Why D’Oench, Duhme? An Economic, Legal, and Philosophical Critique of a Failed Bank Policy

In 1942, the Supreme Court handed down its decision in the case of D’Oench, Duhme, & Co. c. FDIC. This decision established an equitable estoppel under the umbrella of federal common law to protect the insurance fund of the Federal Deposit Insurance Corporation (FDIC) from secret agreements between borrowers and banks which misrepresented the value of a bank’s assets. In the last fifty years, the D’Oench doctrine has been greatly expanded by the courts, and its purported legislative counterpart, 12 U.S.C. Section 1823(e) has enjoyed similar expansion. More recently, courts have even created a fiction by holding that the FDIC enjoys rights as a holder in due course under federal common law as a necessary extension of the original D’Oench doctrine. During this expansive development, one consideration has remained constant. The goal sought to be preserved by this unbridled growth of the doctrine was the protection of the insurance fund as an integral part of regulatory failed bank policy. The core value inherent in this goal was, and continues to be, economic. However, neither courts, legislators, nor academicians have suggested any major reconsideration of one of the most misguided disciples of failed bank policy—the D’Oench doctrine. With the tidal wave of litigation involving the FDIC, Resolution Trust Corporation (RTC), and successor financial institutions, serious critical analysis needs to be given to D’Oench and the current economic approach to the failure resolution system. This analysis will show that the D’Oench doctrine has placed economic values on a pedestal, effectively trumping ethical values of common decency and fair play, and that it is time to apply a new value-based approach to banking regulatory policies

Bankruptcy Policy: Toward a Moral Justification for Financial Rehabilitation for the Consumer Debtor

The central justification for the debtor financial relief provisions of the Bankruptcy Code is founded in a natural law theory of morality. The law reflects reason and conscience, and those fundamental principles of fairness and humanitarianism form the moral dimension of the debtor relief provisions of the Bankruptcy Code. Historically, America has recognized an objective moral dimension to the bankruptcy process, and Congress has continually enacted legislation implementing its fresh start policy, which strives to obtain goals that mirror that moral fiber. This fiber is composed of two separate but mutually dependent strands of values, intertwined into a coherent plan of debtor financial relief. The first strand reflects the humanitarian concerns of the nation by stressing the fundamental dignity of every individual. This strand acknowledges the nation\u27s awareness that the basic economic conditions of human well-being are essential to society\u27s continued existence and are due members of society as inalienable rights. The second strand symbolizes the recognition by a debtor that in return for such rights, he has the duty and obligation to deal fairly with individual members of the nation. Together, these intertwined strands form the roots of an underlying moral foundation for debtor financial relief. These strands of mutual covenant signify the greatness of a nation that rejects economic action as an end in itself, and seeks justification on a higher plane

Raborn v. Davis—Paycheck in Employee’s Possession: A Limitation of the Current Wage Exemption in Texas

Extensions of credit generally help both the debtor and creditor. However, a result of our credit-based economy is that individuals are free to make poor economic decisions, and that they should suffer the consequences of these poor decisions. Although legal rules have had a role in ensuring that debtors are protected from overzealous creditors, commercial transactions can only exist if obligations of debtors are legally enforceable. The role of government, therefore, is to set parameters for procedures to enforce these obligations, while also setting a floor of protected or exempt assets so that debtors will not become wards of the state. Following a judgment for $22,761.35 in unpaid attorney’s fees, Burta Rhoads Raborn sought relief under the Texas turnover statute to satisfy the unpaid judgment. After an evidentiary hearing, the district court ordered the judgment debtor to relinquish to a court-appointed receiver any current or future income he received from his employer. The receiver was then to distribute a portion of the debtor’s income to the creditor and return enough to the debtor to cover his subsistence, and this turnover was to continue until the judgment was satisfied. Following appeal, the Texas Supreme Court upheld the trial court’s judgment, holding that an order directing a judgment debtor to turn over his future paychecks does not violate the Texas constitutional garnishment prohibition. The court stated that a trial court therefore has the authority to order a judgment debtor to turnover future paychecks upon receipt by the debtor. However, this cursory opinion of the Texas Supreme Court fails to interpret properly the term “current wages” found in the Texas Constitution’s wage garnishment prohibition. For this reason, the development of the present interpretation of “current wages” requires critical analysis, following which a meaningful alternative to that interpretation can be suggested

Mandamus Review of the Granting of the Motion for New Trial: Lost in the Thicket

A trial court’s broad discretion in granting a new trial has been one of the mainstays of Texas jurisprudence since early statehood. Historically, this discretion was not subject to review through the ordinary appellate processes. This principle remains inviolate today, as the granting of a new trial is an interlocutory order from which the appellate courts of Texas do not have jurisdiction. Furthermore, the use of an original mandamus proceeding to compel a trial court to set aside the granting of a new trial has had only limited application. However, in response to the case of In re Columbia Medical Center of Las Colinas, Subsidiary, LP, a sharply divided Texas Supreme Court held that the failure of the trial court to disclose the reasons for disregarding the jury’s verdict and entering a new trial was arbitrary and an abuse of discretion. The Supreme Court then conditionally granted a mandamus to direct the trial court to state reasons for the granting of the new trial. The Texas Supreme Court’s decision was a dramatic rejection of the then-existing discretionary authority of the trial judge to grant new trials. Furthermore, the decision was a radical shift in Texas mandamus jurisprudence. It is therefore worthwhile to examine and evaluate whether the Columbia case is in the best interest of Texas jurisprudence. A thorough review of district court discretion for granting new trials, mandamus jurisprudence, and the Columbia case supports the argument that the court should reject the Columbia case and its progeny as an improper intrusion on the discretion of the trial court and as an unnecessary expansion of the appellate courts’ mandamus authority. Additionally, legislation should therefore be enacted to stop this growing mandamus intrusion

Mandamus Review of the Granting of the Motion for New Trial: Lost in the Thicket

A trial court’s broad discretion in granting a new trial has been one of the mainstays of Texas jurisprudence since early statehood. Historically, this discretion was not subject to review through the ordinary appellate processes. This principle remains inviolate today, as the granting of a new trial is an interlocutory order from which the appellate courts of Texas do not have jurisdiction. Furthermore, the use of an original mandamus proceeding to compel a trial court to set aside the granting of a new trial has had only limited application. However, in response to the case of In re Columbia Medical Center of Las Colinas, Subsidiary, LP, a sharply divided Texas Supreme Court held that the failure of the trial court to disclose the reasons for disregarding the jury’s verdict and entering a new trial was arbitrary and an abuse of discretion. The Supreme Court then conditionally granted a mandamus to direct the trial court to state reasons for the granting of the new trial. The Texas Supreme Court’s decision was a dramatic rejection of the then-existing discretionary authority of the trial judge to grant new trials. Furthermore, the decision was a radical shift in Texas mandamus jurisprudence. It is therefore worthwhile to examine and evaluate whether the Columbia case is in the best interest of Texas jurisprudence. A thorough review of district court discretion for granting new trials, mandamus jurisprudence, and the Columbia case supports the argument that the court should reject the Columbia case and its progeny as an improper intrusion on the discretion of the trial court and as an unnecessary expansion of the appellate courts’ mandamus authority. Additionally, legislation should therefore be enacted to stop this growing mandamus intrusion

Time to Repair the Chain: Void Deeds, Subsequent Purchasers, and the Texas Recording Statutes

Abstract forthcoming

The Evolving Standard for Granting Mandamus Relief in the Texas Supreme Court: One More Mile Market down the Road of No Return.

The Prudential balancing test should be of concern for anyone interested in the rule of law. This test is the current binding precedent for determining when an appellate court should exercise its mandamus authority upon a finding of a clear abuse of discretion. This test has substantially altered one of the most time honored principles of mandamus jurisprudence, and replaced it with a newly articulated standard that leads to nothing short of ad hoc decision making. In the area of mandamus jurisprudence, the Texas Supreme Court has, from time to time, developed different ways to circumvent the common law history and precedents whenever it felt the need to exercise jurisdiction over a case because of the egregious abuse of discretion by the trial court. Apparently, frustrated by being unable to affect the quality of the state judiciary, the court has used its power much like the old common law courts in a general supervisory role as a check and balance of the injustice and the additional costs and delay caused by clearly erroneous trial court decisions. The attempt to expand its jurisdiction with the Prudential balancing test is simply an usurpation of the prerogative of the legislature to expand or contract the jurisdiction of the Supreme Court. It is simply wrong; moreover, it sends the wrong message to the trial bench and the Bar by placing mandamus at the level of an interlocutory appeal. After reflecting on the long history of mandamus jurisprudence, the Court should take the earliest opportunity to reverse the Prudential decision and specifically reject the balancing test; it should return to the tried and trusted traditional approach to mandamus jurisprudence

Raborn v. Davis - Paycheck in Employee\u27s Possession: A Limitation of the Current Wage Exemption in Texas.

Extensions of credit generally help both the debtor and creditor. However, a result of our credit-based economy is that individuals are free to make poor economic decisions, and that they should suffer the consequences of these poor decisions. Although legal rules have had a role in ensuring that debtors are protected from overzealous creditors, commercial transactions can only exist if obligations of debtors are legally enforceable. The role of government, therefore, is to set parameters for procedures to enforce these obligations, while also setting a floor of protected or exempt assets so that debtors will not become wards of the state. Following a judgment for $22,761.35 in unpaid attorney’s fees, Burta Rhoads Raborn sought relief under the Texas turnover statute to satisfy the unpaid judgment. After an evidentiary hearing, the district court ordered the judgment debtor to relinquish to a court-appointed receiver any current or future income he received from his employer. The receiver was then to distribute a portion of the debtor’s income to the creditor and return enough to the debtor to cover his subsistence, and this turnover was to continue until the judgment was satisfied. Following appeal, the Texas Supreme Court upheld the trial court’s judgment, holding that an order directing a judgment debtor to turn over his future paychecks does not violate the Texas constitutional garnishment prohibition. The court stated that a trial court therefore has the authority to order a judgment debtor to turnover future paychecks upon receipt by the debtor. However, this cursory opinion of the Texas Supreme Court fails to interpret properly the term “current wages” found in the Texas Constitution’s wage garnishment prohibition. For this reason, the development of the present interpretation of “current wages” requires critical analysis, following which a meaningful alternative to that interpretation can be suggested