Undoubtedly, federal programs that by their nature are and must be uniform in character throughout the nation necessitate formulation of controlling federal rules. Conversely, when there is little need for a nationally uniform body of law, state law may be incorporated as the federal rule of decision.
The Supreme Court of the United States granted certiorari in two cases to determine whether contractual liens arising from federal loan programs took precedence over private liens in the absence of a federal statute setting priorities. In the first case, defendant supermarket O. K. Super Markets ("O.K.") borrowed money from both Kimbell Foods, Inc. ("Kimbell") and Republic National Bank of Dallas ("Republic"), which assigned its security interest to the government. Both parties perfected a security agreement in the same inventory. The court of appeals created a new federal rule to determine that the wholesaler's lien was first in time. In the second case, the Farmers Home Administration obtained loans from the government and gave a security interest in crops and equipment. Defendant repairman obtained a lien in the same property. The court of appeals held in favor of the repairman under a special federal commercial law rule.
Should contractual liens arising from certain federal loan programs take precedence over private liens in the absence of a federal statute setting priorities?
The Court affirmed the judgment in the first case because state law gave preference to the wholesaler's lien. The Court vacated and remanded the second case to determine the priority of the liens under state law. Absent a congressional directive, the relative priority of the liens was to be determined under nondiscriminatory state laws.