Evening star., 1934-09-14
COURT WILL VOID
HOTEL SALE ORDER
Justice Let's Announces He
viii Make Three Trustees
Permanent.

Deciding the holders Of Mayflower
Hotel bonds were entitled to~a re-
organization under the new bank
ruptcy law, Justice r. Dickinson Let's
announced in District Supreme Court
yesterday he would make permanent
the appointment of three temporary
trustees for tina. property and set
aside an earlier decree in equity for
public sale of the hotel.
This decision was regarded as i'm
portant from legal standpoint, as 1t
is the first one holding final equity
decree for foreclosure could be in
validated under the provisions of the
new bankruptcy act, which sup
posedly makes possible cheaper and
quicker reorganizations of bankrupt
properties.
Signature Expected Today.
Justice Let's is expected to sign
orders today ratifying his announce
ment from the bench and fixing Oc-
tober 20 as date for receiving pro-
posed plans of reorganization under
the new act. The temporary trustees
whose appointments will be made per-
manent, are ]. Miller Kenyon, Rush
L. Holland and John Lewis Smith
who are serving under. $500 900 bond
Their operation of the hotel as re-
ceivers was criticized recently in the
report of a Senate subcommittee
which conducted an investigation into
the financing and management of the
property. This report said the sue
cess of the hotel was not attributable
to the management of the receivers
The proposal to set aside the equity
decree for foreclosure, in which Jus.
tice Jesse C. Adkins ordered a public
sale Of the property and fixed a mini.
mum price Of $2,800,00 was op.
posed by the Manufacturers Trus
Co. Of New York, trustee under the
first mortgage.
Courts Power Questioned.
Through Attorneys Hugh Obeal
trust company questioned the power
of bankruptcy court to enjoin en-.
forcement of an equity decree handed
down before the petition in bank.
ruptcy was filed. Lyeth argued thai
Justice Let's could not act without
voiding the foreclosure decree anc
contended all the parties were boune
by that decree
Attorney Paul Lesh, who said HI
represented 88 per cent of the frs
mortgage bondholders, said he favored
the reorganization under the bank
ruptcy law and announced he was pre-.
pared to submit an amended reorgani
zation plan for adoption in the bank.
ruptcy case
Lesh declared that under an equity
foreclosure the minority bondholder
would receive cash in lieu of new
securities. In a bankruptcy reorgani
zation, he said, If two-thirds of {
class of creditors agree, the court car
compel the minority group to accep
the same securities as the majority get
Attorney Joseph c. McGarraghy
appearing for the second mortgage
)holders, and Attorney Joseph Lowe
representing a group of non-depositinl
first mortgage bondholders, also urges
adoption of the proposal for reorgani
zation under the bankruptcy laws.
Trustee Is Criticized.
Lowe criticized the conduct of tn
corporate trustee, contending it wa
not acting in the best interests of tn
bondholders it represents.
The financial structure Of the hote
was reorganized in 1928 and a frs
mortgage issue of $7,500.0 900 author
lied. The authorized issue of secon,
mortgage bonds totaled $2,500, 900. o
these two issues, approximately So,
500 900 of bonds are outstanding.
A default in the second mortgage oc
CURED in May, 1881, and in July o
that year q foreclosure suit was file,
and receivers were appointed. L
October, 1881, the first mortgage hold