Court Opinion

ID: 9487163
Source: CourtListenerOpinion
Date Created: 2023-08-05 12:10:01.053493+00
Date Added: 2024-06-11T17:52:08.003518
License: Public Domain

HARRY T. EDWARDS, Circuit Judge,
dissenting:
Were we writing on a clean slate, we might be free to decide this case on the basis of the “policy” considerations that obviously have influenced the majority. We are not so unconstrained, however. I recognize that this circuit has not had occasion to address the common law doctrine embodied in D’Oench, Duhme & Co., Inc. v. FDIC, 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 (1942), and its statutory cousin, 12 U.S.C. see. 1823(e), which controls the judgment in this case. But the Supreme Court and our sister circuits have had numerous occasions to consider and apply the doctrine. As I read their decisions, I see no principled way to distinguish this case from the myriad of factually similar cases in which the D’Oench doctrine has been routinely enforced to bar the presentation of claims of the sort at issue here.
The law is clear that, under D’Oench, no agreement may be asserted against the FDIC — either as an affirmative claim or as a defense — unless the principal terms of the agreement are manifest from the bank’s written records. See Timberland Design, Inc. v. First Serv. Bank for Sav., 932 F.2d 46, 48-49 (1st Cir.1991). There are two important purposes underlying this doctrine: (1) federal examiners must be able rapidly and accurately to determine the health of a *601failed institution based solely on the formally maintained records of that institution, Langley v. FDIC, 484 U.S. 86, 91-92, 108 S.Ct. 896, 401-402, 98 L.Ed.2d 840 (1987); and (2) as between bank customers and the American taxpayers, the risk of nonrecovery from a failed institution should be placed on customers who have failed to protect themselves by committing their agreements with the bank to writing, id. at 94, 108 S.Ct. at 402; see also In re NBW Commercial Paper Litig., 826 F.Supp. 1448, 1461 (D.D.C.1992) (“D’Oench ... insure[s] that creditors and depositors ... are favored over those who can protect themselves against harm.”). The D’Oench bar is “expansive and perhaps startling in its severity,” Bowen v. FDIC, 916 F.2d 1013, 1015 (5th Cir.1990), but it has been seen to be fully justified by a well-established national policy that protects federal insurers (and the taxpayers they represent) against challenges based on unrecorded agreements.
Du Pont does not ground its substantive claims on a current written agreement that resided in the bank’s records at the time the bank failed. The written escrow agreement that originally set out the parties’ obligations, by its own terms, expired at the end of 1983. Thus, du Pont’s claim that the bank violated the terms of the escrow agreement in years beyond 1983 is dependent on evidence that the escrow agreement was extended. Yet, du Pont has not produced a written extension agreement, nor any other document that clearly evidences that the escrow agreement covered the period relevant to its complaint.
Du Pont instead relies on an alleged oral agreement with the bank to treat the escrow agreement as coterminous with the underlying contract between Kimberly and the District of Columbia, and on the parties’ “course of conduct,” which du Pont asserts evidences the ongoing nature of the agreement. In a simple contract action under state law, both types of evidence might demonstrate that parties intended to be bound by the terms of the escrow agreement beyond 1983, despite the written agreement’s limited duration. But the context here is quite different: this case involves a bank failure requiring the federal government to take over the institution and find a successor bank to assume the failed bank’s assets and liabilities. In such a circumstance, du Pont’s putative agreement to extend the terms of the written escrow agreement cannot serve as a basis for holding the Government hable, because it is unrecorded and plainly barred by D’Oench. See Twin Constr., Inc. v. Boca Raton, Inc., 925 F.2d 378, 384 (11th Cir.1991) (rejecting the use of parol evidence to validate an otherwise flawed agreement, the court stated that “[wjhile such an inquiry may be permissible in the context of normal contract construction, we do not believe that D’Oench and section 1823(e) permit this inquiry.”).
The fact that this case involves an “escrow agreement,” rather than a more typical debt instrument, does not change the result under D’Oench. See OPS Shopping Ctr., Inc. v. FDIC, 992 F.2d 306, 308 (11th Cir.1993) (noting that D’Oench “now applies in virtually all cases where a federal depository institution regulatory agency is confronted with an agreement not documented in the institution’s records.”). In its brief, du Pont asserts that in order for D’Oench and its attendant bar to apply, the legal challenge arising from the asserted agreement must diminish an asset of the bank, and that an escrow agreement is not an asset. However, every court that has considered the question has held that the existence of a specific asset is not a prerequisite to applying the D’Oench bar. See id. at 309-10 (providing citations). Further, absolutely nothing in the record supports du Pont’s claim that an escrow agreement is such that it would be unimportant to a bank examiner evaluating the relative health of a failed institution. Indeed, at oral argument, the FDIC argued it does evaluate escrow agreements and that such agreements can be important to its examination, a contention du Pont did not even attempt to rebut. In light of the record, I do not see how we can second-guess the FDIC on this point.
Additionally, it is quite easy to imagine how an escrow agreement might represent an asset or a liability for a bank: such an agreement might permit the bank to take advantage of a “float” of funds; it might provide significant fees to the bank for servicing the agreement; and it might be trans*602ferable. At oral argument, in response to these very hypothetical, du Pont’s counsel conceded that an escrow agreement might be a thing of value to a bank, and subsequently to bank examiners who are pressed to make a quick assessment of the' bank’s financial soundness. We should be mindful that an escrow agreement is a negotiated contract, and there are an infinite number of ways, limited only by the parties’ ingenuity, that an escrow agreement and the bank’s escrow service might be drawn so as to be an important aspect of the bank’s portfolio. For these reasons, I do not see how this court can “exempt” escrow agreements from D’Oench’s reach. The majority has simply rewritten the law, with neither authority nor good basis.
In this ease, an application of D’Oench does not “punish” du Pont; rather, the law merely requires du Pont to bear the consequences of failing to commit to writing an alleged understanding that the escrow agreement extended beyond its terms. Du Pont failed to avail itself of numerous opportunities to protect its interests; the American taxpayer should not have to pay for du Pont’s poor dealings. In short, both the law and the equities in this case favor the FDIC. Du Pont’s attempt to assert claims premised on the extension of a written agreement beyond its terms — evidence of such extension being unrecorded — is the paradigmatic situation to which D’Oench applies. Accordingly, I dissent.