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."

Having read this section, Mr. B. said it was explicit, and precluded argument. The voluntary action of the debtor, which it authorized, was limited to the mere filing of the declaration of insolvency. It went no further; and it was confined to traders--to the trading classes--who, alone, were subject to the laws of bankruptcy.

Mr. B. said that the English had, as we all know, an insolvent system, as well as a bankrupt system. They had an insolvent debtors' court, as well as a bankrupt court; and both these were kept separate, although there were no States in England to be trodden under foot by treading down the insolvent laws. Not so with us. Our insolvent laws, though belonging to States called sovereign, are all trampled under foot! There would be a time to go into this. At present, Mr. B. would only say that, in England, bankruptcy and insolvency were still kept distinct; and no insolvent trader was allowed to proceed as a bankrupt. On the contrary, an insolvent, applying in the insolvent debtors' court for the release of his person, could not proceed one step beyond filing his declaration. At that point the creditors took up the declaration, if they pleased, transferred the case to the bankrupt court, and prosecuted the case in that court. This is done by virtue of the 13th section of the insolvent debtors' act of 7th George IV. (1827). Mr. B. read the section, as follows:

"_Insolvent debtors' act of 7th year of George IV._ (1827).

"SEC. 13. _And be it further enacted_, That the filing of the
petition of every _person_ in actual custody, who shall be
subject to the laws concerning bankrupts, and who shall apply
by petition to the said court for his or her discharge from
custody, according to this act, shall be accounted and adjudged
_an act of bankruptcy from the time of filing such petition_;
and that any _commission_ issuing against such person, and
under which he or she shall be declared bankrupt before the
time appointed by the said court, and advertised in the _London
Gazette_, for hearing the matters of such petition, or at
any time within two calendar months from the time of filing
such petition, shall have effect to avoid any conveyance and
assignment of the estate and effects of such person, which
shall have been made in pursuance of the provisions of this
act: _Provided, always_, That the filing of such petition shall
not be deemed an act of bankruptcy, _unless_ such person be so
declared bankrupt before the time so advertised as aforesaid,
or within such two calendar months as aforesaid; but that
every such conveyance and assignment shall be good and valid,
notwithstanding any commission of bankruptcy under which such
person shall be declared bankrupt after the time so advertised
as aforesaid, and after the expiration of such two calendar
months as aforesaid."

This (said Mr. B.) accords with the section of the year before in the bankrupt act. The two sections are accordant, and identical in their provisions. They keep up the great distinction between insolvency and bankruptcy, which some of our judges have undertaken to abrogate; they keep up, also, the great distinction between the proper subjects of bankruptcy--to wit: traders, and those who are not traders; and they keep up the distinction between the release of the person (which is the object of insolvent laws) and the extinction of the debt with the consent of creditors, which is the object of bankrupt systems. By this section, if the "_person_" in custody who files a declaration of insolvency shall be a trader, subject to the laws of bankruptcy, it only operates as an act of bankruptcy--upon which the creditors may proceed, or not, as they please. If they proceed, it is done by suing out a commission of bankruptcy; which carries the case to the bankrupt court. If the creditors do not proceed, the petition of the insolvent trader only releases his person. Being subject to bankruptcy, his creditors may call him into the bankrupt court, if they please; if they do not, he cannot take it there, nor claim the benefit of bankruptcy in the insolvent court: he can only get his person released. This is clear from the section; and our bill of 1841 committed something worse than a folly in not copying this section. That bill creates two sorts of bankruptcy--voluntary and involuntary--and, by a singular folly, makes them convertible! so that all may be volunteers, if they please. It makes merchants, traders, bankers, and some others of the _trading_ classes, subject to involuntary bankruptcy: then it gives all _persons_ whatever the right to proceed voluntarily. Thus the involuntary subjects of bankruptcy may become volunteers; and the distinction becomes ridiculous and null. Our bill, which is compiled from the English Insolvent Debtors' Act, and is itself nothing but an insolvent law perverted to the abolition of debts at the will of the debtor, should have copied the 13th section of the English insolvent law: for want of copying this, it annihilated involuntary bankruptcy--made all persons, traders or not, volunteers who chose to be so--released all debts, at the will of the debtor, without the consent of a single creditor; and committed the most daring legislative outrage upon the rights of property, which the world ever beheld!