F.D.I.C. v. Jahner, 920285

• Decision Date: 08 September 1993
• Docket Number: No. 920285,920285
• Parties: 24 UCC Rep.Serv.2d 692 FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver for First State Bank of Regent, North Dakota, Plaintiff and Appellee, v. Frank JAHNER, Defendant and Appellant, and Francis Jahner and Teresa Jahner, Defendants. Civ.
• Court: North Dakota Supreme Court

Page 57

506 N.W.2d 57

24 UCC Rep.Serv.2d 692

FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver for First

State Bank of Regent, North Dakota, Plaintiff and Appellee, v. Frank JAHNER, Defendant and Appellant, and Francis Jahner and Teresa Jahner, Defendants.

Civ. No. 920285.

Supreme Court of North Dakota.

Sept. 8, 1993.

Pearce & Durick, Bismarck, for plaintiff and appellee; argued by Lawrence A. Dopson.

Howe, Hardy, Galloway & Maus, PC, Dickinson, for defendant and appellant; argued by Michael J. Maus.

MESCHKE, Justice.

Frank Jahner appeals from a judgment for Federal Deposit Insurance Corporation (FDIC), as Receiver for First State Bank of Regent, North Dakota, enforcing his guaranty of a debt. We affirm.

Frank Jahner's son, Francis Jahner, purchased a lumber business, Regent Lumber, in 1976. Francis borrowed operating funds from the First State Bank of Regent (the Bank). The loan was secured by an $80,500 loan guaranty executed by Frank Jahner. Francis Jahner and Teresa, his spouse, incorporated the business as Regent Lumber Company, Inc., in 1979. Francis and Teresa were the only stockholders.

The corporation borrowed $175,000 from the Bank in 1981 and from time to time thereafter borrowed additional funds from the Bank. In early 1987, Francis Jahner stopped being active in the business, and he and Teresa moved out of the area. Marvin Jahner, Francis's brother, took over management of the business in April 1987. Marvin executed notes to the Bank evidencing renewals of prior corporate indebtedness and new loans.

The lumber business was closed in 1988. The inventory, a truck, and a forklift were sold to Farmers Union Oil Company of Regent. Proceeds of the sale of the corporation's assets were insufficient to repay the Bank. The Bank sued Frank Jahner in 1989 to enforce a guaranty that was asserted to have been executed by him on April 22, 1981, and that guaranteed all indebtedness of Regent Lumber Company, Inc. to the extent of $80,500.

The Bank was closed in 1990, and FDIC was appointed its receiver. FDIC intervened in the action against Frank Jahner and filed an amended complaint. Frank Jahner denied signing the 1981 loan guaranty and contended that Marvin Jahner had no authority to borrow funds for Regent Lumber Company, Inc.

The jury returned a special verdict finding (1) that Frank Jahner did "enter into a contract of personal guaranty with First State Bank of Regent by signing a written agreement on or about April 22, 1981," and (2) that Marvin Jahner did "act as an agent for Regent Lumber Company, Inc., in the execution of promissory notes dated 11/7/87, 12/4/87, 1/4/88, 3/11/88, 4/1/88 and 12/30/88." The trial court entered a judgment for FDIC against Frank Jahner for $80,500 plus costs. Frank Jahner appealed.

I. Deposition Evidence

Frank Jahner contends that under Rule 32(a)(3), NDRCivP, the trial court erred in allowing the evidentiary use of the deposition of Paul Richter, who had been the executive officer and majority stockholder of the Bank. Rule 32(a)(3), NDRCivP, says:

The deposition of a witness, whether or not a party, may be used by any party for any purpose if the court finds:

(A) that the witness is dead; or

(B) that the witness is at a greater distance than 100 miles from the place of trial or hearing, or is out of the state, unless it appears that the absence of the witness was procured by the party offering the deposition; or

(C) that the witness is unable to attend or testify because of age, illness, infirmity, or imprisonment; or

(D) that the party offering the deposition has been unable to procure the attendance of the witness by subpoena; or

(E) upon application and notice, that such exceptional circumstances exist as to make it desirable, in the interest of justice and with due regard to the importance of presenting the testimony of witnesses orally in open court, to allow the deposition to be used.

FDIC sought to use only a small portion of the deposition to show that Frank had signed the disputed guaranty. After the trial court allowed that evidence, both parties caused additional parts of the deposition to be read into the record. We deem significant only the deposition testimony that Frank signed the guaranty.

Frank Jahner contends that Richter's deposition was inadmissible because FDIC did not prove any of the circumstances listed in NDRCivP 32(a)(3). Counsel for FDIC told the trial court that Richter was in South Dakota and unavailable as a witness. Counsel for Frank argued: "I don't think the Court can take a statement of Counsel as evidence. You have to have an attempt to subpoena him." Nevertheless, the trial court admitted the deposition.

The admission of deposition testimony lies within the trial court's discretion, and reversal is appropriate only upon a clear showing that the trial judge abused his discretion. Alfonso v. Lund, 783 F.2d 958, 961 (10th Cir.1986). Frank now contends that, at the time of trial, Richter was in Regent, North Dakota, less than 100 miles from the place of trial. Yet, when FDIC counsel represented at trial that Richter was in South Dakota, Frank did not dispute that representation, but argued that the trial court could not accept a statement of counsel as evidence. Ikerd v. Lapworth, 435 F.2d 197, 205 (7th Cir.1970), upheld a trial court's admission of a deposition when the proffering counsel represented that the Indiana deponent was in California and could not be present for trial, opposing counsel said they would independently try to verify the representation, and the court advised opposing counsel that, "unless they established to the contrary, [the] deposition would be accepted upon the representation made that [the witness] was outside the jurisdiction of the court."

The North Dakota Rules of Professional Conduct, at Rule 3.3(a), direct: "A lawyer shall not: (1) Make a statement to a tribunal of fact or law that the lawyer knows to be false; ..." Moroever, the Comment to that rule explains that "an assertion purporting to be on the lawyer's own knowledge, as ... in a statement to the tribunal, may properly be made only when the lawyer knows the assertion is true or believes it to be true on the basis of a reasonably diligent inquiry." A trial court does not abuse its discretion in relying on a procedural representation of counsel that is not contradicted by opposing counsel.

Moreover, Richter's deposition testimony that Frank signed the disputed guaranty was cumulative of the testimony of Francis Jahner and Mandan Police Chief Dennis Rohr that Frank signed it. Under these circumstances, we conclude that the trial court did not abuse its discretion in allowing evidentiary use of Richter's deposition testimony.

II. D'Oench Doctrine

Frank Jahner contends that the trial court erred in refusing to admit evidence of the fact that he did not knowingly sign the disputed guaranty, even though Frank's primary defense at trial was that he did not sign the guaranty. The trial court precluded Frank from introducing evidence that, if he did sign the guaranty, he didn't knowingly sign it.

Beginning with D'Oench, Duhme & Co. v. FDIC, 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 (1942), a body of law has developed to protect the FDIC from many collection defenses that are not apparent in an insured bank's records. In D'Oench, the FDIC sued on an unpaid note that it acquired through the assumption of an insured bank's deposit liabilities by another bank. The maker of the note alleged that the note was given without any consideration and with the understanding that no suit would be brought thereon. The Supreme Court quoted related statutes and invalidated the asserted defense for several reasons:

These provisions reveal a federal policy to protect respondent and the public funds which it administers against misrepresentations as to the securities or other assets in the portfolios of the banks which respondent insures or to which it makes loans.

315 U.S. at 457, 62 S.Ct. at 679, 86 L.Ed. at 962.

Public policy requires that a person who, for the accommodation of the bank, executes an instrument which is in form a binding obligation, should be estopped from thereafter asserting that simultaneously the parties agreed that the instrument should not be enforced.

315 U.S. at 459, 62 S.Ct. at 680, 86 L.Ed. at 963, quoting Mount Vernon Trust Co. v. Bergoff, 272 N.Y. 192, 5 N.E.2d 196, 197 (1936).

It needs no argument to demonstrate that the integrity of ostensible assets has a direct relation to solvency.

. . . . .

If the secret agreement were allowed as a defense in this case the maker of the note would be enabled to defeat the purpose of the statute by taking advantage of an undisclosed and fraudulent arrangement which the statute condemns and which the maker of the note made possible.

315 U.S. at 461, 62 S.Ct. at 681, 86 L.Ed. at 964. This view, excluding nearly all defenses not apparent from a bank's records, is well-known as the D'Oench doctrine.

The D'Oench doctrine has been supplemented by legislation. 12 U.S.C.S. Sec. 1823(e) says:

Agreements against interests of Corporation. No agreement which tends to diminish or defeat the interest of the Corporation in any asset acquired by it under this section or section 11 [12 USCS Sec. 1821], either as 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.

D'Oench and Sec. 1823 have...