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adopted, that the committee be instructed to urge upon Congress an amendment of the law upon the lines suggested, and that the committee continue the study of the question and report at the next meeting of the Association. And, pending this question, unanimous consent is asked, as I understand it, that the gentleman whose name has been mentioned be permitted to address the Association. It will require unanimous consent, because to admit these gentlemen to speaking privileges upon the floor cannot be granted them, nor the rights of membership in the Association be given them, under the by-laws. The only persons thus privileged are those especially invited to deliver addresses, those who are here as members of the Association, and those who are here in a representative capacity as delegates from state and district bar associations.
Is there objection to hearing Mr. Brandenburg, of the Attorney-General's Department? The Chairman hears none and the Association will be pleased to hear from him.
E. C. Brandenburg, of the District of Columbia :
Gentlemen of the American Bar Association : In the last annual report of the practical operation of the Federal bankruptcy law, which I had the honor to make to the AttorneyGeneral, I took the liberty of incorporating certain of your resolutions, together with others, commendatory of the law, expressive of the views of the greatest legal association in existence, in the belief that they would of necessity aid Congress in legislating upon the subject of bankruptcy. This led to a correspondence with the learned chairman of your Committee on Commercial Law, who has now invited me to present some views on the subject.
I desire to preface my remarks with the statement that any. thing coming from me today is not necessarily the views of the judicial department of our government with which I am connected, but my individual views, gained from a careful study of the various features of the law of bankruptcy in the preparation of several works on the subject, in addition to my connection with the work at Washington.
In this day of steam and electricity, which have annihilated distance and brought San Francisco and New Orleans to our door, when the lawyer of New York is frequently required to give immediate advice to a client in California concerning rights under the laws of a distant state, the necessity for uniformity in laws on general subjects has long been felt and continues to grow. We are demanding of the states uniform laws with reference to negotiable instruments, uniform laws with reference to divorces and so on, but the states are jealous of their rights, and the road of the advocate of uniformity is rough and rugged. It was only after years of earnest appeal and demand upon Congress, that it exercised its constitutional right and enacted the present law, which, while far from being perfect, is a vast improvement over any previous enactment on the subject, and over no law at all.
As sustaining the views of your committee in favor of a Federal law on the subject of bankruptcy, it may not go amiss to analyze some of the criticisms with which we come in contact. In the first place, no law of so wide an application was ever placed upon a statute book that did not require amendment and revision for its perfection, and this law is no exception to the rule. It may well be likened to the construction of one of our great men-of-war. The best mechanics, engineers and constructors the government can command, exercise every possible skill for months in the preparation of the plans and specifications, and still, when these great leviathans of the deep finally leave the stays, preparatory to their mission of peace or war, imperfections and bad adjustments are discovered, requiring alteration and correction. In the same sense but to a greater degree will the practical operation of a law demonstrate its imperfections. The best friends of the bankruptcy law admit that it must be amended in many particulars.
An objection frequently, though I fear thoughtlessly raised, to the existence of a Federal bankruptcy law, is that it enables an insolvent to obtain a discharge from his obligations,
and therefore is not wise legislation. As a fact, would not the repeal of the law relegate us to the state insolvent or assignment laws-systems varying with the number of states, though founded upon the same principle as the Federal law of relieving the unfortunate debtor of his obligations upon surrendering his property, with almost the single exception that the release or discharge under the state insolvent or assignment law is limited to the particular state, while under the Federal law it is co-extensive with the limits of the United States, and possibly to our newly acquired possessions, though upon this latter point there seems to be some difference of opinion.
The question of exemptions allowed under the law is frequently cited as an evidence of its weakness. Such critics need merely to be reminded that Congress, in adopting the state statutes on this subject, has wisely deferred to the views and judgment of the legislatures of the several states, and if the amount of such exemptions seems to work a hardship to your creditor client, relief must be sought at the hands of your legislators. Again, the question is asked whether your client would fare better in the absence of the Federal law, and again comes the reply, that prior to its enactment, the debtor making an assignment or becoming insolvent, had set apart identically the same exemption as under the Federal law.
While the recommendations of your committee are excellent, I will go a step further, and urge that where a man has once demonstrated his inability as a business man and has taken advantage of the law, and makes two or more applications for relief, he should be deemed unworthy of the same consideration as in the case of one who files a single petition, and in such case, I urge that his assets should bear a certain ratio to his liabilities, say 50 per cent. on the second application, 75 per cent. on the third, and so on, thus removing the incentive of the dishonest man to repeated commercial adventures which finally result in the defrauding of his creditors,
I have earnestly advocated strengthening and extending the grounds of objections to a discharge, and believe that if Congress
will make criminal offenses of the obtaining of property by an insolvent debtor through fraud or false representation of his financial standing, or of the fraudulent conveyance of property or its concealment—not, as now, merely grounds of objection to a discharge ;—and as crimes make them punishable, it will do much to prevent that fraud which is so apt to bring the law into disrepute. The fact that property illegally conveyed or concealed may be recovered if discovered, will not prevent the dishonest man from endeavoring to enrich himself at the expense of his creditors, but if, upon discovery, a term in prison is presented as a punishment for his dishonesty, it will act as a deterrent in a manner which cannot otherwise be accomplished.
While there are other particulars in which the law should be amended, there are two recommended by your committee to which I desire briefly to refer. The first is that with reference to the question of the fees for administering the law. From the silence of the marshal and clerk, I judge them to be amply compensated, but the same is not true of the referee and trustee. The former requires judicial ability and learning, the latter business tact and often peculiar knowledge, while both must be men of unquestioned character and sound judgment. Many of the cases are without assets, and with the ruling of some of the courts, which I consider unsound, that on secured claims these officers are not entitled to commissions, the fee of $10 and $5, respectively, is altogether out of proportion to the services required. “A laborer is worthy of his hire," and it is peculiarly true in this instance, if we want a fair and unbiased administration of the law.
The second amendment suggested by your committee, which I desire most heartily to support, is that with reference to section 57g of the law, which the weight of authority interprets as requiring a creditor who has received payment on account within four months, whether with guilty knowledge or not, to surrender the same before he can prove his claim for the residue of the account. I am again in the minority upon this point, and believe that those courts err, which have held that where payment has been received without guilt on the part of the creditor or knowledge of the debtor's insolvency, they should be entitled to prove their claims for the residue of their accounts without surrendering such so-called preferences. Any other interpretation must of necessity unsettle business and do much to defeat the avowed purpose of the lawmakers.
The importance of a Federal bankruptcy law cannot be questioned. You are therefore to be congratulated that your committee has given such careful attention to the subject and so lucidly presented the matter for your consideration, as I am firmly convinced that the law has come to stay. The lawyer who has a commercial practice, must of necessity familiarize himself with its provisions, and should exert himself to see that it is perfected. You may refuse to file a voluntary petition in bankruptcy and send the applicant to other counsel, but if you have clients, be they corporations, partnerships or individuals, they have business dealings with others who may become bankrupt, or who may make conveyances, or suffer preferences, in which such clients need protection and advice. As I recently had occasion, in a lecture at the Columbian University, in response to the statement of a member of the class that he did not expect to take bankruptcy business, to urge a careful consideration and study of the law, for the reasons just stated, with equal propriety I may now be permitted to say that as practicing lawyers and students of law, you should interest yourselves in its provisions to the end that the great influence you exert shall be felt in remedying its defects and strengthening its weaknesses. As emphasizing the necessity for this and to give you an idea of the magnitude of the business under this law, it is only necessary to say that in the year ending September 30th, 1899, about 21,000 petitions for voluntary, and in the neighborhood of 1000 petitions for involuntary, bankruptcy were filed, this being considerably