The New York herald., 1922-12-07

the appointment OF counsel for Federal
receivers in this city. The practice now
to a great degree in vogue for selecting
receivers counsel started in this way !:
1t was assumed that If a lawyer repre-
sented creditors he would be the proper
man to be counsel for the receiver be-
cause he having only the interest Of the
creditors at heart would fight every
body who ought to be fought and If
necessary ride over the bankrupt. pref
erential creditors and everybody else
who stood in the way of a proper and
honest administration OF the bankrupt
estate.
on this theory It became a practice
or custom for the receivers In many
cases to appoint the attorneys for the
petitioping creditors TO act as their
counsel. That was all right on the face
OF 1t but this is what happened: AS 7
have already indicated. under the press
cnt practice of appointing receivers the
receiver himself in many cases does not
cut much of real figure. Naturally
there are some notable exceptions but
as rule the estate is run largely by
receivers counsel.
John Smith. shrewd lawyer. the
counsel for the bankrupt or insolvent
defendant, knowing that the chances are
that when a receiver is appointed for
his client the receivers counsel Will di-
rect tho receivership administration,
concludes IL will be prudent and wise
10 have a reasonably friendly person
act as such counsel. He goes to his
friend. John Jones. also n very shrewd
lawyer. and says in substance that his
client is about TO go into bankruptcy or
his or its affairs are going to be put
into an equity receivership, that he
will give Jones the names OF three per-
sons whom he can use as petitioning
creditors in bankruptcy proceeding or
the names of one nonresident of this
State who will become the complainant
in an equity receivership. which he does.
The petition In bankruptcy or bill in
equity is filed with these three people
rs the petitioning creditors or tho nom
resident friend as complainant in the
equity suit and John Jones as their at
torney or solicitor. A receiver is ap-
pointed and John Jones. who certainly
Is not very hostile 10 his friend John
for the insolvent corporation is ap-
pointed counsel for the receiver and
practically runs the estate. and John
Smith complacently feels that he has
no cause TO lose sleep. Naturally II oc-
casionally turns out that John Smith
made mistake In the selection of his
John Jones and has good reason to be
very sorely disappointed.
The practice with reference 10 the
appointment OF receivers counsel to
which have just adverted ought TO be
emphatcally and effectively ended. With
rare exceptions based on particular cir
cumstances OF particular cases only at
torneys who have had nothing directly
or indirectly. sentimentally or other
wise. in any possible shape or form. to
do with the bankrupt or defendant or
his or it's attorney in connection with
the bringing OF tho recelvership pro-
ccedlngs and are under no obligation,
real or fanccd. Of any kind TO the
bankrupt or defendant or his lawyer,
and none other. should be appointed
counsel for receivers.
Unless there arc decided changes and
reforms with reference to the prevail
ing method Of appointing receivers and
receivers counsel there will undoubtedly
be Congressional investigation. Theee
changes ought to be made and these re-
forms can be and ouxh, TO be brought
about without the necessity Of Congress
sional action. HENRY WotLatAN.
New York. December 6.