MESSAGE FROM MOORE TO FANS EVERYWHERE. Regarding the soft ball contest, of which you have appointed me general manager, I desire to advise the members of the League that these games will be unique and interesting and at the same time afford much amusement to the onlookers. Already the team managers representing the various sections of the United States to which they have been appointed are engaged in selecting players for their teams. and it is expected that in the May Bulletin the make-up of these teams in part at least will be presented. Joseph B. Jacobs of Boston has accepted the position of eastern manager and promises a winning team. I have a scheme afoot that will result in valuable prizes being secured, one for each individual member of the winning team, the details of which will be announced later. Regarding the make-up of the various teams, only members of the C. L. L. A of record April 1, 1913, will be eligible to play, and each team must present members residing in the states comprising the section it represents. i. e., no southern member can play on an eastern team nor vice versa. Eastern team shall be composed of C. L. L. A. members from the North Atlantic States from Maine to Delaware. Southern team-Gulf States north to Mason-Dixon line. Western team-Rocky Mountain and Pacific Coast States. Northern team-Northern and Central States from Ohio to the Rockies. Each team manager may select as many players as he sees fit, but only ten can play at any one time and only ten prizes will be awarded, and the manager of the winning team will select those members of his team entitled to the prizes. I hope to be able to state in the May Bulletin the names of the donors of the prizes, and the character of same. W. E. MOORE, General Manager, Soft Ball Contests. Note:-Say, Mr. G. M., what do the umpires get? A CHEERING NOTE. Frederic P. Vose, President Commercial Law League of America, 140 South Dearborn Street, Chicago, Ill. My Dear Mr. Vose: I haven't forgotten the little chat I had with you while I was in Chicago a few weeks ago nor my promise to write you my opinion of some of the suggestions for the Cape May Convention program. First, I am enclosing herewith to you the application of Mr. Charles F. Werner of this city to become a member of the League, to which his check is attached for $5 in payment of the first year's dues. I wish you would kindly sign the application as the third member and forward it to Mr. Kreamer. One promise fulfilled! We have succeeded in having the Vanderburgh County Bar Association adopt the fee schedule of the League. Check another one! Now in regard to the program, I am very much interested in that ball game which you have scheduled, but as every one cannot get into the baseball game, I would suggest a volley ball game on the side. We have several lawyers here who are volley ball enthusiasts, two present members of the League and Mr. Werner, whose application I am enclosing herewith, and if the lawyers in other places are as enthusiastic, we could certainly have a good game. All that would be required would be a common tennis net and a good volley ball. We could play on the shifting New Jersey sands very nicely. I think you are arranging an excellent program for our next convention and I do not know of any suggestions that I could make which would be of value. The Atlantic City Convention was my first and I was at that time just beginning to build up a commercial. practice. It has occurred to me that there may be a number of lawyers in attendance at the convention who are somewhat new at the business and are there to gain information in regard to starting or extending a commercial business and who know very little about it. If there be any considerable number of such, it seems to me that a talk along the line of some of the members' experience in starting their own business would be of value. Something quite elementary which would not interest a large number of the League members but would interest the class indicated. I have succeeded in three years in building up a very nice collection business, but I, no doubt, would have done better if I had had the experience of some others at the time I began. Under the head of "Unfair Forwarders" it seems to me could be classified the members of our League who send out business at less than the League rates. Why not publish the names of the Unfair Forwarders along with the House Agencies? Wishing you the greatest success with your program and with kindest personal regards, I am, Yours very truly, EDMUND L. CRAIG, Evansville, Ind. HOUSE AGENCIES. A Timely Communication on an Ever Present Evil. Frederic P. Vose, Esq., Chicago. My Dear Mr. Vose: I have just received your letter of March 26th in reply to a letter I wrote you a few days ago with reference to House Agencies. The experience our firm has just had was with a well known house attorney whose name, by the way, has been published in the list of house agencies in the Bulletin for a number of years. As a matter of fact, if my memory does not play me false, his name was one of the very first inserted in the Bulletin as a house attorney after it was voted by the League to publish such a list. In this particular instance a piece of business was received by our firm from this house attorney and the account was accompanied by a forwarding contract providing for a division of fees. After a great deal of work on the claim, including bringing of suit, a contested trial, obtaining judgment and issuance of execution, the claim was collected, and I dictated the remittance letter on behalf of our firm. In making remittance we advised the house attorney that we were deducting the straight fee without division, in view of the fact that he was not entitled to a division, he being the credit manager of the client and being paid for his services and expenses in connection with the forwarding of that particular item of business by client. The house attorney insisted upon returning the check and demanding a division of fees, and later filed his claim with the bonding company over whose list the business was forwarded to our firm. Considerable correspondence passed between our firm and the bonding company; between the bonding company and the house attorney; between our firm and the house attorney; and finally between our firm and yourself. As a matter of principle I absolutely refused to divide the fee and requested the surety company to refuse settlement under its bond, and invited suit. I have just received information that the house attorney has withdrawn his claim against the surety company, and that he has accepted the check originally tendered. While instances of this kind were very frequent a few years ago it is an exception at the present time, and personally I feel that house agencies and house attorneys can be "put out of business" entirely provided the proposition is handled in the proper manner and by the proper people; and when I say the proper people I refer to the bonding companies who are list publishers, and the other mercantile lists. I do not think that the lists and bonding companies are entirely to blame. A great many receiving attorneys are willing and even anxious to handle business from house agencies and house attorneys and concede a division of fees. As a matter of fact, I know it to be true that some members of the Commercial Law League are of the opinion that the house agency list as published in the Bulletin is for their benefit and assistance in obtaining the business of the house agencies and house attorneys. And I have no doubt that some of the house agencies listed in the Bulletain obtain considerable amusement from the fact that they are obtaining free advertisement of their business and the business of their employers. However, I believe with you that the surety companies who are list publishers and the other mercantile lines who have the bonding feature and who operate complaint departments, should get together among themselves and enter into an agreement which shall be binding upon every member that becomes a party to such an agreement that they will not sustain any complaints against an attorney who is a member of the Commercial Law League of America made by a house agency or a house attorney against that member for a refusal to divide fees on any business placed in his hands. I have read with a good deal of interest during the past six months, articles written by Julius Henry Cohen of New York, and while I do not agree with him on everything he says, yet I believe he is on the right track in many of his assertions regarding how far a lawyer can ethically go as regards contracts with clients, with forwarding agencies and others for the receipt of fees for services or the division of fees with others who may be responsible for the attorney receiving the business. I think Mr. Cohen will agree with me that it is not proper for any attorney to knowingly receive business from a house agent or a house attorney who is paid by the client, receiving a stated salary for his services, and divide the fees with that agency. And when I say Mr. Cohen I mean also practically the entire rank and file of the Commercial Law League of America. Therefore, I insist that if the attorneys, members of the Commercial Law League, refuse to divide fees with a house agency or house attorney and the surety companies and mercantile lists get together and agree not to accept a complaint against a member of the League who has refused to divide fees, that this evil of house agencies can be effectually stamped out. I have personally succeeded in getting three or four corporations to do away with the house agency proposition entirely by calling their attention to the fact, firstly, that it is not a proper way to handle business, and, secondly, that if they persisted in compelling a division of fees, the better class of attorneys throughout the country would absolutely refuse to handle their business, with the result that they would lose considerably more in service than they had previously gained by saving a portion of the fee. In order to get this matter before the League and have it called to the attention of the surety companies and list publishers, I have no objection to your publishing this letter in the next issue of the Bulletin, and I hope that it will be of sufficient interest to prompt action by the list publishers as well as by the members of the League who are "ed on from time to time to divide fees wtih these agencies. I am, Very sincerely yours, WM. G. BRYANT, Clark, Lockwood. Bryant & Klein, Detroit. AN INTERESTING CASE Decided by the United States District Court for the District of Colorado, sitting in bankruptcy. The effect of the amendment of 1910 to Section 47, Clause 2, of Subdivision A, of the Bankruptcy Act. The company, a Colorado corporation, was declared an involuntary bankrupt on October 14, 1011. The B. Company of Cincinnati had sold and delivered certain merchandise to the bankrupt within three months prior to the adjudication. The sale had been accomplished through the reliance of the vendors on a written statement made to R. G. Dun & Company in January, 1911, which statement was communicated to and relied upon by the vendors. Being satisfied that the statement was fraudulent the vendors, through their attorneys, Messrs. Cobb, Howard & Bailey of Cincinnati retained the firm of Thomas, Bryant, Nye & Malburn of Denver to take such steps as might be necessary to rescind the sale and recover the goods. November 3, 1911, a reclamation petition was filed and refused by the receiver then in possession. Later a trustee was appointed, and under stipulation between the trustee and the attorneys for the Fabian Company, when the bankrupt stock was sold, the goods reclaimed were sold separately and the fund remained in the hands of the trustee to abide the result of the proceedings. Upon the hearing before the referee he found that the financial statement given by the bankrupt to Dun & Company, and afterwards communicated to the vendor, was false and made with intent to deceive; that it was made at a time when the hankrupt was absolutely insolvent and known to be so by its officers; that it was communicated to the agency for the purpose of obtaining credit; that the vendor relied upon the false statement and sold the goods upon the faith of such statement, and that the vendor had elected to rescind the sale and sought to reclaim the goods at the earliest opportunity. Nevertheless, the referee found that the facts were not sufficient in law to justify the reclamation of the goods and gave judgment denying the petition. From this order of the referee the matter was taken before the district judge on a petition for review, the referee certifying to the district judge the following question: "May a vendor, who has been induced to sell his property on credit by materially false representations of the purchaser, rescind the sale and reclaim the property after the purchaser has been adjudged bankrupt and after the property has come into the possession of the bankruptcy court?" The following extract from the brief of counsel for the vendor states the position which they took in the matter: "The question arises under the amendment of 1910 to Section 47-2 (2) of the Bankruptcy Act, as it is conceded on all hands that prior to the amendment of 1910 the trustee in bankruptcy stood absolutely in the shoes of the bankrupt. The real question now is, how far has the amendment of 1910 changed the rule in respect to property in the possession of the bankrupt at the time of bankruptcy, the vendor of which might have rescinded and recovered on account of the fraud which induced the sale if proceedings had been begun prior to bankruptcy? "We are not willing to concede that Section 47-a as amended refers to all property, the mere physical possession of which was in the bankrupt at the time of bankruptcy, as 'property coming into the custody of the court."" We conceive that there may be a vast difference between property coming into the custody of the court' and property in the possession of the bankrupt, which may, by virtue of the bankruptcy proceedings, come merely into the possession of the trustee in bankruptcy. The language of the amendment simply says that the trustee shall be deemed vested with all the rights; remedies and powers of a creditor holding a lien by legal or equitable proceedings.' It does not declare that the trustee shall have the title or right of a bona fide purchaser for value. If Congress had intended to grant such a right or title to the trustee it would not have granted merely the right or title of a creditor holding a lien. We think that manifestly the referee in bankruptcy fell into error in this matter by failing to distinguish between the rights of a creditor holding a lien' and 'a bona fide purchaser for value.' "It must be conceded, as stated by the referee in his certificate, that the right of the vendor to reclaim in this instance depends upon the law of the State of Colorado. "The lien of an attachment or of a judgment binds the property upon which it operates against any subsequent act of the defendant, but it does not affect the rights in third persons outstanding at the time it is acquired.' Gates Iron Works v. Cohen, 7 Colo. App. 341. Banks & Bros. v. Rice, 8 Colo. App. 217. Nichols v. Chittenden, 14 Colo. App. 49. L. V. G. M. & M. Co. v. Lambert, 15 Colo. App. 445. "A failure to distinguish between cases where possession of property has been transferred in satisfaction of or as security for a pre-existing debt, and cases where it has been attempted to create a lien as security for a pre-existing debt without transfer of possession, has resulted in much confusion, as is clearly pointed out by the Court of Appeals of Colorado in the case of Reid v. Bird, 15 Colo. App. See also: People's Savings Bank v. Bates, 120 U. S. 556, 557. 35 Cyc. 508. 116. Doane v. Lockwood, 115 Ill. 490; 4 N. E. 500. McMahon v. Green, 12 Ala. 17; 46 Am. Dec. 242. "Of course it goes without saying that property belonging to another cannot be sold to satisfy the debt of the judgment debtor, citing Harstock v. Hardware Co., 16 Colo. App. 48. OPINION OF THE COURT. In deciding the case, Judge Lewis said: "The proof adduced by The B. Company to sustain its claim and certified here, establishes these facts: In January, 1911, the bankrupt made to R. G. Dun & Co., a mercantile agency, a written statement of its then assets and liabilities by which it appeared that its assets then exceeded its liabilities to an amount more than $19,000. This statement was given by the bankrupt for the purpose and with the knowledge on the part of the bankrupt that it would be circulated in the trade and that on it credit would be fixed and extended to the bankrupt. The bankrupt sent to the petitioner June 17, 1911, its written order and request, by the hand of one of petitioner's traveling salesmen who had solicited in Denver, for the purchase of a large bill of merchandise. Immediately on the receipt of the order the petitioner applied to R. G. Dun & Co., at its Cincinnati office, for report to it on the financial standing of bankrupt, and received in reply a copy of the statement made by the bankrupt, in January preceding, noted above. On this statement petitioner extended credit to the bankrupt, accepted its order and shipped the goods therein called for, beginning in the late days, of July and extending up to September 9, 1911. The sale was unconditional. The bankrupt did not pay for the goods. The proof is clear and positive to the effect that credit was extended and the goods shipped by petitioner relying on its belief that the financial report Inade by the bankrupt to R. G. Dun & Co., and by it communicated to petitioner, was a true statement of its financial worth at the time said statement was made. Said statement was at that time untrue and grossly false. The bankrupt was then hopelessly insolvent. Its liabilities at that time greatly exceeded its assets. It then knew that its assets were not then sufficient to meet is liabiliies and that its failure was imminent. Its insolvent condition was thenceforth intensified. "The petitioner had no knowledge of the insolvent condition of the bankrupt until after proceedings in bankruptcy were instituted. "On these facts it is the general rule that the vendor is entitled to rescind the sale and reclaim the goods sold from the vendee and from all others who are not bona fide purchasers for value, on discovering the fraud of his vendee. 1 Benjamin on Sales, Secs. 648-9. 2 Pomeroy's Eq. Jur., Secs. 777-8. Stove Co. v. Mitchell, 117 Fed. 774. Reid, Murdock & Co. v. Bird, 15 Colo. App. 118. "And this right in the vendor to retake his goods is superior to a judgment lien, 2 Pomeroy's Eq. Jur., Sec. 721 et seq., to a mortgage lien for a pre-existing debt, id., Sec. 749; Bank v. Bates, 120 U. S. 556; Broom Co. v. Guymon, 115 Fed 112; Reid, Murdock & Co. v. Bird, 15 Colo. App. 116, and to an attachment levy, Mining Co v. Lambert, 15 Colo. App. 445. Such lienors are not armed with the rights of bona fide purchasers. "It is the established rule in Colorado that one who takes possession of property in payment of or security for a pre-existing debt can successfully invoke the protection given a bona fide purchaser for value. Knox v. McFarran, 4 Colo. 596. McMurtrie v. Riddell, 9 Colo. App. 497. But the holding to that effect in each of these cases is properly attributable to the requirements of the state recording_act, in relation to real property, Jerome v. Bank, 22 Colo. 40. It is held also, in Beaman v. Stewart, 19 Colo. App. 226. that a pre-existing creditor may take his debtor's chattels in satisfaction of the debt and successfully defend his title as a bona fide purchaser for value against an execution levy thereafter made on the same property in behalf of another creditor; but there the debt for which the property was turned over was extinguished. These Colorado cases, except the last two, were carefully considered in Reid, M. & Co. v. Bird, supra, wherein, after noting the holdings of the State Supreme Court to the effect that one who takes property in payment or security of a pre-existing debt is to be regarded as a purchaser for a valuable consideration, it is said (page 122, 15 Colo. App.): "This doctrine was very clearly announced and ever since that time the courts have universally held that a pre-existing debt is a good consideration for the transfer of property either in payment of. or as security for a debt. This, however, has only been holden so far as the cases themselves show where there has been an actual transfer of the title, or a turning over of the property in payment, or as security. We have been referred to no case nor have we found one where it has been held that the execution of a chattel mortgage on personal property on the consideration of a pre-existing debt, would be a valid transfer unassailable by a vendor who had the right to rescind the sale on the ground of fraud.' "The amendment to Section 47 of the bankruptcy act, supra, does not attempt to put the trustee in such a favored position. It only gives him the rights, remedies and powers of a creditor holding a lien.' Prior to the amendment the trustee would have taken title to this merchandise subject to claimant's equities, i. e., a right to rescind the sale induced by the vendee's fraud. Zurtman v. Bank, 216 U. S. 134. It must therefore be held that in this jurisdiction said amendment does not cut off the right of petitioner to rescind the sale and reclaim the unsold part of its goods. The order of the referee will be reversed and the trustee is directed to pay over to petitioner, The B. Company, the sum in his hands received for the goods of petitioner. It is so ordered."" NOTE: Subsequent to the judgment of the District Court, and after the fund arising out of the sale of the reclaimed property was turned over to petitioner, a claim was filed for the value of the goods obtained and disposed of by the bankrupt, based upon the invoice price thereof, and to this claim was added the costs expended in the reclamation proceedings. This claim has been allowed and upon it the vendor will share with other creditors in final dividend. THE RECEIVER AND MINIMUM RATES. My Dear Mr. President: The Forwarder on March 3, 1913, sent me for collection a claim of A. & Co., New York, against B. of this city, on open account for $317.01. My attention is now called to the fact that this business was forwarded on a lower schedule of fees than that adopted by our League. I have today written The Forwarder about this and asked them to adopt the schedule approved by the League and have sent the carbon copy of my letter to them to Secretary Kreamer, and am writing you personally to call your attention to the matter and suggest that you take this matter up with The Forwarder. I believe you will be able to present the matter to them in such a manner that they will see the justice of our position and fall in line with other forwarders who have adopted the minimum schedule of our League. I think that I shall refuse to accept any further items unless they raise their rates. I think every member of the League should be loyal and firm in this matter. Allow me to congratule you on the improvement in the Bulletin and the increased interest that seems to be manifest among the members of the League. I am planning to attend next convention and I want to travel on the official train from Chicago. I presume there will be none west of there. And look forward to the pleasure of meeting you and other friends at that time. I hope to obtain some more applications. Very truly yours, RECEIVER. The president addressed the Forwarder the following, and still awaits a reply: In re A. & Co. v. B. Receiver of Nebr., has written stating that he, as a member of the League, has written you, as members of the League, suggesting that this item of business forwarded to him by you should be handled on the C. L. L. A. minimum schedule. I am quite sure that if you have received this item of business from your client on a lesser basis than the C. L. L. A. schedule provides, that on placing the matter fairly before your client he will readily agree that the League schedule is fair and will be willing to concede that it should control in this case. The law office with which the writer is connected adopted the C. L. L. A. rates shortly after they were promulgated by the League. We have lost no valuable business thereby, and we have felt that we were according to the forwarders a just recompense for services rendered. The forwarders, in return for the increased fee, have given to this office exceptional service. In addition to being forwarders we are also receivers from Eastern points, and we handle no business for less than the C. L. L. A. rates. We have yet to find a forwarder so unfair that he refuses our request when the matter is squarely put before him. This subject has been treated in the last few issues of the League Bulletin, and I refer you to the article "This One Thing," in the March Bulletin, the article entitled "Oklahoma" on page 11 of the February Bulletin and my editorial on "Our Aim" on the inside front cover page of the February Bulletin; also the article on "Schedule of Fees," appearing on pages 2 and 3 of the January Bulletin. Aside from the Operative Resolution of the League, there is economic law that is being violated by disregard of our League schedule. The increased cost of living must bring an increased cost of income to match it, and whereas in the old days commercial business was handled on a 10 per cent. or better rate, without the sliding or diminishing scale, many of the forwarders in the East have cut under and demand that the receiver take business at a loss. The answer that the receivers are giving to such unfair demands on the part of forwarders is the establishment of local Bar rates, and in some quarters these rates have been raised to an unreasonable amount, but it is the swing of the pendulum prompted by self preservation and propelled with violence by the disgust that the receivers feel toward many forwarders who send their business on a short-sighted schedule, although, in the vast majority of cases, exacting a decent fee from their clients. I shall be very glad, indeed, to hear from you on this subject. Yours very truly, FREDERIC P. VOSE, President. STANDING AND SPECIAL COMMITTEES. Your reports are to be presented to the President by the 25th of April for publication, in whole or part, together with the recommendations and proposed resolutions. See paragraph 20 on page 4 of the December Bulletin. Neglect not. A PRETTY RACE Between Charles F. Maxwell, state membership chairman of Iowa, and Judge Wil- SYMPATHY FOR SUFFERERS. At the present writing we have not learned that any of our members suffered in the storm at Omaha, or in the floods in the Central States. If there be such, however, they are assured of our sympathy and the League members will be glad to render such consideration and assistance as lies within their power. |