Langley v. Federal Deposit Insurance
Headline: Unrecorded loan misrepresentations cannot defeat FDIC collection: Court affirms that unapproved, unfiled warranties or conditions are barred, making it harder for borrowers to avoid payment.
Holding: A condition to repayment—including a warranty about existing facts—is an “agreement” under §1823(e), so unapproved, unfiled misrepresentations cannot be used to defeat the FDIC’s claim on an acquired note.
- Blocks unrecorded misrepresentation defenses against FDIC suits on acquired notes.
- Requires borrowers to have agreements approved and filed to avoid FDIC collection.
- Protects examiners and the deposit insurance fund from undisclosed loan conditions.
Summary
Background
The Langleys bought land and financed it with a loan from Planters Trust & Savings Bank. They alleged the bank misrepresented acreage, mineral acres, and existing mineral leases. After the Langleys defaulted, the state closed Planters, the FDIC became receiver, paid another bank nearly $37 million to assume Planters’ deposits, and acquired the Langleys’ March 1982 note. The FDIC sued to collect on the note; lower courts granted the FDIC summary judgment and rejected the Langleys’ misrepresentation defenses.
Reasoning
The central question was whether a bank’s unrecorded warranty or factual misrepresentation can be treated as an "agreement" that defeats the FDIC’s claim. The Court explained that an "agreement" in the statute includes conditions and warranties that affect repayment, not just future promises. The statute’s writing, board-approval, and contemporaneous-recording requirements let examiners rely on bank records and prevent collusive or late-added terms. The Court held fraud in the inducement or FDIC knowledge does not save an unrecorded agreement; only fraud that makes the instrument void from the start would fall outside the statute.
Real world impact
Because the Langleys’ alleged misrepresentations were not in the bank’s approved written records, the defenses were barred and the FDIC’s collection claim stands. The ruling protects bank examiners and the deposit insurance system by enforcing a strict recording rule. Borrowers who rely on unrecorded statements or warranties will have difficulty using them to avoid payment in suits by the FDIC.
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