Court Opinion

ID: 9462175
Source: CourtListenerOpinion
Date Created: 2023-08-04 22:33:46.725341+00
Date Added: 2024-06-11T17:37:26.498722
License: Public Domain

WEBSTEE, Circuit Judge
(dissenting).
I must respectfully dissent. It is my view that United States v. Kramel, 234 F.2d 577 (8th Cir. 1956), has been correctly undermined by more recent opinions of this court which place reliance upon cases from other circuits adhering to the prevailing view that federal, not state, law is to be applied in determining the remedies available to the United States for breach of a federal duty.1
In determining whether federal or state law should be applied in litigation arising out of a defaulted FHA mortgage our court recently observed:
The rule governing this case is that while state law will be followed to determine what security interests the Government obtains in its financial transactions in nationwide programs, federal law will be applied to determine what remedies are available to the Government to enforce its security interest.
United States v. Thompson, 438 F.2d 254, 256-57 (8th Cir. 1971), citing United States v. Stadium Apartments, Inc., 425 F.2d 358 (9th Cir.) cert. denied, 400 U.S. 926, 91 S.Ct. 187, 27 L.Ed.2d 185 (1970); see United States v. Chester Park Apartments, Inc., 332 F.2d 1, 4 (8th Cir.), cert. denied, 379 U.S. 901, 85 S.Ct. 191, 13 L.Ed.2d 176 (1964). See also United States v. McCabe Co., 261 F.2d 539 (8th Cir. 1959).
In the Stadium Apartments case, supra, the Ninth Circuit considered an action by the government to protect its interest in a defaulted FHA mortgage and said:
[There is a] federal policy to protect the treasury and to promote the security of federal investment which in turn promotes the prime purpose of the [FHA] Act — to facilitate the building of homes by the use of federal credit — [which] becomes predominant. Local rules limiting the effectiveness of the remedies available to the United States for breach of a federal duty can not be adopted.
425 F.2d at 363, quoting United States v. View Crest Garden Apartments, Inc., 268 F.2d 380, 383 (9th Cir.), cert. denied, 361 U.S. 884, 80 S.Ct. 156, 4 L.Ed.2d 120 (1959).
Thus in terms of property interests, the nature of an interest in property acquired by the government is determined under state law. It takes property subject to preexisting liens determined in accordance with state law. If the government undertakes to perfect a security interest, that interest is tested against the recording and filing requirements of the state where the property is located.
On the other hand, once an interest has been acquired by the government, the power to assert a claim for any injury to that property which is recognized under federal law may not be abridged *844or limited by state statute or decision, absent some clear manifestation of a federal legislative intent to do so.
This principle, which we applied in Thompson, supra, has been applied by five other circuits to reach a result different than that reached by this court in Kramel. In these cases, state law defenses of good faith or absence of knowledge have been rejected as against federal claims based upon wrongful conversion.2
Thus, in United States v. Hext, 444 F.2d 804 (5th Cir. 1971), the Fifth Circuit, relying upon Clearfield Trust Co. v. United States, 318 U.S. 363, 63 S.Ct. 573, 87 L.Ed. 838 (1943), found the need for uniformity in administering the vast Farmers Home Administration program sufficient to support the application of “federal law, to be fashioned by the federal courts according to general principles of commercial law.” 444 F.2d 809. In so doing it noted that a state statutory defense had been specially enacted to protect warehousemen from such conversion claims.
The Sixth Circuit had earlier reached the same conclusion in United States v. Carson, 372 F.2d 429 (6th Cir. 1967). While it recognized that the federal courts may, in fashioning a federal rule, choose in appropriate cases to apply state law even though the federal policy of protecting the treasury and promoting the security of federal investments may be involved, the court nevertheless found state law inappropriate and held a uniform federal rule to be “the more appropriate alternative.” 372 F.2d at 432. In so doing it rejected Kramel and followed similar holdings by the Third and Ninth Circuits in United States v. Sommerville, 324 F.2d 712 (3d Cir. 1963), cert. denied, 376 U.S. 909, 84 S.Ct. 663, 11 L.Ed.2d 608 (1964), and United States v. Matthews, 244 F.2d 626 (9th Cir. 1957).3
I conclude that the policy considerations expressed in these cases, as well as the principles applied in our more recent holdings, see United States v. Thompson, supra,4 warrant our formal repudiation of Kramel rather than adherence to a concept which will continue to divide the circuits and subject enforcement of federal rights under a national program to a wide range of state law defenses. Should Congress determine that the need *845for uniformity in administering the Farmers Home Administration program and the policy of promoting the security of federal investment should be subordinated to a state interest in “quick flow of commerce in livestock,” Majority Opinion, page 842, note 2, the appropriate remedy is by legislation.

. The court in Kramel erroneously assumed state law to be applicable absent a clear expression of congressional intent to the contrary. However, as Mr. Justice Jackson said in his concurring opinion in D’Oench Duhme & Co., Inc. v. FDIC, 315 U.S. 447, 471, 62 S.Ct. 676, 686, 86 L.Ed. 956 (1942):
A federal court sitting in a nondiversity case such as this does not sit as a local tribunal. In some cases it may see fit for special reasons to give the law of a particular state highly persuasive or even controlling effect, but in the last analysis its decision turns upon the law of the United States, not that of any state.
Accord, United States v. Standard Oil Co., 332 U.S. 301, 305, 67 S.Ct. 1604, 91 L.Ed. 2067 (1947); see Clearfield Trust Co. v. United States, 318 U.S. 363, 366-67, 63 S.Ct. 573, 87 L.Ed. 838 (1943).
Similarly, the Court in United States v. Yazell, 382 U.S. 341, 356, 86 S.Ct. 500, 509, 15 L.Ed.2d 404 (1966), noted that “[generally, in the cases applying state law to limit or condition the enforcement of a federal right, the Court has insisted that the state law is being ‘adopted’ as the federal rule.”

. United States v. Hext, 444 F.2d 804 (5th Cir. 1971); Cassidy Commission Co. v. United States, 387 F.2d 875 (10th Cir. 1967); United States v. Carson, 372 F.2d 429 (6th Cir. 1967); United States v. Sommerville, 324 F.2d 712 (3d Cir. 1963), cert. denied, 376 U.S. 909, 84 S.Ct. 663, 11 L.Ed.2d 608 (1964); United States v. Matthews, 244 F.2d 626 (9th Cir. 1957).
In the 19 years since it was decided, only the Fourth Circuit, in United States v. Union Livestock Sales Co., 298 F.2d 755 (4th Cir. 1962), has followed Kramel See note 4 infra.

. United States v. Yazell, 382 U.S. 341, 86 S.Ct. 500, 15 L.Ed.2d 404 (1966), relied upon in the majority opinion, is not contrary to these cases. Texas at that time retained the ancient law of coverture, which provided that “a married woman could not bind her separate property unless she had first obtained a court decree removing her disability to contract.” 382 U.S. at 342, 86 S.Ct. at 501. Under Texas law her note and chattel mortgage issued jointly with her husband to the Small Business Administration could not bind her separate property. In an enforcement action following default, the court applied the Texas law but limited its holding to the narrow facts with which it had been presented, noting:
(1) that the loan to Yazell was individually negotiated in painfully particularized detail, and (2) that it was negotiated with specific reference to Texas law * * *.
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[And] that the transaction was custom-tailored by officials of SBA located in Dallas and Lampasas, Texas, and undoubtedly familiar with Texas law.
* * * * * *
[And that] it must be emphasized that this was a custom-made, hand-tailored, specifically negotiated transaction. It was not a nationwide act of the Federal Government, emanating in a single form from a single source.
Id. at 345-48, 86 S.Ct. at 503. [Footnotes omitted.] It may also be seen that state law was applied to determine the interest acquired by the government agency; no state law was applied to defeat an otherwise perfected security interest.

. In United States v. E. W. Savage & Son, Inc., 475 F.2d 305, 306 n. 1 (8th Cir. 1973), we noted the conflict between the circuits on this question and declined the opportunity to reaffirm our position in Kramel.