                   United States Court of Appeals,

                            Fifth Circuit.

                             No. 93-3193.

          Duane DENDINGER, et al., Plaintiffs-Appellants,

                  Saeed Ahmed, Plaintiff-Appellant,

                                  v.

          FIRST NATIONAL CORPORATION, et al., Defendants,

   Federal Deposit Insurance Corporation, as receiver for First
National Bank, Defendant-Appellee.

                            March 16, 1994.

Appeals from the United States District Court for the Eastern
District of Louisiana.

Before HIGGINBOTHAM and DUHÉ, Circuit Judges and STAGG,1 District
Judge.

     DUHÉ, Circuit Judge:

     This appeal presents two disputes involving the now insolvent

First National Bank of Covington, Louisiana ("FNB").           The first

dispute involves a number of plaintiffs, suing together, seeking

rescission and money damages under federal and state law for notes

they signed in favor of FNB to purchase securities.           The second

dispute involves Appellant, Saeed Ahmed, who seeks damages for an

alleged wrongful offset of a certificate of deposit ("CD").          The

district court granted summary judgment against all Appellants. We

affirm.

                              BACKGROUND

     Appellant,   Duane   Dendinger,   and    other   named   plaintiffs,

     1
      District Judge of the Western District of Louisiana,
sitting by designation.

                                   1
executed promissory notes payable to the order of FNB, or payable

to the order of another institution later consolidated with FNB,

for the purpose of purchasing shares of stock.              Following their

suit against FNB, the Comptroller of the Currency declared FNB

insolvent and appointed the FDIC as receiver for FNB.             The FDIC

took possession and control of the assets, property, and affairs of

FNB, including the promissory notes.         The FDIC was substituted as

the party in interest to defend all claims asserted against FNB.

The FDIC also filed counterclaims against many of the plaintiffs to

recover the amounts due on their notes.             Appellants admitted in

their complaint and answer that they executed the notes, but have

not asserted that any written agreements were entered into that

modified the obligations on the notes. Appellants allege, however,

that their obligations on the notes are not enforceable due to

alleged material misrepresentations by FNB that prompted their

execution of the notes and purchase of the stock.             The district

court   granted   summary   judgment   for    the    FDIC   dismissing   all

affirmative claims by Appellants against the FDIC and granted

summary judgment on the FDIC's counterclaims, awarding judgments to

the FDIC on the note obligations.       Appellants appeal the summary

judgment granted on the FDIC's counterclaims.

     The second dispute involves Saeed Ahmed's claims against FNB.

In 1984 Ahmed bought a $100,000 CD from the First Progressive Bank

of Metairie, Louisiana, which he deposited with the Louisiana

Commission of Insurance in 1985 to qualify as a self-insured health

care provider under the Louisiana Medical Malpractice Act.            Later


                                   2
in 1985, Ahmed bought securities for $110,000, financed by a note

executed    in   favor   of   First   National    Bank   of   Riverlands,     a

subsidiary of FNB.       First Progressive, the issuer of the CD, then

became a subsidiary of FNB as well.          After Ahmed had defaulted on

his loans, FNB off set the CD against the balance due.             Ahmed sued

seeking damages for an alleged wrongful offset.           Ahmed appeals the

district court's grant of summary judgment for the FDIC.

                                 DISCUSSION

I. Standard of Review

     We review a summary judgment de novo. Abbott v. Equity Group,

Inc., 2 F.3d 613, 618 (5th Cir.1993).             Summary judgment may be

granted if there is "no genuine issue as to any material fact and

... the moving party is entitled to a judgment as a matter of law."

Fed.R.Civ.P. 56(c).

II. Claims on the Promissory Notes

         The FDIC does not dispute the factual allegations made by

Appellants regarding the circumstances surrounding the execution of

the promissory notes.         Rather, the FDIC argues that despite any

alleged    illegality    attendant    to   the   execution    of   the   notes,

Appellants do not have a defense to FDIC recovery under the

doctrine set forth in D'Oench, Duhme & Co. v. FDIC, 315 U.S. 447,

62 S.Ct. 676, 86 L.Ed. 956 (1942) and that doctrine's codification

in 12 U.S.C. § 1823(e).2         The D'Oench, Duhme doctrine, and its

     2
      At one time, § 1823(e) did not apply to the FDIC in its
receiver capacity. Beighley v. FDIC, 868 F.2d 776, 783 (5th
Cir.1989). In 1989, the statute was amended to include the FDIC
as receiver. Financial Institutions Reform, Recovery, and
Enforcement Act (FIRREA), Pub.L. No. 101-73, 103 Stat. 183.

                                      3
statutory    counterpart,   bar    borrowers     from     defending     against

collection   efforts   of   the   FDIC    by   arguing    that   they   had   an

unrecorded agreement with the failed bank.               D'Oench, Duhme, 315

U.S. at 459-60, 62 S.Ct. at 680;         § 1823(e).

     Appellants respond that the D'Oench Duhme doctrine has no

application in this case.     Appellants arrive at this conclusion as

follows.    They contend that the execution of the notes violated §

10(b) of the Securities Exchange Act and, thus, the notes are

voidable at the discretion of the innocent victim under § 29(b) of

the Act, 15 U.S.C. § 78cc(b).3           See Mills v. Electric Auto-Lite

Co., 396 U.S. 375, 386-88, 90 S.Ct. 616, 622-23, 24 L.Ed.2d 593

(1970) (holding that under § 29(b) a contract is voidable at the

option of the innocent party).      Appellants argue that they elected

to hold the contracts void when they filed suit against FNB prior

to the receivership.    They contend that the FDIC has no right or

interest that could be defeated or diminished by an unwritten


FIRREA took effect after the events in question and before the
judgment by the district court. Nonetheless, we need not
consider whether the statute applies retroactively because we
have long held that both the statutory and common law doctrines
bar similar defenses by borrowers. See Resolution Trust Corp. v.
Camp, 965 F.2d 25, 31 (5th Cir.1992); Kilpatrick v. Riddle, 907
F.2d 1523, 1526 n. 4 (5th Cir.1990), cert. denied, 498 U.S. 1083,
111 S.Ct. 954, 112 L.Ed.2d 1042 (1991).
     3
      This section provides in pertinent part:

            Every contract made in violation of any provision of
            this chapter or of any rule or regulation thereunder,
            and every contract (including any contract for listing
            a security or an exchange) heretofore or hereafter
            made, the performance of which involves the violation
            of, or the continuance of any relationship or practice
            in violation of, any provision of this chapter or any
            rule or regulation thereunder, shall be void....

                                     4
agreement because the FDIC does not take title to a note if it is

void.    See Langley v. FDIC, 484 U.S. 86, 93-94, 108 S.Ct. 396, 402-

03, 98 L.Ed.2d 340 (1987).

     Although Appellants state correct propositions of law, they

have mistaken the nature of their obligations on the notes.      The

Supreme Court in Langley did conclude that the FDIC does not take

title to void obligations, but it explained that a transaction is

void only if a plaintiff successfully asserts a fraud in the factum

defense;     "that is, the sort of fraud that procures a party's

signature to an instrument without knowledge of its true nature or

contents."    Id. at 93, 108 S.Ct. at 402.   In contrast, Appellants

assert that FNB fraudulently induced them to execute the promissory

notes, a defense that makes the notes merely voidable.    Id. at 94,

108 S.Ct. at 402-403.    Thus, title of the notes properly passed to

the FDIC.

     Because Appellants' obligations on the notes are voidable

rather than void, the principles we announced in Kilpatrick v.

Riddle, 907 F.2d 1523 (5th Cir.1990), cert. denied, 498 U.S. 1083,

111 S.Ct. 954, 112 L.Ed.2d 1042 (1991), control this case.        In

Kilpatrick, the plaintiffs claimed that swindlers coaxed them into

signing notes in connection with the financing of new branches of

a bank.      The plaintiffs sued several defendants for violating

federal securities law.      While the suit was pending, the bank

failed, and the notes were assigned to a bridge bank by the FDIC.

The FDIC-created bridge bank in turn sued plaintiffs on their

notes.    We concluded that an oral misrepresentation by a lender to


                                   5
a borrower, whether in violation of federal securities law or not,

constitutes an unwritten "agreement" that does not bind the FDIC

under the D'Oench, Duhme doctrine.         Id. at 1527 (citing Langley,

484 U.S. at 92-93, 108 S.Ct. at 402).        Second, we concluded that a

" "voidable interest is transferable whether or not FDIC knows of

the misrepresentation or fraud which produces the voidability.' "

Id. at 1528 (quoting FDIC v. Kratz, 898 F.2d 669, 671 (8th

Cir.1990)).    Accordingly, we held that the D'Oench, Duhme doctrine

precluded the plaintiffs from asserting their federal securities

law claims and defenses.

       Appellants next argue that as innocent borrowers from the

bank, with no intent to deceive the bank or its regulators, they

fall in an exception to the D'Oench, Duhme doctrine recognized by

the Ninth Circuit in FDIC v. Meo, 505 F.2d 790 (9th Cir.1974).               The

court in Meo allowed a good faith borrower to assert the defense of

failure of    consideration     against    the   FDIC   because   he   was    "a

completely innocent party."      Id. at 792-93.     We admit that the two

cases relied on by Appellants, FDIC v. McClanahan, 795 F.2d 512,

516   (5th   Cir.1986),   and   Buchanan    v.   Federal   Savings     &   Loan

Insurance Corp., 935 F.2d 83, 85-86 (5th Cir.), cert. denied, ---

U.S. ----, 112 S.Ct. 639, 116 L.Ed.2d 657 (1991), acknowledge the

holding in Meo and a possible "innocent borrower" defense.

      The Ninth Circuit's decision, however, is not binding on this

Court, and, more importantly, we have recently disapproved of the

"innocent borrower" exception to the D'Oench, Duhme doctrine:

           We need not consider Payne's innocence. Even if Payne's
      reliance on Meo might have been well placed at one time, it is

                                     6
       misplaced today and has been since Langley was decided in
       1987.   In Langley, the makers of the note were "wholly
       innocent" in that they relied on false representations by the
       bank in executing the note. Yet the Supreme Court held that
       the makers could not assert their defense. In so doing the
       Langley Court destroyed the "wholly innocent borrower"
       exception to the D'Oench, Duhme doctrine.

FDIC v. Payne, 973 F.2d 403, 407 (5th Cir.1992).           Similarly, in

Bowen v. FDIC, 915 F.2d 1013, 1016 (5th Cir.1990), we disavowed any

inference in McClanahan that malfeasance was necessary in order for

the D'Oench, Duhme doctrine to apply.         See also Bell & Murphy and

Assocs., Inc. v. Interfirst Bank Gateway, N.A., 894 F.2d 750, 753-

54 (5th Cir.), cert. denied, 498 U.S. 895, 111 S.Ct. 244, 112

L.Ed.2d 203 (1990);          Beighley v. FDIC, 868 F.2d 776, 784 (5th

Cir.1989).       Thus, the weight of the authority in this Circuit

militates against an "innocent borrower" defense.

       In sum, Appellants are barred by the D'Oench Duhme doctrine

from       asserting   any   of   their   defenses   against   the   FDIC.

Accordingly, the FDIC is entitled to summary judgment as a matter

of law.

III. Ahmed's Claims

           FNB had a statutory right under 6:316 of the Louisiana

Revised Statutes4 and a contractual right5 to setoff Ahmed's CD

       4
        Section 6:316(A) provides:

              [C]ompensation takes place by operation of law between
              funds held on deposit with a bank organized under this
              Title or with a national bank domiciled in this state
              and any loan, extension of credit, or other obligation
              incurred by the depositor in favor of the bank.... The
              funds to which this compensation applies shall be
              deemed to be pledged by the depositor in favor of the
              depository bank.


                                      7
against the amount owed and due on his loan.         Ahmed argues,

however, that the bank wrongfully set off the CD because the

Louisiana Insurance Commission had a superior right to it.       He

claims that depositing his CD with the Insurance Commission in 1985

created a pledge under the Louisiana Civil Code.     Ahmed contends

that because he did not receive the loan to which the CD was set

off until later in 1985 and the bank from which he received the

loan did not merge with the bank that issued the CD until December

31, 1987, the Insurance Commission's right to the CD primed the

bank's right of setoff.

     The FDIC correctly points out the critical flaw in Ahmed's

argument:     the CD was not pledged to the Louisiana Insurance

Commission.    A pledge is "a contract by which one debtor gives

something to his creditor as a security for his debt." La.Civ.Code

Ann. art. 3133 (West 1952).   For the CD to be pledged, Ahmed must

prove a valid underlying principal obligation.    Alley v. Miramon,

614 F.2d 1372, 1382 (5th Cir.1980).   In Ahmed's case, however, no


     La.Rev.Stat.Ann. § 6:316(A) (West Supp.1993).
     5
      The pertinent part of the loan agreement states:

                 This note ... shall be secured by ... the balance
            of every deposit account of the parties hereto or any
            of them, may at any time have with the Bank.

                 Bank is hereby authorized at any time and from
            time to time at its option to compensate itself by
            applying any part or all of the balance of every
            deposit account of the parties hereto or any of them,
            and/or any or all monies now or hereafter in the hands
            of the Bank, or in transit to or from the Bank, and
            belonging to the parties hereto or any of them to the
            payment, in whole or in part, of this note, in
            principal, interest, costs and attorney's fees.

                                  8
underlying obligation exists for which the pledge could serve as

security.

         Ahmed argues that his principal obligation to the Insurance

Commission was to produce an unencumbered asset worth $125,000 in

order to be considered a self-insured health care provider who

qualified to participate in the Patients' Compensation Fund.                 See

La.Rev.Stat.Ann.    §§   40:1299.41-.48      (West    1992).     Contrary    to

Ahmed's assertion, however, he did not owe the Commission any

obligation to become self-insured.            He voluntarily chose to be

classified     as   self-insured       and    could    have    changed     that

classification at any time by filing proof of adequate insurance

policy coverage with the Commission.            See id. § 40:1299.42(E);

La.Ins.Regulation,       Malpractice       Self-Insurance,      Rule   No.    2

(effective 11/20/75).     Alternatively, Ahmed argues that contingent

malpractice claims serve as the underlying obligation because the

Commission could use the CD to cover claims not paid.                    Yet, a

"[p]ledge is an accessory contract which secures the performance of

an underlying existing principal obligation."                  Texas Bank of

Beaumont v. Bozorg, 457 So.2d 667, 671 n. 4 (La.1984).6                       No

malpractice claims were pending when FNB offset the loan, and

malpractice claims not yet risen into existence cannot serve as the

principal obligation.

         Ahmed next argues that even if there were no pledge, the

transaction still qualifies as a transfer of an instrument for

     6
      But see Wolf v. Wolf, 12 La.Ann. 529, 532 (1857) (finding
no principle of law which prevents a pledge being made to secure
an obligation not yet risen into existence).

                                       9
valuable consideration in accordance with La.Rev.Stat.Ann. § 10:3-

302 (West 1993).     The CD issued by the bank to Ahmed was stamped

with the term "non-transferable".       When an instrument on its face

notes that it is non-transferable, the instrument is non-negotiable

under Louisiana commercial law.     Id. § 10:3-104(d).   The Louisiana

Insurance Commission cannot be a holder in due course as Ahmed

argues. Thus, the Insurance Commission has no superior rights over

the bank's right of setoff under statute and the loan agreement.7

         Finally, Ahmed argues that if the bank had a right of setoff,

it did not satisfy the notice requirements of § 6:316(D) of the

Louisiana Revised Statutes when it asserted its setoff claim, and

as a result, it did not satisfy a condition precedent to making an

offset. Ahmed failed to raise this argument to the district court,

and accordingly, we will not consider this claim.      See Topalian v.

Ehrman, 954 F.2d 1125, 1131-32 n. 10 (5th Cir.), cert. denied, ---

U.S. ----, 113 S.Ct. 82, 121 L.Ed.2d 46 (1992) (parties may not

advance new theories or raise new issues to secure reversal of

summary judgment).      The district court did not err in granting

summary judgment for the FDIC.

                               CONCLUSION

     For the foregoing reasons, we affirm the district court's

grant of summary judgment for the FDIC against all Appellants.

     AFFIRMED.


     7
      Ahmed devotes considerable time to briefing the argument
that the recipient of a pledge does not have to give notice to
subsequent creditors to have priority. Because we find no
pledge, we will not address this argument.

                                   10
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