The committee met at 10 o'clock a. m., Hon. George S. Graham (chairman) presiding.

STATEMENT OF MR. ROBERT A. B. COOK, REPRESENTING THE
NATIONAL ASSOCIATION OF CREDIT MEN.

The CHAIRMAN. The next bills for consideration by the committee are H. R. 5426 and H. R. 5193, which are printed herewith:

[H. R. 5426, Sixty-eighth Congress, first session.]

A BILL To amend an act entitled "An act to establish a uniform system of bankruptcy throughout the United States,' approved by the President July 1, 1898, and acts amendatory thereof and supplementary thereto.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 3 (a), section 14 (b), section 24, section 25 (a), section 29 (a), (b), and (d), section 57 (n), section 60 (a), and section 64 (a) and (b) of an act entitled "An act to establish a uniform system of bankruptcy throughout the United States,” approved July 1, 1898, and acts amendatory thereof and supplementary thereto, be, and the same are hereby, amended and supplemented so as to read as follows:

"SEC. 3. (a) Acts of bankruptcy by a person shall consist of his having (1) conveyed, transferred, concealed, or removed, or permitted to be concealed or removed, any part of his property, with intent to hinder, delay, or defraud his creditors, or any of them; or (2) transferred, while insolvent, any portion of his property to one or more of his creditors with intent to prefer such creditors

over his other creditors; or (3) suffered or permitted, while insolvent, any creditor to obtain a preference through legal proceedings, and not having at least five days before a sale or final disposition of any property affected by such preference vacated or discharged such preference; or (4) suffered or permitted, while insolvent, any creditor to obtain through legal proceedings any levy, attachment, judgment, or other lien, and not having vacated or discharged the same at least five days before the expiration of four months from the date of obtaining such levy, attachment, judgment, or other lien; or (5) made a general assignment for the benefit of his creditors; or, being insolvent, applied for a receiver or trustee for his property, or because of insolvency a receiver or trustee has been put in charge of his property unde the laws of a State, of a Territory, or of the United States; or (6) admitted in writing his inability to pay his debts and his willingness to be adjudged a bankrupt on that ground. "SEC. 14. (b) The judge shall hear the application for a discharge and such proof and pleas as may be made in opposition thereto by the trustee or other parties in interest, at such time as will give the trustee or parties in interest a reasonable opportunity to be fully heard, and investigate the merits of the application and discharge the applicant unless he has (1) committed an offense punishable by imprisonment as herein provided; or (2) with intent to conceal his financial condition, destroyed, concealed, or failed to keep books of account or records from which such condition might be ascertained; or (3) obtained money or property on credit upon a materially false statement in writing, made by him or any person or his representative for the purpose of obtaining credit from such person; or (4) at any time subsequent to the first day of the 12 months immediately preceding the filing of the petition transferred, removed, destroyed, or concealed, or permitted to be removed, destroyed, or concealed, any of his property with intent to hinder, delay, or defraud his creditors; or (5) has been granted a discharge in bankruptcy within six years; or (6) in the course of the proceedings in bankruptcy refused to obey any lawful order of, or to answer any material question approved by the court: Provided, That a trustee shall not interpose objections to a bankrupt's discharge until he shall be authorized so to do at a meeting of creditors called for that purpose.

"SEC. 24. (a) The Supreme Court of the United States, the Circuit Court of Appeals of the United States, and the supreme courts of the Territories, in vacation in chambers and during their respective terms, as now or as they may be hereafter held, are hereby invested with appellate jurisdiction of controversies arising in bankruptcy proceedings from the courts of bankruptcy from which they have appellate jurisdiction in other cases. The Supreme Court of the United States shall exercise a like jurisdiction from courts of bankruptcy not within any organized circuit of the United States and from the Supreme Court of the District of Columbia.

"(b) The several circuit courts of appeal shall have jurisdiction in equity, either interlocutory or final, to superintend and revise in matter of law the proceedings of the several inferior courts of bankruptcy within their jurisdiction. Such power shall be exercised on due notice and petition by any party aggrieved.

"(c) Appeals and reviews under this section shall be taken within 30 days after the judgment or order, or other matter complained of, has been rendered or entered.

“SEC. 25. (a) Appeals, as in equity cases, may be taken in bankruptcy proceedings from the courts of bankruptcy to the Circuit Court of Appeals of the United States, and to the supreme courts of the Territories in the following cases, to wit: (1) From a judgment adjudging or refusing to adjudge the defendant a bankrupt; (2) from a judgment granting or denying a discharge; and (3) from a judgment allowing or rejecting a debt or claim of $500 or over. Such appeal shall be taken within 30 days after the judgment appealed from has been rendered, and may be heard and determined by the appellate court in term or vacation, as the case may be.

"SEC. 29. (a) A person shall be punished by imprisonment for a period not to exceed five years upon conviction of the offense of having knowingly and fraudulently appropriated to his own use, embezzled, spent, or unlawfully transferred any document belonging to a bankrupt estate which came into his charge as trustee, receiver, custodian, or other officer of the court.

"(b) A person shall be punished by imprisonment for a period not to exceed two years upon conviction of the offense of having knowingly and fraudulently (1) concealed any property belonging to the estate of a bankrupt; or (2)

made a false oath or account in or in relation to any proceeding in bankruptcy; (3) presented under oath any false claim for proof against the estate of a bankrupt, or used any such claim in composition personally, or by agent proxy, or attorney, or as agent, proxy, or attorney; or (4) received any material amount of property from a bankrupt after the filing of the petition, with intent to defeat this act; or (5) extorted or attempted to extort any money or property from any person as a consideraion for acting or forbearing to act in bankruptcy proceedings.

"(d) A person shall not be prosecuted for any offense arising under this act unless the indictment is found or the information is filed in court within three years after the commission of the offense, except where he has been absent from the jurisdiction of the court, in which case the time during which such person has been so absent shall not be a part of the period of limitation prescribed herein.

"SEC. 57. (n) Claims shall not be proved against a bankrupt estate subsequent to six months after the adjudication; or if they are liquidated by litigation and the final judgment therein is rendered within thirty days before or after the expiration of such time, then within sixty days after the rendition of such judgment: Provided, That the right of infants and insane persons without guardians, without notice of the proceedings, may continue six months longer.

66

SEC. 60. (a) A person shall be deemed to have given a preference if, being insolvent, he has, within four months before the filing of the petition, or after the filing of the petition and before the adjudication, procured or suffered a judgment to be entered against himself in favor of any person, or made a transfer of any of his property, and the effect of the enforcement of such judgment or transfer will be to enable any one of his creditors to obtain a greater percentage of his debt than any other of such creditors of the same class. Where the preference consists in a transfer, such period of four months shall not expire until four months after the date of recording or registering of the transfer, if by law such recording or registering is required or permitted.

“SEC. 64. (a) The court shall order the trustee to pay all taxes legally due and owing by the bankrupt to the United States, State, county, district, or unicipality, in the order of priority as set forth in paragraph (b) hereof: Frovided, That no order shall be made for the payment of a tax assessed against real estate of a bankrupt in excess of the value of the interest of the bankrupt estate therein as determined by the court.

"Upon filing the receipts of the proper public officers for such payments, the trustee shall be credited with the amounts thereof, and in case any question arises as to the amount or legality of such tax the same shall be heard and determined by the court.

"b. The debts to have priority, in advance of the payment of dividends to creditors, and to be paid in full out of bankrupt estates, and the order of payment shall be (1) the actual and necessary cost of preserving the estate subsequent to filing the petition; (2) the filing fees paid by creditors in involuntary cases; and, where property of the bankrupt, transferred or concealed by him either before or after the filing of the petition, shall have been recovered for the benefit of the estate of the bankrupt by the efforts and at the expense of one or more creditors, the reasonable expenses of such recovery; (3) the cost of administration, including the fees and mileage payable to witnesses as now or hereafter provided by the laws of the Unted States, and one reasonable attorney's fee, for the professional services actually rendered, irrespective of the number of attorneys employed, to the petitioning creditors in involuntary cases while performing the dutes herein prescribed, and to the bankrupt in voluntary cases, as the court may allow; (4) where the confirmation of composition terms has been refused or set aside upon the objection and through the efforts and at the expense of one or more creditors, in the discretion of the court, the reason able expenses of such creditor or creditors; (5) taxes payable under section a hereof; (6) wages due to workmen, clerks, traveling or city salesmen, or servants which have been earned within three months before the date of the commencement of proceedings, not to exceed $300 to each claimant; and (7) debts owing to any person who by the laws of the States or the United States is entitled to priority."

SEC. 2. Nothing herein shall have the effect to release or extinguish any penalty, forfeiture, or liability incurred under any act or acts of which this act is amendatory.

SEC. 3. That all parts of acts inconsistent herewith be, and the same are hereby, repealed.

SEC. 4. This act shall take effect and be in force on and after the expiration of three months from the date of its passage and approval.

[H. R. 5193, Sixty-eighth Congress, first session.]

A BILL To amend section 14 of the act entitled "An act to establish a uniform system of bankruptcy throughout the United States," approved July 1, 1898, as amended.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That clause (5) of subdivision (b) of section 14 of the act entitled "An act to establish a uniform system of bankruptcy throughout the United States" is amended to read as follows: " (5) been granted a discharge in bankruptcy within six years; or"

Mr. Cook. Mr. Chairman and gentlemen of the committee, my name is Robert A. B. Cook. I am a member of the Boston bar, also a member of the executive bankruptcy committee of the National Association of Credit Men. While it is also my privilege to be a member of the recently created special committee on bankruptcy of the American Bar Association, and of the bankruptcy committee of the Commercial Law League, the latter of which is represented by Mr. Brandenberg, of the Washington bar, yet, in my appearance before the committe to-day, I shall undertake to represent the views only of the National Association of Credit Men.

Mr. HERSEY. We had a bill a year ago. Is this the same bill? Mr. Cook. It is not the same bill. There are fewer amendments in this bill.

I am very glad, Mr. Chairman, that Representative Hersey recalls our bill of last year, and I sincerely hope that you, Mr. Chairman, and those of the gentlemen who are associated with you now and have been with you for the past two years, will also recall the fact that we were here some two years ago on a bankruptcy bill.

I may say, Mr. Chairman, first, that a similar bill has been filed at the instance of our association and through the courtesy of Senator Walsh of Montana with the Senate. Upon that bill no formal hearings have been had. We have, however, talked the matter over informally with Senator Walsh, and, if I am correctly informed, in all probability hearings on that bill will not be required.

The CHAIRMAN. Before you proceed further, I would call the committee's attention to the fact that Mr. O'Connor, of New York, introduced the bill H. R. 5193, and that it contains an item which is included in H. R. 5426, so that we have both bills before us.

Mr. Cook. I intend, Mr. Chairman, to make reference to H. R. 5193.

The CHAIRMAN. And I should like to add that while this bill was introduced by me, it was introduced by me by request, and I am not familiar with all the changes that are called for in it, and therefore, it is an open subject before the committee.

Mr. Cook. Perhaps, Mr. Chairman, I might add, following the reference by Representative Hersey, that along with the introduction of our bill in the House of Representatives some two years ago, at that time there was a bill pending in the Senate. The bill to which I refer as having been introduced in the Senate some two years ago was introduced at the instance of the American Bar Association, and

hearings had been had on that bill either prior to the introduction of our bill into this body or certainly before the hearings conducted on our bill by your committee.

Mr. HICKEY. Can you tell us how your bill proposes to change the present law?

Mr. Cook. I shall be glad to do that if you will pardon me half a minute, Mr. Representative.

It was the sense of the committee when we were before you in April, 1922, that we await the action of the Senate upon the bill then pending before it.

The Senate committee, in the course of time, reported out the bill with certain amendments contained in that bill and certain amendements contained in the House bill, and their report also contained certain amendments suggested by the Attorney General's office. Later, and some ten days or two weeks prior to the adjournment of the last Congress, the bill which was reported out by the Senate was passed and the chairman of the executive bankruptcy committee of the Credit Men's Organization and myself hastened to Washington and then interviewed the then chairman, Judge Volstead, only to learn to our sorry and dismay that you had discontinued hearings for the session; that you also had discontinued executive sessions, and that only one day had been allotted to you for hearings.

Mr. HERSEY. Did you approve the bill that passed the Senate? Mr. Cook. Yes, sir; and every amendment contained in this bill which we are now presenting to you, with two exceptions, was contained in the Senate bill as passed.

Mr. HERSEY. And did they have hearings over there at the Senate? Mr. Cook. Yes, Mr. Representative.

Mr. HERSEY. And printed hearings?

Mr. Cook. Printed hearings. I have a copy of those which I will be glad to supply you.

Mr. HERSEY. Can you give us the number of the Senate hearings? Mr. COOK. Mr. Chairman, I have no doubt the Representative is more familiar with these Government pamphlets than I am. It seems to be a hearing before a subcommittee of the Committee on the Judiciary on Senate bill 2921. The date of the hearing was March 1, 1922.

Now, then, turning to our bill H. R. 5126, the first amendment which we have proposed is to be found on page 2 at line 12, beginning with the words "suffered or permitted, while insolvent, any creditor to obtain through legal proceedings, any levy, attachment, judgment, or other lien, and not having vacated or discharged the same at least five days before the expiration of four months from the date of obtaining said levy, attachment, judgment, or other lien.”

That, Mr. Chairman and gentlemen, is a new act of bankruptcy entirely. At the present time there are five acts of bankruptcy included in the bankruptcy law.

Mr. HERSEY. What is the new language added-from where?
Mr. Cook. Starting with line 12, the whole clause (4).

Mr. YATES. "Suffered or permitted." etc?

Mr. Cook. Suffered or permitted." and the whole of clause (4), which runs down to and includes the most of line 17.