to recover guarantees on loans by Bell. Bell counterclaimed for securities and common law fraud. The FDIC moved for summary judgment on the counterclaims and the Tenth Circuit held that the FDIC was immune from the counterclaims pursuant to Section 1823(e), regardless of whether the fraud was caused by overt misrepresentation or deceitful omission. Id. at 66. The Court held that "[s]ince the [Langley] Court included fraudulent warranties within the definition of 'agreement' without circumscribing fraud to overt acts, [it saw] no basis for concluding one form of fraud is governed by § 1823(e) while another is not." Id.
Although Bell was decided by the Tenth Circuit and therefore is not binding, the Court finds the Bell decision persuasive as a logical extension of Langley. Even though the resulting rule may be a harsh one, it is justified by the overriding need to protect the FDIC and the nation's banking system.
Hudson also asserts that D'Oench does not apply because the secret loan and check kiting scheme by the Centennial management was allegedly known or should have been known to auditors of Centennial and that the agreement itself was recorded in the board of directors meetings, so the information was available to the FHLBB and subsequently the FDIC. However, D'Oench applies regardless of whether the FDIC knows of the misrepresentation prior to its acquisition of the note. Langley, 108 S. Ct. at 402-03. As a result, defendant's sole affirmative defense is barred as a matter of law.
Defendant further claims that the sale of stock violated federal securities law and thus the loan at issue is void under Section 29(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78cc as against the FDIC.
However, even if Centennial would be liable for the acts of Shah and Hansen and thus the loan transaction would fall within the federal securities laws, the loan would be considered voidable rather than void. Mills v. Electric Auto-Lite Co., 396 U.S. 375, 386-88 (1970). Therefore, it would constitute a "right, title or interest" that could be diminished or defeated, and the public policy considerations of Langley would still apply. See Langley, 108 S. Ct. at 402.
Finally, defendant claims that even if both Langley and Bell apply, there remains a factual issue as to whether she has complied with the requirements of Section 1823 (e). Although it is unclear from the cases as to exactly what defendant must state in the written agreement so as to give the FDIC the requisite warning that a loan may be qualified, it appears that defendant has failed to provide any written warning.
Defendant claims that her loan was somehow contingent on the viability of Centennial and its stock. However, as pleaded in her amended answer, the terms of the agreement recorded in the minutes of Centennial's board of directors meetings and in Centennial's accounting books do not indicate that the loan was qualified in any way. Defendant is asserting unwritten terms of an agreement. This situation is exactly what the D'Oench doctrine and Section 1823(e) disallows. Therefore there can be no factual question remaining as to compliance with Section 1823(e).
Because there are no material issues of fact remaining, and defendant's sole affirmative defense is barred by the D'Oench doctrine and its progeny, plaintiff is entitled to judgment as a matter of law. Consequently, plaintiff's motion for judgment on the pleadings is GRANTED. Plaintiff is to submit a proposed judgment consistent with this Order within 10 days of the date of this Order.
IT IS SO ORDERED.
DATED: March 15, 1990.