Abstract
During the Depression of the 1930's, Congress created a number of federal loan programs as part of Roosevelt's New Deal legislation aimed at stimulating economic growth. In the almost fifty years since then, Congress has expanded these programs to the point where today there are over one hundred and sixty of them, representing the nation's largest single source of direct and insured loans. From 1959 until the recent decision in United States v. Kimbell Foods, Inc., the Supreme Court applied the theory of the inchoate lien (now called the "choateness doctrine") to determine priority in suits involving federal consensual liens arising under the loan programs. The choateness doctrine was originally formulated by the Supreme Court to resolve priority disputes between competing federal and non-federal liens, and it has since served to grant priority to the federal lien in almost every case in which it has been applied. The common law rule for determining the priority of liens among competing creditors was that a lien "first in time" was "first in right." The choateness doctrine, however, modified the common law rule by adding that a non-federal lien must also be "choate" before it can be considered first in time. For a lien to be "choate," the "identity of the lienor, the property subject to the lien, and the amount of the lien must be established. Failure to meet any of these conditions forecloses priority over the federal lien, even if under state law the non-federal lien was enforceable for all purposes when the federal lien arose. In Kimbell Foods, the Supreme Court found that state law, rather than the choateness doctrine, should determine the priority of a federal consensual lien secured by personalty. The current Maine case of Chicago Title Insurance Co. v. Sherred Village Associates is the first post-Kimbell Foods case to face these issues squarely. Although Chicago Title presents the opportunity to restore some measure of stability in commercial relations involving federal interests, the complex issue of special federal priority under the loan programs seems ripe for a legislative rather than judicial solution. This article will discuss the birth and expansion of the choateness doctrine and recent federal court decisions applying the doctrine; it will conclude by suggesting that the enactment of federal legislation is the most appropriate response by which the federal government can protect its recognized interests while eliminating the inequities of the choateness doctrine.
First Page
269
Recommended Citation
James A. Houle,
The Choateness Doctrine and the Federal Loan Programs—A Plea for Federal Legislation,
33
Me. L. Rev.
269
(1981).
Available at:
https://digitalcommons.mainelaw.maine.edu/mlr/vol33/iss2/3
