Weber

Introduction

Title 12 United States Code section 1823 (e) (section 1823(e)) is a section of the Federal Deposit Insurance Act which invalidates certain agreements between a bank and its obligor(s) that tend to diminish the interest of the Federal Deposit Insurance Corporation (FDIC) in assets acquired by it in its corporate capacity. In sum, section 1823(e) provides that unless a bank and its borrower(s) execute a written agreement which has gone through all the normal approval processes of the bank, and said agreement is a part of the bank’s records, the FDIC is not required to honor the agreement when it takes over the assets of the bank, should the bank fail.

Section 1823(e) is a partial codification of the so-called D’Oench, Duhme doctrine (D’Oench, Duhme & Co. v. F.D.I.C. (1942) 315 U.S. 447 [ 86 L.Ed. 956 , 62 S.Ct. 676 ]), widely recognized and applied as an equitable rule of estoppel. (Walsh v. New West Federal Savings & Loan Assn. (1991) 234 Cal.App.3d 1539, 1542-1543 [ 1 Cal.Rptr.2d 35 ]; Webb v. Superior Court (1990) 225 Cal.App.3d 990, 995 [ 275 Cal.Rptr. 581 ]; see Note, Borrower Beware: D’Oench Duhme and Section 1823 Overprotect the Insurer When Banks Fail…