Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-01-31
MORTGAGES FOUND
RELEASED IN FOUR
SWARTZELE DEALS
NotehoIderS Must Look to
Assets of Company to
Collect Claims.
RECEIVERS TAKE OVER
HAY-ADAMS HOUSE
Department of Justice Probe of
Bankrupt Firm Believed
Almost Complete.

The receivers who have taken over the
affairs of Swartzell, Rheem & Hensey
bankrupt mortgage banking house. an
nounced today they had discovered that
mortgages had been released on four
large properties financed through the
mortgage banking concern.
These properties, it was said, are the
Shoreham ONCE Building and the
Eroadmoor. Ponce de Leon and West
chester apartment developments.
This means that the persons hold
ing mortgage notes under the original
mortgages on these projects, which
have been released, will have to re-
cover as much as they can of the face
value of their securities from the as
sets of the concern after the schedule
of assets and liabilities has been deter
mined by the receivers.
Note Holders Not Paid. .
The receivers said they had not de-
termined how many holders of notes
on these properties were not paid when
the mortgages were released.
Under the practice of many mort
gage banking houses the holders of the
mortgage notes are paid when the mort
gage is released. Many holders of
notes on projects financed through
Swartzell, Rheem G. Hensey have ad-
vised the receivers. however, that they
were not paid when the mortgages were
released.
The receivers also announced they
had taken over operation Of the Hay
Adams House, which was financed
through Swartzell, Rheem & Hensey.
Maj julius !. Peyser. one of the re-
ceivers, said this action was taken to
protect the interest of note holders on
this property until the title could be
thoroughly examined. He said repre-
sentative of the receivers had been
placed at the hotel but that there
would be no interference with the OPP
Grafton of the hostelry, which is located
at Sixteenth and H streets, and is one
Of the city's most elaborate hotels.
Investigation Continues.
Meanwhile Special Agents Charles T.
Malone and e. J. Armbruster of the
Bureau of Investigation, Department of
Justice. are continuing their examina-
ton of the books Of the mortgage bank
ing concern to determine whether there
was any violation OF law In the man
ner Of conducting its affairs. They are
expected to submit a report to Nugent
Dodds. Assistant Attorney General in
the near future. Two other special
agents, Louis Loebl and Aaron w.
jacobson, are working on the investi-
CATION, but the precise nature of their
work has not been disclosed.
The disclosure that some mortgages
had been released without payment to
the note holders direct gave rise to a
complicated situation in the civil side
Of the case.
Several local construction firms were
advanced money by SwartZell, Rheem
& Hensey to launch building projects.
The builders executed mortgages en-
the particular property to secure the
loan. In some cases, the builders say,
they paid of the loan and the mort
under the mortgage, however, say they
were not paid.
May Look to Builder.
If these holders are unable to secure
full payment from the mortgage bank
ing house after the receivers have de-
termined its assets, they may lock to
the builder for their money, despite the
fact that he has paid the money once.
If the courts should hold that swart-
cell, Rheem g. Hensey YVES acting as
the agent of the builder. and not as
the agent of the note purchasers. the
builder probably would be held liable
to make good the loss Of the note
holders.
In the opinion of local lawyers the
determination of this question will
hinge largely on the Interpretation of
the clause in the trust agreements
which made the mortgages payable
Eat the Office of Swartzell, Rheem and
Hensey." The builders are expected
to claim that they were relieved of all
responsibility when and If they COM
piled with this stipulation. 1t is be-
1ieved. however, that the point will not
be settled except after lengthy and in
volved civil proceedings.
Work on the addition to the new
Shoreham Hotel, which voluntarily
went into receivership two days ago
was resumed today after a meeting Of
contract and material men interested
in the project last night.
1t was asserted at the meeting that
the present structure is fully occupied
and that applications are in hand suf'
ficient to fill more than the seconc
INIT which iS o. F1er cent c0YnOletPd