The Tract, Trials and Travails of Joseph Phillips

J. Edward Hollenbeck and Joseph Phillips: the two men without whom Covina would not have existed.

These past six weeks I've been doing a deep dive into Covina founder Joseph Swift Phillips, and I've uncovered many surprising new facts. The subjects are fairly complicated and make for a long, dry read, however, so I thought I'd approach this article differently and start off with a list of my main points and then delve into the particulars afterwards.

I should perhaps note here at the outset that none of the following findings have been described in any previous published history of Covina. This is all new stuff here, especially the legal blockbuster near the end!

tl;dr summary:

• As I stated in a previous article, the real estate deal between Phillips and Hollenbeck for the tract of land which would become Covina took place in 1881, not 1882.

• The 1881 deal was only a contract for deed, not an outright sale, and Phillips may have used real estate instead of cash for his down payment.

• In 1885, Phillips had to borrow $40,000 to pay off Hollenbeck, and the loan was secured by a deed of trust that conveyed legal title from Hollenbeck directly to trustee James F. Houghton. Phillips himself never actually held marketable title to the tract which bore his name.

• Although Phillips was empowered to arrange and negotiate sales, all of the original land purchases and title conveyances in the Phillips Tract from 1885-1889 were brokered and closed by Houghton.

• Phillips ultimately failed to repay his 1885 loan, so in 1889, Houghton foreclosed and Phillips forfeited all of his Covina properties.

• Hollenbeck and Houghton both made big bank on the Phillips Tract, while Phillips himself lost everything.

• In 1894, Phillips sued almost everyone who had been involved with his past land dealings in a last ditch effort to recoup his financial losses.

• In sum, litigation expense was likely a significant contributor to Phillips's financial downfall.

Details and references below.

Going back over a century, every account of Covina's early history has told some variation of the following:

"In 1882, J. S. Phillips paid $30,000 to J. E. Hollenbeck for 2,000 acres of land in Rancho La Puente."

Unfortunately, that statement is factually incorrect. For one thing, the date is off by a year, and second, Phillips didn't pay Hollenbeck a 5-figure sum, at least not at that point in time.

The actual documented facts are that, in September, 1881,^1,2 J. S. Phillips and J. E. Hollenbeck merely signed a purchase agreement—specifically what today is called a contract for deed—which in this case stipulated a base sale price of $30,000, 10% interest per annum on the unpaid balance, and 5 years to pay in full.^1,2

Furthermore, based upon the sequence and timing of the transactions shown below, it also appears that Phillips's consideration for the deal may have been a conveyance of real property rather than a cash payment.

In quick succession in 1881, Phillips deeded Hollenbeck a prime piece of downtown Los Angeles real estate (426-430 S. Spring St. today), Hollenbeck gifted Antonio Badillo [sic] 100 acres of his elder brothers' former land, and Hollenbeck and Phillips recorded their "agreement to convey."³
Clippings from The Daily Commercial of September, 1881.

It's worth pointing out that Pflueger (1964) (and every other Covina historian, as well) starts using the name "Phillips Tract" to refer to this land in every instance after 1882. However, no mention of such a place can be found in newspapers of the day anywhere prior to January, 1885, because until that date, J. E. Hollenbeck was still in fact "owner in fee"⁴ of the property.

Although Phillips did not buy the tract outright, his contract with Hollenbeck did allow him to possess, occupy and use the land. According to accepted history, Phillips moved into the former residence of Julián Badilla on San Bernardino Road in 1882.⁵ This date appears correct. One newspaper mentions Phillips residing in El Monte in March of 1882,⁶ and gives his residence as being in the Azusa Valley specifically in August of that year.⁷ His first planting of barley was reported in May, 1883,⁸ buying a harvester in June, 1883,⁹ and surveying of the land taking place in January of 1884.¹⁰

Phillips in the Azusa Valley.¹⁰ Note the reference to Phillips's "ranch" or "residence" on "the Hollenbeck tract," not the Phillips Tract. Also, curiously, there's no mention of Fred Eaton in this early survey party. Clipping from the Los Angeles Herald of January 22, 1884.

No land sales took place in the new tract until April, 1884, and in each of these instances, for reasons already stated, Hollenbeck and Phillips conveyed title jointly. Two of those conveyances were published in the Los Angeles Herald and are shown below. (Chronologically the first land sale—20 acres to Joseph Moxley on April 3, 1884³—apparently did not see print in that newspaper.) After the Moxley, Pollard and Eckles sales, the total area of the tract now comprised 1,956.75 acres.³

Los Angeles Herald, April 5, 1884, and May 2, 1884.

Mid-September, 1884, marked three full years since Phillips signed his purchase agreement, which meant he now owed Hollenbeck an additional $9,000 in interest. No doubt Hollenbeck was growing impatient by this time and wanted this deal done once and for all. So, with his back against the wall, and unable to pay his due by grain harvesting alone, Phillips was pretty much forced to borrow a lump sum to pay Hollenbeck all he owed him.

Phillips found a willing lender in the Pacific Mutual Life Insurance Company of California. The corporation loaned Phillips $40,000, and his debt was secured by a deed of trust.^3,11 This meant that legal title to the tract would be conveyed not to Phillips directly, but to a trustee who would hold title to the land as security until the loan was repaid in full.³

The acreage number in this notice contains a typographical error. It should correctly read "1956 3/4 acres." Los Angeles Times, January 14, 1885.

Preamble to the trust deed which secured Phillips's loan, dated January 8, 1885.³ Courtesy Los Angeles County Registrar-Recorder.

The trustee was an esteemed and very wealthy gentleman by the name of James Franklin Houghton, who was himself a director of Pacific Mutual Life, in addition to being a twice-elected former State Surveyor-General, Member of the California Academy of Sciences, and future Regent of the University of California.^12,13 The man was definitely a "big name" in his time.

Portrait¹⁴ of James F. Houghton (1827-1903): trustee landman of the Phillips Tract from 1885-1889, and owner of most of the Covina townsite from 1889-1894.

And yet, despite the fact that Houghton conducted virtually all of the original real estate transactions in the Phillips Tract from 1885-1895, and ended up making more money in Covina real estate than Phillips himself, no one familiar with Covina history today has likely ever heard of the man. Pflueger (1964) mentions Houghton only once in passing, and even then states incorrectly that Houghton was himself the lender of the $40,000 that Phillips paid to Hollenbeck.

An example of how Phillips—as the landowner and holder of equitable title—could negotiate purchase agreements and conduct sales of his properties,¹⁵ but only the trustee, Houghton, was empowered to close and convey legal title to the buyers.¹⁶

Using the search function on the newspaper archive, I compiled a list of the real estate conveyances recorded by Houghton, along with a tally of the sale prices. My accounting is necessarily incomplete because these searches do miss a certain number of "hits," so these totals should be considered minimum estimates only. That said, I found that from February, 1885, to June, 1889, Houghton as trustee sold 153 Phillips parcels: 38 lots in the Covina townsite proper, and 115 of the ≥10.1 acre tract lots for a minimum sum total of $109,913.45.

That sounds like it should have been more than enough money for Phillips to not only pay off his loan but to live very happily ever after. Unfortunately, the lender had burdened Phillips with some fairly harsh terms. For example, Houghton was required to withhold $30 per-acre-sold (or $303 for each of the 10.1 acre parcels), and Phillips was charged 1% per month interest on the unpaid loan balance.³ This in addition to his many other expenses meant that, as of June, 1889, Phillips had only managed to repay $5,000 of his principal $40,000 debt.¹⁷ At that point in time, there being relatively few of the 10.1 acre tract parcels remaining unsold, basic arithmetic must have made it obvious to the insurance company accountants that Phillips was not going to be able to repay the balance due, and Houghton was instructed to foreclose. Thus failing to satisfy the terms of his loan, J. S. Phillips never would obtain full legal title to the "Phillips Tract."

I've already written about the Phillips foreclosure, so rather than go through all that again, I'll just let you read the original newspaper account of the proceedings then continue on with the rest of the story from there.

Writeup of the Phillips foreclosure and forced sale in the Los Angeles Herald of June 3, 1889.

After the foreclosure, Houghton came to own most of the Covina townsite lots himself.¹⁸ In one transaction, Houghton somehow arranged to acquire 165 Covina town lots for only $1,¹⁹ or just 6/10ths of a cent apiece. By the end of his association with Covina in 1896, Houghton had sold no fewer than 285 town lots and 9 tract lots for a minimum estimated grand total of $29,229.80. Pocket change to a man as wealthy as Houghton, but a vastly greater profit compared to Phillips, who ended up walking away from his Covina venture with not a single red cent to show for it.

When I wrote about Phillips's foreclosure four years ago, I thought that was the end of his story as far as Covina was concerned, but I was wrong. Just the other day I found this sensational story in the Los Angeles Times of January 20, 1894.

A complicated read, but the second paragraph neatly summarizes the business and financial relationships between Phillips, Hollenbeck and Houghton.¹¹

No previous historical account of Covina had ever mentioned this huge lawsuit. (They never mentioned the foreclosure, either, but this is a much bigger and more involved affair.) The specifics are complex, but in general it appears Phillips had arranged a second trust deed to pay off his debt to his primary lender, and he alleged the second trustee fraudulently mishandled the properties that were used for collateral.

The trial dragged on for two weeks, and as it turned out, Phillips won the case.²⁰ It was not reported exactly how much the jury awarded Phillips, but it was apparently a "compromise verdict,"²¹ which would suggest Phillips only got a fraction of the damages he was seeking.

All that aside, from a historian's point of view, the particulars of this case are less important than the fact that five whole years after he left Covina, Phillips was still involving himself with major litigation trying to recoup the losses he'd suffered, which actually continued a long-standing pattern with him.

Several factors contributed to Phillips's ultimate downfall. Pflueger (1964) blamed a failed mining investment for Phillips's financial collapse, and the article above about his foreclosure cites mining losses, as well.¹⁷ Bringing water to his land also cost Phillips dearly. The digging and cementing of the Covina Ditch cost a staggering $88,200 alone.⁵ Yet the amount of money Phillips spent on litigation over the years must also be considered as a proximate cause of his troubles.

For example, in 1885, Phillips was involved in three simultaneous lawsuits over water rights from the San Gabriel River,²² in addition to a suit brought against three representatives of the Brethren Church in Chicago who, in 1884, had failed to honor their contract to purchase the entirety of the Phillips Tract.^23,24

Then in 1889, the litigious Phillips even sued the Covina Methodist Episcopal Church for $4,000,²⁵ the same parish he had given land to build their church on College Street only two years before.⁵ Phillips lost that action.²⁶ And then, of course, his biggest lawsuit of all against George Kerckhoff, et al., which alone probably cost him thousands to litigate. While there's no way of telling exactly how much money Phillips spent on lawsuits in his Covina years, there can be no doubt it was considerable.

When all was said and done, Hollenbeck and Houghton came out the big winners with regard to Covina, and Phillips the big loser. His Covina enterprise had ended in nothing but heartbreak and ruination. A truly unfortunate ending for such a hardworking and dedicated man.

Joseph Phillips visited Covina one last time in 1893. It was reported thus in the Covina Argus:

J. S. Phillips, proprietor and founder of the "Phillips Tract" now called Covina, returned to Covina and Lower Azusa. It was through his enterprising spirit that the [irrigating company] was inaugurated and completed bringing water upon 3,000 [sic] acres which had heretofore been utilized as a sheep and grain ranch. Today it is the center of one of the richest and most prosperous communities in southern California. Its orange and lemon groves now cover the entire tract. Yet the conceiver of this grand enterprise which brought water to develop its wealth and production became strained and impoverished in its accomplishment. On his return from Covina in reply to the question, "How is Covina?," with sadness in his words replied, "I knew water would make it the garden spot of southern California, but little did I conceive in my wildest enthusiasm so grand and marvelous a result could be made in six short years. I was once the owner of the whole tract which I sacrificed and lost to bring about its present transition. Today I would consider it sufficient compense to be possessor of a ten acre tract to make me a home."

Joseph Swift Phillips died of a stroke on October 24, 1905, while riding in a buggy with his wife from Long Beach to his last home at Westminster.²⁷ At his funeral, all his pallbearers were prominent citizens of Covina. However, I noted with a complete lack of surprise that on the list of all the locals who attended, the Kerckhoff family was not among them.

References:

¹ Los Angeles Herald, September 15, 1881, p.5.
² The Daily Commercial, September 16, 1881, p.3.
³ Indenture made between J. E. Hollenbeck, J. S. Phillips, and James F. Houghton, trustee, et al., dated January 8, 1885, recorded in Liber 134 Pages 78-87 of Deeds, Los Angeles County, California.
⁴ Los Angeles Express, January 19, 1894, p.8.
⁵ Pflueger, D. H. 1964. Covina: Sunflowers, Citrus, Subdivisions. Castle Press, Pasadena, California, 372pp.
⁶ The Daily Commercial, March 10, 1882, p.3.
⁷ Los Angeles Times, August 11, 1882, p.4.
⁸ Los Angeles Herald, May 20, 1883, p.3.
⁹ Los Angeles Herald, June 14, 1883, p.3.
¹⁰ Los Angeles Herald, January 22, 1884, p.2.
¹¹ Los Angeles Times, January 20, 1894, p.7.
¹² The Bay of San Francisco, Vol. 2. Lewis Publishing Company, Chicago, Illinois, 1892, pp. 345-346.
¹³ The National Cyclopaedia of American Biography, Vol. 7. James T. White & Company, New York, 1897, p.146.
¹⁴ Men of the Pacific Coast, 1902-1903, The Pacific Art Company, San Francisco, 1903, p.398.
¹⁵ Los Angeles Times, September 8, 1886, p.3.
¹⁶ Los Angeles Times, January 18, 1887, p.7.
¹⁷ Los Angeles Herald, June 3, 1889, p.1.
¹⁸ Los Angeles Herald, August 16, 1889, p.7.
¹⁹ The Daily Journal, September 10, 1890, p.3.
²⁰ Los Angeles Times, February 2, 1894, p.3.
²¹ Los Angeles Times, February 1, 1894, p.7.
²² The Weekly Mirror, September 26, 1885, p.6.
²³ Chicago Tribune, March 19, 1885, p.9.
²⁴ Los Angeles Herald, December 1, 1885, p.5.
²⁵ Los Angeles Times, March 14, 1889, p.8.
²⁶ Covina Argus, July 6, 1907, p.7.
²⁷ Covina Argus, October 28, 1905, p.1.