Mr. HALL of Indiana. Mr. Chairman, I will withdraw my motion to indefinitely postpone.

The CHAIRMAN. Mr. Patman moves that the committee meet tomorrow morning at 10.30 for the consideration of the bills specified.. (The motion was put and carried.)

The CHAIRMAN. The motion is carried and it is so ordered.

The committee stands adjourned until 10.30 o'clock to-morrow morning.

(Whereupon, at 12.00 o'clock noon, the committee adjourned until 10.30 o'clock a. m. Thursday, February 26, 1931.)

REAL-ESTATE, MORTGAGE-FORECLOSURE, AND

BLUE-SKY LEGISLATION

THURSDAY, FEBRUARY 26, 1931

HOUSE OF REPRESENTATIVES,

COMMITTEE ON THE DISTRICT OF COLUMBIA,

Washington, D. C. The committee met at 10.30 o'clock a. m., Hon. Frederick N. Zihlman (chairman) presiding.

The CHAIRMAN. The committee will come to order.

STATEMENT OF JOSEPH A. BURKART, ATTORNEY

Mr. BURKART. I was informed late yesterday afternoon that Mr. Brinkman had stated before this committee yesterday that Judge Adkins, formerly a member of the law committee of the board of trade, had advised Mr. Brinkman that the board of trade in its entirety had indorsed the blue sky bill and that Judge Adkins had said that in his opinion it was not drastic enough. With no knowledge of any such conversation I got in touch with Judge Adkins yesterday, and we had the chairman of a subcommittee of the committee on law of the board of trade, of which I am the general chairman, and I referred this bill to him and he did make a report on it through an associate, Mr. Mercier, whose report Mr. Adkins agreed with, and that did not indicate that the bill was not drastic enough. On the contrary, their report indicated that the bill was too drastic; they felt, among other things, that the basis of valuation should not be the assessed valuation but the fair valuation.

They were not opposed to the 8 per cent, but felt that the provision of the uniform act for a fair valuation rather than the assessed valuation should apply. They were also opposed to burdening the Supreme Court of the District of Columbia with the additional labor of trying de novo all cases that might go through on appeal from the commission. They recommended that appeals to the court might be made but that it should be left to the discretion of the court whether to call for additional oral testimony, documentary evidence, or a trial de novo. They also were opposed to the provision that indicated that if there was evidence tending to show that there was no intention to violate the law the penalty should not apply because that would have a tendency to nullify the law itself. They also called attention to the fact that the act to control fraudulent advertising in the District of Columbia was repealed by this bill. If it was intended to be repealed some provision should be made in this bill to protect it. Under those circumstances Mr. Brinkman

evidently must have misunderstood Mr. Adkins because that is the situation that exists and the report was made by Mr. Adkins as chairman of the subcommittee considering this particular bill.

Now, with reference to the mortgage bill, I am considerably surprised that this bill has passed the Senate in the form that it has for the reason that at the meeting of representatives of various associations including the Washington Board of Trade, called at the instance, I think, of Mr. Brinkman, representatives from the various organizations in the District were selected on his statement to this committee that if we would endeavor to get together and formulate something in the shape of a bill that we thought would appeal to the residents of the District of Columbia and give it to him, that then we would have a round-table conference and endeavor to iron out any differences and put in condition a bill that would satisfy everybody.

I was appointed on that committee along with representatives of the bankers, investment bankers, and the real-estate board and the building associations and several others. We had a number of conferences and we produced and sent to Mr. Brinkman the results of those conferences. If there was ever any round-table conference or any meeting of Mr. Brinkman with that committee, I never got any notice of it and never heard of it although I did attend a meeting of the committee, that is, I was in communication with them over the telephone, when I could not attend.

There are several features of the real estate bill that are going to produce complications that will clog the courts with litigation. There are other features that are going to cause the borrowers as well as the lenders untold trouble. Our committee was unanimously opposed to the idea of restoring the antequated practice of equity in redemption. We felt that whatever time should be given to the defaulting mortgagor should be in advance of the sale.

Mr. LOOFBOUROw. You were the chairman of the legislative committee of the board of trade?

Mr. BURKART. Chairman of the law committee of the board of trade. We felt that the mortgagor should not be provided with facilities by reason of technical questions before the court as to the regularity of the sale. Judicial sales under the law require only 10 days' notice, and my recollection is that our committee recommended 25 days, feeling that was sufficient to enable any mortgagor to make preparations for refinancing or to pay his mortgage. The whole system of this mortgage bill is complicated. It is not easy to performance to foreclose a mortgage at all. One of the bad features of it is that it provides that sales shall be made by the marshal of the District of Columbia.

The marshal is not an experienced auctioneer and those of us who have had experience with these sales know that it requires an experienced auctioneer to get the best results out of sales. While I have no advance information I think the marshal here would say that he would rather have those sales conducted by the auctioneer than by himself because he knows nothing about it. Another of the very serious objections to this bill is something that was apparently added almost as an afterthought and at the last minute, and that is the requirement of the surrender of notes or

exhibition of notes to the recorder of deeds, and the marking of those notes canceled before any release of property can be effected. That will be a serious handicap to refinancing, and just as an illustration of that let me cite one or two instances that came under my personal observation where it was impossible to procure the notes for surrender. One case was that of a college professor here who went abroad and stayed a while, studying and teaching, and to aid his expenses in studying, carried with him quite a few real-estate notes that he had invested in, and clients of mine in the real-estate business sent to me insisting on them and it became necessary to secure some of these notes to procure a release so that one particular transaction had to be refinanced. It happened at that time he had to leave Germany where he was both studying and teaching. His notes were in a safety deposit box in the city of Munich and it was impossible for him to get them. He had gone to England when the war was on and we had considerable difficulty in securing a release of the existing mortgage so that the new mortgage could be put on, and the transaction refinanced, and it was only because the real-estate agent happened to be a director of the title company examining the title and had been the agent for a number of years for this particular gentleman, though living abroad, that a bond from him was accepted by the title company and the transaction closed. If it had been some stranger to the title company the refinancing could not have been perfected.

Another instance, I had only recently, a case where there were some 38 or 39 notes in transactions, that had been deposited in the bank for collection and about half of them, I think 19, had been paid and surrendered to the mortgagor. The other half were paid at one time and the other half were brought to my client who was the trustee, with the request that he execute a release. The matter was referred to me and, of course, I could not let him execute release on only half the notes. It developed that the mortgagors could not find their notes, did not know whether they were destroyed, lost, or what had been done with them, and it was necessary then for the trustee to be protected by bonds, which was an expense to the mortgagor, in order to get release.

Still a third instance that comes to mind in the recent past is where another gentleman and I were trustees in a deed of trust made some 18 or 20 years ago-a deed of trust given for a merchandise debt, and the party who gave them not realizing the necessity of retaining his notes, did not retain them and then died and his heirs attempted to sell the property, the trust outstanding, and it was only because of the personal knowledge of the matter, all of the parties in the partnership in the matter of the merchandise having died, and I had represented them for a quarter of a century and had knowledge of the history of the transaction and knew that these notes had not been paid, that the matter did not come back to the company after default. In order to enable the heirs to realize on the sale of that property I did release it after requirement of a bond, which was an expense to them.

Mr. LOOFBOUROW. Is there any elastic provision in this bill at all with respect to cancellation of a note? Or must the note be delivered?

Mr. BURKART. The note must be delivered and indorsed by the recorder of deeds and notation made on the record before release can be effective, as I read the bill.

Mr. LOOFBOUROw. There is no elastic provision which can be used in there?

Mr. BURKART. Except at a considerable expense. The loss of the note can be established in the equity court.

Mr. PALMISANO. Would that apply also after the maturity of the note?

Mr. BURKART. Before the release can be effected that note must be presented to the recorder of deeds, and in addition to that you are putting on the recorder of deeds (who is not a judicial officer) and a lot of incompetent clerks of his, a question to determine, in which the duty, if it rests anywhere, should rest in the court. If there is any necessity for preliminary proceedings the logical way, it would seem to me, would be to require it to be filed in court with a nisi prisi order and publication and then sale final, but just as this bill endeavors to put on the marshal of the District of Columbia, or to convert the marshal of the District into an auctioneer, which he is not and can not be, you are endeavoring to make a court of the recorder of deeds, to pass on legal questions. If there is to be any preliminary report it should be made by somebody who knows what he is doing, and that is a judge of the court, and the notes, whether they are in existence or not, if the judge can be satisfied that the notes have been paid, and orders a release, if the release is ordered by the court that should be sufficient.

STATEMENT OF 0. H. BRINKMAN

Mr. BRINKMAN. I just wanted to say for the information of the committee that Mr. Burkart does not understand some of the provisions of the law or the statements I made; but I will not interrupt at length now but will explain later when I have time.

Mr. BURKART. Is there anything in regard to the requirement for recording of these notes that I do not understand?

Mr. BRINKMAN. Yes; I do not think you understand that provision. The mortgage or deed of trust can be released any time. If there are 200 notes outstanding you may still release the mortgage.

Mr. BURKART. But the release is not effective.

Mr. BRINKMAN. It is not effective as to notes outstanding. It should not be.

Mr. BURKART. That is exactly my point in the matter. As long as there are notes outstanding, anybody seeking to refinance knows that he is liable to have to pay over again and will not be able to effect refinancing until he knows personally of that.

Mr. HULL. Take the case of the Wardman property where they specified deed of trust and left notes outstanding. That is what we are trying to get at, but he says if we can not do that what is the use of anyhing?

Mr. BURKART. That you can do. It is a nisi prisi proceeding in court.

Mr. HULL. Your attorneys and bankers have had a chance before the Senate committee to suggest a plan. You are here in the last