental). From 2007 to 2012, Wheeler

Rental borrowed millions of dollars from the Bank. On behalf of Wheeler Rental,

Dustin and Shana executed multiple promissory notes in connection with these loans.

In August and September 2007, Dustin also signed two personal guarantees of

Wheeler Rental’s indebtedness to the Bank (Guarantees).

      Dustin and Shana divorced in 2011. Their divorce decree, which incorporated

a settlement agreement, allocated Wheeler Chevrolet and its associated debts to

Dustin, and Wheeler Rental and its associated debts to Shana. The divorce decree

also provided that the proceeds from the sale of the marital residence would be used

to pay down specified debts. After their divorce, all promissory notes on behalf of

      1
        We recite the facts as found by the district court in its Amended Findings of
Fact and Conclusions of Law following the bench trial. Cadlerock does not contend
that any of the district court’s factual findings is clearly erroneous.

                                          2
Wheeler Rental were executed only by Shana. Shana also signed new guarantees of

the Wheeler Rental loans; Dustin did not.

      When the Bank failed in January 2014, the FDIC was appointed as receiver.

At that time, Dustin’s Guarantees of the Wheeler Rental debt remained in the Bank’s

records. Although the Bank’s files did not contain any explicit agreement releasing

the Guarantees, its records included the following documents: the Wheelers’ divorce

decree; four post-divorce promissory notes signed only by Shana on behalf of

Wheeler Rental; six post-divorce guarantees of Wheeler Rental’s debt, also signed

only by Shana; two Loan Officer Memos summarizing Wheeler Rental’s debt that

listed Shana as the sole guarantor; and other internal memoranda and letters from the

Bank related to Wheeler Rental’s debt that referenced only Shana.

      The FDIC sold the Wheeler Rental promissory notes, as well as other security

instruments, mortgages, and guaranty agreements, to Cadlerock’s affiliate, who

assigned those assets to Cadlerock. Cadlerock obtained a default judgment in state

court against Wheeler Rental in excess of $5 million. Cadlerock then filed this action

against Wheeler in the district court to collect on its judgment by enforcing his

Guarantees of the Wheeler Rental debt.

      Wheeler asserted four defenses, only two of which are pertinent to this appeal.

He contended that his signature on the September 2007 Guaranty was forged. The

court held against Wheeler on that issue, see Aplt. App., Vol. I at 274-75, and he has

not appealed that ruling. Wheeler also argued that the Bank had released him from

his Guarantees of the Wheeler Rental debt before the Bank failed. Following a bench

                                            3
trial, the district court held in favor of Wheeler on that defense. In doing so, the

court held that the so-called “no asset” exception to § 1823(e) applied in this case,

allowing Wheeler to assert his release defense without satisfying the requirements of

that section. Alternatively, the court held that the release agreement asserted by

Wheeler in defense of Cadlerock’s claim satisfied the requirements of D’Oench and

§ 1823(e) and was therefore enforceable against Cadlerock. On appeal, Cadlerock

argues that the district court erred as a matter of law in both of these rulings.2

II.    Discussion

       The resolution of this appeal turns on the application of D’Oench and

§ 1823(e) to the facts found by the district court after a bench trial. We review the

court’s application of the law de novo. San Juan Cty. v. United States, 754 F.3d 787,

796 (10th Cir. 2014).

       A.     The D’Oench Doctrine and § 1823(e)

       D’Oench held that debtors obligated to a failed bank could not assert a side

agreement with the bank as a defense against the FDIC’s efforts to collect on the

debtors’ notes. See Castleglen, Inc. v. Resolution Tr. Corp., 984 F.2d 1571, 1575-76

(10th Cir. 1993). “The Court held that federal policy evinced by provisions of the

Federal Reserve Act barred the assertion of the secret agreement by one responsible

       2
        Wheeler raised two other defenses in the district court: (1) his liability for
Wheeler Rental’s debt was extinguished by his settlement agreement with the FDIC
regarding Wheeler Chevrolet’s debt, and (2) enforcement of his August 2007
Guaranty was barred by the statute of limitations. The court rejected both of these
defenses, see Aplt. App., Vol. I at 276-77; id. at 278 n.15, and Wheeler has not
appealed these rulings.
                                            4
for creation of the false status of the note in the hands of the bank.” Id. D’Oench’s

holding was codified in 12 U.S.C. § 1823(e). See Castleglen, 984 F.2d at 1576. That

section provides:

       No agreement which tends to diminish or defeat the interest of the [FDIC]
       in any asset acquired by it under this section or section 1821 of this title,
       either as security for a loan or by purchase or as receiver of any insured
       depository institution, shall be valid against the [FDIC] unless such
       agreement—
              (A) is in writing,
              (B) was executed by the depository institution and any person
              claiming an adverse interest thereunder, including the obligor,
              contemporaneously with the acquisition of the asset by the
              depository institution,
              (C) was approved by the board of directors of the depository
              institution or its loan committee, which approval shall be reflected in
              the minutes of said board or committee, and
              (D) has been, continuously, from the time of its execution, an
              official record of the depository institution.
12 U.S.C. § 1823(e).3

       Notably, “[a]s the doctrine has evolved, its focus has shifted from the

fraudulent, illegal, or secret character of the debtor’s acts to the effect the acts have

on the regulatory agency’s ability to evaluate quickly and accurately a savings

institution’s assets.” Castleglen, 984 F.2d at 1576. “Bank examiners must often

conduct these evaluations and decide the course of the bank’s fate overnight.” FDIC

v. Noel, 177 F.3d 911, 918 (10th Cir. 1999). “Neither the FDIC nor state banking

       3
        For the purposes of this case, the reach of the statute and D’Oench are
coextensive. See Castleglen, 984 F.2d at 1576 (noting D’Oench and § 1823(e) are
“usually . . . construed in tandem”).

                                             5
authorities would be able to make reliable evaluations if bank records contained

seemingly unqualified notes that are in fact subject to undisclosed conditions.”

Langley v. FDIC, 484 U.S. 86, 91-92 (1987). Thus, one purpose of D’Oench and

§ 1823(e) is to allow regulators to rely on an asset’s face value. Castleglen, 984 F.2d

at 1577. And the protections of the doctrine extend, as well, to third party transferees

from the FDIC. See id.

       “The purpose of the doctrine is certainty,” and the statutory requirements for a

valid side agreement are “‘categorical.’” Id. at 1579 (quoting Langley, 484 U.S. at

95). Therefore, “[s]cattered evidence in corporate records from which one could

infer the existence of an agreement does not meet the requirements of the statute.”

Id. (citing decisions rejecting as insufficient to satisfy the statute: (1) suggestive

evidence in a bank’s records, (2) documents from which an inference of an agreement

could be drawn, and (3) agreements implicit in record documents but apparent only to

someone familiar with the negotiations).

       B.     The “No Asset” Exception to § 1823(e)

       Courts have recognized that “[§] 1823(e) does not apply to every inquiry

concerning an asset.” FDIC v. Merch. Nat’l Bank of Mobile, 725 F.2d 634, 639

(11th Cir. 1984). Merchants National Bank identified the following circumstances,

commonly referred to as the “no asset” exception, where the statute does not apply:

       It does not apply when the court determines if an asset is invalid for fraud,
       or for breach of bilateral obligations contained in the asset. In such cases
       the parties contend that no asset exists or an asset is invalid and that such
       invalidity is caused by acts independent of any understanding or side
       agreement.

                                             6
Id. (citations omitted). We and our sister circuits have consistently cited this

language in Merchants National Bank to define the contours of the no asset

exception. See, e.g., Grubb v. FDIC, 868 F.2d 1151, 1158-59 (10th Cir. 1989).

Merchants National Bank ultimately held that the exception it recognized did not

apply in that case, where a party sought to resolve an asserted ambiguity in a failed

bank’s records with extrinsic evidence, including the “intent of the parties,

knowledge by FDIC, and surrounding circumstances,” that did not meet § 1823(e)’s

requirements. 725 F.2d at 637, 639. The court reasoned that “Congress did not

intend that Sec. 1823(e) be avoided in this manner; [such a] construction would drain

substantial vitality from Sec. 1823(e), as applied to this case, by throwing into

question the very records of the bank that the statute entitles FDIC to consider and

rely upon.” Id. at 639.

      Later, in Langley, the Supreme Court observed that the presence of fraud could

be relevant to § 1823(e)’s requirement that the agreement in question tends to

diminish the “interest” of the FDIC in an “asset.” 484 U.S. at 93 (internal quotation

marks omitted). The Court held that “the real defense of fraud in the factum—that is,

the sort of fraud that procures a party’s signature to an instrument without knowledge

of its true nature or contents—would take the instrument out of § 1823(e), because it

would render the instrument entirely void, thus leaving no right, title or interest that

could be diminished or defeated.” Id. at 93-94 (citations, brackets, and internal

quotation marks omitted). But the court did not apply such an exception to § 1823(e)

                                            7
in Langley because the facts there supported only fraud in the inducement, and

voidable title in an asset is an “interest” transferrable to the FDIC. Id. at 94.

       This court applied the no asset exception where promissory notes had already

been voided by a district court judgment when a bank failed and the FDIC stepped in

as receiver. Grubb, 868 F.2d at 1158-59. We held that, due to the preexisting

judgment, “the FDIC acquired no right, title or interest in the . . . notes that the fraud

claims and defenses could diminish or defeat, and section 1823(e) does not bar those

claims and defenses.” Id. at 1158 (internal quotation marks omitted). We reasoned

that, “because a judgment already existed when the FDIC purchased [the bank’s]

assets, the purposes of section 1823(e) [were] not vitiated. The judgment provided

the FDIC a reliable record indicating that the notes were void . . . .” Id. at 1159. In

support of our holding in Grubb, we cited both Langley and Merchants National

Bank. Id. at 1158-59.

       C.     D’Oench and § 1823(e) Bar Wheeler’s Release Defense

       We hold that the D’Oench doctrine and § 1823(e) apply to Wheeler’s release

defense and bar him from asserting it against Cadlerock, as the FDIC’s transferee.

              1.     The Agreement Releasing Wheeler’s Guarantees Does Not
                     Satisfy the Requirements of § 1823(e)

       Wheeler’s defense against Cadlerock’s claim is based on an agreement by the

Bank to release his Guarantees of the Wheeler Rental debt. Because such an

“agreement” would tend to diminish or defeat the FDIC’s interest in “assets,” namely

Wheeler’s Guarantees, it must satisfy the requirements of § 1823(e). Among other

                                            8
conditions, the agreement must be in writing, it must be executed by both the Bank

and Wheeler, and it must have been an official record of the Bank continuously since

its execution. See 12 U.S.C. § 1823(e)(1)(A), (B), (D).

      When the FDIC acquired the Bank’s assets, the Bank’s records did not contain

an explicit written release of Wheeler’s Guarantees. The district court nonetheless

characterized the evidence of a release agreement as “clear and convincing,” even

“overwhelming.” Aplt. App., Vol. I at 272 & n.9. In addition to documents in the

Bank’s records, the court cited a great deal of testimony from the trial. But it also

pointed separately to certain documents that the FDIC received when the Bank failed,

which it stated were “easily sufficient” to establish that Wheeler was not a guarantor

of Wheeler Rental’s debt. Id. at 273.

      These documents included the Wheelers’ divorce decree incorporating their

settlement agreement;4 four post-divorce promissory notes signed only by Shana on

behalf of Wheeler Rental; six post-divorce guarantees of Wheeler Rental’s debt, also

signed only by Shana; two Loan Officer Memos summarizing Wheeler Rental’s debt

that listed Shana as the sole guarantor; and other internal memoranda and letters from

the Bank related to Wheeler Rental’s debt that referenced only Shana.

      4
         The district court took pains to emphasize that the terms of the Wheelers’
divorce decree did not extinguish their obligations to third party creditors, including
the Bank. Rather, the court found, based upon the testimony at trial, that the Bank
was involved in implementing the division of the couple’s debt as contemplated by
their divorce decree.
                                           9
      The district court acknowledged there was no single document in the Bank’s

records reflecting the Bank’s agreement to release Wheeler from his Guarantees of

the Wheeler Rental debt. But the court held, citing another Circuit’s decisions, that a

collection of documents in the Bank’s files could reflect such an agreement.

Cadlerock disputes that point, but we need not decide the question because the

collection of documents relied on by the district court fails to establish the existence

of a release agreement with the certainty required by § 1823(e). See Castleglen,
984 F.2d at 1579 (“The purpose of the doctrine is certainty and an inference of an

alleged agreement does not meet the requirements of § 1823(e).” (internal quotation

marks omitted)); Noel, 177 F.3d at 918 (“[T]he FDIC has no duty to scour a failed

institution’s documents for inferences . . . supporting defenses . . . that might prevent

the FDIC from collecting the full value of an otherwise facially valid instrument.”).

At best, the district court pointed to suggestive evidence in the Bank’s records that

would have required the FDIC to infer the existence of an agreement. Consequently,

because Wheeler’s asserted release agreement fails to satisfy § 1823(e), the statute

bars him from raising that agreement in defense of Cadlerock’s claim to enforce his

Guarantees. That is, unless an exception to § 1823(e) applies in this case.

             2.     The No Asset Exception Does Not Apply to Wheeler’s Release
                    Defense

      The district court held that D’Oench and § 1823(e) are inapplicable to

Wheeler’s release defense because the Bank agreed to release him from his

Guarantees before it failed; therefore, applying the no asset exception, the court held

                                           10
that the “assets” in question—Wheeler’s Guarantees—did not exist when the FDIC

acquired the Bank’s assets. Cadlerock asserts that the district court erred in applying

the no asset exception under the circumstances in this case.

       While the no asset exception is widely recognized, it has not been consistently

applied, as demonstrated by the conflicting cases the parties cite on appeal. Citing

Merchants National Bank, Cadlerock construes the exception as applying in only two

scenarios: where the parties contend (1) that “no asset exists,” or (2) that “an asset is

invalid and that such invalidity is caused by acts independent of any understanding or

side agreement.” 725 F.2d at 639. Cadlerock asserts that our decision in Grubb is an

example of the first scenario because the notes in that case had already been voided

by a court judgment when the FDIC acquired the failed bank’s assets. Cadlerock

maintains that this first category applies only to a defense asserting that an asset is

void ab initio, as discussed in Langley, 484 U.S. at 93-94. Wheeler does not claim

on appeal that his Guarantees are void.5

       As to the second scenario, Cadlerock points to Howell v. Continental Credit

Corp., 655 F.2d 743 (7th Cir. 1981). Merchants National Bank cited Howell as an

example of circumstances where § 1823(e) does not apply, in particular “when the

court determines if an asset is invalid . . . for breach of bilateral obligations contained

in the asset,” 725 F.2d at 639 (citation omitted). Howell held that D’Oench and

       5
        As noted, Wheeler did not appeal the district court’s adverse ruling on his
defense that his signature on the September 2007 Guaranty was forged.
Consequently, there is no basis for this court to conclude that fraud in the factum
rendered that Guaranty void taking it out of § 1823(e), per Langley.
                                            11
§ 1823(e) did not bar a lessee from asserting a defense that leases acquired by the

FDIC were invalid due to inadequate consideration. 655 F.2d at 745-47. The court

observed that the very documents the FDIC sought to enforce—the leases—facially

manifested bilateral obligations and were the basis of the lessee’s defense, as

opposed to a defense that was based upon a side agreement. Id. at 746-47.

Cadlerock notes that, unlike the lessee in Howell, Wheeler does not assert that his

Guarantees are invalid due to a breach of bilateral obligations contained in the

Guarantees.

      Cadlerock cites additional authorities supporting its narrow construction of the

no asset exception. In FDIC v. P.L.M. International, Inc., 834 F.2d 248, 253

(1st Cir. 1987), guarantors argued that § 1823(e) did not apply because their

guarantees ceased to exist before the FDIC acquired a failed bank’s assets. But the

court construed Merchants National Bank as permitting the use of documents that do

not meet the requirements of § 1823(e)—i.e., “nonconforming evidence”—only to

prove that an asset never existed due to fraud at the outset, as distinguished from

“cases where the parties contend[] that a side agreement control[s] the rights of the

parties.” Id. Thus, P.L.M. held the exception was inapplicable in that case because

the guarantors sought “to avoid liability under the guaranty agreement by asserting

the validity of a nonconforming release: a side agreement of which the FDIC had no

knowledge until seven months after its acquisition of the principal asset.” Id. at 254.

      In FDIC v. Zook Bros. Construction Co., 973 F.2d 1448, 1451 (9th Cir. 1992),

a guarantor argued that D’Oench and § 1823(e) did not apply because a novation had

                                          12
occurred before the FDIC took over the bank. After citing the Merchants National

Bank formulation, the court noted the FDIC’s position—consistent with that

decision—that the no asset exception is “limited to instruments which are invalid for

fraud or breach of obligations in the asset itself.” Id. at 1453. The court did not find

either of these circumstances in Zook Bros. Rather, it held that the guarantor’s

novation defense “depend[ed] on proving an implied agreement between [the

guarantor] and [the bank] that is belied by the presence of the . . . guaranty in the

Bank’s file.” Id. at 1452. The no asset exception therefore did not apply, because

the evidence supporting a novation failed to comply with § 1823(e). Id. at 1453

(“Zook . . . seeks to avoid federal law by asserting the validity of an implied side

agreement to extinguish her guaranty, although no document in the bank’s file says

that it is terminated.”).

       Notably, the documents supporting the guarantor’s novation defense in

Zook Bros. resembled the type of evidence the district court relied upon in this case

to hold that the Bank agreed to release Wheeler’s Guarantees. The guarantor in Zook

Bros. pointed to a new loan consolidation agreement and her husband’s written

affirmation of his previous guarantees—both of which were in the bank’s files—as

well as the absence of such a new affirmation document signed by her. Id. at 1450.

       For his part, Wheeler contends that the district court properly relied on FDIC

v. McFarland, 33 F.3d 532 (5th Cir. 1994), in holding that the no asset exception

applies to his release defense. After quoting the Merchants National Bank

formulation of the exception, id. at 537, McFarland held that it “will not . . . be

                                           13
applied where the agreement is not reflected in the official records of the bank,” id. at

538. Applying this requirement, the court allowed a guarantor to assert a release

defense against the FDIC based upon a letter in a failed bank’s records stating the

bank’s agreement to release her guaranty. Id. at 538-39. That letter, which was

separate from the guaranty that the FDIC sought to enforce, did not otherwise comply

with the requirements of § 1823(e). Id. at 536 (noting the letter was not executed by

the guarantor and was not reflected in the loan committee’s minutes). McFarland

nonetheless held that “there [was] no ‘understanding or side agreement’ of the type

that could have caused the FDIC to be misled.” Id. at 539 (quoting Merch. Nat’l

Bank, 725 F.2d at 639). Thus, under McFarland, a debtor can assert defenses against

the FDIC—such as discharge, novation, or accord and satisfaction—that are based on

a side agreement, so long as that agreement is found in the failed bank’s records and

is clearly determinable therefrom. See id. at 538.

      Addressing Cadlerock’s authorities, Wheeler contends they do not mandate a

reversal of the district court’s decision, and that nothing in Grubb indicates that this

court intended to limit the no asset exception to the facts in that case. But Wheeler

does not provide us with any reason, much less a persuasive one, to extend that

exception as broadly as its application in McFarland. We decline to do so.

      As we construe the reasoning and holding in McFarland, that decision placed

insufficient focus on the effect of the debtor’s acts upon the FDIC’s ability to

evaluate quickly and accurately a failed bank’s assets, see Castleglen, 984 F.2d at

1576. To that end, “Congress opted for the certainty of the requirements set forth in

                                           14
§ 1823(e).” Langley, 484 U.S. at 95. Therefore, we will tread carefully in

recognizing any exception to those requirements.

       Cadlerock’s narrow construction of the no asset exception—limiting it to

defenses (1) asserting an asset is void, or (2) asserting an asset is invalid due to a

breach of bilateral obligations contained in the asset itself—is consistent with both

Langley, 484 U.S. at 93-94, and the decisions cited in Merchants National Bank,
725 F.2d at 639. It is also in keeping with the text and the purposes of § 1823(e). In

the first category of the exception—where an asset is void ab initio—§ 1823(e) does

not apply because the FDIC never took title to an “asset.” And the second category

preserves the FDIC’s ability to rely on the bank’s records in evaluating the worth of

its assets because the “asset,” and the “agreement” that “tends to diminish” it, are one

and the same.

       Moreover, we emphasize that the extent to which the district court relied on

oral testimony in applying an exception to § 1823(e) in this case is entirely at odds

with the purposes of the statute. As we have held, the FDIC, and any subsequent

purchaser, are not required to piece together an agreement affecting the face value of

an asset by drawing inferences from various documents in a failed bank’s records.

See Castleglen, 984 F.2d at 1579. Here, any inference of a release agreement that

might have been drawn from the Bank’s records required the extensive background,

explanation, and context supplied by the testimony at trial.

       For example, the district court cited—and characterized as “important to

understand,” Aplt. App., Vol. I at 259—testimony regarding the different Bank

                                            15
officers who were responsible for the Wheelers’ loans over time, id. at 259-61.

Again pointing to oral testimony, the court stated it was necessary to understand the

Bank’s “procedures with respect to guaranty paperwork,” to discern “where Dustin

Wheeler stood with the bank in the wake of the . . . divorce.” Id. at 261. While

acknowledging that the Wheelers’ divorce decree did not bind the Bank, the court

cited testimony regarding the Bank’s understanding of those documents, its intent to

separate the couple’s debts in accordance with them, and the Bank’s role in doing so.

Id. at 262 & n.6. And as to the terms of the agreement underlying Wheeler’s defense,

which the court characterized as “a fully performed bilateral agreement,” id. at 284, it

cited testimony that the Bank agreed to release Wheeler’s Guarantees in exchange for

the Wheelers’ pay down of certain loans using the proceeds from the sale of the

marital residence, id. at 263-64. This latter issue was supported only by testimony at

the trial. See id. at 263-64; see also id. at 284-85 (the district court’s

acknowledgement that Wheeler’s side of the agreement—the $1.5 million pay

down of debt—was not reflected in the records in evidence regarding the

Wheeler Rental debt).6

       6
        The court cited additional trial testimony in summarizing the “clear and
convincing” and “overwhelming” evidence, Aplt. App., Vol. I at 272 & n.9,
supporting its determination that the Bank had agreed to release Wheeler from his
Guarantees of the Wheeler Rental debt, see id. at 264-66, 267-68, 269, 271, 272.

                                            16
       Although the district court stated that the Bank’s records alone were “easily

sufficient to establish that Dustin Wheeler was not the guarantor of the Wheeler

Rental credits,” id. at 273, it is clear from the court’s extensive analysis that the

testimony it cited was ultimately necessary to support its determination that the no

asset exception applies in this case. Reliance on such evidence plainly runs counter

to the purpose of § 1823(e) to enable the FDIC to quickly and accurately assess the

value of a failed bank’s assets.

       We hold that the no asset exception to § 1823(e) does not apply to Wheeler’s

release defense because he does not assert that his Guarantees are void, nor does he

claim that they are invalid due to a breach of bilateral obligations in the Guarantees

themselves. Therefore, the agreement underlying his release defense must satisfy the

requirements in § 1823(e). We hold it does not. Wheeler is therefore barred by

D’Oench and § 1823(e) from asserting that defense against Cadlerock, as the FDIC’s

transferee.7

       7
        We acknowledge the district court’s apparent attempt to do equity in this
case. But courts cannot graft an equitable exception upon the plain terms of
§ 1823(e). See Langley, 484 U.S. at 94. Moreover, “the equities the statute regards
as predominant,” id., do not favor Wheeler, as the borrower. Rather, § 1823(e)
protects the interests of those who are harmed by a borrower’s failure to ensure that
his agreement with a bank is approved and recorded in accordance with the
requirements of the statute. Id.; see also Noel, 177 F.3d at 918 (“The design of the
D’Oench doctrine . . . 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.” (internal quotation marks omitted)).

                                            17
III.   Conclusion

       The judgment of the district court is reversed. This case is remanded to the

district court for entry of judgment in favor of Cadlerock III, LLC, on its claim to

enforce Dustin Wheeler’s Guarantees of the Wheeler Rental debt.

                                            Entered for the Court

                                            Mary Beck Briscoe
                                            Circuit Judge

                                          18