Pauline Rust v. Paul Johnson and Nora Johnson, City of Los Angeles v. Paul Johnson, Nora Johnson, and the Secretary of Housing and Urban Development

This case arises out of the foreclosure of a street improvement bond on a parcel of property located at 342 East 105th Street in Los Angeles, California. The foreclosure resulted in two parties claiming title to the property and in a dispute over the power of the City of Los Angeles to foreclose on property in which the United States holds an interest.

FACTS

On August 14, 1971, the City of Los Angeles (City) assessed the property for street improvements in the amount of $158.36 and issued a bond to pay the assessment. At the time of the assessment, the Federal National Mortgage Association (FNMA) was in the process of foreclosing on a purchase money mortgage interest which it held in the property under a deed of trust. The deed of trust was insured by the Federal Housing Administration (FHA) and had been previously assigned to FNMA by the Imperial Bank.

FNMA completed its foreclosure and, on March 3, 1972, it conveyed the tract to the Secretary of Housing and Urban Development (HUD) in exchange for FHA insurance benefits. HUD owned the property from March 3, 1972 until September 21, 1973. During the period of its ownership, HUD did not make any payments on the street…