Evening star., 1933-05-29
UPHOLDS HUR[EY'S
TITLE TO BUILDING
District Appeals Court A.
firms Ruling in
SWartzeII Case.

The Shoreham Office Building, Fiji.
teenth and H streets, one of the storm
centers of the Swartzell, Rheem & Hen
sey Co. investigation, was held to be
the property of Patrick j. Hurley, for
mer Secretary of War. and Joseph I.
Cromwell, business associate. by the
District Court of Appeals today.
The ruling of the higher court affirms
a decision by the District Supreme
Court, which was reached after
lengthy hearing in which Mr.. Hurley
was an important witness.
The case was brought by Martha ".
Rhoderick, Henrietta W.. Moore and
other holders of notes secured by an
original mortgage on the Shoreham
property. They purchased these notes
through the now defunct Swartzell,
Rheem g. Hensey Co. A paragraph in
the deed of trust provided these notes
could be released upon payment Of the
full amount of the loan secured by the
trust at the Office of the Swartzell
company.
Sold to Two Employees.
When the building was nearly COM
pleted it was sold to two employees OF
the Swartzell concern. At later date
the Swartzell company entered into
contract with Mr.. Hurley to exchange
ths Shoreham Building for the Hurley
Wright Building. Mr.. Hurley and Mr..
Cromwell formed the Shoreham Corpo-
ration to take title to the property when
the sale was completed.
Under the agreement /. became nee
essary to refinance the existing first
mortgage on the property for $780,
900. The Metropolitan Life Insurance
Co. agreed to- advance 81 100000 for
this purpose, but stipulated enough
money to pay all the notes under the
original mortgage be placed on deposit
in a bank for the benefit of the note
holders The check for $1,600,000 and
another one for $l50,000 were deposited
in the Riggs National Bank In an ac-
count earnarked for the benefit of the
noteholders.
Rheem Borrowed Funds
Edmund D. Rheem, executive head
of the Swartzell company, then bor-
rowed from the bank the additional
funds necessary, and the entire amount
was placed in the account.
The original deed of trust was then
released The note holders were
credited with the amount due them
on the books of the SwartZell company,
but the holders of approximately
100000 of the notes never actually
received payment.
The plaintiffs, members of the un-
paid group, brought suit to have the
new deed Of trust set aside, and the
oris>,ual deed, which protected their
investment. reinstated on the ground it
had been fradulently released.
Failed to Study Deed.
The Court of Appeals pointed out
that, although the Swartzell company
may have converted the $500, 900 to its
own use, both the noteholders and the
Shoreham Investment Corporation were
innocent parties. Declaring the acts of
the noteholders in investing money with
the Swartzell company and in failing to
study the deed protecting their invest
ment made the loss possible, the court
held they must bear the loss rather
than the investment corporation, which
had no notice of the fraud and was not
responsible for it.
The investment corporatinon was rep
resented by Attorney Louis Titus, while
Attorneys F. D. McKenney, John S.
Flannery and G. Bowdoin Craighill of
Washington and Albert Wright of New
York appeared for the life insurance.
company. The trustees of the mort |
gage was represented by Attorney Joseph |
D. Sullivan.