DONNA M. RYU United States Magistrate Judge

ORDER ON PARTIES' MOTIONS FOR SUMMARY JUDGMENT [DOCKET NOS. 77, 86]

Plaintiff Simmons First National Bank ("Simmons") brings this action for judicial foreclosure against real property owned by Defendants Richard C. Lehman and Michele D. Koo. Both parties now move for summary judgment pursuant to Federal Rule of Civil Procedure 56. [Docket No. 77 (Defs.' Mot.), 86 (Pl.'s Mot.).] Simmons also moves to supplement the evidence submitted in opposition to Defendants' motion for summary judgment. [Docket No. 105.] Having carefully considered the parties' arguments, the relevant legal authority, and having had the benefit of oral argument, the court hereby denies Defendants' motion for summary judgment and grants Simmons's motion for summary judgment. The court also grants in part Simmons's motion to supplement the evidence.

I. Facts & Background

This dispute concerns a February 4, 2009 deed of trust ("the Deed of Trust") recorded against Defendants' residential property in Woodside, California ("the Woodside property"). The Deed of Trust secured a $3 million loan to Bonhomme Investment Partners, LLC ("Bonhomme") made by Excel Bank ("Excel"). (Renner Decl., Jan. 13, 2015, ¶ 7, Ex. 5 (Deed of Trust).) At the time Excel made the loan, Defendant Lehman and third party Donald Davis were the sole owners of Bonhomme. Lehman is married to Koo. Excel failed in October 2012 and the Federal Deposit Insurance Corporation ("FDIC") took control of Excel's assets as a receiver. Simmons acquired certain of Excel's assets through a Purchase and Assumption Agreement between Simmons and the FDIC, including the Bonhomme loan and the Deed of Trust. (Renner Decl. ¶ 10, Ex. 7.)

The circumstances of the Bonhomme loan are as follows: in early 2009, Davis, Bonhomme's then-manager, asked Excel for a loan for Bonhomme to use as a line of credit. On February 6, 2009, Bonhomme delivered to Excel five documents in connection with the loan ("the Loan Documents"): • a promissory note for the amount of $3,000,000 with a maturity date of February 6, 2010, executed by Davis and Lehman on behalf of Bonhomme ("the Note"). The Note provides that it is secured by a deed of trust dated February 6, 2009 "covering 60 Prospect St, Woodside, CA, 94062," the Woodside property. (Renner Decl. ¶ 3, Ex. 1 (Note).) • a personal guaranty executed by Lehman securing Bonhomme's debts, liabilities and obligations regarding the $3,000,000 ("the Guaranty"). The Guaranty provides that it is "secured by a mortgage or security agreement dated 02/06/2009." (Renner Decl. ¶ 4, Ex. 2 (Guaranty).) • an agreement executed by Davis and Lehman on behalf of Bonhomme extending a line of credit in the amount of $3,000,000 by Excel ("the Line of Credit agreement"). The Line of Credit agreement states that "I have signed the following documents in connection with this line of credit and note(s) entered into in accordance with this line of credit . . . mortgage dated FEBRUARY 06, 2009 . . . guaranty dated FEBRUARY 06, 2009." (Renner Decl. ¶ 5, Ex. 3 (Line of Credit agreement).) • a third party pledge agreement granting Excel a security interest in the Woodside property on behalf of Bonhomme, executed by Lehman and purporting to contain Koo's signature. (Renner Decl. ¶ 6, Ex. 4 (Third Party Pledge).) • a notarized "Long Form Deed of Trust and Assignment of Rents" dated February 4, 2009 and recorded on February 17, 2009 against the Woodside property, providing that it was for the purpose of securing the Note. (Deed of Trust.) The document was executed by Lehman and purports to contain Koo's signature and initials. The Deed of Trust was notarized by Richard C. Fellhauer, a notary public in Missouri. Bonhomme failed to pay the outstanding principal, interest, and charges on the Note at maturity, and Simmons now seeks to foreclose on the Deed of Trust.

Defendants do not dispute any of the facts set forth above. Koo denies having signed the Third Party Pledge or the Deed of Trust, asserting that her signatures on those documents were forged. She does not identify anyone whom she contends is responsible for the forgery.

II. Procedural History

On May 22, 2013, Simmons filed a state court complaint against Defendants for judicial foreclosure, specific performance, and injunctive relief. Defendants removed the case to federal court on June 21, 2013. In July 2013, Defendants answered and asserted affirmative defenses, including that they were induced to enter into the loan transactions by oral representations made by Shaun Hayes, a shareholder of Excel's holding company. [Docket Nos. 12 (Koo Answer) ¶ 28, 15 (Lehman Answer) ¶ 28.] They also asserted that "[n]either Defendant Lehman nor Defendant Koo executed the Trust Deed before the notary public who purported to notarize the Trust Deed," and that the Deed of Trust was fraudulent at its inception. (Koo Answer ¶ 41; Lehman Answer ¶ 41.)

On January 8, 2015, the court granted Simmons leave to file an amended complaint. [Docket No. 91.] On January 9, 2015, Simmons filed an amended complaint, again alleging claims for 1) judicial foreclosure; 2) specific performance; and 3) injunctive relief. It also alleged alternative bases for enforcing the Deed of Trust, including, inter alia, estoppel. [Docket No. 92 (Am. Compl.).] Defendants answered on January 22, 2015, bringing counterclaims for 1) slander and disparagement of title; 2) quiet title; and 3) declaratory judgment. [Docket Nos. 98 (Koo Answer to Am. Compl.), 99 (Lehman Answer to Am. Compl.).]

Defendants move for summary judgment. Simmons moves for partial summary judgment on Defendants' fraud-based affirmative defenses.

III. Legal Standard

A court shall grant summary judgment "if . . . there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The burden of establishing the absence of a genuine issue of material fact lies with the moving party, see Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986), and the court must view the evidence in the light most favorable to the non-movant. See Scott v. Harris, 550 U.S. 372, 378 (2007) (citation omitted). A genuine factual issue exists if, taking into account the burdens of production and proof that would be required at trial, sufficient evidence favors the non-movant such that a reasonable jury could return a verdict in that party's favor. Anderson v. Libby Lobby, Inc., 477 U.S. 242, 248. The court may not weigh the evidence, assess the credibility of witnesses, or resolve issues of fact. See id. at 249.

To defeat summary judgment once the moving party has met its burden, the nonmoving party may not simply rely on the pleadings, but must produce significant probative evidence, by affidavit or as otherwise provided by Federal Rule of Civil Procedure 56, supporting the claim that a genuine issue of material fact exists. TW Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987) (citations omitted). In other words, there must exist more than "a scintilla of evidence" to support the non-moving party's claims, Anderson, 477 U.S. at 252; conclusory assertions will not suffice. See Thornhill Publ'g Co. v. GTE Corp., 594 F.2d 730, 738 (9th Cir. 1979). Similarly, "[w]hen opposing parties tell two different stories, one of which is blatantly contradicted by the record, so that no reasonable jury could believe it, a court should not adopt that version of the facts" when ruling on the motion. Scott, 550 U.S. at 380.

Where, as here, the parties have filed cross-motions for summary judgment, "[e]ach motion must be considered on its own merits." Fair Hous. Council of Riverside Cnty., Inc. v. Riverside Two, 249 F.3d 1132, 1136 (9th Cir. 2001). "In fulfilling its duty to review each cross-motion separately, the court must review the evidence submitted in support of each cross-motion." Id.

IV. Discussion

A. Defendants' Motion

Defendants move for summary judgment on the grounds that there are no genuine issues of material fact as to whether Koo executed the Deed of Trust or authorized anyone to sign the Deed of Trust on her behalf. Defendants submit a declaration by Koo in which she states "I did not sign the [Deed of Trust], and I did not place any initials on the CA Deed of Trust. I did not authorize anyone to sign my name on the CA Deed of Trust, and I did not authorize anyone to place my initials on the CA Deed of Trust. I am not aware who signed my name on the CA Deed of Trust, or who placed my initials on the CA Deed of Trust." (Koo Decl., Nov. 5, 2014, ¶ 2.) She also states that she has never met Fellhauer, the notary public who notarized the Deed of Trust. (Koo Decl. ¶ 3.) Koo also testified at deposition in July 2014 that she had never seen the Deed of Trust before her deposition, had never discussed the Deed of Trust with Lehman, and that Lehman had never told her that the Deed of Trust had been recorded against the Woodside property. (Koo Dep. 100-101.) Defendants also submit a declaration by Lehman, in which he states that he did not sign or initial Koo's name on the Deed of Trust, nor authorize anyone to sign or initial her name on the Deed of Trust. (Lehman Decl., Nov. 6, 2014, ¶ 2.) According to Defendants, based on their unequivocal testimony regarding the Deed of Trust, there is no dispute of fact as to whether Koo executed the document and they are entitled to judgment as a matter of law. In response, Simmons presents evidence that it contends create a triable fact as to whether 1) Koo signed the Deed of Trust; 2) Lehman was authorized to sign Koo's name on the Deed of Trust; and 3) Koo is estopped from denying that she signed the Deed of Trust.

Pursuant to California Evidence Code section 1451:

A certificate of the acknowledgment of a writing other than a will, or a certificate of the proof of such a writing, is prima facie evidence of the facts recited in the certificate and the genuineness of the signature of each person by whom the writing purports to have been signed if the certificate meets the requirements of Article 3 . . . .

Accordingly, based on the presumption that the Deed of Trust is genuine, a jury must weigh the evidence of the Deed of Trust itself against Defendants' evidence that Koo's signature on the document was forged. See Hernandez, 2010 WL 1493506, at *3 (denying summary judgment in action by mortgagor to void a refinanced loan; "it is for the jury to weigh the evidence of the alleged forged loan documents themselves against the evidence produced by Plaintiff indicating forgery.").

While Defendants' motion for summary judgment must be denied on the ground that the Deed of Trust is presumed genuine, see Ware, 122 Cal. App. at 355-56, Simmons' opposition does not rest solely on this argument. It also presents evidence that it claims raises a triable issue of fact concerning whether Koo did in fact sign the Deed of Trust. Federal Rule of Evidence 901 provides that handwriting may be authenticated by a non-expert, lay witness as long as the witness's familiarity with the handwriting "was not acquired for the current litigation." Fed. R. Evid. 901(b)(2); see United States v. Dreitzler, 577 F.2d 539, 553 n.24 (9th Cir. 1978) (noting that a witness who was defendant's former secretary "was a qualified non-expert to testify as to whether handwriting on certain government exhibits was that of [the defendant's]."). Laura Feuerborn, who is the former office manager of Lehman's medical practice, testified that she has seen documents Koo has signed with her initials, "MDK," and that the initials on the Deed of Trust appear similar to those she has seen Koo sign. (Feuerborn Dep. 75-76.) She also testified that the signature on the Third Party Pledge appears to be written by Koo. (Feuerborn Dep. 87-88.) Joanne Hetlage, the office manager of Koo's medical practice, testified that she had seen Koo initial documents "[a] hundred" times, and that the initials on the Deed of Trust appear to be written by Koo. (Hetlage Dep. 38-39, 42.) Finally, David Apted, who has been Defendants' financial advisor for over 12 years, testified that the signature above Koo's name on the Deed of Trust "kind of looks like hers." (Apted Dep. 15, 31-32.) While the testimony of Feuerborn, Hetlage, and Apted does not unequivocally authenticate Koo's signature and initials on the Deed of Trust, the court finds that this evidence is enough to raise a genuine dispute of fact as to whether Koo signed the Deed of Trust.

Simmons also presents evidence that it argues raises triable issues of fact regarding authorization. "A spouse may act as agent for the other in transactions affecting community property." United States v. Real Property Located at 3756 W. 106th Street, 940 F.2d 1537, 2 (9th Cir. 1991) (citing In re Nelson, 761 F.2d 1320, 1322 (9th Cir. 1985) (affirming bankruptcy court's finding of "implied actual authority" where spouse was aware husband had signed her name to documents, knew husband had signed her name to loan documents and had authority to do so, and permitted husband to handle her personal finances)). Here, Koo testified that she did not authorize anyone to sign her name or place her initials on the Deed of Trust, (Koo Decl. ¶ 2), and that Lehman has never signed any documents on her behalf. (Koo Dep. 131.) However, Simmons submits evidence contradicting Koo's assertion that Lehman has never signed documents on her behalf and supporting its claim that Lehman signed Koo's name on the Deed of Trust. Feuerborn testified that she had seen Lehman sign Koo's name during a period of time when Koo was out of town, and that it was "kind of common for him to do it." (Feuerborn Dep. 110-11.) Deanna Frailey, a former office manager of Lehman's medical practice, testified that she had seen Lehman sign documents more than 100 times, and stated that Koo's initials on the Deed of Trust and Third Party Pledge resembled Lehman's handwriting. (Frailey Dep. 67-68, 69-71, 73, 88-89.) She also testified that she was aware that Lehman had signed Koo's name on documents for Credit Suisse, Defendant's financial advisor. (Frailey Dep. 80-81.) Hetlage testified that she had personally signed over 100 documents on Koo's behalf, including bank deposit slips. (Hetlage Dep. 42-43.) Simmons also presents evidence that Lehman handles financial transactions for Koo. (Koo Dep. 49-51.)

Additionally, Simmons presents evidence that appears to contradict Koo's own testimony that she was unaware that the Deed of Trust had been recorded against the Woodside property. In an email exchange about a possible sale of the Woodside property with a real estate agent, Tony Fregoso, Koo wrote to Fregoso on May 6, 2013 that "[w]e currently use that property as collateral on a startup and I don't want to go through the legal time & expense of substituting collateral etc if the buyers aren't serious." (Murphy Decl., Feb. 5, 2015, ¶ 7 Ex. 4 ("the Fregoso email").) This statement could be construed as an admission that Koo knew the Woodside property was pledged as security for the Bonhomme loan. This evidence, along with the testimony by Feuerborn, Frailey, and Hetlage, which Defendants do not challenge, is sufficient to raise a genuine dispute of fact regarding whether Koo authorized Lehman to sign the Deed of Trust on her behalf. See In re Nelson, 761 F.2d at 1322 ("Under California law, questions regarding the existence of an agency are questions of fact.").

Simmons also argues that Koo should be estopped from denying that she signed the Deed of Trust pursuant to MacKay v. Darusmont, 46 Cal. App. 2d 21 (1941). In MacKay, the court held that a spouse was estopped from attacking a transfer of property she claimed was community property without her signature where she had enabled and caused the property's title to be placed in her husband's name alone as separate property, knew of the sale to buyers, knew the consideration the buyers paid her husband, and spoke with the buyers and never disclosed her community interest. Id. at 26-27; see also In re Nelson, 761 F.2d at 1323 (spouse estopped from attacking validity of deed of trust she did not personally sign where it was "clear that [the spouse] received in one way or another the benefit of the loan proceeds."). In 2013, Lehman transferred his interest in Bonhomme to Lehman and Koo. It is also undisputed that proceeds from the $3 million line of credit were used to pay off $33,901.99 in outstanding property taxes due on the Woodside property. (Robertson Decl., Jan. 15, 2015, ¶¶ 3-8, Ex. 1 (reflecting payments by Excel to San Mateo County Tax Collector).) Further, the Fregoso email could lead a factfinder to infer that Koo was aware that the Woodside property was security for the Bonhomme loan. Therefore, Simmons argues she benefitted from the loan, yet waited until this litigation to disavow the transaction and assert that her signature on the Deed of Trust was forged. Additionally, Simmons presents evidence that Koo was aware of the appraisal of the Woodside property, arranged by Davis, and that she consented to the appraisal. (Koo Dep. 119-122.) The court finds that these facts are sufficient to raise a dispute of fact as to whether Koo is estopped from denying the validity of the Deed of Trust. See In re Marriage of Burkle, 139 Cal. App. 4th 712, 751 (2006) (doctrines of estoppel, ratification, and laches barred spouse from challenging validity of transfer of community property by husband because she accepted benefits of transaction over five-year period with knowledge of transfer).

In sum, the court finds that Simmons has introduced evidence sufficient to raise triable issues of fact regarding whether Koo signed the Deed of Trust, authorized Lehman to sign the Deed of Trust on her behalf, or should be estopped from disavowing the Deed of Trust. Accordingly, Defendants' motion for summary judgment is denied.

B. Simmons's Motion

1. Whether Simmons's Motion is Moot

Simmons moves for summary judgment on Defendants' second through fifth affirmative defenses in which Defendants allege that they were induced to enter into the loan transactions by misrepresentations and omissions made by Shaun Hayes, a shareholder of Excel's holding company. On January 22, 2015, after Simmons filed its motion, Defendants filed answers, affirmative defenses, and counterclaims to Simmons's amended complaint, superseding their original answers. Defendants contend that Simmons's motion is moot because it is directed to the affirmative defenses in their original answers. However, upon careful review of Defendants' original and operative answers, the court finds that they allege the same fraud-based affirmative defenses based on identical facts; i.e., Excel and Hayes's "misrepresentations of material facts and their omission of material facts." (Compare Lehman Answer ¶¶ 28-31 with Lehman Answer to Am. Compl. ¶¶ 38-41; Koo Answer ¶¶ 28-31 with Koo Answer to Am. Compl. ¶¶ 38-41.) The only substantive change is the addition of the affirmative defense of fraud in the factum, which is also based on Excel and Hayes's "misrepresentations of material facts and their omission of material facts." (Lehman Answer to Am. Compl. ¶37; Koo Answer to Am. Compl. ¶ 37.) As Simmons's motion challenges the legal sufficiency of Defendants' affirmative defenses, including the affirmative defense of fraud in the factum, (see Pl.'s Mot. 14-19), and none of Defendants' changes to their affirmative defenses materially affect Simmons's motion, the court will not require Simmons to file a new motion for summary judgment. See Buechler v. Your Wine & Spirit Shoppe, Inc., 846 F. Supp. 2d 406, 414 (D. Md. 2012) (holding that a motion for summary judgment was not mooted by the filing of amended complaint because "such a motion is not directed at the adequacy of a complaint's allegations but is instead focused on the merits of the substantive claim."); see also Fed. R. Civ. P. 1 (the Federal Rules of Civil Procedure "should be construed and administered to secure the just, speedy, and inexpensive determination of every action and proceeding").

Accordingly, the court construes Simmons's motion as a motion for summary judgment on the following operative affirmative defenses: 1) fraud in the factum (second affirmative defense); 2) fraud in the inducement (third); 3) violations of the Securities Exchange Act, 15 U.S.C. § 78a, et seq. (fourth); 4) violations of the Missouri Securities Act, Mo. Rev. Stat. § 409.5-501, et seq. (fifth); and 5) negligent misrepresentations (sixth).

2. Applicability of 12 U.S.C. § 1823(e)

Through the affirmative defenses at issue in this motion, Defendants assert that the Loan Documents, including the Deed of Trust, are void, invalid, or otherwise unenforceable because they "resulted from misrepresentations as to the character and/or essential terms of the proposed agreements and transactions" by Excel and Hayes, which were relied upon by Bonhomme and Lehman. (Lehman Answer to Am. Compl. ¶¶ 37, 38; see also ¶¶ 39-41; Koo Answer to Am. Compl. ¶¶ 37, 38; see also ¶¶ 39-41.) Specifically, Defendants assert that Excel and Hayes's misrepresentations and omissions include the following:

(1) Excel Bank and Shaun Hayes deceptively conditioned Excel Bank's loan to Bonhomme, as well as a loan from Truman Bank, on Bonhomme's purchasing certain common stock in Truman Bank's parent holding company, Truman Bancorp, Inc. ("Bancorp") (the "Bancorp Common Stock"); (2) Excel Bank and Shaun Hayes failed to provide material information regarding the applicable lending standards for Excel Bank and Truman Bank; (3) Excel Bank and Shaun Hayes failed to disclose that Truman Bank and Bancorp were having financial difficulties, or that the Bancorp Common Stock was worth less than the cost of purchasing it; (4) Excel Bank and Shaun Hayes falsely stated that Lehman would need to pledge certain California property he jointly owned with his wife . . . Koo ("the property") to secure Bonhomme's loan, that Lehman's pledge of the Property was necessary to meet Excel Bank's lending standards, and that, if Lehman pledged the Property, Excel Bank would at a later date substitute the Bancorp Common

Stock as collateral for the loan and release its lien on the Property; and (5) Excel Bank and Shaun Hayes failed to disclose that Bancorp and Truman Bank were subject to a December 10, 2008 Agreement by and between The Templar Fund, Inc., Bancorp, FFC Financial Corporation, Truman Bank and the Federal Reserve Bank of St. Louis (the "Consent Decree"), which Consent Decree governed and restricted certain actions by Bancorp and Truman Bank.

12 U.S.C. § 1823(e) and the D'Oench, Duhme doctrine "prohibit unwritten, undocumented claims and defenses against the FDIC or an assignee bank." Cmty. Bank of Ozarks v. FDIC, 984 F.2d 254, 256 (8th Cir. 1993); see Brookside Assocs. v. Rifkin, 49 F.3d 490, 493 (9th Cir. 1995) ("[t]he D'Oench, Duhme doctrine . . . is a principle of equitable estoppel that permits bank examiners to rely on the records of a bank in evaluating the bank's financial condition, by protecting the bank authorities from suits founded on undisclosed conditions or deceptive documents." (citations omitted)). An agreement that would effectively limit the liability of a borrower to the FDIC must satisfy strict statutory requirements. Section 1823(e) provides in relevant part that "[n]o 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, . . . as receiver of any insured depository institution, shall be valid against the [FDIC]" unless the agreement:

(A) is in writing,



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



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



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

In Langley v. FDIC, 484 U.S. 86 (1987), the Supreme Court expanded the scope of D'Oench, Duhme by holding that the term "agreement" in section 1823(e) "covers more than promises to perform acts in the future"; it also includes misrepresentations constituting fraud in the inducement. Id. at 92-94. Since Langley, numerous courts have concluded that fraud based upon material omissions, as opposed to affirmative misrepresentations, also falls within the meaning of "agreement" under section 1823(e). See, e.g., FDIC v. Hudson, 800 F. Supp. 867, 871 (N.D. Cal. 1990) (citing FDIC v. Bell, 892 F.2d 64, 66 (10th Cir. 1989)); Avirez, Ltd. v. Resolution Trust Corp., 876 F. Supp. 1135, 1141 (C.D. Cal. 1995) ("section 1823(e) applies as much to misrepresentation claims based upon non-disclosures as to those based upon affirmative assertions."); FDIC v. Tarkanian, No. 10cv980-WQH-BGS, 2012 WL 1327849, at *4 (S.D. Cal. Apr. 17, 2012) (following Avirez, granting summary judgment on counterclaims based upon misrepresentations and omissions).

Simmons argues that the allegations supporting the affirmative defenses at issue here are based upon "alleged misrepresentations, misleading omissions, or side promises." (Pl.'s Mot. 9.) In their third affirmative defense, "fraud in the inducement," Defendants allege that the Loan Documents are "void, invalid, and unenforceable" due to Excel and Hayes's misrepresentations and omissions, including failing to provide material information regarding applicable lending standards; conditioning the loan on Bonhomme's purchasing Bancorp stock, which was worthless; falsely promising that if Lehman pledged the Woodside property to secure the loan, Excel would later substitute Bancorp stock as collateral and release its lien on the Woodside property; and failing to disclose the existence of a restrictive consent decree governing Bancorp and Truman Bank. Defendants' fourth and fifth affirmative defenses are for violations of the Securities Exchange Act, 15 U.S.C. § 78a, et seq., and Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5, and violations of the Missouri Securities Act, Mo. Rev. Stat. § 409.5-501, et seq., which each make it unlawful for a person to make an "untrue statement of a material fact or to omit to state a material fact" in connection with the purchase or sale of a security. 17 C.F.R. § 240.10b-5; Mo. Ann. Stat. § 409.5-501. In their sixth affirmative defense, "negligent misrepresentations," Defendants allege that the Excel and Hayes's "material misstatements and omissions of fact . . . if not intentional, were negligent and reckless." (Koo Answer to Am. Compl. ¶ 41; Lehman Answer to Am. Compl. ¶ 41.) These defenses rest on the same facts supporting the fraud in the inducement defense; specifically, the allegation that Defendants "were induced by Excel Bank's and Shaun Hayes' misstatements and omissions" in violation of those laws. (Koo Answer to Am. Compl. ¶¶ 39, 40; Lehman Answer to Am. Compl. ¶¶ 39, 40; see Defs.' Opp'n 8 ("the misrepresentations induced Bonhomme to enter into the Note, and that 'but for' those misrepresentations, Bonhomme would not have executed the Note.).) As Defendants have produced no written documentation of these misrepresentations, omissions, and promises that would satisfy the requirements of section 1823(e), Simmons asserts that the counterclaims fail as a matter of law.

Defendants do not address Simmons's arguments that counterclaims based upon allegations of fraud in the inducement are barred unless they comply with section 1823(e)(1), and accordingly concede this issue. Therefore, summary judgment is granted as to Defendants' third, fourth, fifth, and sixth affirmative defenses: 1) fraud in the inducement (third); 2) violations of the Securities Exchange Act, 15 U.S.C. § 78a, et seq. (fourth); 3) violations of the Missouri Securities Act, Mo. Rev. Stat. § 409.5-501, et seq. (fifth); and 4) negligent misrepresentations (sixth).

Defendants argue that the remaining counterclaim for fraud in the factum renders the loan void, rather than voidable, thus taking it out of the protections of section 1823(e). Defendants rely on Langley, in which the Court distinguished fraud in the factum from fraud in the inducement, noting that fraud in the factum "would take the instrument out of § 1823(e), because it would render the instrument entirely void, thus leaving no 'right, title or interest' that could be 'diminish[ed] or defeat[ed].'" Langley, 484 U.S. at 93-94 (internal citations omitted). First, the Ninth Circuit has noted that this statement was "dictum," and that the Court "did not expressly hold that the defense of fraud in the factum is not barred by section 1823(e) and D'Oench, Duhme." Kennelly, 57 F.3d at 822 (declining to decide the issue because it concluded that defendants had failed to allege or establish fraud in the factum).

More importantly, Defendants have not adequately alleged or established fraud in the factum. Restatement (Second) of Contracts section 163 provides: "If a misrepresentation as to the character or essential terms of a proposed contract induces conduct that appears to be a manifestation of assent by one who neither knows nor has reasonable opportunity to know of the character or essential terms of the proposed contract, his conduct is not effective as a manifestation of assent." Restatement (Second) of Contracts § 163 (1981). "Fraud in the factum is 'the sort of fraud that procures a party's signature to an instrument without knowledge of its true nature or contents.'" Kennelly, 57 F.3d at 822 (citing Langley, 484 U.S. at 93); see also Black's Law Dictionary 776, fraud in the factum (10th ed. 2014) ("Compared to fraud in the inducement, fraud in the factum occurs only rarely, as when a blind person signs a mortgage when misleadingly told that the paper is just a letter."). Here, Defendants do not allege or present evidence that Excel or Hayes misrepresented anything about the "character or essential terms" of any of the Loan Documents, including the Deed of Trust. In fact, in their opposition, they admit that "the alleged fraudulent misrepresentations by Excel Bank and Hayes do not contradict the relevant terms and conditions of the Note or Deed of Trust," (Defs.' Opp'n 8 (emphasis added)), thus conceding that there was no misrepresentation as to the character or essential terms of the Loan Documents. In other words, there is no dispute that the Loan Documents evidenced a loan transaction purporting to encumber the Woodside property. See Beazie v. Amerifund Fin., Inc., No. 09-00562 JMS/KSC, 2011 WL 2457725, at * (D. Haw. June 16, 2011) ("the FAC does not assert fraud in the factum-Plaintiff knew he was entering into a mortgage loan transaction on the subject property."). Nor do Defendants cite any evidence that they lacked "reasonable opportunity to know of the character or essential terms" of the loan transaction. While Lehman denies any recollection of the circumstances during which he signed the Loan Documents, (Lehman Dep. 105, 107, 187-88, 199, 200-208), Simmons presents deposition testimony by Davis, Bonhomme's managing member, in which he admits he was provided with the Loan Documents and had the opportunity to read and review them before signing and that he understood the nature of the documents. (Davis Dep. 53-56, 61-62, 66-68, 89-90, 93-94, 155-57.)

In sum, Defendants present no evidence to establish that a genuine dispute of fact exists as to whether their second affirmative defense sounds in fraud in the factum. The court finds that Defendants' second affirmative defense is based upon fraud in the inducement, because it is premised on alleged misrepresentations, omissions of material facts, and side promises that induced Bonhomme to enter into the loan. Accordingly, the allegations of misrepresentations, omissions, and side promises fall within the meaning of "agreements" under section 1823(e)(1). As Defendants have failed to submit evidence that the agreements satisfy the requirements of section 1823(e)(1), they cannot form the basis of affirmative defenses. Therefore, Simmons's motion for summary judgment is granted as to Defendants' second affirmative defense, labeled "fraud in the factum."

V. Conclusion

For the foregoing reasons, Defendants' motion for summary judgment is denied. Simmons's motion is granted. Summary judgment is granted as to Defendants' affirmative defenses of 1) fraud in the factum; 2) fraud in the inducement; 3) violations of the Securities Exchange Act, 15 U.S.C. § 78a, et seq.; 4) violations of the Missouri Securities Act, Mo. Rev. Stat. § 409.5-501, et seq.; and 5) negligent misrepresentations.

IT IS SO ORDERED. Dated: February 13, 2015

/s/_________

DONNA M. RYU

United States Magistrate Judge