Newton v. Uniwest Financial Corp.

• Decision Date: 23 June 1992
• Docket Number: No. 91-15329,91-15329
• Citation: 967 F.2d 340
• Parties: Carson Wayne NEWTON, Plaintiff-Appellant, v. UNIWEST FINANCIAL CORP., a corporation; United Savings Bank of Wyoming, F.S.B. a Federal stock savings bank; Uniwest Services Corp., a corporation; Federal Deposit Insurance Corporation, an agency of the United States, as receiver for Buena Vista Bank and Trust Co.; Gary H. McGill, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 340

967 F.2d 340

23 Fed.R.Serv.3d 421

Carson Wayne NEWTON, Plaintiff-Appellant, v. UNIWEST FINANCIAL CORP., a corporation; United Savings Bank of Wyoming, F.S.B. a Federal stock savings bank; Uniwest Services Corp., a corporation; Federal Deposit Insurance Corporation, an agency of the United States, as receiver for Buena Vista Bank and Trust Co.; Gary H. McGill, Defendants-Appellees.

No. 91-15329.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Jan. 14, 1992.

Decided June 23, 1992.

Peter C. Bernhard, Schreck, Jones, Bernhard, Woloson & Godfrey, Las Vegas, Nev., for plaintiff-appellant.

David W. Stark, Otten, Johnson, Robinson, Neff & Ragonetti, Denver, Colo., for defendants-appellees, Uniwest, et al.

Jack M. Englert, Jr., Holland & Hart, Denver, Colo., for defendant-appellee, F.D.I.C.

Before TANG, PREGERSON, and FERGUSON, Circuit Judges.

Appeal from the United States District Court for the District of Nevada.

TANG, Circuit Judge:

Carson Wayne Newton ("Newton") appeals from the district court's orders granting summary judgment in favor of defendants on both Newton's claims against

                them and defendants' counterclaims against Newton.   The case arises from two investments Newton made in 1985.   Although he now focuses on an alleged violation of a federal law prohibiting certain tying agreements, the gravamen of Newton's action in district court was securities fraud.   Defendants' counterclaims were based on promissory notes that Newton gave in return for loans used to make the two investments.   We conclude the district court properly applied D'Oench, Duhme & Co. v. FDIC, 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 (1942), to bar both Newton's tying claim and his affirmative defense based on the alleged unlawful tying agreement.   Therefore, we affirm
                

BACKGROUND

In 1985, Newton borrowed $200,000 from Buena Vista Bank & Trust Company ("Buena Vista") and $300,000 from United Savings Bank of Wyoming ("USB"), and executed a promissory note for each amount. ¹ Newton used these loans to purchase stock offered by defendant Uniwest Financial Corporation ("Uniwest"). Uniwest is a savings and loan holding company of which USB was a subsidiary.

Upon acquiring the Uniwest stock, Newton assigned it as his capital contribution to a limited partnership. The partnership was set up to oversee the development of Fiesta RV ("Fiesta"), a recreational vehicle park in Arizona. Meanwhile, Fiesta arranged a $2,100,000 loan from USB for the purpose of acquiring property in Arizona. Unfortunately, Fiesta, Buena Vista, and USB subsequently suffered major financial setbacks: Fiesta declared bankruptcy, and both USB and Buena Vista were found to be insolvent.

The Federal Deposit Insurance Corporation ("FDIC") was appointed receiver for Buena Vista, thus acquiring Newton's note for $200,000. Similarly, the Federal Savings and Loan Insurance Corporation ("FSLIC") was appointed receiver for USB, and likewise acquired Newton's note for $300,000. Immediately upon becoming the receiver for USB, FSLIC transferred the assets and liabilities of USB, including Newton's $300,000 note, to Rocky Mountain, F.S.B. ("Rocky Mountain").

Newton filed this lawsuit in September, 1987, naming as defendants Uniwest, its various subsidiaries (including USB), Gary McGill, Mark Perlmutter, and Buena Vista. McGill was President of Uniwest; Perlmutter was its Chairman. Thereafter, the district court substituted the FDIC for Buena Vista and Rocky Mountain for USB.

Newton's first amended complaint contains eight counts. Counts one and two set forth the essence of Newton's legal attack, alleging various federal securities law violations based on purportedly false statements in Uniwest financial documents. Newton has abandoned these claims on appeal, however. Count four--the claim pertinent to this appeal--alleges that USB violated 12 U.S.C. § 1464(q) by conditioning its loan to Newton on the use of the loan proceeds to buy Uniwest stock. ²

In response to the lawsuit, the FDIC counterclaimed to recover on the Buena After two years of discovery had transpired, the district court granted summary judgment in favor of defendants on all claims and counterclaims. In particular, as to the claim of an illegal tying agreement originally asserted against USB, the district court held that USB's successor-in-interest, Rocky Mountain, was absolved of liability by virtue of the doctrine enunciated in D'Oench, Duhme & Co. v. FDIC, 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 (1942). Newton timely appeals, challenging the district court's judgment only in regard to its application of the D'Oench doctrine.

                Vista note, and Rocky Mountain counterclaimed to recover on the USB note.   Newton replied by asserting as an affirmative defense that defendants' conduct, including the alleged unlawful tying agreement, barred the counterclaims
                

DISCUSSION

I

We review a grant of summary judgment de novo, in part to determine whether the district court properly applied the relevant substantive law. Tzung v. State Farm Fire & Casualty Co., 873 F.2d 1338, 1339-40 (9th Cir.1989).

Newton argues that the district court erred in holding that the rule announced by the Supreme Court in D'Oench barred Newton's action under 12 U.S.C. § 1464(q). ³ Newton maintains that under section 1464(q) he should be able to sue a failed savings and loan's successor-in-interest, even though the alleged unlawful tying agreement was not evident on the face of the institution's records at the time it was placed in receivership by the FSLIC. We disagree.

In D'Oench, the FDIC acquired a note as collateral securing a loan to a failed bank. 315 U.S. at 454, 62 S.Ct. at 678. When the FDIC sought to recover on the note, the defendant claimed that a separate agreement with the bank, not evident to the FDIC when it acquired the note, relieved defendant from liability. The Supreme Court held that the defendant "was responsible for the creation of the false status of the note in the hands of the bank." Id., 315 U.S. at 461, 62 S.Ct. at 681. Consequently, the defendant "cannot be heard to assert that the federal policy to protect [the FDIC] against such fraudulent practices should not bar its defense to the note." Id.

The Court thus implemented a "federal policy to protect [the FDIC] and the public funds which it administers against misrepresentations as to the securities or other assets in the portfolios of the banks which [the FDIC] insures or to which it makes loans." Id. at 457, 62 S.Ct. at 679. In doing so, the Court noted:

Plainly one who gives such a note to a bank with a secret agreement that it will not be enforced must be presumed to know that it will conceal the truth from the vigilant eyes of the bank examiners.... The test is whether the note was designed to deceive the creditors or the public authority or would tend to have that effect. It would be sufficient in this type of case that the [note] maker lent himself to a scheme or arrangement whereby the banking authority on which [the FDIC] relied in insuring the bank was or was likely to be misled.

Id. at 460, 62 S.Ct. at 680-81.

We recently considered the D'Oench doctrine in Federal Sav. & Loan Ins. Corp. v. Gemini Management, 921 F.2d 241 (9th Cir.1990). In that case, defendant Gemini Management obtained financing from Centennial Savings and Loan Association for Gemini's proposed social club in San Francisco. The first loan agreement, which was never signed, discussed a loan of $1.5 million. This agreement contained an integration Responding to Gemini's protests against the reduction in amount, Centennial offered assurances that an additional amount covering the shortfall would be forthcoming. Thus, relying on these oral assurances and on the absence of an integration clause in the second agreement, Gemini believed that there was still an agreement to finance the entire project with a loan of $1,545,000 and so agreed to the terms of the second agreement. Centennial, however, failed to provide the additional amount, and the social club subsequently failed.

                clause.   The second loan agreement discussed a loan of only $1.1 million;  the agreement contained no integration clause
                

When FSLIC, as receiver for Centennial, sued Gemini on its note, Gemini asserted Centennial's breach of the agreement both in an affirmative defense and in a counterclaim. We held that the first agreement, which remained unsigned, did not provide a basis for Gemini's claims and that D'Oench barred Gemini's claims insofar as they are based on an agreement not memorialized in Centennial's records. 921 F.2d at 246.

The Gemini decision is sweeping. In reaffirming the vitality of the D'Oench doctrine, we observed that "FSLIC's ability to evaluate the financial condition of troubled thrift institutions depends, now more than ever, upon the protective shield of D'Oench." Id. at 245. Our decision in Gemini thus extended D'Oench to cover FSLIC, not only stripping defendants of certain defenses asserted in response to FSLIC's claims, but also shielding FSLIC from defendant's counterclaims. See also Kilpatrick v. Riddle, 907 F.2d 1523, 1528 (5th Cir.1990) ("defenses framed as causes of action must also be barred, because any other result would nullify the doctrine"), cert. denied, --- U.S. ----, 111 S.Ct. 954, 112 L.Ed.2d 1042 (1991).

We have discussed the D'Oench doctrine in only three other cases: FDIC v. Bank of San Francisco, 817 F.2d 1395 (9th Cir.1987); FDIC v. First Nat'l Fin. Co., 587 F.2d 1009 (9th Cir.1978); and FDIC v. Meo, 505 F.2d 790 (9th Cir.1974). The Bank of San Francisco case is not relevant here because the note maker was not a party to the action. Rather, the dispute concerned a letter of credit, which we deemed "sui generis." 817 F.2d at 1398.

In Meo, we declined to apply the D'Oench doctrine to a case where the FDIC sued on a note given to a bank in payment for stock in the bank. 505 F.2d at 791. The bank erroneously issued voting trust...