Thigpen v. Sparks

Decision Date16 February 1993
Docket NumberNo. 91-1977,91-1977
Citation983 F.2d 644
PartiesRoy E. THIGPEN, III, Plaintiff, v. Marc A. SPARKS, et al., Defendants. Marc A. SPARKS, Defendant-Counter Plaintiff-Appellant, v. FEDERAL DEPOSIT INSURANCE CORPORATION, In its capacity as receiver for BancTexas Dallas, N.A., Counter Defendant-Appellee.
CourtU.S. Court of Appeals — Fifth Circuit

James A. Pikl, Paul D. Schoonover, Vial, Hamilton, Koch & Knox, Dallas, TX, for appellant.

Guy Irvin Wade, III, Paul C. Watler, Pamela Ann Swank, Jenkins & Gilchrist, Dallas, TX, E. Whitney Drake, Sp. Counsel, F.D.I.C., Washington, DC, for F.D.I.C., as receiver for BancTexas Dallas, N.A.

Appeal from the United States District Court for the Northern District of Texas.

Before GOLDBERG, JONES, and DeMOSS, Circuit Judges.

EDITH H. JONES, Circuit Judge:

The issue in this case is whether an individual's breach of warranty claims, which arose when a now-failed bank sold him a wholly-owned Texas trust company, are barred against FDIC by the D'Oench doctrine, 1 12 U.S.C. § 1823(e) or § 1821(d)(9)(A). We hold that they were not so barred and thus reverse and remand the district court's summary judgment.


Appellant Marc A. Sparks purchased a Texas trust company called The Dallas Empire Company (DEC) from BancTexas, Dallas, planning to sell it afterward. Both Sparks and Roy Thigpen, III, the prospective purchaser, required that DEC have a "continuous, uninterrupted corporate charter" as a condition to purchase. By letter dated May 8, 1986, the Chairman of the Board and CEO of the bank represented to Sparks, among other things, that DEC "has had a continuous and uninterrupted status of good standing through this present date." One week later, Sparks bought DEC for $45,000. The May 15 bill of sale warranted that DEC was in good corporate standing at that time.

Before the sale to Thigpen, for which Sparks was to receive $150,000, Sparks learned that DEC's charter had been forfeited briefly for non-payment of corporate franchise taxes in 1985. Despite the charter's reinstatement, Thigpen refused to purchase DEC and sued Sparks, BancTexas and another individual in state court for violation of the Texas Deceptive Trade Practices Act (DTPA). Counter-claims and cross-claims were filed. By autumn, 1987, the state court had granted summary judgment in favor of the bank on Thigpen's and Sparks's DTPA claims and dismissed Thigpen's original petition with prejudice. Only Sparks's breach of warranty claims against the bank remain. BancTexas was declared insolvent in January 1990, and FDIC was appointed its receiver. Substituted as a party defendant for the bank in state court, FDIC removed the case to federal court and some months later filed a motion for summary judgment on Sparks's claims.

The district court held that Sparks's claims against FDIC are barred by the relatively new FIRREA 2 provision that states in pertinent part:

"[A]ny agreement which does not meet the requirements set forth in § 13(e) [12 U.S.C. § 1823(e) ] shall not form the basis of, or substantially comprise, a claim against the receiver or the Corporation."

12 U.S.C. § 1821(d)(9)(A), effective in September, 1989. The requirements incorporated in that provision from 12 U.S.C. § 1823(e) include that the agreement be in writing, executed by both parties contemporaneously with the "acquisition of the asset" by the institution, and be continuously maintained among the institution's business records. FDIC offered an affidavit of Linda Bratton, one of its employees, to attest that no documents in BancTexas's files reflected whether the sale of DEC to Sparks, or the May 8 letter, had been approved by the bank's board of directors. The Court found this affidavit, unanswered by Sparks, conclusive against him for purposes of § 1821(d)(9)(A).

Sparks moved for reconsideration on several grounds. First, he contended that because the DEC transaction constituted a sale of an asset by the bank, it did not fall within the purview of D'Oench, § 1823(e) or § 1821(d)(9)(A) as a matter of law. If § 1821(d)(9)(A) was necessary to make the § 1823(e) requirements applicable to Sparks's "claim" against FDIC, he contended, then § 1821(d)(9)(A) was being improperly retroactively applied, for it became effective in September 1989, while the DEC transaction occurred in 1986. Finally, he moved for an opportunity to conduct discovery to counter the Bratton affidavit. Because the bank had defended Sparks's case on the merits, he was not forewarned by FDIC's substitution that he might have to produce evidence to show that the DEC sale had complied with 12 U.S.C. § 1823(e). The district court denied the motion for reconsideration and this appeal followed.


Sparks undertakes a four-fold attack on appeal. He disputes that § 1821(d)(9)(A) applies retroactively to his claims against FDIC. He contends that D'Oench and § 1823(e) do not apply to the DEC transaction.

                Even if those rules did apply, he maintains that FDIC did not carry its summary judgment burden.   Finally, he asserts that if any of these avoiding doctrines are available to FDIC, the district court abused its discretion in not allowing further discovery.   FDIC takes issue with each of these propositions

Our analysis begins with a threshold question that the parties have not resolved. The linchpin of Sparks's argument and conversely, the Achilles heel of FDIC's response, is an assumption that the May 8 letter from the president of BancTexas is part of the agreement by which DEC was sold. If it was part of that agreement--and Texas has a doctrine that a contract may consist of multiple writings 3--then D'Oench does not logically apply. The D'Oench doctrine was formulated to protect the integrity of bank insolvency proceedings by making secret agreements between banks and preferred customers unenforceable. According to Sparks's theory, however, BancTexas profited by selling DEC under the very same written agreement whose alleged warranty of continuing corporate existence FDIC now seeks to escape. If this is correct, Sparks's case would be analogous to Federal Deposit Insurance Corp. v. Laguarta, 939 F.2d 1231, 1237-39 (5th Cir.1991), in which we held that a borrower could assert an affirmative defense, notwithstanding D'Oench Duhme, because the defense arose from an express written obligation undertaken by the bank in the loan agreement with the borrower. This court concluded that because the funding obligations on which LaGuarta premised his claims were spelled out in the parties' loan agreement and modification agreement, the D'Oench doctrine was inapplicable. 939 F.2d at 1239. The court cited with approval a district court decision interpreting § 1823(e), the original provision based on D'Oench:

None of the policies that favor the invocation of this statute are present in such cases because the terms of the agreement that tend to diminish the rights of the FDIC appear in writing on the face of the agreement that the FDIC seeks to enforce.

Riverside Park Realty Co. v. FDIC, 465 F.Supp. 305, 313 (M.D.Tenn.1978).

In Laguarta, however, there was no question whether the borrower's loan agreement and modification agreement were collateral to the promissory note; as the court observed, they were integral to the loan transaction. Here, that is not necessarily the case. Indeed, FDIC has assumed that the May 8 letter was collateral to the bill of sale for DEC. From this assumption proceed FDIC's arguments that the May 8 letter did not separately comply with D'Oench or § 1823(e).

As we view it, the threshold question is whether that letter was part of the parties' agreement of sale of DEC or whether it was subsumed by the parol evidence rule or a similar principle and did not become part of the parties' final agreement. Before FDIC entered this case, BancTexas and Sparks had begun to brief this question on summary judgment, but neither the state nor the federal court ever ruled on it. On remand, the court must answer this question. If the May 8 letter was not, under Texas law, part of the documents comprising the DEC sale contract, then Sparks cannot prevail because he has no right to rely on that letter's representations. If the May 8 letter was part of the contract, then FDIC prevails only if the DEC sale to Sparks had to be documented pursuant to 12 U.S.C. § 1823(e) or § 1821(d)(9)(A).

Sparks argues here as he did to the trial court that § 1823(e) does not apply at all to the DEC sale or, if it does, it only applies by an impermissibly retroactive application of § 1821(d)(9)(A). We are inclined to agree that § 1823(e) does not apply to a claim arising from a bank's sale of 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--

                an asset in a nonbanking transaction.   Section 1823(e) provides in full as follows

(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. (Emphasis added).

This case would represent a unique application of § 1823(e) because the gist of the dispute is neither a loan transaction, actual or contemplated, between a borrower and lender nor a conventional banking transaction of any kind, but rather the bank's sale of an asset to Sparks, an individual who on the record...

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