Revised February 22, 1999

UNITED STATES COURT OF APPEALS

For the Fifth Circuit

No. 98-50117

SMS FINANCIAL, LIMITED LIABILITY COMPANY,

Plaintiff - Appellant,

VERSUS

ABCO HOMES, INC.; ABBOTT CONSOLIDATED INDUSTRIES, INC.; 

ABBOTT DEVELOPMENT COMPANY; H. EUGENE ABBOTT; RICHARD E ABBOTT,

Defendants - Appellees.

Appeal from the United States District Court

for the Western District of Texas

February 18, 1999

Before SMITH, DUHÉ, AND WIENER, Circuit Judges

JOHN M. DUHÉ, JR., Circuit Judge: 

SMS Financial L.L.C. (“SMS”), sued to recover on a promissory

note issued by ABCO Homes, Inc. (“ABCO”), Abbott Consolidated

Industries, Inc. (“ACI”), Abbott Development Co. (“ADCO”), H. Eugene

Abbott, and Richard E. Abbott (collectively, “Defendants”). SMS

appeals on the following grounds the district court’s grant of

summary judgment for the Defendants: (1) it is the holder and owner

of the note; (2) equitable estoppel; (3) limitations; (4)
1All of the Defendants were co-makers of this note. 

2In 1994, the FDIC sent SMS a letter containing a check for

$2,752.10, the amount SMS paid for the note, and the request for

return of the note. 

3There is no other explanation provided by the parties for the

return of the note “in a box” except that it was inadvertently

done. 

2

commercially unreasonable disposition of collateral; and (5) no

relation back of SMS’s amended complaint. Because we hold that SMS

is the holder of the note and find that genuine issues of material

fact exist concerning the remaining issues raised by the Defendants,

we reverse and remand to the district court for further proceedings.

I. Background

This appeal involves a promissory note made by the Defendants

payable to the FDIC. ADCO was the maker of a previous note owed to

Western State Bank of Midland. The FDIC took over that bank’s

operations when the bank failed. When ADCO defaulted on that note,

the FDIC allowed the Defendants to refinance the debt through the

note payable to the FDIC.1 In 1993 the FDIC sold its note to SMS in

a bulk sale of notes. The FDIC endorsed its note to SMS, but did

not physically deliver it to SMS. Subsequently, SMS requested a

refund of the purchase price for this note as provided for under the

terms of their contract. The FDIC issued a refund check to SMS and

requested return of the endorsed note.2 Of course, SMS did not have

possession of the note, and therefore could not return it. In 1997,

the FDIC sent the note to SMS “in a box” with other documents.3 
4SMS does not appeal ABCO and ADCO’s dismissal on summary

judgment. 

3

SMS sued the Defendants on the note shortly after receiving it.

The district court granted the Defendants’ Motion For Summary

Judgment as to all Defendants on the grounds that SMS was not the

owner or holder of the note, as to ABCO on the additional ground of

a settlement with the FDIC, and as to ADCO on the additional ground

that the debt was discharged in bankruptcy.4 

II. Discussion

A. Is SMS the holder or owner of the note?

SMS argues the district court erred in granting the Defendants’

Motion for Summary Judgment because a fact issue exists concerning

whether SMS is the owner or holder of the note. We hold SMS is the

holder of the note. 

This court reviews the district court’s determination de novo.

See La. Bricklayers & Trowel Trades Pension & Welfare Fund v.

Alfred Miller Gen. Masonry Contracting Co., 157 F.3d 404, 407 (5th

Cir. 1998); see also Willis v. Roche Biomedical Lab., Inc., 21 F.3d

1368, 1370 (5th Cir. 1994). We must determine whether the pleadings

and summary judgment evidence demonstrate there is no genuine issue

as to any material fact, and whether the Defendants are entitled to

judgment as a matter of law. Id. at 1371.

SMS argues it became the note’s owner and holder through the

FDIC’s negotiation of the note in 1997 by delivery of the endorsed
5The Plaintiff also relies on the affidavit of a loan

specialist with the FDIC, Cynthia Wilkins, in which she opined

that the FDIC has not reacquired or obtained delivery or possession

of the note since the FDIC endorsed the note to the Plaintiff. Her

affidavit conflicts with the evidence that the FDIC repurchased the

note from SMS through the refund check and letter dated February

16, 1994. 

6SMS’s reliance on Tex. Bus. & Com. Code § 3.207 (Vernon Supp.

1999), which provides how a note is reacquired, is misplaced. The

issue is not whether the FDIC reacquired the note, but whether SMS

is the holder of the note therefore entitling it to enforce the

instrument through this lawsuit. 

7The district court held ABCO should be dismissed from this

lawsuit due to its settlement with the FDIC in a 1996 lawsuit over

the note.

4

note to SMS. Alternatively, SMS contends it is the owner and holder

of the note because the Defendants failed to prove the FDIC

reacquired the note from SMS through the refund check in 1994.5

SMS asserts the FDIC did not reacquire the note because the FDIC did

not strike out the endorsement to SMS even though the FDIC had

possession of and had paid for the note.6

The Defendants contend SMS is not the holder or owner of the

note because the FDIC reacquired the note through the letter and

check dated 1994 discussed above. The Defendants also assert that

SMS judicially admitted the FDIC’s reacquisition of the note in 1994

and the FDIC’s status as holder and owner of the note in 1996 when

SMS conceded the correctness of the district court’s grant of

summary judgment to ABCO.7 The Defendants argue if the FDIC

settled with ABCO in 1996 in a dispute concerning the note, then the

FDIC must have owned the note in 1996. Finally, the Defendants
5

claim the Plaintiff misstated the FDIC’s position through Cynthia

Wilkins’ affidavit because her affidavit does not constitute the

official position of the FDIC. 

To recover on a promissory note, the plaintiff must prove: (1)

the existence of the note in question; (2) that the party sued

signed the note; (3) that the plaintiff is the owner or holder of

the note; and (4) that a certain balance is due and owing on the

note. Bean v. Bluebonnet Savings Bank FSB, 884 S.W.2d 520, 522

(Tex.App.--Dallas 1994, no writ). “‘Negotiation’ means a transfer

of possession, whether voluntary or involuntary, of an instrument

by a person other than the issuer to a person who thereby becomes

its holder.” Tex. Bus. & Com. Code § 3.201(a) (Vernon Supp. 1999).

“[I]f an instrument is payable to an identified person, negotiation

requires transfer of possession of the instrument and its

indorsement by the holder.” Id. § 3.201(b). When an instrument

is payable to an identifiable person, the “holder” is the person in

possession if he is that identified person. See Tex. Bus. & Com.

Code § 1.201(20) (Vernon Supp. 1999). When a holder indorses an

instrument, whether the instrument is payable to an identified

person or payable to bearer, and “the indorsement identifies a

person to whom it makes the instrument payable,” it is a “special

indorsement”. Tex. Bus & Com. Code § 3.205 (Vernon Supp. 1999).

“When specially indorsed, an instrument becomes payable to the

identified person and may be negotiated only by the indorsement of
8The Texas Business and Commerce Code contains Texas’ version

of the U.C.C. This statute was amended in 1995 to conform to the

Uniform Commercial Code. Prior to this amendment, the definition

of “negotiate” did not include an involuntary transfer of an

instrument, which is likely what occurred in this case. The

effective date of this amendment was January 1, 1996. The

Historical and Statutory Notes provide that the Act does not apply

to a right accrued before its effective date. The Plaintiff

obtained possession of the indorsed note from the FDIC in 1997.

Therefore, the Plaintiff’s right as a holder did not accrue until

1997, long after the effective date of the Act.

6

that person.” Id. (emphasis added). A “person entitled to enforce”

an instrument includes the holder of an instrument. See Tex. Bus.

& Com. Code § 3.301 (Vernon Supp. 1999). 

The district court did not recognize the distinction between

the status of holder and owner under the Uniform Commercial Code.

The district court relied on an outdated version of the Texas

Business and Commerce Code.8 SMS is a holder of the note as defined

in § 3.201 because it is in possession of a note which is payable

to itself. SMS became a holder when the FDIC negotiated the note

to it through the endorsement and delivery of the note in 1997. See

Tex. Bus. & Com. Code § 3.201 (Vernon Supp. 1999). SMS is the

holder of the note even if the FDIC’s delivery of the note was

inadvertent. As holder of the note, SMS is also a person entitled

to enforce the instrument under § 3.301. See Tex. Bus. & Com. Code

§ 3.301 (Vernon Supp. 1999). Whether SMS is the owner of the note

is a separate question which does not affect whether it is the

holder of the note. Whether the FDIC reacquired the ownership of

the note by refunding the purchase price of the note to SMS is
9In 1996, the FDIC and ABCO entered into a settlement

agreement concerning a lawsuit brought by ABCO against AmWest

alleging conversion and other causes of action inolving the

wrongful seizure and sale of collateral ABCO gave to secure another

note. 

7

irrelevant to the issue of whether SMS is the holder of the note.

B. The Defendants’ alternative grounds for summary judgment. 

The Defendants contend we could also affirm the district

court’s grant of their Motion For Summary Judgment on these

alternative grounds: (1) equitable estoppel; (2) limitations; (3)

commercially unreasonable disposition of collateral; and (4) no

relation back of SMS’s amended complaint.

1. Equitable Estoppel

The Defendants argue the FDIC falsely represented to them

during settlement negotiations in a 1996 lawsuit that it did not own

the note and that they relied to their detriment on that false

statement because they would have asked for a release from the note

in the settlement had they known the truth. The Plaintiff did not

address the Defendants’ promissory estoppel theory on appeal.9

We find a genuine issue of material fact exists concerning

whether the FDIC falsely represented that it did not own the note

in these negotiations. See Edwin M. Jones Oil Co. v. Pend Oreille

Oil & Gas Co., 794 S.W.2d 442, 447(Tex.App.-Corpus Christi 1990,

writ denied) (false representation is an element of the defense of

estoppel). The Defendants’ argument that the FDIC’s representation

was false is apparently based on their belief that the FDIC
10The Defendants introduced copies of the FDIC’s 1994 letter

and refund check. The Plaintiff introduced the affidavit of

Cynthia Wilkins in which she averred that at no time since the FDIC

indorsed the note to the Plaintiff has the FDIC reacquired or

obtained delivery or possession of the note. 

8

reacquired the note through the letter and refund check sent by the

FDIC to SMS in 1994. SMS argued in its Response to Defendants’

Motion for Summary Judgment that the FDIC’s statement was not false

because the FDIC sold the note to SMS in 1993. There is conflicting

evidence in the record concerning the ownership of the note.10

Because we find a genuine issue of material fact exists concerning

this issue, we cannot affirm on this ground. 

2. Limitations

The Defendants argue limitations also bars the Plaintiff’s

suit. The note matured on February 15, 1991. In April and May of

1991, Fairmont Park Lanes Bowling Center made two payments on the

note. At that time, ABCO operated the bowling alley and owned the

bowling alley’s equipment but leased the land and building where the

bowling alley was located from ADCO. On July 30, 1991, H. Eugene

Abbott sent a letter to the FDIC requesting an extension of time on

the note, offering a reduced monthly payment, and assuring that

“they” anticipated “their” cash flow would soon increase enabling

“them” to retire “their” debt with the FDIC. SMS sued on the note

on April 9, 1997. 

Both 28 U.S.C.A. § 2415(a) and 12 U.S.C.A. 1821(d)(14) on their

face apply to this action. Section 2415 provides the limitations
11Section 2415(a)’s tolling provision provides that “in the

event of later partial payment or written acknowledgment of debt,

the right of action shall be deemed to accrue again at the time of

each such payment or acknowledgment.” 28 U.S.C.A. 2415(a) (West

1994). 

12Because the FDIC was the original payee of the note, SMS is

the assignee of the FDIC in its corporate capacity rather than the

FDIC as a receiver or conservator of a failed bank. 

9

period for actions on contracts brought by the United States or its

agencies. See 28 U.S.C.A. § 2415(a) (West 1994). Section 1821 was

enacted as part of the Financial Institutions Reform, Recovery, and

Enforcement Act of 1989 (“FIRREA”) and provides the limitations

period for contractual claims held by the FDIC when appointed as a

receiver or conservator of a failed bank. See 12 U.S.C.A. §

1821(d)(14) (West 1989 & West Supp. 1998). Both statutes provide

a six year limitations period. However, § 2415 contains a tolling

provision while § 1821 does not.11 

Assignees of the FDIC, such as SMS, are entitled to the same

six year period of limitations under § 2415(a) and § 1821(d)(14).

See FDIC v. Bledsoe, 989 F.2d 805, 811 (5th Cir. 1993).

Additionally, § 1821 applies to the FDIC’s action even when the FDIC

sues in its corporate capacity, rather than as a receiver or a

conservator of a failed bank.12 See 12 U.S.C.A. 1823(d)(3)(A) (West

1989)(giving FDIC, in its corporate capacity, the same rights,

powers and privileges as FDIC acting as receiver); see also FDIC v.

Bates, 838 F.Supp. 1216, 1217 (N.D. Ohio 1993); FDIC v. Thayer Ins.

Agency, Inc., 780 F.Supp. 745, 749 (D. Kan. 1991); FDIC v. Howse,
13SMS alleged a payment made by one of the Defendants tolled

the statute of limitation under §2415 for all of the Defendants

because that Defendant was acting as an agent for the others. If

we determine that § 2415 applies, the fact issue will be whether

the payments or the June 30, 1991 letter were made by an agent of

the Defendants therefore tolling the limitations period for all. 

10

736 F. Supp. 1437, 1445 (S.D. Tex. 1990). 

If we determine that § 2415 applies, a genuine issue of

material fact will exist concerning whether the Defendants tolled

the statute of limitations period through the partial payments or

the letter.13 If we determine that only § 1821 applies, the

Plaintiff’s case will be time barred, and we could affirm the

district court’s grant of summary judgment on this alternative

ground. 

a. case law

SMS relies on the only case addressing this issue, Midstates

Resources Corp. v. Farmers Aerial Spraying Service, Inc., 914

F.Supp. 1424, 1426-27 (N.D. Tex. 1996), in arguing that the two

statutes should be construed together resulting in the tolling of

§ 1821's period. SMS also argues the two payments from Fairmont

Lanes tolled the period because the bowling alley was the

Defendants’ agent authorized to make payments on the loan. SMS

claims this agency relationship resulted from the Defendants’

practice of making payments through the bowling alley throughout the

life of the note. Finally, SMS contends that H. Eugene Abbott’s

June 30, 1991 letter constituted an acknowledgment which was also

sufficient to toll the limitations period. 
14The Defendants often attribute legal conclusions in their

brief to cases which clearly did not decide the issue they claim it

did. Their brief does more to obscure the issue than elucidate the

correct course of the law in this area. 

15Nothing in the letter evidences that H. Eugene Abbott signed

it in his representative rather than individual capacity.

16SMS did not raise this issue for the first time on appeal.

SMS alleged in its complaint that the partial payments and letter

tolled the limitations period. 

17In further support of its position, Midstates relied on cases

which stated that § 1821 was meant to “clarify” the earlier law of

§ 2415. See Midstates, 914 F.Supp. at 1427 (citing Jackson v.

Thweatt, 883 S.W.2d 171, 177 (Tex. 1994)); see also FDIC v.

Schoenberger, 781 F. Supp. 1155, 1158 (E.D. La. 1992); see also

FDIC v. Howse, 736 F.Supp. 1437, 1446 (S.D. Tex 1990). 

11

The Defendants repeatedly mischaracterize cited cases, arguing

that only § 1821 should apply, therefore time barring SMS’s suit.14

They argue that even assuming § 2415's tolling does apply, they did

not toll the limitations period. The Defendants argue that no

agency relationship existed between the bowling alley and the

Defendants, and that H. Eugene Abbott clearly signed the June 30,

1991 letter to the FDIC as a representative of ABCO and not in his

individual capacity.15 Additionally, the Defendants argue that SMS

cannot raise the agency theory for the first time on appeal.16

In Midstates, the court held § 2415's tolling provision should

apply because it does not conflict with one of § 1821’s

provisions.17 The court relied on Resolution Trust Corp. v. Seale,

13 F.3d 850, 854 (5th Cir. 1994) in stating that “section 1821

controls only when one of its specific statutory ‘rules’ conflicts

with one of section 2415's general statutory rules.” Midstates, 914
18This is the language Midstates relied on in applying the

tolling provision of 2415(a). 

12

F.Supp. at 1426. A closer examination reveals that Midstates

misconstrued Seale. 

Seale involved whether the later enacted § 1821 could revive

claims previously barred by a state statute of limitations. After

exploring the legislative history of § 1821, the court determined

it should not revive the previously barred claims. In an effort to

bolster its position, the court briefly addressed whether § 2415(b)

revived the same claims. The court held that § 2415(b) did not

revive the previously barred claims, but the court was indecisive

concerning whether § 2415(b) should apply at all. The court first

stated that “[a] general statutory rule usually does not govern if

a more specific rule covers the case” and, therefore § 1821, as the

more specific rule, should apply rather than § 2415(b).18 Then the

court noted that we gave effect to both § 2415 and § 1821 in FDIC

v. Belli, 981 F.2d 838, 842 (5th Cir. 1993). Midstates used the

first language to prove the opposite conclusion when it held that

the tolling provision of § 2415(a), as the more specific rule,

should prevail over the more general rule, i.e. no tolling

provision, of § 1821.

In Belli, the court assumed both § 2415 and § 1821 applied to

an action brought by the FDIC. Belli involved a suit by the FDIC

on notes that were executed before Congress enacted FIRREA. First,

the court decided that a cause of action “accrues” for the purposes
19See J. Michael Dorman & James E. Essig, Annotation, Special

Commentary: Limitation of Actions Under § 2(d)(14) of Federal

Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA)

(12 U.S.C.A. § 1821(d)(14)) in Actions Brought by Federal Deposit

Insurance Corporation as Receiver, 126 A.L.R. Fed. 1 (1995)

20One line of cases held the cause of action accrued when the

debtor defaulted. See FDIC v. Peterson, 770 F.2d 141 (10th Cir.

1985); see also FDIC v. Ashley, 754 F.Supp. 179 (D.C. Kan. 1990).

Another line of cases held the cause of action accrued when the

FDIC acquired the right to sue by being appointed receiver of the

bank. See FDIC v. Former Officers & Directors of Metropolitan

Bank, 884 F.2d 1304 (9th Cir. 1989); see also FDIC v. Hinkson, 848

F.2d 432 (3rd Cir. 1988). 

13

of § 2415(a) when the debtor defaults and not when the FDIC acquires

the right to sue on the note by being appointed receiver or

conservator of the bank. See Belli, 981 F.2d at 840. After

determining that the FDIC’s suit was barred under § 2415(a), the

court applied § 1821 retroactively to the action. Id. at 842. The

court held § 1821 also barred the FDIC’s suit because §2415(a)’s

time period for the action expired before § 1821 became effective.

Section 1821's time period does not revive claims that expired

before its effective date. Id. In determining that § 1821 barred

the FDIC’s suit, the court assumed that both § 1821 and § 2415

applied.

b. legislative history

Before the enactment of FIRREA, § 2415 governed the limitations

period when the FDIC sued on a contract.19 A split in the circuits

developed concerning when a cause of action “accrued” under §

2415.20 Congress resolved this split of authority by providing in
21 Extending these limitations periods will

significantly increase the amount of money

that can be recovered by the Federal

Government through litigation, and help ensure

the accountability of the persons responsible

for the massive losses the Government has

suffered through the failures of insured

institutions. The provisions should be

construed to maximize potential recoveries by

the Federal Government by preserving to the

greatest extent permissible by law claims that

would otherwise have been lost due to the

expiration of hitherto applicable limitations

periods.

135 Cong. Rec. S10182-01 (1989)

14

FIRREA that a cause of action accrues either when the FDIC acquires

the claim by assignment or receivership, or when the cause of action

accrues under state law, whichever is later. See 12 U.S.C.A.

1821(d)(14) (West 1989 & West Supp. 1998). 

The little amount of legislative history concerning this

section evidences Congress’ intent to broaden the FDIC’s powers.

Congress’ brief analysis in debate indicates it intended to extend

the limitations period through this section.21 Additionally, one of

Congress’ stated purposes in enacting FIRREA was to “strengthen the

enforcement powers of Federal regulators of depository

institutions.” Financial Institutions Reform, Recovery, and

Enforcement Act of 1989, Pub.L. No. 101-73, 103 Stat. 183, 187.

Applying the tolling provision of § 2415 in connection with § 1821

would fulfill Congress’ stated goals in FIRREA.

Because we hold that § 2415's tolling provision should be
22The collateral at issue is the bowling alley’s equipment. 

15

construed with § 1821's limitations period, a genuine issue of

material fact exists concerning whether the bowling alley’s partial

payments or H. Eugene Abbott’s June 30, 1991 letter tolled the

limitations period for all of the Defendants. As a result, we

cannot affirm the district court’s grant of summary judgment on this

ground. 

3. Commercially unreasonable disposition of collateral; notice.

The Defendants contend that we could also affirm the district

court on the grounds that the FDIC did not provide the Defendants

with sufficient notice of the lease of their collateral, the FDIC

did not dispose of the Defendants’ collateral in a commercially

reasonable manner, and the FDIC violated Tex. Bus. & Com. Code §

9.504(c) by effectively selling the collateral to itself in a

private sale. Because we hold the Defendants received adequate

notice and genuine issues of material fact exist concerning the

other grounds, the Defendants’ arguments fail. 

a. Notice

On July 17, 1991, the FDIC sent to each Defendant a notice of

intent to foreclose on the collateral securing the note.22 On

December 17, 1991, the FDIC sent a second notice of intent to

foreclose on the collateral to H. Eugene Abbott and ABCO. The FDIC

leased the collateral to Amwest Savings on January 21, 1992, and
23Because Amwest had already foreclosed on the bowling alley

building and land as a result of ADCO’s default on another note,

Amwest took possession of the collateral on December 3, 1991. The

January 21, 1992 lease was retroactive to December 3, 1991. 

16

ultimately sold it to Amwest on September 3, 1992.23

When disposing of collateral securing a debt, a creditor must

“give reasonable notification of the time and place of any public

sale or reasonable notification of the time after which any private

sale or other intended disposition is to be made.” Tex. Bus. & Com.

Code § 9.504(c) (Vernon 1991). “The purpose of this notification

is to give the debtor an opportunity to discharge the debt, arrange

for a friendly purchaser, or to oversee that it is conducted in a

commercially reasonable manner.” FDIC v. Lanier, 926 F.2d 462, 464

(5th Cir. 1991) (citing 2 J. White & R. Summers, Uniform Commercial

Code § 27-12 at 598-99 (3d ed. 1988)).

The Defendants argue the two letters sent by the FDIC were

insufficient notice because the first did not mention a lease, and

the second letter, although mentioning the possibility of a lease,

was sent only to H. Eugene Abbott and ABCO after the lease began.

The July 17, 1991 letter provided, 

[d]emand is made upon you to pay such indebtedness in

full on or before the 16th day of August, 1991. In the

event you do not pay this sum to the FDIC by such date,

the FDIC will exercise its legal rights and remedies to

collect such indebtedness, including, but not limited to,

foreclosure of the Deed of Trust and sale of the property

covered thereby in accordance with the terms of such Deed

of Trust.

This letter notified the Defendants that the FDIC would dispose of
24Because the sale was ultimately private, the FDIC was only

required to provide the date after which the collateral would be

sold, rather than the time and place of any public sale. See Tex.

Bus. & Com. Code § 9.504(c) (Vernon 1991). 

17

their collateral if they did not pay by August 16, 1991. The letter

was adequate to “inform reasonable business persons” that their

property would be sold after that date. Siboney Corp. v. Chicago

Pneumatic Tool Co., 572 S.W.2d 4, 6 (Tex. Civ. App.-Houston [1st

Dist.] 1978, writ ref’d n.r.e.). While the letter does not state

whether the disposition will be by public or private sale, “the

notice is not defective simply because it does not specifically

state that the goods would be sold privately.”24 Lanier, 926 F.2d

at 465; see Hall v. Crocker Equip. Leasing Inc., 737 S.W.2d 1, 3

(Tex. App.-Houston [14th Dist.] 1987, writ denied). Because the

notice to the Defendants was adequate, we cannot affirm the district

court’s grant of summary judgment on this ground. 

b. commercially reasonable manner

The Defendants also argue SMS should be precluded from

obtaining a deficiency judgment because the FDIC did not dispose of

the collateral in a commercially reasonable manner as required by

§ 9.504(c). They claim the FDIC’s disposition was commercially

unreasonable because the FDIC sold the collateral for a price

substantially below its value, and the FDIC only offered to sell the

collateral to one person. 

Section 9.504(c) allows the disposition of collateral “as a

unit or in parcels and at any time and place and on any terms”, but
25The parties dispute whether various appraisals valued the

bowling alley equipment in place or removed from the premises. The

Defendants argue the value of the equipment in place was

substantially higher than if removed. 

18

“every aspect of the disposition including the method, manner, time,

place and terms must be commercially reasonable.” Tex. Bus. & Com.

Code § 9.504(c) (Vernon 1991). In Texas, the creditor must allege

in his complaint either specifically that he disposed of the

collateral in a commercially reasonable manner, or generally that

he satisfied all conditions precedent to his right of recovery. See

Greathouse v. Charter National Bank-Southwest, 851 S.W.2d 173, 176-

77 (Tex. 1992). If pleaded generally, the creditor must prove that

the disposition of the collateral was commercially reasonable only

if the debtor specifically denies it in his answer. Id. at 177.

If pleaded specifically, the creditor must prove the allegation to

recover on the debt. Id. Here, SMS alleged generally that it

satisfied all conditions precedent to its right to recover on the

note, and the Defendants denied that allegation. Therefore, it was

SMS’s burden to produce evidence that the FDIC disposed of the

collateral in a commercially reasonable manner. 

SMS contends the sale was commercially reasonable because it

sold the equipment for a reasonable price. The Defendants argue

it was commercially unreasonable because the price was substantially

below the equipment’s actual value, and the FDIC only offered to

sell the equipment to one person, Amwest.25

The price of the equipment is not dispositive of this issue.
26Don Tucker was described in the record as the “largest

wholesaler of bowling equipment in the United States.” 

19

Section 9.507(b) provides that “the fact that a better price could

have been obtained by a sale at a different time or different method

from that selected by the secured party is not of itself sufficient

to establish that the sale was not made in a commercially reasonable

manner.” Tex. Bus. & Com. Code § 9.507(b) (Vernon 1991). Section

9.507(b) also provides:

[i]f the secured party either sells the collateral in the

usual manner in any recognized market therefor or if he

sells at the price current in such market at the time of

his sale or if he has otherwise sold in conformity with

reasonable commercial practices among dealers in the type

of property sold he has sold in a commercially reasonable

manner. 

Tex. Bus. & Com. Code § 9.507(b) (Vernon 1991). Because there is

no evidence that a “recognized market” exists for used bowling alley

equipment, that part of the section is inapplicable. The answer

turns on whether the FDIC sold the equipment in conformity with

reasonable commercial practices amongst dealers of used bowling

alley equipment. 

The district court correctly found that a genuine issue of

material fact existed concerning this issue, and we agree. While

the Defendants assert that the FDIC made only one attempt to sell

the equipment, the record reflects that at least one other inquiry

was made to Don Tucker of Tulia, Texas.26 The Defendants point to

no other procedural irregularities in the sale indicating that it

was conducted in a commercially unreasonable manner. Because a
27SMS did not address this argument in its brief. 

28The district court recognized that there is no recognized

market for bowling alley equipment and that the equipment is not

the subject of widely distributed price quotations. Therefore,

neither of the exceptions in § 9.504(c) allowing the creditor to

buy collateral at a private operate in this instance. 

20

genuine issue of material fact exists concerning whether the FDIC

disposed of the collateral in a commercially reasonable manner, this

alternative ground for summary judgment fails. 

c. creditor as the buyer at a private sale

The Defendants also argue as an alternative ground that the

FDIC violated § 9.504(c)’s prohibition against the creditor buying

collateral at a private sale.27 Section 9.504(c) provides that

“[t]he secured party may buy at any public sale and if the

collateral is of a type customarily sold in a recognized market or

is of a type which is the subject of widely distributed standard

price quotations he may buy at a private sale.” Tex. Bus. & Com.

Code § 9.504(c) (Vernon 1991). 

The Defendants’ argument rests on its conclusion that Amwest

was the agent of the FDIC when the equipment was sold. They argue

because Amwest was the FDIC’s agent, the sale of the collateral to

Amwest violated § 9.504(c).28 The Defendants point to an

“assistance agreement” between the FDIC and Amwest briefly mentioned

in a settlement agreement between those parties and in the affidavit

of H. Eugene Abbott. The Defendants neglected to include this

agreement in the record, and did not explain the nature of this
21

agreement. Because there is insufficient evidence in the record

supporting the existence of an agency relationship between the FDIC

and Amwest, we cannot affirm the district court’s grant of summary

judgment on this ground.

4. Relation back

Finally, the Defendants argue we should affirm the district

court’s grant of summary judgment on the ground that the Plaintiff’s

amended complaint did not relate back to its original complaint.

SMS’s claim will be time barred if its amended complaint does not

relate back, because the amendment occurred more than six years

after any of the alleged tolling events occurred. Because we hold

the Plaintiff’s amended complaint relates back to the filing of the

original, the Defendants’ argument fails. 

The Plaintiff mistakenly identified itself as SMS Financial II,

L.L.C. in its original complaint. As a result, the Plaintiff

amended its complaint with its correct name, SMS Financial, L.L.C.

The complaints are identical with the exception of the deletion of

a roman numeral. 

Fed. R. Civ. P. 15(c)(3) allows an amended pleading to relate

back when: (1) it changes the party or the naming of the party ; (2)

the claim arose out of the conduct, transaction, or occurrence in

the original pleading; (3) the party brought in by the amendment

has received notice so that the party will not be prejudiced in

maintaining a defense on the merits; and (4) the party knew or
29 The relation back of amendments changing

plaintiffs is not expressly treated in revised

Rule 15(c) since the problem is generally

easier. Again the chief consideration of

policy is that of the statute of limitations,

and the attitude taken in revised Rule 15(c)

toward change of defendants extends by analogy

to amendments changing plaintiffs. 

Fed. R. Civ. P. Rule 15(c) advisory committee’s note, 1966

amendment. 

 

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should have known that, but for a mistake concerning the identity

of the proper party, the action would have been brought against the

party. Fed. R. Civ. P. 15(c)(3). While Rule 15(c) as written only

applies to amendments adding defendants to an action, the Advisory

Committee Notes for the 1966 Amendment to Rule 15 indicate that the

rule also applies to amendments changing a plaintiff.29

Additionally, we have consistently applied Rule 15(c) criteria to

amendments changing plaintiffs. See Flores v. Cameron County,

Texas, 92 F.3d 258, 272-73 (5th Cir. 1998); see also FDIC v. Conner,

20 F.3d 1376, 1385-86 (5th Cir. 1994). 

SMS’s amendment corrected an insignificant error in its name.

The claim asserted in the amended complaint is identical to the

original complaint, and the Defendants do not claim that they were

prejudiced in any way. Because SMS’s amended complaint relates back

to the filing date of the original complaint, we cannot affirm the

district court’s grant of summary judgment on this ground.
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CONCLUSION

For the foregoing reasons, we reverse the district court’s

grant of summary judgment and remand this case to the district court

for further proceedings.

REVERSED AND REMANDED.