In re Newcomb Interests, Inc.

The matter before the Court is a petition for review of an order made by the Referee in Bankruptcy.

The relevant facts, which are undisputed, are as follows. On July 25, 1946 the petitioner, Harry A. Farros, and two other persons who were then, with him, co-owners of the Casa Del Rey Hotel in Santa Cruz, California, entered into a written agreement leasing the hotel, for a period of fifteen years and one month, to Newcomb Interests, Inc. The lessors at that time held a general on-sale liquor license, which was in use at the hotel. The lease transferred that license to Newcomb, but with the provision that on termination of the lease, the license would be retransferred to the lessors without their making any payment for its return. Concurrently with the making of the lease, Newcomb executed, as security for payment of the rent, a chattel mortgage on the personal property located in the hotel. Both the lease and the mortgage were then duly recorded, and the lessee went into possession.

In August 1954 lessee failed to pay the rent then due, and remained in default during the following month. On September 30, 1954, petitioner Farros, who had previously secured sole ownership of the…