The bill hereby reported represents the result of those conferences and the subsequent consideration of the bill by the committee and the Senate. A statement of its content matter, as well as an account of events leading up to the introduction of the bill, is contained in the statement of the corporation counsel of the District of Columbia, which is appended hereto, with the Commissioners' favorable report, as a part of this report. The letters appended hereto refer to the bill (S. 4444) of the Seventysecond Congress, first session. The bill referred to was amended and passed the Senate on June 8, 1932. The bill under consideration (S. 866) is identical to the bill which passed the Senate. The committee knows of no opposition to the bill. Hon. ARTHUR CAPPER, COMMISSIONERS OF THE DISTRICT OF COLUMBIA, Chairman Committee on the District of Columbia, United States Senate, Washington, D. C. SIR: The Commissioners of the District of Columbia have the honor to submit the following on Senate bill 4444, Seventy-second Congress, first session, entitled "A bill to provide for recording of deeds of trust and mortgages secured on real estate in the District of Columbia, and for the releasing thereof, and for other purposes", which you referred to them for report as to the merits of the bill and the propriety of its passage. There is enclosed herewith a report made to the Commissioners by the corporation counsel, under date of May 12, 1932, which gives a brief résumé of the various provisions of the bill and suggests certain amendments. The Commissioners concur in the report and recommendations of the corporation counsel. Very truly yours, L. H. REICHElderfer, President Board of Commissioners of the District of Columbia. MAY 12, 1932. To the COMMISSIONERS: In re S. 4444, entitled "A bill to provide for recording of deeds of trust and mortgages secured on real estate in the District of Columbia, and for the releasing thereof, and for other purposes" (C. C. O. File No. 16459/3). REPORT In the past, investors in bonds and notes secured by deeds of trust upon properties in the District of Columbia have suffered severe losses because of (1) the issuance of duplicate sets of notes or bonds purporting to be secured by the same deed of trust, (2) the wrongful release of properties from the operation of deeds of trust securing notes or bonds, and (3) the abuse of the provision frequently inserted in deeds of trust securing large issues of bonds that the trustees therein are authorized to release the properties from the effect of the deed of trust upon the payment of the amounts of the indebtedness to certain named persons or corporations, such funds in violation of the terms of the trust not being applied by the persons or corporations receiving the same to the satisfaction of the obligations secured. At a hearing before the committee of the United States Senate on the District of Columbia, Mr. John A. Petty, then executive secretary of the Washington Real Estate Board, testified with respect to the subject of the release of deeds of trust and expressed certain views as to the manner in which the evils above referred to might be corrected. He was thereupon requested by Senator Blaine to prepare a bill, with the cooperation of this office, embodying his, Mr. Petty's suggestions. As the result of this request Mr. Petty spent a number of weeks in studying and analyzing the subject with the legislative committee of the Washington Real Estate Board, consisting of Mr. A. W. Lawson, vice president of the Washington Loan & Trust Co.; Mr. H. L. Rust; Mr. William J. Flather, Jr., of Glover & Flather; Mr. Percy H. Russell; and Mr. William I. Beale, vice president of the American Security & Trust Co. A tentative draft of a proposed bill was prepared and submitted to this office. Suggestions were made which were incorporated therein. The proposed bill as thus amended was again considered by the legislative committee of the real estate board at a meeting at which were also present Mr. James J. Becker, president of the Real Estate & Columbia Title Insurance Co.; Mr. J. H. Baden, of the Commercial National Bank; Mr. A. W. Hoover, of the New York Title Co.; Hon. Sidney F. Taliaferro, former Commissioner of the District and now vice president and trust officer of the Riggs National Bank; Mr. George E. Fleming, of the Union Trust Co.; Mr. Frank Stetson, of the National Savings & Trust Co.; Mr. C. Clinton James, of the National Council of Building and Loan Associations; and Hon. A. A. Hoehling, former justice of the Supreme Court of the District of Columbia and now vice president and trust officer of the National Metropolitan Bank. At this meeting further changes were suggested in the bill which were approved by this office. The bill in its final form was submitted to Senator Blaine, who introduced it in the Senate. The bill, as introduced, meets with the approval of all the persons named above, including this office. However, a few minor amendments are suggested herein. A brief résumé of the various provisions of the bill follows: Section 2 prohibits the recorder of deeds from accepting for record any deed of trust or release thereof except in accordance with the provisions of this act. Section 3 provides that no deed of trust shall be recorded unless the evidence of the indebtedness secured thereby shall be identified by the recorder as the note or bond secured by such deed of trust. The purpose of this section is to prevent the issuance of more than one note or series of notes purporting to be secured by the same deed of trust, thus furnishing a protection to the public and also enabling the recorder to recognize a note as the one secured when such note is presented to him marked "paid" and canceled for the purpose of securing the recordation of the release of a deed of trust as thereafter provided in the bill. Fees to the recorder are provided for each identification. Section 4, paragraph (a), prohibits, except as otherwise provided in the bill, the recorder accepting for record a release of any deed of trust unless the evidence of indebtedness secured thereby is presented to him marked "paid" and canceled: Provided however, That if such evidence of indebtedness is unavailable for presentation, the recorder may accept such release if a bond is given for the payment of the amount due or a sum of money sufficient to assure such payment is deposited in the registry of the court. Paragraph (b) of the same section permits the recorder to accept partial releases of deeds of trust where evidence is furnished him that the amount required by the terms of the deed of trust authorizing such release has been paid and the payment has been endorsed upon the evidence of indebtedness, but where the note is unavailable for such endorsement such partial release may be accepted upon the giving of a bond or the making of a deposit in the registry of the court as provided in the preceding paragraph. Paragraph (c) of the same section directs the clerk of the court to accept such a deposit and paragraph (d) authorizes the court to order the money paid to the person entitled thereto without poundage or commission. Paragraph (e) of the same section prescribes fees to be charged by the recorder for examining the paid and canceled notes or evidences of payment. Paragraph (f) of the same section authorizes the Supreme Court of the District to order the release of a deed of trust in whole or in part where the owner and holder of the evidence of indebtedness consents thereto in cases where such release is not in accordance with the terms of the trust. Paragraph (g) of the same section also authorizes the court to order a release of a deed of trust in whole or in part where the owner of the real estate covered thereby has become entitled under the terms of the said deed of trust to the release by reason of doing some act or perform ng some condition other than the payment of money. Section 5 exempts from the provisions of the act deeds of trust executed by any corporation operating under the supervision, control, or regulation of a public utilities commission. Section 6 provides that the act, except as to section 7 thereof, shall not apply to any deed of trust or release in which a trustee named therein is a banking institution doing business under the supervision of the Comptroller of the Currency, provided that such banking institution has signified its willingness to act as such trustee by its signature and seal to the deed of trust before the same is 8. Repts., 74-1, vol. 1 recorded. It is believed that where such a banking institution assumes the duties of trustee, the public is amply protected. The following amendment to this section has been suggested which meets with the approval of the legislative committee of the Washington Real Estate Board and of this office. Insert at the end of section 6, line 25, page 7, a new paragraph to read as follows: "(c) In the event such banking institution is named in a deed of trust as sole trustee or as cotrustee with an individual trustee, the recorder, upon request, shall identify the note secured by said deed of trust in the manner provided and for the fees prescribed in section 3 of this act." Section 7 provides that no clause or provision contained in any deed of trust for the payment or redemption in part or in whole of the indebtedness secured thereby, by the deposit of funds for that purpose, shall be valid unless the depository so named shall be a banking institution doing business under the supervision of the Comptroller of the Currency and shall have signified its willingness to act as such depository by its signature and seal to the deed of trust before the same is recorded. The object of this section is to prevent the abuse of the clause to which reference has heretofore been made permitting the release of a trust upon payment of a sum designated to a person or corporation named therein. This provision, however, is quite essential where a trust secures a large issue of bonds, which at the time they mature, or be called for payment, may be held by persons residing in various parts of this country and, possibly, in foreign lands. The requirement that the depository should be a banking institution is believed to be a sufficient safeguard against the dissipation of the fund and yet, at the same time, it will permit the trust to be released when the money is paid in order that the property may be refinanced. However, in order to assure the authority of the trustee to release when the money has been deposited in accordance with this section the following sentence should be added to the end of section 7 at line 20, page 8: "When such banking institution shall certify to the recorder that it holds on deposit the sum required by the deed of trust to be paid for the release in whole or in part of said deed of trust, the recorder shall accept for record and record such release." This amendment likewise meets the approval of the legislative committee of the real-estate board. Section 8 authorizes the recorder to employ such additional personnel as may be necessary to carry out the duties imposed upon him by this act, the salaries of such personnel to be fixed in accordance with the Classification Act of 1923, as amended. It is believed that the fees for the services provided in the act will be more than sufficient to pay the salaries of the additional personnel. However, because of the provisions of this section this bill should be referred to the Bureau of the Budget to ascertain whether it is in conformity with the financial policy of the President. Section 9 provides that the act shall become effective 90 days after its passage, and that the act shall not apply either to deeds of trust recorded prior to the effective date of the act, or to any subsequent release thereof. It is manifest that this act cannot be made retroactive for constitutional reasons, and also for the further reason that the recorder, not having identified the notes secured by a deed of trust recorded prior to the effective date of the act, would not be in a position to know with any degree of certainty that the notes presented to him marked "paid" and canceled and accompanying a release to be recorded were the notes secured by the deed of trust sought to be released. Section 10 is the usual clause to the effect that if any part of the act is held to be unconstitutional or invalid the remainder of the act shall not be affected by such decision. In my opinion this is one of the most important and beneficial pieces of legislation for the District of Columbia that has been introduced in Congress in recent years. I believe that if it is enacted into law it will safeguard to a marked degree investors in evidences of indebtedness secured by deeds of trust, if not cure the evils to which reference has been made. RECOMMENDATION It is recommended that the Commissioners urge the early passage of this legislation with the amendments above set forth. WILLIAM W. BRIDE, Corporation Counsel, District of Columbia. Appended hereto and made a part of this report is a letter from the president of the Board of Commissioners recommending the passage of this legislation. COMMISSIONERS OF THE DISTRICT OF COLUMBIA, Hon. WILLIAM H. KING, United States Senate, Washington, D. C. EXECUTIVE OFFICE, Washington, December 31, 1934. SIR: With reference to your suggestion that a bill relative to recording deeds of trust and mortgages in the District of Columbia, similar to S. 866 in the Seventy-third Congress, first session, be introduced at the forthcoming session, we beg to report that this bill (S. 866) was reported by your committee on February 2, 1934. The bill was an amended draft of a bill, S. 4444, in the Seventysecond Congress, first session, upon which bill your committee reported on May 9, 1932 (Rept. No. 734 in that session), in which was incorporated a long report from the Commissioners respecting the bill. We have no reason at this time to alter the prior recommendations. |