Heritage Bank v. Bruha

district court’s order and remand the cause with directions to
the district court to grant Parmar a new trial. Because we have
instructed the court to grant Parmar a new trial, we do not
address his argument that the State’s loss of evidence warrants
a new trial.
R eveRsed and Remanded foR a new tRial .
G eRRaRd, J., not participating in the decision.
wRiGht, J., not participating.
heritage Bank v. Bruha 	263
Cite as 283 neb. 263
heRitaGe Bank , a state BankinG coRpoRation, appellee ,
v. JeRome J. BRuha , defendant and thiRd -paRty
plaintiff, appellant, and pRime tRadinG
company, inc., et al ., thiRd -paRty
defendants , appellees.
812 n.W.2d 260
Filed February 10, 2012. 	no. S-10-1219.
1. Summary Judgment: Appeal and Error. an appellate court will affirm a lower
court’s grant of summary judgment if the pleadings and admitted evidence show
that there is no genuine issue as to any material facts or as to the ultimate infer-
ences that may be drawn from the facts and that the moving party is entitled to
judgment as a matter of law.
2. ____: ____. in reviewing a summary judgment, an appellate court views the
evidence in the light most favorable to the party against whom the judgment is
granted and gives such party the benefit of all reasonable inferences deducible
from the evidence.
3. Uniform Commercial Code: Interest. although the uniform Commercial Code
allows notes to have a variable interest rate, under neb. u.C.C. § 3-104(a) (Cum.
Supp. 2010), the principal amount must be fixed.
4. Promissory Notes: Negotiable Instruments. a fixed principal amount is an
absolute requisite to negotiability.
5. ____: ____. to meet the fixed principal amount requirement, the fixed amount
generally must be determinable by reference to the instrument itself without any
reference to any outside source. if reference to a separate instrument or extrinsic
facts is needed to ascertain the principal due, the sum is not “certain” or fixed.
6. ____: ____. a note given to secure a line of credit under which the amount of the
obligation varies, depending on the extent to which the line of credit is used, is
not negotiable.
7. Negotiable Instruments. For a person to be a holder in due course, the instru-
ment must be negotiable.
8. Contracts: Fraud. Fraud in the execution goes to the very existence of the
contract, such as where a contract is misread to a party or where one paper is
Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
11/01/2026 04:42 AM CST

surreptitiously substituted for another, or where the party is tricked into signing
an instrument he or she did not mean to execute. Fraud in the inducement, by
contrast, goes to the means used to induce a party to enter into a contract. in such
cases, the party knows the character of the instrument and intends to execute it,
but the contract may be voidable if the party’s consent was obtained by false
representations.
9. Banks and Banking: Contracts. the doctrine established in D’Oench, Duhme
& Co. v. F. D. I. C., 315 u.S. 447, 62 S. Ct. 676, 86 L. ed. 956 (1942), gener-
ally applies to bar defenses or claims against federal regulators in those instances
where a financial institution enters into an oral or secret agreement that alters the
terms of an existing unqualified obligation.
10. Negotiable Instruments. the doctrine established in D’Oench, Duhme & Co.
v. F. D. I. C., 315 u.S. 447, 62 S. Ct. 676, 86 L. ed. 956 (1942), is separate
from the doctrine of holder of due course; so, whether a document is negotiable
is irrelevant.
11. Banks and Banking: Assignments: Federal Acts. the doctrine established in
D’Oench, Duhme & Co. v. F. D. I. C., 315 u.S. 447, 62 S. Ct. 676, 86 L. ed.
956 (1942), and its statutory codification at 12 u.S.C. § 1823(e) (2006) protect
assignees of the Federal Deposit insurance Corporation.
12. Federal Acts: Contracts: Warranty: Fraud: Words and Phrases. the word
“agreement” in 12 u.S.C. § 1823(e) (2006) encompasses warranties made to
induce a party to the contract, even if such warranties are made fraudulently.
13. Federal Acts: Fraud. under 12 u.S.C § 1823(e) (2006), the defense of fraud
in the inducement is barred unless the defense meets the requirements of
the statute.
14. Judgments: Interest. neb. rev. Stat. § 45-103 (reissue 2010) provides for
a default interest rate but allows for the parties to contract otherwise. neb.
rev. Stat. § 45-103.01 (reissue 2010) states that that rate shall accrue on the
judgment.
15. ____: ____. although compound interest generally is not allowable on a judg-
ment, it is established that a judgment bears interest on the whole amount from
its date even though the amount is in part made up of interest.
appeal from the District Court for Valley County: kaRin
l. noakes, Judge. affirmed in part, and in part reversed and
remanded.
Barry D. geweke, of Stowell, kruml & geweke, P.C.,
L.L.O., for appellant.
kent e. rauert, of Svehla, thomas, rauert & grafton, P.C.,
for appellee heritage Bank.
heavican, 	c.J., 	wRiGht, 	connolly, 	G eRRaRd, 	stephan,
mccoRmack , and milleR-leRman, JJ.
264 	283 neBraSka rePOrtS

connolly, J.
heritage Bank (heritage) sued Jerome J. Bruha on prom-
issory notes that it had purchased from the Federal Deposit
insurance Corporation (FDiC). the FDiC had obtained the
notes after it became a receiver for the failed bank that had
initially lent the money to Bruha. the notes secured lines of
credit for Bruha’s benefit. the district court granted summary
judgment to heritage and awarded it $61,384.67 on one of the
notes. Bruha appeals. the primary issues are whether either the
holder-in-due-course rule of nebraska’s uniform Commercial
Code or federal banking law bars Bruha’s defenses to the
enforcement of the note. We conclude that federal law bars
Bruha’s defenses, and thus, we affirm in part. But because of a
minor error in the court’s calculation of interest, we reverse in
part, and remand for correction.
i. BaCkgrOunD
1. pRomissoRy notes
On four different occasions in 2008, Bruha signed promis-
sory notes with Sherman County Bank. although the district
court ultimately granted summary judgment to heritage on
all four notes, Bruha’s arguments relate only to the fourth and
final note. So we will limit our discussion to the facts regarding
this note. We will, however, provide some background to put
the note in context.
the notes secured lines of credit under which Bruha could
borrow money from Sherman County Bank. Bruha then appar-
ently invested the money in accounts with a trading company,
which allegedly shared management with Sherman County
Bank. in brief, Bruha claims that Sherman County Bank misled
him into borrowing money that, in turn, he invested with a trad-
ing company that generated trade commissions through risky
and speculative commodity trading.
in an affidavit, Bruha claimed that representatives of Sherman
County Bank repeatedly advised him against taking money out
of his trading account, stating that he would lose more money
if he did so than he would by leaving it in. Bruha claimed
that the representatives often understated the potential losses
he would suffer by staying in the account. also, Bruha claims
heritage Bank v. Bruha 	265
Cite as 283 neb. 263

he was told that the existing collateral would cover the credit
he later took. Further, although he admittedly knew he was
increasing his debt burden, he thought it was under one note
as opposed to four. the record, however, contains no internal
records or documents of Sherman County Bank evidencing any
of the representations regarding his account that Bruha claims
Sherman County Bank made.
Bruha signed the fourth note, no. 1723, on December 16,
2008. the note evidenced a promise to pay “the principal
amount of Seventy-five thousand & 00/100 ($75,000.00) or
so much as may be outstanding, together with interest on the
unpaid outstanding principal balance of each advance.” the
note stated that it “evidence[d] a revolving line of credit.”
the note contained a variable interest rate. the rate was
subject to change every month and calculated on an index
maintained by Sherman County Bank. the interest rate on
Bruha’s note was 1 percentage point under the percentage on
the index at any given time. the initial rate was 7.25 percent,
and was later adjusted to 6.75 percent. On default, this interest
rate would increase by 5 percentage points.
there are admittedly a few typographical errors on the note.
Because Bruha claims these errors affect the validity of the
note, we recount the details. For one, the maturity date on the
note is February 1, 2008, which, read literally, means that the
note would have matured about 10 months before Bruha signed
it. We note that the three other notes had maturity dates of
February 1, 2009. in fact, when Bruha later extended the life
of the notes with Sherman County Bank to august 1, 2009,
the extension agreement listed an original maturity date for all
notes, including note no. 1723, of February 1, 2009.
there are two other typographical errors on note no. 1723.
they are both in a section titled “COLLateraL.” it reads:
“Borrower acknowledges this note is secured by an assignment
of hedge account from Jerome Bruah [sic] to Sherman County
Bank dated Date [sic].” thus, Bruha’s name is misspelled and
a line for a date is unfilled.
On note no. 1723, Bruha received the following advance-
ments: he received $10,000 on December 16, 2008; $40,000
on December 17; and $1,000 on January 30, 2009. this
266 	283 neBraSka rePOrtS

totaled $51,000. there is no dispute that Bruha received all of
this money.
an affidavit also established the interest rate on the notes.
it shows that the initial rate was 7.25 percent. this rate was
adjusted to 6.75 percent on February 1, 2009. then, on august
2, after Bruha defaulted, the rate increased to 11.75 percent.
Sherman County Bank eventually failed, and the FDiC was
appointed as receiver. the FDiC then sold and assigned some
of Sherman County Bank’s assets to heritage. these assets
included the notes signed by Bruha.
heritage sued Bruha to enforce the notes. the complaint
alleged that Bruha owed heritage on the four notes and that
heritage had received the notes from the FDiC after Sherman
County Bank had been placed into receivership. But as men-
tioned, only note no. 1723 is the subject of this appeal. as to
note no. 1723, heritage claimed that the principal was $75,000
and that the initial interest rate was 8.25 percent. heritage also
alleged that the interest rate was to jump 5 percentage points
upon default. heritage alleged that it was a holder in due
course and entitled to enforce the note.
in his amended answer, Bruha admitted that he signed
note no. 1723 but claims that he did not do it voluntarily. he
claimed that Sherman County Bank had procured his signa-
ture “by fraud and/or misrepresentation.” Bruha admitted that
he had not paid the note but denied that he was obligated to
do so.
2. the distRict couRt’s oRdeRs
heritage moved for summary judgment, which the dis-
trict court granted. the court began by discussing 12 u.S.C.
§ 1823(e) (2006), the text of which we reproduce below in our
analysis. the gist of § 1823(e) is that for certain defenses to
be asserted against the FDiC or its assignees, such a defense
must comply with criteria set out in that statute. according
to the district court, one of these criteria is that the defense
be evidenced in writing. the court found that there was no
evidence in writing of a defense that would invalidate the
note. apparently conflating § 1823(e) with the holder-in-due-
course doctrine, the court concluded that because there were
heritage Bank v. Bruha 	267
Cite as 283 neb. 263

no defenses that met the requirements of § 1823(e), the FDiC
became a holder in due course.
the district court then cited an eighth Circuit case, Federal
Deposit Ins. Corp. v. Newhart,1 for the proposition that the
FDiC transfers its protected status to its assignees. in sum,
because Bruha could not show anything in writing that would
invalidate the note, heritage was entitled to enforce them.
the court then recounted the interest rates on note no. 1723.
the court recognized the variable interest rate and that the rate
would increase by 5 percentage points upon default. the court
noted that the interest rate was 7.75 percent from the day it
was signed (this, as we later explain, was error), December 16,
2008, until February 1, 2009. From February 1 until august 2,
the interest rate was 6.75 percent. then from august 2 onward,
the note had an interest rate of 11.75 percent.
in calculating the amount Bruha owed, the principal on the
note was $10,000 from December 16 until December 17, 2008.
On December 17, Bruha received an additional $40,000, which
brought the principal to $50,000. On January 30, 2009, Bruha
received a $1,000 advance, which brought the principal to
$51,000. the court calculated the total accumulated interest on
the note at $10,384.67. adding this to the principal, the court
concluded that Bruha owed heritage $61,384.67 on note no.
1723. the court then ruled that postjudgment interest would be
computed on this amount at 11.75 percent per annum.
ii. aSSignMentS OF errOr
Bruha assigns, restated and renumbered, that the district
court erred in:
(1) granting summary judgment to heritage;
(2) concluding that the FDiC and, in turn, heritage were
holders in due course of the notes;
(3) finding that there was no written documentation that
would call the validity of note no. 1723 into question;
(4) applying the D’Oench doctrine2 to this case; and
(5) calculating postjudgment interest on $61,384.67.
1 Federal Deposit Ins. Corp. v. Newhart, 892 F.2d 47 (8th Cir. 1989).
2 D’Oench, Duhme & Co. v. F. D. I. C., 315 u.S. 447, 62 S. Ct. 676, 86 L.
ed. 956 (1942).
268 	283 neBraSka rePOrtS

iii. StanDarD OF reVieW
[1,2] an appellate court will affirm a lower court’s grant
of summary judgment if the pleadings and admitted evidence
show that there is no genuine issue as to any material facts
or as to the ultimate inferences that may be drawn from the
facts and that the moving party is entitled to judgment as a
matter of law.3 in reviewing a summary judgment, an appel-
late court views the evidence in the light most favorable to the
party against whom the judgment is granted and gives such
party the benefit of all reasonable inferences deducible from
the evidence.4
iV. anaLYSiS
1. Because note no. 1723 was not neGotiaBle ,
heRitaGe is not a holdeR in due couRse
Bruha argues that heritage is not a holder in due course.
Similarly, he argues that the FDiC was not a holder in due
course when it held the note. a holder in due course is, with
some exceptions, “immune to defenses, claims in recoupment,
and claims of title that prior parties to commercial paper might
assert. the holder in due course always enjoys certain pleading
and proof advantages.”5 So if heritage were a holder in due
course, it would enjoy an advantageous position in litigation
with Bruha.
We conclude, however, that heritage is not a holder in due
course because the note was not “negotiable” and article 3 of
the uniform Commercial Code does not apply to this case.
neb. 	u.C.C. 	§ 	3-104(a) 	(Cum. 	Supp. 	2010) 	provides:
“except as provided in subsections (c) and (d), ‘negotiable
instrument’ means an unconditional promise or order to pay
a fixed amount of money, with or without interest or other
charges described in the promise or order . . . .” (emphasis
supplied.) here, the note fails to meet the definition of a
3 Mandolfo v. Mandolfo, 281 neb. 443, 796 n.W.2d 603 (2011).
4 Id.
5 2 James J. White & robert S. Summers, uniform Commercial Code
§ 17-1 at 168-69 (5th ed. 2008).
heritage Bank v. Bruha 	269
Cite as 283 neb. 263

“negotiable instrument” because it was not a promise “to pay a
fixed amount of money.”
[3,4] although the uniform Commercial Code allows notes
to have a variable interest rate,6 under § 3-104(a), the principal
amount must be fixed.7 “a fixed amount is an absolute requisite
to negotiability.”8 this is because unless a purchaser can deter-
mine how much it will be paid under the instrument, it will be
unable to determine a fair price to pay for it, which defeats the
basic purpose for negotiable instruments.9
[5] We applied this principle in Rodehorst v. Gartner,10 in
which we stated that “[a] guaranty is not an agreement to pay a
fixed amount and is therefore not a negotiable instrument sub-
ject to article 3 of the nebraska uniform Commercial Code.”
to meet the fixed amount requirement, the fixed amount gener-
ally must be determinable by reference to the instrument itself
without any reference to any outside source.11 if reference to a
separate instrument or extrinsic facts is needed to ascertain the
principal due, the sum is not “‘certain’” or fixed.12
[6] here, the text of the note states that Bruha “promises
to pay . . . the principal amount of Seventy-five thousand
& 00/100 Dollars ($75,000.00) or so much as may be outstand-
ing . . . .” (emphasis supplied.) Further, the note states that it
“evidences a revolving line of credit” and that Bruha could
request advances under the obligation up to $75,000. this
fails the “fixed amount of money” requirement of § 3-104(a);
one looking at the instrument itself cannot tell how much
Bruha has been advanced at any given time. So, the note is
6 See neb. u.C.C. § 3-112 (reissue 2001).
7 See id., comment 1. See, also, 6 William D. hawkland & Lary Lawrence,
uniform Commercial Code Series § 3-104:7 (rev. 1999).
8 6 hawkland & Lawrence, supra note 7 at 3-45.
9 Id.
10 Rodehorst v. Gartner, 266 neb. 842, 848, 669 n.W.2d 679, 684 (2003).
11 4 William D. hawkland & Lary Lawrence, uniform Commercial Code
Series § 3-106:2 (rev. 1999).
12 See id. at 3-100. See, also, Resolution Trust v. Oaks Apts. Joint Venture,
966 F.2d 995 (5th Cir. 1992); Trust Co. v. Creasy, 301 n.C. 44, 269 S.e.2d
117 (1980).
270 	283 neBraSka rePOrtS

not negotiable. Stated simply, “[a] note given to secure a line
of credit under which the amount of the obligation varies,
depending on the extent to which the line of credit is used, is
not negotiable . . . .”13
[7] For a person to be a holder in due course, the instrument
must be negotiable.14 Because the note was not a negotiable
instrument, neither the FDiC nor heritage could ever become
a holder in due course of it under nebraska law. and further,
because this note is not a negotiable instrument, article 3 does
not apply.15
2. BRuha’s alleGed defenses
having determined that the holder-in-due-course doctrine
does not apply, we consider the defenses Bruha asserts against
the enforcement of the note. We also point out that federal law,
namely the D’Oench doctrine and § 1823(e), may still bar these
defenses. We discuss this question later in our opinion.
Bruha argues that the note is invalid and unenforceable. he
points to minor irregularities on the face of the note. he also
asserts that he signed the note because he was the victim of
fraud. there is no dispute that Bruha actually received every
dollar that heritage is claiming he owes on the principal.
(a) the typographical errors
although the notes do contain a few minor irregularities,
these appear to be the result of sloppy clerical work. the date
on the note contains a typographical error that, taken literally,
would mean that the loan had matured before Bruha had signed
the note. Bruha’s name is also misspelled as “Bruah” in one
place. Finally, a line for a date is left blank.
Bruha, however, does not attempt to tie these mistakes to
any sort of contract defense, such as mistake or fraud. he
cites no case, statute, or regulation that would show how these
13 11 am. Jur. 2d Bills and Notes § 84 at 463-64 (2009). See, also, Yin v.
Society National Bank Indiana, 665 n.e.2d 58 (ind. app. 1996); Farmers
Production Credit Assoc. v. Arena, 145 Vt. 20, 481 a.2d 1064 (1984).
14 See neb. u.C.C. § 3-302 (reissue 2001).
15 See neb. u.C.C. § 3-102 (reissue 2001).
heritage Bank v. Bruha 	271
Cite as 283 neb. 263

minor irregularities invalidated the note. Similarly, Bruha does
not explain what remedy he would be entitled to. apparently,
Bruha thinks that these minor errors on the face of the note
have somehow transformed otherwise valid obligations into a
winning lottery ticket—the proceeds of which are his to keep.
Without any citation to any source of law whatsoever, we are
unprepared to accept such a proposition.
(b) allegations of Fraud
Bruha’s brief also makes glancing, undeveloped references
to fraud. Bruha’s fraud allegations are sketchy at best.
[8] We begin by noting that there are potentially two differ-
ent types of fraud at issue: fraud in the execution and fraud in
the inducement.
Fraud in the execution goes to the very existence of the
contract, such as where a [contract] is misread to the
[party] or where one paper is surreptitiously substituted
for another, or where a party is tricked into signing an
instrument he or she did not mean to execute. . . . Fraud
in the inducement, by contrast, goes to the means used to
induce a party to enter into a contract. in such cases, the
party knows the character of the instrument and intends to
execute it, but the contract may be voidable if the party’s
consent was obtained by false representations . . . .16
in liberally construing his complaint, it appears that Bruha
has alleged fraud in the inducement. Bruha submitted his own
affidavit. the gist of the affidavit is that officials at Sherman
County Bank repeatedly told Bruha he would be better off
if he maintained his trading account rather than closing it.
they allegedly induced Bruha into taking additional loans by
misrepresenting the profitability of the trading accounts. But
nowhere does Bruha claim that he was unaware that he was
incurring additional debt in his negotiations with the bank,
although he might have thought it was under one note instead
of four notes. in sum, Bruha knew the character of the transac-
tions he was entering, although he might have been led there
16 Gonzalez v. Union Pacific RR. Co., 282 neb. 47, 66, 803 n.W.2d 424, 442
(2011).
272 	283 neBraSka rePOrtS

by false pretenses. this sounds in fraud in the inducement, not
fraud in the execution.
3. § 1823(e) BaRs BRuha’s fRaud
in the inducement defense
having concluded that if Bruha has stated any defense, he
has stated a defense of fraud in the inducement, we move on to
Bruha’s next argument. For this purpose, we assume, but do not
decide, that Bruha could prove the elements of his fraud-in-the-
inducement defense.
Bruha argues that the district court erred in applying the
D’Oench doctrine and its codification at 12 u.S.C. § 1823(e).
We begin our discussion of this issue with the u.S. Supreme
Court case that gave rise to these rules.
in D’Oench, Duhme & Co. v. F. D. I. C.,17 the u.S. Supreme
Court recognized a common-law rule that barred the invocation
of secret agreements to defeat a claim of the FDiC. the case
involved the FDiC’s efforts to enforce notes it had acquired from
a failed bank. the signer of the notes and the bank, however,
had secretly agreed that the bank would never seek to enforce
the notes; the bank had taken the notes to make it appear in
better financial shape than it actually was. the FDiC did not
learn of this secret agreement until after it had demanded pay-
ment on the notes. When the FDiC sought to enforce one of the
notes, the defendant pointed to the secret agreement, arguing
that the parties had never intended the notes to be enforced and
that the notes lacked consideration. Citing “a federal policy to
protect [the FDiC], and the public funds which it administers,
against misrepresentations as to the securities or other assets in
the portfolios of the banks [that the FDiC] insures or to which
it makes loans,”18 the Court ruled that the defendant could not
rely on the secret agreements in its defense.
[9,10] the D’Oench doctrine generally applies to bar defenses
or claims against federal regulators in those instances where a
financial institution enters into an oral or secret agreement that
17 D’Oench, Duhme & Co., supra note 2.
18 Id., 315 u.S. at 457.
heritage Bank v. Bruha 	273
Cite as 283 neb. 263

alters the terms of an existing unqualified obligation.19 the
doctrine provides well-reasoned, unchallengeable finality to the
lender’s books and records when used by regulatory agencies
to assess the lending institution’s solvency. We stress that this
doctrine is separate from the doctrine of holder in due course,
so whether the document is negotiable is irrelevant.20
the D’Oench doctrine is codified at 12 u.S.C. § 1823(e),
which provides in relevant part:
no agreement which tends to diminish or defeat the
interest of the Corporation 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
Corporation unless such 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 execu-
tion, an official record of the depository institution.
Section 1823(e)’s most obvious purpose “is to allow fed-
eral and state bank examiners to rely on a bank’s records in
evaluating the worth of the bank’s assets.”21 these evaluations,
which sometimes “must be made ‘with great speed,’”22 would
be virtually impossible if “bank records contained seemingly
19 Oaks Apts. Joint Venture, supra note 12.
20 See, e.g., Resolution Trust Corp. v. Kennelly, 57 F.3d 819 (9th Cir. 1995);
Randolph v. Resolution Trust Corp., 995 F.2d 611 (5th Cir. 1993); Adams
v. Madison Realty & Development, Inc., 937 F.2d 845 (3d Cir. 1991);
Federal Deposit Ins. Corp. v. P.L.M. Intern., Inc., 834 F.2d 248 (1st Cir.
1987).
21 Langley v. FDIC, 484 u.S. 86, 91, 108 S. Ct. 396, 98 L. ed. 2d 340
(1987).
22 Id., quoting Gunter v. Hutcheson, 674 F.2d 862 (11th Cir. 1982).
274 	283 neBraSka rePOrtS

unqualified notes that [were] in fact subject to undisclosed
conditions.”23
[11] all courts agree that § 1823(e) is a codification of the
D’Oench doctrine.24 Further, courts agree this doctrine also
protects assignees of the FDiC.25 We note that there is an
“open question whether the judicially created doctrine and its
statutory counterpart are coterminous.”26 there is also a dispute
whether subsequent u.S. Supreme Court case law27 has effec-
tively disapproved of the common-law rule.28 But we need not
decide these issues because § 1823(e) bars Bruha’s defense; so
deciding whether a common-law rule would provide greater
protection for heritage is unnecessary.
as mentioned, the only defense that Bruha has alleged
is a defense of fraud in the inducement. We now consider
whether under § 1823(e), Bruha may assert this defense against
heritage. Our starting point in this analysis is Langley v.
FDIC,29 the seminal case interpreting § 1823(e).
in Langley, a bank (later received by the FDiC) sued the
defendants to collect on promissory notes that the defendants
had signed in order to receive money to purchase land. the
defendants argued that the bank had procured their signatures
23 Id., 484 u.S. at 92.
24 See, e.g., Young v. F.D.I.C., 103 F.3d 1180 (4th Cir. 1997); DiVall Insured
Income v. Boatmen’s First Nat. Bank, 69 F.3d 1398 (8th Cir. 1995);
Vasapolli v. Rostoff, 39 F.3d 27 (1st Cir. 1994); Adams, supra note 20.
25 See, e.g., Beal Bank, SSB v. Pittorino, 177 F.3d 65 (1st Cir. 1999); Caires
v. JP Morgan Chase Bank, 745 F. Supp. 2d 40 (D. Conn. 2010) (collect-
ing cases); AAI Recoveries, Inc. v. Pijuan, 13 F. Supp. 2d 448 (S.D.n.Y.
1998); Santopadre v. Pelican Homestead and Sav. Ass’n, 782 F. Supp.
1138 (e.D. La. 1992); OCI Mortg. Corp. v. Marchese, 255 Conn. 448, 774
a.2d 940 (2001); AGI v. Pacific Southwest Bank, F.S.B., 972 S.W.2d 866
(tex. app. 1998).
26 Vasapolli, supra note 24, 39 F.3d at 33 n.3.
27 See, Atherton v. FDIC, 519 u.S. 213, 117 S. Ct. 666, 136 L. ed. 2d 656
(1997); O’Melveny & Myers v. FDIC, 512 u.S. 79, 114 S. Ct. 2048, 129
L. ed. 2d 67 (1994).
28 Compare, e.g., DiVall Insured Income, supra note 24, with Motorcity of
Jacksonville v. Southeast Bank N.A., 120 F.3d 1140 (11th Cir. 1997).
29 Langley, supra note 21.
heritage Bank v. Bruha 	275
Cite as 283 neb. 263

by misrepresentation. they claimed that the bank had misrep-
resented the size of the tract of land, the amount of mineral
deposits on the land, and the lack of existing mineral leases on
the land. the bank records, the minutes of the board of direc-
tors, and the minutes of the bank’s loan committee, however,
contained no evidence of such misrepresentations.
[12] the Court held that § 1823(e) barred the misrepresen-
tation defense, which the Court characterized as fraud in the
inducement. the Court reasoned that generally, the truthfulness
of a warranty was a condition of a contract, and that the word
“agreement” in § 1823(e) encompassed such warranties, even
if such warranties were made fraudulently. So the terms of the
agreement were subject to § 1823(e). and fraud in the induce-
ment would not be a defense unless such fraud met the require-
ments of § 1823(e).
[13] thus, Langley holds that § 1823(e) bars the defense of
fraud in the inducement unless the defense meets the require-
ments of the statute. in this case, Bruha has failed to show that
his defense does so.
to assert his defense of fraud in the inducement, Bruha
must show that the agreement, including the allegedly fraudu-
lent assertions made by Sherman County Bank regarding the
profitability of the accounts, has met § 1823(e)’s requirements
as follows: the agreement is in writing; 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;
was approved by the board of directors of the depository insti-
tution or its loan committee, with such approval reflected in
the minutes of said board or committee; and has been, contin-
uously, from the time of its execution, an official record of the
depository institution.
Bruha does not point to anything regarding the fraud in
any writing. nor does he explain how the alleged fraudulent
misrepresentations satisfy any of the other requirements of
§ 1823(e). Summed up, his defense does not meet the require-
ments § 1823(e).
Bruha does point to the minor irregularities in the note.
But as we mentioned earlier, he does not explain how these
276 	283 neBraSka rePOrtS

irregularities fit into any defense. as clearly explained in
Langley, 	the 	“agreement”—which 	would 	include 	potential
assertions about the profitability of an investment—would have
to be found in writing. here, it was not. thus, § 1823(e) bars
Bruha from asserting the defense against heritage. Because
Bruha has not alleged any other defense, the district court did
not err in granting heritage summary judgment.
4. JudGment inteRest R ate calculation
Bruha’s final argument relates to the manner in which post-
judgment interest is accruing on the judgment. as mentioned,
the principal due on the note was $51,000. the court, how-
ever, determined that there was $10,384.67 of interest due on
the note. taken together, the total judgment was $61,384.67.
the court then ruled that this total would accumulate interest
at the rate of 11.75 percent per annum. Bruha argues this is
error. he argues that the court should calculate postjudgment
interest only on the overdue principal, which was $51,000.
the parties agree that the interest rate applicable is 11.75 per-
cent per annum. the question is whether this rate is applied
to the judgment—which was $61,384.67 and included some
accrued interest—or the outstanding principal of $51,000. We
conclude that it is the former.
[14,15] neb. rev. Stat. § 45-103.01 (reissue 2010) pro-
vides: “interest as provided in section 45-103 shall accrue on
decrees and judgments for the payment of money from the date
of entry of judgment until satisfaction of judgment.” neb. rev.
Stat. § 45-103 (reissue 2010) provides for a default interest
rate but allows for the parties to contract otherwise. the parties
did so contract in this case. But § 45-103.01 states that that
rate shall accrue on the judgment. Bruha is essentially claiming
that the court should apply the rate to an amount other than the
judgment; he is arguing that the court should apply the rate to
only a single component of the judgment. But this argument
belies the plain language of § 45-103.01, which, again, states
that interest shall accrue on the judgment. in fact, the nebraska
Court of appeals has already rejected Bruha’s argument, and
we now adopt its reasoning. “although compound interest gen-
erally is not allowable on a judgment, it is established that a
heritage Bank v. Bruha 	277
Cite as 283 neb. 263

judgment bears interest on the whole amount from its date even
though the amount is in part made up of interest.”30
Further, many courts have held that the interest due before
judgment merges into that judgment and thus begins to accrue
postjudgment interest.31 the purpose of interest is to compen-
sate the party for being deprived of the use of its money.32 in
this case, not only was heritage deprived of its use of the over-
due principal, it has also been deprived of the use of interest
payments that should have been paid on that principal.
thus, the district court did not err in stating that postjudg-
ment interest would accrue on the total amount of the judgment
owed to heritage by Bruha. We do note, however, one error
by the district court that the parties failed to raise. the district
court stated in its order that the initial interest rate on note
no. 1723 was 7.75 percent. this is incorrect; the initial rate
was 7.25 percent. this interest rate was adjusted, as the district
court correctly noted, to 6.75 percent on February 1, 2009. in
all other respects, the district court’s order appears to be cor-
rect. accordingly, we remand the cause to the district court to
calculate interest using the proper initial interest rate.
V. COnCLuSiOn
We agree with the district court that § 1823(e) bars Bruha’s
defense. Because the court erred in applying an initial interest
rate of 7.75 percent instead of 7.25 percent, we reverse in part,
and remand to the district court to recalculate the interest on
the judgment.
affiRmed in paRt, and in paRt
ReveRsed and Remanded.
wRiGht and G eRRaRd, JJ., not participating in the decision.
30 Valley Cty. Sch. Dist. 88-0005 v. Ericson State Bank, 18 neb. app. 624,
631, 790 n.W.2d 462, 468 (2010). See, also, Ramaekers, McPherron &
Skiles v. Ramaekers, 4 neb. app. 733, 549 n.W.2d 662 (1996).
31 See, e.g., Caffey v. Unum Life Ins. Co., 302 F.3d 576 (6th Cir. 2002); Air
Separation v. Lloyd’s of London, 45 F.3d 288 (9th Cir. 1995); Quality
Engineered Inst. v. Higley South, 670 So. 2d 929 (Fla. 1996).
32 See, e.g., Air Separation, supra note 31.
278 	283 neBraSka rePOrtS