Simmons First National Bank v. Lehman
4:13-cv-02876
N.D. Cal.Feb 13, 2015Background
- In February 2009 Excel Bank made a $3,000,000 loan to Bonhomme Investment Partners, secured by a deed of trust recorded against defendants Richard Lehman and Michele Koo’s Woodside, CA property; Lehman (and Donald Davis) were Bonhomme owners. Simmons acquired the loan and deed of trust from the FDIC after Excel failed.
- The recorded Deed of Trust (notarized in Missouri) and related documents purport to bear Koo’s signature/initials; Koo denies signing and alleges forgery. Lehman does not deny he signed the loan documents for Bonhomme.
- Simmons seeks judicial foreclosure; defendants asserted affirmative defenses including fraud in the inducement/factum, securities and negligent misrepresentation claims.
- At summary judgment, Simmons argued the notarized Deed of Trust is prima facie genuine and produced lay-witness testimony (and later handwriting exemplar evidence) creating triable issues about authorship and whether Lehman was authorized to sign for Koo.
- Defendants moved for summary judgment contesting authorship/authority; Simmons moved to strike or resolve several fraud-based affirmative defenses as barred by 12 U.S.C. § 1823(e) / D’Oench, Duhme doctrine.
- The court denied defendants’ summary judgment motion (finding genuine disputes about signature, authority, and estoppel) and granted Simmons’ motion, holding defendants’ fraud-in-inducement, securities, and negligent-misrepresentation defenses fail under § 1823(e); defendants did not establish fraud in the factum.
Issues
| Issue | Plaintiff's Argument (Simmons) | Defendant's Argument (Lehman/Koo) | Held |
|---|---|---|---|
| Whether Deed of Trust is conclusively invalid because Koo’s signature is forged | The notarized deed is prima facie genuine but Simmons also offers lay-witness and exemplar evidence supporting genuineness | Koo swears she did not sign or authorize signature/initials and claims forgery | Denied for defendants: notarized deed carries a rebuttable presumption of genuineness and Simmons produced enough evidence to create triable issues of fact on signature/authority/estoppel |
| Whether Lehman was authorized or had apparent/agency authority to sign Koo’s name | Evidence (witnesses, emails, conduct, use of property as collateral) supports agency/authorization and possible estoppel | Koo denies ever authorizing Lehman or knowing of the recorded deed | Denied for defendants: factual disputes exist whether Lehman signed for Koo or Koo is estopped from denying the deed |
| Whether fraud-based affirmative defenses (fraud in inducement, securities claims, negligent misrep.) are barred by 12 U.S.C. § 1823(e) / D’Oench, Duhme | § 1823(e) bars reliance on unwritten side agreements, misrepresentations or omissions that would diminish FDIC-assignee’s interest absent the statute’s strict formalities | Defendants contend misrepresentations/omissions (conditioning loans on stock purchase, nondisclosure of Consent Decree, promises to substitute collateral) invalidate the loan defenses | Granted for plaintiff: defendants failed to show any qualifying written agreement satisfying § 1823(e); fraud-in-inducement/related securities/negligence defenses are barred |
| Whether fraud in the factum applies to render the instruments void (and thus outside § 1823(e)) | Simmons: defendants haven’t shown fraud in the factum; they admit the documents reflect a loan encumbering the property | Defendants: assert fraud that would make the instruments void rather than voidable, taking them outside § 1823(e) | Denied for defendants: no evidence that defendants lacked knowledge or reasonable opportunity to know the instrument’s character; allegations amount to inducement, not factum, so § 1823(e) applies |
Key Cases Cited
- D’Oench, Duhme & Co. v. FDIC, 315 U.S. 447 (1942) (establishes that unwritten side agreements or secret understandings cannot defeat a bank/FDIC’s interest)
- Langley v. FDIC, 484 U.S. 86 (1987) (extends § 1823(e) reach to certain fraud-in-inducement misrepresentations; discusses distinction with fraud in the factum)
- Celotex Corp. v. Catrett, 477 U.S. 317 (1986) (summary judgment burden-shifting principles)
- Resolution Trust Corp. v. Kennelly, 57 F.3d 819 (9th Cir. 1995) (discusses § 1823(e) and notes Langley dictum; applies D’Oench, Duhme principles)
- Ware v. Julien, 122 Cal. App. 354 (1932) (notarized instrument is prima facie evidence of genuineness of signature; rebuttable presumption)
- In re Nelson, 761 F.2d 1320 (9th Cir. 1985) (spousal agency/authority and implied actual authority in community-property contexts)