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COURTROOM AT EASTON, PA.

APRIL 1, 1935.-Committed to the Committee of the Whole House on the state of

the Union and ordered to be printed

Mr. WALTER, from the Committee on the Judiciary, submitted the

following

REPORT

[To accompany H. R. 7050)

The Committee on the Judiciary, to whom was referred the bill, H. R. 7050, after consideration, report the same to the House favorably with amendments, with the recommendation that the bill as amended do pass.

The committee amendments are as follows:

1. Strike out all after the enacting clause down to and including line 5 on page 2, and insert in lieu thereof the following:

That the Act of June 27, 1930, entitled An Act to provide for terms of the United States District Court for the Eastern District of Pennsylvania" (Ch. 634, 46 Stat. 820).

2. Amend the title to read: “To amend the Act of June 27, 1930, Ch. 634, 46 Stat. 820.

Under the statute (46 Stat. 820) authorizing the conducting of terms of Federal Court in Easton, Pa., it is provided that the “Authority shall continue only during such time as suitable accommodations for holding court at Easton are furnished free of expense to the United States”. Since the passage of this act the regular terms of court have been held in the Northampton County Court House, and the copyright, patent, and all other cases in which jury trials are not necessary are conducted either in the Northampton County Court House or in a room shared by the court with the post-office inspectors. While this arrangement has caused considerable inconvenience, nevertheless the business of the United States has been transacted without undue hardship under the above-mentioned arrangements.

The United States recently purchased a site on which to erect an addition to the present Federal Building in Easton, Pa., and will shortly commence constructing improvements to this building. Without any great expense a courtroom and chambers can be provided in the new building. Under the present law it is impossible to provide a courtroom and chambers, and inasmuch as an addition to the present building will be constructed in which suitable accommodations can be provided the repeal of the proviso above mentioned is sought.

In compliance with clause 2a of rule XIII present law is printed below in roman, with matter proposed to be omitted in black brackets:

Terms of the United States District Court for the Eastern Judicial District of Pennsylvania shall be held at Easton, Pennsylvania, on the first Tuesdays in June and November of each year: Provided, however, That all writs, precepts, and processes shall be returnable to the terms at Philadelphia and all court papers shall be kept in the clerk's office at Philadelphia unless otherwise specially ordered by the court, and the terms at Philadelphia shall not be terminated or affected by the terms herein provided for at Easton. [Provided further, That this authority shall continue only during such time as suitable accommodations for holding court at Easton are furnished free of expense to the United States.]

AMENDMENTS TO BANKRUPTCY ACT

APRIL 1, 1935.- Referred to the House Calendar and ordered to be printed

Mr. GREGORY, from the Committee on the Judiciary, submitted the

following

REPORT

(To accompany H. R. 5452)

The Committee on the Judiciary, to whom was referred the bill (H. R. 5452) to amend an act entitled "An act to establish a uniform system of bankruptcy throughout the United States, approved July 1, 1898, and acts amendatory thereto and supplementary thereto", reported the same with one amendment, and recommended that the bill as amended do pass.

The only amendment that the committee made in H. R. 5452 was to strike out the word "sold”, printed bill page 2, line 16, and insert in lieu thereof the word “conveyed”.

This bill amends section 75 of the Bankruptcy Act, and more especially amends subsections (n) and (o), and paragraph 3 of subsection (s) of section 75. It has for its object and purpose the clarification of section 75, so that the decisions and the interpretation and construction that the United States district courts have, and may hereafter make, may become and be uniform. The amendments provided for in this bill have become necessary because of the great confusion caused by the diverse rulings of the various United States district courts, in the construction of section 75.

Some courts have held that the farm debtor could not take advantage of the act after foreclosure sale and during the period of redemption. Some of these courts have refused to permit the farmer in that position to file his petition, although under the law of the State he was in possession and full control of the property and could redeem it within the period allowed. Other courts have held that the farmer could not take advantage of the act during the period of a moratorium established by the State; while others have held that the debtor could not take advantage of the act after sale, but prior to confirmation of sale, although in all of these cases, if the debtor had the money and were in a position to pay, he could redeem and save his property. Obviously, these courts are reasoning too technically, and have failed

H. Repts., 74-1, vol. 2

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to carry out the intention of Congress, which was to protect the farmer's property and home.

Again, other courts have held when the farmer's homestead and other exemptions were set aside, that that ended their jurisdiction under section 75, and the farm debtor was left to the mercy of his mortgagees and lien holders, and the protection of that section withdrawn. In reading section 75, including subsection (s), it is plain that Congress had no such intention. Its object was to protect the farmer in his home and property, and not to desert him and leave him to the mercy of his creditors. Other courts have held that if any of the creditors refuse to consent to sell back the property under the terms and provisions of paragraph 3 of subsection () of section 75 of the Bankruptcy Act, that that ended it all, and he had no remedy. Such courts apparently construe only one paragraph of subsection (s), and brush all the rest aside; while others, construing paragraph 3 in conjunction with paragraph 7, and with the whole act, have held that if all the creditors do not consent, they must object in writing, and that then the procedure will be under paragraph 7 of subsection (s). When Congress passed section 75 and amendments, it certainly intended that the act should be construed as a whole, and not merely one paragraph.

It was undoubtedly the intention of Congress that the farmer should pay a fee of $10, and no more. In fact, the act says so.

Yet many of the courts have held that when the farmer amended his petition of conciliation to a petition of bankruptcy, he had to pay the usual fees in a bankruptcy proceeding. Some courts again hold that the conciliation commissioner is through with the case when a petition for conciliation is amended to a petition of bankruptcy. Others have held the reverse. In reading the whole act, it is quite apparent that Congress intended the conciliation commissioner to act as referee, because it imposed the same qualifications upon him. The proceedings having been started before the conciliation commissioner, he is on the ground, a resident of the county, and knows the conditions, and is in a far better position to continue in charge of the case than the referee, who in some States is several hundred miles away. Congress intended to place this act within the hands and possibilities of the debtor farmer, and keep down the expense.

Other courts have entered whole-heartedly into the spirit of the act, and construed it liberally, carrying out the intention of Congress. These have held that the farmer can take advantage of the act during the period of redemption, that the conciliation commissioner was to continue to act, and that the farmer could take advantage of the act any time before he was completely divested of title and possession. These courts have interpreted the act as a whole in connection with the times, and the purposes for which it was passed—the protection of agriculture.

The amended subsection (n), as set forth in H. R. 5452, in fact construes, interprets, and clarifies both subsections (n) and (o) of section 75. By reading subsections (n) and (o) as now enacted, it becomes clear that it was the intention of Congress, when it passed section 75, that the debtor farmer and all of his property should come under the jurisdiction of the court of bankruptcy, and that the benefits of the act should extend to the farmer prior to confirmation of sale, and during the period of redemption; and that no proceedings

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after the filing of the petition should be instituted, or, if instituted prior to the filing of the petition, should not be maintained in any court, or otherwise. Yet there have been a multiplicity of different holdings and conclusions reached by different courts on this subject. The amended subsection (n) as proposed in H. R. 5452 clarifies, construes, and interprets the intent of Congress, so as to bring about uniform decisions and rulings by the courts in the future.

The amended paragraph 3 of subsection (s), as set forth in H. R. 5452, has for its purpose and object the clarification of that paragraph, and brings paragraph 3 of subsection (s) in harmony with paragraph 7 of subsection (s). It is plain, by reading paragraphs 3 and 7 together, and in connection with all of section 75 and of subsection (s), that it was the intention of Congress that the farm debtor should be able to protect and save his home and exemptions. It was not the intention of Congress for the courts merely to set aside the exemptions, and then say to the creditors: “Now, go and take it.”

It is also clear that Congress intended that if the creditors would not consent to the property being sold back to the farm debtor, that they should file objections, and then they would come under paragraph 7. Otherwise, subsection (s) would be meaningless. And yet there has been a great diversity of decisions on that point. Some courts hold that if the creditors did not consent, that that ended the proceeding under subsection (s); others holding that consent would be taken for granted, unless they filed written objections; while other courts have held that when the exemptions were set aside, including the homestead, that the court was through, and the creditors could bring foreclosure proceedings. Such, we are satisfied, was not the intention of Congress when it passed the act. In fact, section 75, and especially subsection (s), when read as a whole, clearly shows that the purpose of Congress in passing this legislation was to protect the farmer's property and his home, and at the same time protect the creditors by giving them the fair value of the property, under the terms and provisions of the act.

Under the original paragraph 3, there also has been some confusion in regard to what was meant by “all taxes shall be paid by the debtor." The amended paragraph 3 has added the word "future", printed bill, page 5, line 6. There should have been no confusion on this point, because the past due taxes were already included as debts of the debtor, and the intention of Congress clearly was to provide that all future taxes should be paid by the debtor. Some courts also seem confused as to whether section 75 should be construed by itself, or in connection with all of the Bankruptcy Act, and how court costs and administration charges should be paid. Of course, section 75 is just a part of the Bankruptcy Act, and should be construed in connection with the whole act, except insofar as it repeals or modifies that act, and these costs always have been and should be paid out of the bankrupt's estate. Therefore this matter has been clarified by adding the following language in the amended paragraph 3, page 5, lines 8 and 9: "After all court costs and administration charges have been paid”, and so forth.

Section 3 of H. R. 5452 clarifies section 75 further, by providing that the conciliation commissioner shall continue to act as referee when the farmer amends his petition from a petition of conciliation to a petition of bankruptcy, and allows such conciliation commissioner an addi

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