SAN DIEGO — Fabulous Inns of America, the controversial company with only one hotel--located in Mission Valley--will be taken over by a court-appointed receiver next month if two groups of squabbling shareholders don't settle their litigation out of court.
Superior Court Judge James A. Malkus said Tuesday that he would appoint a receiver for the embattled hotel company next month and ordered both sides to submit a list of possible candidates.
Also, Malkus said he will rule Feb. 5 on management's motion to dissolve the corporation, which has been mired in litigation for several years--first by several one-time dissidents who took control of the company and, recently, by two warring factions within the former dissident group.
The liquidation value of the company is about $7 per share, not including liquidation costs, according to Fabulous Inns officials. The stock trades at less than $4 per share.
"If they can't settle in the next week, then the company likely will be liquidated," one longtime company observer said.
Chula Vista investor Frank Ferreira, Fabulous Inns' largest shareholder and once an ally of current management, said he would welcome the appointment of a receiver. Ferreira has sued management in an attempt to void all or part of an out-of-court settlement the company reached last summer with the ousted executives.
Fabulous Inns Chairman Jeffrey Krinsk, the former dissident who led the coup to oust prior management, said that his office is "going forward to prepare for a receiver."
Management will not be displaced under a receivership, Krinsk said. "A receiver doesn't come in and magically replace everyone. He just oversees management's liquidation."