Webb v. Superior Court

• Decision Date: 28 November 1990
• Docket Number: No. B050595,B050595
• Court: California Court of Appeals Court of Appeals
• Parties: Raymond Lex WEBB, Petitioner, v. SUPERIOR COURT of the State of California, for the County of Los Angeles, Respondent. NEW WEST FEDERAL SAVINGS AND LOAN ASSOCIATION, etc., et al., Real Parties in Interest.

Page 581

275 Cal.Rptr. 581

225 Cal.App.3d 990

Raymond Lex WEBB, Petitioner, v. SUPERIOR COURT of the State of California, for the County of Los Angeles, Respondent NEW WEST FEDERAL SAVINGS AND LOAN ASSOCIATION, etc., et al., Real Parties in Interest.

No. B050595.

Court of Appeal, Second District, Division 3, California.

Nov. 28, 1990.

Review Denied Feb 28, 1991.

Herzfeld & Rubin, Martin S. Friedlander, Los Angeles, for petitioner.

No appearance for respondent.

Wyman Bautzer Kuchel & Silbert, Penny Kelen Meepos, Kathleen Villarruel Schneider, Los Angeles, for real parties in interest.

CROSKEY, Associate Justice.

INTRODUCTION

Petitioner Raymond Webb ("Webb") seeks a writ of mandate and a review of the order of the superior court granting summary adjudication of issues in favor of real party in interest New West Federal Savings and Loan Association ("New West"). ¹ The issues presented involve the In D'Oench, Duhme the Federal Deposit Insurance Corporation (the "FDIC") sued D'Oench, Duhme & Co., a brokerage firm, for payment on a note the FDIC assumed when the bank that held the note failed. D'Oench, Duhme & Co., executed the note so that the bank could cover a loss from bonds it had bought from the firm. The receipt for the note, not contained in the bank records, indicated that the note was given with the understanding that it would never be called for payment. (Id., at p. 454, 62 S.Ct. at p. 678.) D'Oench, Duhme & Co., asserted the agreement and lack of consideration as defenses to liability. The Supreme Court held that the defendant was estopped from raising defenses based on this "secret agreement." (Id., at pp. 460-461, 62 S.Ct. at pp. 680-681.) The Court, after analyzing several provisions in section 12B of the Federal Reserve Act (12 U.S.C., § 264), ² held that liability was determined by federal common law, pursuant to the federal policy to protect both the FDIC and the public funds that 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 pp. 456-457 and fns. 3 and 4, 62 S.Ct. at pp. 678-679 and fns. 3 and 4.) In furtherance of that policy, a defendant is not permitted to assert as a defense an agreement that was intended to "deceive the creditors or the public authority or would tend to have that effect." (Id., at p. 460, 62 S.Ct. at p. 680.)

interpretation and application of federal law, specifically D'Oench, Duhme & Co., Inc. v. Federal Deposit Ins. Corp. (1942) 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 ("D'Oench, Duhme ") and its progeny.

D'Oench, Duhme has been applied in numerous cases over the years. Its holding has become known as the D'Oench, Duhme doctrine, which is "essentially a rule of estoppel." (Fair v. NCNB Texas Nat. Bank (N.D.Tex.1990) 733 F.Supp. 1099, 1103.) "It prevents those who give notes to federally insured institutions from raising defenses based on side agreements made with officers of failed institutions regarding the enforceability of promissory notes. The doctrine encourages debtors to memorialize all agreements in writing and reflects the equitable principle that losses incurred as a result of unrecorded arrangements should not fall on deposit insurers, depositors, or creditors but rather upon the person who could have best avoided the loss. [Citations.]" (Ibid.) As will be seen, the facts of this case bring it squarely within the D'Oench, Duhme doctrine. We hold that the trial court correctly applied D'Oench, Duhme, and we deny the writ.

FACTS AND PROCEDURAL BACKGROUND

We recite the facts in light of the general rule for reviewing a summary adjudication of issues: we construe the moving party's declarations strictly and the responding party's declarations liberally. (LaRosa v. Superior Court (1981) 122 Cal.App.3d 741, 745, 176 Cal.Rptr. 224.)

The Rubidoux Project

In late 1981 and early 1982, Frank Vaughn ("Vaughn") was Senior Executive Vice President and Director of State Savings and Loan ("State"). He supervised the Real Estate Department, which was charged with monitoring construction loans that were in default, and with implementing what were called "work out" programs to cure the defaults or to acquire and dispose of State's secured properties with the least cost to State. One loan that was in default involved the construction of ten single family houses and the development of 14 additional acres in Rubidoux, California ("the Rubidoux project").

In early 1982, Vaughn contacted Webb, who was doing business as Webb Construction Company, a sole proprietorship. At Vaughn's request, Webb agreed to take over management of the Rubidoux project Vaughn asked two officers who were working in State's Real Estate Department to prepare the documents reflecting the joint venture. The only written document that was prepared, however, spelled out the equal division of profits aspect of the agreement with respect to Phase 1 only. No written document was ever prepared by State to document the joint venture agreement as to Phase 2.

to obtain a deed in lieu of foreclosure, to complete and sell the first ten houses ("Phase 1"), and then to construct and sell residences on the 14 acres ("Phase 2"). State and Webb agreed to the terms of a joint venture under which State would pay all costs of development, Webb would be paid a percentage of costs as [225 Cal.App.3d 996] overhead and a contractor's fee, and any profits would be shared equally between State and Webb.

Webb completed construction of and sold the first ten houses under Phase 1 of the joint venture agreement. As a result of the sales, the entire trust deed in favor of State was paid in full, and the profits, $72,329, were to be equally divided between State and Webb. However, State did not divide or pay to Webb any of the profits and, by December 31, 1982, State owed Webb just over $36,000. In August 1983 State merged with American.

The Woodrow Wilson Deed of Trust

Webb and his wife, Barbara Young Webb, owned a home at 7692 Woodrow Wilson Drive ("the Woodrow Wilson property") in Los Angeles, which was their principal residence. In March 1983 Webb borrowed $450,000 from State and secured it by a first trust deed on the Woodrow Wilson property. The terms of the loan provided that the first eleven months' interest would be paid from an interest reserve account. Webb told Vaughn that he planned to repay the loan with his proceeds of the joint venture.

The Litigation

On July 11, 1984, State, which by then had merged with and was known as American, (see fn. 1, supra ), recorded a notice of default on the trust deed on the Woodrow Wilson property. In August 1984 the management of American was replaced, and the new management decided to close down several development projects, including Phase 2 of the Rubidoux project.

In October 1984, American began foreclosure proceedings against the Woodrow Wilson property. In March 1985, Webb filed bankruptcy, and the foreclosure sale was automatically stayed.

In an effort to save his home and recover what was due him under the joint venture, Webb, in February 1986, filed suit against American. In July 1986, he filed an amended complaint in which he alleged multiple causes of action and sought a temporary restraining order to enjoin the trustee's sale, which was then proceeding. Webb was unsuccessful in his attempt to block the sale, which took place on August 25, 1986. Subsequently, American, in an effort to enforce its trustee's deed and gain possession, filed an unlawful detainer action against Webb, who still resided with his wife at the Woodrow Wilson property. On September 2, 1988, American filed a motion for summary judgment or summary adjudication of issues. That motion was denied, except as to four issues, on the ground that there were questions of fact concerning Webb's claimed set-off defense.

During the next several months, American was declared insolvent and eventually the deed of trust on the Woodrow Wilson property and the litigation surrounding it were transferred to New West. (See fn. 1, supra.) On August 29, 1989, New West filed a complaint as defendant in intervention in the Webb suit. On that same date, New West filed a motion for summary judgment or summary adjudication of issues.

Following many subsequent filings, the trial court denied the summary judgment but granted the summary adjudication on multiple issues. The court ruled that (1) the D'Oench, Duhme doctrine estopped Webb's claims for affirmative relief or a set-off of money allegedly owed him, and (2) New West did not waive that defense in

                the unlawful detainer action. 3  The trial court also found that in so far as Webb's multiple causes of action for damages were based on the oral agreement and related to Phase 2 of the Rubidoux Project, those causes of action are barred. 4  The trial court found that Webb is barred from (1) claiming damages or rescission based on the Truth-in-Lending Act, and (2) from recovering punitive damages. 5
                

PETITIONER'S CONTENTIONS

Webb makes a number of contentions which we summarize as follows: (1) the D'Oench, Duhme doctrine does not preempt the California equitable doctrines of set-off and successor liability, nor does it bar the assertion of those claims in this case; (2) even if the D'Oench, Duhme doctrine does apply, it may not be asserted by New West; (3) the codification of the D'Oench, Duhme doctrine, 12 U.S.C. section 1823, does not apply in this case; (4) New West waived its right to assert the D'Oench, Duhme doctrine and is estopped from asserting it; and (5) the doctrine does not bar any of Webb's causes of action for damages, rescission or punitive damages.

DISCUSSION

1. Standard of Review

Review of the trial court's determination on a motion for summary adjudication of issues involves pure matters of law. First, the appellate court must analyze the pleadings to determine whether the motion is directed to the issues...