C&C Investment Properties, L.L.C. v. Trustmark National Bank
2016 U.S. App. LEXIS 17824
5th Cir.2016Background
- In 2004 Glen and Charlotte Collins formed C&C Investment Properties, LLC and bought foreclosed properties from Heritage Banking Group financed by promissory notes and deeds of trust, personally guaranteed by the Collinses.
- The borrowers claim a side agreement: Heritage would accept payment equal to its foreclosure price and later refinance properties to reflect renovation value; they stopped paying when Heritage allegedly failed to honor that agreement.
- Heritage foreclosed; borrowers sued Heritage for breach and fraudulent inducement. Heritage failed and the FDIC became receiver, transferring Heritage’s assets (including the loans) to Trustmark under a Purchase and Assumption Agreement.
- Trustmark, substituted as defendant, pleaded 12 U.S.C. § 1823(e) (D’Oench, Duhme doctrine) as a defense and filed counterclaims to collect the loan balances; it moved for summary judgment asserting the side agreement was unwritten and barred by §1823(e).
- Borrowers argued Trustmark waived the §1823(e) defense (affirmatively in the purchase agreement or procedurally by delay) and that a triable issue exists because there was testimony suggesting the side agreement was memorialized in writing (e.g., an email).
- The district court granted summary judgment for Trustmark; the Fifth Circuit affirmed, holding no waiver and no evidence satisfying §1823(e)’s writing/board-approval/record requirements.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether purchaser (Trustmark) affirmatively waived §1823(e) via Purchase & Assumption Agreement | The Purchase Agreement’s assumption of certain liabilities shows Trustmark assumed loans free of D’Oench defense | Agreement does not expressly or impliedly surrender §1823(e); language transfers certain litigation liabilities but does not waive statutory defenses | No affirmative waiver; purchaser did not clearly and intentionally relinquish §1823(e) defense |
| Whether Trustmark procedurally waived §1823(e) by raising it late | Failure to raise defense in FDIC’s early 12(b)(6) motion and delay prejudiced borrowers | Trustmark pleaded the defense in its answer and may assert it later, including at summary judgment; Rule 12 does not force early timing | No procedural waiver; defense timely raised in answer and may be litigated at summary judgment |
| Whether the borrowers’ testimony and communications create a genuine dispute that a written agreement satisfying §1823(e) exists | Heritage executive testified there was likely written communication (email) approving the arrangement, suggesting a written agreement existed | Testimony at most shows communications about the arrangement, not a written, signed agreement approved by the board and kept as an official bank record as §1823(e) requires | No genuine issue: evidence insufficient to meet §1823(e)’s four requirements (writing, contemporaneous execution, board approval/minutes, official record) |
| Whether purchaser-of-assets rule affects application of §1823(e) | Borrowers implied purchaser assumed liabilities irrespective of books, undermining D’Oench protections | Fifth Circuit treats purchasers from FDIC as entitled to D’Oench protections; buyers may assert §1823(e) against claims not satisfying statutory formalities | §1823(e) applies to Trustmark as assignee; protections extend to private purchasers of failed-bank assets |
Key Cases Cited
- D’Oench, Duhme & Co. v. FDIC, 315 U.S. 447 (1942) (establishes rule barring oral side agreements against FDIC/receiver)
- Langley v. FDIC, 484 U.S. 86 (1987) (explains policy reasons for D’Oench: reliance on bank records and preventing fraudulent secret terms)
- Lemaire v. FDIC, 20 F.3d 654 (5th Cir. 1994) (D’Oench bars reliance on oral agreements as defenses against FDIC)
- Tex. Refrigeration Supply, Inc. v. FDIC, 953 F.2d 975 (5th Cir. 1992) (purchase agreement language does not automatically constitute affirmative waiver of D’Oench defense)
- Resolution Trust Corp. v. McCrory, 951 F.2d 68 (5th Cir. 1992) (documents not kept as official bank records fail §1823(e) requirements)