The herald., 1898-09-09
The BANKRUPTCY ACT.
ITS APPLICATION TO BANKS AND
RAILROADS
BIG AUGUST BANK CLEARINGS
Decline Of Banking Proflts-Mutual
Life Investigation-War ASSESS
ment Illegal
OFFICE OF THE HERALD,

OFFICE OF THE HERALD,
Los Angeles Sept. 5, 1898.
More or less confusion exists as to the
intent and operation Of the national bank
ruptcy bill passed by congress last July.
The exciting events which preceded and
followed the making Of the law occupied
the public mind to the exclusion Of all 9TH
er matters, and the bill, which is one of the
most important pieces of legislation sane
tened by congress in recent years, has re-
ceived little attention. For all that 1t is
now the law Of the land, and as bankers.
perhaps more than any other class. says
the New York Financier. are interested in
its specific sections, reference to several
interesting phases may not be amiss here.
The limit Of this article will permit only
casual reference to a few Of these. For
the present the connection Of corporations
with the law will be considered.
The new ceasure expressly excerpts M
tional banks from the class who may be
adjudged bankrupt. The courts, in fact,
always held that national bank could not
be proceeded against in bankruptcy, on
the ground that bankruptcy act did not
repeal or supersede the provisions of the
act in relation to the winding up of insolv-
ent national banks and the appointment of
receivers for them. Nor (Black on BonlI-
ruptcy. page 3D could the two acts exist
together as furnishing concurrent or CO.
ordinate remedies. The national banking
act is more particular and specific with
reference 20 procedure In these cases than
Is the bankruptcy law; and the fact that
creditors OF their own motion cannot insti-
tftute proceedings under the latter statute,
does not change ~the construction Of the
acts. Nor did congress intend to inject the
provisions of the bankruptcy act into the
other statute, so that the creditors could
apply the remedies Of one and the comp
trroller Of the currency those Of the other.
Such construction could only produce
confusion and conflicts Of jurisdiction.
This has been held by the highest courts,
notably in the case Of the Manufacturers
National VS.. Bliss. Still, former acts con-
tained no exempting clause. The legisla-
ton dealing with state banks is somewhat
similar Under the law OF 1867 (Thornhill
vs. Bank Of Louisiana) It was held that a
bank incorporated under the laws OF state
was subject to the provisions of the ma
tional bankruptcy act. The present law
provides expressly that its involuntary
features may apply to private bankers but
not to banks incorporated under state or
territorial law.
Railroads are debarred by the express
provisions of the act from fling voluntary
n0fitfnnC - ho nj Yysfav al a,,Ao
ta.ion Of the laws seems also to debar pro-
ceedings against them In involuntary bank
ruptcy. The act in It's provisions for vol
untary bankruptcy applies to unincorpor-
ated companies and to corporations en-
gagged principally In manufacturing. trad
Ing. printing, publishing or mercantile pur-
suits. and creditors holding combined
claims to the amour. Of $1,000 may proceed
against such concerns on the ground that
they have committed an act of bankruptcy
Under the law Of 1867 (Blac,z on Bank
ruptcy, page 30). where no specific excep-
ton was made, the law applying to "all
moneyed, business or commercial cor
porations and joint stock companies" it
was universally held that railroads must
be included under the head Of business
corporations" and that they were liable,
therefore, to be thrown into bankruptcy
In the case Of the New Orleans, S. F. & L.
R. Co. VS.. Delamore, the court ruled that
"the jurisdiction of the bankruptcy court
to adjudicate railroad company bankrupt
and to administer its property under the
bankruptcy act, has been sustained by
several circuit courts of The United States,
No circuit court before which the question
has been brought, has denied the jurisdic-
ton. AS they were the courts of last re-
sort upon this question, and vaQuab
rights may depend on their judgments upon
the point, we think the question should be
considered as settled by the authorities
cited,and are unwilling at this late day 10
re-examine It," Again. In the case OF Ala
bama and c. r. Co. VS.. Jones. 1t was OBJ
served that corporation carrying on and
pursuing any lawful business, defined and
clothed by Its charter to do so. is clearly
a business corporation and amenable to
the bankruptcy law, and 1t seemed to be
the clear intent Of the law to bring within
It's present scope all corporations. except
those organized for religious, municipal or
political purposes.
Under the new law, according to Black,
from whose work we have quoted several
times, q railroad company, since 1t neither
trades. manufactures, prints or publishes,
as the principal part Of ITS business, can
not be amenable to the law, unless 1t should
be considered that It's business is mer-
camille pursuit. which the courts are not at
all likely to hold.
Insurance companies were held to be
subject TO the operation Of the laws Of
1867, but the 1893 act makes It matter Of
considerable doubt whether they, too, are
not exempt, as are railroads and banks,
or the clauses relating to voluntary and
Involuntary bankruptcy.
August Bank Clearings
Following the rather unsatisfactory ex-
hibit Of bank clearings made in the month
Of July has come one for the month Of Au-
gust. which, because Of its favorable fea-
lures, does much to restore the former
average Of heavy monthly bank clearings
for which the present year seems likely to
be notable. The appearance Of hesitation
impaired to the bank clearngs exhibit
by the total for the month OF July. says
Bradstreet's, gave place In August TO q
much more favorable showing, and the
total for the month Just ended is not only
the han V,fne% Auar a. tn thai