Davidson v. F.D.I.C. ( 1995 )

  •                   UNITED STATES COURT OF APPEALS
                          FOR THE FIFTH CIRCUIT
                                  No. 93-8335
              Appeal from the United States District Court
                    For the Western District of Texas
                              (January 25, 1995)
    Before GARWOOD and EMILIO M. GARZA, Circuit Judges, and HEAD,*
    District Judge.
    GARWOOD, Circuit Judge:
         Plaintiff-appellant William C. Davidson (Davidson) brought
    this suit to enjoin and, ultimately, to set aside a nonjudicial
    foreclosure sale of his property conducted on behalf of the Federal
    Deposit Insurance Corporation (the FDIC) as receiver for United
    Bank of Texas.   Following the district court's entry of judgment
    for the FDIC as receiver, Davidson filed a timely notice of appeal.
         District Judge of the Southern District of Texas, sitting by
    We affirm.
                         Facts and Proceedings Below
         The facts in this case are undisputed.   On October 5, 1983, R.
    Bird Corporation, a Texas corporation, acting through its president
    Richard Bird, executed a "Real Estate Note" for $350,000 payable,
    principal and interest, on April 13, 1984, to United Bank of Texas
    (the Bank) in Travis County, Texas.    The note, as recited therein,
    was secured by a lien on a tract of land located in Travis County,
    Texas (the Property), described in a deed of trust dated October 5,
    1983, and recorded in the Travis County, Texas real property
    records.    The note and deed of trust likewise recite that the note
    is in part payment of the purchase price of the property and is
    also secured by a vendor's lien retained in deed of even date of
    the property to the maker of the note.   The deed of trust contained
    a clause granting the Bank's trustee a power to sell the Property
    in the event of default in the note.     The note's due date passed,
    but the Bank did not foreclose.   Thereafter, on October 6, 1986, R.
    Bird Corporation deeded the Property to Richard Bird; in the deed,
    Richard Bird assumed the outstanding indebtedness against the
         On June 4, 1987, the Texas Banking Commissioner declared the
    BankSQa Texas bank, the deposits of which were insured by the
    FDICSQinsolvent and appointed the FDIC receiver of the Bank.
    Vernon's Ann. Tex. Civ. Stats. art. 489b, §§ 1,3.     As the Bank's
    receiver, the FDIC acquired the Bank's assets, including the deed
    of trust and the promissory note, the cause of action on which
    accrued April 13, 1984, the date the note became past due.       On
    March 27, 1990, almost six years after the note became past due and
    almost    three   years   after   the    FDIC   became   receiver,   Davidson
    acquired the Property from Richard Bird and subsequently invested
    approximately $8,000 in repairs to the improvements thereon.
           In March 1992, Davidson petitioned a Texas state court for
    injunctive relief against the Bank's substitute trustee under the
    deed     of   trust,   seeking    to    prevent   a   proposed   nonjudicial
    foreclosure on the Property.            After the state court granted a
    temporary restraining order, the FDIC as receiver intervened as a
    defendant and removed the case to the district court below, where
    Davidson's request for injunctive relief was denied on April 6,
    1992.     The next day, the Bank's substitute trustee, acting on
    behalf of the FDIC as receiver, conducted a nonjudicial foreclosure
    sale in Travis County in accordance with the deed of trust.              The
    FDIC as receiver was the successful bidder at the sale, purchasing
    the Property for a $104,300 credit on the note.
           Davidson claimed the sale was untimely and asked the district
    court to set it aside on that basis.              After a bench trial on
    stipulated facts, the district court entered judgment for the FDIC
    as receiver.      The court held that the sale was valid because it
    took place within the six-year limitations period of the Financial
    Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA),
    Pub.L. 101-73, 103 Stat. 183 (1989); 12 U.S.C. § 1821(d)(14).
    Davidson now appeals, principally arguing that, on the date FIRREA
    became effective, the deed of trust had already become void under
    Texas law and therefore could not be revived.
         The ultimate issue in this case is whether the power of sale
    contained in the Bank's deed of trust acquired by the FDIC as
    receiver was still enforceable on August 9, 1989, the date FIRREA
    became effective.   Resolution of that issue initially turns on
    whether the claim was valid when acquired by the FDIC on June 4,
    1987. If time-barred or otherwise void under state law at the time
    of the FDIC's appointment as receiver, the claim cannot be revived
    merely because a government agency holds it.     F.D.I.C. v. Dawson,
    4 F.3d 1303
    , 1306-07 (5th Cir. 1993), cert. denied, 
    114 S. Ct. 2673
    (1994); see also R.T.C. v. Seale, 
    13 F.3d 850
    , 853 (5th Cir. 1994)
    (government cannot revive claims that are stale when acquired
    unless Congress explicitly directs otherwise); F.D.I.C. v. Belli,
    981 F.2d 838
    , 842-43 (5th Cir. 1993); F.D.I.C. v. Bledsoe, 
    989 F.2d 805
    , 808 (5th Cir. 1993).   An acquired claim is thus valid if, at
    the time of the FDIC's appointment as receiver, it is still good
    under the law that created it.   In Texas, a mortgage is an incident
    of the debt; it is therefore generally enforceable so long as the
    debt itself is enforceable, which is to say, four years after the
    cause of action on the debt accrued.     Tex. Civ. Prac. & Rem. Code
    §§ 16.004(a)(3) (debt), 16.035 (power of sale) (1986).     Here, as
    the parties concede, the FDIC became receiver and acquired the deed
    of trust some three years after the cause of action on the note
    accrued; the claim was therefore good at the time of the FDIC's
         The problematic issue in this case, then, is whether the deed
    of trust remained enforceable on the effective date of FIRREA,
    August 9, 1989.   That is, although both sides concede the validity
    of the claim when the FDIC was appointed, both dispute what
    happened to the claim in the intervening two years between the
    FDIC's appointment as receiver and the effective date of FIRREA.
    If the claim died in the interim, FIRREA does not revive it, and
    the foreclosure should have been set aside.         If the claim survived
    the interim, then the limitation provisions of FIRREA apply, and
    the foreclosure was timely.1
          Accordingly, the emphasis in this litigation has been on what
    law   applies   during   the    two-year   period   between   the    FDIC's
    appointment and FIRREA.        The district court concluded that, once
    the   FDIC   acquired    the    Bank's   claim,   the   six-year    general
    limitations period of 28 U.S.C. § 2415(a), the general statute of
    limitations for contract actions, relayed the deed of trust beyond
    FIRREA's effective date. In other words, because the deed of trust
    was valid when acquired, the Texas four-year limitations period was
    displaced by the six-year federal rule under 28 U.S.C. § 2415(a),
    which in turn carried the deed of trust over FIRREA's effective
    date and into the safe harbor of FIRREA's own six-year limitations
    period.   According to the reasoning of the district court, it was
         FIRREA explicitly imposes a six-year statute of limitations
    on "any contract claim" brought by the FDIC as a receiver.   12
    U.S.C. § 1821(d)(14)(A)(i)(I). According to section
    1821(d)(14)(B)(i), the limitations period began in this case on
    the date of the FDIC's appointment as receiver, June 4, 1987, and
    ended on June 4, 1993. Therefore, if FIRREA applies to this
    case if, in other words, the claim acquired by the FDIC receiver
    was valid on the effective date of FIRREA, then the April 1992
    foreclosure was timely. See F.D.I.C. v. Belli, 
    981 F.2d 838
    842-43 (5th Cir. 1993) (section 1821(d)(14) does not revive
    claims that expired before FIRREA's effective date of August 9,
    by   way   of    this   statute-of-limitations      relay      race   that    the
    foreclosure avoided a time bar.
          Section 2415(a) provides in part, "[E]very action for money
    damages brought by the United States . . . or agency thereof which
    is founded upon any contract . . . shall be barred unless the
    complaint is filed within six years after the right of action
    accrues."       Because the debt was not barred on June 4, 1987, when
    the FDIC was appointed receiver, the debt then became subject to
    section 2415(a)'s six-year limitations period, calculated from the
    note's April 13, 1984, maturity.           Belli at 840-42; Bledsoe at 807
    & n.4.     But for FIRREA, the debt would thus have become barred
    April 13, 1990.      Because the debt was not barred when FIRREA became
    effective August 9, 1989, FIRREA's six-year limitations period,
    which is calculated from June 4, 1987, meant that the debt would
    not be barred until June 1993, well after the foreclosure (see note
    1, supra).      Bledsoe at 808-809.
          Davidson     argues   that    section   2415(a)   does    not   apply   to
    mortgage     foreclosures,    and    apparently    every    court     that    has
    considered this question agrees.           See United States v. Alvarado, 
    5 F.3d 1425
    , 1430 (11th Cir. 1993); Westnau Land Corp. v. U.S. Small
    Business Admin., 
    1 F.3d 112
    , 115-16 (2d. Cir. 1993) (collecting
    cases); United States v. Dos Cabezas Corp., 
    995 F.2d 1486
    , 1489
    (9th Cir. 1993); United States v. Ward, 
    985 F.2d 500
    , 501-03 (10th
    Cir. 1993); Cracco v. Cox, 
    66 A.D.2d 447
    , 414 (N.Y. 4th Dept.
    1979); United States v. Warren Brown & Sons Farms, 
    1994 WL 654440
    (E.D. Ark. Sept. 29, 1994); United States v. Succession of Sidon,
    812 F. Supp. 674
    , 675-76 (W.D. La. 1993); United States v. LaSalle
    National Trust, 807 F.Supp 1371, 1372-73 (N.D. Ill. 1992); United
    States v. Mr. Wonderful Enterprises, 
    1992 WL 521532
     (E.D.N.Y. Feb.
    25, 1992); United States v. Freidus, 
    769 F. Supp. 1266
    , 1273-74
    (S.D.N.Y.   1991);   United    States   ex   rel.   Small   Business
    Administration v. Edwards, 
    765 F. Supp. 1215
    , 1222 (M.D. Pa. 1991);
    United States v. Copper, 
    709 F. Supp. 905
    , 908 (N.D. Iowa 1988);
    United States v. Matthews, 
    1988 WL 76567
     (E.D.N.Y. 1988); Curry v.
    United States, 
    679 F. Supp. 966
    , 970 (N.D. Cal. 1987).
         We join the Ninth, Eleventh, Tenth, and Second Circuits in
    this respect and hold that section 2415(a) does not directly apply
    to foreclosures on security for the debt. It is a well-established
    principle that all statutes of limitations against the United
    States are to be strictly construed.    Badaracco v. Commissioner,
    104 S. Ct. 756
    , 761 (1984).     The courts have all agreed that, by
    characterizing the action as one for "money damages," the strict
    terms of section 2415(a) distinguish between actions for recovery
    on the promissory note and actions to foreclose on the security.
    In short, although both an action on the promissory note and a
    foreclosure under the deed of trust are founded upon contract, only
    the former is strictly an action for money damages within the
    meaning of section 2415(a).2    We thus disagree with the district
         We observe that FIRREA's six-year period applicable to "any
    contract claim," 12 U.S.C. § 1821(d)(14)(A)(i)(I), has no such
    (or similar) "for money damages" limitation as is contained in
    section 2415(a). Thus it is clear that FIRREA applies to
    foreclosure actions.
         This limitation in section 2415(a)'s coverage is explained,
    though perhaps not justified, by ancient distinctions between the
    right to collect on the debt (or for a deficiency) and the right
    to foreclose on a deed of trust. As one New York appellate court
    has observed, "It is a long-standing rule that the right to
    court   that    section   2415(a)   directly   governs   the   mortgage's
    foreclosability between the date of the FDIC's appointment as
    receiver and the effective date of FIRREA.
         While apparently conceding that section 2415(a) does not apply
    to foreclosures, the FDIC argues that section 2415(c) represents an
    affirmative congressional prohibition on limitations against the
    government's rights to foreclose, thus displacing state law to the
    contrary.      FDIC's Brief at 14 ("[T]he inapplicability of section
    2415(a) merely confirms the applicability of section 2415(c), which
    places no limitations on the time for . . . foreclosure.").
    Subsection (c) provides, "Nothing herein shall be deemed to limit
    the time for bringing an action to establish the title to, or right
    of possession of, real . . . property."           The plain meaning of
    foreclose a mortgage securing a debt is distinct from the right
    to bring an action for money damages on the note . . . .
    Congress recognized and preserved this distinction and intended
    that section 2415 apply only to actions for money damages."
    Cracco, 66 A.D.2d at 449. An action for the collection of a debt
    is an action at law for money damages, whereas an action to
    foreclose on a deed of trust is an equitable action to sell the
    property, irrespective of the debt's amount. Finally, the
    foreclosure remedy is in rem, not in personam, and is therefore
    limited to the property itself.
         Courts have specifically held that section 2415(a) does not
    limit the government's power of sale. See Dos Cabezas Corp., 995
    F.2d at 1490 (relying on subsection (c)); Curry v. United States
    Small Business Admin., 
    679 F. Supp. 966
    , 970 (N.D. Cal. 1987)
    (subsection (a) not a bar to the SBA's exercise of a power of
    sale in a deed of trust).
         In Texas, the right to nonjudicially foreclose a deed of
    trust has been described as "a mere right to have recourse to the
    property for the satisfaction of the obligor's debt." 30 Tex.
    Jur. 3rd, Deeds of Trust And Mortgages, § 5 at 465. Moreover,
    Texas law considers a sale under a deed of trust "equivalent to a
    strict foreclosure by a court of equity." First Federal Savings
    and Loan Ass'n v. Sharp, 
    347 S.W.2d 337
    , 340
    (Tex.Civ.App.SQDallas 1961), aff'd, 
    359 S.W.2d 902
     (Tex. 1962)
    (citation omitted).
    section 2415(c), however, is to clarify or confirm that subsection
    (a) does not apply to actions relating to land titles.          Cf. S. Rep.
    No.   1328,   89th   Cong.,   2d   Sess.   2   (1966),   reprinted   in   1966
    U.S.C.C.A.N. 2502.3      Section 2415(c) therefore has no independent
    preemptive force.      Consequently, there is no statutory basis for
    the proposition that there are no pre-FIRREA time limits on the
    FDIC receiver's power to foreclose.
          Finally, the FDIC contends that, if section 2415(a) does not
    apply to foreclosures, then there can be no state limitation on the
    government's right to foreclose because of the federal common law
    rule that time does not run against the sovereign.           Guaranty Trust
    Co. of New York v. United States, 
    58 S. Ct. 785
     (1938); United
    States v. Summerlin, 
    60 S. Ct. 1019
     (1940); see also United States
    v. Palm Beach Gardens, 
    635 F.2d 337
    , 339-40 (5th Cir.) (explaining
         This report includes the following with respect to
    subsection (c):
                              PERSONAL PROPERTY
               Subsection (c) makes it clear that no one can
          acquire title to Government property by adverse
          possession or other means. This is done by providing
          that there is no time limit within which the Government
          must bring actions to establish title to or right of
          possession of real or personal property of the United
          States. In other words, there is no statute of
          limitations applying to Government actions of this
          type." 1966 U.S.C.C.A.N. at 2505.
          . . .
               "Subsection (c) expressly provides that nothing in
          the new section shall be construed to limit the time in
          which the Government may bring an action to establish
          the title to, or right of possession of, real or
          personal property." Id. at 2510.
    that the general rule "derives from the common law principle that
    immunity from limitations periods is an essential prerogative of
    sovereignty"), cert. denied, 
    102 S. Ct. 635
     (1981).               Setting aside
    whether      this   particular   rule    applies   in    the    absence    of   a
    significant federal interest in conflict with state law, see United
    States v. California, 
    113 S. Ct. 1784
    , 1791 (1993), we decline to
    view the legal issue narrowly as one of limitations.                We believe
    the more precise issue to be whether the mortgage survives the
    debt, and, in a case such as this, that question is normally
    determined by state, not federal, law.         See, e.g., Curry v. United
    States Small Business Admin., 
    679 F. Supp. 966
    , 970-72 (N.D. Cal.
    1987) (relying on the California state law doctrine that the
    mortgage does survive a limitations bar on the underlying debt).
           Although generally federal law governs issues involving rights
    of the United States arising under nationwide federal programs, it
    begs the question here to assume, as the government does, that the
    FDIC acts in this case pursuant to a significant federal interest.
    It is now well established that there is no general federal common
    law, Erie Railroad Co. v. Tompkins, 
    58 S. Ct. 817
    , 822 (1938), and,
    further, that federal common law rules should displace state laws
    only in the case of a significant conflict with specific or unique
    federal interests.       See Boyle v. United Technologies Corp., 
    108 S. Ct. 2510
    , 2514-16 (1988). Here, the displacement of state law in
    favor   of    federal   common   law    presupposes     the    existence   of   a
    significant federal proprietary interest in conflict with state
    law.    See United States v. Kimbell Foods, Inc., 
    99 S. Ct. 1448
    (1979); Clearfield Trust Co. v. United States, 
    63 S. Ct. 573
    See    also   19   Charles   A.   Wright    et   al.,   Federal   Practice   and
    Procedure § 4514 (1982).          Absent such an interest or some express
    congressional policy to the contrary, state law governs state-law
    rights held by the FDIC in its limited capacity as the receiver of
    a nonfederal entity.         In its supposition that federal law applies
    to this case, the FDIC cites a series of cases in which the courts
    applied Kimbell Foods to displace state rules in favor of federal
    common law.        The absence here of a significant federal interest,
    however, critically distinguishes this case from those in which the
    courts applied federal law to preserve the government's right to
           For instance, in United States v. Ward, 
    985 F.2d 500
    , 503
    (10th Cir. 1993), a Tenth Circuit case relied on by the FDIC here,
    the United States had itself made loans secured by real estate
    mortgages.     The loans were made by the Farmers Home Administration
    (FmHA) in accordance with federal policy under the Farm and Rural
    Development Act of 1949. Accordingly, the case involved the rights
    of the United States in a nationwide federal programSQthe very
    reason the Court displaced state law in Kimbell Foods.                  It was
    explicitly upon this basis that the Tenth Circuit preempted state
           "The basic reason why the Wards cannot prevail is that
           federal law governs issues involving the rights of the
           United States arising under nationwide federal programs.
           Consequently, because the underlying loans were made to
           the Wards by the Farmers Home Administration of the
           Department of Agriculture and emanated from the Farm and
           Rural Development Act of 1949, a nationwide federal
           program, the government is not affected by Oklahoma's
           lien expiration law." Ward, 985 F.2d at 503 (citations
    For this reason, the court in Ward determined, "[I]f the government
    is barred from the enforcement of the mortgage, the limitation must
    come from federal law."         Id.
         Indeed, all other circuit court decisions arguably on point
    deal with loans or subsidies made or guaranteed by the federal
    government under the auspices of some congressionally established,
    nationwide program.       In addition to Ward, see, for example, United
    States v. Alvarado, 
    5 F.3d 1425
     (11th Cir. 1993) (loan made by the
    FmHA); United States v. Dos Cabezas, 
    995 F.2d 1486
     (9th Cir. 1993)
    (same); Cracco v. Cox, 
    66 A.D.2d 447
     (4th Div. N.Y. 1979) (same);
    United States v. City of Palm Beach Gardens, 
    635 F.2d 337
    Cir.) (action to recover funds used in the construction of a
    nonprofit hospital sold to a profit-making organization pursuant to
    the Hill-Burton Act), cert. denied, 
    102 S. Ct. 635
     (1981); Alger v.
    United States, 
    252 F.2d 519
     (5th Cir. 1958) (action for the
    recovery   of   federal    meat   subsidies   made   under   the     Livestock
    Slaughter Subsidy Program authorized under the Emergency Price
    Control Act of 1942); United States v. Borin, 
    209 F.2d 145
    Cir.) (same), cert. denied, 
    75 S. Ct. 33
     (1954).                Besides FmHA
    loans,   the    most   common    fact   pattern   involves   loans    made   or
    guaranteed by the Small Business Administration (SBA).             See United
    States v. Kimbell Foods, Inc., 
    99 S. Ct. 1448
     (1979); Westnau Land
    Corp. v. United States Small Business Admin., 
    1 F.3d 112
    United States v. Sellers, 
    487 F.2d 1268
     (5th Cir. 1974).               In such
    cases, there is likewise a valid federal interest connected to a
    nationwide program.       See Kimbell Foods, Inc., 
    99 S. Ct. 1448
    (involving a loan guaranteed by the SBA).
          Here,    the    FDIC   asserted    the    power    of     sale,   not    in   its
    corporate capacity, but only in the limited capacity of receiver of
    a local, nonfederal entity.        The real estate lien note and the deed
    of trust documented a local transaction between private parties in
    Texas, and the deed of trust was secured by a lien on Texas real
    property.     In this context, the concerns of Kimbell Foods are not
    implicated.4        See California, 113 S.Ct. at 1791 (1993) (discussing
    in   dicta    how    the   application   of    federal    law     presupposes       the
    government acting "in its sovereign capacity").                  The Supreme Court
    has recently made clear that the capacity in which the FDIC acts
    may have a determinative impact on whether a state or federal rule
    should control.        In O'Melveny & Myers v. F.D.I.C., 
    114 S. Ct. 2048
    (1994), the FDIC, as receiver for a failed federally insured,
    California-chartered         savings    and    loan,    asserted    a   tort    claim
    against former counsel for the S&L.             Although both sides conceded
    that state law created the right upon which the FDIC acted, the
    government     argued      that   federal      law     should    control      whether
    "knowledge of corporate officers acting against the corporation's
    interest will be imputed . . . to the FDIC."              Id. at 2052.        On that
    issue, the FDIC argued for "federal pre-emption . . . over the law
         Whereas there is no significant federal interest here, there
    is a strong local interest in state regulation of land titles.
    See Mason v. United States, 
    43 S. Ct. 200
    , 203-04 (1923); see
    generally 14 Charles A. Wright et al., Federal Practice and
    Procedure § 3652 n.4 (1985). Such strong state interests should
    "be overridden by the federal courts only where clear and
    substantial interests of the National Government, which cannot be
    served consistently with respect for such state interests, will
    suffer major damage if the state law is applied." United States
    v. Yazell, 
    86 S. Ct. 500
    , 507 (1966) (refusing to displace state
    law relating to family property arrangements).
    of imputation . . . [applicable] to the FDIC suing as receiver."
    Id. at 2053.
         In O'Melveny, the FDIC quoted the following language of
    Kimbell Foods: "[F]ederal law governs questions involving the
    rights of the United States arising under nationwide federal
    programs."   Id.   "But the FDIC is not the United States," the Court
    responded, "and even if it were we would be begging the question to
    assume that it was asserting its own rights rather than, as
    receiver, the rights of [the S&L]."        Id.   In the absence of an
    applicable and contrary federal rule, the Court refused to displace
    state law merely because of the FDIC receiver's connection to the
    suit.   Before tolerating the preemption of state law, the Court
    insisted that the FDIC identify a "significant conflict between
    some federal policy or interest and the use of state law."      Id. at
    2055 (citation omitted).     With particular emphasis on the FDIC's
    role as receiver, the Court found a palpable lack of a "specific"
    and "concrete" federal interest:       "The rules of decision at issue
    here do not govern the primary conduct of the United States or any
    of its agents or contractors, but affect only the FDIC's rights and
    liabilities, as receiver, with respect to primary conduct on the
    part of private actors that has already occurred."       Id.
         The Court rejected the suggestion of the FDIC that there was
    a federal interest in simply not depleting the deposit insurance
    fund.   Because "neither FIRREA nor the prior law sets forth any
    anticipated level for the fund," the Court concluded that the FDIC
    was effectively asserting a "federal policy that the fund should
    always win."   Id.   The Court rejected this so-called "more money"
    argument.   Id.   See also United States v. Yazell, 
    86 S. Ct. 500
    504-05 (1966).     In this case, the FDIC has made the identical
    argument:      "Because   the   FDIC/Receiver's   foreclosure   of   this
    property reduces the monetary exposure of the federal deposit
    insurance fund '[t]he FDIC's right to recovery in these instances
    is determined under comprehensive federal law that preempts state
    law in this field'" (quoting Gaff v. FDIC, 
    919 F.2d 384
    , 390 (6th
    Cir. 1990), modified, 
    933 F.2d 400
         By asserting here the same generalized federal interest in
    winning, the FDIC has again failed to identify, nor can we find, a
    specific, concrete federal interest within the meaning of Kimbell
    Foods.   As a result, state law should govern state-law rights held
    by the FDIC in its capacity as receiver of a state-chartered
         We note in passing a relevant lower court decision, in which
    a California district court applied California law to determine
    whether a mortgage can survive the extinguishing or barring of the
    underlying debt. Curry v. United States Small Business Admin., 
    679 F. Supp. 966
    , 970-72 (N.D. Cal. 1987).5      In so doing, the district
         In contrast to the case sub judice, the government in Curry
    had made the loan secured by the mortgage. The court therefore
    appropriately determined that federal law controlled, but chose,
    in the absence of a specific federal rule, to adopt the relevant
    state law under the terms of Kimbell Foods. State law was
    therefore adopted as the federal rule and applied to the facts at
    hand. Here, in comparison, we determine that state, not federal,
    law controls and hence need not determine the propriety of
    adopting the state rule. On this basis, we distinguish United
    States v. Cooper, 
    709 F. Supp. 905
     (N.D. Iowa 1988), in which the
    court refused to adopt the Iowa state rule that the barring of a
    debt bars the mortgage. Because the loan in Cooper was made by
    the SBA under a nationwide federal program, the case fell clearly
    within Kimbell Foods. Its decision not to adopt state law as the
    court in Curry confronted a situation remarkably similar to the one
    here.   There, the government, through the SBA, made a loan to the
    plaintiff secured by a deed of trust with a power of sale.              At
    issue was the validity of the attempted nonjudicial foreclosure
    under the deed of trust, notwithstanding that the underlying loan
    obligation was extinguished by the general six-year statute of
    limitations   found   in   section    2415(a).       The   court   reviewed
    California law to determine the effect of this limitations bar on
    the enforcement of the mortgage.          California, at least at the time
    of the Curry decision, followed the majority rule "that a deed of
    trust 'never outlaws' and that the power of sale may be exercised
    even though the statute of limitations has barred any action on the
    underlying debt or obligation."      Id. at 971.6     For this reason, the
    court held that the SBA could exercise its power of sale even
    though section 2415(a) barred an action on the note.
         Though in one sense, the situation in this case is identical
    to Curry, in another, it is the reverse.         Here, unlike Curry, there
    is no dispute that the FDIC could sue on the note because section
    2415(a), which applies directly to the debt only, carried the
    FDIC's power to enforce the debt past FIRREA's effective date.
    Thus, in this case, we are not concerned with the effect of a
    relevant federal rule of decision is therefore inapposite to the
    case at hand.
         These facts were complicated by the passage of a California
    statute designed to reverse the general rule that a power of sale
    survives indefinitely. Id. at 971. Nevertheless, the exceptions
    built into the statute were such that the law could not
    invalidate a power of sale until five years after the statute's
    operative date. The SBA's interests fell within this safe harbor
    provision. Id. at 972.
    barred debt on the mortgage, but instead with the effect of an
    enforceable debt on the mortgage.       The critical question in this
    case, therefore, is the obverse of Curry's:      can the power of sale
    under a deed of trust be extinguished when the note secured by the
    deed of trust is still enforceable?      In other words, although both
    parties agree that the FDIC is not barred from suing the debtor on
    the note for the underlying debt, they dispute whether enforcement
    of the mortgage itself is barred.      To answer this question, we turn
    to the law of Texas and inquire into the connection between
    mortgages and the notes they secure.
         It is a general and long-established principle in Texas that
    a mortgage is a mere incident of the debt.       In Duty v. Graham, 
    12 Tex. 214
     (1854), the Texas Supreme Court held that, a mortgage
    being merely security for the debt and not a conveyance in itself,
    the debt "is the principal thing," to which the mortgage is only an
    "incident."   Id. at 217.   See also Slaughter v. Owens, 
    60 Tex. 668
    672 (1884) ("The vendor's lien exists by reason of the debt alone.
    So long as that continues and can be enforced the lien subsists and
    can be foreclosed."); Falwell v. Hening, 
    78 Tex. 278
    , 279 (1890)
    ("The lien was incident to the claim for the purchase money.        If
    the note was not barred the lien was not"; limitations on note
    suspended by absence of maker from state); Stone v. McGregor, 
    99 Tex. 51
    , 87 S.W.334, 336 (1905) (". . . the note was barred by the
    statute of limitation of four years . . . nothing occurred to
    suspend the statute of limitation . . . .      There being no right of
    recovery on the note, there can be no foreclosure of the lien . .
    . ."); Brown v. Cates, 
    99 Tex. 133
    87 S.W. 1149
    , 1151 (1905) (" .
    . . the limitation available to a purchaser of property incumbered
    by a lien to secure a debt of his vendor is that which applies in
    favor of the debtor against the creditor; and that, so long as the
    creditor's cause of action against the debtor upon the debt is not
    barred, the     right   to   foreclose     against   the   purchaser   of   the
    property continues.       But when the debt is barred the action to
    foreclose the lien is also barred"); Jolly v. Fidelity Union Trust
    118 Tex. 58
    10 S.W.2d 539
    , 541 (1928) ("The rule has been
    long established in this state that the lien by which a debt is
    secured is incident to the debt; and that a written extension of
    the maturity of the debt, by the debtor, operates as an extension
    of   the   lien   also,      unless   the    extension     agreement    shows
         We acknowledge that there is some historical justification
    in Texas for a distinction between a judicial and a nonjudicial
    foreclosure with respect to this rule. Although Texas law has
    long recognized that a mortgage is merely an incident of the
    debt, in 1887 the Texas Supreme Court drew a short-lived
    distinction between judicial and nonjudicial foreclosures.
    Fievel v. Zuber, 
    3 S.W. 273
     (Tex. 1887). In Fievel, the court
    held that a nonjudicial foreclosure under a power of sale, unlike
    a judicial foreclosure, could be exercised after the statute of
    limitations had barred enforcement of the underlying debt. Id.
    at 274. The court reasoned that statutes of limitations do not
    "destroy" the debt, but merely bar its judicial enforcement.
         Whatever relevance this distinction between nonjudicial and
    judicial foreclosures may have had at the time of Fievel, the law
    of Texas has since been changed to conform to the larger
    principle that the mortgage follows the debt. Shortly after a
    statutory provision in 1905 that limited the time for exercising
    a power of sale to ten years after the maturity of the debt, the
    Texas legislature, in amendments some eight years later, exactly
    matched the limitations period for nonjudicial (as well as
    judicial) foreclosures to the four-year rule for debts. See,
    e.g., Stubbs v. Lowrey's Heirs, 
    253 S.W.2d 312
    , 313
    (Tex.Civ.App.SQEastland 1952, writ ref. n.r.e.) (where the debt
    was barred by limitations, the foreclosure sale under a deed of
    trust was "void"); Howard v. Stahl, 
    211 S.W. 826
    , 828
    (Tex.Civ.App.SQAmarillo 1919, no writ) (same); Rudolph v. Hively,
         Consistent   with   this   principle,   Texas   law   matches   the
    limitations period of the mortgage to that of the note.        Each is
    four years from the maturity of the debt.      Tex. Civ. Prac. & Rem
    Code § 16.004(a) (debt); 16.035(a), (b), & (d).8       If the debt is
    188 S.W. 721
    , 722-23 (Tex.Civ.App.SQAmarillo 1916, writ ref.)
    (same). The relevant Texas statutes do not distinguish for
    limitations purposes between judicial and nonjudicial
    foreclosures. See note 8, infra.
         Likewise, at least prior to the adoption of Article 9 of the
    Uniform Commercial Code, the Texas law of chattel mortgages and
    other personal property liens reflected the principle that the
    mortgage follows the debt it secures. University Savings and
    Loan Ass. v. Security Lumber Co., 
    423 S.W.2d 287
    , 292 (Tex. 1967)
    ("[L]iens are incidents of and inseparable from the debt.").
    Indeed, the statute of limitations on chattel mortgages was
    considered implicit in the four-year period for debts (found
    formerly in article 5527). Alexander v. Ling-Temco-Vought, Inc.,
    406 S.W.2d 919
    , 924-25 (Tex.Civ.App.SQTexarkana 1966, writ ref.
    n.r.e.). Consequently, the "lien followed the debt, and was not
    barred so long as the debt was not barred." Liquid Carbonic Co.
    v. Logan, 
    79 S.W.2d 632
    , 633 (Tex.Civ.App.SQAustin 1935, no
    writ). To the extent Texas' version of Article 9 of the Uniform
    Commercial Code does not speak to this question, these common-law
    principles still control and "supplement . . . provisions" of the
    code. Tex. Bus. & Com. Code § 1.103 (1994).
         Section 16.035 provides in relevant part:
              "(a) A person must bring suit for the recovery of
         real property under a lien debt or the foreclosure of a
         lien debt not later than four years after the day the
         cause of action accrues.
              (b) A sale of real property under a power of sale
         in a mortgage or deed of trust that secures a lien debt
         must be made not later than four years after the day
         the cause of action accrues.
              (c) The running of the statute of limitations is
         not suspended against a bona fide purchaser for value,
         a lienholder, or a lessee who has no notice or
         knowledge of the suspension of the limitations period
         and who acquires an interest in the property when an
         outstanding lien debt is more than four years past due,
         except as provided by:
                   (1) Section 16.062, providing for suspension
              in the event of death; or
    barred by limitations, so is the mortgage, a mere incident of the
    debt.    If limitations has not run on debt, without reference to
    tolling or debt extension, then limitations has not run on the
    mortgage.      Here, the applicable limitations period on the debt is
    that fixed by federal law at six years.                 We conclude that, absent
    special circumstances, it is not consistent with the manifest
    scheme    of    the    Texas   law    to   void   the     lien    when   the   stated
    limitations years on the debt have not elapsed.                   To do so would be
    contrary to the general rule that the mortgage follows the debt and
    would    pervert      the   purpose   of    the   Texas    law,    which   seeks   to
    harmonize the limitations period applicable to both the note and
    the security.         Moreover, such a result would discriminate against
    the federal law by not allowing the holder of a note as to which
    the applicable federal limitations years had not passed the same
    privileges as the holder of a note as to which the applicable state
    limitations years had not elapsed.
                        (2) Section 16.036, providing for recorded
                   extensions of lien debts.
              (d) On the expiration of the four-year limitations
         period, it is conclusively presumed that a lien debt
         has been paid and the lien debt and a power of sale to
         enforce the lien become void at that time."
         Section 16.036 provides in part that "parties primarily
    liable for a lien debt . . . may suspend the running of the four-
    year limitations period for lien debts through a written
    extension agreement" to be "signed and acknowledged as provided
    by law for a deed" and recorded in the real estate records "of
    the county where the real property is located."
         Section 16.037 provides: "An extension agreement is void as
    to a bona fide purchaser for value, a lienholder, or a lessee who
    deals with real property affected by a lien debt without actual
    notice of the agreement and before the agreement is acknowledged,
    filed, and recorded."
         To be sure, Texas law strives to protect from secret tollings
    or extensions the unknowing bona fide purchaser who acquires the
    land when the limitations period on the debt has facially expired.
    Section 16.035(c); 16.037 (see note 8, supra). However, as between
    the parties, and those holding under them in subordination to the
    mortgage, informal, unrecorded extensions of the debt, not meeting
    the standards of section 16.036 (see note 8, supra), suffice also
    to extend the lien.   See, e.g., Jolly, supra at 541 (predecessor to
    section 16.035(c) "not intended . . . to have application where an
    unbarred lien is extended by the parties to it, and no other
    persons are affected by the extension, except those holding under
    voluntary conveyance from the mortgagor in subordination to the
    lien"; and not intended to change "rule . . . long established . .
    . that the lien by which a debt is secured is incident to the debt;
    and that a written extension of the maturity date of the debt, by
    the debtor, operates as an extension of lien also, unless the
    extension agreement shows otherwise"); T.A. Hill State Bank of
    Weimar v. Schindler, 
    33 S.W.2d 833
    , 837 (Tex. Civ. App.SQGalveston
    1930, writ ref'd) (predecessor to section 16.035 did not change
    prior settled law "that any renewal of the note made before it
    became barred which was valid as between the parties preserved the
    lien until the expiration of four years after the maturity of the
    debt fixed by the renewal, except as against subsequent innocent
    purchasers and lienholders"); Mercer v. Daoran Corp., 
    676 S.W.2d 580
    , 581-82 (Tex. 1984) (one who becomes junior lienholder before
    senior lien debt is facially barred is not protected by section
    16.035's predecessor from subsequent unrecorded extension of senior
    debt). Similarly, as between the parties, an informal, unrecorded,
    and unacknowledged written promise to pay a limitations barred debt
    is held to revive both the debt and the lien securing it.   Beeler
    v. Harbour, 
    116 S.W.2d 927
    , 930-931 (Tex. Civ. App.SQFort Worth
    1938, writ ref'd).   See also Falwell.9
         Here, when the FDIC was appointed receiver in June 1987, four
    years had not elapsed since the note's original maturity date.
    Consequently, at that time the note and lien were each fully in
    force.   The appointment of the FDIC as receiver brought into play
    section 2415(a), the federal six-year statute of limitations.    As
    a result, the debt would not become barred before 1990.         For
    purposes of its effect on Texas limitations law as applied to the
    validity of the lien, it seems to us that this would be treated at
    least as favorably to the validity of the lien as if the parties
    had previously, by unrecorded instrument, extended the note's
    maturity, so it would not be barred before 1990.      On August 9,
    1989, when FIRREA came into effect, no innocent, ignorant third
    party purchaser for value had (or had had) any interest in the
    property.   In those circumstances, and as the debt was not barred,
    the FDIC receiver could then have foreclosed its lien consistent
    with Texas law. FIRREA then took over, and its limitations period,
         In Falwell, the payee filed suit in February 1885 on a March
    1878 note of Abercrombie's maturing November 1, 1880, and to
    foreclose the implied vendor's lien securing it; limitations did
    not bar the note because Abercrombie had been out of the state
    continuously since a time prior to November 1880; on November 2,
    1878, Abercrombie had conveyed to Falwell the land deeded
    Abercrombie by the payee in March 1878. Falwell then knew of the
    payee's lien. It was held that the lien was properly foreclosed
    as to Falwell. "The lien was incident to the claim for the
    purchase money. If the note was not barred the lien was not."
    which did not expire before June 1993, directly applied, unlike
    that of section 2415(a), not only to claims on the note but also to
    foreclosure     claims   (see    note   2,   supra).10   As   the   lien     was
    foreclosable on FIRREA's effective date, application of FIRREA
    would not revive a void or barred lien.            When Davidson, the only
    bona fide purchaser involved, first acquired an interest in the
    property   in   March    1990,    limitations    concerning   the   lien     was
    governed by FIRREA, and had not expired.
         Consistent with the general principle in Texas that a mortgage
    survives so long as the debt, provided the rights of innocent,
    ignorant third-party purchasers for value are not prejudiced, the
    FDIC in this case was not barred from exercising the power of sale
    contained in the deed of trust on or before the effective date of
    FIRREA.    That being the case, the foreclosure was timely under the
    limitations     provisions       of   FIRREA,   found    in   12    U.S.C.     §
         For the foregoing reasons, the judgment of the district court
         We recognize that this is a nonjudicial foreclosure, but
    nothing in the Texas statutes treats such a foreclosure
    differently for limitations purposes from a judicial foreclosure.
    See note 8, supra. We are aware of no Texas authority holding
    that a nonjudicial foreclosure is limitations barred where
    neither the debt nor a judicial foreclosure action is so barred.
    Moreover, Texas law considers a nonjudicial sale under a deed of
    trust "equivalent to a strict foreclosure by a court of equity."
    First Federal Savings and Loan Ass'n v. Sharp, 
    347 S.W.2d 337
    340 (Tex. Civ. App.SQDallas 1961), aff'd 
    359 S.W.2d 902
    1961). Of course, we do not here deal with a situation in which
    it is contended that the express terms of the instrument were
    transgressed by the nonjudicial sale. We are concerned only with
    the effect of the general limitations statutes.