E.J. Sebastian Associates v. Resolution Trust Corp., 94-1679

• Decision Date: 29 December 1994
• Docket Number: No. 94-1679,94-1679
• Citation: 43 F.3d 106
• Parties: E. J. SEBASTIAN ASSOCIATES, a South Carolina General Partnership, Plaintiff-Appellant, v. RESOLUTION TRUST CORPORATION, as receiver of Standard Federal Savings Bank, Columbia, South Carolina, Defendant-Appellee, and Standard Federal Savings Bank, formerly known as Standard Federal Savings & Loan Association, Defendant.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 106

43 F.3d 106

E. J. SEBASTIAN ASSOCIATES, a South Carolina General Partnership, Plaintiff-Appellant, v. RESOLUTION TRUST CORPORATION, as receiver of Standard Federal Savings Bank, Columbia, South Carolina Defendant-Appellee and Standard Federal Savings Bank, formerly known as Standard Federal Savings & Loan Association, Defendant.

No. 94-1679.

United States Court of Appeals Fourth Circuit.

Argued Nov. 2, 1994.

Decided Dec. 29, 1994.

ARGUED: Harry Clayton Walker, Jr., Swagart & Walker, P.A., Columbia, SC, for appellant. William Thomas Toal, Johnson, Toal & Battiste, Columbia, SC, for appellee.

Before RUSSELL and WIDENER, Circuit Judges, and CHAPMAN, Senior Circuit Judge.

Reversed and remanded by published opinion. Senior Circuit Judge CHAPMAN wrote the opinion, in which Judge RUSSELL and Judge WIDENER joined.

OPINION

CHAPMAN, Senior Circuit Judge:

E.J. Sebastian Associates ("Sebastian") brought suit against the Resolution Trust Corporation ("RTC"), as receiver for Standard Federal Savings Bank, Columbia, South Carolina ("Standard Federal"), for breach of contract and in quantum meruit in the United States District Court for the District of South Carolina. Sebastian seeks compensation for services it allegedly rendered to Standard Federal prior to its being taken over by RTC. The RTC moved for summary judgment claiming that the D'Oench Doctrine and Sec. 1823(e) barred Sebastian's claims. The district court agreed and granted the motion finding that the D'Oench Doctrine and Sec. 1823(e) barred Sebastian's claims as a matter of law. After careful consideration of the record, the briefs, and oral arguments, we find the grant of summary judgment on the present record was error, and for the reasons discussed below, we reverse and remand to the district court for further development of the facts.

I.

Standard Federal retained Sebastian to assist it in raising additional capital and agreed to pay Sebastian one percent of the additional capital obtained as a result of Sebastian's assistance. Standard Federal realized $22,000,000 in new capital from the sale of its stock due to Sebastian's efforts. Although Sebastian completed performance under its agreement with Standard Federal, the bank refused to pay Sebastian its agreed upon commission ($220,000). For the purposes of this appeal, the parties do not dispute that there was an oral contract and that Sebastian performed its obligations thereunder.

The RTC became receiver of Standard Federal, and Sebastian filed an administrative proof of claim with the RTC on December 12, 1991, seeking compensation for its services rendered to Standard Federal. By letter dated February 18, 1993, the RTC denied Sebastian's claim. Sebastian sued the RTC on April 15, 1993, upon two theories of liability. First, Sebastian contends that the RTC's refusal to pay the claim constitutes a breach of the contract between Sebastian and Standard Federal. In the alternative, Sebastian contends that it is entitled to recover in quantum meruit the reasonable value of the services it rendered to Standard Federal.

Because the district court found that Sec. 1823(e) and the D'Oench Doctrine applied to Sebastian's claim and because Sebastian's contract was not in writing, Sebastian's claim was unenforceable against the RTC. Summary judgment was granted and Sebastian appeals. We review de novo the district court's granting of summary judgment. EEOC v. Clay Printing Co., 955 F.2d 936 (4th Cir.1992).

II.

In D'Oench, Duhme & Co. v. FDIC, 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 (1942), a bank accepted a series of notes from a securities firm, but the bank's representatives agreed never to collect on the notes. The transaction was intended to keep the bank from showing a loss that it had incurred from another debtor's default. When the bank subsequently failed, the FDIC attempted to collect on the notes. A suit ensued, and D'Oench asserted his undisclosed agreement with the bank's representatives as a defense to collection. The FDIC argued that D'Oench should be estopped from asserting the undisclosed agreement as a defense because the FDIC had no knowledge of the agreement. Id. at 454-56, 62 S.Ct. at 678-79.

The Supreme Court found that public policy favored protecting the FDIC and the public from agreements which misrepresented the assets of insured institutions. Id. at 457, 62 S.Ct. at 679. The Court fashioned a federal rule which prevents a borrower from asserting against the FDIC defenses based upon secret, unrecorded side agreements that modify the terms of otherwise apparently unqualified obligations from the borrower to the bank. "The test is whether the note was designed to deceive the creditors or the public authority, or would tend to have that effect." Id. at 460, 62 S.Ct. at 681.

Following D'Oench, Congress substantially codified the D'Oench Doctrine in Sec. 1823(e):

No agreement which tends to diminish or defeat the interest of the Corporation in any asset acquired by it under this section or section 1821 of this title, 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...