Opinion
Hearing Granted March 7, 1962.
Opinion vacated 23 Cal.Rptr. 771, 373 P.2d 859.
C. Douglas Wikle, Walter Atkinson, W. Alan Thody, Los Angeles, Dell L. Falls, Lancaster, for petitioners.
Cooper & Boller, Los Angeles, for real parties in interest.
FRAMPTON, Justice pro tem.
Petitioners seek a writ of prohibition to restrain respondent court from proceeding further in the trial of a mortgage foreclosure action, except as it may affect the named plaintiffs therein; they also seek a writ of mandate directing respondent court to dismiss such action as to all parties purportedly represented as members of a class, and to strike certain portions of the complaint.
The petition shows that Hink is the owner of a note of the face value of $4,000, secured by a deed of trust which he purchased from Los Angeles Trust Deed and Mortgage Exchange on or about April 5, 1960. Lauten is the purchaser under contract, with Los Angeles Trust Deed and Mortgage Exchange of a similar note and trust deed. The Lauten note and trust deed is only partially paid for, has not been delivered, but has been allocated to her on the books of Los Angeles Trust Deed and Mortgage Exchange. The latter company was adjudicated a bankrupt on November 28, 1960, and the Lauten note and trust deed are now in the possession of the trustees in bankruptcy as part of the bankrupt estate.
The complaint below is brought in the name of eight named plaintiffs 'on behalf of themselves and all others similarly situated.' Petitioners are not named therein and therefore come within the category of 'all others similarly situated.' The complaint seeks to foreclose 302 trust deeds, each covering a separate parcel of land, securing 302 promissory notes each of the face value of $4,000 and of the total face value of $1,208,000. It further appears that each promissory note was executed by defendant Bell Canyon Ranchos, Inc., and was payable to one Walter Darracott. In each of the trust deeds defendant Bell Canyon Ranchos, Inc., was the trustor, Title Insurance and Trust Company was trustee and Walter Darracott was beneficiary. All of said trust deeds were recorded in the office of the county recorder of Los Angeles County. It further appears that Walter Darracott assigned all of said promissory notes and his beneficial interest in and to the trust deeds to the Los Angeles Trust Deed and Mortgage Exchange. All of said transactions are alleged to have been supported by a valuable consideration. It further appears that between April 5, 1960 and June 7, 1960, the notes and trust deeds were purchased from said Los Angeles Trust Deed and Mortgage Exchange by the plaintiffs herein for a valuable consideration; that the notes are now in default and that plaintiffs seek foreclosure of such trust deeds.
The petition shows that in the assets of the estate of the bankrupt (Los Angeles Trust Deed & Mortgage Exchange), there are more than 15,000 trust deed notes, including some of those involved in this action, allocated to the accounts of more than 8,000 investors; that about one-third of said notes were partially paid for under separate executory contracts and the other two-thirds were fully paid for; that under a ruling of the bankruptcy court, the fully paid for notes and trust deeds may be obtained by the payment of a $25 processing fee, and the partially paid for notes and The petition further shows that only 14 of the 302 notes and trust deeds are in the hands of investors, and that on April 10, 1961, defendant Bell Canyon Ranchos, Inc., obtained a restraining order from the bankruptcy court prohibiting the trustee in bankruptcy from assigning or delivering any of the remaining notes and trust deeds to investors until hearing was had on an order to show cause why all of said notes and trust deeds should not be returned to said Bell Canyon Ranchos, Inc. Such restraining order is now in full force and effect.
The petition further shows that the reasonable market value of the parcels of land securing the deeds of trust will vary from 20 per cent to 70 per cent of the face value of the notes; that no investor has an interest in any note and trust deed but his own; that no two deeds of trust are secured by the same parcel of real property; that each parcel of land is unique; that the individual parcels of real property which secure the notes and trust deeds differ widely in size and widely in value, depending on their size, their proximity to roads or commercial development, and whether they are corner or interior lots.
Petitioners assert that there are several remedies available to an investor who holds one of the notes and trust deeds, as follows: he may foreclose by sale; forclose by judicial decree; sue on his promissory note; sue for damages for fraud or under the Securities Act of 1933 or the Securities Exchange Act of 1934, 15 U.S.C.A. §§ 77a et seq., 78a et seq.; rescind the sale of the note to him and sue for a refund of the purchase price either on the basis of fraud or under the Securities Act of 1933 or the California Corporate Securities Act.
Petitioners further allege, upon information and belief, that at the judicial foreclosure sale, the named plaintiffs through their counsel, intend to bid in every parcel of property mentioned in the complaint, for a sum equal to the full amount of the note on the theory that they represent all investors and may act for them in all particulars, and if this should occur it will completely destroy the right to any deficiency judgment on the promissory note. They further allege that if such bid is not made there will be created an equity of redemption which will last a full year and possibly longer, during which time the owners of the property will be entitled to remain in possession to the exclusion of the trust deed holders.
Petitioners further allege that a group of 100 investors in the notes and trust deeds sought to be foreclosed in the action below, have filed an action in the United States District Court for the Southern District of California, Central Division, in which they seek as to some of the defendants named in the action below, rescission of their contract to purchase. They also, in the federal court, plead a cause of action as against some of the defendants named below, under section 12 of the Securities Act of 1933 and a cause of action under the California Corporate Securities Act, Corporations Code, § 25000 et seq.; that the trustors named in the deeds of trust are defendants in both the federal and state court actions; that if the state court action proceeds to a judgment of foreclosure, it may destroy certain of the causes of action in the federal court by making it impossible to tender therein the trust deed notes.
Petitioners moved the lower court to dismiss the action as a class action, which motion was denied. They assert that the respondent court in entertaining said action as a class action, is acting in excess of its jurisdiction, and they seek appropriate relief here.
Both sides agree that the facts involved in this case are basically similar to the Chance et al. v. Superior Court,
In Chance, this court held that under the circumstances there presented, the action could not be maintained as a class action. For the same reasons as stated in Chance, the within action may not be maintained as a class action. The respondent court is restrained from taking any further action on the complaint except as such action may relate to the rights of the named plaintiffs and any others who may voluntarily join or intervene, against the defendants, and said court is directed to dismiss the action as to petitioners.
SHINN, P.J., and FORD, J., concur.