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Imaginary reprisals are made, which in such cases are necessary to heal the breach, that the British squadron will withdraw, leaving the Commis sioner Lin still possessed of full authority to enforce his Celestial majesty's prohibitory decrees.
Art. II.—A GENERAL BANKRUPT LAW.
"But ships are but boards, sailors but men: there be land rats and water rats, water thieves and land thieves; I mean, pirates; and then, there is the peril of waters, winds, and rocks."—Shakspeark.
The subject of a general bankrupt law is one of very grave importance, and is naturally exciting a lively interest among business men. The meeting of congress has led to a more animated discussion of the general policy of such a law.
The Merchants' Magazine, addressing itself to reading and thinking men of all pursuits, yet peculiarly identified with the feelings and interests of traders, may properly be expected to lend its aid to an enlightened discussion of this difficult but important branch of commercial policy. We say commercial policy, because bankrupt laws, although not always confined exclusively to those who are engaged in trade, are nevertheless most needed by, and are mainly designed for, that class of men.
Bankrupt and insolvent laws, and laws allowing imprisonment for debt, were unknown to the common law. They are artificial regulations, originating in an artificial state of society. They were unknown to the simplicity of primitive institutions and habits. When human wants were few and simple; when men watched the flock, or tilled the soil, or followed the chase for a subsistence, any thing like an extended system of credit, or hazardous enterprise, involving great risks and ruinous losses, was unknown. It was not till mankind emerged from barbarism into civilization, and from natural to artificial wants, and thus passed to the pursuits of commerce, that the necessity for such laws was felt or existed. They are the natural product of commercial pursuits. The reasons are obvious. Commercial pursuits are, generally, more hazardous than any other branch of industry in which labor and capital can be invested. Commerce borrows and lends; commerce is a factor; she is also a common carrier. That which she buys and sells is subject to great and sudden fluctuations in value, involving immense losses to buyer and seller. That which she carries is often borne on a proverbially unstable element. While the possessions of the agriculturist are as stable as the "firm-set earth" which he cultivates, those of the merchant are embarked upon the treacherous seas, with nothing but a frail, and perhaps rotten plank, between untold treasures and the fathomless depths below.
Bankrupt and insolvent laws are predicated upon the two ideas of fraud and misfortune; the former of which is coerced and punished, and the latter relieved.
Those who take pleasure in investigating first causes will find matter for much curious speculation in the fact that, for the last thirty-seven years, indeed, with the exception of three years, from the adoption of the federa* constitution, we have had no national bankrupt law. No commercial country, at all comparable with the United States in the extent of its commerce, has been without such laws within the last century.
And the fact seems still more singular, when the condition of our country and the characteristics of our people are considered. Our country is comparatively new; the mass of its population are born to toil; there are vast resources to develop, and numerous hands for their development, with but a scanty supply of the necessary pecuniary means. The consequences are, that the less settled and newest parts of the country are indebted to the older and more populous sections for the loan of these pecuniary means; while the whole country, the old and new parts, in different degrees, are indebted for pecuniary aid to the capitalists of Europe. Credit, as a system, has therefore long, and to a very wide extent, existed among us. The American people are proverbially enterprising; and a facility in obtaining credit, co-operating with a temperament active and sanguine, constantly tempts to enterprises of peculiar hazard, and ofttimes singularly disastrous in their results. These losses fall heavily on individuals; but the ardent and enterprising spirit which encounters great labors and hazards for the sake of probable, sometimes only possible success, is, no doubt, the cause of our unparalleled growth and prosperity. De Tocqueville says, that the American is "the cheapest and the quickest trader in the world." Speaking of the enterprising and vigorous character of the Americans, the same author, (in the first part of his "Democracy in America," p. 403,) says, "The European sailor navigates with prudence; he only sets sail when the weather is favorable; if an unforeseen accident befalls him, he puts into port; at night, he furls a portion of his canvass; and when the whitening billows intimate the vicinity of land, he checks his way, and takes an observation of the sun. But the American neglects these precautions, and braves these dangers. He weighs anchor in the midst of tempestuous gales; by night and by day he spreads his sheets to the wind; he repairs as he goes along such damage as his vessel may have sustained from the storm; and when he at last approaches the term of his voyage, he darts onward to the shore as if he already descried a port. The Americans are often shipwrecked, but no trader crosses the seas so rapidly. And as they perform the same distance in a shorter time, they can perform it at a cheaper rate.
"The European touches several times at different ports in the course of a long voyage; he loses a good deal of precious time in making the harbor, or in waiting for a favorable wind to leave it; and he pays daily dues to be allowed to remain there. The American starts from Boston to go to purchase tea in China; he arrives at Canton, stays there a few days, and then returns. In less than two years he has sailed as far as the entire circumference of the globe, and he has seen land but once. It is true that during a voyage of eight or ten months he has drunk brackish water, and lived upon salt meat; that he has been in a continual contest with the sea, with disease, and with a tedious existence; but, upon his return, he can sell a pound of tea for a halfpenny less than the English merchant, and his purpose is accomplished.
"I cannot better explain my meaning than by saying that the Americans affect a sort of heroism in their manner of trading. But the European merchant will always find it very difficult to imitate his American competitor, who, in adopting the system which I have just described, follows not only a calculation of his gain, but an impulse of his nature."
The same celebrated author, in the second part of his "Democracy in America," again adverts to the peculiarity of our condition and habits. "In the United States," says he, "fortunes are lost and regained without difficulty; the country is boundless, and its resources inexhaustible. The people have all the wants and cravings of a growing creature; and whatever be their efforts, they are always surrounded by more than they can appropriate. It is not the ruin of a few individuals, which may be soon repaired, but the inactivity and sloth of the community at large, which would be fatal to such a people. Boldness of enterprise is the foremost cause of its rapid progress, its strength, and its greatness. Commercial business is there like a vast lottery, by which a small number of men continually lose, but the state is always a gainer; such a people ought, therefore, to encourage and do honor to boldness in commercial speculations. But any bold speculation risks the fortune of the speculator, and of all those who put their trust in him. The Americans, who make a virtue of commercial temerity, have no right, in any case, to brand with disgrace those who practise it."
These are the opinions of a writer of large views, and a truly philosophical spirit; and that they are not dictated by hostile feelings to either our people or institutions, is proved by the following passage, quoted from the same work:—
"Nations, as well as men, almost always betray the most prominent features of their future destiny in their earliest years. When I contemplate the ardor with which the Anglo-Americans prosecute commercial enterprise, the advantages which befriend them, and the success of their undertakings, I cannot refrain from believing that they will one day become the first maritime power of the globe. They are born to rule the seas, as the Romans were to conquer the world."
That a people so situated, and possessing such peculiarities of character, should have remained so long without provision, by a general bankrupt law, for the reverses naturally resulting from such condition and character, is truly extraordinary; and it will be still more extraordinary if the teachings of both philosophy and experience, on this subject, shall continue to be unheeded.
We propose to present to the readers of the Merchants' Magazine some of the prominent reasons which seem to urge upon Congress the passage of a general bankrupt law. It will be seen that our object does not embrace the proposal of a plan, or the discussion of the details of such a law. At most, we can only state the principles, and the prominent and essential features of such a law as is, in our judgment, imperatively demanded by the condition and wants of the country.
What are bankrupt and insolvent laws? Has congress the constitutional power to pass bankrupt and insolvent laws 1 Is it expedient to pass a general bankrupt law immediately? To the discussion of these questions we invite attention. First: What are bankrupt and insolvent laws? This question may be answered by definition, and by historical references. They have existed in most commercial nations. The cessio bo- norum of the civil law bears some resemblance to the English, and still closer resemblance to the French bankrupt laws; but under that system the person, and not the future acquisitions, of the debtor was discharged. The eessio bonorum probably furnished the hint from which most of the modern systems of bankruptcy were derived.
The word bankrupt is supposed to be derived from bancus, a bench, and ruptus, broken, in allusion to the benches formerly used by the moneylenders in Italy, which were broken in case of their failure.
The first of the English bankrupt statutes was enacted in the time of Henry VIII. That first and imperfect draft has been greatly improved by subsequent statutes. A minute history of English legislation on the subject of bankruptcies and insolvencies would show that it is one of great inherent difficulties; and that the skill of the most experienced statesmen and astute lawyers has been baffled in the attempt to overcome those difficulties. Indeed, the English bankrupt statutes have changed as often as the chameleon changes his hues, or Proteus his shapes.
The statutes of the late and present reigns have greatly improved the English system.
"Bankrupt and insolvent laws," says Chancellor Kent, (2 Com. 388,) "are intended to secure the application of the effects of the debtor to the payment of his debts, and then to relieve him from the weight of them."
Dishonest debtors will not voluntarily, and unfortunate debtors cannot, pay their debts. Against the former class the creditor needs protection; while the latter class needs protection against the creditor. If no debtors were dishonest, and no creditors cruel, there would be comparatively little necessity for bankrupt laws. Such laws are designed to protect the creditor from fraud, and the debtor from oppression. From the dishonest debtor they wrest the property which he misapplies or craftily conceals from his creditors; and from the unfeeling and oppressive creditor they snatch the iron rod with which he smites his honest but unfortunate debtor. They give to the creditor a satisfaction of his demands to the extent of the debtor's property; and they give to the debtor a release of his person and future acquisitions from the burden of his past obligations.
Has congress power to pass bankrupt and insolvent laws?
The 8th section of article 1st of the constitution declares that congress "shall have power to establish an uniform rule of naturalization, and uniform laws on the subject of bankruptcies throughout the United States."
The power to establish "uniform" bankrupt laws throughout the Union, was deemed by the framers of the constitution to be so essential, that (as appears by the journals of the convention) nine states voted for the above clause, and only one against it. Its necessity seemed so undoubted, as to be almost unanimously conceded. Mr. Madison appears to have preserved a very faithful record of the debates of the convention, but the Madison Papers contain no trace of any discussion of this section. And its necessity appears to have been equally conceded out of and in the convention. The published debates of the state conventions do not question the necessity or policy of this constitutional grant of power to congress; and the distinguished authors of the Federalist dismissed the subject with a single sentence. "The power of establishing uniform laws of bankruptcy, says Mr. Madison, in the 42d number of the Federalist, "is so intimately connected with the regulation of commerce, and will prevent so many frauds where the parties or their property may lie, or be removed into different states, the expediency of it seems not likely to be drawn in question." An attempt has been made to limit the powers of congress, under the
vol. iv.—No. i. 4
clause of tne constitution above cited, to the establishment of bankrupt laws, to the exclusion of insolvent laws. For this distinction there is no authority, either in the terms used, or the reasons for conferring the power. The two species of laws are not sufficiently distinct to enable us to say of any particular provision that it necessarily belonged to a bankrupt law and not to an insolvent law, or vice versa. Our colonial legislation, and the European legislation, before the adoption of the constitution, had blended the systems together in such a manner as to make it impossible by any analysis to separate and designate with perfect precision the essential elements of each. We are, undoubtedly, bound to construe the terms of the constitution according to their natural and obvious import. Assuming, then, that the term "bankruptcies" was used by the framers of the constitution according to its then general acceptation, we have no authority for saying that it did not include " insolvencies." But the want of authority for this distinction is more apparent, when we pass from the terms in which the power is granted, to consider the objects for which it was conferred. "If," says Chief Justice Marshall, in his masterly opinion in the celebrated case of Gibbon vs. Ogden, "if, from the imperfection of human language, there should be serious doubts respecting the extent of any given power, it is a well settled rule that the objects for which it was given, especially when those objects are expressed in the instrument itself, should have great influence in the construction."
The general object for which the power to pass bankrupt laws, and various other enumerated powers were given, was commercial regulation. Many of the powers expressly conferred on the federal government by the constitution, would be entirely useless and impotent, unless we regard, as the framers regarded commerce, as one of the great purposes for the promotion of which we became one people under one constitutional government. That bankrupt laws are commercial regulations there is no doubt. That for all purposes of commercial regulations we are, and were intended to be one people, there is just as little doubt. The want of this perfect identity for commercial purposes was one of the most radical defects of the confederation; and the pressure of this evil led to the commercial convention, out of which originated the convention of the framers of the constitution. Every state in the Union trades with every other state in the Union. As a consequence, the citizens of every state in the Union are debtors and creditors to the citizens of every other state in the Union. There are therefore obligations to be enforced and discharged in each and against each. Is it not obvious that the rule by which these obligations are to be enforced and discharged, should be uniform? The people ol Albany, New York, and Buffalo, are, in this respect, one people under one rule. Should not the people of New York, Philadelphia, Boston, Cincinnati, and New Orleans, be equally one people for every purpose relating to the enforcement and discharge of these obligations? If one rule in one city, and a different rule in another city, in the state of New York, would be inconvenient, why is not one rule for one state, and another rule for another state, equally inconvenient? Of course, reference is here had, not to the modes of procedure in the courts, but to the ultimate right to have the obligation enforced or discharged. The fluctuating and conflicting legislation of the different states, produces endless uncertainty and confusion in the laws of debtor and creditor. The New York merchant, trading with twenty-nine states and territories, instead of having