< Back to H.R. 3892 (104th Congress, 1995–1996)

Text of the D’Oench Duhme Reform Act

This bill was introduced on July 24, 1996, in a previous session of Congress, but was not enacted. The text of the bill below is as of Jul 24, 1996 (Introduced).

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HR 3892 IH

104th CONGRESS

2d Session

H. R. 3892

To clarify treatment of certain claims and defenses against an insured depository institution under receivership by the Federal Deposit Insurance Corporation, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

July 24, 1996

Mr. TORKILDSEN introduced the following bill; which was referred to the Committee on Banking and Financial Services


A BILL

To clarify treatment of certain claims and defenses against an insured depository institution under receivership by the Federal Deposit Insurance Corporation, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ‘D’Oench Duhme Reform Act’.

SEC. 2. FINDINGS AND PURPOSES.

    (a) FINDINGS- The Congress finds that--

      (1) in D’Oench Duhme & Co. v. Federal Deposit Insurance Corporation, 315 U.S. 447 (1942), the Supreme Court determined that secret side agreements that were not recorded in the records of an insured depository institution should not be enforceable against Federal banking agencies when those agencies acquired assets following the failure of the institution;

      (2) the Supreme Court based its holding (hereafter in this section referred to as the ‘D’Oench doctrine’) on its power to develop Federal common law;

      (3) in 1950, the Congress supplemented the D’Oench doctrine by amending section 13(e) of the Federal Deposit Insurance Act to invalidate agreements relating to assets acquired by Federal banking agencies that were not recorded in official depository institution records;

      (4) Federal and State courts have expanded the scope of the D’Oench doctrine and section 13(e) of the Federal Deposit Insurance Act by interpreting them to bar tort claims based on oral representations, claims that do not relate to assets acquired by Federal banking agencies, and numerous other claims and defenses beyond the original scope and intent of those two lines of authority;

      (5) the Federal banking agencies’ aggressive use of the D’Oench doctrine and section 13(e) of the Federal Deposit Insurance Act in the administrative claims process and litigation, combined with the expansive interpretation of those authorities by the Supreme Court, have led to fundamentally unfair results; and

      (6) many individuals have been barred from asserting potentially valid claims and defenses once an insured depository institution has been declared insolvent and taken over by a Federal banking agency.

    (b) PURPOSES- The purposes of this Act are--

      (1) to unify the lines of authority developed under the Federal common law and referred to in subsection (a) and section 13(e) of the Federal Deposit Insurance Act, so that all cases relating to agreements against the interest of the Federal Deposit Insurance Corporation are decided pursuant to Federal statutory law; and

      (2) to return the D’Oench doctrine to its original purpose by continuing to bar the enforcement of unrecorded agreements, but allowing certain potentially valid intentional tort and other claims and defenses to be adjudicated on their merits.

SEC. 3. CLARIFICATION.

    Section 13(e) of the Federal Deposit Insurance Act (12 U.S.C. 1823(e)) is amended to read as follows:

    ‘(e) AGREEMENTS AGAINST INTERESTS OF THE CORPORATION-

      ‘(1) IN GENERAL- No agreement which tends to diminish or defeat the interest of the Corporation in any asset acquired by the Corporation under this section or under section 11, by purchase or assumption, or in its capacity as receiver of any insured depository institution, shall be enforceable against the Corporation unless that agreement is in writing and was executed in the ordinary course of business by an insured depository institution through an officer or other employee or representative of the institution having the authority to execute such an agreement on behalf of the institution.

      ‘(2) CLAIMS AGAINST THE CORPORATION- Notwithstanding paragraph (1), no court may bar, estop, or otherwise prohibit the adjudication against the Corporation, in its corporate capacity and as receiver of an insured depository institution, of--

        ‘(A) a claim or defense that does not relate to specific assets acquired by the Corporation;

        ‘(B) a claim or defense that does relate to transactions that would not, in the normal course of business, be reflected in the transaction records of the institution;

        ‘(C) a claim or defense in litigation commenced before the date of the appointment of the Corporation as receiver or conservator for the insured depository institution;

        ‘(D) a claim or defense, filed at any time, based on alleged intentional torts or alleged violation of State or Federal law, if--

          ‘(i) the party asserting the claim or defense demonstrates that the party did not--

            ‘(I) participate in a scheme to defraud the subject insured depository institution; or

            ‘(II) knowingly lend itself to a scheme to mislead bank examiners by misrepresenting the value of the assets of the institution; and

          ‘(ii) any oral representations relied upon are not in conflict with a written agreement contained in the records of the institution.

      ‘(3) STATUS AS HOLDER IN DUE COURSE- Except as otherwise provided in paragraph (1), any other provision of Federal statutory law, or applicable State law, the Corporation may not defeat a claim related to an asset by demonstrating that the asset was acquired in good faith, for value, and without actual knowledge of the claim, unless the Corporation also demonstrates that the asset was not acquired by the Corporation upon its appointment as conservator or receiver or as part of a purchase and assumption transaction.

      ‘(4) EXCEPTION FOR VENDOR AGREEMENTS- Subsection (e)(1) does not apply to an agreement for the sale or purchase of goods or services actually received by or delivered to an insured depository institution before the date of appointment of a receiver for that institution.’.

SEC. 4. REPEAL.

    Section 11(d) of the Federal Deposit Insurance Act (12 U.S.C. 1821(d)) is amended--

      (1) by striking paragraph (9); and

      (2) by redesignating paragraphs (10) through (19) as paragraphs (9) through (18), respectively.

SEC. 5. CONFORMING AMENDMENTS.

    Section 11 of the Federal Deposit Insurance Act (12 U.S.C. 1821) is amended--

      (1) in subsection (e)--

        (A) in paragraph (8)(A), by striking ‘subsection (d)(9) of this section and’;

        (B) in paragraph (8)(B), by striking ‘(12)’ and inserting ‘(11)’; and

        (C) in paragraph (8)(E), by striking ‘subsection (d)(9) of this section,’; and

      (2) in subsection (g)(4), by striking ‘(d)(11)’ and inserting ‘(d)(10)’.

SEC. 6. APPLICABILITY.

    Section 13(e) of the Federal Deposit Insurance Act, as amended by this Act, shall apply to administrative claims brought or pending, and any litigation filed, in progress, or on appeal, on or after October 19, 1993.