On May 15, 1936, the Circuit Court of Appeals for the Seventh Circuit denied a petition for leave to appeal from an order confirming a plan of reorganization under Section 77B of the Bankruptcy Act in the case of In re Garfield Arms Hotel Building Corporation. The property of the debtor, consisting of a furnished hotel building, was encumbered by a first mortgage bond issue of $254,500 with interest at six and one-half per cent in default since October 16, 1929. There was a second mortgage of $50,000 and accrued interest as well as approximately $22,000 in judgments against the debtor. The unpaid taxes exclusive of interest and penalties approximated $30,000. The property was placed in the hands of a receiver under a decree entered in first mortgage foreclosure proceedings on March 31, 1931, but no progress had been made toward a reorganization prior to the filing of a petition under Section 77 B. The original plan of reorganization gave the first mortgage bondholders ninety-one per cent of the stock in a new corporation while the remaining nine per cent was to be divided among the junior interests (including stockholders of the debtor). It was accepted by more than two-thirds of the creditors of each class and by all of the stockholders of the debtor. This plan was later amended to eliminate participation by any interests junior to the first mortgage.
REORGANIZATION WITHOUT CONSENT OF CREDITORS - SECTION 77B (b) (5),
Mich. L. Rev.
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