Brief Fact Summary. This case involves two competing security interests in the property of O.K. Super Markets, Inc. Both interests were perfected pursuant to the Texas Commercial Code.
Synopsis of Rule of Law. When there is little need for a nationally uniform body of law, state law may be incorporated as the federal rule of decision.
Issue. Whether contractual liens arising from certain federal loan programs take precedence over private liens, in the absence of a federal statute setting priorities?
Held. The source of law is federal, but a national rule is unnecessary to protect the federal interests underlying the loan programs. As a result, the court adopted the state law as the appropriate federal rule for establishing the relative priority of the competing federal and private liens.
Discussion. The court found that nationwide standards are not necessary for the protection of the federal treasury from defaulting debtors. The court based its rationale on the fact that sufficient state codes exist to furnish convenient solutions that in no way are inconsistent with the protection of federal interests. Furthermore, the court based its decision, in part, on the fact that SBA employees are instructed to follow state laws carefully in the administration of their programs.