Murphy v. Federal Deposit Insurance

The beneficiary of a letter of credit sought to recover against the FDIC, after the issuing bank failed. The FDIC argues that recovery is barred by the D’Oench, Duhme doctrine and 12 U.S.C. § 1828 (e). We reject these arguments. The traditional commercial law principle, that a letter of credit stands independent of irregularities in its procurement, survives bank failure. Our earlier decision, at 12 F.3d 1485 (9th Cir. 1993), is vacated.

I. Facts.

Mr. Murphy won his suit against the FDIC in a jury trial. The FDIC does not challenge any of the jury instructions. Its appeal arises out of denial of its motions for directed verdict and judgment notwithstanding the verdict. Many of the facts were established by stipulation. For those which were not, Murphy is entitled to have the evidence viewed in a light most favorable to him, resolving conflicts in his favor and giving him the benefit of reasonable inferences, to determine whether substantial evidence supported the verdict. Vaughan v. Ricketts, 950 F.2d 1464, 1468 (9th Cir.1991). We are required to sustain a judgment based on a jury verdict if it was supported by substantial evidence, that is, such relevant evidence as “reasonable…