the Court finds that plaintiff has alleged, at most: (1) loans from the National Bank of Washington for $ 10.85 Million (2) a subsequent agreement by NBW for additional financing of $ 650,000 that the bank apparently communicated only orally to Asaph, (3) internal documentation evidencing NBW's approval of this additional financing agreement, (4) NBW's retention of counsel to prepare closing documents for the additional loan, (5) failure by NBW to close and fund the loan increase, (6) reliance by Asaph to its detriment on the unclosed loan agreement, (7) FDIC-Receiver's subsequent refusal to close and fund the loan increase after its appointment as receiver for NBW, and (8) injury related solely to the unfunded $ 650,000 loan agreement.
Sections 1823(e) and 1821(d)(9)(A) and the D'Oench, Duhme Doctrine
Having fixed these allegations, the Court may proceed to consider the FDIC's argument that plaintiff's action is barred. The Court is aided greatly in this effort by the recent, comprehensive analysis of 12 U.S.C. 1823(e) and 1821(d)(9)(A) and the D'Oench, Duhme Doctrine provided by Judge Royce Lamberth in In Re National Bank of Washington Commercial Paper Litigation, 1992 U.S. Dist. LEXIS 2842 (D.D.C. 1992)("In Re NBW"). Reference to this decision allows the Court to summarize briefly here that the doctrine arose in 1942 in the Supreme Court's decision in D'Oench, Duhme & Co. v. FDIC, 315 U.S. 447 (1942), and has gradually expanded to insulate the FDIC, in both its "receiver" and "corporate" capacities, from liability in lawsuits in which, typically, a borrower seeks to avoid payment of its note by asserting a superseding oral side agreement with the lender either as a defense or as an affirmative counterclaim.
Id. at 8-11. The D'Oench Doctrine formed a precursor to 12 U.S.C 1823(e), which Congress passed in 1950 to bar claims against the FDIC in its corporate capacity that did not meet the statute's stringent writing requirements. Congress amended the statute in 1989 as part of the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) to extend its application to the FDIC in its capacity as receiver of a failed bank.
Id. at 11. Section 1823(e) provides that
No agreement which tends to diminish or defeat the interest of the Corporation in any asset acquired by it under this section or section 1821 of this title, either as a security for a loan or by purchase or as receiver of any insured depository institution, shall be valid against the Corporation 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, which approval shall be reflected in the minutes of said board or committee, and
(4) has been continuously, from the time of its execution, an official record of the depository institution.
12 U.S.C. 1823(e)(1988)(emphasis added). It has been held that a claimant must satisfy all elements of Section 1823(e) before an agreement may be enforced against the FDIC, see FDIC v. Manatt, 922 F.2d 486, 488 (8th Cir.), cert. denied, 111 S. Ct. 2889, 115 L. Ed. 2d 1054 (1991), and the Court finds that the statute's use of the conjunctive supports this construction. In the only Supreme Court case to consider Section 1823(e), the Court indicated that the term "agreement" in the statute should be interpreted broadly. See Langley v. FDIC, 484 U.S. 86, 92-93, 98 L. Ed. 2d 340, 108 S. Ct. 396 (1987).
FIRREA also added Section 1821(d)(9)(A) to the protections afforded to the FDIC. In Re NBW at 13. That statute provides that
any agreement which does not meet the requirements set forth in section 1823(e) of this title shall not form the basis of, or substantially comprise, a claim against the receiver or the Corporation.
12 U.S.C. 1821(d)(9)(A)(1991). Few courts have yet interpreted this provision, and its meaning is not altogether clear, since virtually no legislative history underlies it, and post-FIRREA courts barring claims against the FDIC have relied almost exclusively on Section 1823(e) and D'Oench, often without distinguishing between the two. In Re NBW at 17-18, 33-34. Judge Lamberth, however, has observed that "Section 1823(e) sets forth procedures for the FDIC's dealings with creditors," while "Section 1821(d)(9)(A) was enacted as part of FIRREA's provisions regarding the FDIC's role as receiver, i.e., when FDIC would be defending against affirmative claims." Id. at 35-36 (emphasis added). As to the interplay between the two statutes and the doctrine, he found after extensive consideration that D'Oench forms
a safety net which Congress has left to insure that the specific wording of the statute [1823(e)] does not prevent the true application of Congress' policies. Indeed, one of the principal purposes behind FIRREA's amendment of Section 1823(e) and creation of Section 1821(d)(9)(A) was to extend further protection to the federal government when stepping in for failed financial institutions."
Id. at 23. While in its area of application D'Oench embodies a less stringent writing requirement than does Section 1823(e), id. at 38-39 & n. 23, Section 1821(d)(9)(A) incorporates the "requirements" of Section 1823(e) by reference, including its stringent writing requirement, id. at 34-35, as well as its "asset" requirement, which provides that FDIC must have an "interest . . . in an asset acquired by it" that is "diminished or defeated" by the agreement at issue in order for the statutory bars to apply.
In this case, the FDIC argues that Section 1823(e) applies because the "agreement" Asaph seeks to enforce is the June 1990 pledge to loan $ 650,000, the "asset" is the underlying loan for $ 10.85 Million, now held by FDIC, and allowing Asaph's claim would permit it to offset the amount still owed on the underlying loan by $ 650,000, thus diminishing FDIC's interest in the "asset." Reply at 11. Although the Court finds a certain irony in this argument, as does plaintiff, Opposition at 10, because FDIC's contention of inadequate pleading by plaintiff is based largely on the absence of a link between the underlying loans and the NBW's alleged promise of an increase, the Court nonetheless finds that Section 1823(e)'s asset requirement is met because the underlying loans are "'particular, identifiable assets'" in which FDIC has acquired an interest as a receiver, see id. at 30-31, and because these assets -- essentially accounts receivable -- are identifiable solely to the plaintiff, whose own exhibits show it be or to have been in arrears in paying. See Opposition at Attachments B, C, and D (dunning letters dated September, October, and December 1990 from FDIC to Asaph Limited Partnership).
Moreover, In Re NBW held that, while the term "asset" within Section 1823(e) should not be "interpreted so broadly as to encompass any liability or other existing condition which affects the financial condition of the receivership," it is "appropriate that 'asset' should refer to . . . promises to make future loans." Id. at 32 (emphasis added). Several cases support application of this view to the facts presented here. Timberland Design v. First Service Bank for Savings, 932 F.2d 46, 49-50 (1st Cir. 1991)(D'Oench Doctrine protects FDIC from borrower's affirmative claims based on an alleged oral agreement by bank to lend additional money in the future; Section 1823(e) expressly not considered); Bowen v. FDIC, 915 F.2d 1013, 1014-16 (5th Cir. 1990)(same; Section 1823(e) expressly not considered); Tuxedo Beach Club Corp. v. City Federal Savings Bank, 749 F. Supp. 635, 642 (D.N.J. 1990)(same; agreement "clearly . . . unenforceable . . . within section 1823(e) and the D'Oench, Duhme Doctrine").
Based on this authority, the Court is satisfied that plaintiff's alleged loan increase agreement would, within the meaning of Section 1823(e), diminish the FDIC's interest in an asset it holds as receiver. In accordance with the observation in In Re NBW that Section 1821(d)(9)(A) was intended to cover FDIC in its capacity as receiver -- "i.e., when FDIC would be defending against affirmative claims" -- the Court finds it appropriate to apply primarily this statute to the alleged agreement, in conjunction with Section 1823(e), which defendant FDIC primarily relies upon. The Court notes that application of either statute imposes on the plaintiff the strict writing requirement of Section 1823(e)(1), as well as the requirement of 1823(e)(2) that the writing have been "executed" by the depository institution and the plaintiff. In addition, application of either statute obviates the need to apply the D'Oench Doctrine; the Court does not consider whether D'Oench might also bar liability on the facts alleged.
The Court has already discussed and rejected, supra at 6 and n.2, plaintiff's argument that the alleged loan increase was "executed." As noted, plaintiff argues that Section 1823(e)'s writing requirement is met because written evidence of the agreement may be found in NBW's "books and records," "in the closing documents" that were not executed, and "in NBW's files" reflecting the loan committee's approval of the increase. Opposition at 13. FDIC argues that plaintiff has "been unable to allege in good faith the existence of an executed written agreement to extend additional financing" and that "this Court should not permit . . . Asaph to cobble together its agreement on a piecemeal basis." Reply at 14. The Court agrees. See In Re NBW, 1992 U.S. Dist LEXIS 2842, citing FSLIC v. Gemini Management, 921 F.2d 241, 245 (9th Cir. 1990)("D'Oench and its progeny require a clear and explicit written obligation"; letter of intent to lend insufficient); and Beighley v. FDIC, 868 F.2d 776, 783 (5th Cir. 1989)(holding that "numerous" executed documents which, when read together evidence an agreement to lend, do not meet the "certain and 'categorical'" requirements of Section 1823(e)). The Court also agrees that additional discovery on this point seems unwarranted, since "had [plaintiff] signed a written agreement with [NBW], [plaintiff] 'would obviously be aware of the fact and (would be) capable of alleging it specifically.'" Oliver v. Resolution Trust Corp., 955 F.2d 583, 585 (8th Cir. 1992); see FSLIC v. Cribbs, 918 F.2d 557, 560 (5th Cir. 1990)(permitting plaintiff to undertake extensive discovery absent any indications he could assert a viable defense based on documents he sought would serve no useful purpose); FDIC v. Virginia Crossings Partnership, 909 F.2d 306, 309-10 (8th Cir. 1990); accord Tuxedo Beach, supra, 749 F. Supp. 635, 642-43 and n.4 (permitting discovery of alleged documents but noting that "these documents, if they exist, must together satisfy the requirements of section 1823(e) in order to bind" federal receiver).
Finally, the Court acknowledges plaintiff's additional argument that
if, as Plaintiff alleges, the increase became part of the Loan and the letters [dunning letters, Exhibits B, C, & D, referred to above] were sent on behalf of FDIC-Corporate reaffirming the Loan's obligations, then FDIC-Corporate had an independent duty to honor the agreement. Thus, failure to honor the Loan made FDIC-Corporate liable for its own breach (as assignee), not for the breach of FDIC-Receiver [which was caused by FDIC-Receiver's "failure to honor the loan"].
Opposition at 7-8. FDIC raises a number of arguments in response to this contention, but the Court need not consider them, in that it has rejected plaintiff's underlying premise -- that plaintiff has adequately alleged that "the increase became part of the Loan" for purposes of this suit. As noted, Section 1821(d)(9)(A) bars actions against "the receiver or the Corporation" based on agreements not in compliance with Section 1923(e)'s requirements. Likewise, the complaint and plaintiff's opposition make clear that Asaph's due process, contract impairment, and taking claims are based on FDIC's demands for repayment of the loans extended by NBW "despite the repudiation or disallowance of the Loan Increase" and the "mutual obligations of the Loan Agreement." Complaint Para. 90-91; Opposition at 26 ("Defendant wants Plaintiff to repay the Loan in full while rendering less than full performance on their obligations"). Here again, the "mutual obligations" rejected by the Court form the basis of the claims.
For the foregoing reasons, the Court will grant defendant FDIC's motion and dismiss plaintiff Asaph's complaint in its entirety, pursuant to Fed. R. Civ. P. 12(b)(6), for failure to state a cause of action upon which relief can be granted.
Judge George H. Revercomb
EDITOR'S NOTE: The following court-provided text does not appear at this cite in 794 F. Supp. 402.
ORDER - April 30, 1992, Filed
For the reasons set forth in the accompanying Memorandum and Opinion, it is
ORDERED that defendant FDIC's motion is GRANTED and plaintiff Asaph's complaint is DISMISSED in its entirety, pursuant to Fed. R. Civ. P. 12(b)(6), for failure to state a cause of action upon which relief can be granted.
Judge George H. Revercomb