United States v. Yazell

Decision Date17 January 1966
Docket NumberNo. 10,10
Citation15 L.Ed.2d 404,86 S.Ct. 500,382 U.S. 341
PartiesUNITED STATES, Petitioner, v. Ethel Mae YAZELL
CourtU.S. Supreme Court

[Syllabus from pages 341-342 intentionally omitted] Sol. Gen. Thurgood Marshall for petitioner.

Mr. J. V. Hammett, Lampasas, Tex., for respondent.

Mr. Justice FORTAS delivered the opinion of the Court.

This case presents an aspect of the continuing problem of the interaction of federal and state laws in our complex federal system. Specifically, the question presented is whether, in the circumstances of this case, the Federal Government, in its zealous pursuit of the balance due on a disaster loan made by the Small Business Administration, may obtain judgment against Ethel Mae Yazell of Lampasas, Texas. At the time the loan was made, Texas law provided that a married woman could not bind her separate property unless she had first obtained a court decree removing her disability to contract.1 Mrs. Yazell had not done so. At all relevant times she was a beneficiary of the peculiar institution of coverture which is now, with some exceptions, relegated to history's legal museum.

The impact of the quaint doctrine of coverture upon the federal treasury is therefore of little consequence. Even the Texas law which gave rise to the difficulty was repealed in 1963.2 The amount in controversy in this extensive litigation, about $4,000, is important only to the Yazell family. But the implications of the controversy are by no means minor. Using Clearfield Trust Co. v. United States, 318 U.S. 363, 63 S.Ct. 573, 87 L.Ed. 838, as its base, the Government here seeks to occupy new ground in the inevitable conflict between federal interest and state law. The Government was rebuffed by the trial and appellate courts. We hold that in the circumstances of this case, the state rule governs, and, accordingly, we affirm the decision of the United States Court of Appeals for the Fifth Circuit, 334 F.2d 454.3 Reference in some detail to the facts of this case will illuminate the problem.4 Delbert L. Yazell operated in Lampasas, Texas, a small shop to sell children's clothing. The shop was called Yazell's Little Ages. Occasionally, his wife, Ethel Mae, assisted in the business. The business, under Texas law, was the community property of husband and wife, who, however, were barred by the coverture statute from forming a partnership. Dillard v. Smith, 146 Tex. 227, 230, 205 S.W.2d 366, 367. A disastrous flood occurred in Lampasas on May 12, 1957. The stock of Yazell's Little Ages was ruined. Its fixtures were seriously damaged.5

The Small Business Administration had a regional office in Dallas, Texas. As of December 31, 1963, the agency had outstanding in Texas, generally under the supervision of its Dallas regional office, 1,363 business loans and 4,172 disaster loans, aggregating more than $60,000,000.6 Upon the occurrence of the Lampasas flood, the SBA opened a Disaster Loan Office in Lampasas, under the direction of the Dallas office.7

On June 10, 1957, Mr. Yazell conferred with a representative of the SBA about a loan to enable him to cope with the disaster to his business. After a careful, detailed but commendably prompt investigation, the head of SBA's Disaster Loan Office wrote Mr. Yazell on June 20, 1957, that authorization for a loan of $12,000 had been received. Yazell was informed that the loan would be made upon his compliance with certain requirements. He was told that a named law firm in Lampasas had been employed by the SBA to assist him in complying with the terms of the authorization.8

Yazell and his wife 'doing business as' Yazell's Little Ages then signed a note in the amount of $12,000, payable to the order of SBA in Dallas at the rate of $120 per month including 3% interest. On the same day they also executed a chattel mortgage on their stock of merchandise and their store fixtures. By express reference to Article 4000 of the Revised Civil Statutes of Texas, the chattel mortgage exempted from its coverage retail sales made from the stock. The chattel mortgage was accompanied by a separate acknowledgment of Mrs. Yazell before a notary public, which was required by Texas law as a part of the institution of coverture. The notary attested, in the words of the applicable Texas statute, that 'Ethel Mae Yazell, wife of Delbert L. Yazell * * * whose name is subscribed to the (chattel mortgage) * * * having been examined by me privily and apart from her husband * * * acknowledged such instrument to be her act and deed, and declared that she had willingly signed the same * * *.' See Tex.Rev.Civ.Stat.Ann. Art. 6608. See also Art. 1300, 4618 (Supp.1964), 6605. These statutes all relate to conveyances of the marital homestead.

The note, chattel mortgage and accompanying documents were in due course sent to the Dallas office of SBA. Both the Lampasas law firm engaged by SBA to assist Yazell and the Acting Regional Counsel of SBA certified that 'all action has been taken deemed desirable * * * to assure the validity and legal enforceability of the Note.' Thereafter, the funds were made available to Yazell pursuant to the terms of the loan.9

From the foregoing, it is clear (1) that the loan to Yazell was individually negotiated in painfully particu- larized detail, and (2) that it was negotiated with specific reference to Texas law including the peculiar acknowledgment set forth above. None of the prior cases decided by this Court in which the federal interest has been held to override state law resembles this case in these respects; the differences are intensely material to the resolution of the issue presented.

Next, it seems clear (1) that the SBA was aware and is chargeable with knowledge that the contract would be subject to the Texas law of coverture; (2) that both the SBA and the Yazells entered into the contract without any thought that the defense of coverture would be unavailable to Mrs. Yazell with respect to her separate property as provided by Texas law; and (3) that, in the circumstances, the United States is seeking the unconscionable advantage of recourse to assets for which it did not bargain. These points will be briefly elaborated before we reach the ultimate issue: whether, despite all of the foregoing, some 'federal interest' requires us to give the United States this advantage.

It will be noted that the transaction was custom-tailored by officials of SBA located in Dallas and Lampasas, Texas, and undoubtedly familiar with Texas law. It was twice approved by Texas counsel who certified that 'all action has been taken deemed desirable' even though no effort was made to cause Mrs. Yazell to have her incapacity removed under Texas law.10 In at least two decisions since 1949, federal courts had applied the Texas law of coverture in actions under federal statutes.11 At no time does it appear that the SBA made the slightest suggestion to the Yazells or their SBA-appointed counsel that it intended to enforce the contract against Mrs. Yazell's separate property.12 The forms used, although specifically adapted to this transaction and to Texas law, made no reference to such an intent, and it is either probable or certain that no such intent existed. As stated above, the SBA now has more than 5,000 loans outstanding in Texas.13 The Solicitor General informed the Court that the SBA, in conformity with the general practice of government lending agencies, requires that the signature of the wife be obtained as a routine matter.14 If it had been intended that the result now sought by the Government would obtain, simple fairness as well as elementary craftsmanship would have dictated that in a Texas agreement the wife be advised, at least by formal notation, that she was, in the opinion of SBA, binding her separate property, despite Texas law to the contrary. Again, it must be empha- sized that this was a custom-made, handtailored, specifically negotiated transaction. It was not a nationwide act of the Federal Government, emanating in a single form from a single source.15

We now come to the basic issue which this case presents to this Court. Is there a 'federal interest' in collecting the deficiency from Mrs. Yazell's separate property which warrants overriding the Texas law of coverture? Undeniably there is always a federal interest to collect moneys which the Government lends. In this case, the federal interest is to put the Federal Government in position to levy execution against Mrs. Yazell's separate property, if she has any, for the unpaid balance of the $12,000 disaster loan after the stock of merchandise and fixtures of the store have been sold, after any other community property has been sold, and after Mr. Yazell's leviable assets have been exhausted. The desire of the Federal Government to collect on its loans is understandable. Perhaps even in the case of a disaster loan, the zeal of its representatives may be commended. But this serves merely to present the question—not to answer it. Every creditor has the same interest in this respect; every creditor wants to collect.16 The United States, as sovereign, has certain preferences and priorities,17 but neither Congress nor this Court has ever asserted that they are absolute. For example, no contention will or can be made that the United States may by judicial fiat collect its loan with total disregard of state laws such as homestead exemptions.18 Accordingly, generalities as to the paramountcy of the federal interest do not lead inevitably to the result the Government seeks. Our problem remains: whether in connection with an individualized, negotiated contract, the Federal Government may obtain a preferred right which is not provided by statute or specific agency regulation, which was not a part of its bargain, and which requires overriding a state law dealing with the intensely local interests of family property and the protection (whether or not it is up-to-date or even welcome) of married women.

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