March 26, 1993    United States Court of Appeals
                United States Court of Appeals
                    for the First Circuit

                                         

No. 92-1584

       DAVID J. McCULLOUGH AND WINIFRED M. McCULLOUGH,

                   Plaintiffs, Appellants,

                              v.

            FEDERAL DEPOSIT INSURANCE CORPORATION,
          AS RECEIVER FOR BANK OF NEW ENGLAND, N.A.,

                     Defendant, Appellee.

                                         

                         ERRATA SHEET

   The  opinion  of this  Court issued  on  March 12,  1993, is
amended as follows:

        On  cover  sheet,  insert   "(now  deceased)"
        between   "Judge   Brown"  and   "heard  oral
        argument . . ."

        On page 6, line 19, delete "supra note 4"
                                         

March 12, 1993
                United States Court of Appeals
                    For the First Circuit
                                         
No. 92-1584

       DAVID J. McCULLOUGH AND WINIFRED M. McCULLOUGH,

                   Plaintiffs, Appellants,

                              v.

            FEDERAL DEPOSIT INSURANCE CORPORATION,
          AS RECEIVER FOR BANK OF NEW ENGLAND, N.A.,

                     Defendant, Appellee.
                                         

   APPEAL FROM AN ORDER OF THE UNITED STATES DISTRICT COURT

              FOR THE DISTRICT OF MASSACHUSETTS

       [Hon. Edward F. Harrington, U.S. District Judge]
                                                      
                                         

                            Before

                   Torruella, Circuit Judge,
                                           
                Brown,* Senior Circuit Judge,
                                            
                  and Stahl, Circuit Judge.
                                          
                                         

William  H. Sheehan, III  with whom  Pearl, McNiff,  Crean, Cook &amp;
                                                                  
Sheehan was on brief for appellants.
   
Michelle Kosse,  Counsel, Federal  Deposit Insurance  Corporation,
              
with  whom  Ann  S.  DuRoss,  Assistant  General Counsel,  Colleen  B.
                                                                  
Bombardier, Senior  Counsel, Daniel  I.  Small, and  Widett, Slater  &amp;
                                                                  
Goldman, P.C. were on brief for appellee.
         
                                         

                        March 12, 1993
                                         
                 
*Of  the  Fifth Circuit,  sitting by  designation.   Judge  Brown (now
deceased)  heard oral argument in this matter, and participated in the
semble, but did not participate in the drafting or the issuance of the
panel's  opinion.   The remaining  two panelists therefore  issue this
opinion pursuant to 28 U.S.C.   46(d).

          STAHL,  Circuit  Judge.    In  Langley  v.  Federal
                                                             

Deposit Ins.  Corp., 484  U.S. 86 (1987),  the Supreme  Court
                   

ruled that 12  U.S.C.   1823(e)1 shields  the Federal Deposit

Insurance Corporation ("FDIC") from essentially all claims of

misrepresentation relating to any  asset acquired by it under

12 U.S.C.    1821 or 1823.  This appeal requires us to decide

whether  this  rule  should  apply in  situations  where  the

"misrepresentation" at issue actually is  an unlawful failure

to disclose crucial information.   Believing that the Langley
                                                             

                    

1.  12 U.S.C.   1823(e) provides:

       No agreement  which tends  to diminish or  defeat
     the interest of the [FDIC] in any asset acquired by
     it  under  this section  or  section  1821 of  this
     title, either as security for a loan or by purchase
     or   as  receiver   of   any   insured   depository
     institution,  shall  be  valid against  the  [FDIC]
     unless such agreement-

          (1) is in writing
          (1)

          (2)  was  executed   by  the   depository
          (2)
          institution  and  any person  claiming an
          adverse  interest  thereunder,  including
          the  obligor, contemporaneously  with the
          acquisition   of   the   asset   by   the
          depository institution,

          (3)   was  approved   by  the   board  of
          (3)   
          directors  of the  depository institution
          or  its  loan  committee, which  approval
          shall be reflected in the minutes of said
          board or committee, and

          (4) has been, continuously, from the time
          (4) 
          of  its execution, an  official record of
          the depository institution. 

                             -2-
                              2

rule  does  apply,  we  affirm  the  district  court's  order

dismissing the underlying complaint against the FDIC.

          Plaintiffs-appellants  David  J.  and  Winifred  M.

McCullough  initiated  this  action  by  filing  a  complaint

seeking damages  and  an order  enjoining  defendant-appellee

FDIC from collecting on a promissory note made  by plaintiffs

in favor  of the FDIC's predecessor-in-interest,  the Bank of

New England ("BNE").   The note was given  in exchange for  a

loan  which plaintiffs  used  to purchase  four  units of  an

industrial condominium  project ("the project")  in which BNE

had a  significant  interest because  of  loans made  to  the

original  developer and  a competing  developer.   Plaintiffs

contend, inter  alia, that  when  BNE extended  the loan,  it
                    

failed to disclose to them that  the project was subject to a

Notice of Responsibility  ("NOR"), previously  issued by  the

Massachusetts    Department    of    Environmental    Quality

Engineering.    The  NOR  required  the  removal  of  certain

hazardous waste on the  property.2  In plaintiffs' view,  the

aforementioned omission constituted  misrepresentation and  a

violation of the Massachusetts Consumer Protection Act, Mass.

Gen. Laws Ann. ch. 93A,    2 and 11 (West 1984 &amp; Supp. 1992).

                    

2.  In their complaint, plaintiffs also alleged that BNE made
affirmative misrepresentations at the time the loan agreement
was  negotiated, but  have  since conceded  that federal  law
precludes  them  from  proceeding   on  the  basis  of  these
allegations.  See generally Langley, 484 U.S. at 90-93.  
                                   

                             -3-
                              3

          The  FDIC responded  to  plaintiffs'  complaint  by

filing a  motion to dismiss.  As the basis therefor, the FDIC

argued  that the  Langley rule  applies as  much to  the non-
                         

disclosure    of   information    as   to    an   affirmative

misrepresentation.   After  a  hearing,  the  district  court

agreed and issued a memorandum and order granting  the FDIC's

motion.   In  so doing,  the court  joined an  ever expanding

number  of courts  that have  explicitly endorsed  the FDIC's

argument.   See Federal Deposit  Ins. Corp. v.  State Bank of
                                                             

Virden, 893 F.2d  139, 144 (7th  Cir. 1990); Federal  Deposit
                                                             

Ins. Corp. v.  Bell, 892 F.2d 64, 66 (10th  Cir. 1989), cert.
                                                             

dismissed, 496  U.S. 913 (1990);  In re NBW  Commercial Paper
                                                             

Litigation, No.  90-1755(RCL), 1992 WL 73135,  at *11 (D.D.C.
          

March 11, 1992); Federal Deposit Ins. Corp. v. Hudson, 800 F.
                                                     

Supp.  867, 870-71  (N.D.  Cal. 1990);  Federal Deposit  Ins.
                                                             

Corp. v. Sullivan, 744 F. Supp. 239, 242-43 (D. Colo. 1990).3
                 

                    

3.  At the time the district  court issued its memorandum and
order,  one court  had departed  from existing  authority and
decided  that    1823(e) does  not bar  claims based  upon an
unlawful omission.  See Grant County Savings &amp; Loan Assoc. v.
                                                          
Resolution Trust Corp., 770 F. Supp. 1374, 1379-82 (E.D. Ark.
                      
1991).    This  decision  was, however,  reversed  while  the
instant  appeal was pending.  See Grant County Savings &amp; Loan
                                                             
Assoc. v.  Resolution Trust  Corp.,  968 F.2d  722 (8th  Cir.
                                  
1992).  While the reversal was premised on other grounds, the
Eighth  Circuit, in  dicta,  expressed its  doubt  as to  the
                          
district court's conclusion that    1823(e) did not  apply to
an unlawful  omission.    See  id. at  724  (indicating  that
                                  
defendant's argument that   1823(e) barred plaintiff's  claim
for failure to disclose "ha[d] merit").

                             -4-
                              4

          On  appeal, plaintiffs assert that the overwhelming

prevailing  consensus is incorrect.   In essence, plaintiffs'

argue that an unlawful  omission of the type at  issue cannot

be  viewed  as  a form  of  "agreement"  to  which    1823(e)

applies, as "there  is nothing on the  table to agree  to; no

promise, condition, or warranty is made."  See  Grant County,
                                                            

770  F.  Supp. at  1381.   Although  possessing  some surface

appeal, plaintiffs' contention  fails when analyzed in  light

of the theoretical foundation upon which Langley rests.4
                                                

          The holding in Langley  depends upon and flows from
                                

the  following  observation:    as a  matter  of  contractual

analysis, a  contractually bound  party's attempt to  avoid a

contractual obligation and/or to seek damages through a claim

of misrepresentation is nothing more  than a challenge to the

truthfulness  of a  warranty  made by  another  party to  the

contract, and  a concomitant  claim that the  truthfulness of

that  warranty   was  a   condition  of  the   first  party's

performance.    See Langley,  484 U.S.  at  90-91.   In other
                           

words,  the claim is analogous to one for breach of warranty,

with the warranty being a condition precedent to performance.

Therefore, because  such a warranty falls  within the purview

                    

4.  Apparently  conceding that  our  ruling as  to whether   
1823(e) applies to unlawful non-disclosures also resolves the
propriety of the district court's dismissal  of their ch. 93A
claim,   plaintiffs    confine   their   argument    to   the
misrepresentation context.  We  believe that this approach is
appropriate, and accordingly so confine our discussion.

                             -5-
                              5

of the term  "agreement,"5 this  type of  breach of  warranty

claim cannot be asserted against the FDIC unless the warranty

meets the requirements of   1823(e).  See id. at 91-92.
                                             

          We can find no logical basis for this reasoning not

obtaining  with equal  force where  the  misrepresentation at

issue  arises out  of  a non-disclosure  of information.   In

terms  of  the facts  of this  case,  it makes  no difference

whether  BNE affirmatively  stated that  the project  was not

subject  to the NOR  or tacitly indicated this  was so by not

informing  plaintiffs of  the NOR.   Either  way, plaintiffs'

misrepresentation claim  is tantamount to a  challenge to the

truthfulness of BNE's  warranty that the project  was free of

any NOR, and a  claim that the truthfulness of  this warranty

was a condition  of plaintiffs' performance.   See Langley at
                                                          

90-91.    The  non-disclosure  at  issue  here  can  only  be

actionable  at common law as  a misrepresentation if it falls

into a  narrow range  of circumstances allowing  it, somewhat

fictionally, to  be treated as an assertion.  Cf. Restatement
                                                 

(Second)  of Contracts,    161  (listing those  situations in

which a  non-disclosure is  "equivalent to an  assertion" and

actionable as  a misrepresentation); Restatement  (Second) of

Torts,   551 (1977) (listing those situations in which a non-

                    

5.  As the Supreme Court noted, "[T]he term `agreement' often
has `a wider meaning than promise,' and embraces [a warranty,
the truthfulness of which  is] a condition upon performance."
Id. at  91 (quoting  Restatement (Second) of  Contracts    3,
   
Comment a (1981)).

                             -6-
                              6

disclosure  is actionable  as tortious  misrepresentation and

noting that a person against whom a successful non-disclosure

claim is brought will be "subject to the same liability . . .

as  though [s/]he  had  represented the  nonexistence of  the

matter that [s/]he has failed  to disclose").  Thus, adoption

of  plaintiffs' view would require us  to endorse this quasi-

fiction  for purposes  of  viewing the  non-disclosure as  an

asserted misrepresentation, but to  reject it for purposes of

viewing  the  non-disclosure  as   a  de  facto  warranty  in
                                               

conducting  our    1823(e)  analysis.   We  are  not inclined

towards so one-sided an approach.   

          Not only does the conclusion that   1823(e) applies

to  misrepresentations  based  upon   non-disclosures  follow

naturally from  the Supreme  Court's analysis in  Langley, it
                                                         

also comports with  common sense.   We join  the Seventh  and

Tenth  Circuits in  being unable  to articulate  any rational

basis  for  a regime  in  which  such misrepresentations  are

outside  the   scope  of   the   statute  while   affirmative

misrepresentations  are not.    See generally  State Bank  of
                                                             

Virden, 893  F.2d at 144; Bell,  892 F.2d at 66.   Indeed, we
                              

think it apparent that Congress  could not have intended that

the  statute be  so  construed.    Moreover, we  share  Judge

Lamberth's view  that  "permitting suit  on  omissions  would

practically  swallow  the  Langley  rule  since  parties  can
                                  

generally  turn  a[n affirmative]  misrepresentation  into an

                             -7-
                              7

omission by  means of artful  pleading."  In re  NBW, 1992 WL
                                                    

73135, at *11.

          Before  concluding,  we  observe  that  plaintiffs'

complaint  does   not  make   entirely   clear  whether   the

misrepresentation  claim sounds  in contract  or tort.   Such

fact, however, has no bearing on our analysis.  We previously

have held that  the common law doctrine announced in D'Oench,
                                                             

Duhme &amp;  Co. v. FDIC, 315 U.S. 447 (1942), of which   1823(e)
                    

is somewhat  loosely  described as  the  codification,  "bars

defenses and  affirmative claims whether cloaked  in terms of

contract or  tort, as long  as those  claims arise out  of an

alleged secret agreement."   Timberland Design, Inc. v. First
                                                             

Service Bank for Savings,  932 F.2d 46, 50 (1st  Cir. 1991).6
                        

In so doing, we remarked that "[t]o allow [a party] to assert

tort claims  based on  [a secret] agreement  would circumvent

the very policy behind D'Oench[.]"  Id.  Clearly, the genesis
                                       

of plaintiffs' claim, whether the claim is framed in contract

or  tort, is the alleged  warranty made by  BNE regarding the

NOR.  As such, the claim is barred.  

                    

6.  Obviously,  in   Timberland,  we  were   considering  the
                               
application of D'Oench to  contract and tort claims.   We see
                      
no reason,  however, why our ruling in  Timberland should not
                                                  
also  be  implemented where     1823(e),  D'Oench's statutory
                                                 
partner,  is   being  applied.    See   Castleglen,  Inc.  v.
                                                         
Resolution Trust Corp., No. 90-4002, 1993  WL 27915, at *5-*6
                      
(10th Cir.  Feb. 9, 1993)  (holding that    1823(e) precludes
tort claims,  as  well as  contract  claims, arising  out  of
unrecorded agreements).  

                             -8-
                              8

          In  sum,  we are  persuaded  to join  that  body of

authority  which has concluded that   1823(e) applies as much

to misrepresentation claims based upon non-disclosures as  to

those based  upon affirmative  assertions.  Thus,  we believe

that    1823(e) governs  plaintiffs' misrepresentation claim.

Accordingly,  because this  claim  arises out  of an  alleged

warranty that was unwritten and otherwise did not comply with

the  requirements of the  statute, we hold  that the district

court  properly ruled that the  claim cannot, as  a matter of

law, be asserted against the FDIC.

          Affirmed.  No costs.
                   

                             -9-
                              9
