ABBOTT, EDWARDS & LUEDDE Federal Reserve Bank Building, 418 Pine Street, ST. LOUIS JOHN B. EDWARDS as easily as trade acceptances and cash discounts; but they are willing to argue or promise almost anything to put over their precious trade acceptance plan. Now, would it be fair to eliminate the cash discount system and put the merchant who pays his bills promptly on a par with those who take sixty days or more time? Under the present system the buyer has an opportunity to discover any defects in the merchandise bought and obtain satisfactory adjustment from the seller, but if trade acceptance was given immediately upon receipt of merchandise and defects later discovered, the buyer could not rescind the sale or set-off his damages against the amount owing the seller, but would have to pay his trade acceptance in full to discount company or other holder for value. His only remedy would be to go to the seller's city and there sue him for damages. This situation would undoubtedly be taken advantage of by unscrupulous manufacturers and so much shoddy, defective merchandise would be turned out that the confidence now existing between manufacturer anr retailer would be destroyed. This would result in the buyer demanding indemnities and safe-guards to such an extent that the present plan of sale by sample and personal assurance of manufacturer of the quality of goods would be done away with to the great inconvenience and expense of the reputable manufacturer and retailer. Now let us consider the effect of the general use of trade acceptances on our banking system. Mr. Wm. G. Avery of the Guarantee Trust Company of New York, a strong advocate of trade acceptances, stated in one of his speeches that the use of trade acceptances would relieve the buyer of the necessity of borrowing from his local bank. Mr. Avery might have gone further and stated that the general use of trade acceptances would also make it impossible for buyer's local bank to loan him, as what bank doing business on sound banking principles could afford to loan a depositor who was giving acceptances all over the country in amounts unknown to his local banker? If local banks attempted to make such loans their losses would be such that they would very quickly quit the practice. Neither could local banks loan the seller who was discounting his trade acceptances with trust and discount companies over the country. But, supposing for the sake of argument, trade acceptances were generally adopted and local banks continued to loan both buyer and seller. what would be the result? The retailer would buy goods on long time acceptances and borrow money from the local bank. This would enable him to do double the business his capital would justify and the manufacturer would discount the acceptances and borrow money from his local bank. This would enable him to branch out and do double the business justified by his capital. In fact, both buyer and seller could almost do business without capital. Think of the good times that would result-until the craaks began to cash in-then the discount companies holding acceptances would get the assets and local banks would hold the bag; but the trade acceptance advocates would argue that most manufacturers and retailers are honest. Well, then admit they are for the sake of further argument and wait until one of our periodical dull seasons roll around. The retailer, doing business on the other fellow's capital, has been liberal with his credits and his customers being unable to pay him, he can't meet his acceptances. The seller, having done more business than his capital justified, can't protect his endorsements. The result-bankruptcy of both manufacturer and retailer, with all the bills receivable, socalled trade acceptances, in the hands of discount companies. Who holds the bag? The local banker. Against this situation compare our present system under which there exists a close, confidential relationship between local banks and their depositors, and between buyer and seller, in times of stress the seller with ample capital for the amount of business he is doing gives the buyer extensions. Local banks accommodate both buyer and seller and the Federal Reserve Banks take care of the local banks by rediscounting their paper. Business goes on. The burden of depression is withered with but little loss to anyone, and when a bankruptcy does occur, all the assets are distributed equally among the creditors. The trade acceptance advocates will probably say this particular evil of their system can be avoided by local banks taking the trade acceptances. Now, anyone who has given this subject a moment's consideration knows that this is not the purpose and would not result from the adoption of trade acceptances. Already numbers of large trust companies have been organized for the discounting of trade acceptances and are doing a large business in the piono, automobile and other lines, and under their unique plan of requiring the discounter to pay small brokerage and protect forfeitures, which is done by putting up new paper on which they again collect the brokerage, they are actually receiving as high as 15 to 30 per cent interest instead of 7 or 8 per cent the discounter thinks in the beginning he will pav. and once in the toils of these discount companies, the Wolcott, Wolcott, Lankford & Kear General Practice. Collections. Depositions before S. I. MAUCK, Notary Public ATTORNEYS AND COUNSELLORS SEABOARD NAT'L BANK BLDG. Norfolk, Va. discounter rarely gets out except through the bankrupt court. We need no new system for the local banks to properly accommodate their own local depositors, both buyer and seller. The Federal Reserve System is perfect for this purpose, and tell me who should finance buyer or seller? His own bank who knows him, his habits, his financial and moral worth, or some discount company in New York? Should the seller finance the buyer by taking his long time acceptance, or should his local bank extend him such accommodation as he deserves? a Now, who will be benefited by the general adoption of trade acceptances? First, the bankruptcy lawyer who would necessarily reap harvest the first general business depression over the country. Most of us have some bankruptcy practice, but we are first of all good citizens with the interest of the whole country at heart. Furthermore, many of us have business interests outside of our practice and we must look at this subject from the standpoint of the good citizen having the commercial interest of his country at heart, and not from an indvidual ADVERTISING is the Art of Interesting the Other Fellow in Your Proposition. In most of the great commercial law offices of today the secret of their success lies in the fact that they have Advertised Liberally, Continuously and Well. Note, too, that most of them have always advertised in The American Legal News, the Great Business - Getter for Lawyers FOR TERMS ON SPACE ADDRESS Advertising Manager, American Legal News, Detroit, Michigan. or selfish standpojnt. But the real beneficiary, profiteers who would reap a harvest from the adoption of trade acceptances, are the old crowd down on Wall Street, who, prior to the Federal Reserve Act, controlled the money and credits of the country and created a panic by withholding both when they wanted to buy up a steel corporation or by some other means fleece the lambs as they called us-the general public. Now, I warn, you, Gentlemen, that if this crowd through their paid speakers, propagandists and deluded prominent men with banking aspirations, some of whom head large organizations, succeed in obtaining the general use of trade acceptances, they will again gain control of the credits of the country, defeat the purpose of the Federal Reserve Act and set us back fifty years from a commercial standpoint. WARNING NEEDED For Business Public in Matter of Rates for Collections. By reason of the advanced costs of living and overhead charges, no lawyer or collection agency can conduct a business of handling claims on less than the official rates of the Commercial Law League, which are published on page thirtythree of this issue. Those who attempt rate shaving must make their profit by resort to trickery and shyster methods. The employment of lawyers or agencies on the old terms is a direct encouragement to dishonesty and inefficiency. It is important to the public welfare that this condition be given the widest publicity by lawyers handling commercial litigation and collections. The Commercial Law League, a national organiation of over six thousand members, has appointed a special committee to give wide publicity to this condition of affairs in the collection world. The chairman is the editor of this magazine and would appreciate very much indeed, the co-operation of all commercial lawyers. The committee is preparing a leaflet for distribution to manufacturers, jobbers and business men generally. It wil be so arranged that the lawyers can distribute it, either with or without their names imprinted thereon. The committee will gladly furnish these leaflets in any quantity desired to the lawyer who will agree to distribute the literature. The business card of an attorney can readily be affixed by the use of a rubber stamp, if the attorney desires to take advantage of the opportunity thus offered for legitimate publicity. For further information please address: Frederick R. Austin, Chairman, care of American Legal News, 655 Book Bldg., Detroit. 2000 Big Pages -Two Volumes in One BOUND FOR HARD USAGE THE BOBBS-MERRILL COMPANY Kindly refer to the AMERICAN LEGAL NEWS in relying to this ad. The Lawyer's Work In Relation to the Income Tax By GEORGE E. HOLMES; Washington, D. C. The income tax is to a great extent a matter of accounting and eventually no doubt the major part, though not all, the work of preparing returns will be in the hands of the accountants, as is the case in Great Britain today. Many a lawyer does not regard the preparation of returns as an integral part of his professional work. When he assists a client in such matters it is sometimes done more in the spirit of accommodation than a discharge of an essential legal responsibility. There seems also to be on the part of many general practitioners a certain reluctance to master the intricate problems of income taxation-a new and undeveloped field. On the other hand the accountants saw at once the great opportunities of the income tax, the larger vistas opening up before their eyes and strenuously prepared to meet their new responsibilities. Great credit must be given to the members of the accounting profession for the keenness, the energy and the conscientious manner in which they have met and handled the intricate accounting problems of their clients arising out of the applcation of the income and profits taxes. The new and more important position of the accountant in the business world has been induced by the precision of accounting demanded by the heavy rates of the income and profits taxes in force since 1916. In some cases, perhaps in many cases, the accountant, in his zeal, has over-stepped the bounds of his profession and assumed the responsibilty of answering legal question arising in the preparation of returns or in deciding as to the taxability of certain items of income, the deductibilty of charges or expenditures, or the advisability of adhering to existing forms of carrying on business. Such questions are generally purely legal in their nature and fall within the province of the lawyer. As a matter of fact, the subject of income taxation is now, to use a popular expression a fiftyfifty proposition. It calls for the services of the accountant and the lawyer with about equal insistence. Happily situated is the lawyer who has accounting training and experience, for his service is of double value to the client. But he who has only knowledge and experience of legal principles and their application occupies also an important position with relation to the subject and his lient. The law is still in a very undeveloped state. To determine what the law means is a task peculiarly within the province of the legal profession. Its practical application to the taxpayer's accounts may thereafter be the work of the bookkeeper or accountant. There is often a tendency to follow blindly the rulings of the Treasury Department on obscure or ambiguous provisions of the law. In some quarters the official rulings are regarded as sacrosanct-to be accepted without question. But the conscientious lawyer will form his own conclusion of the meaning of the statute and impart his own opinion-an opinion which should, of course, be reached only after a due consideration of all official Government opinions which may have been uttered on or relating to the question. The legal profession has in fact a duty to perform with regard to the formation of the great body of Treasury rules and regulations. New rulings are sometimes in the nature of ex parte decisions or mere statements of official opinion. If they do not seem sound it should be and is the public duty of every lawyer to express his reasons for dissenting from the conclusions stated in the ruling and to address the Commissioner on the subject. Such expressions are welcomed by the administration officials and are given due regard. A predicament may seem to arise when counsel disagrees with a ruling of the Treasury Department and is called upon to advise his client how to proceed. On the other hand, the law authorizes the Commissioner to make rules and regulations which presumably should be followed to avoid the question of penalty for negligently or fraudulently preparing the return, and on the other hand a return so prepared is to the mind of the attorney clearly incorrect. This situation may be met without danger of penalty and without payment of the disputed amount of tax if the return is prepared in accordance with the regulations and a claim for abatement is attached there to, setting forth the amount of tax calculated according to advice of counsel and demanding abatement of the difference between that amount and the amount shown on the face of the return. The claim for abatement operates to stay the collection of the tax until the question has been passed upon by the Commissioner at Washington. When the question is decided, interest at the rate of 6 per cent per annum is added to any amount of the claim which may be denied, but no penalty is imposed if the tax is paid within ten days after the notice of disallowance of the claim is received by the taxpayer. If the claim is denied the disputed tax may be paid under protest and steps taken to obtain its recovery. Disagreement between the taxpayer and the Treasury Department frequently arises on examination of the taxpayer's books some time, often two or three years, after the filing of his return. Such audits are bein effectively carried onat the present time with respect to the returns for 1917 and prior years. The inspection is made by auditors sent out by the Treasury Department either direct from Washington or from the office of the Detroit-EDWARD A. RICH CHICAGO-Walter E. Moss Attorney and Counsellor at Law 1552 Penobscot Bldg.,Detroit, Mich. Commercial Department fully equipped or aggressive handling of Collections and Bankruptcy Matters THE STATE OF WEST VIRGINIA WARREN B. KITTLE, Judge I have examined the first volumes of the New Edition of Page on Contracts, and believe it to be superior to anything in the way of a text book that has ever been written on the Law of Contracts. It is evident Mr. Page is a ripe scholar, for he has handled his subject in a masterly way, throwing new light on every phase of the law pertinent to his treatise. He has in very fact written a treatise, beginning with the earliest the primitive history of contracts-and out of the material of the ages has constructed an edifice bearing much resemblance to a domed cathedral. It is an epoch-making book and will be studied and cited for many years to come. Yours very truly, W. B. KITTLE. NEW SECOND EDITION PAGE ON CONTRACTS By WM. HERBERT PAGE Of the Law School of the University of Wisconsin THE LAW RELATING TO THE GENERAL PRINCIPLES UNDERLYING ALL KINDS OF CONTRACTS Out of Contracts, express or implied, and out of quasi-contractural rights, arises ninety per cent of the litigation with which the lawyers and courts are concerned. In the great bulk of cases, lawyers and courts are driven to a consideration of the fundamental principles of contract law before the rights of their clients and of the parties litigant can be adjusted. In this new edition special attention has been given to topics which have been presented for adjudication most frequently in recent years, such as mistake, misrepresentation and fraud, together with the remedies of cancellation. and recissions; the effect of option contracts and of orders on approval; the validity of contracts as affected by railway rate legislation, the Interstate Commerce Act, and legislation restricting or prohibiting the sale of intoxicating liquors; government contracts, and the effect of war upon the validity and performance of contracts, contracts by corporations, trusts and monopolies affecting contracts, etc., etc. ANNOTATED FORMS Volume VII will contain forms of contracts of all kinds, with the purpose in view of furnishing outlines to the Bar of the various forms of contracts for use in drafting contracts. These forms are annotated, so that questions of the validity and effect of the different covenants contained therein can readily be solved. DATES OF DELIVERY Volumes I, II and III now ready; Volume IV in March; Volumes V, VI and VII in April, 1920. 7 Large Volumes, Buckram Binding, Price $52.50 The W. H. ANDERSON CO., Law Book Publishers, CINCINNATI |