# Fahey v. O'Melveny & Myers Federal Home Loan Bank of San Francisco v. O'Melveny & Myers

> Court of Appeals for the Ninth Circuit · December 17, 1952 · 200 F.2d 420

URL: https://www.frixlaw.com/law-library/cases/230604

## Case

- **Full name:** FAHEY Et Al. v. O’MELVENY & MYERS Et Al.; FEDERAL HOME LOAN BANK OF SAN FRANCISCO v. O’MELVENY & MYERS Et Al.
- **Court:** Court of Appeals for the Ninth Circuit
- **Decided:** December 17, 1952
- **Citations:** 200 F.2d 420
- **Precedential status:** Published
- **Opinion:** Opinion by Bone
- **Judges:** Stephens, Healy, Bone
- **Cited by:** 54 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/230604

## How later opinions describe it (automated extraction)

- describing these banks as governmental banking agencies

## Opinion text

BONE, Circuit Judge.
I
The essential issues presented on this appeal primarily involve and concern the status and operations of Federal Home Loan Banks. The instant appeal is from one of the many orders made by the lower court in proceedings in the so-called “consolidated cases” (“Mallonee Case” and the “Los Angeles Action”) described in our opinion in Case No. 12,511, 196 F.2d 336 , entitled “Home Loan Bank Board et al. v. Mallonee et al.,
and
consolidated case Federal Home Loan Bank of San Francisco, et al. v. Federal Home Loan Bank of Los Angeles, et al.” For convenience wc shall hereafter refer to the entensive litigation embraced in these consolidated cases as the “main case,” and for a better understanding of the facts and issues involved in this appeal reference should be had to our opinion in the main case. Many important contentions advanced on this appeal were relied on by the same parties in that case and they have stipulated that portions of the printed record in appeal No. 12,511 should be available for reference and utilization in this case. We approved this procedure.
A frequent reference will be made herein to “the Board” or “Board.” As indicated in footnote 3 to our opinion in the main case, 196 F.2d 342 , the composition and official status of the administrative authority or agency having supervisory control over the operations of Federal Home Loan Banks under the Federal Home Loan Bank Act, Chapter 11, Title 12 U.S.C.A., underwent the various changes there noted. Our use of the terms “Board” or “the Board” is a reference to this central administrative agency or authority and includes (when suggested in context) the former Home Loan Bank “Administration” referred to in our opinion in case No. 12,511. The term “association” or “associations” is a reference to any Federal Savings and Loan Association other than the “Long Beach Federal Savings and Loan Association” (a litigant in the main case) the latter being referred to herein as “Association.”
A reference to three Board orders here in controversy means the three reorganization orders issued by the Board (then “Administration”) on March 29, 1946, these being numbered 5082, 5083 and 5084. See footnote 5 in our main case opinion for text of the orders. 196 F.2d 343 . The former Federal Home Loan Bank of Los Angeles was abolished by these Orders which merged it (along with the Federal Home Loan Bank of Portland) into the Federal Home Loan Bank of San Francisco. The former Federal Home Loan Bank of Los Angeles will be variously referred to by that title or as “Los Angeles Bank,” or “Los Angeles.” “Los Angeles Action” means the action instituted in the main case
*426
by the Federal Home Loan Bank of Los Angeles and six “association” co-plaintiffs. It was there consolidated with the socalled “Mallonee Case.”
The Federal Home Loan Bank of San Francisco will be referred to by that title or simply as “San Francisco.” Where necessary or desirable, the Federal Home Loan Bank of Portland will be referred to by that title, or as “Portland,” or the “Portland Bank.”
The highly involved controversy described in our opinion in the main case appears to be without a counterpart in the books and by reason of entire absence of case law authority which directly deals with and/or directly passes on issues here presented Which involve the problem of administrative supervision of Federal Home Loan Banks, we must and do conclude that the final and conclusive answer to many important contentions of the parties before us must necéssarily be found in the clear and unambiguous terms of the Federal Home Loan Bank Act. Allied legislation touching the operations of associations under the Home Owners’ Loan Act of 1933, as amended, 12 U.S.C.A. § 1461 et seq., is also involved. Where any issues raised in the main case legitimately come within the orbit of the instant appeal we will treat them as proper factors for consideration and comment.
The Basis of This Appeal.
The order which is the subject of the instant appeal directed the payment of “interim attorneys’ fees” to appellees from certain funds which had .been impounded in the registry of the lower court by an order made during proceedings in the main case. Which of the various litigants in that case owned these funds, and/or had right to possession of the whole Of any part thereof, was a controversy confronting the lower court, and the impounding order here involved placed these funds and assets in the registry of the court pending final adjudication of the merits of the various claims. At a later point we discuss their source and nature.
The order on appeal originated in the manner we now indicate. It was entered on June 19, 1950 in the main case and was issued pursuant to motions filed in that case in January 1949 and February 1950 by the co-plaintiffs in the so-called “Los Angeles Action.” Appellees were and are counsel for the former Federal Home Loan Bank of Los Angeles and one of its six association co-plaintiffs (Wilmington) and the motion was based on the grounds that this former bank had no funds with which to pay its attorneys for services in that case “since all of its assets are in the possession of Federal Home Loan Bank of Portland, sometimes known and referred to as a Federal Home Loan Bank of San Francisco,”
1
and
that the associated plaintiffs (plaintiffs in the so-called “Los Angeles action”) “have a beneficial interest in the assets of Los Angeles Bank
now in possession of said defendant Federal Home Loan Bank of Portland
sufficient to entitle them, and each of them, to the payment
out of said assets
of the fees of their attorneys.” (Emphasis supplied.)
The order directed the clerk of the lower court to pay from and out of these impounded funds the sum of $67,500 to- appel-lees who were counsel for Los Angeles, for services theretofore rendered in the so-called “Los Angeles action”; and to pay the sum of $7,500 to counsel for Wilmington Association (a co-plaintiff in said ac
*427
tion) for services theretofore rendered in the “consolidated actions.”
8
The court described the allowance as “an interim allowance on account only” and the formal order provided that the payment be made “out of funds and moneys heretofore deposited and now on deposit in the Registry of the Court in the above entitled consolidated actions”
and
that “the amounts ordered hereby paid generally from the funds in the Registry of the Court are not by the terms of this Order, imposed, allocated or assessed upon or against any specific party or parties, fund or funds, provided, however, that it is hereby determined and ordered that the amounts, or any part thereof, herein allowed and ordered paid from said funds shall never
be
allocated against
or
imposed upon funds or assets owned by or belonging to the Long Beach Federal Savings and Loan Association, (Association) or any of its shareholders, members or stockholders, either individually, or as an association, except as such association shall be required to bear as a member-shareholder only of a Federal Home Loan Bank. The intention being that the services for which fees are herein allowed are primarily for the benefit of said Los Angeles Bank and its associa-
tion member-shareholders as distinguished from the Long Beach Association and other parties as separate entities or parties.”
The order further provided “that Long Beach Association
2
3
shall not at any time be required to deposit any additional money or property in Court in these consolidated actions upon or because of the payment of all or any portion of the sums herein ordered and directed to be paid.”
It will be noted that the foregoing motion of Los Angeles refers to “assets of Los Angeles Bank now in possession of said defendant Federal Home Loan Bank of Portland.” As indicated above, “Portland” and “Los Angeles” banks were merged into the Federal Home Loan Bank of San Francisco.
Other appeals now pending in this court also- involve these impounded funds which suggests the necessity of identifying their source and nature. The record indicates, and stress is given the fact that this fund arose out of five “interpleader or intervention proceedings” in the so-called “Mal-lonee Case,” supra, (which was consolidated with the “Los Angeles Action” in the main case) each of which interpleader proceedings was based on the presumption that
*428
the 1946 order of the Federal Home Loan Bank Administration appointing Ammann as Conservator of the Long Beach Federal Savings and Loan Association
was void ab initio,
and that
every act
performed by Am-mann in the management of.the said Association was a nullity and therefore subject to collateral attack. These interpleader and/or intervention proceedings in ,the main case which we describe at this point were instituted by Title Service Company, Robert H. Wallis, Home Investment Company, George Turner and the Long Beach Federal Savings and Loan Association.
AU were parties in and to the so-called Mallonee case.
Home Investment Company intervened on July 1, 1946 to secure an order quieting title and to secure recon-veyance of 174 deeds of trust which had previously been interpleaded by Title Service Company in its answer and cross-claim in interpleader and which deeds had been deposited in court. Home Investment Company does not appear to be a claimant to the funds here considered. '•
As to the intervening and interpleading parties mentioned in the preceding paragraph see our opinion in the main case, 196 F.2d 336, 378, 379 , wherein we held that the five original actions or proceedings instituted by the there identified Mallonee-Association group and Wallis and Home Investment Company should have been dismissed by the lower court for the reason that they failed to state a claim upon which the relief they demanded could be granted and for the further reason that Association had failed to exhaust tendered and available administrative remedies.
Title Service Company (a'John Doe defendant in the Mallonee case) filed so-called cross-claims in interpleader in that action in which it alleged that it was trustee under some 8,000 trust deeds securing loans made by the Association with a remaining balance of over $12,000,000; that it was faced with a demand of the Conservator that it make reconveyances of title to borrowers on repayment of loans secured by the trust deeds while the Association was demanding that it not make such reconvey-ances. It asked the lower court to adjudicate the “rights” of these adverse claimants. In this posture of the controversy the court thereafter required borrowers desiring to obtain reconveyances of title on final repayment of their loans, to
intervene
in the Mallonee action and to deposit their final payment in the registry of the court. The court also ordered the Conservator to deposit in court all sums paid -by these borrower interveners during the Conservator-ship, after which the court ordered delivery of the reconveyances. In proceedings in the Mallonee case $1,641,037.96 of Association funds were thus drawn into the registry of the court.
In his “cross-claim in interpleader” Wallis, a John Doe defendant in the Mallonee case, deposited an unendorsed cashier’s check for $50,000 payable to himself — a check delivered to him by Association to be used to pay his legal fees, etc., in litigation in connection with the troubles of Association described in our opinion in the main case. He prayed that the court “instruct” him as to his “rights and duties” in the face of conflicting demands upon him by Association and the Conservator as to “the use of the check.”
After the termination of the Conserva-torship over Association, Turner, a John Doe defendant in the .Mallonee case [ 196 F.2d 349 ], filed a so-called “cross-claim in interpleader” alleging certain undefined conflicting claims to rentals due from him under a lease of real property from Association. He deposited in the registry of the court the sum of $11,515.87 (the amount then alleged to be due). From time to time he deposited additional rentals as they became due and at the date of the order here appealed from, the amount of rentals so “interpleaded” and drawn into the registry of the court was $18,503.52.
In April 1949, Association, claiming conflicting demands by the “Federal Savings and Loan Insurance Corporation”, see sub-chapter IV, Title 12 U.S.C.A. § 1724 et seq., on the one hand and Association shareholders (.Mallonee group) on the other, was permitted by the court to
interplead
in the Mallonee case and deposit in the registry of the court the sum of $24,374.06 being the amount of insurance' premiums claimed by the sáid insurance corporation, which was
*429
required by statute to insure the accounts of Association. See 12 U.S.C.A. § 1726 (a). As succeeding installments of insurance premiums fell due, Association filed “supplemental interpleaders” in the Mallonee case in connection with which proceedings these “installments” were deposited in court. At the date of the order here on appeal the amount of insurance premiums so “interpleaded” and deposited in the registry of the court was $55,485.25.
In May 1946, Association, acting through its (then) Conservator (Ammann)
borrowed
from the Federal Home Loan Bank of San Francisco the sum of $7,300,000 (later paid down to $6,300,000) and pledged as security for this loan some $12,000,000 of its notes and trust deeds
and
$5,300,000 face value of government bonds. On Motion of Association in the Mallonee case the court, on March 13, 1948, entered an order requiring the Federal Home Loan Bank of San Francisco to deposit in the registry of the court the
notes
of Association evidencing the $6,300,000 loan together with the United States bonds in the sum of $5,300,-000 and the notes
and
trust deeds which had been pledged as collateral. On motion of Association, the lower court, on March 26, 1948, entered an order releasing to Association
the said notes and trust deeds
then amounting to more than $8,000,000 and “lifted” the then lien of the Bank of San Francisco thereon, and
transferred
this lien to so much of the funds then in the registry of the court (under the borrower-intervener proceedings) as would make the difference between $5,300,000 (the face value of the deposited bonds)
and
$6,324,098.35 (the amount of principal and interest due as of March 10, 1948 on Association’s
notes
to the Bank of San Francisco) plus interest on $6,300,000 from March 10, 1948 until paid.
So much by way of specific identification of the interpleader-intervention proceedings and the impounded funds. It should again be emphasized that the question as to the
validity
of the original appointment of Am-mann as Conservator of Association underlies, explains the existence of, and gives decisive character to much of the controversy over the impounded funds.
A vigorous dispute and controversy arose among the parties to the main case concerning the legal ownership of, or posses-sory and/or lien rights, in, the said impounded funds, and their contentions are illuminating. During argument of counsel in April, 1950, preliminary to formulating the order here on appeal, counsel for Association made plain to the lower court that it was claiming
all
of the impounded funds and assets
and
that its claim extended to a
cancellation of its note
held by the Bank of San Francisco. Association also demanded a return of
all
of the bonds which had been deposited as security with the Bank of San Francisco.
Counsel for appellant Bank of San Francisco pointed out to the court that all it had in its possession were the notes executed by Conservator Ammann which Association claims are
void
because the appointment of Ammann as Conservator of Association was invalid. (It appears that four notes of Association are involved.) See further contentions set forth in footnote 4, infra.
A part of the colloquy in open court here set out sheds much light on this important issue in both this and the main case. (Emphasis supplied by us.)
The Court: “So far as the Long Beach Association is concerned, it is claiming that it owes neither the San Francisco Bank
nor
the Los Angeles Bank any money.”
Counsel for Association: “That is right.”
The Court: “That it is entitled not only to
all
of the [impounded] funds in court but also to a cancellation of the note [given by the Conservator of Association (Ammann) to the Bank of San Francisco]”
Counsel for Association: “That is right.”
The Court: “And the return of all of the
bonds
which are deposited [with Bank of San Francisco] as security. And if that did ultimately occur,
then
there would be no funds [impounded] in court except the Long Beach Association’s. Is that not your basis of objection”?
*430
Counsel for Bank of San Francisco: “That is one hundred per cent correct. All we have is the notes, which are claimed by the Association to be void
because
Ammann had no authority [when acting as Conservator of Association] to make them; and if that be true and the
Association ultimately prevails on that,
then the security securing these notes
falls with the void notes.”
The record at this point does not show that counsel for the contending parties rejected the implications of the contention here raised by counsel for Association; furthermore all parties agreed that they wanted “a final [appealable] judgment” on the issue of payment of appellees’ fees from the impounded funds.
Counsel for the Bank of San Francisco added this statement to the court:
“I think who owns them [the impounded funds] is as clear as anything can be, that is, that Long Beach [Association] owns them. I never, never knew of any person who had anything put up for security that didn’t own it. All the other fellow had was a security in it.”
Counsel was here apparently conceding that Association owned the impounded assets
but
was insisting that Association still remained lawfully indebted to the Bank of San Francisco on its several notes security for payment of which
was some portion of the impounded funds.
At another point occurred the following exchange:
“The Court: (addressing counsel for Bank of San Francisco) “You just asserted a claim to $6,000,000, in bonds and $1,000,000 in cash.”
Counsel for Bank of San Francisco: “We do, your Honor. The bonds in this impound we claim to have a lien on them. We recognize the general property ownership in that collateral belonging to the Long Beach Association. We have them as pledgees as security for our notes.”
Counsel for Long Beach Association : “This lien that they claim they have got from Ammann. I don’t think they got anything.”
(This contention of Association is of course also a challenge to the validity of the appointment of Ammann as Conservator.)
That the various claims affecting rights in the impounded funds were creating a confusing pattern is evidenced by another extract from the colloquy before the court. Referring to the claims of appellees for interim attorneys’ fees to be paid from the impounded funds the court said:
“They
[appellees] are not saying that they want "attorney fees from the defendant [Bank of San Francisco]; they say they want attorney fees
from their own money
which the defendant [Bank of San Francisco] has got and money to which they lay claim and title and this court has jurisdiction in personam over the defendant to compel him to disgorge what belongs to them. Is that your theory?” (The “them” here referred to was of course the former Bank of Los Angeles.)
Counsel for appellees: “That’s it exactly, your Honor.”
The record in the main case sheds further light on the impounded funds. In a supplemental cross-claim filed by Association on May 28, 1948, it alleged that in making the advancements of said $6,300,-000 to Ammann as purported Conservator for Association, San Francisco Bank and other cross-defendants “were using wholly or in part, money, funds, and assets, which they knew were owned by, the property of, and belonging to the Federal Home Loan Bank of Los Angeles [or belonging to its stockholders] which said money, funds and assets have been acquired by the cross-defendants by fraudulent and malicious
seizure and confiscation of said Los Angeles Bank
* *
Further light is shed on the various claims by an argument of counsel for Los Angeles made in court in the main case on July 30, 1948. He stated:
“We [Los Angeles Bank] are assenting claims to the $6,300,000 worth of notes on deposit in the registry of
*431
the court, executed by Ammann as Conservator, and it is our claim that the funds used to make these loans, in large part,
were funds of the Los An-geles Bank."
This frank avowal leaves no doubt as to the position of Los Angeles.
In an answer of the Bank of San Francisco (in the main case) to the amended cross-claim of Association which answer was filed July 30, 1948 San Francisco describes the loan made to Association in the following manner. It asserted that during the period while Ammann was in charge of Association as Conservator, Association borrowed from the Bank of San Francisco sums exceeding $6,300,000 which sums were at all times secured as required under the provisions of the Federal Home Loan Bank Act and rules and regulations adopted pursuant thereto, by the assignment and pledge of United States Government Bonds, promissory notes secured by mortgages or deeds of trust on real property, and stock held by said Association in said Bank of San Francisco. That all said sums so borrowed by Association were used by Association in transacting and operating the business of Association and for purposes and to the .benefit of the business of Association. San Francisco further averred that no payment of said indebtedness has ever been tendered to the said Bank of San Francisco and no demand for surrender of said collateral or any part thereof has even been made by Association and no attempt has ever been made by Association to effect a redemption of said collateral by payment of said indebtedness.
As the record indicates, the conflicting contentions respecting the impounded funds make a confusing picture. Because of the importance which all parties attach to these funds we have given them more elaborate treatment in the margin.
4
*432
Before concluding this part of our opinion reference should be made to the views expressed by the Supreme Court in Fahey v. Mallonee, 332 U.S. 245 , 67 S.Ct. 1552 , 91 L.Ed. 2030 , concerning matters which bear directly on the issue of the validity
*433
of the notes held by the Home Loan Bank of San Francisco. A formal holding of the Court was that the shareholders of Association (Mallonee) were estopped,
as the Association would be,
from challenging the provisions of the Act, Home Owners’ Loan
*434
Act of 1933, which authorized the Board to prescribe the terms and conditions under which a conservator may be named, 332 U.S. at page 256 , 67 S.Ct. at page 1557 . A final decision was that it was error to oust the conservator (Ammann)
or to enjoin any of his proceedings,
or to enjoin the administrative hearing on his appointment. 332 U.S. at page 257 , 67 S.Ct. at page 1557 . It was during his tenure as conservator of Association that Ammann negotiated loans from the Home Loan Bank of San Francisco to Association and for and on behalf of Association executed and delivered these notes to that bank to evidence the loans. The claimed lien of San Francisco on the impounded funds is based on these notes.
For a detailed record of the proceedings in the lower court leading up to the order impounding the funds, recourse should be had to the printed transcript of record on the appeal in the main case (12,511). The motion of Association for order of impound appears at pp. 3562 to 3597; the motion of Association for an order to San Francisco to show cause why funds should not be impounded appears at pp. 3597 to 3599; the order directed to San Francisco and Los Angeles requiring these banks to show cause why the motion of Association to impound the funds claimed by Association should not be granted, appears at pp. 3599 to 3601; the “Return” of San Francisco to the court’s order to show cause appears at pp. 3690 to 3752; the “Return”
*435
of Los Angeles to the court’s order to show cause appears at pp. 3642 to 3646; the impounding order of the court, dated March 13, • 1948, appears at pp. 8399 to 8525.
The above mentioned “Returns” of San Francisco and the accompanying affidavit, of Frank Noon set forth a detailed description of the conditions under which the loan was made by San Francisco to Association during the time Ammann was serving as Conservator of Association. The basis of the asserted “lien” of San Francisco, on the impounded funds is clearly indicated in these documents. For further illuminating comments on this loan transaction by counsel for the Mallonee group see printed transcript in case 12,511, pages 6219 to 6225, and pages 6298 to 6301.
II
Underlying practically all of the issues posed on this appeal is an impressive body of statute law and we are persuaded that many of the contentions which are asserted to be of not only vital, but controlling importance on this appeal must find sanction and support in this legislation, or be rejected. We refer to the “Federal Home Loan Bank Act”, Title 12, Chapter 11, U. S.C.A. It is our view that this legislation represents a constitutional exercise of Congressional authority; that its unambiguous language expresses a clear and definite Congressional purpose and intent to preempt the entire field of banking activities embraced within the terms and provisions of this banking legislation and reserve to Congress the fullest measure of control over such activities. To accomplish the purpose or purposes expressed in this legislation our Congress saw fit to create its own administrative arm or agency (the Home Loan Bank Board) through which it could direct and control the administration of the provisions of the Home Loan Bank Act. To that end it vested in this Board wide power and authority to control the affairs and operation of banks in the Home Loan Bank System set up under the Home Loan Bank Act. We consider it unnecessary to recite the powers of the Board— they are set out in great detail in the bank act, and their inclusion would unduly expand this opinion. Our ultimate conclusions as to their meaning and significance must serve our purpose. We have previously indicated that we adhere to the view that the Home Loan Bank Act which created the nationwide “Federal Home Loan Bank System” must control when its terms are applicable to fact situations revealed in the record. And as related legislation we may not overlook the here involved Federal Savings and Loan Insurance Corporation or the Home Owners Loan Act of 1933.
5
Where we deem it necessary we shall refer to any of the provisions of these legislative enactments.
One thing is abundantly clear in this case. Appellants and appellees are poles apart in their appraisal of the effect and controlling force and applicability of the sweeping terms of the Federal Home Loan Bank Act (and allied legislation) on the many issues present in this case. The sharp conflict of views is best exemplified by the formal contentions of the parties which we set out at this point. We think it necessary to fully expose them because we are convinced that the acid test of their validity must, in the last analysis, lie in the terms of the legislation just above noted.
Appellants’ Contentions
Appellants the Federal Home Loan Bank Board and its members, and the Federal Home Loan Bank of San Francisco assert that eight questions are presented for decision on this appeal and we summarize them as follows:
1. Whether the (three) orders of March 29, 1946 (see footnote 5 in opinion No. 12,-511) readjusting the Eleventh Federal Home Loan Bank District and dissolving the Los Angeles Bank invaded any legally protected private rights of the bank or its members so as to give them standing to sue.
2. Whether out-of-state service of process (in the main case) on the members of
*436
the Home Loan Board and other non-resident appellants under either Section 1655 or Section 2361 of Title 28 U.S.C.A. gives the court jurisdiction. to invalidate the (three) orders of March 29, 1946.
3. Whether the allegations of the Los Angeles complaint that there was a failure to afford a (Board) hearing and make find- ' ings thereon or that the (three) orders were issued for improper motives give the court jurisdiction to review the (three) orders.
4. Whether the Los Angeles complaint in the main case fails to state a claim within the jurisdiction of the court either (a) because the action constitutes a collateral" attack upon administrative orders; or (b) because the orders are valid until duly set aside in an appropriate proceeding.
5. Whether the consolidated actions (in the main case) insofar as they seek to invalidate the orders of March 29, 1946, constitute an unconsented suit against the United States.
6. Whether prior to trial and a determination of the merits of this action (the main case) claimed by plaintiffs to be
quasi in rem
and claimed by defendants to be in personam, the court is authorized"to award attorneys’ fees to plaintiffs’ attorneys.
7. Whether in this action (the main case) to recover property, based upon the alleged invalidity of the (three) orders of March 29, 1946, the right and title to which property is in dispute between the plaintiffs and the defendants, the court is authorized to award attorneys’ fees out of such property.
8. Whether the (impounded) deposits in court are unavailable for payment of the fees allowed to attorneys for the Los An-geles Bank and its plaintiff shareholders (a) because they do not constitute funds “created, preserved or protected” by the plaintiffs; or (b) because the proceedings as a result of which the deposits were made constitute an impermissible collateral attack upon administrative orders; or ■ (c) because the attorneys’ fees are not alleged to have been earned in any of the intervention or inter-pleader proceedings in which the deposits were made; or (d) because the order by its terms precludes payment out ©f any funds of Long Beach Association, and there are no other funds available for such payment.
Appellants urge that in disposing of the foregoing questions the lower court erred in six particulars, as follows:
1. In determining that it had Or has jurisdiction of the “consolidated actions” No. 5678 and 5421, (the Los Angeles Action and the Mallonee Case in the main case) or either of them, and its Findings of Fact and Conclusions of Law to that effect are erroneous.
2. In determining, that it had jurisdiction in the consolidated actions over the persons -of the Home Loan Bank Board, John H. Fahey, individually and as a Federal Home Loan Bank-Commissioner, and Federal Savings and Loan Insurance Corporation, either
(a) on the ground that the actions are brought under 28 U.S.C.A. § 1655 , or
(b) by reason of the various subjoined and subsidiary interpleader or intervention proceedings, or
(c) by reason of any general appearance having been made on behalf of said parties, or ■
(d) by virtue of determination by the District Court in previous orders entered in the consolidated actions that it has jurisdiction, and its findings of fact and conclusions of law to the contrary are erroneous.
3. In determining that the legal services rendered by appellees O’Melveny & Myers, Richard Fitzpatrick, and W. I. Gilbert, Jr. (in the main case) have inured to the bene-' fit of their respective clients (Bank-of Los Angeles and Wilmington Association) so that they are now compensable, and Findings of Fact No. 14, 15,116, 17, 18 and 21 are erroneous. (These Findings accompany the order on appeal.)
4. In determining that O’Melveny & Myers, Richard Fitzpatrick, and W. I. Gilbert, Jr., are entitled to recover attorneys’ fees upon their motion therefor and in fixing the amount of such fees.
5. In directing payment of such attorneys’ fees out of funds and monies on deposit in the registry of the court in the consolidated actions; and the court especially
*437
erred in directing payment generally out of funds in the registry of the court without designating the particular fund or funds from which the payment should be made, or the party or parties upon whom the burden of payment is to rest.
6. In exempting Long Beach Association and its property from the burden of contributing to the payment of said judgment while adjudicating that all other parties to the litigation and all other claimants to the funds on deposit in the registry of the court are potentially liable for the payment of the same as may be determined in subsequent adversary proceedings which the court reserves power to conduct.
Appellants boil down the foregoing arguments to three basic contentions which typify their ¡case and if these postulates are sound in law the order on appeal must be reversed. They are based on the broad premise that the order may not stand primarily because the lower court was without jurisdiction of the so-called “Los Angeles Action” in connection with which the award was made, as well as because of the absence of any
legal basis
upon which the award could be made. Summarized, (with our emphasis supplied) these three contentions are:
A
The Los Angeles Action does not present a claim within the jurisdiction of the district court. Neither the Los Angeles Bank nor its shareholder plaintiffs (co-plaintiffs in the Los Angeles Action) had
any jus-ticiable right
which could be adjudicated by a Federal Court. The shareholders had no standing to sue (in the main case) because none of their
legally protected rights
was invaded by the (three) orders of March 29, 1946, which readjusted the Eleventh and Twelfth Federal Home Loan Bank Districts and consolidated the Los Angeles and Portland Banks. The Los Angeles Bank had no standing to sue because,
being an instrumentality of the United States performing solely governmental functions,
it had no justiciable right to the continuance of its existence.
Further, the administrative action complained of is not subject to judicial review
because it was the exercise of legislative authority properly delegated to the Board and involved determinations which the Act provided could be made only by the Board.
This is not altered by the fact that the orders complained of were issued without notice, hearing or formal findings. The statute does not require such hearing or findings and there exists no constitutional right of the plaintiffs to such hearing.
The Home Loan Bank Board and its members are indispensable parties to the maintenance of the Los Angeles Action because no effective relief could be granted
without compelling action by the Board. Valid service upon the Board and its members has not been had.
Finally, the action is an unconsented suit against the United States because it seeks to compel official action by the Home Loan Bank Board, a branch of the Executive Department of the Government.
B
The order awarding attorneys’ fees cannot be sustained for the reason that it does not fall within any of the limited exceptions to the general rule that plaintiffs may not recover attorneys’ fees from other parties to the litigation.
This is not
a case where a fiduciary is put to expense in defending an unfounded suit or in administering or protecting trust property.
This is not
a case where the plaintiffs have either recovered or preserved a fund for the benefit of a class.
This is not
an action
in rem
where fees may be allowed for services rendered directly to the court or its representative.
This is not
a case resisting an application fpr the appointment of a receiver for a corporation, in which attorneys’ fees may under some circumstances be allowed out of the undisputed property of such corporation.
This is
a suit where the plaintiffs, attacking the validity of Governmental orders, valid on their face, seek to recover property, the right and title to which is 'claimed by the defendant (Federal Home Loan Bank of San Francisco) and seek attorneys’ fees before a determination on the merits has been made. The plaintiff may not recover attorneys’ fees out of the funds in dispute.
*438
C
In no event was the court authorized to award attorneys’ fees out of funds deposited in the registry of the court. Such funds
are improperly in court because they result from impermissible collateral attacks upon administrative action. They are, therefore, not subject to disbursement by the court.
Finally, the order awarding attorneys’ fees cannot be sustained because the deposits out of which the fees are ordered paid were made in proceedings at most “in the nature of interpleader,” and attorneys’ fees may not be paid out of such deposits.
Appellees’ Contentions
Appellees have summarized their arguments, and their views concerning the' foregoing theories of appellants are as follows: (Emphasis ours)
1.. The Los Angeles action is not an action brought, as such, to review the actions of the commissioner (Board) evidenced by his Orders Nos. 5082, 5083, 5084. It is, on the contrary, a plenary equity action
quasi in rem
brought under 28 U.S.C.A. § 57 (now § 1655). In this action the effect of these orders of the Board which reorganized the Bank of Los Angeles into the Bank of San Francisco constitute the sole muni-ments of title under which the San Francisco Bank claims are drawn in question purely as an incident to the district court’s inquiry into title, ownership and the right to possession of the assets and properties constituting the
res
before the court. In' addition, to this, and as an incident to its basic jurisdiction
in rem,
(over the assets in possession of the San Francisco Bank) the lower court has acquired jurisdiction
in personam
of the San Francisco Bank, the party in actual possession of
the assets and properties in dispute.
2.
The activities of the commissioner leading up to the seizure of the demanded assets and properties are subject to» judicial scrutiny.
3. The contention of appellants that neither the Los Angeles Bank nor its member associations have any standing to question the
validity
of the (three administrative) orders of March 29, 1946, is devoid of merit.
' 4. The contention of appellants that the Home Loan Bank Board and its members are indispensable parties is devoid of merit; as is the contention that these are uncon-sented suits against the United States.
5. Under the plain provisions of 28 U.S. C.A. § 1655, the district court had and has plenary power and jurisdiction to hear and determine
all questions
material to the claim of Los Angeles Bank and its member associations that their respective titles to, the assets and properties in dispute should be quieted, that clouds upon such titles should be removed and that'possession of such assets and properties should be restored to their rightful owners.
6. Upon the case made by the pleadings; in the actions below and by the findings in. this proceeding, Los Angeles Bank is in precisely the same situation as is any corporation whose assets are seized by public-authority in visitatorial proceedings.
(a) In such a case, the corporation, acting in good faith, is entitled to its day in court to contest the validity of the seizure- and, irrespective of whether or not a casé-is ultimately made out for the interference-of state or governmental authority, it is entitled to an allowance of fees to its attorneys. Otherwise, as the cases say, it would' he hamstrung in any bona fide effort to defend itself.
7. Under such circumstances, an
interim-.
allowance of attorneys’ fees is proper. The-test is not that of ultimate success or failure in the litigation; it is whether or not the defense or the cause of action, as the-case may be, is, as the district court here-found, conducted in good faith and on reasonable grounds.
8. The district court did not err in directing payment of the attorneys’ fees out of moneys in the registry of the court; and' appellants’ arguments to the contrary are-moot and academic.
'9. The pleadings in the Los Angeles,. Action show' that the Los Angeles Bank: was forced into a state of liquidation which liquidation is akin to, but much more drastic tlian in an ordinary receivership. Under such circumstances the corporation, or-' where there is a claim that it no longer ex--
*439
ists, a stockholder in a class action, (such as association co-plaintiffs in the Los Angeles Action), must be allowed to litigate the validity of this seizure (under the Board orders above mentioned) and in analogy to receivership and liquidation cases must have the right to look toward the assets of the corporation for fees necessary to resist the seizure and liquidation, this since the test of the propriety of attorneys’ fees
in stick situations
is not the ultimate success or failure of the litigation since an interim .allowance of fees prior to the conclusion of the suit is proper
where proceedings are .conducted in good faith and on reasonable grounds.
To deny Wilmington that right, either by intimidating it not to use its own funds or where there is intimidation, by denying it recourse to a fund in court in which it has a
proprietary interest,
would be a denial of due process of law.
During the arguments before the lower court preceding the making of the order here on appeal, appellees contended that the Bank of San Francisco should be regarded as a “constructive trustee” holding assets belonging to the Los Angeles Bank which provides another ground of equitable jurisdiction; that this status of these parties makes it the “duty” of directors of former Los Angeles Bank to resist the wrongful seizure orders of the Board by every means at their power.
It will be noted that throughout the contentions of appellees, above noted, great stress is laid upon the nature and purpose of the Los Angeles Action which is yet to be tried. It cannot be doubted that the validity of the demands of Los Angeles for relief must be a major consideration in examining the claims of appellees. They have elaborated these contentions in their briefs to which we now turn.
The arguments of counsel for Los An-geles clearly indicate that its complaint was drawn with the purpose of justifying demand of the prayer for a
particular form
of relief. While one argument of Los Angeles is that the lower court should “scrutinize the activities” of the Commissioner because he omitted to make a “finding” of facts which would justify his three
orders, and
because
his “mode” of exercising the powers conferred on him by law, Home Loan Bank Act, was in defiance of statutory requirements, the real and basic theory underlying, the Los Angeles case is that the three orders reorganizing the Home Loan Banks in the Pacific Coast area (sans this challenge as to procedural steps) were null and void
because enforcement of Board orders of this nature
must necessarily result .in
confiscation
of private
property
and private
property rights
of Los Angeles and its association member-stockholders. This view of appellees is emphasized throughout this litigation and is based on the assumption that Federal Home Loan Banks possess the fundamental characteristics of private banking institutions and as such cannot be regarded in law as instru-mentalities set up by -Congress to perform public and governmental functions. This concept underlies and is the real basis of the Los Angeles Action, hence it also underlies and characterizes appellees’ case since their claims asserted on this appeal stem from services rendered to Los Angeles and its association-member co-plaintiffs in the main case.
Appellants vigorously reject this thesis of appellees. They assert that as a matter of law these banks are public agencies, and arms and instrumentalities of the federal government and this irreconcilable conflict of views injects into the litigation an issue of dominating character and importance. And in reference to the Board this court accepts the view that the Federal Home Loan Bank Board is clearly an agency of the United States and a branch of the Executive Department of the Government, and we so hold.
We turn now to the phase of the case where this issue of public versus private character of the banks is discussed by the parties, and to contentions as to whether and to what extent private and proprietary rights were involved when the status of Federal Home Loan Banks in the Pacific Coast area was changed by the three reorganization orders of Administration which abolished the Bank of Los Angeles and created the Bank of San Francisco.
*440
III
Is a Federal Home Loan Bank a Public or Private Banking Institution?
It is crystal clear that Los Angeles posits its main and controlling demand for relief on the assumption that Federal Home Loan Banks
must
be regarded in law as possessing
a private and proprietary character
which is not, (and cannot be) stripped away, diluted or diminished by the terms of the Federal Home Loan Bank Act under which they exist and operate. Its arguments déaling with the legal
status
of such banks are predicated on the theory that when the Bank of Los Angeles was abolished by administrative orders, these orders unlawfully confiscated and destroyed
private property and property rights
of Los Angeles. See our comments on the fo'rm of the Los Angeles Action in our opinion in the main case, supra, 196 F.2d at pages 345 to 348, inclusive. Such a concept, if sound in 'law, would logically require the conclusion that under the terms of the Federal Home Loan Bank Act not only the legal
status
of these banks but the corporate
control
by them over assets in their possession, may not lawfully be challenged, changed or affected by.or under administrative orders of the Board.:
Appellees’ arguments leave some doubt as to whether they concede that
some
administrative controls, under the Home Loan Bank Act, may be validly enforced. ■ However, the orders which abolished the Banks of Los Angeles and Portland and established the Bank of San Francisco are vigorously assailed ás being
beyond the powers
of the administrative Authority set up by the terms of the Act — this primarily for reasons discussed in this part of our opinion. It is true that one of the grounds advanced in the attack on the orders is that they were (also) arbitrary and capricious and the product of ill-will and malice of Commissioner Fahey. But the fundamental thesis of Los Angeles and one that gives controlling character to its entire case is that the orders are void
because
they destroyed “private ownership” of the bank by its California member associations (of which its co-plaintiff in the so-called Los Angeles Action the Federal Savings and Loan Association of Wilmington was one).
The complaint in the Los Angeles Action leaves no doubt as to the real basis of that action. It charges that the administrative authority made an unlawful “seizure of private property” of Los Angeles when it issued and enforced the three reorganization orders. This alleged “seizure” is characterized as expropriation and confiscation of its private property “without any process of law” — as pure and simple “spoliation.” To meet and thwart this claimed invasion and destruction of purely private property and property rights- it resorted to an action
quasi in rem
to “quiet title” to the seized private property, under Title 28, § 1655, U.S.C.A., old § 57 the property in question being “the assets and properties” of the former Home Loan Bank of Los Angeles. It assures us that:
“A
reading of the [Los Angeles] complaint makes it perfectly obvious that
all of the elements
of the conventional cause of action in equity by an
owner
out of possession
to quiet title,
to remove a cloud on title
and to regain possession
are present. * * * The action
is purely and simply
an. equitable action
quasi in rem to try title
as between one who alleges itself to be
an owner out of possession
— the Los Angeles Bank — and one who alleges itself to be
an owner in possession
— the San Francisco Bank.”
Los Angeles adds the query:
. “By just what species of reasoning appellants arrive at the conclusion that the right to hold and deal in property
free from unwarranted, interference and spoliation under color of governmental authority is not a legally protected right,
is not made clear.” (Emphasis ours.)
In the face of these frank avowals it is impossible to misconceive the basic theory and premise upon which the Los Angeles Action rests.
If the above noted assumption is basicly sound in law, it would be impossible 'for the Board to formulate an order or orders which would
lawfully
abolish a Federal
*441
Home Loan Bank. The prayer of Los An-geles (which is in harmony with the theory of its pleadings) is convincing proof that it would be denied the real (and only effective) relief it seeks unless the lower court has jurisdiction to enter, and does enter, a decree which, in practical effect, would be a judicial declaration that the former Home Loan Bank of Los Angeles enjoyed the legal status of a privately owned and privately controlled banking institution and that no administration order or orders of the Board could have the effect of abolishing or changing
that status.
Since the Los Ange-les Action has not been tried, the nature and scope of the controversy must be viewed and appraised by the specific demands made i,n the prayer for relief.
The prayer, inter alia, demands a decree that the three Board orders “be declared and adjudged to be null, void and of effect,”
and
“any and all clouds and purported liens thereby created upon * * * assets or properties of plaintiffs or any of them be removed”; that “the titles and right to possession of plaintiffs and each of them as against defendants and each of them to the assets and properties be confirmed and be declared, adjudged and established to be superior to and be quieted as against all claims or rights asserted * * * under * * * or by virtue of said purported orders * * The court is asked to issue a writ of possession to effect restoration of (claimed) assets to Los Angeles; require execution of all documents necessary to restore Los Angeles to title and possession of its (claimed) assets; and require an accounting of all assets of Los Angeles transferred by the orders. The prayer further demands that defendants be forever barred from asserting any claims whatever against the (claimed) assets of Los Ange-les, and that the decree inure to the benefit of all members and stockholders of Los An-geles Bank. For reference to where prayer of complaint appears, see comment in footnote 22, infra.
It is argued by appellees that
all
of the relief thus demanded in this prayer may lawfully be granted by an equity court despite the fact that the granting of such relief by judicial decree would completely bypass any sort of official action by the Federal Home Loan Bank Board. Thus, the orders may lawfully be set aside and nullified as completely as though they were made without a semblance of authority to' be found in the Federal Home Loan Bank Act to make administrative orders of this character.
In the last analysis the validity of the claims advanced in the Los Angeles Action must rest upon the legal conclusion that
due process of law
requires that the “assets and properties” mentioned be held to be the
private property
of the shareholder association members of the Los Angeles Bank.
6
It is of course obvious that refusal of the court to grant a form of relief which conforms to this theory ‘would strip the heart out of the case of Los Angeles.
If we agree with the basic postulate of Los Angeles that purely “private property” was “confiscated without due process or any process of law” by orders which abolished a Home Loan Bank by “reorganizing”’ and “readjusting” banking elements and bank districts in the Federal Home Loan Bank System, we must go further and accept as sound law the inevitable corollary — that the granting of a “charter” (the organization certificate issued to Los Angeles under Section 12 of the Home Loan Bank Act) necessarily resulted in the creation of a private banking institution which thereafter passed (in a large and here undefined area) from under the most important of the administrative and legislative controls set up by Congress in the Federal Home Loan Bank Act.
We would also have to conclude that once granted by the Board under the Federal
*442
Home Loan Bank Act, a “charter” invested a Home Loan Bank with all of the attributes and characteristics of a purely private corporation and immediately clothed it and all of the properties in its control and possession with
all
of the protections provided by general law as in a case where a purely private corporate enterprise was involved.
Thus it may not be deprived of its corporate existence by any administrative action of the Board because the very act of creating it under terms of the Act automatically gave it a “vested right”
to, and a “justicia-ble interest” in, a continued corporate existence as a private banking institution. This is a status which the courts will protect in the manner and to- the full extent demanded by Los Angeles.
The noted arguments of Los Angeles can have no other legal meaning, unless we blind ourselves to the dominating and controlling issue presented in the Los Angeles pleadings. We make further comment on this phase of the case at a later point in this part of our opinion.
The terms of the Federal Home Loan Bank Act of 1932 provide the only authority for the “creation” of Federal Home Loan Banks which are required to operate within certain bank “districts” designated in Section 1423 of Title 12 U.S.C.A. It is sufficient to state that such banks are brought into existence by formal administrative action of the Board. When “created,” the banks are authorized and required to perform the functions designated in the Act under a so-called “organization certificate”, Section 1432, which document is issued by and under authority vested in the Board. This certificate is evidence of the corporate existence of such banks as an integral part of what is frequently referred to as the Federal Home Loan Bank System. By regulations of the Board these “organization certificates” are to be deemed the “charter” of a bank.
The “charter” of the Bank of Los Ange-les was executed by the first directors of the Bank under date of October 13, 1932, and this charter contains, among other things, the following provisions:
“2. The location of the principal office of this Bank will be in the City of Los Angeles, State óf California, or at such other city as the Federal Home Loan Bank Board may from time to time determine is suited to the convenient or customary course of business of the institutions eligible to become Members of this Bank.
“3. This Bank shall be established in the City of Los Angeles, State of California, in District Number Twelve,, as defined by the Federal Home Loan Bank Board, or as may from time to-time be readjusted or modified by said Board. Said District Number Twelve as now defined is as follows:
“The States of California, Arizona,. Nevada and the Territory of Hawaii.
“7. This Bank shall have succession until dissolved by the Federal Home-Loan Bank Board under this Act or by further Act of Congress.”
A true and correct copy of the organization certificate or corporate charter of the former Federal Home Loan Bank of Los Angeles is set forth at length in the printed transcript on the appeal in the main case (No. 12,511) at pp. 4144 to 4149. A true and correct copy of the organization certificate or corporate charter of the former Federal Home Loan Bank of Portland is also- set forth at length in the same printed, transcript at pp. 4149 to 4154.
If we agree with Los Angeles and ap-pellees in this case we would also have to-conclude that provisions in the Federal Home Loan Bank Act relating to the “acquisition” of one Home Loan Bank by another, the liquidation of one bank as a result of such “acquisition” under orders or directions of the Board, “payment of the liquidated bank's liabilities,” and “retirement of its stock,” are incidents in the business affairs of these banks comparable in-character to similar transactions in the field of private corporate enterprises and that
all
such incidents
must be governed in all essential respects
by the rules of law and common business practices applicable to such transactions in the world of private business. Such a conclusion is irresistible if the former Bank of Los Angeles must be regarded in law as a private banking venture and not as a public banking agency.
*443
In argument to the lower court counsel lor the Bank of San Francisco contended that Federal Home Loan Banks really “go into business with the federal government” and that part, or much of their initial capital is frequently supplied by the federal ■government in the early stages of the bank’s existence. Counsel also pointed out to this court and to the court below that at the inception of the Los Angeles Action the federal government owned more than 51% of the. capital stock of the Los Angeles Bank.
6½
• At the conclusion of Part one of this opinion we made reference to the “Return” of San Francisco to the order to show cause why the
motion of
Association to impound the funds claimed by Association should not be granted. In this “Return” (dated March 8, 1948) San Francisco* alleged that: “the outstanding capital stock of San Francisco Bank, as of January 30, 1947, was of the par value of $27,535,100, of which stock of the par value of $15,927,-900 was and still is owned by the United States.” Apparently this assertion is not denied. As an indication -of the continuing financial interest of the federal government in the Bank of San Francisco, it was shown by the testimony of the Treasurer of the San Francisco Bank that during the year 1948 this bank paid large sums of money to the Treasurer of the United States as ■dividends on stock in that 'bank owned by the government.
Much controversy was injected into the case by contentions dealing with the problem of whether or not the federal government had a right to “vote” the stock it held in Home Loan Banks, an aspect of this litigation which does not minimize the importance or signifi'cance of the fact that the government is a stockholder in San Francisco, and was a stockholder in the former Bank of Los Angeles.
In noting claims of Los Angeles as to the
status
of Home Loan Banks we do not consider it necessary to set forth the text of the many sections of the Federal Home Loan Bank Act which spell out the completeness of the administrative and legislative controls over Federal Home Loan Banks — it is sufficient to say that the regulatory provisions of this Act reveal an intention on the part of Congress to retain the broadest kind of federal control over the number, powers and existence of these purely legislative creatures.
A brief reference to the Home Loan Bank Act will reveal the sweeping and plenary character of these legislative and administrative controls which are made the price of a hank’s very existence — promoters of such banks are charged with full knowledge of this fact. And we assume that such promoters would not contend that private individuals have some sort of “inherent right” (or constitutional right) to organize and thereafter operate a so-called “Federal Home Loan Bank” and exercise any of the statutory powers granted to such a banking institution without receiving a “charter” from the Board and/or without any attempt to comply with the many requirements and regulatory provisions of the Federal Home Loan Bank Act. And see provisions of Section 1441, Title 12 U.S. C.A. on penalties for misuse of title.
*444
Furthermore, men do not go blindly into these Home Loan Bank ventures — they assume all of the obligations with all of the legislative and administrative “strings” attached when a charter is granted to them by the Board. Courts may not remain indifferent to the presence of this type of plenary control set up by. Congress — a “life and death” type of control which Congress has seen fit to maintain without any material changes since the advent of the Act in 1932.
The administrative control mechanism thus set up by Congress is a vital adjunct of the bank system, and by adopting it Congress charted a course of business conduct for these banks thus.becoming the controlling force in their lives. Any other view would sanction the unacceptable theory that a mere creature of Congress may become greater than its creator without the author of its existence becoming aware of the fact.
It cannot be doubted that if Congress saw fit to repeal the Federal Home Loan Bank Act, such a legislative act would end the official existence of every Home Loan Bank in the nation now functioning under that Act, for all of the rules which guide and control the operations of such institutions would cease to be effective. Such a contingency must be left to speculation. Certainly no “due process” argument based on the Fifth Amendment could be successfully invoked to tie the hands of our national legislature if it desired to end a banking system it had created. That no illusions might remain concerning the intent of Congress to retain a firm control over the life tenure and affairs of these banks, it adopted the expedient of serving an unusual and very blunt legislative caveat in the language of Title 12 U.S.C.A. §§ 1445 , 1446 and 1449 concerning the matter of
continued existence
of Home Loan Banks. These legislative pronouncements cannot -be regarded as other than a deliberate notice that in enacting the Home Loan Bank Act Congress did not create, or intend to create, any sort of “vested right” in either the
continued existence or status
of any bank in the Home Loan Bank System, or for that matter, any vested right in the continued existence of the Federal Home Loan Bank System itself. It is not necessary to decide what disposition would be made of the assets of Home Loan Banks if the Federal Home Loan Bank Sj'stem was abolished. It may be assumed that if the Home Loan Bank System was terminated by legislation, the banks in that system would be liquidated in an orderly manner, and under congressional mandate their capital assets distributed back to the owners of stock after financial obligations of the bank were fully discharged.
In the face of the plain legislative pronouncements we have noted we must and do conclude that Congress, and not the courts, may continue or end the System or any part of it; that Congress and not the courts may direct
how, where and when
a Home Loan Bank is to function. An
affirmative action
by Congress
{or
the Board under authority of, and within the provisions of law referred to in the above paragraph) is the sine qua non of change in the
status
of any bank — the tail would literally wag the dog if courts could exercise a power to
compel or thwart
action by the Board or Congress in the field of control where Congress has so specifically and bluntly reserved to itself and to its administrative agent, the Board, the exclusive power to make effective decisions.
Nor did the Act create, or purport to create, any so-called “proprietary rights” of association members in the continued existence of any Home Loan Bank, or “rights” of any kind which might be successfully interposed as a bar to ending the existence of a bank if Congress, or the Board, (within the terms and conditions imposed by Title 12 U.S.C.A. § 1423 ) eliminated it by readjusting bank districts. Yet basically and fundamentally, and particularly as respects Board action, such a theory underlies the entire case of appellees and Los Angeles, i. e., that the Los Angeles Action cast in the form employed may successfully invoke judicial action which, in effect, would literally supplant official Board and/or Congressional action. (See further comments dealing with “rights” of association members in Part 5 herein.)
*445
By way of further emphasis we add that we are convinced that Congress on any consideration it deemed advisable could have readjusted the Eleventh and Twelfth Districts in the Home Loan Bank System, could have liquidated and dissolved the Los Angeles Bank, and could have transferred its assets to the San Francisco Bank, all without notice and hearing, and based upon information obtained in any manner it saw fit. Appellants have so argued and they support their view by such cases as Hunter v. Pittsburgh, 207 U.S. 161 , 28 S.Ct. 40 , 52 L.Ed. 151 ; Pacific States Box & Basket Co. v. White, 296 U.S. 176 , 56 S.Ct. 159 , 80 L.Ed. 138 . Attention is also directed to the language of Mr. Justice Frankfurter in Joint Anti-Fascist Refugee Committee v. McGrath, 341 U.S. 123, 167 , 71 S.Ct. 624, 646 , 95 L.Ed. 817 , where he stated:
“Again, when decisions of administrative officers in execution of legislation turn exclusively on considerations similar to those on which the legislative body could itself have acted summarily, notice and hearing may not be commanded by the Constitution.”
Congress delegated
that power
to the Board; see Sections 3, 25 and 26 of the Home Loan Bank Act; and appellees do not deny the constitutionality of the delegation. Consult School District No. 3 of Town of Adams v. Callahan, 237 Wis. 560 , 297 N.W. 407 , 135 A.L.R. 1081 . The exercise of a power so clearly and unmistakably delegated to the Board by Congress did not require that notice and hearing be granted by the Board as a prerequisite of action by the Board. And we think that exercise of its delegated powers in the issuance of the challenged orders does not present a constitutional question.
We also agree with appellants that
funds
handled by these banks are
used
only in the performance of public and governmental functions, hence they are properly to be regarded as possessing the nature of “public funds.” Cf. Inland Waterways Corp. v. Young, 309 U.S. 517, 524 , 60 S.Ct. 646 , 84 L.Ed. 901 ; D’Oench, Duhme & Co. v. Federal Deposit Insurance Corp., 315 U.S. 447 , 62 S.Ct. 676 , 86 L.Ed. 956 ; Federal Deposit Insurance Corp. v. Citizens State Bank, 8 Cir., 130 F.2d 102 . We think that sound public policy intrudes in a situation such as is presented in the Los Angeles Action where the very nature of its claim constitutes an assertion that
use
of the funds in possession of the former Bank of Los Angeles may lawfully be directed and controlled by its directors in the same manner and to the same degree and with the same results as though that bank was the absolute private property of its association members, and was conducted
exclusively
for their private profit. And “management” of a Home Loan Bank does not mean “ownership” of the bank.
There is an analogy between this sort of a system of regional reserve banks to service institutions engaged in the field of home mortgage financing under the supervision and control of a central administrative agency acting under Congressional mandate, and the plan of reserve banks embodied, in the Federal Reserve System for banks generally, 12 U.S.C.A. § 221 , and the Federal Farm Loan Act for farm mortgages, 12 U.S.C.A. § 641 . Comparison of these systems, (with certain characteristics in common) is not so far inapposite as to justify overlooking judicial expressions concerning the nature and functions of the regional reserve banks established by the two earlier Acts just above mentioned, for these expressions add emphasis to the contentions of appellants. There is a sufficient similarity of plan and purpose in these three institutional set-ups to make cases dealing with the Federal Reserve System and operations under the Federal Farm Loan Act pertinent to the present inquiry. The rationale of cases dealing with the last two named operations lend support to the view that a reserve bank created pursuant to a Congressional act is a government instrumentality — hence the functions it performs are “governmental.” Consult Federal Land Bank v. Bismarck Lumber Co., 314 U.S. 95, 102 , 62 S.Ct. 1 , 86 L.Ed. 65 ; Smith v. Kansas City Title & Trust Co., 255 U.S. 180 , 41 S.Ct. 243 , 65 L.Ed. 577 ; Federal Land Bank v. Gaines, 290 U.S. 247 , 54 S. Ct. 168 , 78 L.Ed. 298 ; Osborn v. Bank of the United States, 9 Wheat. 738, 860 , 6 L. Ed. 204 .
*446
Since, as we later indicate, a Federal Home Loan Bank is a federal instrumentality organized to carry out public policy and its functions are wholly governmental, neither the bank nor its association members,- although they ar.e nominally stockholders, acquire under the provisions of the Bank Act, any vested interest in the continued existence of said bank or any legally protected private rights which would enable them to invoke the due process clause. People’s Bank v. Federal Reserve Bank of San Francisco, D.C., 58 F.Supp. 25 ; Federal Land Bank v. Bismarck Lumber Co., 314 U.S. 95 , 62 S.Ct. 1 , 86 L.Ed. 65 ; Knox National Farm Loan Ass’n v. Phillips, 300 U.S. 194, 202 , 57 S.Ct. 418 , 81 L.Ed. 599 ; Federal Land Bank v. Gaines, 290 U.S. 247, 254 , 54 S.Ct. 168 , 78 L.Ed. 298 ; Greene County National Farm Loan Ass’n v. Federal Land Bank, 6 Cir., 152 F.2d 215 , certiorari denied 328 U.S. 834 , 66 S.Ct. 978 , 90, L.Ed. 1610. (And see further comments in Part 5 herein on contentions concerning claimed “property interests”, of federal association members in a Federal Home Loan Bank.)
In this view of the law the controlling issue is and must be whether
the claim
of Lo-s Angeles that under law it has a vested right to a continuous corporate existence, has merit. We are fully persuaded that such a claim does not, and can not, reach the dignity of an assertion of a legal right in the strict sense since clearly it does not appear from “the nature and character of the (basic) legislation that Congress intended to create a statutory privilege protected by judicial remedies.” See Stark v. Wickard, 321 U.S. 288, 306 , 64 S.Ct. 559, 569 , 88 L.Ed. 733 .
The Los Angeles Bank and the district it serves were initially created in the sole discretion of the Board, and the Board was specifically authorized to “readjust” all bank districts, Sec. 3, 12 U.S.C.A. § 1423 ; during its lifetime, the Bank was directed to act
only
“subject to the approval of the board” Sec. 12, 12 U.S.C.A. § 1432 , and could be required, without its consent, to assume the obligations of consolidated debentures of
all
of the banks in the System or otherwise extend credit to the other Banks, as the Board might direct, Sec. 11, 12 U.S.C.A. § 1431 ; and was given succession
only
“until dissolved by the board” Sec. 25, 12 U.S.C.A. § 1445 . Certainly such a sweeping grant of powers to the Board over Federal Home Loan Banks negatives in vigorous fashion any intention that the grant of corporate existence to the Los Angeles Bank should create in that Bank “a statutory privilege (of permanent existence) protected by judicial remedies.”
This legislatively created system of Home Loan Banks exemplifies the principle that whatever rights and privileges Congress may constitutionally confer, it may withhold — and by the same token if privileges are conferred, they may be granted upon such terms and conditions as Congress may see fit to' prescribe. The beneficiary of privileges so conferred may not be heard to question the authority of the Congress to enforce the express terms of a legislative grant of privileges through the medium of an administrative agency it created to enforce such terms.
It would serve no useful purpose to further elaborate the issue of private versus public character of Federal Home Loan Banks. It is clear that such “rights” as these banks possess or may lawfully exercise stem only and exclusively from grants of limited authority under federal legislation and not from possession of any of the purely inherent characteristics and attributes of orthodox private corporate business enterprises. Our reading and interpretation of the Federal Home Loan Bank Act leaves us with the firm conviction that when it set up the “Federal Home Loan Bank System,” in 1932, the Congress of the United States thereby intended to, and did, create a Federal agency and instrumentality of the legislative branch of the federal government to carry out and discharge important governmental functions, to wit, the furnishing of reserve banking facilities for saving and loan associations and similar institutions within a district created by the Board through the medium of a Home Loan Bank in that district which is chartered by the Board.
We hold that all Federal Home Loan Banks within the System are, and operate
*447
as, public banking agencies and instrumen-talities of the federal government, and as such have no justiciable (and proprietary) interest in their continued existence.
Los Angeles and appellees reject all of the conclusions we have expressed in this Part of our opinion. As we have indicated, they contend that under the particular form in which Los Angeles cast its complaint the equity powers of the court were invoked which fact gives the court jurisdiction
for all purposes
which of course would include the granting of
all forms of relief demanded in the complaint.
This conclusion is said to find support in the familiar doctrine that where equity has properly assumed jurisdiction, it has the power to' decide all relevant matters and to do complete justice between the parties, even to granting relief ordinarily cognizable only at law.
This contention suggests a consideration of exactly what the court would be required to do to implement the sort of decree which would provide the
specific relief
demanded by Los Angeles. We turn now to the problem posed by that contention (see Part 4) for it necessarily includes within its scope the “relief” which the decree (to be effective)
must grant without any action whatever by the Board, official or otherwise.
An interesting aspect is that such a decree would, wholly escape the orbit of the familiar doctrine that “equity follows the law” — in this case, “the law” laid down in carefully measured terms in the Federal Home Loan Bank Act.
IV
Necessity for Board Action Considered
It is not contended that in the main case out of which this appeal grows and upon -tyiiich it is grounded, personal service of process was ever had upon Commissioner Fahey within the State of California. He was not a resident of the State of California, and the official residence of Administration was then in the District of Columbia (as is also the case with the present Board). As the arguments to which we now refer will indicate,
complete reliance
is placed on the sufficiency of “substituted service” upon Fahey under the form of action relied on by Los Angeles. We conclude and therefore hold that the “substituted service” on the Commissioner (Fahey) did not confer jurisdiction in per-sonam over the Commissioner (and see footnote 9, infra).
As to the effect of “substituted service” on Fahey, no contention is made that such service conferred personal jurisdiction over the present Board since the substituted service of 1946 is based on the language of
(now)
Title 28 U.S.C.A. § 1655 and does not purport to confer personal jurisdiction upon absent defendants so served, but authorizes only a judgment affecting the property which is the subject of action. Los Angeles poses the problem in the following language:
“Since the case has not been tried, the scope of the controversy must be measured by the claims set forth in the complaint. In this connection, it is worthy of note to point out that the answer of the San Francisco Bank admits that it claims the disputed assets solely under and by virtue of the three administrative orders above referred to; in other words, the sole muniments of title upon which it relies in this action
quasi in rem
to quiet title, to remove clouds on title and to regain possession, are these three administrative orders.
“On the merits then,
the fundamental question below
concerns the basic power of a court in equity, in an action
quasi in rem,
to adjudicate property rights as against a claim that the administrative nature of the acts underlying the controversy preclude the exercise of its historical jurisdiction in this regard.” (Emphasis ours.)
We do not agree with the theory underlying the foregoing argument. We are convinced that the indispensable prerequisite to a decree quieting title in this case would be a determination of the
validity
of the administrative orders complained of and we also agree with appellants that the heart of the Los Angeles Action is the alleged invalidity of the orders. Here Los Angeles makes a collateral attack on the validity of the orders by an action to recover property (all located in California)
*448
and remove clouds on title and on this basis sought and secured the order for substituted service under 28 U.S.C.A. § 1655 . In the absence of jurisdiction in personam over the Commissioner (Fahey) under the substituted service above mentioned, and absence of jurisdiction in personam over the present and functioning Board and/or its members, we think that these orders, can be attacked only in a direct action to set them aside; they are valid until set aside in an appropriate judicial proceeding- where the administrative authority is brought within the personal jurisdiction of the court,
or
they are terminated by subsequent order of the present Board., In our view the Los Angeles Action necessarily proceeds on the presumed invalidity of the orders, a presumption that the law does not permit in an in rem action like the Los Angeles Action, since such an action constitutes a collateral attack on their validity and therefore cannot be maintained. Adams v. Nagle, 303 U.S. 532 , 58 S.Ct. 687 , 82 L.Ed. 999 .
Los Angeles and appellees do not agree with the conclusions stated in the preceding paragraph.. They go even further in rejecting it and buttress their more sweeping rejection by arguments which make clear that under their theory the question of whether it was necessary (in 1946) to secure personal jurisdiction of the lower court over Commissioner Fahey (or over the later and present Federal Home Loan Bank Board and/or its members) as a basis of jurisdiction in the lower court to grant
all relief
demanded by Los Ange-les, is a matter of no importance. On this point they emphatically urge that no sort of official administrative action by the present Board is necessary (or is here sought) in order to give the lower court jurisdiction to enter a decree which in every essential respect will
completely restore
the former Bank of Los Angeles to its former position and status in the Federal Home Loan Bank System. In arguments related to this phase of the case Los Angeles assures us that under its
quasi in rem
procedure to try title to assets it claims from the Bank of San Francisco, there is no necessity for the court to engage in any “species of
review
of the administrative orders.” It is said that the problem is not whether the orders should be set aside in an administrative sense but whether they (and particularly Order No. 5082) operated to transfer title of assets of Los Angeles to the Bank of San Francisco. This “certainly does not call for a setting aside of the orders as in the case of an administrative review.” The orders could not and did not operate to transfer title and “had no more effect than would a wild deed, executed in favor of the San Francisco Bank by a third party not connected with the title”; therefore a question of this character does not “go to the
jurisdiction
of the District Court.”
It is clear that Los Angeles and appellees assume that because the lower court acquired jurisdiction in personam over the Board-chartered Bank of San Francisco it must necessarily follow, as a matter of law, that under the form of action instituted by Los Angeles, the lower court is now vested with jurisdiction to ignore the existence of the Board and enter a decree which sets aside and completely nullifies the challenged 1946 orders of Administration. That this theory also underlies the complaint of the plaintiffs in the. Los Angeles Action is made evident by the vigorous contention that in order to be
fully effective
in providing
all
of the relief demanded by Los Angeles the decree of the court
“need not require the
[present]
Board to do a single thing, either directly or indirectly”
— this
because “the decree, will effectively grant the refjgef desired by Expending Itself on the Sah Francisco Bank, which is before the Court and is in possession of the disputed assets.”
7
8
(Emphasis ours.)
*449
To sustain the validity of these conclusions appellees advance the following revealing argument:
“Repeated 'decisions of the Supreme Court indicate, however, that
neither Fahey nor the Home Loan Bank Board
were or are indispensable parties to this controversy over title and right to possession of the seized Los Angeles Bank assets.
The test, as laid down by the Supreme Court is whether or not the decree may be said to be capable
*450
of
expending■
itself against the subordinate of the governmental agency involved; here,, of course, the San Francisco Bank."
(Emphasis ours.)
No cases dealing directly or indirectly with the power and authority of the Federal Home Loan Bank Board under the Home Loan Bank Act are cited (and none are to be found in the books) which support the legal theory that, under Section 1655 of Title 28 U.S.C.A. an in rem jurisdiction of a California District Court over the Home Loan Bank of San Francisco (itself admittedly a mere subordinate creature of administrative action of the Board) will sustain a decree with the far reaching consequences of the one here sought. But it is urged that the holding of the Supreme Court, in Williams v. Fanning, 332 U.S. 490 , 68 S.Ct. 188 , 92 L.Ed. 95 , sustains appellees’ argument just above set forth, this because the Bank of San Francisco is before the court; is in actual possession of the assets of the former Los Angeles Bank,
and nothing remains to be done
except the entry of a decree which restores (re-activates) the former Bank of Los Angeles and orders and directs that the assets of that bank now in possession of the Bank of San Francisco be placed in possession of the “re-activated” Bank of Los Angeles.
In further support of the principle here invoked appellees cite Hynes v. Grimes Packing Co., 337 U.S. 86 , 69 S.Ct. 968 , 93 L.Ed. 1231 ; Jeager v. Simrany, 9 Cir., 180 F.2d 650, 651 ; Rank v. Krug, D.C., 90 F.Supp. 773, 802 ; Reeber v. Rossell, D.C., 91 F.Supp. 108, 111 ; National Radio School v. Marlin, D.C., 83 F.Supp. 169 , 170 and Varney v. Warehime, 6 Cir., 147 F.2d 238 . The last mentioned case is said to express “the guiding principles.”
In connection with the foregoing argument with its rejection of principles we regard as firmly imbedded in administrative law, appellees do not favor us with an expression of their views as to the significance of the pronouncements in Blackmar v. Guerre, 5 Cir., 190 F.2d 427 and the same case on appeal reported in 342 U.S. 512 , 72 S.Ct. 410 . And see Payne v. Fite, 5 Cir., 184 F.2d 977 which also considers the controlling limitations of the doctrine espoused by Los Angeles and appellees. See also cases cited in footnotes 7 and 23.
It is to be noted that the Bank of San Francisco is only to be required to
surrender
the assets mentioned. It may be assumed that the demand of Los Angeles for “relief” necessarily had to stop at this point because no provision of law can be found in the Home Loan Bank Act which would authorize the subordinate Bank of San Francisco to act for and on behalf of the Board in the performance of any of the administrative functions of the Board (including the “restoration” or “re-activation” of an abolished Federal Home Loan Bank),
or
that any provision of law exists by virtue of which the Bank of San Francisco could lawfully take any sort of corporate action which could possibly affect, or direct the performance of, official duties or actions of the Board such as the re-adjustment of bank districts which is here inescapably involved.
All banks of the Federal Home Loan Bank System are required to exercise the powers vested in them “subject to the approval of the board”; for a court to order a subordinate Home Loan Bank to perform any of- the Board’s functions would be a judicial act without a vestige of sanction in the Home Loan Bank Act; furthermore the lawful existence of the Bank of San Francisco is challenged by appellees. In any event, no court has jurisdiction to authorize or direct a district bank to take any sort of action in the performance of which it would be compelled to ignore or violate any of the restrictions, limitations or controls which the Home Loan Bank Act imposes on it. Since it is conceded (and properly so) that the Home Loan Bank of San Francisco is but a subordinate segment of a nation-wide federal banking system it must necessarily conform (under its charter) to all provisions of the Home Loan Bank Act and to the rules and regulations of the Board. So far as the Los Angeles Action is concerned that bank comes squarely within the doctrine laid down in Payne v. Fite, supra.
But appellees avoid the force of this doctrine by the argument that the lower court has “plenary power” to adjudicate the
*451
Bank of San Francisco a constructive trustee and order it
“to return the assets demanded by Los Angeles without in any way touching the orders in
question.” The decree having accomplished
this much,
ap-pellees appear to assume that it would have presumptively “expended itself.”
As indicated in part three herein, it is contended that sitting as a court of equity, the form of specific relief demanded is within the power of the court in a proceeding
quasi in renn,
under Section 1655 of Title 28 U.S.CA. It is also suggested that such relief in personam would ibe purely in aid of
and incidental
to an in rem jurisdiction over the property itself. In support of the view that the court need not touch the orders Los Angeles cites Title Insurance & Trust Co. v. California Development Co., 171 Cal. 173, 198-199 , 152 P. 542 .
To support the argument that the three orders are “involved”
only as an incident
to the claimed equity jurisdiction of the court, appellees cite Jellenilc v. Huron Copper Mining Co., 177 U.S. 1 , 20 S.Ct. 559 , 44 L.Ed. 647 ; Harvey v. Harvey, 7 Cir., 290 F. 653 .
We need not labor the point that the various contentions of appellees are in themselves a blunt repudiation of the idea that to secure the relief Los Angeles demands it must
also
ask the court
to order and direct the Board
to take some or any sort of official action to withdraw or nullify the three orders. They are also a complete repudiation of the idea that personal jurisdiction over the (present) Board and/or its members must be secured (or is at all necessary under the theory of Los Angeles) in order to give the lower court jurisdiction to make and enter in the main case a decree of the character here sought.
It is clear from the record and the briefs in the main case and in this case, that appellees and Los Angeles also completely reject the theory that the Board and/or its members are necessary or indispensable parties in this entire litigation. Their assumption is that as an agency of (he United States under the Federal Home Loan Bank System the Board may be wholly disregarded in any of the steps taken by Los Angeles in the Los Angeles Action which is yet to be tried. Not only is it said that the Board and its members are not indispensable parties to the Los Angeles Action but it is further urged that this action is not an unconsented suit against the United States; that under Section 1655, supra, absent defendants may be served (as they were in the Los Angeles Action) by
substituted service
on (then) Commissioner Fahey; that Fahey appeared by various motions in which he attacked the jurisdiction of the lower court over the subject matter of the Los Angeles suit and over his person; that Fahey’s successor (the Board) has subsequently answered as to the merits while “attempting” to preserve the jurisdictional points. (Parenthetically, we state that in our view the jurisdictional challenge was properly and effectively preserved.)
9
*452
Appellees indícate that they are quite persuaded that in any event, and as to the Board, the jurisdictional challenge of appellants is entirely without merit. On this point they emphatically urge that
“for the purposes of jurisdiction
* * *
it is manifestly of no moment zuhether Fahey or the Board actually appeared or not”
since both said Section 1655 and its predecessor Section 57, supra, provide that where the absent defendant does not,
after substituted
service, appear, the adjudication shall, as to him, “affect only the property which is the subject of the action.” ' Appellees add that “so far as Commissioner Fahey and his present successor [Board] are concerned, the jurisdiction of the District Court to adjudicate title and right to possession of the, demanded properties and assets attached at the moment [substituted] service was made upon the late Commissioner.
“Whether he was an indispensable party to this controversy or whether he was not,
the District Court obtained jurisdiction then and there to adjudicate his claims, if any, with reference to the [Los Angeles Bank] assets.” And’speaking for Los Angeles appellees assure us that- “It is only such a decree — one affecting only the property which is the subject of the action— which is sought in the Los Angeles phase of the litigation. The prayer is that the assets and properties be recovered, that title in appellees be quieted and confirmed, and that any cloud occasioned by the three orders be removed.” And the right of the lower court to enter such a decree is thought to find' justification in the views expressed in Jellenik v. Huron Copper Mining Co., supra; Harvey v. Harvey, supra, and McRoberts v. Independent Coal & Coke Co., 8 Cir., 15 F.2d 157 .
Thus the characterization given its action by Los Angeles as purely one to recover property and to remove clouds from title to assets and property within the State of California- reveals the fundamental nature of the suit and the basis upon which it sought and secured an order for substituted service under Section 1655, supra.
The very nature of the action brings to the front a question of law as to indispensable parties. The law as applied to the necessity for the presence of superior administrative officers in actions wherein
the validity
of their acts is questioned, has been recently restated in Williams v. Fanning, supra, and has been followed by this Court in Daggs v. Klein, 9 Cir., 169 F.2d 174 . These cases reaffirm the rule that a superior administrative officer is an indispensable party to an action where
the
relief sought will require him to take action, either by exercising a power lodged in him
or by having a subordinate exercise it for him.
Williams v. Fanning, supra, 332 U.S. at page 493 , 68 S.Ct. at page 189 . The Fanning case also emphasizes that such superior official is indispensable to an action in which the relief requested would involve “risk that the judgment awarded would ‘expend itself on the public treasury or domain,
or interfere with the public administration.”’
332 U.S. at page 493, 68 S.Ct. at page 189 .
Under either of these two tests the presence of the Home Loan Bank Board and its members is required in this action. The relief requested requires the redivision of the present Eleventh District into two districts for there can be one and only one bank'to a district. It requires the reactivation of the Los Angeles Bank. It requires the appointment and election of officers and directors of the reactivated bank, for the terms of such officers and directors have long since expired. (Directors serve for definite terms and not until their successors are elected and qualified. Section 7, Federal Home Loan Bank Act.) It would also require the reactivation of the Portland Bank, as such. It would require issuance of new certificates of stock by both the Los Angeles and Portland Banks. ' None of these requirements or any other essentials to the granting of the relief prayed for in
*453
the Los Angeles Action is possible without action by the Board since, under Section 12 of the Act, no bank may exercise any functions vested in it by the Act except “subject to the approval of the board”. To us it is obvious that a decree of the court which was capable of granling the relief which the appellees and Los Angeles seek would necessarily have to require the Board “to take action * * * by exercising * * * a power lodged in” it. Williams v. Fanning, supra, 332 U.S. at page 493 , 68 S.Ct. at page 189 ; Daggs v. Klein, supra. Certainly no mere subordinate bank which was itself subject to the jurisdiction of the Board has
the power or authority which must be exercised
to effectuate such a decree.
Jurisdiction to compel action of the character noted would therefore exist only where the Court had a personal jurisdiction over the Home Loan Bank Board members; a direct attack on the orders could only be made after personal service in the proper jurisdiction was had on the Federal Home Loan Bank Commissioner and upon the members of the Board. Attempting to compel such action by a subordinate bank notwithstanding the absence of Board approval, would certainly seriously interfere with the public administration and effective operation of the Home Loan Bank System, not only in California and the present Eleventh District, but throughout the nation. The entry of the decree sought by these plaintiffs might raise serious questions concerning the validity of consolidated debentures and woitld certainly impede the issuance of additional such securities. Title 12 U.S.C.A. § 1431 (b).
We agree with appellants that without formal Board approval, the functions of the San Francisco Batik or a reconstituted Los Angeles Bank could be performed only with serious financial risk to the directors, a risk which responsible persons would certainly be reluctant to assume since they would be acting without Board sanction and without any sort of authority to be found in the Home Loan Bank Act. Our attention is not directed to any provision of that Act which would require the Board (under such a decree) to proceed to perform its statutory supervisory functions over a judicially “reactivated” Bank of Los Angeles precisely as though this bank had never suffered an interruption in its corporate existence. And nowhere in the Act is the ministerial duty imposed on the Board to restore the Los Angeles Bank or to return assets theretofore transferred to the San Francisco Bank even under such a decree.
A final consideration. Such a decree would seriously impinge upon the Board’s continuing statutory duty to supervise the Federal Home Loan Bank System, for it would substitute Court’s supervision for that vested in the Board by statute. In short, enforcement or attempted enforcement of such a decree would create confusion in the System of a kind difficult to measure because of its unprecedented character. We make further comment on these matters just below.
In making plain their own position on this appeal, appellees also argue that the Los Angeles Action is not a suit against the United States because Section 1655, supra, “is clearly a vehicle whereby
under general law,
within the meaning of the cases
typified
by Land v. Dollar, 330 U.S. 731 [ 67 S. Ct. 1009 , 91 L.Ed. 1209 ], a party may litigate his claims to specific property. Such being the case, the Dollar decision and its prototypes stand as authority for the proposition that
any and all questions germane to the Los Angeles Bank’s claim to its seised assets and properties
may be litigated in the Los Angeles Action and in the (bank’s) cross-claim in the Mallonce action.” It is said that this is true because Section 1655, supra, provides “the conventional type of action to determine conflicting rights or claims as to real or personal property within the jurisdiction
upon the basis of substituted service upon the parties outside the jurisdiction.”
The provisions of the Federal Home Loan Bank Act are not cited or relied on to support the fundamental theory which thus underlies the Los Angeles Action. Unless we are willing to ignore or set aside dear provisions of the Home Loan Bank Act we cannot agree that the Dollar case here relied upon provides a rule applicable to the unprecedented problems wrapped up in the
*454
involved litigation of which the Los An-geles Action is a part.
We have heretofore held that Home Loan Banks are not private banking corporations hut
are
public banking agencies of the United States and it is in light of that holding tliat we further examine the demands of Los Angeles which immediately concern the character of these banks. That Home Loan Banks are legislatively created institutions , and that Congress set up a schedule of rules under which they came into existence and under which they are required to function as the price of existence, are conclusions we have accepted and adopted.
While Home Loan Banks are operated under carefully delimited private management, this fact in nowise militates against our view that they are governmental banking agencies. No constitutional limitations are suggested which forbid Congress to create this type of public agency to perform certain functions of a public nature within a limited area of the banking field under the regulatory limitations and restrictions set up in the Home Loan Bank Act, hence we do not doubt that such bank functions as aré prescribed in the Federal Home Loan Bank Act are public and federal in their nature, and we so hold.
In dealing with the question of the indispensability of the United States as a party to the Los Angeles Action, little need be said. Despite the form of the Los Angeles Action we think that it. is, in legal effect, a suit against the United States. And nowhere in the Federal Home Loan Bank Act does it appear that the Government of the United States had waived immunity to suit in an action which immediately involves the
status
as well as the creation and/or re-activation of Federal Home Loan Banks and Home Loan Bank Districts. Nor has the government waived immunity to suit involving the issue of control of their assets and the measure of administrative control over these banks exercised through a purely Congressional instrumentality — the Board. And, as we. later-emphasize, we are persuaded that a suit of the character just above mentioned would he a suit against the United States if brought against the Board. Furthermore, it is clear that even if Congress had specifically provided a statutory waiver of sovereign immunity to suit in an action like that brought by Los Angeles, it could impose such conditions and restrictions as 'it chooses. Nichols v. United States, 7 Wall. 122 , 19 L.Ed. 125 ; Luckenbach S. S. Co. v. United States, 272 U.S. 533, 536 , 47 S.Ct. 186 , 71 L.Ed. 394 , But the Act does not waive sovereign immunity to suit in actions of the character above noted.
Where statutory consent to a suit against the sovereign is not given, the attempted exercise of judicial powers to adjudge against a sovereign is void. United States v. United States Fidelity & Guaranty Co., 309 U.S. 506, 514 , 60 S.Ct. 653 , 84 L.Ed. 894 .
It also rests with Congress to determine not only whether the United States may be sued, but in which courts the suit may be brought. Where jurisdiction has not been conferred by Congress, no officer of the United States has the power to give any court jurisdiction of a suit against the United States. State of Minnesota v. United States, 305 U.S. 382, 388, 389 , 59 S.Ct. 292 , 83 L.Ed. 235 . An issue of this character was injected into the case by an argument of Mallonee and Association. See our reference in Part five herein to cases discussing this particular problem.
Not only is the Home Loan Bank Act wholly silent as to the right of any Home Loan Bank to sue the Board, but Congress also carefully refrained from making the Board a suable entity. Furthermore, it is an unincorporated agency of the United States, itself without power to sue or be sued — the statute of the Board’s creation gave no such consent. See United States Department of Agriculture, etc., v. Remund, 330 U.S. 539, 541, 542 , 67 S.Ct. 891 , 91 L.Ed. 1082 . It is not at all strange that due to the nature of their banking functions it was necessary for Congress to confer upon Home Loan Banks the power to “complain and to defend, in any court of competent jurisdiction” — “to sue and be sued,” 12 U.S.C.A. § 1432 , but no authority was conferred upon such a district bank to defend in a suit where the clearly revealed purpose of the suit is to compel the local bank to perform, or attempt to perform, a
*455
function which only the Board may lawfully perform. The equity powers of a federal court may not be invoked to sanction entertaining of a suit wherein a decree is sought which directs a bank to take action of that character. Congress has carefully withheld giving to any bank the power to perform Board functions even under the compulsion of a decree such as is here sought. See footnote 8, supra.
The “interest” of the federal government in the operation and function of Federal Home Loan Banks thus arises from a statutory relationship which is not to be measured in law only and alone by the amount of capital which the government may have invested in one of these banks at any given time. In the Los Angeles Action we not only have a demand for recovery of specific property over which the United States maintains the “legislative interest” of a continuing administrative control (through Board control of bank functions) but in this case we also face the fact that the United States had a financial stake (or “interest”) in the Los Angeles Bank, as we have pointed out in Part three herein. See footnote 6% supra. The Supreme Court has held that a proceeding against property in which the United States has an interest is a suit against the United States. See United States v. Alabama, 313 U.S. 274, 282 , 61 S.Ct. 1011 , 85 L.Ed. 1327 ; Maricopa County v. Valley National Bank, 318 U.S. 357, 362 , 63 S.Ct. 587 , 87 L.Ed. 834 .
The authorities above cited will serve to indicate the very narrow range within which suits against the sovereign are permitted, regardless of the form in which such suits are brought.
What then is the
measure
and/or extent of judicial control which (under the unprecedented circumstances of this case) the lower court may lawfully exercise over the
status,
and property in possession of, any bank here involved ? Here the lower court does not have personal jurisdiction over the Board, see footnote 7, supra, but in any event such jurisdiction is not considered by Los Angeles and appellees to be an essential ingredient of the litigation. While nothing to be found in the Home Loan Bank Act even remotely suggests or infers that the Act confers jurisdiction on the lower court to enter a decree which would have the legal effect of
changing
the official (statutory)
status
of a bank the lower court appears fully persuaded that under the facts and the pleadings in the Los Angeles Action it may lawfully exercise this very measure of control. This is made evident by the record in this appeal and in the appeal in the main case.
To begin with, the lower court faces the fact that the Home Loan Bank of Los An-geles was formally
abolished
by the three 1946 administrative orders here in controversy. The purpose of the Los Angeles Action is to secure “restoration” of the former Bank of Los Angeles to its former
official status
within the Federal Home Loan Bank System. It seeks to accomplish this purpose solely through a decree of the lower court. It demands such a decree despite the fact that nowhere in the Home Loan Bank Act is there a semblance of authority for the lower court to make and enforce a decree of this character, this because such functions are specifically reserved by Congress to the Board. The orders in question were valid on their face for they dealt with matters and acts clearly committed by law to the control and supervision of the (then) Commissioner (Fahey). In making the orders Fahey did not purport to act as an individual — he was acting as an official performing a function within the statutory scope of his official powers. Fahey was a statutory administrative agent of Congress. The real significance of the Federal Home Loan Bank Act lies in the fact that by this legislation Congress made sure that
it
retained permanent control over the nationwide bank system it created in 1932. The delegation of authority to Fahey thus came directly from Congress and from no other source.
We are convinced that the 1946 Los Angeles suit against Fahey (Administration) being a suit against
official action
of a servant and agent of Congress, was in truth and in substance a suit seeking relief against the United States in its sovereign capacity. This fact made it necessary that Los Angeles bolster its claim for equitable relief by demanding that the court “go back
*456
of the orders” and “scrutinize the activities” of Commissioner Fahey which were charged to be motivated by malice. Obviously the court did “scrutinize” the alleged malicious “motives” of Commissioner Fahey, but. we think the contention as to the presence of “motives” loses legal force as an argument. We agree with appellants that allegations that improper motives prompted the promulgation of the challenged orders, that their purpose was “wholly punitive and disciplinary and not otherwise,” do not permit a collateral attack upon the validity of the orders through means of which these orders are subjected to an impermissible form of judicial review in an action of the basic character of the Los Angeles Action. For “if the order is justified by a lawful purpose, it is not rendered illegal by some other motive in the mind of the officer issuing it”-. Isbrandtsen-Moller Co. v. United States, 300 U.S. 139, 145 , 57 S.Ct. 407, 410 , 81 L.Ed. 562 . And see our comfnents on this point of law in our opinion in the main case, 196 F.2d 336, 380 , and cases cited.
.In this posture of the case it is evident that the specific “relief” which Los Angeles demands at the hands of the court would, to be effective, necessarily require the court to enter a decree which on its face “reactivated” the Bank of Los Angeles within the Federal Home Loan Bank System and this without
any action on the part of a Congressional legislative agent
— the
Board.
In light of the clear provisions of the Home Loan Bank Act it is impossible to view such a transition in the
status
of this abolished bank as being legally possible of accomplishment without official administrative action by the present Board.
But other practical considerations intrude. We are quite persuaded that if the decree sought by Los Angeles is to be effective in providing all of the relief it demands and wrap up all pertinent issues in one package in accordance with the best traditions of equity practice, it would have to go further and blot out of existence the administratively created Home Loan Bank of San Francisco — certainly an “effective decree” would have to eliminate the corporate existence of the Bank of San Francisco otherwise it would be left to later assert the claim that under the decree
it still retained a valid corporate existence as a Home Loan Bank.
Unless such a possible claim was also extinguished by the decree the resulting uncertain official status of the San Francisco Bank would remain as a basis for its later assertion of the very claims it is here asserting. Even the assertion of such a claim would create a chaotic situation within the Federal Home Loan Bank System of the United States.
No suggestion is advanced by Los An-geles or appellees as to how that sort of a situation would or could be avoided or eliminated, or what
disposition
should and would be made of the corporations known as the Federal Home Loan Banks of San Francisco and Portland. If the decree of the lower court “re-activates” the former Bank of Portland, then former (1946) assets of that bank now merged with assets claimed by the Bank of San Francisco, must somehow be segregated and returned to the re-activated Portland Bank, or Los Angeles would be denied part'of the full relief it demands and which it asserts must and should be granted. Surely Los Angeles could not be “restored” and thereafter be permitted to retain possession of any part of the assets in possession of the former Bank of Portland at the time it was abolished in 1946.
These and allied considerations raise vital legal and administrative problems of grave significance and reveal but a few of the involvements and complications suggested by the specific demands of Los Angeles. They tender inescapable issues and they may not, and should not, be disregarded unless we are willing to leave unsettled aspects of and issues in this equity action which would surely inspire more litigation. The very least that can be said is that they are so important that they should not be left to conjecture or speculation in an equity suit which rests on the theory that
all matters in dispute
are to be, and would be, eliminated by the decree. The
legal existence
of the Home Loan Bank of San Francisco and the former Bank of Portland are very much “a matter in dispute”
if
the Los An-geles Action means anything. The presence and pertinence of these troublesome issues
*457
persist as one of the dominating facts which gives significant character to this extensive litigation. At a later point we refer more specifically to other and allied phases of the same problems.
We can find nothing in the Federal Home Loan Bank Act, nor has any provision therein been cited to us, which by the most tortured construction would grant jurisdiction to the lower court to “re-establish” or “re-activate” the Banks of Los Angeles and Portland
and
blot out of existence (or alternatively ignore the corporate existence of) the present Bank of San Francisco. Yet viewed both realistically and technically that is exactly what the suit of Los Angeles really calls upon the lower court to do, and this in face of the fact that readjustment of bank districts and the necessary steps to accomplish such purposes are functions and matters exclusively committed by statute law to the discretion of the Board. But since Los Angeles and appellees posit their case on the assumption that the lower court has “plenary jurisdiction” under the form of the Los Angeles Action to order the changes we have suggested, and this in the absence of any kind of administrative Board action, we consider it necessary to outline what we think the court would have to direct in its decree in order to give to Los Angeles
all
that it demands.
If it was to restore (as demanded) the status quo ante in the here involved Pacific Coast area of the Federal Home Loan Bank System, the decree would (as a necessary minimum) have to order, direct and approve : (a) restoration and re-activation of the -Home Loan Banks of Portland and Los Ang'eles; (b) abolition of the Home Loan Bank of San Francisco; (c) reestablishment and ré-activation of the Home Loan Bank Districts of the entire Pacific Coast area as they existed prior to the making and enforcement of the three Board orders of March 29, 1946 by a redivision of the present Eleventh District into two Districts, since under the law here involved there can be one and only one bank to a District; (d) the appointment of necessary public directors for the new (court) recreated banks in Los Angeles and Portland; (e) budgets for these banks; (f) the supervision of such further procedural steps as would bring about a transfer of the now scrambled title to assets claimed by each of these banks, past and present. (It may be assumed that the “supervision” here referred to would be given by a special master under directions from the court since a court is not equipped to personally supervise the involved accounting procedure that would be necessary.)
A decree which did not purport to accomplish the steps and changes just above noted would deny the essentials of the relief specifically demanded by Los Angeles and leave it the target of potential demands not eliminated by the decree — demands which in our judgment would have a statutory basis. Los Angeles is now in a position where it cannot have the lower court stop at a half-way point in the granting of full “equitable relief” — it cannot achieve judicial “restoration” or “re-activation” of the Los Angeles Bank unless at the same time the court “does something” in the decree about
the corporate existence
of the former Bank of Portland
and
the present Bank of San Francisco. That “something” is the judicial disposition of these subordinate elements in the Home Loan Bank .System, and certainly that vital problem cannot be shunted to one side as utterly irrelevant to any real issue in the case. A decree granting the demands voiced in the complaint in the Los Angeles Action would leave these two' corporate entities dangling in mid-air after the lower court
transferred
the assets of San Francisco to the recreated Bank of Los Angeles. Perhaps Los An-geles assumes that the problem of the future
status
of the Banks of San Francisco and Portland is of no legal consequence, or is properly to be left to some future administrative action by the Board.
Whatever the theory of Los Angeles (and we are measuring what we conceive to be its theory by the demands in its complaint) we can find no justification for assuming that the lower court has jurisdiction to hereafter enter and enforce a decree of the character sought by Los Angeles, and certainly no jurisdiction to enter and enforce a decree which left the Banks of Portland and San Francisco wandering about in
*458
:some corporate “no man’s land”'with a
status
impossible to define by any legal standards suggested by the parties or to be found in the Home Loan Bank Act.
We are also assured by appellees that the relief demanded by Los Angeles does not tall'for
setting aside
the reorganization orders' of 1945 as in a case where an orthodox type of judicial review of administrative orders is demanded. As to this particular matter they contend that if the “relief” demanded “goes too far” in asking that the three Board orders be declared “null and void,” an objection would relate
merely to the form of the equity decree to be rendered.
So it is obvious that Los Angeles discards all of the orthodox conceptions of formal judicial review of final administrative orders on the theory that the decree need not direct (and will not direct) the Board to take any sort of administrative action on the orders of March 29, 1945; the court will simply declare them null and void and the decree demanded will have the legal effect of retroactively stripping them of force and effect. In short, the Board is not to be called upon to play any part -in the procedure under and by means of which Los Angeles regains its former
status
in the Home Loan Bank System.
In viewing the foregoing contentions (which are advanced on behalf of both the appellees and Los Angeles), we think it apparent that an examination of the provisions of the Federal Home Loan Bank Act would at once suggest the necessity of formal Board action of an official character if the 1946 orders of “Administration” which abolished the Bank of Los Angeles are to be lawfully set aside. We are quite convinced that the present Board may not be ignored, and we are also convinced that Board action would be necessary unless we are willing to utterly disregard all pertinent regulatory provisions of that Act, or openly and frankly read them out of the legislation. No cases are cited, and none are to be found which could possibly justify or sanction such drastic action on our part, and certainly the language of the Federal Home Loan Bank Act ■ vigorously repels the idea that the Board may be utterly disregarded in disposing of the vitally important issues here presented without suing the Board and/or its members in a federal court where service of the process of that court would at least give the court personal jurisdiction over the Board and its members. See Blackmar v. Guerre, 342 U.S. 512 , 72 S.Ct. 410 ; Queens County Group of Savings and Loan Associations v. Home Loan Bank Board, D.C., 104 F.Supp. 396 and same case in, D.C., 106 F.Supp. 504 . And see cases cited in footnotes 7 and 23.
We have examined the cases relied on by Los Angeles and appellees and we do not agree that the rationale of the cited cases sustains the basic contentions of these appellees in this and in the main case. We are convinced that the Los Angeles Action is by its very nature an unconsented suit against the United States. It is directed against the Federal Home Loan Bank of San Francisco' which we have held to be an agency of the United States. Its real purpose was to- compel definite action by this subordinate agency — action which we regard as
official action
which only the Board could take,, thus giving the Los Angeles Action all of the essential characteristics of a suit against the United States which cannot' be maintained except with its consent which is here withheld. See Larson v. Domestic & Foreign Commerce Corp., 337 U.S. 682 , 69 S.Ct. 1457 , 93 L.Ed. 1628 ; American Dredging Company v. Cochrane, 89 U.S.App.D.C. 88 , 190 F.2d 106 ; Seiden v. Larson, 88 U.S.App.D.C. 258 , 188 F.2d 661 .
So far as the record shows, a controversy of this particular character has never confronted the federal courts although the legislation here considered has been on the books since 1932. Through all these years Congress has seen fit to retain the plenary administrative controls it set up in the Act, an attitude which probably finds its reason in the distressing and unforgettable experiences of the depression of the 30’s which called for aggressive legislative steps to alleviate the financial miseries and tragic economic plight of vast numbers of home owners throughout the nation. And it is worthy of note that Los Angeles and ap-pellees do not challenge the constitutionality of the Federal Home Loan Bank Act. It
*459
is inore than arguable that if the forms of administrative and legislative control it set
up over one
small and highly specialized type of banking activity is distasteful to Congress and to the American people our national legislature would have long since changed the rules or wholly abandoned this narrow field of banking legislation.
10
Our views concerning the phase of the case considered in this Part of our opinion call for the conclusion (1) that the lower court did not have jurisdiction in personam over the Commissioner under the substituted service of 1946 (see footnote 9, supra); (2) that the lower court does not have jurisdiction in personam over the (present) Board; (3) that the lower court may not lawfully command the subordinate Bank of San Francisco to perform acts which (under the clear provisions of the Home Loan Bank Act) the Board alone is authorized to perform; (4) that the yet untried Los Angeles Action is an unconsented suit against the United States; (5) that the “specific relief” demanded in the Los An-geles Action may not lawfully he granted by decree or judgment of the lower court and the lower court is without jurisdiction to grant such relief; (6) that neither the Bank of San Francisco nor the Bank of Portland is in law the alter ego of the Board, and neither of these hanks may lawfully be commanded or required by decree or judgment of the lower court to perform acts an

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/230604. Public record. Not legal advice.