A great deal has been said in this country in criticism of the administration of law; that we spend too much time in trying to find out justice and not enough in trying to get rid of cases. That, of course, is true. But it is the difference between the common law theory of justice and the administrative theory of justice, which is maintained on the continent of Europe.

Now, there is no department of justice of the government except the Interstate Commerce Commission and lately, the Federal Trade Commission, which has as complete control of justice within its sphere as you gentlemen, and you have had thrust upon you from 1898 on, the necessity to apply justice from the European conception of administrative law, and it is very, very easy to fall into the theory that your job is machinery. I hope that the bankruptcy experts, of which you gentlemen are indeed excellent representatives, will not forget that the American people have been built on the theory of justice; that justice is more important than expedition and getting through with it. Of course, the original theory of bankruptcy law in England was to get a man who is an honest man, out of the difficulties of not being able to convert his assets into a shape with which to pay his creditors and to get rid of them until he could get a chance like an honest man, to make more money and pay his debts. I always thought that the theory that creditors would be benefited from bankruptcy courts, is a misconception. I hope you will not allow yourselves to be swayed to that point that you forget that the theory of justice is the theory of common law as Americans inherited it from England; that administrative machinery is not as important.

It makes very little difference, it seems to me, whether the assets of the creditors, especially as I see about only seven per cent of the debts are being collected over the country as a whole, as I think Mr. Cole suggested, I think it makes very little difference whether they get that seven per cent a year or so later. The only criticism I could make, and the criticism by Mr. Cole and others, is that it is not important that those assets should be distributed rapidly justice is the first thing. All the relations of law upon which the development of our theory of law depends, depend upon justice rather than upon expedition.

Now, I appeal to you gentlemen, as you have probably the most notable instance in the administration of the law, to bear in mind that it is the law of fifty to a hundred years hence, and bear in mind that the law must be developed for the good of society as a whole. My theory is, within the next fifty years, the courts and the bar must develop a theory of justice which will be adopted by the legislature, to put into form the theory of law which the bar will recognize as just; that it must be a construal of the statute from the standpoint of public good. It requires the wise consideration of the bar at all times, and you gentlemen, as selected members of the bar, to apply with so much power, the theories of justice which have been given in your hands in the development of administrative law. You must bear that in mind.

Now, many others are going to talk. Judge Page by this time knows what he wants to tell us, and I want to say, Mr. Toastmaster, I greatly wish the opportunity to come. and say to you that we hope you will become members of

a Section of the American Bar Association. I take it that very few Referees in the United States are not or were not practicing lawyers before being Referees. Practically all or a large proportion of your membership already are members of the American Bar Association, and I hope you will all become so. There are something like five hundred Referees and I see no reason why Referees in Bankruptcy should not apply to the Secretary of the American Bar Association and do your work through the organized Bar. We have had for the last few years, very able representatives of your Association on one of our committees. Why not absorb all those who are primarily interested in administration of this great branch of the law and why not become a factor, a constructive factor in the whole American Bar Association, which must take the administration of justice of the whole country.

I thank you. (Applause.)

TOASTMASTER: We are very thankful indeed and we appreciate, Mr. Sims, your very kind words and the very interesting and instructive talk you have given us in regard to bankruptcy law and its administration.

The next speaker is a man who is the third of the presidents of the Commercial Law League of America to address the Referees Association. The League has always been very close to my heart and I find it difficult at times to divide my time between the League and the American Bar Association, but because of its very close relation with the practice of bankruptcy law, lawyers who are members of the League and who attend the League sessions find that is one of the subjects that creates the most discussions. We have with us the Honorable Robert H. Sykes of Durham, North Carolina, the incoming president of the League, who will now speak to us. (Applause.)

MR. SYKES: Mr. Toastmaster and distinguished guests, ladies and gentlemen: Representing as I do that definite division of the legal fraternity known as the country lawyer, practicing in one of the smaller cities, it would be most inappropriate to even think that I could say anything in this presence that would either instruct or entertain you gentlemen on a subject that makes up your daily tasks. Practicing as I do in a small community, I have not come in contact with the larger problems of the bankruptcy law that you are dealing with daily, but there may be one or two angles that I get of this tremendous question, that possibly have sometimes escaped you.

I approach this august presence with a due humility and a real thirst for knowledge. I realize, of course, that my presence here as a guest and a speaker comes solely by virtue of the fact that I happen to be the president of the Commercial Law League of America, and speaking for that organization, as its president, I wish to bring you the friendliest and most cordial greeting and to assure you that certainly during the year's administration, and I hope through all these years that are to come, there shall continue to exist that close co-operation and friendly spirit that has always existed between these two organizations. As an intimation of that, the only committee that has been thus far appointed by the new administration of the Commercial Law League of America has been the committee on bankruptcy, because it has seemed that the subject of bankruptcy has taken such an interest, taken

on such an interest lately that it would have been almost fatal to delay the appointment of a committee for that subject, in view of the things that are now going on in our nation, and in appointing that committee it was my great pleasure, as well as my privilege, to include upon it, your distinguished member, my friend, Herbert Bierce, and also as another member of the bankruptcy committee I appointed another member of this organization as its chairman, who is an honorary member, Mr. Robert A. B. Cook of Boston, and I wish to say that the only reason he is not here tonight is because of the fact that his being abroad prevents him from doing so.

May I be facetious for a moment and suggest that the bankruptcy world and the legal world seems at this time. to be divided into three parts. The first part seems to be those of us who favor the so-called Donovan Report; the second part is comprised of those of us who do not favor the so-called Donovan Report, and the third part is composed of those who seem to know little and care less about the Donovan Report. But the lawyers in this country, and particularly your organization are tremendously interested in the Donovan Report and in its effect upon the business and the law of this country. Whatever may be our opinion about it, whether we agree with Colonel Donovan or not, I think we all acknowledge that we owe him and his extremely intelligent and industrious lieutenants a deep debt of gratitude for the tremendous work that he has put forth and for the result that he has accomplished and for the report that he has published. This report, while it may not reflect the conditions that exist in all parts of the country, certainly does reflect the most degrading condition of affairs in one section of our country, and it may be that as a result of this report those conditions there may be corrected, and I believe that as a result of this report there will be a tremendous deterrent to those who would try to degrade the bankruptcy law in other parts of our country by acts similar to those that have been uncovered in the Southern District of New York, so that I acknowledge here that Colonel Donovan and his associates have done, I believe, a wonderful work, not only for bankruptcy, but for the legal profession generally throughout the United States.

The lawyers themselves in their own organization, and the courts are the ones to correct abuses of this sort that we know to exist, and as a thorough examination and a thorough report have shown us that conditions do exist, far in excess of anything that we had even imagined. This report, if I may say, gave us many suggestions, and so much information that it would be, of course, absurd for me to attempt to analyze it or to criticize it or to suggest anything in regard to any one of its various features, so that what I can say must, of course, only be in a most general sense. I think that the abuses that have been brought out by this report, could very, very largely be corrected without any great amendments to the bankruptcy law.

Speaking for the Commercial Law League of America, may I say that we do not believe that the bankruptcy law needs any very great amendment or very great workingover. We are of the opinion that it is a law that is sound and safe, that is fundamentally right and just, and that

ROBERT HIDEN SYKES

As president of the Commercial Law League of America, Judge Sykes addressed our Chicago Conference. He was born in Wilmington, North Carolina, educated at the State University, spent several years with a prominent law firm in New York City, located at Durham in 1906 where he has since engaged in general practice. For four years he was judge of the County Court, and in 1917-18 was an Assistant Attorney General of his State. He is a member of the American Bar Association and of the North Carolina Bar Association serving as president of that organization in 1928-29 and was elected president of the Commercial Law League of America in 1930, in which organization he has been very active for many years.

if it is strictly and properly administered, that the law will stand for justice and righteousness for many, many years to come. Of course, I do not think that it is a perfect thing. Nothing that ever originated within the human mind or that was the result of the human brain could possibly be perfect. There are many statutes upon our books that are not perfect. The bankruptcy law is not perfect, but it is fundamentally right; it is fundamentally just and I believe if it is strictly enforced that the very conditions that have been recited in the report that Colonel Donovan has made, could be corrected in a way so as not to disturb the bankruptcy law itself. Speaking for myself, however, as an individual and practitioner of the law before the bankruptcy courts, but not as a representative of the Commercial Law League of America, if you gentlemen are going to recommend legislation to correct the defects in the law, there are just three small things that it seems to me would materially enhance its value and materially aid the administration of justice.

The Donovan Report, as I read it, would seem to take from the Referees many of the duties that they have at the present time, and place them elsewhere. I believe, and I believe the Commercial Law League generally believes, that instead of doing that thing, the very reverse of that thing should be done; that the powers and duties and responsibilities of the Referees in Bankruptcy of this country should be enlarged and expanded and that they should be given greater power to administrate, first, because they are the people who know the local conditions; they are people who universally, so far as I have ever been able to discover, stand high in their communities. They have the respect of people who practice in their courts and the respect of litigants who go into their courts to have cases adjusted, and the Referees in Bankruptcy are the men who can deal with conditions that arise in the district, and they are the men, it seems to me, whose duty should be enlarged, whose powers and responsibilities should be expanded, and who should be permitted and allowed to administer this law without being hampered. Now, the three very small suggestions that I shall make, if you gentlemen care to consider them, are these:

First: I believe there ought to be a very early beginning of the administration of the bankruptcy estate. My observation has been that after the adjudication of bankruptcy a great deal of time ensues which is absolutely lost to the cause, which involves a great deal of expense, and which involves a great deal of confusion. But immediately upon the bankrupt being adjudged, the Referee should be permitted or allowed to appoint a trustee or some officer to take charge of the estate and to go forward with it without all this notice for creditors and various other things. (Applause.)

Another slight suggestion I would make is this: That in communities such as mine I said it was a small community but we are very proud of it it is in North Carolina, and my home town is Durham, where the Durham "bull" originated, and where it still lives. In that community we find it very difficult to get intelligent and industrious trustees to serve, because of the fee. It is almost impossible to get a man who has anything else to do or who could do anything else, to serve as trustee, because when he gets his pay at the end of the administration of the estate, it is so pitiful that it will hardly pay him for half the time he has given to it.

Another suggestion I would make is this: That some provision ought to be made out of the estate itself, for a searching investigation of things that lead up to the bankruptcy and a rigid examination and cross examination of the bankrupt himself or anybody associated with him who had anything to do with bringing about this condition. The Referees say they will not permit the estate to be squandered by hiring somebody to investigate it or hiring somebody to audit the books or employ a lawyer to make an investigation which may amount to nothing, but if some scheme could be devised whereby, when necessary, this investigation and facts leading up to the bankruptcy and examination of the bankrupt himself could be provided, I believe there would be a great many less bankruptcy cases and that the creditors themselves would receive large dividends in the administration of the estate.

I said that I was not going to try to say anything to instruct you. What I have said is not intended as that, but merely as a suggestion. I appreciate more than I can express, the invitation which you gentlemen and ladies have given me to appear before you and I want to say again, as representing the Commercial Law League of America, that I shall be most happy to continue to cooperate with you gentlemen in everything you want us to do, that looks toward the betterment of the bankruptcy law and the administration of it in the United State. I thank you. (Applause.)

TOASTMASTER. Glad to have these words from Judge Sykes and the greetings which he brought us from the League.

In this connection, we are again honored as an association, by having two of our members appointed as members of the Committee on Commercial Law and Bankruptcy of the American Bar Association, and we are happy in having the Chairman of that Committee with us this evening. Through an unfortunate mixing of dates, he arrived one day late for the Memphis Conference, and the banquet was over, but we are happy indeed to have him with us this evening. During the day he wired us that he was on his way. I cannot promise him anything especially in the way of a reward. His predecessor, Simon Fleischman, of his committee, was made an honorary member of this association, but that was in recognition of the work done by that committee in securing the enactment of the 1926 amendment; that is simply because of the work of the committee itself, but I do know that Mr. Lashly has given considerable study and very careful thought to the administration of the bankruptcy law, not only from the viewpoint of chairman of this committee of the American Bar Association, but he is an active practitioner and member of the St. Louis Bar.

Therefore we are highly pleased indeed, to have Jacob M. Lashly of St. Louis with us, who will now speak to us. (Applause.)

MR. LASHLY: Mr. President, distinguished guests, ladies and gentlemen: I trust that I may be pardoned for my unconventional appearance, as I may be pardoned, I hope, with long suffering patience, for my unconventional discussion.

I had not expected to find ladies here when I came, and I sat here and saw these ladies and I marked the appearance of satisfaction and comfortableness upon the faces of all, and I supposed they were wives of the Referees. I was a little bit shocked to hear the suggestion that some of them are Referees themselves.

It may be that the discussion which Judge King imposed upon me, altogether against my will, will be received better in view of the professional character of all of the audience here. I had intended at first, to discuss an entirely different subject, as it is too much for an organization of lawyers and Referees to meet and discuss one technical subject all day, and then discuss it in the evening and go on with the discussion the next day, and as we have had the bankruptcy law for breakfast and for all day discussion and for a nightcap, I had hoped to discuss another subject, but Judge King is a very imperious person. He invited me to come and speak and he invited me to speak on the subject of the

bankruptcy law, and so I feel constrained by the limitations of my invitation to discuss the bankruptcy law.

Perhaps I had better take out my watch so that I will be sure. I have a very remarkable watch here. I got it when we were abroad in 1924. It is quite a trick, it is a speaker's watch. It has an alarm, and after I have spoken one hour and twenty minutes, the alarm comes on. After I have spoken two hours, it jumps from the table. (Laughter.)

Since the discussion that has already preceded my remarks and that I must discuss the same subject that has been discussed already and that is likely to be discussed some more when I have concluded, maybe I should compel your attention at the beginning, like the German professor who was making a lecture on the hippopotamus. He said at the beginning of his remarks, "In order now that you might get a complete and adequate idea of the horrible topic of this lecture, you must keep your eyes firmly focused on me." (Laughter.)

Just some little analysis of the bankruptcy law: The object of the bankruptcy law has been conceded by all the text writers and most people in these days to be the ratable distribution of assets; that is the object of the present law, the creditors law. Of course, that was not the object of the 1867 law, which was passed at the end of the Civil War, in order to relieve those debtors who had been bled white by the terrific struggle between the North and the South; nor was it the object of the 1841 and 1843 law which followed immediately after the panic of 1837, but the 1898 law is a creditors law and the primary object of the administration in bankruptcy, of the whole structure of the bankruptcy law, with its procedure and rules, is a ratable distribution of the assets.

Prior to that law, the bankrupt was distributing his own assets. Why, he was making an assignment to his own lawyers who took the position of distributor. The question then is, who shall distribute the assets under this bankruptcy law, and that brings us to the provision in the law for that purpose. The law provides that the creditors may get together and select one of their number; that is the contemplation of the law. The selection of trustees is not limited to one of their number, but the assumption is that the creditors will select one of their own number. It is not contemplated that he shall be the same person in two cases; it is not contemplated that he shall have any experience or that he shall be a man or a company of great standing; as a matter of fact, the bankruptcy law limits the requirement as to the qualification of the trustee almost only to that he must just be a human being. The creditors were to select one of their own number to distribute the assets ratably among themselves, it being deemed to be a principle of democracy likened to the movements of our great American Republic, that this little group hère should be democratized and should govern themselves and the assets which are no longer owned by the former owner; that by virtue of the bankruptcy adjudication, his title has been divested from him and shall now be taken over by this representative who will, in the process of true Republican or Democratic fashion, you may take your choice (in these days it is hard to tell which is which), whether the system is a Democratic system or a Republican

system, but in bankruptcy administration the principle of rule by representation was to remain, and the price that has been paid for this democracy in the bankruptcy law has been a high one. Who then shall be the administrative official? That is beginning to be the great issue. The trustee was found, under that system, to be unable to interpret or learn or apply the rules of conduct specified in the Act. In the first place, he was not familiar with the duties of trustee, and in the second place he was not capable of properly interpreting and construing the duties of the trustee, and in the third place it was not evidently contemplated in the Act that he should be able and capable of himself to construe and interpret and apply that law, if he should find out what it was, by chance, and so it became necessary for him to seek advice and direction, and so the issue ceased to be so much who would be the trustee as to who would direct the trustee, and because the trustee's emoluments have already been pointed out at this table and in this presence (no such pointing out was really necessary) we already know that trustees' emoluments are not great and that ordinarily they are merely complimentary. So, who should direct the trustee? There were many candidates for the position of the director of the trustee, and it came to be, in the great system of American efficiency, a matter of devising means for the selection of a particular trustee, with a view of becoming a director or advisor of the trustee, because, in the direction of the trustee there was the direction of the policy of the administration of the bankruptcy estate and the control of the liquidation and the distribution and all that goes with it, and then, the emoluments were not so circumscribed in reference to the direction of the trustee, the emoluments for the director were not so circumscribed. § 48 did not limit them nor the lawyers for the trustee like it did the trustees. And then, in this great system of efficiency and propaganda of the American people and the American lawyers, means were devised for the selection of the trustee, a trustee who would be safe and sane in the employment of his advisors. His advisor was sure of compensation. If his advisor did not already have a client, it was one way of getting a client, getting a case, getting a lawsuit and getting into court and getting a fee. Now, having made that explanation, may we just concede, ladies and gentlemen, that the bankruptcy law is a law that deals altogether with the material consideration? There is little if any altruism to be found in bankruptcy administration. The very nature of the thing excludes that hypothesis. It is not founded on any principles that nourish or cherish ideals of that sort. A man has personally owned property, and while he owned and held it he defended it. Now he relinquishes his ownership and possession, turns it over to the court, but the court is an indefinite thing, merely an abstraction to him, and as he sees his property, which he so long owned, he grabs a piece of it, if he can, and later, maybe, if you give him a little time, he conceals it, and then in a little while it rests there without a claimant, without an owner, an impersonal thing, not owned by anyone, like the spirit that used to dominate the settlers and squatters in the great Northwestern country, that you read such marvelous and wonderful books about; it is everybody's and nobody's. No one really has the same attitude toward