is that the bankruptcy law is founded on the democratic inciple of participation of those interested in its adminisition, particularly in the administration of the estate. was undoubtedly the concept, and wise concept, of the imers of the original act that a law so intimately inter>ven with the everyday affairs of business life all through e country, needed for its administration the active inrest of the creditors. As our democracy in politics needs r itself and for its preservation the active participation the citizens, so the bankruptcy law needs for its enforceent the active participation of the creditors. But right re I am going to do a little criticising of the bankruptcy urts along the line pursued by my good friend Cook: e you always sure that you are trying to help the creditors take an interest in bankruptcy matters? Why, do you now, in some parts of the country, it is almost a venial n to nominate as trustee any business man or anybody se than the receiver who has been appointed by the court, if there were some infallibility about the choice of the idge-appointed receiver as against the creditor-appointed ustee! The law is founded on this democratic principle creditors participating and taking an interest in the 1ministration, and their taking of an interest should be couraged. There should not be that inquiry, "What is he matter with the receiver; why don't you elect him?" here is nothing the matter with him, but creditors want heir own trustee. The inquiry should be directed the ther way, it strikes me. It seems to me that a judge, ruly appreciative of the fundamentals of the bankruptcy w and trying to make it walk straight instead of stagger, ould seek, in the event of the necessity of the appointent of a receiver, to pick out a business man of that articular trade involved in the failure, who on inquiry e finds will likely command a majority in the number and mount of votes for trustee. I am inclined to think, as udge Hough has in effect said- and we all know his wide xperience as a bankruptcy judge that a good many of he troubles come from the judges' not paying attention o the work they should attend to the work of selecting, as I would say, not their own receiver, but selecting the ight receiver the man, I would say, who is in the trade, who is interested in it, and who would like to see the best possible done for the trade. That may be heresy or 'treason." If so, you know what Patrick Henry said: 'Make the most of it!"

Then another thing is the attitude, I am afraid, of some of our courts with regard to compositions. One of our ablest judges in the Southern District of New York once declared in open conference that when a composition came up before him he always ascertained how many creditors were opposed and what proportion of the claims they had, and if they were small in number and small in amount, he said these words: "I give them short shrift." Now that isn't the right way! In the first place, there is no such thing as a divine right to make a composition. Until this present law, there was no law of bankruptcy passed in the United States that originally contained any right to make a composition, and that right got first into the jurisprudence through an amendment to the act of 1867, during the last two years before it was repealed. We all know (in the larger centers at any rate) we all know that the greatest

bankruptcy evils occur in compositions and are covered up by compositions. Indeed, some of us have become so pessimistic that we think a great majority of the compositions are fraudulent; that they are the smoke screen for fraudulent transfers, concealing of assets, spurious claims and all the other evils that infest the insolvent estates, and so the attitude of the courts ought to be to encourage creditors to discover the true condition of affairs and, if there is reasonable ground for opposing the composition, then not to discourage opposition.

Now, none of the amendments of 1926 are opposed to any of these fundamentals of the bankruptcy law. On the contrary, some of them are especially designed to advance the democratic principle of participation of creditors in bankruptcy matters, to help them to take an interest in bankruptcy proceedings. The condition of affairs is almost hopeless for creditors in matters of composition to-day. No matter if a creditor proves to the court that a certain proposed composition is an evil one and the court so holds, yet the burden of the expense of opposing it is upon the one creditor though all creditors benefit, as things are now, and will be until the 27th day of August, 1926. That creditor, successful though he be, right though he be, must bear the expense of attorneys' fees, and of accountants' fees and of special masters' fees, all together amounting away into hundreds of dollars and maybe into thousands in the effort to enforce the bankruptcy law. And so, by one of the amendments of 1926, it has been provided that creditors who, at their own expense, have shown the court that a composition was not right so that the court has refused it, may be allowed reimbursement out of the estate for their expense in opposing an effort to help the creditors take an interest in the enforcement of the bankruptcy law.

And one other and then I am done. One other of these amendments that I have taken particular interest in is along the same line. This democratic principle of creditors' taking an interest in bankruptcy enforcement implies that creditors are informed, that they talk freely with each other and with the officers of the court in regard to the affairs of the bankrupt. But creditors live a great distance from each other nowadays, and sometimes hundreds of miles away from the bankruptcy court where the proceedings are pending, and if they are to inform the receiver or trustee or are to talk with other creditors, or if the receiver or trustee is to communicate with them in any way, it must be by mail, and so if they want to tell about the dealings that they think have taken place between the bankrupt and third parties, there is the possibility of the letters falling into the wrong hands and libel suits following. So we have another provision that we must be proud of, I think, in the amendatory law, namely, that where creditors communicate such criticism to each other or it is communicated between them and the receiver or the trustee, provided it be uttered in good faith concerning their common debtor, they shall be protected and suit shall not be brought against them by anybody (another effort to help creditors help themselves) another effort to strengthen and protect the fundamental principle which we must protect because it is the principle upon which this bankruptcy law is founded, the principle of self-help!

My on salunded by Mr Wilde, Carried. Varsover May 1 compliment you upon the care with wrotne prabonare formulated this document. It is quite an that goes without saying and I feel

1817 hazity Nikt pour action in the matter.

My Winery The Committee on Permanent Organizabon nominatex, at the suggestion of those present, the folmony for additional members of the official board, that pe those members who are not officers, being nine, one from Ach Judicial Circuit:

Find Circuit Daniel W Lincoln, Worcester, Mass. Second Circuit James W. Persons, Buffalo, N. Y. Third Circuit John T. Olmsted, Harrisburgh, Pa. Fourth Circuit Pussell G. Nesbitt, Wheeling, W. Va.

Fifth Circuit E M. Baker, Dallas, Texas. Seth Circuit Charles T. Greve, Cincinnati, Ohio. Seventh Circuit Charles A. Burnett, Lafayette, Ind. Eighth Circuit Elmer N. Powell, Kansas City, Mo. Ninth Circuit Stephen N. Blewett, Stockton, Cal. Mr Jones moved that the gentlemen named be elected as the first Board of Directors of this organization. Flon seconded by Mr. Hendricks, and carried.

Mo

REFEREES EXPENSES

******** X Transcrže. Tem X: Charmai ales and pennemen The autom.i. manufacture of Derut discreet some years are th. the longer the spoke the greater there I feel that e Keleren te e dactered that far from their strict lin t2the eart of these speeches.

When Referee King sent out his first questionnaire w reference to the matters we wild Ike to hear discusse at this meeting Itacated that I would like to hear ds cussed this matter of Referees Expenses. Not that thought I was best qualified to speak on the subjectwas that I knew probably less about it than anyone els and wanted information. But out of the spirit of cooperation and wanting to do anything possible within my powe to add to the interest of this meeting. I agreed to make i short talk on this matter, and possibly by my remarks provoke some discussion that might be of assistance t

the Referees.

From the interest taken in the discussion yesterday seems that it is a matter of vital importance and consid erable interest to the Referees present.

When I was first appointed Referee six and a half years ago by Justice Sanford, now a member of our Supreme Court, there was no rule of Court in our district with reference to Referees' expenses, and I operated for some year or two paying all the expenses out of my compensation. and I found it consumed fifty percent of all the income. and I began to look around to see how others handled the matter. Although I did not send an inquiry to every Referee, I did to one in every district, about 150, and received replies from about 75 to 100, to find out how they handled the expenses in reference to stenographic services clerical, telephone and things like that, and in those replies I found that almost every Referee, with few exceptions had some rule of Court which would enable them to recoup the expenses, or part of them. But I didn't find any similarity or uniformity in their methods. So it occurred

o me that inasmuch as all the recent amendments to the Bankruptcy Act have been made largely for the purpose f putting teeth into the Act for the benefit of the credit an, this organization was probably the proper one to ponsor any further amendments necessary to provide ome uniform method and authority for the allowance of he Referee's expenses.

Judge Sanford was a strict constructionist of the Bankuptcy Act. His interpretation is that it is the preacher of legislation, and if you can not find it within the four corners of the Act itself or the General Orders, it's not there, ind there's no excuse then for such a rule. Frankly, I do not agree with him, and I know the Bankruptcy Act never ntended the Referee to pay all the expenses of adminisration out of the very small fees he receives.

And I might also state that I believe some adjustment should be made in the compensation of trustees and receivers in small estates. It is difficult to get any competent rustee to serve in a case where it is apparent that the assets will not amount to over $500 to $1000. That is my experience. This Bankruptcy Act was passed in 1898 when i dollar went lots farther than it does now, and to have efficient administration in small estates, I believe the Referees', Receivers' and Trustees' commission on the funds administered should be increased. That is merely a suggestion for the Committee on Legislation to consider.

Some Referees have an allowance of so much for each notice. Some have allowances, or rather a rule of Court, I might say, of a specific amount for all expenses up to and including the first meeting of creditors, and for additional amounts thereafter.

I feel that the Referees in Detroit have certainly done a good job in getting their District Judges to make a flat allowance for their expenses. I have not met with quite the same success in my district, although in asset cases, at the final meeting of creditors, I have presented an expense account of the Referee and have been repaid my expenses to some extent, without an order of the Court, by presenting it at the creditors' meeting, and getting it passed by the consent of the creditors present. The money belongs to the creditors and they have done that after due notice. I do not believe there can be any objection to that by the Department. There are usually the trustee and one or two attorneys representing creditors present.

I do not want to exceed my time limit, but possibly I have made a few remarks that may present discussion. I am afraid if I continue longer I will find myself in the position of the old negro who applied for life insurance. The agent was asking him his family history and he says "Is your mother living?" "Yes, sir." "Is your father living?" "No, he's dead." "What did he die with?" "He just die from shortness of breath." "Shortness of breath! What's that? What was the matter with him?" "Just that, that's all." "Well didn't they have a doctor?" "Yes, sir, they had a doctor with him." "Well what did the doctor say?" "Well, the doctor come and look at him, and after about three minutes the doctor say 'Cut him down — he's dead'." The chairman might "cut me down" if I talk any longer. (Applause)

PRESIDENT: Thank you for that talk. This is the financial section of our program. The next matter is Fees of

Receivers and Trustees. By Referee Lincoln, of Worcester, Mass.

FEES OF RECEIVERS AND TRUSTEES

MR. LINCOLN: I would like to report that the delegates of the First Circuit met in caucus and owing to the legislative experience of the chairman presiding, the results were entirely satisfactory and here I am. (Laughter)

I am mightily impressed with the system I see here but whether or not the system was functioning in the same perfect manner when it got me as a speaker on this subject, I will leave to you. I know that I did not get around to see the offices of these Referees. I shall certainly feel that I have missed one of the reasons I came here if I do not, and I do hope that the system will allow us time to do that.

Talking to you about system, we in the effete East ought to have more of it. I suppose I am an average sample of our eastern lack of system. I know that very recently in the law practice end of my office, I brought suit against an individual, and the deputy sheriff who was serving the writ, brought back the information that this man had gone through bankruptcy in my own Court in the last two months! So we certainly need system in the East, at least certain of us do.

Another aspect of the lack of system I happen to be going abroad next week and as a result of my trying to get my work in shape in true army style by passing the buck to some other Referee, and not to speak of my practice, I have been very busy and although I was notified some months ago that I was supposed to speak on this subject to you, I put off preparation of my talk until I got on the train to come here. Well, you know how hot it was on the train. I made up a table and after going that far I became discouraged, and went to bed, saying to myself that when I got to Detroit I would be able to give it some thought. Of course there wasn't time, and yesterday morning, I was hoping that perhaps in the evening I might do something. About half past ten last night I looked at the dinner program and saw there were yet six more speakers. I was discouraged, but stuck it out. I came here to hear Remington, and I was determined that I was going to hear him, in spite of my fellow statesman, Mr. Cook, so I stuck it out, and then at half past twelve I started to go to bed; and let me say here, Mr. Chairman that in this respect I found that your efficient western system has broken down. After waiting ten minutes I finally got an elevator, and although I duly notified the person in charge that I wished to get off at the 7th floor, I couldn't get out until the 14th. I then took a down train, waiting about 5 minutes for it, got out at the 7th floor to get my key and found that the person in charge of the desk there had disappeared. When I finally did get up to my room in order to prepare this talk it was a quarter past one o'clock so what you are going to hear today didn't get any consideration last night. But I am glad to say that while I was shaving this morning, I did give it some consideration.

Last night I was glad to hear, among the other gems we heard, emphasized both by Mr. Cook and Mr. Remington, the thought as to the spirit of the Bankruptcy Act. (Be

fore I speak about that I would like to give my regards to Mr. Cook and say that I am proud of him. I think Mr. Cook put that rather difficult point over 'to the King's taste.' I know you will agree with me.) I want to emphasize the point both these speakers made the spirit of the Bankruptcy Act. Outside the matter of the discharge, we all know it is the creditor's Act, paid for by them, and supposed to be handled through their duly accredited and appointed agent, the trustee. Now, in spite of the remarks Mr. Remington made, that this law was one of the noblest things that ever came from the pen of men, outside, perhaps, the Constitution, I do feel in some aspects at least, it has fallen down. In order to compensate the trustee, the agent of the creditors who is doing this work for them, what do they allow? It is absolutely obvious to all of us that the compensation allowed the trustee is awful and absurd. All of us have had the same experience, as this one. Last year, in a small shoe dealer's bankruptcy, a retail business, a very able wholesale shoe dealer was badly caught as a creditor, and he consented to act. It was a small case but the affairs were in a terrible condition, and that man went in as trustee and did a wonderful piece of constructive work. With almost nothing to work on, he made dividends blossom where we never would have expected any.

I suggested in the course of the proceedings that perhaps he had better have an attorney. He was doing a lot of work, but he said: "No, I am going to do it all myself it's easy enough to get the few legal matters attended to. I can manage." And he did, and he did put in a whole lot of time, and when he was through, he came around to see me and I complimented him on it. I said "you are a worthy man, Mr. Smith. We don't have fellows like you very often in Court, and you've done all the work without a lawyer too, which is remarkable." He laughed. I said: "Ask the clerk to figure your commissions and we will show how we appreciate work like that." He did, and he came back with a sick smile on his face and says: "She said I am entitled to $131.73 as a miximum. Am I going to get that?" I said: "Not necessarily, you will have to file a petition and affidavit saying whether you are going to share it with anyone else, and give an itemized list of what work you have done, and we will notify the creditors, and if they do not object strenuously, maybe I will allow you all of it.

That's all I can do." He said: "I suppose

I am getting less than my employees get for the work I have done. Do you know the way I feel about this Bankruptcy Act, and the Court and everything connected with it? I feel like Rastus felt (and I want to apologize to you gentlemen for I can't use the darkey dialect, and I only wish the previous speaker could tell this story but the substance of the story is this) Rastus' head was cut, he had a wound over his eye and one eye was entirely closed up and his nose was mashed in, and two teeth gone. One arm was in a sling and he was walking on crutches. met a friend who asked him what was the matter. Rastus said 'I've had a little altercation with a fellow. He was a regular Jack Johnson but I didn't know it, and that worthless nigger he landed on my right eye and closed it up and hit me, and I fell down and he picked me up again and hauled off and mashed my nose in, and I fell down again

He

as

and he picked me up and hit me in the mouth and broke two of my teeth, and he walked on my face and stamps on my nose and mouth. I never was so annoyed at a man in all my life.' (Laughter) Well I feel just like that any hard-working, efficient business man who puts in his time, would feel about the Bankruptcy Act." That's the way my friend Smith felt and I do not blame him ii he never does any more work for us.

I referred to the fact that on the train I made out a table. In fact that's the only preparation I made for this talk, and that was the work that discouraged me from doing anything more. But I did make up a table with the idea of seeing whether we could substantially increase the fees of the trustee to such a point that he would be properly compensated. He would work for it, and if it were necessary for him to have an attorney, he could hire one and pay for the services out of his own compensation.

I made up the table to see where we got, and how much money would be necessary. If we did increase the fees, it would solve all the problems. It would compensate the trustee, and in the ordinary routine case, not the special case such as I was speaking about in which we could allow compensation to a lawyer, it would enable him to hire a man and pay for his services out of his own funds. You may urge that there would be a dispute between the lawyer and the trustee as to the fees. Well, perhaps once in a while the Referee may have to act as arbitrator, but in the ordinary circumstance if the trustee needed legal services he could put in a lawyer the same as he would in private life, and he would have nothing to do with the Referee. I am aware of the fact that it is not easy to get any further amendments to the Act, and I know we all appreciate the political difficulties of getting an increase for the trustee, but I think it will do no harm to start thinking about this subject and work out the things that will cause politica! expediency, for there is no reason why the present condition should be allowed to exist, with such ridiculous fees to the trustee.

If you will pardon me for one more minute, I will speak on the subject of these tables. A 2% increase would do no good. I had in mind using the present basis of graduation as you will note by the table I have prepared. It is here for anyone who desires to consult it, if you are interested. (Applause) (See tables on next page.)

PRESIDENT: We will now have the report of the Committee on Resolutions.

MR. COMFORT: Your committee offers the following.

RESOLUTION OF APPRECIATION

RESOLVED, that the sincere and hearty thanks of this Association be extended to the members of the Detroit and Michigan Bar Associations for the fine co-operation which made this Conference possible, and for the cordial welcome and delightful entertainment provided;

To Judge Tuttle, our able and genial Toastmaster; to Judge Simons, who presided so nicely at our luncheon; to Judge Murphy, to Messrs. Fleischmann, Phillips, Dewey, Crissman, Cook and Remington and to Prof. Holbrook, for their interesting and instructive addresses;

To Referees Paul H. King and George A. Marston for conceiving and organizing this, our first Conference;