CORPORATIONS SUBJECT TO BANKRUPTCY
CORPORATIONS
SUBJECT
TO
529
BANKRUPTCY
By R. Jackson Cram IT would seem that the Bankruptcy Act of 1898 had now been in force long enough to give the legal profession, at least, if not that considerable body of laymen whose liabilities exceed their assets, some definite notion of its meaning and effect. As on three occasions previously Congress had enacted similar statutes the provisions of which the courts had construed, their faults as well as their merits should have been tolerably familiar to the national legis lature. Nine years of practise under the Act has, however, shown that in many respects it is defective, not because of the unwise intentions of its framers, but by reason of clumsy wording. It is the object of this article to call attention to one instance of such faulty language and to suggest a remedy by amendment. I refer to that section which defines the classes of corpora tions which may be adjudged involuntary bankrupts. Section 4 B of the Act of 1898 as to corpo rations is as follows: "Any corporation engaged principally in manufacturing, trad ing, printing, publishing, or mercantile pur suits . . . may be adjudged an involuntary bankrupt. . . . Private bankers, but not national banks or banks incorporated under State or Territorial laws, may be adjudged involuntary bankrupts." Compare the broader clause in the Bankruptcy Act of 1867 : " The provisions of this Act shall apply to all moneyed, business, or commercial corporations." In this connection, too, the report of the Conference Committee on the so-called Torrey Bill, which later became the Bankruptcy Act of 1898, is important, in that it shows what the framers of the bill thought the words they had used meant. The committee, consisting of Senators Hoar, Lindsay, and Nelson, and Representatives Henderson, Ray and Torrey, say of this
section1 "(A change has been made in the bill as agreed upon as to who may be adjudged involuntary bankrupts, by in cluding an unincorporated company and corporations engaged principally in manu facturing, trading, printing, publishing, or mercantile pursuits. It is believed that such corporations should be subject to the provisions of this bill. In these times the formation of corporations for these purposes is very common. A great railroad and transportation companies and banks incor porated under any law are left to be dealt with by the laws of the state creating them. It would lead to much confusion and hard ship and many complications should we un dertake to subject the great railroads and transportation corporations to the provi sions of this Act. It is believed that they can be better dealt with under other laws." The construction put upon Section 4 B by the courts shows how pitiably inaccurate were its authors in their use of their mother tongue. What does " principally engaged in manufacturing, trading, printing, pub lishing or mercantile pursuits" mean? Cer tainly not mining. In 1903, accordingly, the section was amended by the addition of that word. Courts have held warehouse,2 water supply,* ice,4 building and loan,5 laundry,8 mutual insurance,7 saloon,8 res taurant* hotel,10 theatrical," construction,12 1 See 144 Fed. Rep. 726. Opinion of Olmstead Referee. (Mass.) I 10 Am. B. R. 474. Northern California. 3 3 Am. B. R. 508. Southern N. Y. 4 14 Am B. R. 61. Southern N. Y. Affirmed 16 Am. B. R. 832. 2d. C. C. A. • 11 Am. B. R. 51. Southern N. Y. ' 9 Am. B. R. 30. Wisconsin. 7 2 Am. B. R. 372. Western Missouri.
- 7 Am. B. R. 173. Colorado.
' 7 Am. B. R. 173. Colorado. '• 13 Am. B. R. 403. 6th C. C. A. II s Am. B. R. 219. Eastern Penn. 1114 Am. B. R. 188. Eastern Virginia. Affirmed 15 Am. B. R. 515. 4th C. C. A.
