Thirty Years' View (Vol. II of 2)

Mr. Buchanan, Mr. Wright, Mr. Woodbury, were the principal speakers against the bill in the Senate. Mr. Benton addressed himself mainly to Mr. Webster's position, confounding insolvency and bankruptcy, as taken at the previous session; and delivered a speech of some research in opposition to that assumption – of which some extracts are given in the next chapter.

CHAPTER LXVII.

BANKRUPT BILL: MR. BENTON'S SPEECH: EXTRACTS

The great ground which we occupy in relation to the character of this bill (said Mr. B.) is this: that it is not a bankrupt system, but an insolvent law, perverted to a discharge from debts, instead of a discharge from imprisonment. As such, it was denounced from the moment it made its appearance in this chamber, at the last session, and I am now ready to prove it to be such. I have discovered its origin, and hold the evidence in my hand. It is framed upon the English insolvent debtor's act of the 1st of George IV., improved and extended by the act of the 7th of George IV., and by the 1st of Victoria. From these three insolvent acts our famous bankrupt system of 1841 is compiled; and it follows its originals with great fidelity, except in a few particulars, until it arrives at the conclusion, where a vast and terrible alteration is introduced! Instead of discharging the debtor from imprisonment, as the English acts do, our American copy discharges him from his debts! But this is a thing rather to be proved than told; and here is the proof. I have a copy of the British statutes on my table, containing the three acts which I have mentioned, and shall quote from the first one, in the first year of the reign of George IV., and is entitled "An act for the relief of insolvent debtors in England." The preamble recites that it is expedient to make permanent provision for the relief of insolvent debtors in England confined in jail, and who shall be willing to surrender their property to their creditors, and thereby obtain a discharge from imprisonment. For this purpose the act creates a new court, to be called the insolvent debtor's court, which was to sit in London, and send commissioners into the counties. The first sections are taken up with the organization of the court. Then come its powers and duties, its modes of proceeding, and the rights of insolvents in it: and in these enactments, as in a mirror, and with a few exceptions (the effect of design, of accident, or of necessity, from the difference of the two forms of government), we perceive the original of our bankrupt act. I quote partly from the body of the statute, but chiefly from the marginal notes, as being a sufficient index to the contents of the sections. (Here the speaker quoted eighteen separate clauses in which the bill followed the English act, constituting the whole essence of the bill, and its mode of proceeding.)

This is the bill which we call bankrupt – a mere parody and perversion of the English insolvent debtor's act. And now, how came such a bill to be introduced? Sir, it grew out of the contentions of party; was brought forward, as a party measure; and was one of the bitter fruits of the election of 1840. The bill was brought forward in the spring of that year, passed in the Senate, and lost in the House. It was contested in both Houses as a party measure, and was taken up as a party topic in the presidential canvass. The debtor class – those irretrievably in debt, and estimated by the most moderate at a hundred thousand men – entered most zealously into the canvass, and on the side of the party which favored the act. The elections were carried by that party – the Congress as well as the presidential. All power is in the hands of that party; and an extra session of the legislature was impatiently called to realize the benefits of the victory. But the opening of the session did not appear to be auspicious to the wishes of the bankrupts. The President's message recommended no bankrupt bill; and the list of subjects enumerated for the action of Congress, and designated in a paper drawn by Mr. Clay, and placed on our journal for our guidance, was equally silent upon that subject. To all appearance, the bankrupt bill was not to come before us at the extra session. It was evidently a deferred subject. The friends and expectants of the measure took the alarm – flocked to Congress – beset the President and the members – obtained from him a special message recommending a bankrupt law; and prevailed on members to bring in the bill. It was brought into the Senate – the same which had been defeated in 1840 – and it was soon seen that its passage was not to depend upon its own merits; that its fate was indissolubly connected with another bill; and that one must carry the other.

This is an insolvent bill: it is so proved, and so admitted: and to defend it the argument is, that insolvency and bankruptcy are the same – a mere inability or failure to pay debts. This is the corner stone of the argument for the bill, and has been firmly planted as such, by its ablest supporter (Mr. Webster). He says:

"Bankruptcies, in the general use and acceptation of the term, mean no more than failures. A bankruptcy is a fact. It is an occurrence in the life and fortunes of an individual. When a man cannot pay his debts, we say that he has become bankrupt, or has failed. Bankruptcy is not merely the condition of a man who is insolvent, and on whom a bankrupt law is already acting. This would be quite too technical an interpretation. According to this, there never could be bankrupt laws; because every law, if this were the meaning, would suppose the existence of a previous law. Whenever a man's means are insufficient to meet his engagements and pay his debts, the fact of bankruptcy has taken place – a case of bankruptcy has arisen, whether there be a law providing for it or not. A learned judge has said, that a law on the subject of bankruptcies is a law making provision for cases of persons failing to pay their debts. Over the whole subject of these failures, or these bankruptcies, the power of Congress, as it stands on the face of the constitution, is full and complete."

This is an entire mistake. There is no foundation for confounding bankruptcy and insolvency. A debtor may be rich, and yet be a bankrupt. Inability to pay does not even enter as an ingredient into bankruptcy. The whole system is founded on ability and fraud. The bankrupt is defined in Blackstone's commentaries – a work just issued and known to all our statesmen at the time of our Revolution – "to be a trader, who secretes himself, or does certain other acts to defraud his creditors." So far from making insolvency a test of bankruptcy the whole system supposes ability and fraud – ability to pay part or all, and a fraudulent intent to evade payment. And every British act upon the subject directs the surplus to be restored to the debtor if his effects sell for more than pays the debts – a proof that insolvency was no ingredient in the acts.

The eminent advocate of the bill, in confounding insolvency and bankruptcy, has gone to the continent of Europe, and to Scotland, to quote the cessio bonorum of the civil law, and to confound it with bankruptcy. He says: "That bankrupt laws, properly so called, or laws providing for the cessio bonorum, on the continent of Europe and Scotland, were never confined to traders." That is true. This cessio was never confined to traders: it applied to debtors who could not pay. It was the cession, or surrender of his property by the debtor for the purpose of obtaining freedom for his person – leaving the debt in full force – and all future acquisitions bound for it. I deal in authority, and read from Professor Bell's Commentaries upon the Laws of Scotland – an elegant an instructive work, which has made the reading of Scottish law almost as agreeable to the law reader as the writings of Scott have made Scottish history and manners to the general reader. Mr. Bell treats of the cessio and of bankruptcy, and treats of them under distinct heads; and here is what he says of them:

"The law of cessio bonorum had its origin in Rome. It was introduced by Julius Cæsar, as a remedy against the severity of the old Roman laws of imprisonment; and his law – which included only Rome and Italy – was, before the time of Diocletian, extended to the provinces. The first law of the code respecting the cessio bonorum expresses, in a single sentence, the whole doctrine upon the subject: 'Qui bonis cesserint,' says the Emperor Alexander Severus, 'nisi solidum creditor receperit, non sunt liberati. In eo enim tantummodo hoc beneficium eis prodest, ne judicati detrahantur in carcerem.' This institution, having been greatly improved in the civil law, was adopted by those of the European nations who followed that system of jurisprudence. In France, the institution was adopted very nearly as it was received with us. Perhaps, indeed, it was from France that our system received its distinguishing features. The law in that country was, during the seventeenth century, extremely severe – not only against bankrupts (which name they applied to fraudulent debtors alone), but against debtors innocently insolvent. *** The short digest of the law of cessio in Scotland, then, is:

"1. That a debtor who has been a month in prison, for a civil debt, may apply to the court of session – calling all his creditors before that court, by a summons in the king's name; and concluding that he should be freed from prison on surrendering to his creditors all his funds and effects.

"2. That he is entitled to this benefit without any mark of disgrace, if (proving his insolvency) he can satisfy the court, in the face of his creditors, that his insolvency has arisen from innocent misfortune, and is willing to surrender all his property and effects to his creditors.

"3. That, though he may clear himself from any imputation of fraud, still, if he has been extravagant, and guilty of sporting with the money of his creditors, he is, in strict law, not entitled to the cessio, but on the condition of wearing the habit (mark of disgrace); but which is now exchanged for a prolongation of his imprisonment.

"4. That, if his creditors can establish a charge of fraud against him, he is not entitled to the cessio at all; but must lie in prison, at the mercy of his creditors, till the length of his imprisonment may seem to have sufficiently punished his crime; when, on a petition, the court may admit him to the benefit.

"5. That, if he has not given a fair account of his funds, and shall still be liable to the suspicion of concealment, the court will, in the meanwhile, refuse the benefit of the cessio – leaving it to him to apply again, when he is able to present a clearer justification, or willing to make a full discovery."

This is the cessio, and its nature and origin are both given. Its nature is that of an insolvent law, precisely as it exists at this day in the United States and in England. Its origin is Roman, dating from the dictatorship of Julius Cæsar. That great man had seen the evils of the severity of the Roman law against debtors. He had seen the iniquity of the law itself, in the cruel condemnation of the helpless debtor to slavery and death at the will of the creditor; and he had seen its impolicy, in the disturbances to which it subjected the republic – the seditions, commotions, and conspiracies, which, from the time of the secession of the people to the Mons Sacer to the terrible conspiracy of Catiline, were all built upon the calamities of the debtor class, and had for their object an abolition of debts. Cæsar saw this, and determined to free the commonwealth from a deep-seated cause of commotion, while doing a work of individual justice. He freed the person of the debtor upon the surrender of his property; and this equitable principle, becoming ingrafted in the civil law, spread over all the provinces of the Roman world – has descended to our times, and penetrated the new world – and now forms the principle of the insolvent laws of Europe and America. The English made it permanent by their insolvent law of the first of George the Fourth – that act from which our bankrupt system is compiled; and in two thousand years, and among all nations, there has been no departure from the wise and just principles of Cæsar's edict, until our base act of Congress has undertaken to pervert it into an abolition debt law, by substituting a release from the debt for a release from jail!

This is the cessio omnium bonorum of Scotland, to which we are referred as being the same thing with bankruptcy (properly so called), and which is quoted as an example for our act of 1841. And, now, what says Professor Bell of bankruptcy? Does he mention that subject? Does he treat of it under a separate head – as a different thing from the cessio – and as requiring a separate consideration? In fact, he does. He happens to do so; and gives it about 300 pages of his second volume, under the title of "System of the Bankrupt Laws;" which system runs on all-fours with that of the English system, and in the main point – that of discharge from his debts – it is identical with the English; requiring the concurrence of four-fifths of the creditors to the discharge; and that bottomed on the judicial attestation of the bankrupt's integrity. Here it is, at page 441 of the second volume:

"The concurrence of the creditors, without which the bankrupt cannot apply to the court for a discharge, must be not that of a mere majority, but a majority of four-fifths in number and value. **** The creditors are subject to no control in respect to their concurrence. Against their decision there is no appeal, nor are they bound to account for or explain the grounds of it. They are left to proceed upon the whole train of the bankrupt's conduct, as they may have seen occasion to judge of him; and the refusal of their concurrence is an absolute bar until the opposition be overcome. **** The statute requires the concurrence of the trustee, as well as of the creditors. There appears, however, to be this difference between them: that the creditors are entirely uncontrolled in giving or withholding their concurrence; while, on the part of the trustee, it is debitum justiliæ either to the bankrupt or to the creditors to give or withhold his concurrence. He acts not as a creditor, but as a judge. To his jurisdiction the bankrupt is subjected by the choice of his creditors; and, on deciding on the bankrupt's conduct, he is not entitled to proceed on the same undisclosed motives or evidence on which a creditor may act, but on the ground of legal objection alone – as fraud, concealment, nonconformity with the statute. In England, the commissioners are public officers – not the mere creatures of the creditors. They are by statute invested with a judicial discretion, which they exercise under the sanction of an oath. Their refusal is taken as if they swore they could not grant the certificate; and no mandamus lies to force them to sign."

So much for bankruptcy and cessio – two things very different in their nature, though attempted to be confounded; and each of them still more different from our act, for which they are quoted as precedents. But the author of our act says that bankrupt laws in Scotland are not confined to traders, but take in all persons whatsoever; and he might have added – though, perhaps, it did not suit his purpose at the moment – that those laws, in Scotland, were not confined to natural persons, but also included corporations and corporate bodies. Bell expressly says:

"Corporate bodies are, in law, considered as persons, when associated by royal authority or act of Parliament. When a community is thus established by public authority, it has a legal existence as a person, with power to hold funds, to sue and to defend. It is, of consequence, subject to diligence; and although personal execution cannot proceed against this ideal-legal person, and so the requisites of imprisonment, &c., cannot be complied with, there seems to be no reason to doubt that a corporation may now be made bankrupt by the means recently provided for those cases in which imprisonment is incompetent." – vol. 2, p. 167.

The gentleman might have quoted this passage from the Scottish law; and then what would have become of his argument against including corporations in the bankrupt act? But he acts the advocate, and quotes what suits him; and which, even if it were applicable, would answer but a small part of his purpose. The Scottish system differs from the English in its application to persons not traders; but agrees with it in the great essentials of perfect security for creditors, by giving them the initiative in the proceedings, discriminating between innocent and culpable bankruptcy, and making the discharge from debt depend upon their consent, bottomed upon an attestation of integrity from the officer that tries the case. It answers no purpose to the gentleman, then, to carry us to Scotland for the meaning of a term in our constitution. It is to no purpose that he suggests that the framers of the constitution might have been looking to Scotland for an example of a bankrupt system. They were no more looking to it in that case, than they were in speaking of juries, and in guarantying the right of jury trials – a jury of twelve, with unanimity, as in England; and not of fifteen, with a majority of eight to give the verdict, as in Scotland. In all its employment of technical, legal, and political phrases, the constitution used them as used in England – the country from which we received our birth, our language, our manners, and customs, and all our systems of law and politics. We got all from England; and, this being the case, there is no use in following the gentleman to the continent of Europe, after dislodging him from Scotland; but as he has quoted the continent for the effect of the cessio in abolishing debts, and for its identity with bankruptcy, I must be indulged with giving him a few citations from the Code Napoleon, which embodies the principles of the civil law, and exemplifies the systems of Europe on the subject of bankruptcies and insolvencies. Here they are:

Mr. B. here read copiously from the Code Napoleon, on the subjects of bankruptcies and cession of property; the former contained in the commercial division of the code, the latter in the civil. Bankruptcy was divided into two classes – innocent and fraudulent; both confined to traders (commercants); the former were treated with lenity, the latter with criminal severity. The innocent bankrupt was the trader who became unable to pay his debts by the casualties of trade, and who had not lived beyond his means, nor gambled, nor engaged in speculations of pure hazard; who kept fair books, and satisfied his creditors and the judge of his integrity. The fraudulent bankrupt was the trader who had lived prodigally, or gambled, or engaged in speculations of pure hazard, or who had not kept books, or not kept them fairly, or misapplied deposits, or violated trusts, or been guilty of any fraudulent practice. He was punished by imprisonment and hard labor for a term of years, and could not be discharged from his debts by any majority of his creditors whatever. Cession of property – in French, la cession de biens – was precisely the cessio omnium bonorum of the Romans, as established by Julius Cæsar. It applied to all persons, and obtained for them freedom from imprisonment, and from suits, on the surrender of all their present property to their creditors; leaving their future acquisitions liable for the remainder of the debt. It was the insolvent law of the civil law; and thus bankruptcy and insolvency were as distinct on the continent of Europe as in England and Scotland, and governed by the same principles.

Having read these extracts from the civil law, Mr. B. resumed his speech, and went on to say that the gentleman was as unfortunate in his visit to the continent as in his visit to Scotland. In the first place he had no right to go there for exemplification of the terms used in our constitution. The framers of the constitution did not look to other countries for examples. They looked to England alone. In the second place, if we sought them elsewhere, we found precisely the same thing that we found in England: we found bankruptcy and insolvency everywhere distinct and inconvertible. They were, and are, distinct everywhere; here and elsewhere – at home and abroad – in England, Scotland, France, and all over Europe. They have never been confounded anywhere, and cannot be confounded here, without committing a double offence: first, violating our own constitution; secondly, invading the States. And with this, I dismiss the gentleman's first fundamental position, affirming that he has utterly failed in his attempt to confound bankruptcy with insolvency; and, therefore, has utterly failed to gain jurisdiction for Congress over the general debts of the community, by the pretext of the bankrupt power.

I have said that this so-called bankrupt bill of ours is copied from the insolvent law of the first year of George IV., and its amendments, and so it is, all except section 13 of that act, which is omitted, and for the purpose of keeping out the distinction between bankrupts and insolvents. That section makes the distinction. The act permits all debtors to petition for the benefit of the insolvent law, that is to say, discharge from imprisonment on surrendering their property; yet, in every case in which traders, merchants, &c. petition, the proceedings stop until taken up, and proceeded upon by the creditors. The filing the petition by a person subject to the bankrupt law, is simply held to be an act of bankruptcy, on which the creditors may proceed, or not, as on any other act of bankruptcy, precisely as they please. And thus insolvency and bankruptcy are kept distinct; double provisions on the same subject are prevented; and consistency is preserved in the administration of the laws. Not so under our bill. The omission to copy this 13th section has nullified all that relates to involuntary bankruptcy; puts it into the power of those who are subject to that proceeding to avoid it, at their pleasure, by the simple and obvious process of availing themselves of their absolute right to proceed voluntarily. And now a word upon volunteer bankruptcy. It is an invention and a crudity in our bill, growing out of the confounding of bankruptcy and insolvency. There is no such thing in England, or in any bankrupt system in the world; and cannot be, without reversing all the rules of right, and subjecting the creditor to the mercy of his debtor. The English bankrupt act of the 6th George IV., and the insolvent debtors' act of the 1st of the same reign, admit the bankrupt, as an insolvent, to file his declaration of insolvency, and petition for relief; but there it stops. His voluntary action goes no further than the declaration and petition. Upon that, his creditors, if they please, may proceed against him as a bankrupt, taking the declaration as an act of bankruptcy. If they do not choose to proceed, the case stops. The bankrupt cannot bring his creditors into court, and prosecute his claim to bankruptcy, whether they will or not. This is clear from the 6th section of the bankrupt act of George IV., and the 13th section of the insolvent debtors' act of the 1st year of the same reign; and thus our act of 1841 has the honor of inventing volunteer bankruptcy, and thus putting the abolition of debts in the hands of every person! for these volunteers have a right to be discharged from their debts, without the consent of their creditors!

Mr. Benton then read the two sections of the two acts of George IV. to which he had referred, and commented upon them to sustain his positions. And first the 6th section of the act of George IV. (1826) for the amendment of the bankrupt laws:

"Sec. 6. That if any such trader shall file in the office of the Lord Chancellor's secretary of bankrupts, a declaration in writing, signed by such trader, and attested by an attorney or solicitor, that he is insolvent or unable to meet his engagements, the said secretary of bankrupts, or his deputy, shall sign a memorandum that such declaration hath been filed; which memorandum shall be authority for the London Gazette to insert an advertisement of such declaration therein; and every such declaration shall, after such advertisement inserted as aforesaid, be an act of bankruptcy committed by such TRADER at the time when such declaration was filed: but no commission shall issue thereupon, unless it be sued out within two calendar months next after the insertion of such advertisement, and unless such advertisement shall have been inserted in the London Gazette within eight days after such declaration filed. And no docket shall be struck upon such act of bankruptcy before the expiration of four days next after such insertion of such advertisement, in case such commission is to be executed in London; or before the expiration of eight days next after such insertion, in case such commission is to be executed in the country; and the Gazette containing such advertisement shall be evidence to be received of such declaration having been filed."