# Federal Home Loan Bank v. Long Beach Federal Savings & Loan Ass'n

> District Court, S.D. California · June 29, 1954 · 122 F. Supp. 401

URL: https://www.frixlaw.com/law-library/cases/1968639

## Case

- **Full name:** 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.
- **Court:** District Court, S.D. California
- **Decided:** June 29, 1954
- **Citations:** 122 F. Supp. 401
- **Precedential status:** Published
- **Opinion:** Opinion by Hall
- **Judges:** Hall
- **Cited by:** 12 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/1968639

## Opinion text

HALL, District Judge.
This oetopean 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, fid 6-5-53;
7. Motion of Plaintiff
*408
(a) To vacate order granting leave to Title Service Co. to intervene and to file its complaint in Intervention and Inter-pleader, and to strike said pleading,
(b) To dismiss said complaint in intervention, fid 6-5-53;
8. Motion of Plaintiff to dismiss third party complaint of Long Beach Federal Savings and Loan Assn, (fid 10-10-52) fid 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 fid 6-5-53;
10. Motion of Plaintiff to strike from Answer of Defendant Long Beach Federal Savings and Loan Assn, fid 6-5-53;
11. Motion of Long Beach Association to deposit $7,000,000, cash or bonds, into court in case No. 13979, fid 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. § 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
*409
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 record in the case, and is undenied any place in these proceedings or in the multitude of proceedings had in consolidated case 5421-5678, that the Long Beach Federal Savings and Loan Association was not indebted in any sum whatsoever on March 29, 1946 or on May 20, 1946, to the Los Angeles Federal Home Loan Bank, or the Portland Home Loan Bank, or the San Francisco Home Loan Bank, (hereinafter called the San Francisco Bank).
Following the seizure of the Long Beach Association by Ammann, notes in the sum of approximately $7,000,000 were executed by Ammann to the San Francisco Bank. In addition to the retention by that bank of approximately five and one-half million dollars of government bonds owned by the Long Beach Association, and in the possession of the Los Angeles Bank on March 29, 1946, for safekeeping only, Ammann assigned all of the trust deeds and notes which were in the possession of the Los Angeles Bank on March 29,1946, to the San Francisco Bank, as security on said notes and apparently continued to do so on other trust deeds and notes on loans made by Ammann during his conservatorship.
While conservator, Ammann executed
1
three documents to San Francisco Bank, (1) “Subordination Agreement” on May 28, 1946; (2). “Collection Agreement” on May 28,1946, and, (3) “Pledge Agree
*410
ment” on May 20,1946. The text of each follows:
“Subordination Agreement
“Whereas, the undersigned has applied to the Federal Home Loan Bank of San Francisco for a loan to be made to it upon its note secured by certain collateral notes and mortgages or deeds of trust, and may hereafter make application for further loans upon like security; and,
“Whereas, the Federal Home Loan Bank of San Francisco requires, as a condition to making such loan, that the undersigned subordinate to the lien of the Federal Home Loan Bank of San Francisco, as pledgee, any other notes secured by said mortgages or deeds of trust, or claims for additional loans made under the terms of, or secured by, any such mortgage or deed of trust;
“Now, Therefore, in consideration of the premises, and of the making of any loan by the Federal Home Loan Bank of San Francisco to the undersigned, the undersigned does hereby undertake and agree to and with the Federal Home Loan Bank of San Francisco, its successors and assigns, that all notes, secured by mortgage or deed of trust at any time pledged by the undersigned to the Federal Home Loan Bank of San Francisco as collateral security for loans made to it by said Federal Home Loan Bank of San Francisco, shall have priority in right and remedy over any claims, however evidenced, for other loans heretofore or hereafter made by the undersigned to the makers of such collateral notes and mortgages or deeds of trust, and shall be satisfied out of the property mortgaged or hypothecated before recourse to such property may be had by the undersigned for the repayment of any such additional loans, and that the undersigned will retain possession of any notes taken for such additional loans and will not assign, pledge, or transfer the same, it being the intent hereof that any note secured by mortgage or deed of trust pledged to the Federal Home Loan Bank of San Francisco shall, as between the undersigned, its successors and assigns, and the Federal. Home Loan Bank of San Francisco, its successors and assigns, be deemed the sole obligation so secured, and. that until full payment thereof shall have been made, the mortgaged or hypothecated property and all proceeds from sale or other disposition thereof shall be held solely as security for the repayment of such pledged note. The undersigned expressly reserves the right to apply any surplus-of mortgaged or hypothecated property or proceeds from sale or other-disposition thereof remaining after-satisfaction of such note, to the-liquidation of other loans made by it to the mortgagor or trustor.
“In Witness Whereof, the undersigned has caused these presents to-be executed in its name by its proper officers, thereunto duly authorized, and its corporate seal to be hereunto affixed this 28th day of May 1946.
“Note: This form should be executed and transmitted with all mortgages or trust deeds offered as security for collateral whenever such mortgages or trust deeds recite that they are intended to secure future or additional loans to the mortgagor or trustor, or other indebtedness of such mortgagor or trustor to the Borrower.
18594”
“Collection Agreement
“This Agreement, entered into this 28th day of May, 1946, between Federal Home Loan Bank of San Francisco, a corporation duly organized under the Laws of the United States, hereinafter called the ‘Bank’,
*411
and Long Beach Federal Savings and Loan Association, a corporation organized and existing under the laws •of the-hereinafter called the ‘Institution’:
“Witnesseth: That for and in consideration of the loan of money made •or about to be made or hereafter to be made to the Institution by the Bank, upon the primary obligation -of the Institution secured by the assignment of certain notes, bonds, mortgages, deeds of trust, deeds to .secure a debt, Vendors’ liens and shares of stock pledged therewith .and/or other collateral or one or all •of them, and jointly and severally hereinafter referred to as Collateral;
“The Institution as its agent shall •collect all interest and principal, dues upon shares, installments of principal or other sums secured by or stipulated in said Collateral to be paid, as herein provided, and when .adequate security has been given by The Institution and maintained, the Institution may retain such collections until a payment to the Bank from the Institution becomes due, .and the Bank may permit the Institution to retain sums so collected in ■excess of the amount required to meet obligations of the Institution to "the Bank; provided, however, that if "the Institution shall receive payment of the full balance remaining due on any said Collateral, or if the Institution shall collect sums in excess of the amount payable thereon in due course, reducing the balance due by as much as five per centum, all such collections shall be forthwith reported by the Institution to the Bank, in order that immediate note may be taken thereof with respect to its bearing upon the diminution of the collateral security held by the Bank, and if from such consideration it shall appear that the collateral security has been unduly diminished by such collections, the Institution shall forthwith upon demand from the Bank substitute other Collateral in place of the reduced or satisfied Collateral, or failing to furnish such substituted Collateral the Institution shall transmit such collections to the Bank to be held by the Bank in place of such reduced Collateral.
“The Bank will refrain from collecting any payments upon Collateral until default shall have been made in due payment or otherwise, or the Institution shall be in receivership or liquidation.
“All payments received by the Institution as dues, subscriptions or payments on installment shares of the Institution held as Collateral to the assigned Collateral, the withdrawal value of all dividends upon such shares are, for the purposes of this agreement, payments of installments of principal on the debtors’ indebtedness, and as such, repayable to the Bank as installments on the principal of this indebtedness if and when demanded.
“The Institution further agrees that if the whole or any part of this obligation shall be due and payable to the Bank, the Bank shall not be required to have recourse first to the Collateral held as security for this obligation, but may, at its option, first have recourse thereto or pursue such other and further remedies for the enforcement of the collection of this debt as it may deem proper in its discretion to adopt.
“In Witness Whereof the respective parties hereto have caused this instrument to be executed and their corporate seals to be affixed hereto by their duly authorized officers the day and year hereinabove written.
*412
“Pledge Agreement
“To the Federal Home Loan Bank of San Francisco
“It is hereby agreed by the undersigned association that any and all Government obligations owned by the undersigned at any time deposited with your Bank, or with the Federal Reserve Bank of San Francisco for your account, are pledged and assigned to your Bank as security for any and all indebtedness now or hereafter owing by this association to your Bank.
“In case of a default by this association in the payment of any indebtedness or in the performance of any obligation to your Bank, you are hereby authorized to realize on such security in the manner and to the extent provided in the note or notes evidencing such indebtedness and/or obligation.
Ammann also executed to San Francisco Bank a document designated “Assignment of Mortgages or Deeds of Trust” bearing date of May 28, 1946, (the date of its execution seems to be a matter of dispute), which reads as follows:
“Assignment of Mortgages or Deeds of Trust
“For Value Received, the undersigned Long Beach Federal Savings and Loan Association hereby assigns and transfers.to Federal Home Loan Bank of San Francisco, a corporation organized under and existing by virtue of the laws of the United States, with its principal office in the City and County of San Francisco, State of California, certain mortgages on all beneficial interest under certain deeds of, or transfers in,, trust hereinafter respectively described : Together With the note or notes therein described or referred to, all of which the undersigned hereby endorses, the money due or-to become due thereon with interest, and all rights accrued or to accrue under said mortgages or said deeds of, or transfers in trust.
“This assignment is made to secure any indebtedness now or hereafter owing by the undersigned to-said Bank, its successors or assigns. Upon any default of the undersigned, said Bank may sell the property hereby assigned, at public or private sale with or without notice.
“Description of Mortgages or Deeds of Trust
(There follows 40 pages of lists describing several thousand trust deeds with date, Trustor, Trustee and recording information.)
“In Witness Whereof, the undersigned has caused this Assignment to be duly executed by its officers thereunto duly authorized, and its corporate seal to be hereunto affixed this 28th day of May, A.D., 1946.
Its acknowledgment bears the same-date. An acknowledgment entitles a document to be recorded in the office of the County Recorder. But neither it, nor any other such assignments, were recorded.
He also executed three similar documents bearing the same date, one containing 23 pages of similarly described trust deeds and each of the other two containing only one sheet of described trust deeds. He executed a total of at least 12 similar documents covering many thousand trust deeds, bearing the dates of June 1, 1946, June 21, 1946, December 23, 1947, and January 6, 1948.
*413
All of the “Homeowners” notes and trust deeds involved in the motions for summary judgment were included in the descriptions of notes and trust deeds attached to said assignments.
On January 24,1948, Ammann, as conservator, released possession of the assets and properties of the Long Beach Association to it under the terms of an order of the Home Loan Bank, No. 388, and an order of this court of January 23, 1948, in action No. 5421, (action No. 5421 having been filed May 27, 1946).
On March 13, 1948, the conservator’s notes in favor of the San Francisco Bank in the sum of $7,000,000 had been reduced to $6,300,000 in face, and on that date, after proceedings in court, this court made its order, (Appendix A, text of order), in action No. 5421-5678, directing the deposit in court by the San Francisco Bank of the original conservator’s notes of $6,300,000, of all of the government bonds and of all of the homeowners notes in favor of Long Beach Association and the trust deeds securing them, which it then had in its possession, as security on the conservator’s notes. Thereafter, in order to prevent approximately 8000 separate obligors on those notes and trust deeds from being drawn into the quicksands of this complicated litigation as parties, or compelling each of them to institute separate suits to protect them and their property rights, and at the same time to preserve the asserted rights of the main contestants, this court, on March 26, 1948, made its order (Appendix B, text of Order), directing the delivery of all the homeowners notes and trust deeds securing them, to the Long Beach Association which had theretofore been deposited in court under the above-mentioned order of March 13, 1948 made in consolidated actions 5421-5678, but retained in the registry of the court the United States government bonds and approximately one and one-half million dollars in cash, theretofore deposited in Court, subject to adjudication of liability on the conservator’s notes of $6,300,000, and subject to whatever lien rights existed on the property so retained in court, in favor of San Francisco Bank.
The Title Service Company was trustee holding the legal title to several! thousand parcels of property under trust, deeds executed to secure homeowners, notes in favor of Long Beach Association, as beneficiary, in the manner above described.
The Title Service Company has filed a cross-complaint in intervention in the within matter which will be described later at more length, but which, among' other things, seeks by its
third
cause of' action therein to quiet title of the trustors to the 8000 properties covered by the notes and trust deeds, and to quiet its title as trustee under said trust deeds as against the San Francisco Bank and other cross-defendants.
The Home Investment Co. was the borrower,' i. e., the payor, on 174 different notes and the trustor on the 174 separate deeds of trust wherein the Title Service Company was the trustee and the Long Beach Association was the beneficiary.
The Home Investment Co. has filed a cross-complaint in intervention on behalf of itself and of all of the other borrowers or payors or homeowners similarly situated, i. e., all of the borrowers on notes and trustors under trust deeds in existence on May 20, 1946, (the date of the seizure), and in existence on March 13. and March 26, 1948 (the date of 'the orders) for the delivery to the association of the trust deeds & notes. (Appendix B), to quiet their title as against the. claims of the San Francisco Bank in the within action, and other cross-defendants.
The Long Beach Association, as payee and owner of the notes and as beneficiary under the trust deeds securing each of them, has filed a cross-claim, the
third
cause of action of which seeks likewise to quiet title of the borrowers, i. e., the “homeowners” of the real properties, and of itself to the notes and as beneficiary under the trust deeds securing them.
The above motions which relate to the subject matter of “Home Owners Quiet
*414
'Title” cross-claims are
Item 2,
“Motion of Federal Home Loan Bank Board, William K. Divers, J. Alston Adams, Kenneth G. Heisler, Federal Savings & Loan Insurance Corp., O. K. LaRoque, A. V. Ammann, George K. Bramley and Carl R. Gray, Jr., to
quash
the service of summons made upon them pursuant to three separate orders for service of summons made by this court on March 3,1953”, upon application of Long Beach Federal Savings and Loan Association, the Title Service Corp., and Robert H. Wallis under the provisions of 28 U.S.C. Sections 1655 , 1335, 1397 and 2361 and the Federal Rules of Civil Procedure.
Item No. S
above, “Motion of Home Investment Co., Long Beach Association and Title Service Co.
for summary judgment” ;
Item No. U
above, “Motion of Plaintiff, (a) to
dismiss
Home Investment Company’s cross-claim for quiet title and, (b) to
strike
and drop Home Investment Company as a party”;
Item No. 6
above, “Motion of Plaintiff, (a) to
dismiss
cross-claim of defendant Long Beach Federal Savings and Loan Association, and, (b) to
strike
said cross-claim” ;
Item No. 7,
“Motion of Plaintiff, (a) to
vacate
order granting leave to Title Service Co. to intervene, and to
strike
its complaint in intervention and, (b) to
■dismiss
the complaint in intervention in the 'alternative.”
The within action was originally commenced on March 27, 2952 as action No. 597402 in the California State ■Courts for Los Angeles County, entitled, “Federal Home Loan Bank of San Francisco, a corporation, v. Long Beach Federal Savings and Loan Association, a Corp.”. Upon appropriate proceedings it was removed to this court on April 3, 1953, and received No. 13979. A motion to remand was thereafter denied. In all of the motions of plaintiffs and cross-defendants, the point is made that the motion to remand was improperly denied. That order of denial (Appendix C, text of order), is now the law of the case and will stand, for that reason, as well as for the reason that no persuasive arguments or authorities are now presented which would require a different conclusion.
The complaint by the San Francisco Bank is founded on the four notes of the total face amount of $6,300,000 allegedly executed by A. V. Ammann as conservator for the Long Beach Federal Savings and Loan Association. The complaint is in five causes of action, the first four of which are stated as causes of action for debt due on each of the four promissory notes involved. The
Fifth
cause of action is for
declaratory relief
and to
foreclose the lien
claimed to exist by the San Francisco Bank, under the terms of said conservator’s four notes, upon the notes and trust deeds which were the subject matter of the orders of this court of March 13 and March 23, 1948, (Appendixes A and B) in action 5421-5678. Much controversy has developed concerning the precise position of the San Francisco Bank with relation to its claimed lien on borrowers’ notes and trust deeds thereon which, after deposit in court by San Francisco Bank under said Order of March 13, 1948 (Appendix A), were turned over to the Long Beach Association by said order of March 26, 1948 (Appendix B). Two paragraphs of the complaint of the San Francisco Bank in its fifth cause of action, after reciting the appointment of Ammann as conservator and the execution by him of the four conservator’s notes of $6,300,000, read as follows:
“VIII
“That said defendant assigned, delivered and pledged to plaintiff certain United States Government Bonds, promissory notes secured by mortgages or deeds of trust on real property and stock of plaintiff as security for the repayment of said sums advanced and loaned to said defendant by said plaintiff as aforesaid. That said security was given and required under the provisions of the Federal Home Loan Bank Act ( 12 U.S.C., Sec. 1421 , et seq.), and the rules and regulations adopted by
*415
the Home Loan Bank Board pursuant thereto. That by reason of
said assignments and pledges said plaintiff became, ever since has been and ¿till is
the
owner
and
holder
of a lien upon all said pledged and assigned property.”
and paragraph XV reads as follows:
“XV
“That by the terms of the charter issued plaintiff by the aforesaid Home Loan Bank Board pursuant to the Home Owners Loan Act of 1933, as amended, and the application made by defendant to said Board for a charter, defendant and its members agreed to be bound by each and all of the terms and provisions of the Home Owners’ Loan Act of 1933, [ 12 U.S.C.A. § 1461 et seq.] the Federal Home Loan Bank Act, and the rules and regulations of the Home Loan Bank Board; and that by reason thereof and the receipt of the aforesaid unpaid advances for the use of and which was used for the benefit of defendant, defendant is estopped from denying that it is indebted to plaintiff in the aforesaid sum of $6,300,000.00, and interest, and is estopped from denying the validity of the aforesaid four promissory notes, and is estopped from denying that
plaintiff is the holder of a lien upon all of the personal property pledged to plaintiff,
or any substituted collateral, and is estopped from denying that plaintiff is entitled to an equitable lien upon the property of defendant in an amount equal to the value of the personal property pledged with plaintiff as aforesaid.” (Italics supplied.)
The four notes are attached to the complaint and provide -for assignment in very broad terms, to San Francisco Bank of the notes and trust deeds thereon executed by borrowers to secure the repayment of loans by Long Beach Association. (Each are in the same form as the text of one which is Appendix D).
Other allegations in the
fifth
cause of action of the complaint of San Francisco Bank allege Long Beach Association is asserting San Francisco Bank has not, and never had, any lien on the notes and accompanying trust deeds. It also alleges that the court was wholly without jurisdiction in action No. 5421 to make the orders of March 13 and 26, 1948 (Appendixes A and B).
No other conclusion can be reached from the language of the complaint but that the San Francisco Bank seeks in action No. 13979 to
establish its lien as of the time prior to the date of the making
of the order of deposit of March 13, 1948 (Appendix A) and turnover order of March 26, 1948 (Appendix B) in 5421-5678, and
as of the time prior
to the dates of making the various orders on interpleader-interventions by the various Homeowners, which are listed in footnote 15, 14 F.R.D. 273 , pages 306, 307, 308; or, as stated in the language of Mr. Angelí, one of counsel for the San Francisco Bank, “It is the position of the San Francisco Bank that they are entitled to have full security for their $6,-300,000 plus all interest due thereon,
exactly as they had it at the time the money and the bonds and the notes and the deeds of trust were taken from the possession of the San Francisco Bank and placed in the Registry of the Court.’'
(Italics supplied.)
In the memorandum of November 30, 1953, 117 F.Supp. 259 , at pages 286, 287, I stated, among other things, as follows:
“However, the position of the San Francisco Bank was further confused by a subsequent contrary statement made by Mr. Angelí during the course of the argument on October 21, as follows, (pages 757, 758): ‘We have filed a very simple action. That is what we conceive the San Francisco Bank rights to be.
We stand on it. *
* *
We state we stand on our complaint as it is filed
and we further say this court has no jurisdiction.’
“If the San Francisco Bank stands on its complaint as it is filed,
*416
which includes a cause of action to foreclose and reestablish its position as security holder as of the date of the turn-over on March 13, 1948, then there can be no doubt in my mind that the trustees holding legal title to the individual-borrowers’ properties under the trust deeds which have been paid off and are now being paid off to the Long Beach Association, as well as the debtors on the individual notes securing those trust deeds, may be confronted with a very serious and complicated situation which might require extensive and expensive litigation on their part. It is simple logic that if the San Francisco Bank secured the title by assignment from the conservator of the trust deeds and notes, and if the order of March 13, 1948 is vacated, dissolved and set aside, then the San Francisco Bank, having assigned the notes and trust deeds, not outright
but only conditionally, pursuant to the order of March 13,
1948, will be in a position to claim that all reconveyances made by the trustees holding legal title of the properties under the trust deeds, after March 13, 1948, were void and may look, or attempt to look, to such trustees for satisfaction of any judgment obtained in 13979 for the value of the property as of the time of the turn-over order on March 13, 1948.
“Likewise, the San Francisco Bank may claim that the debtors on the notes securing those trust deeds, in view of the fact that they were claimed to be, (and it must be presumed that they were validly assigned to the San Francisco Bank) had no right to make payments thereon to the Long Beach Federal Savings and Loan Association but should have made payments thereon to the San Francisco Bank notwithstanding an agreement asserted by the San Francisco Bank to exist which was entered into prior to the appointment of the conservator authorizing the Long Beach Association to be its agent in the collection of balances due on notes. This is particularly so because of the confusing and contradictory statements in various pleadings as well as statements of counsel hereinbefore referred to.
“It must be remembered in this connection that the San Francisco Bank, by its formal pleadings and by the last authoritative statement of its counsel in court, are asserting that the Order of March 13, 1948 was void and that they stand on their complaint as it is filed which seeks to restore the status quo as to all securities including individual-borrower notes and trust deeds as of March 13, 1948.
“The two main contestants in action 13979 are the San Francisco Bank and the Long Beach Association, and the people who would be involved, or whose rights might be endangered by restoring the status quo as of March 13, 1948, are innocent third parties, that is to say, individual property owners who inter-pleaded in the 51 interpleader-proceedings in the consolidated actions 5421 and 5678, the debtors on the trust deeds and notes, and the trustees under the trust deeds holding legal title.
“It therefore seems to me that in view of the fact that the mandate ordered the dissolution, vacation and setting aside of the order of March 13, 1948, requiring the deposit of the collateral in court,
but did not order the dissolution, vacation or setting aside of the order of March 26, 1948, substituting collateral and directing the return to the Association of the notes and trust deeds securing them, that it was the intention of the appellate court to accept the substitution of collateral and that all questions concerning the borrowers’ notes and trust deeds should be eliminated from litigation.
This can be done, by the execution
*417
and appropriate filing of disclaimers or quitclaims by San Francisco Bank.”
After the filing of that memorandum the San Francisco Bank,
on January 18, 1954, filed in the within case
(No. 13979) a
disclaimer
executed and acknowledged by it on November 27, 1953 and recorded in the official records of Los Angeles County on November 30, 1953 in Book 43263, at page 416417 of Official Records. A certified copy of a resolution dated August 24, 25, 1953 of the Board of Directors of the San Francisco Federal Home Loan Bank authorizing a disclaimer was filed in the within case on January 27, 1954. The full text of the disclaimer (without the acknowledgment) follows:
“Book 43263 page 416
“Disclaimer
“Comes now Federal Home Loan Bank of San Francisco, the undersigned, and Disclaims any and all present right, title, lien, interest or estate in, to or upon any and all of the real property more, particularly described in any and every deed of trust, of record, wherein Long Beach Federal Savings and Loan Association, of Long Beach, California, is the named beneficiary and which were assigned to Federal Home Loan Bank of San Francisco by A. V. Ammann as Conservator of said Long Beach Federal Savings and Loan Association, or which were deposited in court in consolidated action No. 5421-5678 in the District Court of the United States for the Southern District of California, Central Division. This instrument is made for the express benefit of the owner or owners of each of the aforesaid parcels of real property, and their successors in interest, and is not made for the benefit of any other person or entity whomsoever. The undersigned, by these presents, does not waive, release, discharge, postpone or in any manner impair any of its rights as against said Long Beach Federal Savings and Loan Association or the property and assets thereof, but to the contrary expressly reserves all such rights.
“Dated: November 27, 1953. (Seal)
Federal Home Loan Bank of San Francisco
By J. Alston Adams J. Alston Adams President
Ray E. Humphrey Ray E. Humphrey Treasurer.”
Under California law a grant of real property or an interest therein of more than an estate at will or for less than one year must be in writing, Cal.Civ.Code, § 1091, and is effective only upon delivery of the deed or instrument, Cal.Civ.Code, § 1054; 9 Cal.Jur. 149, and cases there cited. The above disclaimer is in effect a quit-claim deed. It was not, of course, delivered personally to the several thousand persons for whose benefit it was made. Conditional delivery is prohibited, Cal.Civ.Code, § 1056; constructive delivery is permitted, Cal.Civ.Code, § 1059; it is presumed to have been delivered on its date, Cal.Civ. Code, § 1055. Under Cal.Civ.Code, § 1059, subd. 2, a deed is constructively delivered “Where it is delivered to a stranger for the benefit of the grantee, and his assent is shown, or may be presumed.”
Insofar as the disclaimer conveyed, or quit-claimed anything to Title Service Company, Long Beach Association and Home Investment Co., it was delivered to them when it was filed on January 18, 1954 in the within action. Insofar as it conveyed or quit-claimed anything to the Homeowner trustors who are not named-parties to this action, but for whose benefit the quit-claim was made, it must be presumed that they assented to its delivery for their benefit on that date also, as that was the actual date San Francisco Bank parted with possession thereof. I, therefore, hold that the effective date of the disclaimer
*418
was the date of its filing in this action, viz., January 18, 1954.
The Title Service Company Cross-Complaint in Intervention.
Following the removal of the within action to this court from the State Court, the Title Service Company, on August 18, 1952, filed a “Motion for Leave” to intervene and a proposed Complaint in Intervention. The motion was granted. The cross-complaint is long.
2
It is in three stated causes of action. The
first
cause of action appears to be one in
interpleader
and in the nature of interpleader wherein it states that it interpleads, “The legal titles conveyed to it as trustee upon each of said deeds of trust from the homes of approximately 8000 borrowers of said Association.” (Par. 28): The
second
cause of action is stated to be a cause of action for
declaratory
relief; the
third
cause of action is stated to be a cause of action to
quiet title.
It re-incorporates many of the allegations contained in the first and second causes of action and seeks to quiet title to the property described in paragraph 2 of the third cause of action which reads as follows:
“Plaintiff in Intervention is the owner in fee, and for more than six years last past has been such owner, as trustee of the real property described in:
“(a) The deeds of trust recorded upon the date and in the respective books and pages of the Official Records in the Office of the County Recorder of Los Angeles County, all as detailed in the ‘Order requiring the deposit of certain notes, deeds of trust, etc., held by the Federal Home Loan Bank of San Francisco,’ which said order was filed on March 13, 1948, in said actions numbers 5421-5678 — -P.H. in said United States District Court; on pages numbers 12,188 to, and including 12,263 of the Clerk’s Pagination of Record in the District Court. The said descriptions are also contained in pages 8423, to 8518 in Volume XVIII of the Printed Record on Appeal in Appeal Number 12511 to the United States Court of Appeals for the Ninth Circuit.
“(b) Described in that certain lis pendens recorded in the office of the County Recorder of Los Angeles County, California, in said Action No. 5421 — P.H. in said United States District Court, in June of 1946, each and all of which documents are referred to, and incorporated herein by reference, and made a part hereof, the same as if set forth herein at length.”
In view of the fact that this portion of the within memorandum is limited to the matter of quieting title of the property sometimes described as “Homeowners” titles I will, at this point, treat of the
third
cause of action for quiet title and will not discuss the allegations of
either
the
first
or
second
causes of action.
The essence of Title Service Company’s assertion of right to intervene and to have its, and the homeowners’ rights, quieted is found in paragraph 60 (beginning on page 39 of its complaint) and incorporated by reference in its
third
cause of action; and specifically in a short unnumbered paragraph on page 46 of its complaint reading as follows: “That the present action by the San Francisco Bank, seeking to foreclose a lien claimed by said Bank upon said
*419
notes and deeds of trust proposes to, appears to, and does affect the security of said deeds of trust and/or the rights, and/or powers of beneficiary, and/or trustees thereunder.”
It is further alleged, in substance, that each of the trust deeds contained a provision which requires the Trustor, and, on his failure so to do, permits the trustee or beneficiary to appear in, and defend,
any
action or proceeding
purporting
to affect the security of the trust deed and note or of the
rights
or powers of the
beneficiary
or
trustee.
Among other things, it is alleged that prior to the filing of its cross-claim and since the order of this court of March 26, 1948, in 5421-5678 (Appendix B), returning the trust deeds and notes from the registry of the court to the Long Beach Association, 1717 notes secured by trust deeds had been repaid by the payment of an approximately aggregate sum of $5,291,691.06 to the Long Beach Association by the owners of those properties who or which were obligors on the notes and Trustors under the trust deeds, and that the Title Service Company had executed reconveyances thereon.
The burden of the third cause of action of the Title Service Company’s cross-complaint is, that the San Francisco Bank, by its fifth cause of action, in seeking to reestablish its lien as of the date prior to the order of March 13, 1948 (Appendix A), and as of the date prior to the date of each of the orders of 51 different interpleader-intervention proceedings in 5421-5678, involving a total of 480 parcels of property, details of which may be found in 14 F.R.D. 273 , pages 306, 307, 308, has cast a cloud upon the title of, not only those who own property and are presently payors on notes still secured by trust deeds, but of all of the owners of property who have paid off their notes and secured re-conveyances of their property from the trustee, whether through deposit in court, or subsequent to the order of March 26, 1948 (Appendix B); and, that such claim of right by the San Francisco Bank likewise casts a cloud upon the rights and duties of the Title Service Company, as trustee, both as to paid notes and their accompanying trust deeds, as well as unpaid notes and their accompanying trust deeds.
Home Investment Company Cross-Complaint in Intervention.
The Home Investment Company was a borrower from the Long Beach Association on 174 parcels of property, executing separate notes and trust deeds for each. It intervened in action 5421-5678 and interpleaded approximately $800,000 into court, being the total of balances then due on the 174 trust-deed notes. Orders in 5421-5678 were made in that connection on its complaint in interpleader-intervention, which, among other things, required:
1. Both Ammann, as conservator claiming the sole right to receive payments on the notes, and the Long Beach Association contesting Ammann’s right and claiming it for itself, to execute simultaneous requests for reconveyances to the trustee;
2. The trustee to execute the reconveyances,
3. The original notes and trust deeds to be cancelled and surrendered into court.
The purpose of that procedure was to permit the borrower to pay off his note and secure a clear and merchantable title to his property, without becoming a participant in the then already proliferating litigation. There were 50 other identical or similar proceedings had during the year 1946 and 1947, involving in some instances only one parcel of property, and, in others, many, where similar orders were made and similar proceedings followed. The total number of parcels involved in them, together with the Home Investment Co. interpleader-intervention, was 480, and the total sum of money deposited in court by the borrowers whose notes were thus discharged and property cleared, was the sum of $1,641,037.96, see 14 F.R.D. 273 , at page 306 et seq.
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By the order in 5421-5678 of March 26, 1948 (Appendix B), the lien of San Francisco Bank under the conservator’s notes, was transferred from the homeowners notes and trust deeds to the money on deposit in court and to the $5,-300,000 of government bonds deposited in court under the order of March 13, 1948 (Appendix A).
The 174 notes and trust deeds in which Home Investment Co. was the payor and trustor, as well as those involved in the other proceedings immediately above mentioned, were among those which were seized by Ammann when he took possession of the Long Beach Association on May 20, 1946, and, so far as I can learn, from the various lists of trust deeds and notes were assigned to San Francisco Bank as security under the instruments hereinbefore described.
The Home Investment Co. sues for itself and as a member of the class of all other persons similarly situated, i. e., borrowers owning property upon which they have executed trust deeds to secure notes payable to the Long Beach Association, whether paid or not.
The burden of the allegations of the Home Investment Co. concerning clouds on titles are, in substance, the same as contained in the
third
cause of action of the Title Service Co.
Cross-Claim of Long Beach Association.
As seen from footnote 2, the cross-claim of Long Beach Association is exceedingly lengthy. It is cast in
seven
causes of action. For the purposes of this portion of this memorandum the third cause of action, designated “a cause of action for quiet title,” is the only one to be presently considered. That cause of action incorporates many of the allegations of the other six causes of action.
The property to which it seeks to quiet title is described in paragraph 3 of its third cause of action, which reads as follows:
“Cross-claimant, on May 18, 1946, was, at all times subsequent thereto, has been, and yet is, the absolute and unqualified owner of all beneficial interest in the notes and deeds of trust, and the trusts thereby created, and the ownership in real property therein involved, as beneficiary named in each of said deeds of trust, and as payee named in each of said notes. Said properties are described as:
“(a) The deeds of trust recorded upon the date and in the respective books and pages of the Official Records in the Office of the County Recorder of Los Angeles County, all as detailed in the ‘Order Requiring the Deposit of Certain Notes, Deeds of Trust, Etc., Held by the Federal Home Loan Bank of San Francisco’, which said order was filed on March 13, 1948, in said Action Nos. 5421-5678 — P.H. in said U. S. District Court, on pages 12,188 to and including 12,263 of the Clerk’s pagination of record in the District Court. The said descriptions are also contained in Pages 8423 to 8518, inclusive, in Volume XVIII of the Printed Record on Appeal in Appeal No. 12511 to the United States Court of Appeals for the Ninth Circuit;
“(b) Described in that certain lis pendens recorded in the Office of the County Recorder of Los Angeles County, State of California, in said Action No. 5421 — P.H. in said United States District Court, in June of 1946; and
“(c) Of all assets in the Registry of this Court, including notes, deeds of trust, cash, or other valuables, deposited in the more than 50 interpleader interventions, details of which are alleged in paragraph 31 of the First Cause of Action hereof, which is reincorporated herein by reference the same as if set forth herein at length.
each and all of which documents are referred to, and incorporated herein by reference, and made a part here
*421
of, the same as if set forth herein at length.”
Under Paragraph (c) above, the Long Beach Association seeks to quiet title to all of the assets in the registry of this court. Insofar as the instant matter under consideration is concerned, viz., the trust deeds described in (a) and (b) and heretofore mentioned, the court, in this memorandum, will not be concerned with, and nothing herein will be deemed to affect one way or the other, the assertion of its claim to quiet title to the property set forth in paragraph (c) above quoted, except as to the homeowners notes and deeds of trust therein mentioned which were deposited in court in 5421-5678 in the approximately 50 separate interpleader-interventions ■filed by various homeowners; that is to say, the conservator’s notes, the cash and “other valuables” (the $5,300,000 government bonds) deposited in court in 5421-5678, are not involved in this phif.se and while they are undoubtedly the property of Long Beach Association, the question of “quieting” title to them is involved on the merits as San Francisco Bank claims a lien thereon as security for the conservator’s notes.
From reading the
third
cause of action of the cross-claim of Long Beach, together with the other portions of its complaint incorporated by reference, it becomes evident that the disturbance to, or clouding of titles, of the homeowners under the notes and trust deeds herein elsewhere described, as well as the titles and rights of Long Beach Association therein or thereunder, arises by virtue of the allegations in the complaint of the San Francisco Bank in the within matter contained in its fifth cause of action hereinbefore adverted to.
Motions for Summary Judgment (No. 3)
Motions to Dismiss (Nos. 4, 6, 7b)
Motion to Vacate (No. 7a)
On May 21, 1953 the Home Investment Co., the Title Service Co. and the Long Beach Association filed a joint motion (No. 3) for summary judgment
“quieting title to the homes of 8000 borrowers
against foreclosure of loans paid in full into the registry of the court, and motions for summary judgment quieting title of trustee Title Service Co. and of beneficiary Long Beach Federal Savings and Loan Assn.”
As heretofore noted, there was not at that time on file in the within proceedings any disclaimer by the San Francisco Bank. (It was not filed until January 1954).
On May 29, 1953, the plaintiff filed a motion (No. 4) to dismiss the cross-claim of the Home Investment Co., to strike and drop Home Investment Co. as a party.
On June 5, 1953 the plaintiff filed a motion (No. 6) to dismiss the cross-claim of defendant Long Beach Association. Insofar as that motion to dismiss the cross-claim of Long Beach Association is involved, I will concern myself in this portion of this memorandum only with the motion to dismiss the cross-claim as to the
third
cause of action for quiet title, and that with regard only to the Homeowner-borrowers notes and trust deeds, described in (a) and (b), and that portion of (c) of paragraph 3 of the
third
cause of action to quiet title only as it concerns such trust deeds and notes as hereinbefore indicated, and not with regard to tjie government bonds and cash deposited in court.
On June 5, 1953 the plaintiff filed a motion (No. 7a) to vacate the order granting leave to the Title Service Co. to intervene and also a motion (No. 7b) to dismiss that complaint in intervention. This portion of the memorandum will treat only with that motion to dismiss insofar as it involves the
third
cause of action in the Title Service Company’s complaint in intervention to quiet title.
In resolving the problems presented by the last above mentioned motions which, of course, include the broad question as to whether or not the cross-claims
*422
of Title Service Co.,
Long
Beach Association (as to their
third
cause of action) and Home Investment Co., state a claim for relief under Rule 8 Fed.Rules •Civ.Proc., 28 U.S.C.A., the matter is broken down into three main questions:
1. What is the correct legal procedure to effectively quiet title, i. e., whether by judgment or by dismissal, in view of the Disclaimer?
2. Whether either Title Service Co. or Long Beach Association on the
third
cause of action in each of their cross-claims and Home Investment Co. as to its cross-claim, are proper parties to obtain such relief for themselves and as representatives of a class;
3. Whether summary judgment may, and should, be granted under the Federal Rules of Civil Procedure.
1.
The Legal Procedure to Quiet Title, i. e., Whether by Judgment or Dismissal.
The problem is easier stated than solved. One thing is certain: insofar as the San Francisco Bank is concerned, it has, by its disclaimer, now cleared the way to eliminate from the morass of this and related litigation the question of the validity of the “Homeowners” titles, regardless of the validity of the judgments in the 51 interpleader-interventions in 5421, and regardless of the validity of the orders in 5421 of January 23, 1948, 14 F.R.D. 273 ,315 and of March 13 and 26, 1948 (Appendixes A and B).
San Francisco Bank insists that it would be effective to clear those titles by
dismissing
the cross-complaints. On the other hand, the three movants for summary judgment insist that the appropriate procedure
requires a judgment
quieting title which can, and should be done in this case under the summary judgment procedure provided by the Federal Rules of Civil Procedure and the applicable California law.
The property being located in California and the trust deeds and notes being California contracts, the applicable law- is the local law of the State of California under the provisions of 28 U.S.C.A. § 1652 and Federal Case Law.
In Rose v. Saunders, 9 Cir., 1934, 69 F.2d 339, 341 , the Court of Appeals for this Circuit set forth the rule as to jurisdiction of this court in suits to quiet title, and as to the applicability of California law, both substantive and proceduralwise, at page 341 as follows:
“* * * Neither is it true that state statutes cannot increase federal equity jurisdiction. In Devine v. City of Los Angeles, 202 U.S. 313, 333 , 26 S.Ct. 652, 657 , 50 L.Ed. 1046 the Supreme Court in considering section 738 of the California Code of Civil Procedure, authorizing suits to quiet title, said: ‘This statute enlarged the ancient jurisdiction of courts
of
equity in respect of suits to quiet title, but, the equitable rights themselves remaining, the enlargement thereof may be administered by the circuit courts of the United States as well as by the courts of the State.'"
The rule as to whether or not under the California law a party is entitled to a judgment
or
a dismissal, after a disclaimer has been filed, has been settled in
California since
1890 when the Supreme Court decided the case of Bulwer Consolidated Mining Co. v. Standard Consolidated Mining Co., 83 Cal. 589 , 23 P. 1102, 1104 . It was a quiet title case wherein the defendant admitted that the plaintiff was the owner of the property involved, and “expressly disclaims any estate or interest therein adverse to the plaintiff.” The defendant also denied that it ever had made any such adverse claim. The Supreme Court said: “* * * when, in an action to quiet title to land, the defendant disclaims any interest or estate in the premises, it is immaterial whether or not he had ever before claimed an interest or estate therein adversely to the plaintiff; for in
either event
(emphasis supplied) the plaintiff would be entitled simply to a judgment quieting his title, without costs.” And further, 83 Cal. at
*423
page 608, 23 P. at page 1108 : “If, on the other hand, the defendant, as here, expressly disclaim any estate or interest in the land described in the complaint, and at the same time deny that he ever made any such adverse claim, the plaintiff would still be entitled to a decree quieting his title, but without costs. * * * The object of sections (of the California Code of Civil Procedure relating to quiet title) is to enable the plaintiff, in such action to dispel whatever may be regarded by third persons, as well as by the defendant, as a cloud upon his title; for, even though the defendant makes no adverse claim, third persons may regard plaintiff’s title as being subject to an adverse claim by the defendant, which would be a cloud upon plaintiff’s title, depreciating its value, and which he would be entitled to have removed by the decree of the court, so that his record title may appear perfect, not only to the defendant, but to all persons whom it may thereafter concern.”
That case is accepted as the law of the State of California and that procedure has been, and is, followed almost universally in quiet title actions in the State of California.
From that case it is quite evident that under the law of the State of California, if a party asserts a claim of right to real property, or an interest therein, and if another party disclaims it, either in its pleadings or otherwise, the plaintiff is nevertheless entitled as a matter of procedure to a judgment quieting his title.
The point is made by the San Francisco Bank that a “cloud” to be removable, must be founded on an instrument of record. There is nothing to the point as it is the settled law of California that the remedy of quieting titles is not confined, “to the case of an adverse claimant setting up a legal title, or even an equitable title; but
* *
* was
intended to embrace every description of claim whereby the plaintiff might be deprived of the property, or its title clouded, or its value depreciated, or whereby the plaintiff might be incommoded or damnified by the assertion of an outstanding title already held or to grow out of the adverse
pretension”; Head v. Fordyce, 17 Cal. 149, 151 ; and 22 Cal. Jur. 115, 116 and cases there cited (emphasis supplied.)
In Nichols v. Nichols, 8 Cir., 1927, 20 F.2d 474 , the Court held that a quiet title suit would lie against an interest claimed to exist under a contract which became effective at death: At page 481 of 20 F.2d the court stated: “Under a California Statute almost identical with the Kansas statute, the Supreme Court of that state in Castro v. Barry, 79 Cal. 443, 446 , 21 P. 946, 947 , said: ‘the proceeding is for the purpose of stopping the mouth of a person who has asserted or is asserting a claim to the plaintiff’s property. * * * It is not aimed at a particular piece of evidence, but at the pretensions of an individual. * * * Nor is it necessary that the adverse claim should be of any particular character. * * * And the rule may be even more broadly stated, viz. that the action may be maintained by the owner of property to determine any adverse claim whatever.’ ”
While it is true that it does not appear that the assignments and transfers of the trust deed and notes to San Francisco Bank were recorded in the Office of the County Recorder, it must be remembered that San Francisco Bank persists in its claim that they were validly transferred. And, it must be remembered, as well, that the delivery, Cal.Civ.Code, § 1054, of a document transferring an interest in real property is effective to pass title regardless of its recordation, which, after all, is only for notice to the world of such transfer.
The allegations in the fifth cause of action of the complaint of the San Francisco Bank, are more than mere pretensions, — they are positive assertions of right and title. It is specifically held in Stoner v. Security Trust Co., 1920, 47 Cal.App. 216 -221, 190 P. 500 , that an action would lie under Section 1050 Cal.Code Civ.Proc. to quiet the title to a
*424
purported assignment of a note and mortgage.
By both Sections 738 and 1050 Calif. Code Civ.Proc. a quiet title suit may be maintained on
personal property,
including money, the same as on real property. So the rules on money in the foregoing cases are applicable to the personal property involved here.
I conclude that the effective procedure to quiet title in this case is by judgment and not dismissal.
2.
Are Title Service and Long Beach Association (As to Their Third Cause of Action) Proper Parties: and Which of Them, or Home Investment Co., If Any, Are Representative of a Class ?
As heretofore indicated, the California Law is controlling ( 28 U.S.C. § 1652 ; Rose v. Saunders, supra,) unless Federal statutes, Rules of Civil Procedure or applicable case law hold to the contrary as to class actions.
Home Investment Co., Title Service Co., and Long Beach Association, each claim to be the representative of the class of approximately 8000 “homeowners,” which may roughly be divided into two groups;
1. Those who paid off their notes and secured reconveyances of their property prior to the effective date of the disclaimer (January 18, 1954), whether through the 51 separate interpleader-intervention proceedings in 5421 which were all prior to the order in 5421-5678 of March 26, 1948 (Appendix B); or through the process of paying directly to the Long Beach Association, after said order of March 26, 1948 and prior to the effective date of the disclaimer, January 18, 1954 (a total of about 2200).
2. Those who subsequent to January 18, 1954, were still obligors on notes and trustors under trust deeds securing such notes with the Long Beach Association as Beneficiary and Title Service Co. as Trustee.
Before considering the complaint of Home Investment Co., I will first discuss the
third
cause of action of each — the Title Service Co. and Long Beach Association.
In each of the trust deeds appear the following provisions:
“To Protect the Security of This Deed of Trust, Trustor Agrees:
“ *****
“12. To appear in and defend any action or proceeding
purporting to affect the security hereof or the rights or powers of Beneficiary or Trustee;
* * *.
“13. * * * to
pay, when due, all
encumbrances, charges, and
liens
with interest, on said property or any part thereof, which at any time appear to be prior or superior hereto; * * *
“14. Should Trustor fail * * * to do any act as herein provided, then Beneficiary or Trustee, but without obligation so to do and without notice to or demand upon Trustor * * * may: * * *
commence, appear
in and
defend any
action or proceeding
purporting
to affect the security hereof
or
the
rights or powers
of
Beneficiary or Trustee;
pay, purchase
contest,
or compromise
any
encumbrance, charge or
lien
which in the judgment of either appears to be prior or superior hereto ; and in exercising any such powers, incur any liability, expend whatever amounts in its absolute discretion it may deem necessary therefor, including cost of evidence of title, employ counsel, and pay his reasonable fees.” (Emphasis supplied.)
The trust deeds are three-way contracts, i. e., between the
trustor
(owner, borrower, obligor and payor on the note), the
trustee,
and the
beneficiary,
(lender, obligee and payee on the notes). The Trustee is the trustee for both the Trustor and the Beneficiary and the common agent for both parties, as both are beneficiaries to the extent of their respective interests, 25 Cal.Jur. 42; Hum
*425
boldt Savings Bank v. McCleverty, 161 Cal. 285 , 119 P. 82 ; Atkinson v. Foote, 44 Cal.App. 149 , 186 P. 831 ; Ainsa v. Mercantile Trust Co. 174 Cal. 504 , 163 P. 898 ; Kellum v. San Mateo County Title Co., 127 Cal.App. 276 , 15 P.2d 876 .
Does the within action by the San Francisco Bank purport to affect the security
3
of the trust deed or the rights or powers of the beneficiary or trustee? Under the complaint of the San Francisco Bank, (particularly its fifth cause of action), clearly a situation may arise where judgment
may
be entered holding that the claimed lien of the San Francisco Bank to all of said trust deeds and notes, is
prior or superior to the lien
and right and title of the beneficiary under the trust deeds, and the rights, duties and title of the trustee or beneficiary under them.
A more complete discussion of the consequences of such claims is set forth in the memorandum of November 30, 1953, 117 F.Supp. 259 , a portion of which is hereinabove quoted, and will not be repeated here.
It appears from that discussion, and from the complaint of the San Francisco Bank, that it is inescapable that if judgment were to be given to the San Francisco Bank on its fifth cause of action as pleaded, it would affect the security of each and all of the trust deeds and the rights, powers and title of both the beneficiary and the trustee, and would, and does, cloud the titles of the “Homeowners.” A judgment on the fifth cause of action, which would reestablish the lien of the San Francisco Bank as of the date of its alleged creation, would compound confusion and would or might compel each of the owners of the several thousand parcels of property to bring separate quiet-title suits. To prevent such a multiplicity of suits is one of the very objects and purposes of an equity suit and, by itself, constitutes a ground for the exercise of jurisdiction by United States District Courts. Yuba Consolidated Gold Fields v. Kilkeary, 9 Cir., 1953, 206 F.2d 884 .
From the foregoing quoted provisions of the trust deeds, it was the right and duty of each one of the trustors under the trust to appear in the within action. And, under the terms of the above quoted provisions wherein any trustor so failed to appear, it is the right
of
both the trustee and the beneficiary to appear in an action and, in order to protect not only the beneficiary, but also the separate and different rights and titles of both the trustee and the beneficiary, to “contest” the lien asserted to exist in the complaint of the San Francisco Bank,
The right of a trustee or beneficiary to appear in an action affecting title appears to have been settled in California since 1922 when the Supreme Court decided the case of Title Guarantee & Trust Co. v. Griset, 189 Cal. 382 , 208 P. 673, 676 .
That case involved a registration proceeding under the “special” procedure provisions of the Torrens Title Act of California, Stat.1915, p. 1932. The Ti-tie Guarantee and Trust Co. was trustee under a deed of trust and appeared in the registration proceedings. The lower court held against the Title Company on the ground that it was unnecessary for it, or the beneficiary under the trust deed, to appear in the registration proceedings. The Supreme Court reversed, holding not only that the trustee was entitled to enter the proceedings in the lower court, but was a
necessary
party, because, while the proceedings under the Torrens Act were described as “special proceedings,” they were nevertheless
adversary
proceedings,
“the very object of the act is to furnish a title impregnable against every attack from any source”.
(Emphasis supplied.) It further held that such right to appear in the proceedings and the necessity of them for being a party, derived not only from the nature of the proceedings to secure an impregnable title, but also from the provisions of the trust deed similar to the herein-above quoted provisions contained in the
*426
trust deeds involved in this case. In Title Insurance & Trust Co. v. California Development Co., 179 Cal. 734, 736 , 178 P. 857, 858 , the Court held that a trust deed, with similar provisions required the trustee to “diligently and faithfully” protect the interests of its beneficiaries. The object of the cross-claims of Title Service Co., Long Beach Association in the
third
cause of action of each of their complaints, and of Home Investment Co. is to place the title of the properties involved and their own titles, as they exist, either to the real property under the trust deeds or to the notes of the homeownei's, in a position to be “impregnable against attack from any source.”
I conclude therefore, that Title Service Co., as trustee under the trust deeds, and Long Beach Federal Savings and Loan Association (payee on the notes) as beneficiary under the trust deeds securing the notes, are appropriately and properly entitled to appear in this action and to intervene on behalf of the “homeowners” i. e., the trustors on the trust deeds and payors on the notes, unless applicable Federal Rules relating to class actions prevent it; to which question I shall now turn.
The terms of the trust deeds, herein-before set forth, considered together with the complaint of the San Francisco Bank in its fifth cause of action, brings the
third
cause of action of Title Service Co. and the
third
cause of action of Long Beach Association in each of their cross-claims clearly within the provisions of Rule 23 Fed.Rules Civ.Proc., concerning class actions.
It reads as follows, in its applicable portion:
“(a) Representation. If persons constituting a class are so numerous as to make it impracticable to bring them all before the court, such of them, one or more, as will fairly in* sure the adequate representation of all may, on behalf of all, sue or be sued, when the character of the right sought to be enforced for or against the class is * * * (2) several, and the object of the action is the
adjudication
of
claims
which
do
or
may
affect specific property involved in the action; or
“(3)
several,
and there is a common
question of law or fact affecting
the
several rights
and a
common relief
is sought.” (Emphasis supplied.)
It is alleged there are approximately 8000 parcels of property and obligors on the notes. Can anyone suggest that that number is not “so numerous as to make it impracticable to bring them all before the court?”
The specific terms in the trust deeds, wherein the trustors authorize the trustee and beneficiary to appear in such actions, forecloses any complaint that the appearance by the trustee and the beneficiary will not “fairly insure the adequate representation of all”. Moreover, if each and every one of the trustors were parties to this action, or filed separate actions, no ultimate fact could be induced or proven or found in connection with the homeowners’ rights to quiet titles, which cannot be found in these proceedings.
As heretofore seen, the object of the action as appears by the fifth cause of action in the complaint of the San Francisco Bank is the adjudication of claims which
do or may
affect specific property involved in the action. The notes and trust-deeds are specifically described in the exhibits referred to and the parcels of real property are described by reference to the recordation book and page.
And lastly, as heretofore set forth, there is a coxnmon question of law and fact affecting the various and several rights of the trustors, the trustee and the beneficiary; and, common relief, viz., a quiet title, is sought.
The point is made by the San Francisco Bank that as to the notes which have been paid off and as to their accompanying trust deeds where reconveyances have been executed, neither the Title Service Co., as trustee, nor the Long Beach Association, as beneficiary,
presently own anything
and thus-have no title to quiet
*427
either ■ on behalf of themselves or the homeowners.
This raises the question as to whether or not Title Service Co. and Long Beach Association, or either of them, can represent as a “class” (group 1 above), those homeowners who paid their notes to Long Beach Association and received re-conveyances from Title Service Co. prior to January 18, 1954; it also raises the question as to whether or not executed requests for reconveyances made by Long Beach Association, as beneficiary, to the Trustee, and in the possession of the trusted, and the paid notes in the possession of the beneficiary, upon which it executed the requests for reconveyances, are a present interest in “property,” the title to which may be quieted.
Section 14 of the California Civil Code, insofar as pertinent, defines property as follows:
“1. The word ‘property’ includes property real and personal;
“2. The words ‘real property’ are coextensive with lands, tenements, and hereditaments;
“3. The words ‘personal property’ include money, goods, chattels, things in action, and evidences of debt”.
Other applicable sections of the California Civil Code are:
Ҥ 654. Property, what. The ownership of a thing is the right of one or more persons to possess and use it to the exclusion of others. In this code, the thing of which there may be ownership is called property.
“§ 655. In what property may exist. There may be ownership of all inanimate things which are capable of appropriation or of manual delivery; * * * of all obligations; * * * and of rights created or granted by statute.”
Ҥ 658. (Definition of real property: Severance by agreement.) Real or immovable property consists of:
“1. Land;
“2. That which is affixed to land;
“3. That which is incidental or ■ appurtenant to land; * *
“§ 663. Personal property. Every kind of property that is not real is personal.”
“§ 953. (Things in action defined.) A thing in action is a right to recover money or other personal property by a judicial proceeding.”
“§ 954. Transfer and survivor-ship. A thing in action, arising out of the violation of a right of property, or out of an obligation, may be transferred by the owner. * * * ”
Sections 738, 739 and 1050 of the California Code of Civil Procedure relate to actions to quiet title. Section 738 Cal.Code Civ.Proc. provides: “An action may be brought by any person against another who claims an estate or interest in real or personal property, adverse to him, for the purpose of determining such adverse claim; * * Section 1050 Cal.C.C.P. provides: “An action may be brought by one person against another for the purpose of determining an adverse claim, which the latter makes against the former for money or property upon an alleged obligation * * Section 739 Cal.C.C.P. provides that if a defendant in a quiet title action files a disclaimer, “the plaintiff cannot recover costs.”
The Title Service Co., as trustee, having reconveyed the legal title to the properties which have been reconveyed, does not now own that legal title, and the Long Beach Association, having executed requests for reconveyances, does not own the right to request reconveyances, and presumptively has executed releases to both the trustor and trustee on the notes and trust deeds.
It is the position of both Title Service Co. and Long Beach Association, that each and all of the orders made by this court on the 51 separate interpleaderinterventions filed by the individual homeowners in case No. 5421, were final judgments; that the order in 5421 for the return of the Association by the con
*428
servator to the Association’s officers, of January 23, 1948, 14 F.R.D. 273 , at page 315, was a final judgment; that both had independent grounds of jurisdiction which are not affected or controlled by the opinion of the Court of Appeals in Home Loan Bank Board v. Mallonee, in 9 Cir., 196 F.2d 336 , or any of the other opinions of that Court of Appeals.
It is further the contention of both of them that the order of this court in 5421, of March 26,1948, (Appendix B) was not affected or, invalidated by the decision of the appellate court in Home Loan Bank Board v. Mallonee, 9 Cir., 196 F.2d 336 . I so held in the Order of November 30, 1953, Mallonee v. Fahey, D.C., 117 F.Supp. 259, 287 .
It is, and at all times has been, my view that as to each of the separate interpleader-interventions filed by the homeowners in 5421 (the list appears in 14 F.R.D. 273 , at page 306,) an independent ground of jurisdiction in interpleader existed and that therefore each of the judgments made thereon were valid judgments and no appeal having been taken therefrom, they are final, see 117 F.Supp. 259 . I find nothing in Home Loan Bank Board v. Mallonee, 9 Cir., 196 F.2d 336 , Fahey v. O’Melveny & Myers, 9 Cir., 200 F.2d 420 , or Fahey v. Calverley, 9 Cir., 208 F.2d 197 , which would indicate to the contrary.
And while it is my view that there were independent grounds for jurisdiction of this court in 5421 in making the restoration order of January 23, 1948, 14 F.R.D. 273, 315 , for the return of the Association from Ammann as conservator to the officers of the Association, pursuant to Home Loan Bank Order No. 388, it is also my view, that regardless of whether or not the court had, or did not have, jurisdiction to make its order in 5421, of January 23, 1948, restoring the Association, 14 F.R.D. 273, 315 , or
any
of the other orders and judgments in 5421, that the execution and filing of the disclaimer settles any right of the San Francisco Bank to go back of it, or
any
of the other orders and judgments, and now assert by virtue of its claimed lien a revival of the rights, duties, liabilities and obligations of the trustor, trustee, and beneficiary, or any or either of them, on said notes and trust deeds.
In the plethora of briefs, memoranda, points and authorities in this and related cases, which counsel have incorporated by reference in every one of the memoranda filed herein, and, on what is more than casual research on my own part, I have failed to find any reference to a decided case bearing on the subject as to whether or not either the Long Beach Association, as payee on the notes and beneficiary under the trust deeds, which notes were paid and reconveyances executed before January 18, 1954, or the Title Service Co. as trustee under such trust deeds, upon which it has executed reconveyances, owns such a present interest in property as to enable them to quiet title on their behalf.
The Title Service Co. has executed re-conveyances to the property upon the paid notes, and thus does not presently hold the legal title; it is alleged, and not denied, that it has in its possession the original executed requests for reconveyances; it probably still has the original trust deeds upon which it executed re-conveyances. The Long Beach Association, presumptively, has records or documents in its possession showing the payment to it in full of the notes by the homeowners; it also has received and has on hand the cash paid to it by the homeowners who have paid off their notes and trust deeds, of a sum in excess of $5,000,000. It is the contention of the San Francisco Bank, to which credence is lent by the disclaimer, that all those things are now merely evidences of former obligations which are past and discharged and do not exist as presently enforceable obligations. It is true that the trustee has parted with the legal title to the real property covered by the trust deeds and notes. It is true that the beneficiary has parted with its beneficial interest in the real property covered by the trust deeds and notes which beneficial interest was held by the trustee for its
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benefit, as well as the trustor’s. But it is also true that Long Beach Association, in place and stead of the promissory notes of the homeowners, and in place and stead of its beneficial interest in the property of the homeowners, has received a sum in excess of $5,000,000 subsequent to the orders on the interpleaderinterventions and subsequent to the order of March 26, 1948 (Appendix B) and prior to January 18,1954. It is also true that the Title Service Co. has in its possession the requests for reconveyances, which was the authórity for Title Service Co. as trustee, to execute the reconveyances to the real property covered by the trust deeds to the owners thereof.
As heretofore seen, a quiet title action can be brought to quiet the title to money, Cal.C.C.P. § 1050: the San Francisco Bank alleges an obligation on the part of Long Beach Association to turn that money which it has received over to the San Francisco Bank on its claimed liens. Hence an action will lie to quiet the title to the money which the Long Beach Association received from the homeowners upon all the notes and trust deeds paid prior to the effective date of the disclaimer, January 18, 1954.
As will shortly appear, the
end result
of the disclaimer was to quiet the title of the homeowners; the Long Beach Association was constituted the agent of the San Francisco Bank to collect from the homeowners on their trust deeds and notes; the Long Beach Association did collect and did execute requests for re-conveyances. The end result being to quiet the title of the homeowners, the intervening steps are valid, and Long Beach Association is entitled to a judgment quieting its title to the money received from the homeowners on the trust deeds and notes which were paid after the commencement of the within litigation and prior to January 18, 1954.
While the trustee, Title Service Co. has parted with the legal title to the real property under the trust deeds it nevertheless has in its possession the executed requests for reconveyance on each of the trust deeds. Such executed requests are evidence of its right to execute the reconveyance to the homeowners, and such evidence of a right is, in my judgment, “property,” the title to which can be quieted, and which, in view of the disclaimer and the agency agreements, and for the other reasons appearing in this memorandum, is entitled to be quieted.
But neither the Long Beach Association, nor Title Service Co. has such a present interest in the real property covered by the notes and their accompanying trust deeds upon which reconveyances were made, prior to January 18, 1954, as to entitle either of them to a judgment quieting the title to such real property or to secure a quiet title judgment on the property covered by trust deeds, as representative of that group of the class of homeowners whose notes were paid and who received reconveyances prior to the effective date of the disclaimer on January 18, 1954.
No such question as to the right of the trustee, or the beneficiary, to bring the action arises in connection with the notes which were not paid off, or the trust deeds thereon, on the date of filing of the disclaimer. As to those, the trustee had, and has, a clear, present, existing interest in the real property and in its rights under the trust deed; and just as clearly the beneficiary had, and has, a present, existing interest in the notes and a contingent interest as beneficiary under the trust deeds in the real property; and just as clearly the obligor on the notes and trustors on the trust deeds (the owner or buyer of the property) had a present existing interest in the notes, the trust deeds, and the property covered thereby; and the San Francisco Bank asserted in its complaint a claim of right adverse to all of them.
While it is true that the terms of the trust deeds provide that the trustee
or
the beneficiary may appear on béhalf of the trustor, in any suit of the type described in the trust deeds, it is also true that there is nothing in the
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trust deeds which prevents both of them from so appearing, Calif.Civ.Code, § 860, particularly when their interests are different, and where, as here, they seek a title quieted against claims by San Francisco Bank which are adverse to the interest of each of them and of the trustors.
For the foregoing reasons it is clear, and I so hold, that as class representative, both the Title Service Co. and Long Beach Association are entitled to a judgment as against San Francisco Bank quieting the title for the benefit of, and on behalf of each and all of the trustors, i. e., the “homeowners,” as a class, whose notes were
not
paid off and reconveyances
not
executed on the effective date of the disclaimer, on January 18, 1954, unless the summary judgment provisions of F.R.C.P. prevent it, which question will shortly be reached.
There remains for consideration in this connection, the question as to whether or not Title Service Co. as trustee is entitled to a judgment quieting its title to the trust deeds unreconveyed on January 18, 1954, and the Long Beach Association to a judgment quieting its title to the notes unpaid on January 18, 1954, and its interest in the real property under those notes and trust deeds. Unless the federal summary judgment procedure prevents it, it is my view that each of them is entitled to such a judgment.
In the first place, the title of the homeowner, which is quieted, flows from payments by him to the Long Beach Association on the homeowners note; that the Long Beach Association, in turn, by terms of the notes and trust deeds, then has the duty to execute a request for reconveyance to the Title Service Co. as trustee; that the Title Service Co., upon receipt of such request, then has the duty to execute a reconveyance. It is by that chain of events culminating in the reconveyance of the title to his real property, that the homeowner secures the end result, i. e., a title free from any claim arising out of his execution of the notes and trust deeds. That
is the end result of the disclaimer filed by San Francisco Bank,
and
is the end result
sought in the cross-claims to quiet title of Title Service Co. and Long Beach Association as to their
third
cause of action. It follows as a matter of logic that if the end result is valid, then all the intervening steps are valid also. So, the homeowner being entitled to a judgment quieting his title, after the effective date of the disclaimer, by San Francisco Bank, the property right of the Long Beach Association to receive the money on the notes, and its right to execute requests for reconveyances, and the property right of the trustee, Title Service Co., to honor such requests and to execute reconveyances, which is the final step, and to hold the legal title pending such step, are, of necessity, legal and valid and entitled to be, and are, quieted as against the claims of San Francisco Bank. Section 994 of the California Civil Code gives further force to this conclusion. It provides as follows: “Instruments essential to the title of real property, and which are not kept in a public office as a record, pursuant to law, belong to the person in whom, for the time being, such title may be vested, and pass with the title.”
As seen from memorandum of November 30, 1953, 117 F.Supp. 259 , at page 287, the San Francisco Bank has as security a sum in excess of $600,000 over and above any possible liability which could exist on the conservator’s notes of $6,300,000 which are the subject matter of the original complaint in this action, No. 13979.
Furthermore, by the collection agreement hereinbefore set forth in full by text, the Association is made the agent of the San Francisco Bank for the purposes of collecting on the notes which are secured by trust deeds and has a right to retain such collections until the occurrence of certain contingencies which are not indicated to be present by any of the pleadings. Having such right as agent, it also has the right to execute requests for reconveyances, and the Title Service Co. has the right to rely thereon and to execute reconveyances.
*431
The allegations of San Francisco Bank, in its fifth cause of action, on their face would appear to be an attempt to disaffirm that agency. But, by its disclaimer, the San Francisco Bank has effectively reaffirmed that agency as to all of the notes and trust deeds therein described, which are all of the notes, paid and unpaid, and all the trust deeds, reconveyed or not, involved in the cross-claims for quiet title, and are listed separately in the exhibits attached to documents concerned with the motions for summary judgment.
On the basis of the agency alone the property right of Long Beach Association to receive payments on all the notes and trust deeds so described, and the property right to execute requests for re-conveyances on the trust deeds, and the property right of the trustee, Title Service Co. to hold the legal title and to execute reconveyances on the request of Long Beach Association, as well as the property right of the trustor to receive reconveyances, are legalized so as to give them the right to have the title to such property rights quieted, as against the adverse claim of prior lien and superior right asserted by the San Francisco Bank, made in the fifth cause of action of its complaint.
Hence, it is clear to me, and I conclude, that Long Beach Association as payee on the notes of the individual borrowers, and as beneficiary under the trust deeds, and Title Service Co. as trustee under the trust deeds, are also entitled to a judgment against San Francisco Bank quieting the title of each of them as to notes and accompanying trust deeds which remained unpaid and unreconveyed on January 18, 1954.
The foregoing leaves undisposed of the cross-claim of Home Investment Co. and for reasons which presently appear I am of the opinion that they are entitled to a judgment quieting the title on behalf of themselves and their successors as to the 174 parcels involved, and also to such a judgment, as representatives of the class of all of the other homeowners who paid their notes and secured reconveyances prior to the effective date of the disclaimer, on January 18, 1954.
The Home Investment Co. asserts as to the 174 parcels upon which it filed interpleader-interventions that the judgments and orders made in 5421 are valid final judgments as to it and as representatives of a class of all of the remaining 51 separate interpleader-interventions who or which received similar judgments. But regardless of the validity or invalidity of those orders, the disclaimer sets at rest the right to a quiet title of all of those who interpleaded in 5421-5678, as well as all others who paid their notes and received reconveyances subsequent to the assignment by Ammann as conservator of their notes and trust deeds to the San Francisco Bank and prior to the effective date of the disclaimer, on January 18, 1954.
As to all that class, they come within the provisions of Rule 23 of F.R.C.P. concerning class actions. What has heretofore been said concerning the right of Title Service Co. and Long Beach Association to appear for members of the class of homeowners whose notes were unpaid on January 18, 1954, is equally applicable to those homeowners represented as a class by the Home Investment Co. whose notes were paid and who secured reconveyances
prior
to January 18, 1954, and will not be repeated here, except to add that they are all subject to one common peril, viz., the claim of the San Francisco Bank that its claimed lien is valid as asserted in its fifth cause of action as of a date prior to the time of payment of the notes and execution of the reconveyances thereon.
Nor, in my judgment, is there any question concerning the right of the Home Investment Co. to secure such judgment quieting title, even though they may not presently be the owners of the properties upon which they secured re-conveyances, and even though all of the other 2200 or more who secured reconveyances may not presently be the owners of those properties.
*432
Quiet title actions under the various sections of the California Code of Civil Procedure are in the nature of actions in equity. The statutory right to determine adverse claim upon either real or personal property is an improvement upon the old bill of peace. Castro v. Barry, 79 Cal. 443, 446 , 21 P. 946 .
In speaking of a quiet title action the Supreme Court in Sharon v. Tucker, 1891, 144 U.S. 533 , 12 S.Ct. 720, 723 , 36 L.Ed. 532 , in an opinion by Justice Field stated: “The form of the remedy will vary according to the particular circumstances of each case. ‘It is absolutely impossible,’ says Pomeroy, in his treatise, ‘to enumerate all the special kinds of relief which may be granted, or to place any bounds to the power of the courts in shaping the relief in accordance with the circumstances of particular cases. As the nature and incidents of proprietary rights and interests, and of the circumstances attending them, and of the relations arising from them, are practically unlimited, so are the kinds and forms of specific relief applicable to these circumstances and relations.’ ”
If Home Investment Co. and other similarly situated homeowners who paid their notes and received reconveyances prior to the effective date of the disclaimer on January 18, 1954, do not now own the properties, they have parted with the fee title; if they parted with fee title they had to execute a grant deed; if they executed a grant deed, they either expressly or impliedly covenanted and warranted, “That such estate is at the time of the execution of such conveyance free from encumbrances done, made, or suffered by the grantor, or any person claiming under him.” Cal.Civ.Code, § 1113. The notes and trust deeds were made by the homeowner, and the claimed assignments thereof were made to the San Francisco Bank by the conservator in the name of the Long Beach Association, which was a person claiming under the right given by the homeowner in the trust deeds and notes. If the claims of San Francisco Bank in the fifth cause of action of its complaint were literally enforced, any homeowner, who since payment of his note to Long Beach Association and receipt of reconveyance from Title Service Co. has sold or conveyed his property, would not be free of the encumbrance of the claimed lien of San Francisco Bank.
By Cal.Civ.Code, § 1460 et seq. the above described covenant is a covenant running with the land, and may be enforced by the grantees.
In the article “Quieting Title” in 44 Am.Jur. par. 53, page 41, it is stated, “There is some difference of opinion as to the right of a grantor with covenants of warranty to maintain an action to remove or prevent a cloud on the title conveyed. A majority of the courts take the view that one who has conveyed real property to another by deed containing covenants of warranty may maintain an action against a third person asserting a title or interest hostile to the covenants for the purpose of removing or preventing a cloud on the grantee’s title at least where a part of the purchase money remains unpaid or is withheld by the grantee pending confirmation of his title.”
The cases collected at page 711 of 97 A.L.R. do not all turn upon the question of whether or not any purchase money remains unpaid. But they do give illumination to the reason for the rule that a vendor may bring a suit to quiet title even though he has parted with the title.
As pointed out in Ely v. Wilcox, 1870, 26 Wis. 91 , the obligation of a grantor to his grantee under a covenant of general warranty of title would not be fully performed by his paying back the purchase money, with interest, since the letter and spirit of the covenants require him to defend and make good the title which he purported to convey; and in order to do this effectually, he must have the right to come into a court of equity to establish that title.
In Jones v. Nixon, 1899, 102 Tenn. 95 , 50 S.W. 740, 742 , holding that one-who had conveyed land with full cove
*433
nants of warranty could maintain a suit in equity to prevent the consummation of a proceeding that would cloud his grantee’s title, the court stated: “Jones is bound, by the covenants of his deed, to defend and protect the title of his several vendees, and he ought to be allowed to do so, if he chooses, by an aggressive anticipatory action, rather than wait and make defense to the prospective suit or suits of him who is about to consummate proceedings that will east a dangerous cloud upon that title. He is undoubtedly an interested party. In reality, it may turn out that he, of all persons, is the one most concerned in the dissipation of the impending cloud, and, being so, a court of equity will not be slow to come to his relief.”
In Owen v. Paul, 16 Ala. 130 , the court pointed out, as a further reason for granting the complainant equitable relief, the fact that, since the conveyance by the complainant, title had passed through the hands of numerous purchasers who were dependent upon the complainant’s title for their protection, and on failure thereof each of them must seek indemnity from the other.
It must be remembered in this connection that there are about 2200 parcels of land involved and as many separate owners. The observations and conclusions expressed in Yuba Consolidated Gold Fields v. Kilkeary, 9 Cir., 206 F.2d 884 , with relation to equitable jurisdiction based on multiplicity of suits and class actions in a bill of peace are pertinent in this connection.
It must also be remembered that the disclaimer is made for the benefit of
whoever
owned the title to the properties involved on its effective date. It is of the very essence of equity that 2200 separate individuals should not be required to file separate suits, when the same result can lawfully be obtained in one suit, as here.
From the foregoing it is my conclusion that Home Investment Co. is properly before the court on behalf of itself and its successors in title, and on behalf of, and as a representative of each and all that class of homeowners and their successors in title, who, or which, prior to January 18, 1954, the effective date of the disclaimer, paid their notes to Long Beach Association and received reconveyances for their respective properties.
It is, of course, contended that the cross-claims of Title Service Co. and Long Beach Association, as to the
third
cause of action to quiet title in the cross-claim of each, and the cross-claim of Home Investment Co. do not state a claim for relief. Without separate discussion on that subject, it is seen from what has been said, that each of them does, and I so hold; but that each is entitled only to the relief heretofore indicated, unless under the Federal Summary Judgment procedure they are not now entitled to it as a matter of summary judgment, which question I will now consider.
Can, and Should, Summary Judgment Be Granted Quieting Title?
Rule 56 F.R.C.P. deals with summary judgments. Rule 56(c) provides, inter alia, as follows:
“The judgment sought shall be rendered forthwith if the pleadings, depositions, and admission on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.”
Several “material facts” are involved:
(1) does San Francisco Bank claim any present right, title, lien, interest or estate in, to or upon any or all of the property, the title to which is found to be quieted as hereinbefore set forth?
(2) Did the homeowners who secured re-conveyances prior to January 18, 1954, pay the amount of their notes to Long Beach Association? (3) Did Long Beach Association execute requests for reconveyances on such notes and their accompanying trust deeds to Title Service Co. as trustee? (4) Did Title Service Co., as trustee, execute reconveyances on all of the notes and trust deeds where requests were made prior to January 18, 1954?.
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Items (2), (3) and (4) are alleged to be true by the verified pleadings of Long Beach Association, Title Service Co. and Home Investment Co., and by the verified supporting papers on their motions for summary judgment. None of such facts are denied. There is, therefore, no “genuine issue,” as to them.
As to question numbered (1) above stated, there can be no “genuine issue” as to that fact in view of the disclaimer of the San Francisco Bank.
There is no dispute as to other material facts viz., the execution by the Los Angeles Bank as predecessor of San Francisco Bank of the ‘Collection Agreement’; the assumption and recognition by San Francisco Bank of the obligation of the collection agreement; the continued collection by Long Beach Association and the continued payment by trustors on the notes and trust deeds upon which reconveyances were not made prior to January 18, 1954; the holding by Title Service Company of the legal title as trustee of the real property and the interest of the Long Beach Association as beneficiary on the trust deeds and unpaid notes and trust deeds which were not paid off prior to January 18, 1954; and the assertion by San Francisco Bank in its Fifth Cause of Action of the complaint herein of a claim adverse to the title and rights of those seeking to quiet title and those on whose behalf title is sought to be quieted. Hence, there is no genuine issue as to any material fact, either as to the notes which were paid and trust deeds upon which reconveyances were executed prior to January 18, 1954, or as to the notes and trust deeds which have been in process of payment and reconveyance since that date.
From what has heretofore been said, it is seen that, there being no genuine issue as to any material fact, the cross-claimants are entitled to a judgment as a “matter of law” on the quiet title phases of this litigation as heretofore stated.
While summary judgments do not find great favor, nevertheless this is an instance where the situation is -clearly within the Federal Rules of Civil Procedure for summary judgment, and certainly this complicated litigation with its quagmire of pleadings is one where, if ever, the rule permitting summary judgments ought to be permitted to be given the force and consequences it was intended to have.
Section 54(b) of the Federal Rules of Civil Procedure deals with judgment upon multiple claims. It provides as follows:
“Judgment Upon Multiple Claims. When more than one claim for relief is presented in an action, whether as a claim, counterclaim, cross-claim, or third-party claim, the court may direct the entry of a final judgment upon one or more but less than all of the claims only upon an express determination that there is no just reason for delay and upon an express direction for the entry of judgment.”
Here, if ever, the above rule should be given effect.
The questions resolved in this memorandum have plagued this and related litigation from its inception, in May 1946. Questions relating to the thousands of those who were buyers of homes and payors on notes secured by deeds of trust, have arisen at every turn, and have protruded into almost every hearing and every document filed in this and in 5421-5678, the record of which, on appeal, comprised more than 12,000 printed pages. And while 51 interpleader-interventions (each a separate suit), resulted from such controversies, it has been the earnest endeavor of this court, by the separate judgments in them, and by the turn-back order of January 23, 1948, 14 F.R.D. 273 , at page 315, and by the Orders of March 13 and March 26, 1948 (App. A and B), as well as many other interim orders, to preserve the rights of the thousands of persons who innocently dealt with all, or various, of the parties to this litigation, and to not create or permit any situation which would require them to each get counsel, and pursue their separate protracted and
*435
prolonged ways through litigation in some court or another, to secure that which should have been long ago eliminated from this litigation; and which could have been eliminated had various parties not persisted in their determination to have everything decided their way, or not at all, and without regard to the consequences to those who will now be secured in their quiet title.
The order for turn-back of the Association, of January 23, 1948 and the Orders of March 13 and 26, 1948 (Appendixes A and B) were, in my judgment, then sufficient to accomplish those purposes and were, in my opinion, valid final appealable orders. None of them were appealed from, notwithstanding which, the appellate court in its mandate on the appeal from another order (of injunction), directed this court to make orders vacating or reversing certain orders not appealed from and, in my judgment, not appealable under the law. Nevertheless I felt it my duty to obey the mandate as I interpreted it, 117 F.Supp. 259 . None of the parties sought clarification or recall of the mandate by the court which issued it, or its review by certiorari in the Supreme Court. By that mandate the settlement of titles, which I thought settled, was questioned by the parties. But by judgments in accordance with this memorandum they will, it is hoped, be finally settled.
Some place along the line this litigation must be kept manageable, and Rule 54(b) permits it to be done, at least in some measure in this case, by an “express determination that there is no just reason for delay”, which I now, also, make, in accordance with Rule 54(b) as interpreted by this Circuit in Wynn v. R.F.C., 9 Cir., 212 F.2d 953 .
From the foregoing it is seen, without further discussion, that a judgment in favor of San Francisco Bank on its fifth cause of action as pleaded, would adversely affect Home Investment Co., Title Service Co., and Long Beach Association and that therefore, Home Investment Co., Title Service Co. and Long Beach Association, are entitled to intervene in this action under Rule 24 (a) (3) F.R.C.P., which reads as follows:
“(a) Intervention of Right. * * * (3) when the applicant is so situated as to be adversely affected by a distribution or other disposition of property which is in the custody or subject to the control or disposition of the court or an officer thereof. As amended Dec. 27, 1946, effective March 19, 1948.”
To summarize my conclusions to this point, I hold:
1. That the cross-complaint of the Title Service Co., by its
third
cause of action
states a claim for relief
to
quiet title
as against San Francisco Bank, (1) on behalf of itself as to all of the trust deeds described therein, and, (2) on behalf of the trustors on each of said trust deeds as a class; accordingly, the motion (No. 7 supra) of San Francisco Bank to
vacate
the order granting leave to Title Service Co. to intervene and to strike its complaint in intervention is
denied',
and the
motion to dismiss
the complaint in intervention is denied
as to the third cause of action
in the complaint of Title Service Co. (The motion to dismiss the remainder of its complaint will shortly be dealt with.)
2. The cross-complaint of Long Beach Association, by its
third
cause of action, states a claim for relief against San Francisco Bank, (1) to
quiet title
on behalf of itself as to all of the notes and trust deeds securing them wherein it is named as beneficiary described in said complaint, and, (2) on behalf of, and as representative of the class of, the payors on said notes who are trustors under said trust deeds; accordingly, the motion (No. 6, supra) of San Francisco Bank to
dismiss
the cross-claim of Long Beach Association is
denied
as to the
third cause of action in said cross-claim,
and the motion to
strike
said cross-claim is likewise
denied
as to the
third cause of action.
(The motion to dismiss and strike the remainder of the cross-claim of Long Beach Association will shortly be dealt with.)
*436
3. The cross-complaint of Home Investment Co. for quiet title states a claim for relief to quiet title against San Francisco Bank, (1) on behalf of itself and, (2) on behalf of, and as representative of the class of those described therein, whose notes were paid and re-conveyances issued prior to January 18, 1954; accordingly, the motion (No. 4, supra) of San Francisco Bank to
dismiss
the cross-claim of Home Investment Co. is denied; and the motion of San Francisco Bank to
strike
said cross-claim and drop Home Investment Co. as a party to the action is
denied.
4. The
motions for summary judgment
(No. 3, supra) of Title Service Co. and Long Beach Association, to quiet title,
are granted:
(1) on behalf of each of them respectively, as their interests appear, in and to the notes which were
not
paid prior to January 18, 1954, and in and to the trust deeds upon which re-conveyances had
not
been executed prior to January 18, 1954; (2) on behalf of each of them, insofar as their interest may appear, in and to the real property covered by the notes and their accompanying trust deeds which were
not
paid on or prior to January 18, 1954; (3) in and to the real property covered by the notes and trust deeds, on behalf of each member of the class of “homeowners,” whose notes were not paid or trust deeds reconveyed on January 18, 1954, as the interest of each member of that class appeared on January 18, 1954.
The motion of Long Beach Association
for summary judgment
to quiet title to the money received by it from the “homeowners” on the described notes and trust deeds prior to January 18, 1954, is
granted-,
The motion of Title Service Co. for
summary judgment
to quiet title to the requests for reconveyances on the described notes and trust deeds, upon which it executed reconveyances prior to January 18, 1954, is
granted;
the
motion
of
Long Beach
Association and
Title Service Co. to
quiet title to the real property on behalf of each of them, and on behalf of the “homeowners” who paid their notes and secured reconveyances prior to January 18, 1954, is
denied.
5. The
motion
of Home Investment Co.
for summary judgment
(No. 3, supra) is granted, (1) as to the
174 parcels
on behalf of itself and, (2) its successors in title to said properties, and, (3) on behalf of itself and, (4) as a representative of the class of all those, and (5) their successors in title, who paid their notes to Long Beach Association and secured reconveyances prior to January 18, 1954 and after May 20, 1946. The detailed description of such notes, trust deeds and the real property covered thereby is likewise found in the moving papers for summary judgment. The motion for summary judgment by Home Investment Co. is
otherwise denied.
The parties have argued many other questions orally and in the briefs. I have examined them but find it unnecessary to discuss or pass upon them, in view of the foregoing opinions and conclusions.
Summary Judgment as -to “Official Defendants”
The foregoing discussion does not dispose of the claim of Title Service Co. and Long Beach Association that they are entitled to summary judgment quieting title against those who have been described in the combined litigation, for lack of a more convenient term, as “Official Defendants.” They have appeared herein by filing (1) a Motion (No. 2) to quash service of summons, and (2) objections to motions for summary judgment.
In treating of the objections to motion for summary judgment, I will deal with them at this stage of this memorandum, only insofar as they are concerned with the
third
cause of action of the cross-complaint of Title Service Co. and the
third
cause of action of Long Beach Association (the quiet title counts). For reasons which will hereafter appear I will not at this point deal with the motion to quash service of summons, except as to the Administrator of Veterans Affairs.
*437
The Home Loan Bank Board, William K. Divers, J. Alston Adams, Kenneth G. Heisler, O. K. LaRoque, Federal Savings
&
Loan Insurance Corp., A. V. Ammann, George K. Bramley and Carl R. Gray, Jr., (the “Official Defendants”) filed an opposition to the three motions for summary judgment on the following grounds: (1) the court lacks jurisdiction of the subject matter of the action; (2) the cross-claims fail to state any case or controversy within the jurisdiction of a federal court; (3) the cross-claims of Long Beach Federal Savings & Loan Association, Title Service Co., and Home Investment Co. fail to state any claim upon which any relief can be granted against these defendants; (4) 'Home Investment Co. is not a proper party to maintain this purported class action; (5) none of these defendants now asserts or ever has asserted any claim of right, title or interest to any of the property referred to in said motions for summary judgment; (6) the alleged claims of movants have been finally determined adversely to them by the Court of Appeals for the Ninth Circuit and are res judicata.
The objection was accompanied by a memorandum of points and authorities and affidavits of Wm. K. Divers and A. V. Ammann in support thereof. Affidavits also accompanied the motions for summary judgment and the motions themselves incorporated considerable of the record in the consolidated case 5421-5678. Hence the motions for summary judgment and the opposition thereto are both “speaking” motions.
As hereinbefore seen, without being again repeated, the
third
cause of action of the cross-claims of
each,
the
Title Service Co.
and
Long Beach Association,
concerns property located in this district. The question on the objections to summary judgment turns on whether or not the “Official Defendants” or any of them
did, do,
or
can
claim any interest adverse to the cross-claimants in or to the property involved, which asserted adverse interest can be reached in a quiet title action under the California law. If such asserted adverse interest involves merely the application of laws or regulations of a government agency, then such interests are not the subject of adjudication in a quiet title action. Devine v. City of Los Angeles, 202 U.S. 313 , 26 S.Ct. 652 , 50 L.Ed. 1046 .
Of the “Official Defendants,” I fail to see how or in what way the Administrator of Veterans Affairs can be concerned with the matter of titles to homes or any of the transactions involved on the notes or trust deeds described in any of the cross claims. The
motion to quash
is granted as to him.
The Home Loan Bank Board was originally created by statute on July 22, 1932, 47 Stat. 725 ; 12 U.S.C.A. § 1421 et seq. Its functions, as delineated in that Act, were supervisory of the Federal Home Loan Banks which were also authorized to be created under that statute.
On June 13, 1933 Congress created the Home Owners Loan Corporation, 48 Stat. 128 ; 12 U.S.C.A. § 1461 et seq. The Home Owners Loan Corp. was a sue-and-be-sued corporation, 12 U.S.C.A. § 1463 , and was under the direction and supervision of the Home Loan Bank Board. The Home Owners Loan Corp. was authorized to loan money on real property, including homes. By the Homeowners Loan Act of 1933, last above mentioned, the Home Loan Bank Board was authorized to provide for the organization and regulation of Federal Savings and Loan Corporations, 12 U.S.C.A. § 1464 , which were authorized to loan money on the security of first liens upon homes or combination of homes and business property within 50 miles of their home office. Such is the Long Beach Association.
By Reorganization Plan No. 3, effective July 27, 1947 ( 12 F.R. 4981 ) the Board of Directors of the Plome Owners Loan Corp. was abolished and all of its functions transferred to the Home Loan Bank Board. On June 30, 1953 Congress abolished the Home Owners Loan Corp., 67 Stat. 126 , within a time to be fixed by the Home Loan Bank Board (see note following 12 U.S.C.A. § 1463 ), and fixed a period of limitation within which claims
*438
might be filed against the Home Owners Loan Corp. or its successor. That statute also provided “with respect to any action, suit, or other legal proceeding commenced against the Corporation prior to the date of its dissolution, the Corporation shall continue a body corporate for the purpose of defending such suit and for no other purpose, and service of subpena or other process in such proceeding may be made upon the Corporation by serving the same on the Secretary to the Home Loan Bank Board.” That statute also provided that effective as of the date of the dissolution of the corporation the title to any and all real property remaining in the corporation on such date is transferred to the United States.
It does not appear from the cross-claim of Long Beach Association or of Title Service Co. as to the
third
cause of action in each of the cross-claims, that any adverse claim to either the notes or the trust deeds or the property covered by the notes and trust deeds was ever asserted by the Home Owners Loan Corp. So far as I am able to ascertain, from such pleadings and those incorporated in them by reference, the only connection of the Home Loan Bank Board with this involved matter, was in its supervisory capacity, as the Home Loan Bank Board, and not as the successor in interest of the Home Owners Loan Corp. The Home Loan Bank Board did appoint Ammann as conservator, who seized the property involved; it did create the San Francisco Bank; it does have supervisory power over the San Francisco Bank and the Long Beach Association; and it must be presumed that it authorized the San Francisco Bank to execute the disclaimer. But counsel has not called my attention to any provision of the statutes, and on independent research I have been unable to find any, which authorizes the Home Loan Bank Board to, itself, seize property or claim a title to any property which its conservators or receivers may take, except where it has assumed the functions of the Home Owners Loan Corp. which, so far as I have been able to ascertain from the pleadings, as hereinbefore indicated, are not involved- in any of the conduct under examination or challenge in this case since its inception in 1946. That being so, the Home Loan Bank Board did not, does not, and cannot make any claim of title to the “property” involved in the third cause of action of each, Title Service and Long Beach Association, which is adverse to those cross-claimants.
Under the doctrine of Devine v. City of Los Angeles, supra, the Home Loan Bank Board is thus entitled to have the
motion
for summary judgment denied on the third cause of action of both Title Service Co. and Long Beach Association, and it is denied.
4
The members of the Home Loan Bank Board, as such members, fall within the same category as the Home Loan Bank Board, and are entitled to have
summary judgment
denied as
to them.
Such members, as individuals, have never made any claim to personal ownership, as individuals, of any of the “property” involved. And I cannot read the long and complex allegations of either Title Service Co. or Long Beach Association as alleging anything to the contrary.
No summary judgment
quieting title on the motions
*439
therefore can be entered as to them as individuals, and the motions are denied.
The Federal Savings and Loan Insurance Corporation is likewise a creature of statute, June 27, 1934; 48 Stat. 1255 ; 12 U.S.C.A. § 1724 et seq. While it is a “sue and be sued” corporation, 12 U.S.C.A. § 1725 , its entire interest in any of the notes, trust deeds or properties covered thereby is one which can come into being only in the event of the casualty which is insured against. The casualty is not alleged to exist or to have at any time existed. The right is a right to be subrogated to the interest of the insured on the happening of such casualty. Such casualty may never occur. It is too speculative to be said to be an “adverse” claim which can be quieted in an action as stated in the
third
cause of action of the cross-complaints of Title Service Co. and Long Beach Association. Its governing body is composed of the same persons who are members of the Home Loan Bank Board. Their claim as such members can be no greater than the Insurance Corporation; and no allegation can be found which can be construed to charge that they, as individuals, are claiming any of the property involved. Thus the
motions for summary judgment
as to the Federal Savings and Loan Insurance Corp., its directors, as directors and as individuals,
are denied.
A different situation exists as to Ammann and Bramley. Ammann was Conservator, and Bramley was the deputy conservator. Ammann
did take
and
have possession
of all the trust deeds and notes involved and
did execute assignments
and transfers thereof to the San Francisco Bank. As appears in the memorandum of November 30, 1953, 117 F.Supp. 259, 315 , the association was returned to its officers and directors on January 24, 1948, under Home Loan Bank Board Order No. 388, and the order •of this Court in 5421-5678. As also appears therefrom and from the allegations •of the various pleadings in this ease, there are contentions made that Ammann -continued to be conservator for the Long .Beach Association after such return and orders directing the return. However, one of the grounds of objections to the motion for summary judgment is that Ammann and Bramley do not now assert any claim of right, title or interest to any of the property referred to in the motions for summary judgment. In view of the fact that there was at one time the adverse claim of Ammann as Conservator and Bramley as his deputy, to the property, and that they now disclaim such

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/1968639. Public record. Not legal advice.