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USCA1 Opinion
March 18, 1993 UNITED STATES COURT OF APPEALS
For The First Circuit
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No. 92-1770
FEDERAL DEPOSIT INSURANCE CORPORATION,
Plaintiff, Appellee,
v.
LONGLEY I REALTY TRUST, ET AL.,
Defendants, Appellees,
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ANGELINE A. KOPKA, ET AL.,
Defendants, Appellants.
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ERRATA SHEET
The opinion of this Court issued on March 10, 1993, is
amended as follows:
Page 9, Line 8, should read: "district court's . . ."
instead of "district court . . . "
March 10, 1993 UNITED STATES COURT OF APPEALS
For The First Circuit
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No. 92-1770
FEDERAL DEPOSIT INSURANCE CORPORATION,
Plaintiff, Appellee,
v.
LONGLEY I REALTY TRUST, ET AL.,
Defendants, Appellees,
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ANGELINE A. KOPKA, ET AL.,
Defendants, Appellants.
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APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE
[Hon. Martin F. Loughlin, Senior U.S. District Judge]
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Before
Torruella, Circuit Judge,
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Coffin, Senior Circuit Judge,
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and Cyr, Circuit Judge.
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William E. Aivalikles for appellants.
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E. Whitney Drake, Special Counsel, with whom Ann S. DuRoss,
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Assistant General Counsel, and Richard J. Osterman, Jr., Senior
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Counsel, Federal Deposit Insurance Corporation, were on brief for
appellee Federal Deposit Insurance Corporation.
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March 10, 1993
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TORRUELLA, Circuit Judge. The Federal Deposit
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Insurance Corporation ("FDIC"), as receiver of First Service Bank
("Bank"), sued appellants, Angeline Kopka and David Beach, to
collect on promissory notes made out to the Bank. Appellants
responded that they did not owe the FDIC the amount promised in
the notes because they had entered settlement agreements over
these notes with the Bank before the FDIC took over as receiver.
The district court granted summary judgment in favor of the FDIC,
finding that the doctrine established in D'Oench, Duhme & Co. v.
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FDIC, 315 U.S. 447 (1942), and 12 U.S.C. 1823(e) (1989),
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forbids the assertion of this alleged agreement against the FDIC.
In addition, the district court granted attorney's fees to the
FDIC pursuant to provisions of appellants' promissory notes.
Because we agree that 1823(e) protects the FDIC in this case
and that the district court granted a reasonable attorney's fees
award, we affirm the district court's judgment.
BACKGROUND
BACKGROUND
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Appellants borrowed money from the Bank and executed
promissory notes in the amount of the loans. The notes matured
in May and June of 1989. Appellants contend that they reached a
settlement of these loans on March 15, 19891 which required them
to convey to the Bank the real estate that secured their
promissory notes, free of all liens.
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1 Although appellants name December 21, 1988 as their settlement
date, they maintain that the Bank refused to fulfill the
agreement, forcing them to bring suit in the Hillsborough County
Superior Court, which the court dismissed without prejudice on an
unrelated ground. Consequently, they argue, they entered a new
settlement agreement on March 15, 1989.
On March 31, 1989, the Commissioner of Banks for the
Commonwealth of Massachusetts declared the Bank insolvent and
appointed the FDIC as receiver.2 As receiver, the FDIC demanded
payment of all debts owed to the Bank when the Bank failed. No
evidence of appellants' alleged settlement agreement was found in
the Bank's records. As such, on March 3, 1991, as part of its
debt collection campaign, the FDIC sued appellants on the
promissory notes. Appellants argued that their settlement
agreement with the Bank binds the FDIC as receiver and that they
therefore do not owe the FDIC the amount claimed. The FDIC then
moved for summary judgment, arguing that under D'Oench, Duhme &
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Co. and 12 U.S.C. 1823(e), any unwritten agreement alleged by
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appellants cannot bind the FDIC. The district court initially
denied the motion but granted it upon reconsideration.
DISCUSSION
DISCUSSION
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I. SUMMARY JUDGMENT
I. SUMMARY JUDGMENT
Summary judgments receive plenary review in which we
read the record and indulge all inferences in the light most
favorable to the non-moving party. E.H. Ashley & Co. v. Wells
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Fargo Alarm Services, 907 F.2d 1274, 1277 (1st Cir. 1990).
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II. THE D'OENCH DOCTRINE AND 12 U.S.C. 1823(e) (1989)
II. THE D'OENCH DOCTRINE AND 12 U.S.C. 1823(e) (1989)
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Under D'Oench, Duhme & Co., 315 U.S. at 460, a party
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may not defend against a claim by the FDIC for collection on a
promissory note based on an agreement that is not memorialized in
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2 Massachusetts uses the term "liquidating agent" instead of
receiver. According to 12 U.S.C. 1813(j) (1989), however, the
term "receiver" includes liquidating agents.
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some fashion in the failed bank's records.3 The parties' reason
for failing to exhibit the agreement in the bank's records is
irrelevant, as is the FDIC's actual knowledge of the agreement.
Timberland Design, Inc. v. First Serv. Bank for Sav., 932 F.2d
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46, 48-50 (1st Cir. 1991).
Congress embraced the D'Oench doctrine in 12 U.S.C.
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1823(e). Bateman v. FDIC, 970 F.2d 924, 926 (1st Cir. 1992).
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Section 1823(e) requires any agreement that would diminish the
FDIC's interest in an asset acquired as receiver to be in writing
and executed by the failed bank.4
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3 Although D'Oench, Duhme & Co. dealt with the FDIC in its
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corporate capacity, the D'Oench doctrine equally applies in cases
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involving the FDIC as receiver. See Timberland Design, Inc. v.
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First Serv. Bank for Sav., 932 F.2d 46, 48-49 (1st Cir. 1991).
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4 Section 1823(e) provides:
No agreement which tends to diminish or
defeat the interest of the [FDIC] in any
asset acquired by it . . . as receiver of
any insured depository institution, shall be
valid against the [FDIC] unless such
agreement -
(1) is in writing,
(2) 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,
(3) was approved by the board of
directors of the depository institution
or its loan committee . . ., and
(4) has been, continuously, from the time
of its execution, an official record of
the depository institution.
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Appellants concede that no writing executed by the Bank
exists. Appellants argue, however, that 1823(e) does not apply
to this case for two reasons. First, when Congress originally
enacted 1823(e), the section applied to the FDIC only in its
corporate capacity. It was not until August of 1989 that
Congress amended 1823(e), through the Financial Institutions
Reform, Recovery, and Enforcement Act ("FIRREA"), to make
1823(e) directly applicable to the FDIC in its receiver
capacity. Appellants argue that since they reached a settlement
with the Bank on March 15, 1989, 1823(e) does not apply to this
case.
Second, appellants argue that even if 1823(e), as
amended by FIRREA, applied to cases prior to August 1989, it does
not reach the present case because the FDIC acquired no interest
in the promissory notes as required by 1823(e). We address
these arguments in turn.
A. Retroactivity of FIRREA
A. Retroactivity of FIRREA
In general, district courts apply the law in effect
when they render their decisions, "unless doing so would result
in manifest injustice or there is statutory direction or
legislative history to the contrary." Bradley v. Richmond Sch.
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Bd., 416 U.S. 696, 711 (1974).5 Since the FDIC brought this
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5 In Kaiser Aluminum & Chem. Corp. v. Bonjorno, 494 U.S. 827,
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836 (1990), the Supreme Court noted a tension between Bradley and
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Bowen v. Georgetown Univ. Hosp., 488 U.S. 204, 208 (1988), which
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stated a presumption against retroactivity. However, the Court
declined to reconcile the cases. Kaiser Aluminum & Chem. Corp.,
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494 U.S. at 854.
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action on March 3, 1991, almost two years after the application
of 1823(e) to the FDIC as receiver, 1823(e) presumptively
applies to this case.
Thus, we examine the two exceptions to the general
rule. First, the statute itself and the legislative history
offer little guidance as to Congress' intent with respect to
retroactivity. Under Bradley, this lack of guidance supports
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retroactive application. Bradley, 416 U.S. at 715-16 (stating
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that when legislative history is inconclusive, courts should
apply the statute retroactively).
Second, to determine whether a manifest injustice will
result from the retroactive application of a statute, we must
balance the disappointment of private expectations caused by
retroactive application against the public interest in
enforcement of the statute. Demars v. First Serv. Bank for Sav.,
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907 F.2d 1237, 1240 (1st Cir. 1990). In the present case,
appellants' disappointed expectations are small. Appellants had
notice that their agreement had to meet certain criteria to be
valid against the FDIC. The D'Oench doctrine was well
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The Seventh and Eight circuits have expressly addressed the
issue of retroactivity with respect to the substantive provisions
of FIRREA. Both of these circuits applied FIRREA retroactively.
See FDIC v. Wright, 942 F.2d 1089, 1095-97 (7th Cir. 1991); FDIC
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v. Kasal, 913 F.2d 487, 493 (8th Cir. 1990), cert. denied, 111 S.
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Ct. 1072 (1991).
In light of the muddled state of the law in this area, we
apply Bradley which is well-established precedent in this
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circuit. We find no prejudice in this application because
Bradley permits retroactive application only where no manifest
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injustice will result. See FDIC v. Wright, 942 F.2d at 1095 n.6.
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established when appellants were negotiating with the Bank.
Although D'Oench, Duhme & Co. did not explicitly require a
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writing executed by the Bank, it did require that any agreement
be clearly documented in the Bank's records to be valid against
the FDIC.
In addition, even if D'Oench, Duhme & Co. did not
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provide appellants with sufficient notice of the statute's
requirements, appellants' failure to meet these requirements did
not result from reasonable reliance on the D'Oench doctrine. See
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Van Dorn Plastic Machinery Co. v. NLRB, 939 F.2d 402, 404 (6th
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Cir. 1991) (manifest injustice requires parties' reasonable
reliance on preexisting law). Appellants did all they could to
advance settlement of the debt. In fact, they sent the necessary
documents, with their signatures, to the Bank for execution. The
Bank, however, refused to sign the papers. Appellants,
therefore, could have done nothing more to satisfy either the
D'Oench or the statutory requirements.
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Finally, there is no evidence that appellants made any
attempt to perform under this agreement during the two years
between the time that appellants allegedly entered this agreement
and the time the FDIC filed suit. As such, we cannot conclude
that appellants reasonably expected this agreement to shield them
from liability on their notes.
On the other hand, 1823(e) promotes important public
policies. Congress amended 1823(e), through FIRREA, to "aid
the FDIC in its immediate responsibilities of dealing with
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mounting bank failures in this country." FDIC v. Wright, 942
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F.2d 1089, 1096 (7th Cir. 1991). The FDIC cannot protect public
funds held in failed banks unless it can rely on the bank's
records. FDIC v. McCullough, 911 F.2d 593, 600 (11th Cir. 1990),
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cert. denied, 111 S. Ct. 2235 (1991). Accordingly, we find no
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manifest injustice, and we apply 1823(e), as amended by FIRREA,
to the present case.
B. Acquisition of the promissory notes
B. Acquisition of the promissory notes
In order to receive protection under 1823(e), the
FDIC must first acquire the asset in question from the failed
bank. In FDIC v. Nemecek, 641 F. Supp. 740, 743 (D. Kan. 1986),
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the district court found that the FDIC acquired no interest in a
bank's promissory note because the parties reached an accord and
satisfaction of the note prior to the FDIC's receivership.
Consequently, the court found that 1823(e) did not protect the
FDIC against the asserted accord and satisfaction. Id.
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Appellants argue that in the present case, their notes were
similarly extinguished by their settlement agreement before the
Bank failed.
Even assuming that we agree with the Kansas district
court's interpretation of 1823(e), however, Nemecek does not
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assist appellants. In Nemecek, the bank authorized its attorney
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to enter into an accord and satisfaction with the promisors; the
bank's attorney had already received the promisors' consideration
before the bank failed; and the bank and the promisors considered
the case settled.
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In the present case, nothing in the bank's records
indicated that the bank authorized its attorney to accept the
settlement, and no consideration changed hands. It would render
1823(e) a nullity to hold unwritten agreements, without more,
valid against the FDIC as long as the parties reach the agreement
before the FDIC takes over. Banks and debtors would be able to
defraud the FDIC through secret agreements simply by reaching the
agreement before the FDIC took over. This is precisely the
situation that D'Oench and 1823(e) were intended to prevent.
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Section 1823(e) precludes appellants from binding the
FDIC to their alleged settlement. Accordingly, we affirm the
district courts judgment with respect to the FDIC's claim on the
promissory notes.6
III. ATTORNEYS FEES
III. ATTORNEYS FEES
We review the district court's determination of
attorney's fees only for abuse of discretion. Nydam v.
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Lennerton, 948 F.2d 808, 812 (1st Cir. 1991). The district
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court's order exhibits a careful review of the fees and expenses.
Indeed, the judge rejected $5,182 of the claimed expenses as
unreasonable. In addition, the fees amounted to approximately
two percent of the total judgment. We cannot find an abuse of
discretion in this award.
Affirmed.
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6 Because we find that 1823(e) applies in this case, we need
not reach the issue of whether D'Oench Duhme & Co. would have
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protected the FDIC in this situation on its own.
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Document Info
Docket Number： 92-1770
Filed Date： 3/18/1993
Precedential Status： Precedential
Modified Date： 9/21/2015