UNIFORM SYSTEM OF BANKRUPTCY

TUESDAY, APRIL 12, 1932

UNITED STATES SENATE,

SUBCOMMITTEE OF THE COMMITTEE ON THE JUDICIARY,

Washington, D. C.

The subcommittee met, pursuant to call, at 10 o'clock a. m. in the room of the Committee on the Judiciary, Capitol, Senator Daniel O. Hastings presiding.

Present: Senators Hastings (chairman), Herbert, and Bratton. - The subcommittee had under consideration the uniform system of bankruptcy bill, S. 3866.

Senator HASTINGS. I should like to state, and I would appreciate it if the newspapers would carefully report the fact, that many protests have been received by the committee urging postponement of these hearings for at least 30 days, and the committee desires all of such protestants to understand that they shall not be cut off from a hearing.

The hearings will probably last several weeks, and if we should finish with the persons who appear here we will postpone, from time to time, until everybody, within reason, has had an opportunity to be heard, and certainly ample notice will be given before the hearings are closed.

Senator COPELAND. Mr. Chairman, may I say in that connection that I came over on purpose to tell you that the Onondaga County Bar Association, at Syracuse, and the Erie County Bar Association, at Buffalo, have asked for a postponement for 30 days.

Senator HASTINGS. I must have a couple of hundred telegrams on my desk.

Senator COPELAND. As I understand the matter, the hearings will be continued for some time now, and ample notice will be given to these bar associations so they may be heard?

Senator HASTINGS. If we get through in six weeks I think we will be lucky.

Senator COPELAND. Thank you very much.

Mr. Cook. What form of notice is contemplated being sent? Is it a written notice to all of those who have asked to be notified of the hearings?

Senator HASTINGS. I suppose that would be a practicable proposition, but, on the other hand, if we gave that notice, everybody coming in response to that notice would feel they ought to be heard at that particular time. I think that all that is necessary is just to state publicly that the hearings will be had at certain times, and then let the witnesses take their chances at having to wait over until the next day, and so on.

I suppose we could in important matters for particular reasons fix a day when we would hear a certain witness, if he specified a good reason for it. I think the thing to be considered in the first place is whether we ought to hear Mr. Garrison, from the Department of Justice, and let him outline in a general way what is sought to be done by this bill.

Senator BRATTON. I approve of that suggestion very thoroughly. I should like to have a comprehensive statement of what are to be considered the defects of the existing law.

The CHAIRMAN. Somebody told me you have a bill in the House. Mr. BALDRIGE. Yes.

Senator HASTINGS. It is this bill?

Mr. BALDRIGE. No; I am interested in two lines to be added on to a chapter, which was the bill I introduced over in the House, but when I saw your bill I thought the reasonable thing was to incorporate these two lines I have in this bill.

Senator HASTINGS. It is not in the bill now?

Mr. BALDRIGE. No. I introduced a separate bill, but it is not in the bill now.

Senator HASTINGS. Would you like to be heard?

Mr. BALDRIGE. Yes; it will just take a moment.

STATEMENT OF HON. MALCOLM BALDRIGE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEBRASKA

Mr. BALDRIGE. My name is Malcolm Baldrige, Omaha, Nebr.
On page 28 of Senate bill, section 17——

Senator HASTINGS. You are referring to the Senate committee print, are you not?

Mr. BALDRIGE. Yes; I am referring to the Senate committee print. Senator HASTINGS. Page 28.

Mr. BALDRIGE. On page 28, section 17, is the section entitled "Debts not affected by discharge." In starting with line 21, "A discharge in bankruptcy shall release a bankrupt or debtor from all of his provable debts except such as," and then they enumerate six exceptions. My suggestion would be to amend section 17 by adding number 7, which is as follows: After the word "employment," on page 29, line 18, the following:

Or (7) for necessaries of life furnished him or his family for which he is indebted.

Now, gentlemen, just a brief word : One of the difficulties in a bankruptcy situation is the grocery store and the small dealer who handle the necessaries of life. I have always felt that there would be no complaint about this section from the poor man, because often the small retail man who provides the necessaries of life, realizing a man may become discharged in bankruptcy, often does not give credit where otherwise he does give credit; in other words, I believe if the small retail man is assured he will not be defeated in his claim, that then he would allow credit where otherwise he would not. The reason I mention that phase is that I imagine if any objection. to this addition would be made it might come from the so-called poor man or the man who might be up against paying his bills.

Of course, it will be of tremendous value to the small-store man, because he can not afford to take the loss of $100 or $150 or $250— the small, little corner-grocery store.

Now, the necessaries of life naturally can not be enumerated. Each State, through the rulings of its supreme court, has definitely stated what are the necessaries of life in that particular State, so I think the words "necessaries of life" in the bill would cover them, and each State law would control. Briefly, that is the situation.

There are two gentlemen here who have gone into this thing with the details and figures. I think it would be the proper thing to hear them. One is Mr. James R. Hewitt, the chairman of the legislative committee of the Retail Credit Association, and the other is R. P. Shealey, Washington counsel for the National Retail Credit Association; and as long as I have explained what the addition is, I would like to have Mr. Shealey take over the technical argument.

Senator HEBERT. "Necessaries of life" is a relative term, is it not?
Mr. BALDRIGE. Yes.

Senator HEBERT. It would not be the same in any two cases.
Mr. BALDRIGE. No; and the same in any two States.

Senator HEBERT. Would it not be better to limit the amount which might be allowed-say, $100 or $200, or something like that-in other words, you might find a case where a $6,000 automobile would come into necessaries of life.

Mr. BALDRIGE. Yes.

Senator HEBERT. You do not want that?

Mr. BALDRIGE. No; that would certainly defeat the purpose of the bankruptcy act, would it not?

Senator HEBERT. I think it is difficult to particularize, but I think it should be done by a limitation.

Mr. BALDRIGE. Yes.

Senator HEBERT. What do you think of that?

Mr. BALDRIGE. I have never thought of that. What do you think of that suggestion, Mr. Shealey?

STATEMENT OF R. P. SHEALEY, WASHINGTON COUNSEL, NATIONAL RETAIL CREDIT ASSOCIATION

Mr. SHEALEY. The term "necessaries of life" is a relative term. A $6,000 automobile for one man might be a necessity of life and so considered by a court. In another case an automobile, a Chevrolet or Ford, might not be considered a necessity of life.

I will say to you, Senator, that the amendment is modeled after section 147d of the Canadian bankruptcy act enacted in 1917. When the Canadian act was revised in 1927 that provision was continued exactly as written in the bankruptcy act. At the present moment another movement is on foot to further revise the act, but counsel for the organization having the matter in charge, and the author of that particular amendment of the Canadian bankruptcy act, informs me in that that amendment will be continued in the Canadian bankruptcy act. He states that from every standpoint, from the standpoint of the individual as well as the merchant, it has worked well in practice in Canada.

It is our intention later on to offer as part of the presentation of this amendment in these hearings certain changes, as it is Mr. Baldrige's intention to suggest those changes in this bill. Those changes will not, however, depart from the basic principle sought to be attained, barring necessaries from discharges.

Mr. BALDRIGE. What do you think about the limitation question? Mr. SHEALEY. I think, for the reason that I have stated, a limitation in amount might not work so well. Just as I say, in one case a watch is necessary for one man and is not necessary, maybe, for another. Jewelry has been held to be a necessity of life, and I have seen a recent New Jersey decision holding a radio

Senator HASTINGS. I think

Mr. BALDRIGE. I do not think there is any State in the Union that goes outside of clothing, food, coal. Some still have hotel bills. I think those four would cover the entire field of necessaries of life. I can look that up and bring that and let you know, because that is important.

Senator HEBERT. It occurred to me that there would be no assurance under that provision for the merchant who furnishes what he thinks are necessaries of life, that is going to be paid-if the court says they are not necessaries of life, then he is just out of luck.

It seems to me you want to protect the little merchant.
Mr. BALDRIGE. Yes.

Senator HEBERT. You want to make it particular, so he will be protected.

Mr. BALDRIGE. He would know in his State whether they are necessities of life.

Senator HEBERT. I repeat that "necessaries of life" is a relative term, and it is difficult for the merchant to know what the court will do subsequently to his advancing credit.

Mr. BALDRIGE. If the committee feels that way, we certainly could limit it.

Senator HASTINGS. It occurs to me you might add the necessaries of life, such as food, clothing, fuel, naming them, which everybody realizes are the necessaries of life, such as, I think, would show to the court that it was intended to limit it to such.

Mr. BALDRIGE. That would be perfectly satisfactory.
Senator HASTINGS. We will hear Mr. Shealey.

Mr. SHEALEY. I am Washington counsel for the National Retail Credit Association, and also for a temporary organization of retailers interested in the amendment of the bankruptcy act, particularly the amendment barring necessaries of life from discharge, and limiting the benefits of voluntary bankruptcy to those who owe not less than $500 of unsecured indebtedness.

I will add to the statement that I made a few minutes ago by saying that the latter provision is in the Canadian bankruptcy act to-day. It is represented on the House side by a bill introduced by Representative Andresen, of Minnesota. The number of that bill is 9971.

I want also to say that the principle back of this Andresen bill was in the American bankruptcy act of 1867, the limitation in that case being $300. Of course, no one will contend that $500 to-day means more than $300 did in 1867.