US SUPREME COURT DECISIONS

The Small Business Administration (SBA) made a disaster loan to Yazell, and to his wife, who is respondent here, following flood damage to their shop in Lampasas, Texas. The loan was individually negotiated. The chattel mortgage which secured the loan specifically made reference to Texas law in several respects. After default by the Yazells on the note, and foreclosure of the mortgage, the Government brought this suit against the Yazells for the deficiency. Respondent, Mrs. Yazell, moved for summary judgment on the ground that, under the Texas law of coverture, she had no capacity to bind herself personally by contract on the facts of this case, and hence the contract could not be enforced against her separate property. During the negotiation of the loan, the SBA had at no time indicated an intention that the Texas law in this regard would not apply, nor had the SBA required respondent to have her disability of coverture removed pursuant to Texas law. The District Court granted the motion for summary judgment, and the Court of Appeals affirmed, against the Government's contention that, even in the absence of any express federal statute or regulation on the matter or any indication in the loan contract itself, questions of capacity to contract with the SBA and to subject property to liability on such a contract are governed by federal, and not local, law, and that federal law should not recognize the state coverture doctrine.

Held: There is no federal interest which requires that the local law be overridden in this case in order that the Federal Government be enabled to collect in supervention of the state law of coverture. It is not necessary to decide whether the state law applies by reason of adoption by federal law or ex proprio vigore. Pp. 382 U. S. 345-358.

(a) 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."

Pp. 382 U. S. 345-348.

(b) In the absence of specific provision in the federal statute or regulation, or in the contract itself, the federal interest in the collection of an amount due on a contract individually negotiated chanrobles.com-red

Page 382 U. S. 342

by a federal agency does not justify displacing state law in the peculiarly local field of family and family property rights and immunities. Pp. 382 U. S. 348-349.

(c) The right of the Federal Government to choose those with whom it contracts is not involved. Pp. 382 U. S. 349-350.

(d) State interests where family and family property arrangements are involved should not be overridden by federal courts unless substantial national interests will be significantly impaired by application of the state law. Pp. 382 U. S. 351-353.

(e) Where federal judge-made law has been created to supersede substantive state law, the federal interest has reflected a need, such as the necessity for uniform national application, for such supersession. Clearfield Trust Co. v. United States, 318 U. S. 363, distinguished. Pp. 382 U. S. 353-354.

(f) This Court has, where appropriate, adopted state rules of law as the federal law to be applied, despite the consequent diversity in the rights and obligations of the United States in the different States. Pp. 382 U. S. 354-357.

334 F.2d 454, affirmed.