Opinion ID: 507339
Heading Depth: 2
Heading Rank: 1

Heading: Congressional Intent to Preempt

Text: 9 The SBA's position is that federal and state law directly conflict in this case and that the SBA, therefore, appropriately was permitted to redeem. The SBA argues that section 2410 gives it the unconditional right to redeem within one year and that Arizona's six-month notice requirement is preempted by the statute's clearly unconditional language: The United States shall have one year from the date of sale within which to redeem. 28 U.S.C. Sec. 2410(c) (emphasis added). As did the district court, the SBA relies on United States v. Brosnan, 363 U.S. 237, 80 S.Ct. 1108, 4 L.Ed.2d 1192 (1960), and United States v. John Hancock Mut. Life Ins. Co., 364 U.S. 301, 81 S.Ct. 1, 5 L.Ed.2d 1 (1960). 10 In Brosnan, the Court stated: Under Sec. 2410, a judicial sale is to have the same effect as it would have under local law.... [T]he Government is guaranteed a one-year right to redeem if the plaintiff proceeds under Sec. 2410.... Brosnan, 363 U.S. at 246, 80 S.Ct. at 1114. The Court held that private parties holding defaulted mortgages on property could satisfy those mortgages by using state procedures to extinguish more junior federal tax liens, even though the United States was not included as a party. See id. at 242, 80 S.Ct. at 1111. Brosnan favored the local interests represented by state law, but the Court emphasized that its conclusion would not, of course, withstand a congressional direction to the contrary. Id. 11 In Brosnan, the Court found no congressional direction regarding the applicability of local laws. The Court rejected the government's argument that section 2410 evidenced a congressional intent to have uniform federal rules govern federal liens. It stated that section 2410 evidence[s] no intent to exclude otherwise available state procedures. [Its] only apparent purpose is to lift the bar of sovereign immunity which had theretofore been considered to work a particular injustice to private lienors. Id. at 246, 80 S.Ct. at 1114. Brosnan, therefore, does not support the SBA's argument that Congress intended section 2410 to establish a right of redemption that could be pursued with disregard for state law procedures. 12 In United States v. John Hancock Mut. Life Ins. Co., 364 U.S. 301, 81 S.Ct. 1, 5 L.Ed.2d 1 (1960), the Court held that section 2410 preempted a Kansas statute that gave the mortgagor an exclusive right of redemption within one year of the foreclosure sale. Id. at 304-09, 81 S.Ct. at 3-6 (1960). Kansas law and section 2410 could not coexist. The Kansas statute's exclusivity provision could not be reconciled with the government right established in section 2410. 13 Arizona law gives a lien creditor in the position of the SBA five days in which to redeem foreclosed property, following the expiration of the time for redemption by the judgment debtor. See Ariz.Rev.Stat.Ann. Sec. 12-1282(C) (1982). Under John Hancock, this five-day period of redemption conflicts with the government's one-year right of redemption under 28 U.S.C. Sec. 2410(c). If this were the conflict at issue in this case, John Hancock would control. In the present case, however, the government's one-year period of redemption does not conflict with Arizona's requirement that notice of intent to redeem must be given within six months of a foreclosure sale. Therefore, John Hancock does not mandate the preemption result the SBA suggests. 14 Three substantial factors indicate that the language of section 2410 does not reveal a congressional intent to preempt state notice requirements. First, Congress failed to include any notice provisions in section 2410. Ordinarily, a complete system of redemption would contain some protection, such as a notice system, for the rights of other lien creditors. It is a fair implication that Congress's silence indicates its consent to state notice requirements, which establish a procedure that can integrate rights created under state and federal law. See United States v. Standard Oil Co., 332 U.S. 301, 309, 67 S.Ct. 1604, 1609, 91 L.Ed. 2067 (1947). 15 Second, a finding of federal preemption is disfavored: Preemption of state law by federal statute or regulation is not favored 'in the absence of persuasive reasons--either that the nature of the related subject matter permits no other conclusion, or that the Congress has unmistakably so ordained.'  Chicago & N.W. Transp. Co. v. Kalo Brick & Tile Co., 450 U.S. 311, 317, 101 S.Ct. 1124, 1130, 67 L.Ed.2d 258 (1981) (quoting Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 142, 83 S.Ct. 1210, 1217, 10 L.Ed.2d 248 (1963)). Evidence of a congressional intent to preempt state law should be even clearer when the state law concerns a subject that is peculiarly adapted to local regulation. Hines v. Davidowitz, 312 U.S. 52, 68 n. 22, 61 S.Ct. 399, 405 n. 22, 85 L.Ed. 581 (1941); see DeCanas v. Bica, 424 U.S. 351, 362-63, 96 S.Ct. 933, 939-40, 47 L.Ed.2d 43 (1976); Pacific Legal Found. v. State Energy Resources Conservation & Dev. Comm'n, 659 F.2d 903, 919 (9th Cir.1981) (the presumption operates in favor of the validity of the state law; courts are not to seek out conflicts between state and federal regulation where none clearly exist.), aff'd sub nom., Pacific Gas & Elec. Co. v. State Energy Resources Conservation & Dev. Comm'n, 461 U.S. 190, 220-23, 103 S.Ct. 1713, 1730-32, 75 L.Ed.2d 752 (1983). 16 Although state law should be preempted if it stands as an obstacle to the accomplishment of the full purposes and objectives of Congress, Silkwood v. Kerr-McGee Corp., 464 U.S. 238, 248, 104 S.Ct. 615, 621, 78 L.Ed.2d 443 (1984) (citing Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. 399, 404, 85 L.Ed. 581 (1941)), in the case now before us it is well within the SBA's capacity to comply with Arizona's notice requirement. As we have stated previously, [i]t must be assumed that the Small Business Administration maintains competent personnel familiar with the laws of the various states in which it conducts business, and who are advised of the steps required by local law in order to acquire a valid security interest within the various states. Bumb v. United States, 276 F.2d 729 (9th Cir.1960) (quoted with approval in United States v. Yazell, 382 U.S. 341, 347 n. 13, 86 S.Ct. 500, 504 n. 13, 15 L.Ed.2d 404 (1966)). Moreover, even the SBA's own regulations encourage the use of local procedures for notification purposes. See 13 C.F.R. Sec. 101.1(d)(3) (1987) (In order to implement and facilitate these Federal loan programs, the application of local procedures, especially for recordation and notification purposes, may be utilized to the fullest extent feasible and practicable.). Thus, the Arizona notice requirement does not establish an impediment or obstacle to the accomplishment of federal redemption objectives sufficient to overcome the disfavor that we have for finding a state law preempted. 17 Third, we are guided by the Court's decision in Brosnan, which did not preempt state law in circumstances that, under the analysis of Standard Oil, 332 U.S. at 309, 67 S.Ct. at 1609, presented an even stronger case for preemption than the present one. In Brosnan, the Court upheld state procedures that extinguished federal tax liens even though the government did not participate in or know about the state procedures. 4 4] Brosnan, 363 U.S. at 238-39, 241-42, 80 S.Ct. at 1110, 1111. Moreover, the federal statute at issue in Brosnan contained greater evidence of a congressional intent to preempt state law than in the present case, but the state law procedures were not preempted. Rather, they were adopted as federal law. See Brosnan, 363 U.S. at 240-42, 80 S.Ct. at 1110-11. 18 We conclude that Congress did not intend section 2410 to preempt a state notice requirement such as that contained in Ariz.Rev.Stat.Ann. Secs. 12-1284 and 12-1287 (1982).