Federal Deposit Ins. Corp. v. Kasal, 89-5491MN

Citation913 F.2d 487
Decision Date31 August 1990
Docket NumberNo. 89-5491MN,89-5491MN
PartiesFEDERAL DEPOSIT INSURANCE CORPORATION, in its Corporate Capacity, Appellee, v. Stanley KASAL, Oather Martin, Jr., George Ruzicka, d/b/a Ruzicka Brothers, Oather Martin, Sr., and Francis Kasal, Appellants.
CourtUnited States Courts of Appeals. United States Court of Appeals (8th Circuit)

Pete Kasal, Hutchinson, Minn. (Keefe & Kasal, Hutchinson, Minn.; Christine L Meuers, and Curtin & Barnes, Minneapolis, Minn., on the brief), for appellants.

Brian E. Palmer, Minneapolis, Minn. (Christopher J. Riley, and Dorsey & Whitney; Ann S. DuRoss and E. Whitney Drake, on the brief), for appellee Federal Deposit Ins. Corp.

Before LAY, Chief Judge, HEANEY and TIMBERS *, Circuit Judges.

TIMBERS, Circuit Judge:

Appellants Stanley Kasal, Oather Martin, Jr., George Ruzicka, d/b/a Ruzicka Brothers, Oather Martin, Sr., and Francis Kasal ("appellants") appeal from an order entered July 14, 1989, in the District of Minnesota, Harry H. MacLaughlin, District Judge, granting the motions of appellee Federal Deposit Insurance Corporation ("FDIC") for summary judgment, to dismiss with prejudice appellants' counterclaims against the FDIC in its corporate capacity ("FDIC-corporate"), and to dismiss without prejudice appellants' counterclaims against the Citizens State Bank of Gibbon, Minnesota ("Bank") and against the FDIC in its capacity as receiver of the failed Bank ("FDIC-receiver").

On appeal, appellants claim that the district court erred in holding (1) that 12 U.S.C. Sec. 1823(e) (1988) and federal common law, see D'Oench, Duhme & Co. v. FDIC, 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 (1942), precluded their defense of payment; (2) that there was no genuine issue of material fact precluding summary judgment; and (3) that appellants' counterclaims should be dismissed for lack of subject matter jurisdiction.

For the reasons which follow, we affirm the order of the district court on the first and second claims stated above. With respect to the third claim, we hold that a statutory amendment provides subject matter jurisdiction over appellants' counterclaims against the FDIC-receiver. Addressing those claims, we dismiss them with prejudice.


We summarize only those facts and prior proceedings believed necessary to an understanding of the issues raised on appeal. Since this is an appeal from a summary judgment in favor of the FDIC, we review the facts in the light most favorable to appellants.

This appeal arises from eight related actions filed by the FDIC seeking to collect on promissory notes executed by appellants in favor of the Bank. The FDIC, in its corporate capacity, sought recovery after each appellant defaulted on his obligation on the notes.

Appellant Francis Kasal ("Kasal") was a customer and depositor of the Bank from 1965 to 1986. At one time he was the largest single customer of the Bank, entering into scores of financial transactions involving millions of dollars. He also was involved in several personal financial transactions with Dennis Albertson, the president of the Bank.

Over the course of Kasal's dealings with the Bank, a pattern developed whereby the Bank would issue general debits against Kasal's checking account and would apply the proceeds to his notes. Albertson repeatedly assured Kasal that the debits on his accounts had been applied properly to his obligations. Further, Kasal made most of his deposits directly through Albertson and relied on Albertson to deposit the funds in his accounts.

During 1983, 1984, and 1985, Albertson repeatedly informed Kasal that he was over the Bank's lending limit. Albertson also told him that the Bank would lend additional amounts if he could obtain the signatures of friends or relatives on additional notes. Thereafter, with the advice and encouragement of Albertson, Kasal obtained the signatures on various notes of appellants Stanley Kasal (his cousin), Oather Martin, Sr. (father-in-law), Oather Martin, Jr. (brother-in-law), and George Ruzicka (uncle). In each instance, appellants were told by Albertson and Kasal that they would not be required to repay the loan, but that the Bank would look solely to Francis Kasal for repayment. Certain of the appellants were induced similarly to execute notes on behalf of Albertson. No appellant received the proceeds of these loans, which totaled over $500,000.

Kasal directed Albertson to apply money toward appellants' obligations to the Bank on numerous occasions between 1983 and 1986. Kasal developed suspicions about the handling of his finances in 1986 when he discovered that many of the notes that he and the other appellants had signed with the Bank were not being paid in accordance with his directives. In late 1986, Kasal contacted the Minnesota State Banking Commissioner and the FDIC, requesting an examination of his accounts with the Bank. In May and June of 1987, Kasal met with FDIC examiners and provided them with information. Ultimately, Albertson was convicted of bank fraud, in part for pocketing the funds given him by Kasal. He currently is serving time in a federal prison.

The Bank filed separate lawsuits in the state court against appellants in July, 1987, seeking to collect on the notes executed in favor of the Bank. Each appellant had defaulted on his obligation on the note. Appellants interposed answers alleging the affirmative defenses of lack of consideration, accord and satisfaction or payment, fraud in the inducement, and fraud in the factum. They also asserted counterclaims alleging breach of contract, negligence, promissory estoppel, and misrepresentation.

On March 18, 1988, the Minnesota State Commerce Commissioner determined that the Bank was insolvent, ordered the Bank closed, and appointed the FDIC as receiver. The FDIC-receiver sold certain assets of the Bank, including the notes here involved, to the FDIC-corporate. The FDIC-corporate then moved to be substituted for the Bank as the real party in interest in the state court cases. These motions were denied. The state court, however, did permit the FDIC to intervene as a party plaintiff. The FDIC then removed the cases to the federal district court pursuant to 12 U.S.C. Sec. 1819 (1988) and 28 U.S.C. Sec. 1446 (1988).

The FDIC's complaint alleged that appellants executed various notes in favor of the Bank which the FDIC now owns and that appellants defaulted on the notes. The FDIC sought to collect on the notes and to foreclose on any property given as security for the notes. In response, appellants asserted the affirmative defenses and counterclaims they had raised in the state court. The FDIC moved for summary judgment on the notes executed by appellants and sought dismissal of the counterclaims asserted by appellants against the Bank and the FDIC.

In an order entered July 14, 1989, the district court granted the FDIC's motions for summary judgment, holding that appellants' defense of payment was barred by D'Oench, Duhme and 12 U.S.C. Sec. 1823(e). The court also dismissed with prejudice appellants' counterclaims against the FDIC-corporate, holding that the FDIC-corporate was not answerable for the acts of the Bank. Finally, the court dismissed without prejudice for lack of subject matter jurisdiction appellants' counterclaims against the Bank and against the FDIC-receiver.

This appeal followed.


Our standard of review of the district court's grant of summary judgment is well-settled: we apply the same standard as that applied by the district court. Meyer v. Barnes, 867 F.2d 464, 466 (8th Cir.), cert. denied, --- U.S. ----,110 S.Ct. 86, 107 L.Ed.2d 51 (1989). We therefore will affirm the district court's grant of summary judgment only where "there is no genuine issue as to any material fact and ... the moving party is entitled to judgment as a matter of law." Id. (citing Fed.R.Civ.P. 56(c)); see also FDIC v. Cardinal Oil Well Servicing Co., 837 F.2d 1369, 1371 (5th Cir.1988) ("Typically, suits on promissory notes provide fit grist for the summary judgment mill.").

When considering a summary judgment motion, a court must determine whether there are "any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250,106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). The court's role is not to weigh the evidence, but to determine whether there is a genuine factual conflict. AgriStor Leasing v. Farrow, 826 F.2d 732, 734 (8th Cir.1987). In making this determination, the court must view the evidence in the light most favorable to the non-moving party and must give that party the benefit of all reasonable inferences that can be drawn from the facts. Id.


With the foregoing in mind, we turn first to the affirmative defenses asserted by appellants with respect to their liability on the notes. At the outset, we observe that appellants have dropped their defenses of failure of consideration, fraud in the inducement, and fraud in the factum. Those defenses were waived for purposes of this appeal.


Appellants now contend only that the FDIC cannot recover the full amount of the notes because Kasal made numerous payments, pursuant to their secret unwritten side agreements, intended to be applied to appellants' indebtedness, that were later misappropriated by Albertson. We disagree. We hold that Sec. 1823(e) bars appellants from raising any aspect of their secret side agreements with the Bank as a defense to the FDIC's claims on the notes.

The controlling statute here involved, Sec. 1823(e), provides:

"No agreement which tends to diminish or defeat the interest of the [FDIC] in any asset acquired by it ... shall be valid against the [FDIC] 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...

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