Federal Home Loan Bank v. Long Beach Fed. S. & L. Ass'n

• Decision Date: 29 June 1954
• Docket Number: Civ. No. 13979,5421,5678.
• Citation: 122 F. Supp. 401
• Court: U.S. District Court — Southern District of California
• Parties: FEDERAL HOME LOAN BANK OF SAN FRANCISCO v. LONG BEACH FEDERAL SAVINGS & LOAN ASS'N. TITLE SERVICE CO. v. AMMANN et al. LONG BEACH FEDERAL SAVINGS & LOAN ASS'N et al. v. FEDERAL HOME LOAN BANK OF SAN FRANCISCO. HOME INV. CO. et al. v. FEDERAL HOME LOAN BANK OF SAN FRANCISCO et al. MALLONEE et al. v. FAHEY et al. FEDERAL HOME LOAN BANK OF LOS ANGELES et al. v. FEDERAL HOME LOAN BANK OF SAN FRANCISCO et al.

122 F. Supp. 401

FEDERAL HOME LOAN BANK OF SAN FRANCISCO v. LONG BEACH FEDERAL SAVINGS & LOAN ASS'N.

TITLE SERVICE CO. v. AMMANN et al.

LONG BEACH FEDERAL SAVINGS & LOAN ASS'N et al. v. FEDERAL HOME LOAN BANK OF SAN FRANCISCO.

HOME INV. CO. et al. v. FEDERAL HOME LOAN BANK OF SAN FRANCISCO et al.

MALLONEE et al. v. FAHEY et al.

FEDERAL HOME LOAN BANK OF LOS ANGELES et al. v. FEDERAL HOME LOAN BANK OF SAN FRANCISCO et al.

Civ. Nos. 13979, 5421, 5678.

United States District Court S. D., California, C. D.

June 10, 1954.

As Corrected June 29, 1954.

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Sylvester Hoffman, Los Angeles, Cal., Philip H. Angell, San Francisco, Cal., Verne Dusenbery, Portland, Or., for Federal Home Loan Bank of San Francisco and others.

F. Henry NeCasek, Long Beach, Cal., for Roy E. Hegg and George Turner.

O'Melveny & Myers, and Richard Fitzpatrick, Los Angeles, Cal., for Federal Home Loan Bank of Los Angeles; Coast Federal Savings & Loan Association and others.

W. I. Gilbert, Jr., Los Angeles, Cal., for Receiver Ernest Utley and for First Federal Savings & Loan Ass'n of Wilmington.

James E. Burns, Charles Dal Sooy, and Alden Ames, San Francisco, Cal., for Pioneer Investor's Savings & Loan Association and others.

Linnell & Smith, Long Beach, Cal., for Harold Lee Newendorp and Charles E. Bradley.

Robert A. Moffitt, Los Angeles, Cal., for Land Title Ins. Co.

Thomas F. Menzies and Harold L. Watt, Los Angeles, Cal., for Home Indemnity Co.

Lyman B. Sutter, Long Beach, Cal., for Title Service Co.

Raymond Tremaine, Los Angeles, Cal., for Robert H. Wallis.

Charles K. Chapman, Long Beach, Cal., for Long Beach Federal Savings & Loan Ass'n.

Westover & Smith, Los Angeles, Cal., for Mallonee and others.

Frank G. Makepeace, Long Beach, Cal., for intervenor, Lillian A. Coggswell.

Crail & Crail, Los Angeles, Cal., for Joe Crail.

Roger W. Powers and Paul L. Zimmerman, Los Angeles, Cal., for Charles Taylor.

Shafer & Seymour, Compton, Cal., for Fred G. Hunter and Melba N. Hunter.

Austin, Austin & Jones, Compton, Cal., for Wayne H. Sones and Helen M. Sones.

Kelsey Petterson, Los Angeles, Cal., for M. E. Spice.

Bates S. Himes, Beverly Hills, Cal., for C. C. Connor, dba Surety Finance & Adjustment Co.

Emmett E. Doherty, Los Angeles, Cal., for plaintiff in intervention, John D. Willhoit.

Ronald Walker, Los Angeles, Cal., Special Master.

HALL, District Judge.

This octopean litigation is again before the Court in connection with the subject matter of eleven undecided matters in case No. 13979-FH. They are as follows:

1. Report of Receiver and Petition for Instructions

2. Motion of Federal Home Loan Bank Board to quash service of summons made pursuant to court order filed 3-3-53;

3. Motion of Home Investment Co. et al., for summary judgment quieting title to homes of 8000 borrowers against foreclosure of loans paid in full, and motions for summary judgment quieting title of trustee, Title Service Co. and beneficiary Long Beach Federal Savings and Loan Assn. pur. not. filed 5-21-53;

4. Motion of Plaintiff to

(a) Dismiss Homeowners cross-claim for quiet title, and

(b) Strike and drop Home Investment Co. as a party pur. not. filed 5-29-53;

5. Motion of Plaintiff

(a) To drop parties

(b) Or for severance and early trial filed 6-5-53;

6. Motion of Plaintiff

(a) To dismiss cross-claim of defendant Long Beach Federal Savings and Loan Assn.,

(b) To strike said cross-claim, fld 6-5-53;

7. Motion of Plaintiff

(a) To vacate order granting leave to Title Service Co. to intervene and to file its complaint in Intervention and Interpleader, and to strike said pleading,

(b) To dismiss said complaint in intervention, fld 6-5-53;

8. Motion of Plaintiff to dismiss third party complaint of Long Beach Federal Savings and Loan Assn. (fld 10-10-52) fld 6-5-53;

9. Motion of Plaintiff

(a) To vacate order granting leave to Robert H. Wallis to intervene and to file its complaint in intervention and interpleader, and to strike said pleading,

(b) To dismiss said complaint in intervention fld 6-5-53;

10. Motion of Plaintiff to strike from Answer of Defendant Long Beach Federal Savings and Loan Assn. fld 6-5-53;

11. Motion of Long Beach Association to deposit $7,000,000, cash or bonds, into court in case No. 13979, fld 12-21-53;

Any consideration of any of said matters must be had in the light of proceedings heretofore in it and related matters, (actually about 60 different lawsuits under only three numbers), only a portion of which have found their way into the reports, as follows: Mallonee v. Fahey (statutory three-judge court), D.C., 68 F.Supp. 418, (Sept. 5, 1946); Fahey v. Mallonee, 332 U.S. 245, 67 S.Ct. 1552, 91 L.Ed. 2030 (June 23, 1947) reversing D. C., 68 F.Supp. 418; Ex parte Fahey (June 23, 1947), 332 U.S. 258, 67 S.Ct. 1558, 91 L.Ed. 2041; Mallonee v. Fahey, D.C., 14 F.R.D. 273, (Dec. 1, 1949); Home Loan Bank Board v. Mallonee (April 2, 1952), 9 Cir., 196 F.2d 336; Fahey v. O'Melveny & Myers (November 6, 1952), 9 Cir., 200 F.2d 420; Mallonee v. Fahey (Nov. 30, 1953), D.C., 117 F. Supp. 259; Fahey v. Calverley (Dec. 29, 1953), 9 Cir., 208 F.2d 197.

There are several suits in this court, all of which are interlocked in one way or another, bearing numbers 5421, 5678, 13979, 7989, 13953 and 15588.

In view of the fact that some matters herein discussed concern consolidated case 5421-5678, as well as 13979, this memorandum will be filed in those cases and will serve as their direction for orders which are appropriate hereunder in each of them.

In the memorandum order of this court made on November 30, 1953, 117 F.Supp. 259, provision was made for disposition of a number of pending motions in the consolidated case 5421-5678, and action on the motions which were pending in 13979 above set forth was deferred.

Of the motions in 13979, above listed, that indicated as No. 1, "Report of Receiver and Petition for Instructions," was placed off calendar and has not been reset.

The first portion of this memorandum will treat with those motions listed above which have to do with what has been described as the "Homeowners quiet title" actions, on various cross-claims in intervention in the within action. A more complete description of what is involved in that connection can be found in 14 F.R.D. 273 and in 117 F.Supp. 259, and will not be repeated herein except as is necessary to give clarity to the views herein.

Briefly, however, it would be well to describe at this point the situation giving rise to that phase of this, and related, litigation which long ago reached the quagmire stage.

The Los Angeles Federal Loan Bank was a home loan bank, organized under the appropriate federal statutes, which acted as the banking agency for savings and loan associations, organized under the Federal Home Loan Bank Act, 12 U.S. C.A. ž 1421 et seq., and related statutes. Among other things, it acted as a depository for safekeeping of property and assets of Federal Savings and Loan Associations. By a series of orders of the Federal Home Loan Bank Board, made on March 29, 1946, the Los Angeles Bank was dissolved, its assets and properties were forthwith transferred to the Portland Home Loan Bank and the offices of the Portland Home Loan Bank were removed from Portland to San Francisco and the name thereof changed to the San Francisco Federal Home Loan Bank, see 14 F.R.D. 273.

The Long Beach Federal Savings and Loan Association (hereinafter called the Long Beach Association), was a savings and loan association organized under the Home Loan Bank Act and related statutes. Its principal business was to receive money on savings accounts from depositors and to loan the same to borrowers on real estate. Substantially, if not all, of its loans were made on individually owned homes or to builders on individual homes which were to be sold to individual buyers by the builders. The owner of the real property would execute a note payable to the Long Beach Federal Savings and Loan Association and, to secure that note would execute a trust deed, which trust deed conveyed the legal title of the real estate involved to a third party, who thereafter held the legal title, as trustee, under the trust deed and note, for the purpose of securing the payment of the note. The practice is customary in Southern California and has almost entirely replaced the traditional mortgage procedure. The notes were installment notes. The borrower who owned the parcel of property involved was the payor and obligor on the note, and is known, in the language of the law and the real estate business, as the "trustor" under the trust deed; the Long Beach Federal Savings and Loan Association which was the lender and payee on the note, as the "beneficiary" under the trust deed; and the person or organization holding the legal title as security under the terms of the trust deed and note, as the "trustee." On May 20, 1946, about 8000 of such notes and trust deeds were in existence with Long Beach Association as beneficiary, and Title Service Company as trustee.

On May 20, 1946, A. V. Ammann, under order No. 5254 of the Home Loan Bank Board of the same date, seized all of the property and assets of the Long Beach Federal Savings and Loan Association, as Conservator.

It appears that on March 29, 1946, there was on deposit with the Los Angeles Federal Home Loan Bank several thousand of such notes wherein the Long Beach Federal Savings and Loan Association was the payee, and the accompanying trust deeds wherein Long Beach Federal Savings and Loan Association was the beneficiary. These trust deeds and notes, along with approximately five and one-half million dollars in government bonds, were the property of Long Beach Federal Savings and Loan Association, were in the possession of the Los Angeles Bank for safekeeping only, and not as security for any loan; and it appears from the...