United States v. Marion H. MacKenzie United States of America v. Engine Service Co., Inc., an Arizona Corporation

Upon foreclosure of these mortgages the courts below denied appellants the protection of state laws which would respectively have limited the deficiency judgment against MacKenzie and given Engine Service Co., Inc., redemption rights in the foreclosed property. We have taken these cases en banc to resolve the question whether federal law defers to or adopts these state laws when the creditor is the federal government and the property involved is security for loans made by the Small Business Administration (“SBA”).

In both cases the Government through foreclosure of its security obtained advantages that the laws of Nevada and Arizona would clearly have denied to private creditors. No applicable federal statute or administrative regulation expressly establishes the rights and duties of the Government and the debtor upon the Government’s foreclosing security for an SBA loan. Thus no federal statute nor regulation nullifies these debtor protections in the SBA context, and no provision in the underlying contracts purported to do so. Nor should we create federal law by implication that is antithetical to state laws protecting debtors unless doing so is necessary to achieve the…

(Joined by Circuit Judge BROWNING) concurring:

I concur in the majority’s opinion because, in my view, it comports with my dissenting opinions in United States v. Stadium Apartments, Inc., 425 F.2d 358, 367 (9th Cir. 1970), and Branden v. Driver, 441 F.2d 1171 (9th Cir. 1971).

In the present cases, the loans in question were made by the Small Business Administration (SBA). In Stadium Apartments, the loan was made by the Federal Housing Authority (FHA), and in Branden , by the Veterans Administration (VA). The lending documents in all the cases specified, in effect, that the loans were made subject to the laws of the states in which the real property was situated. In Stadium Apartments, supra, the majority held that Idaho’s redemption statute could not be invoked by the mortgagor upon the FHA’s foreclosure of the mortgage. In Branden, supra, the majority held that VA, the mortgagee, might take a deficiency judgment upon its foreclosure of a purchase-money mortgage on California property, despite a California statute prohibiting such a deficiency judgment. For comments generally supporting my dissenting views in those cases, see Note, Federal Courts — Choice of Controlling Law in…

510 F.2d 39 UNITED STATES of America, Appellee, v. Marion H. MacKENZIE et al., Appellants. UNITED STATES of America, Appellee, v. ENGINE SERVICE CO., INC., an Arizona Corporation et al., Appellants. Nos. 71--1925, 71--1574. United States Court of Appeals, Ninth Circuit. Jan. 13, 1975. Frederick Steiner, Jr., Snell & Wilmer (argued in 71--1574), Phoenix, Ariz., Michael K. Halley (argued in 71--1925), Reno, Nev., for appellants. Stephen M. McNamee, Asst. U.S. Atty. (argued in 1574), Phoenix, Ariz., Stephen Eilpren, Atty., Dept. of Justice, Washington, D.C. (argued in 1925), for appellee. Before CHAMBERS, MERRILL, KOELSCH, BROWNING, DUNIWAY, ELY, HUFSTEDLER, WRIGHT, TRASK, CHOY, GOODWIN, WALLACE and SNEED, Circuit Judges. OPINION HUFSTEDLER, Circuit Judge: 1 Upon foreclosure of these mortgages the courts below denied appellants the protection of state laws which would respectively have limited the deficiency judgment against MacKenzie and given Engine Service Co., Inc., redemption rights in the foreclosed property. We have taken these cases en banc to resolve the question whether federal law defers to or adopts these state laws when the creditor is the federal government and the…