by Paul R. Spitzzeri
Back in March, a post on this blog detailed a couple of letters sent by George H. Woodruff, a Los Angeles attorney and Walter P. Temple’s business partner and counsel, in March 1928 to Temple and his business manager, Milton Kauffman. These missives, including a very lengthy one to Kauffman, attempted to lay out the very desperate situation involving the Temple Estate Company, which managed all of Temple’s oil and real estate businesses and the Homestead.
In the letter to Kauffman, Woodruff noted that he’d looked very carefully into the estate company’s situation and had a plan based on what he’d first ascertained “about a year ago when I endeavored so strenuously and persistently to get Mr. Temple to agree to turn over all the property of the Temple Estate Company to the Temple Holding Company.”
He added that the concept was to get “disinterested parties” to get the needed money and credit to finance the operations of the estate company and help it avoid “inordinate sacrifices and losses.” It was obvious, however, that the plan fell through, evidently because Temple decided to discontinue pursuing the holding company idea. Today’s post goes back to this day in 1927 and a draft letter about that proposal.
The missive, which was to be under Temple’s signature, was almost certainly written by Woodruff as part of his campaign to get him to agree to the holding company proposal, and was addressed to William C. Marble and William S. Witmer, the president and treasurer, respectively of the John M.C. Marble Company, a financial services and investment company founded by William’s father.
In the document, Temple was to state that “I have fully investigated and considered the condition of the affairs of the Temple Estate Company and recognize that it is necessary, in order to protect and conserve the assets of the estate, either to obtain a bond issue or other form of loan . . . or to sell” assets of the company to raise the funds to pay liabilities.
To achieve this purpose, Temple continued:
I have agreed to the plan of assigning and transferring substantially all of the real and personal property of said Estate Company, exclusive of the Workman Homestead Ranch property on which I now reside, to a new corporation to be known as the Temple Holding Company.
The value of the stock of the new firm was to be $1 million and the directorship to consist of Temple, his eldest son Thomas (then completing his first of three years at Harvard Law School), Woodruff, Marble and Witmer. It was stated, though, “that it is my understanding and intention that you two and George H. Woodruff . . . shall have absolute and unrestricted management and control of the business and affairs of said company” with total power to run the enterprise.
Moreover, Temple was to “give my consent and approval to your selling the whole or any part of the property and assets” of the estate company, including the Montebello oil field property leased to Standard Oil Company of California, now Chevron, but which had long passed its peak period of production.
At the time that this agreement was to take effect, moreover, the Temple Estate Company was to receive the stock of the Temple Holding Company and then “be assigned and delivered by said Estate Company to the California Trust Company” which would hold the stock in trust with voting of directors to be handled by Woodruff, Marble and Witmer. It was to be provided that each election of directors would include Walter and Thomas Temple as members.
The purpose for having the California Trust Company, a subsidiary of California Bank, acting as a fiduciary agent for the Temple Estate Company was to be a “bond trustee.” This meant that, when the estate company issued bonds, the trust company would enforce the terms of the issuance, making sure the estate company made its interest payments as well as repayments of the principal. If the estate company was to default, the trust company would ensure the protection of the bond holders.
As Woodruff’s March 1928 letter to Kauffman, covered in the March post, indicated, Temple decided, for reasons not yet known, to not continue with the holding company concept. This led Woodruff to make other suggestions for how to best handle the mounting problems of the Temple Estate Company. What we do know, however, is that the California Trust Company, acting for its parent, California Bank, did foreclose on the Homestead in July 1932, a little more than two years after Temple and his family vacated the ranch, which was leased to the Golden State (also known as Raenford) Military Academy.
Oil and real estate are inherently speculative enterprises, with much capital expended in the home that significant amounts of crude, with the first, and profitable uses of acquired land, with the second, would generate major profits. When they don’t, as was the case with Temple’s investments, debt can rapidly accrue. He sought, from 1926 onward, to manage his rising liabilities through bond issues, loans and other means.
While his personal situation worsened in the last years of the decade, the nation’s over-leveraged economy collapsed with the onset of the Great Depression in October 1929, a situation that worsened considerably with the tidal wave of bank failures three years later, the year the Homestead was lost to California Bank. Temple’s situation eerily mirrored that of his father, F.P.F. Temple, and grandfather, William Workman, in the mid-1870s, and show the risk involved in business endeavors during boom periods which, inevitably, will go bust.
Another good blog.
An interesting revisionist thought to this tale is that IF Mr. Temple had separated the Homestead property from the other corporate assets (and assuming that there was no debt against it) would he have been able to keep it and live on it? And for how long?
The Homestead being a large property needing lots of maintenance, and not producing an income (was farming/ranching going on at the Homestead during the late 20s?) he might have been forced to sell it by the mid to late 30s in any event.
Boom and bust the continuing story of Los Angeles.
Hi Jim, thanks for the comment and thoughts. What we do know is that, as expected, Temple tried to salvage the Homestead before any of his other properties. From 1928-1930, he divested everything else and tried to save the ranch by leasing it to a military boys school. There was a mortgage on the Homestead, however, and that brought foreclosure in 1932. Your question about what would have happened if he’d been able to pay off the mortgage and keep the ranch is very interesting. Walnuts were raised there, but it was not a major income-producer, and, during the depths of the Great Depression, the offset of expenses with income may not have been enough, as you suggest, to save the Homestead.