Court Opinion

ID: 5165268
Source: CourtListenerOpinion
Date Created: 2022-01-02 03:27:45.824451+00
Date Added: 2024-06-11T08:25:49.715226
License: Public Domain

LAVENDER, Vice Chief Justice,
dissenting:
The majority opinion masquerades as an interpretation of federal law. In point of fact, its holding is based on equitable considerations unsubstantiated by either federal case law or statutory law. A careful review reveals that this case is controlled by an established doctrine of law first pronounced in D’Oench, Duhme & Co. v. FDIC,1 and subsequently codified at 12 U.S.C. *43§ 1821(d)(9) and § 1823(e). For this reason, I withdraw my support of the majority’s opinion.
The D’Oench doctrine is a federal policy designed to protect FDIC and the public funds which it administers, against misrepresentations as to the securities or other assets in the portfolios of the banks which FDIC insures or to which it makes loans.2 It is essential that the FDIC have notice of any claim that might defeat an asset of an insolvent bank at the time the FDIC decides whether a bank is to be closed or resold. “Neither the FDIC nor state banking authorities would be able to make reliable evaluations if bank records contained seemingly unqualified notes that are in fact subject to undisclosed conditions.”3
Thus, D’Oench and its progeny as well as its statutory counterpart require, that if there is a claim against FDIC which would defeat an asset of FDIC and the claim is not documented in the Bank’s records it is ineffective as a defense against FDIC. The FDIC need look no further than the official bank records, and this is true whether the ease involves: a traditional loan transaction, an affirmative claim, a disputed document that was a matter of public record, where it might be equitable to do so or, where suit has commenced prior to FDIC taking over the bank to name but a few situations.4
However, Prudential has successfully argued from the inception of this suit that the Estoppel Letter is the only agreement Prudential is trying to enforce and that it is not a side agreement subsequent to an earlier document hence, it falls outside D’Oench and progeny. This is simply not true. The only documents found in the Bank’s record by the FDIC at the time of receivership were the original and amended leases.
Prudential, in its response to FDIC’s petition for rehearing to this Court, finally acknowledges that it is not relying on the Estoppel Letter as a predicate for its claim, rather Prudential is counting on the Estoppel Letter to thwart FDIC’s effort to rely on the amended lease.5 In point of fact, it is the terms of the Estoppel Letter that Prudential is trying to enforce and the letter is an unrecorded side agreement which states terms other than those expressly stated on the face of the original and amended leases and if allowed to stand, will defeat an asset of FDIC.
This is why Prudential cannot hold FDIC liable under the terms of the original lease based on the Estoppel Letter. Clearly, Prudential had every right to sue Allied Tower, Ltd. and Allied Bank over the amended lease (Midnight Amendments). However, the moment FDIC became receiver of the Bank, *44federal law controlled.6 And under federal law, Prudential cannot win because it is asking a court to enforce an outside unrecorded agreement that would deplete the bank’s assets by a greater amount than FDIC anticipated upon taking over the bank. This is exactly what the D’Oench doctrine was intended to prevent.
This is also why the case the majority cites as a basis for its holding, FDIC v. Republicbank Lubbock, IV.A,7 is unpersuasive. In Lubbock, FDIC was a successor to an insolvent bank and held notes secured by a lien on a building which had been occupied by a bank and then sold. FDIC claimed its lien was superior to the lien owned by the second bank. The federal court of appeals determined that under Texas law, a deed of trust stamped by a county clerk one minute earlier than another deed of trust did not entitle FDIC to priority where both instruments were associated with one transaction and were delivered to the clerk and received by the clerk in his official capacity at the same time. Therefore, under Texas law, the deed of trust lien whose priority was stated in the deed of trust as well.as in the subordination agreement had priority over another deed of trust executed in connection with a single transaction. According to Texas law, FDIC was not entitled to avoid the subordination agreement even though the it was not in the bank vendor’s records.
We need look only as far as our own court of appeals to understand why the federal court of appeals’s reasoning is circumspect. In Cimarron Federal Savings & Loan Ass’n v. McKnight,8 our court of appeals explained that “at the instant a bank is declared insolvent and passes into the hands of the federal reeeivers[,] • [f]rom and after that moment, federal law preempts any incompatible state law.... Because I believe the federal court of appeals erred in allowing Texas law to control the facts of Lubbock, I likewise find Lubbock unpersuasive as justification for our decision in the present case.
I would further note that the equities of the situation, the fact that Prudential stands to lose a significant amount of money, is legally irrelevant at this stage of the proceedings because there is no equitable exception under the statute. In Langley v. FDIC,9 the United States Supreme Court stated:
Petitioners are really urging us to engraft an equitable exception upon the plain terms of the statute. Even if we had the power to do so, the equities petitioner invoke are not the equities the statute regards as predominant. While the borrower who has relied upon an erroneous or even fraudulent unrecorded representation has some claim to consideration, so do those who are harmed by his failure to protect himself by assuring that his agreement is approved and recorded in accordance with the statute.... The short of the matter is that Congress opted for the certainty of the requirements set forth in § 1823(e). An agreement that meets them prevails even if the FDIC did not know of it; and an agreement that does not meet them fails even if the FDIC knew. It would be rewriting the statute to hold otherwise.
While I sympathize with Prudential’s plight, I would point out that Prudential was not operating from a weak position — it held all the cards. Prudential could have avoided this entire predicament by requiring the bank to put the Estoppel Letter in the Bank’s records and it could have done so with little effort.
Nor, do I understand how the majority finds that were the D’Oench doctrine applied to this set of facts, this Court would be promoting fraud rather, than preventing it. It was the Bank that perpetuated the fraud against Prudential, yet, the Bank is not punished by the majority’s decision — FDIC is made to suffer the consequences. Today’s decision does nothing to dissuade the real culprits from perpetuating fraudulent acts. *45And more to the point, while a fraud exception to the D’Oench doctrine has been recognized in at least one federal case, neither the holding of that case nor the facts are analogous to our case.10
I also find unjustified the court’s attempt to narrowly hold D’Oench and progeny to a situation involving a bank customer. Although, it is true that the D’Oench doctrine began as a way to defeat a defense on a note, D’Oench has subsequently been applied in numerous factual situations.11 Moreover, I would reiterate that the essence of the D’Oench doctrine is that the documentary basis for a claim must be in the Bank’s records in order to successfully defend against the FDIC. The emphasis is not on the relationship of the parties.12
The majority’s analysis of this case is in err according to both federal statutory law and federal case law. Consequently, for the reasons set forth herein, I respectfully dissent from the majority’s determination that the Estoppel Letter be allowed to successfully thwart FDIC’s right to rely on the amended lease.
I am authorized to state that Justice SIMMS joins in the views herein expressed.

. 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 (1942).

. FDIC v. Aetna Casualty & Surety Co., 947 F.2d 196, 200 (6th Cir.1991).

. North Arkansas Medical Center v. Barrett, 962 F.2d 780, 788-89 (8th Cir.1992). As stated in FDIC v. O’Neil, 809 F.2d 350, 353-54 (7th Cir.1987):
If we accepted Joyce's argument, this would imply that when the appraiser came across the promissory note he would have had to conduct an inquiry into the whereabouts, status, and terms of the "certain agreement," mentioned in (but not a part of) the note. Yet even if he located the agreement it might not occur to him to inquire whether the banks had actually supported Joyce’s bid, because the agreement does not in terms require such support. Maybe such a requirement is implicit, but this would be apparent only to one who had steeped himself in the negotiations leading up to the drafting of the agreement. The FDIC is not required to go so far. It can stop considerable shorter. It can ignore any side agreement imposing conditions on the promissory notes that it acquires from troubled banks unless the agreement conforms to the demanding requirements of section 1823(e). (emphasis added) (citations omitted).

. The failure of Penn Square Bank in July, 1982 marked the beginning of a banking and savings and loan crisis of a size not seen in the United States since the 1930s. In the ensuing ten years, a veritable blizzard of published opinions from both state and federal courts have applied the D’Oench doctrine. In the late 1980s, Congress enacted a comprehensive reform of the federal financial institution regulatory structure. At every stage, Congress and. the courts Have broadened the D’Oench doctrine. Cimarron Federal Savings & Loan Ass’n v. McKnight, 840 P.2d 648, 651 (Okla.Ct.App.1992) (emphasis added).

. Appellee’s Response Brief to Petition for Rehearing at 4, Prudential (No. 77,834).

. Madonna Corp. v. FDIC, 563 So.2d 763 (Fla.App.2d Dist.1990).

. 883 F.2d 427 (5th Cir.1989).

. 840 P.2d 648, 652 (Okla.Ct.App.1992) (emphasis added).

. 484 U.S. 86, 94, 108 S.Ct. 396, 402, 98 L.Ed.2d 340 (1987) (emphasis added).

."Fraud might be relevant if it were ‘independent of any understanding or side agreement,' as in a case where borrower is induced to sign a promissory note by an oral misrepresentation that the bank is solvent, and there is no side agreement.” FDIC v. O'Neil, 809 F.2d 350, 354— 55 (7th Cir.1987) (citations omitted).

. North Arkansas Medical Center v. Barrett, 962 F.2d 780, 787 (8th Cir.1992).

. "Nothing in the statute itself suggests that section 1823(e) would not apply to a creditor’s claim.” Id. at 787 (emphasis added).