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They pleaded that they were entirely ruined; that they had no funds with which to pay these losses, and that they would be bankrupt if they attempted to pay any considerable percentage of the losses. Finally, they began to make compromises running from 60 to 75 per cent of the total amount of the policy.
The insured persons, believing the statements as to the financial con, dition of these companies to be true, accepted the compromises. I am under the impression—but it is only an impression—that some of the insured began suits against some of the companies in Germany and obtained judgments. But those cases were very few in number, because the average man at that time was exceedingly anxious to get as inuch as he could because his business had been destroyed and he was trying to get back into his tradę.
Subsequently, it turned out that these companies had made false statements as to their financial condition; they would have been able to meet their losses in full, had they had the desire to do so.
The amount, probably, that the Aachen & Munich Co. left unpaid was $400,000, the Hamburg-Bremen, $500,000, and the Prussian National, $200,000. These companies carried on their insurance business in the Eastern States; of course, their credit as insurance companies in San Francisco was practically gone after their action. And so indignant were the people of the Pacific coast at the time that I inserted in the Congressional Record a complete list of the insurance companies that were doing business in San Francisco prior to the fire and the earthquake, and a showing as to what each company had done toward meeting its obligations. The sentiment against the German companies was so strong that they, as I say, withdrew from the State. They have been carrying on business, however, in this section of the country; and we were told that they have several millions of dollars tied up in the hands of the Alien Property Custodian.
The crux of the proposed legislation is found on page 3 of the bill, beginning in line 15, with the proviso reading as follows:
Prorided, howerer, That no statute of limitations shall be pleaded or act as a defense in any suit brought to establish or recover any such debt incurred or due after January 1, anno Domini 1906, but judgments based on claims or debts which existed prior to April 1, anno Domini 1911, shall be paid only out of the net assets of the enemy or ally of an enemy remaining in the custody of the Alien Property Custodian or Treasurer of the United States after the payment of duly established debts due from such enemy or ally of an enemy and incurred or due after April 1, anno Domini 1911.
In other words, this proviso would abolish the statute of limitations, so far as the claims against those German companies are concerned, and would enable the insured persons to present their cases to the courts for adjudication.
Mr. Jones. Would that include the ones that made settlement on a compromise basis?
Mr. KAĦN. Yes, sir; if the insured can establish that they were deceived as to the assets of the company.
Mr. JONES. Well, this proviso only goes to the question of waiving the statute of limitations.
Mr. Kahn. That is all; and it only goes to-
Mr. JONES (interposing). The burden would still be on the plaintiff to show the fraud, in order to get a judgment.
Mr. Kaux. Yes. And then it does not deprive those persons who have valid claims from getting their money first; in other words, none of the funds can be taken to pay those claims arising out of the San Francisco fire until the claims that are valid at this time shall have been paid.
Mr. Jones. Then, the way I understand it is this: As to those people who have obtained judgment, their judgment shall be a lien subsequent on the residue of the property?
Mr. Kahn. Well, I am afraid that very few people out there have obtained judgments; they did not sue the company.
Mr. Jones. Most of these claims are unliquidated ?
The CHAIRMAN. What kind of a receipt did the insured give to the company when he accepted 60 or 75 per cent of the claim?
Mr. Kain. He simply gave a receipt for the amount he received.
Mr. Kaun. Well, I do not know whether he did or not; he probably did sign a release; but even so, if it could be shown that he accepted a compromise, by reason of the false statements made by the insurance company, he could go into a court of equity
The CHAIRMAN (interposing). Well, fraud, of course, would vitiate everything
Mr. KAHN. Propably so. He could go into a court of equity at any time within the period he was permitted to do so, and probably recover his full amount.
Mr. MONTAGUE. As I understand you, your bill simply goes to the point that you want to remove the statute of limitations in the State of California, or in any other State in which they wish to bring that action to recover ?
Mr. KAHN. Yes.
Mr. SWEET. But that simply applies to the property that is in the hands of the Alien Property Custodian?
Mr. Kaun. Yes; and only to that part of that property which is not used for paying claims upon which the statute of limitations has not expired.
Mr. Sims. Mr. Kahn, has Congress the power to suspend the bar of the statute of limitations within a State ?
Mr. KAHN. Yes; I will cite a case to that effect
Mr. Sims (interposing). I mean has it power to suspend the statute of limitations, say, of the State of California ?
Mr. KAHx. Yes. Of course, these were foreign corporations; you would have to sue them in the United States courts; even in California the United States court would have jurisdiction.
Mr. Sims. Exclusive jurisdiction!
Mr. MONTAGUE. Was the statute of limitations interposed before this property went into the hands of the Alien Property Custodian?
Mr. KAHN. Yes.
Mr. MONTAGUE. The statute of limitations was then in effect as to these claims?
Mr. Kaun. Yes; they could not have brought suit.
Mr. MONTAGUE. They could not have brought suit in California for that reason?
Mr. Kaux. That is correct.
Mr. MONTAGUE. You have a citation of a case showing that the Federal Government has a right to remove that bar of the statute of limitations?
Mr. Kaun. Yes. Congress has passed legislation upon that subject. The case in point to which I refer is Campbell v. Holt, 115 U. S., page 620.
Mr. Sims. What is the gist of that decision?
Mr. Kahn. I just got it this morning and have not been able to examine it. carefully. I want to say that the attorney for these claimants in California is a man who is considered a very able lawyer at the bar of California, and he sent me a telegram which pointed to the particular case.
Mr. Jones. What have those people done? Have they corralled all of those claims and put them in the name of an attorney in fact to sue in behalf of them all, or are they individual claims?
Mr. Kaun. No; they are individual claims. I have here [indicating] letters from individuals telling the circumstances under which they made settlements with the companies and asking for this relief.
Mr. Jones. I understand that; but I thought that possibly those people on whom a fraud was perpetrated, and who would like to get a judgment on their claims, might have got together and formed themselves into an organization for the purpose of prosecuting those suits, and assigned all of the claims to one person so that he could proceed and bring suit.
Mr. Kaun. I do not think that such an organization has been formed by them; probably it would be a desirable thing to do, but so far as I know there is no such organization. And yet I have had letters from individuals who suffered by the act of the German insurance companies; they have written me urging that this be done, and complaining that they were taken advantage of by those companies, and that they ought to be afforded some relief. That is the gist of the matter.
Mr. SANDERS of Indiana. Mr. Kahn, these losses all occurred during the great earthquake and fire in San Francisco?
Mr. KAHN. Yes.
Mr. SANDERS of Indiana. I suppose there were settlements and compromises made by all the insurance companies?
Mr. KAHN. Yes.
Mr. SANDERS of Indiana. And I suppose those adjustment were made through agents who did the best they could for the various insurance companies?
Mr. KAHN. Yes. As I stated at the beginning, almost every American company, except a few that went bankrupt, paid 100 cents on the dollar. The English companies did the same; but the German com
" the Mr. Jones. The American companies liquidated if they could not pay 100 cents on the dollar?
Mr. Kaun. Exactly. And they made a positive showing that they were absolutely unable to pay the full amount. But the German companies made the claim that they were unable to pay the full amount, and subsequently it was found that they had the money to pay every dollar if they had been inclined to do so.
Mr. STINESS. What is the amount in the hands of the Alien Property Custodian? I beg your pardon, Mr. Sanders; I thought you had finished.
Mr. SANDERS of Indiana. That is all right; I had not quite finished.
Mr. Kaun. I can answer that question quite easily. It is something over $2,000,000, and the amount involved in these claims is about $1,000,000.
Mr. SANDERS of Indiana. Now, it is proposed, as I understand it, to deal with the funds of these German companies in the hands of the Alien Property Custodian, and I suppose that is upon the theory that the United States Government has exclusive jurisdiction with reference to those funds, and that we can legislate with reference to those funds almost to
extent. Mr. Kahn. I believe the act which created the Alien Property Custodian's office provided-in section 12, I think it is—that Congress has jurisdiction over the matter, and legislate further upon the control and disposition of the funds.
Mr. SANDERS of Indiana. Of course, the funds held by the Alien Property Custodian is held in trust for those people, and while it is an enemy corporation, it may be that there are stockholders who are not enemies; that is, they may have stockholders in those foreign corporations who are citizens of this country. Do you know anything about the facts as to that?
Mr. Kaun. Xo; I simply assume that the stock is held almost entirely by citizens of Germany.
Mr. Jones. Well, I know citizens of the United States that have stock in the Hamburg Insurance Co.
Mr. KAHN. In the Hamburg-Bremen Insurance Co.?
Mr. Jones. Yes; in the Hamburg-Bremen Insurance Co. I just know one or two of them.
Mr. Kahn. Well, I imagine that if there are some, the number would be very few in this country; the bulk of the stock is held by German citizens.
Mr. SANDERS of Indiana. Of course, that, however, is a very important trust, because the enemy countries will have money of our citizens in trust; and the reciprocal relations between the two coun. tries determine the rights of the citizens of the several countries; so that, of course, we should deal with that trust fund just as carefully and judiciously as if it were the fund of our own citizens. Do you think it is wise legislation after a period of 10 years has elapsed, after adjustments have been made and the statute of limitations has barred further action, unless that statute is changed by extraordinary emer. gency legislation-do you think it is a wise legislative policy for us to open up these claims and permit the claimants to go back 10 yearswell, it is a great deal more than 10 years now—but the reason I use the period of 10 years,
Mr. Kahn (interposing). It is 14 years ago.
Mr. SANDERS of Indiana (continuing). The reason I am using the period of 10 years is this: That since this right of action accrued, in 1906, 10 years elapsed before we went into the war. Now, all of that period of 10 years having elapsed, do you think it would be a wise legislative policy now to permit the claimants to go back, after 14 years had elapsed, and establish, for instance, that there was fraud in
the settlements? Of course, ordinarily, when the action is predicated originally upon fraud, the statute of limitations, in most jurisdictions, is two or three years, because of the fact that fraud is such an intangible thing to deal with that it is thought best not to have too long a statute. Do you believe it would be a wise legislative policy to go back and do that?
Mr. Kaun. Well, I think this is an exceptional matter; the war coming on impounded in the hands of one individual, an officer of the United States, the funds of those alien companies
Mr. MONTAGUE (interposing). Well, the statute of limitations had already interposed before this property was impounded in the hands of that individual; that is true, is it not?
Mr. KAHN. Yes.
Mr. SANDERS of Indiana. And the people who bought the stock of that corporation would have the right to assume, under ordinary circumstances, that that fund would be free from these claims?
Mr. Kaun. Well, that is true, but
Mr. Smith (interposing). Excuse me for interrupting, but along the same line let me ask this: When did these people that claim that they made those compromises on account of the fraudulent representations discover that such fraudulent representations had been made? How long was it after that was done?
Mr. Kahn. It was some time after. It was done through the act of the agent of one of these companies in California, who told the people who had been insured with the company that he represented the true facts.
Mr. Sims. Well, if they discovered that fraud had been practiced and desired to seek a remedy based upon the fact that the fraud had been practiced, they should have commenced as soon as they discovered it.
Mr. Kahn. They could not; the statute of limitations had interposed.
Mr. Sims. Had the statute of limitations already barred them before that?
Mr. KAHN. Yes; when they found this out it had.
Mr. Sims. They did not at that time come to Congress and ask for the legislation that they are now asking for?
Mr. KAHN. No. Of course at that time they probably would have had very little chance to get payment; they would have had to pursue the funds of these companies all over the country.
Mr. MONTAGUE. The question asked by Judge Sims brings this point up in a very pertinent way: You said they did not then come to Congress and ask for legislation similar to this. Mr. Kahn very properly gives the reason why they did not, because the funds could not be reached.
But that brings up the right of Congress to act in the matter. What right has the Congress to extend the statute of limitations of any State or extend it or contract it? Now, here is the decision to which you have referred [indicating]. This relates, as I read it, to the right of a State to change its own statute of limitations. I would like to get a precedent showing that the United States can