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Simple English definitions for legal terms
D'Oench Duhme doctrine
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A quick definition of D'Oench Duhme doctrine:
The D'Oench Duhme doctrine is a rule that says if a bank fails and a new bank takes over, the borrower cannot make a claim or defense against the new bank if it is based on a secret agreement or promise. The borrower can only make a claim if the agreement or promise was written down, signed by both the bank and the borrower, approved by the bank's board of directors, and kept as a permanent record by the bank. This rule was established by a court case in 1942 and is still partly used today.
A more thorough explanation:
The D'Oench Duhme doctrine is a legal rule that prevents a borrower from making a claim or defense against a federal successor to a failed financial institution if the claim or defense is based on a side or secret agreement or representation. This rule applies unless the agreements or representations have been:
- Put into writing
- Executed by the financial institution and borrower when the loan was issued
- Approved by the financial institution's board of directors or loan committee
- Made a permanent part of the financial institution's records
For example, if a borrower had an agreement with a failed bank that they would not have to pay back their loan if they lost their job, they cannot use this as a defense against a federal successor to the bank unless the agreement meets the four requirements listed above.
The D'Oench Duhme doctrine was established in the case of D'Oench, Duhme & Co. v. FDIC in 1942 and is now partially codified at 12 USCA § 1823(e). However, its standing has been questioned in light of the O'Melveny & Myers v. FDIC case in 1994.