6

FEBRUARY, 1821.

lent bankrupts and concealments of property are proverbial; are so common as to be supposed almost to have lost the nature of crime."

'Men in the same trade will offer to learn who were the bankrupt's customers. Another motive 'to become assignee is, to purchase the bankrupt's 'estate in collusion with him. Another is to reMr. Montague proposes "to assist prosecuting 'tain the unclaimed dividends or undivided re- creditors with funds out of the bankrupt's estate." 'sidue. The last motive which induces a wish to This shows that it is not the severity of the punish'be assignee, is to obtain dominion over the bank- ment only that discourages prosecutions, but the rupt's property, which may result in entire em- difficulty of conviction, trouble and expense, which bezzlement. With regard to the proof of accom- operate alike under milder or severer punishments. 'modation bills, I believe them to exist to a very Your bill, like the British system, supposes that an 'considerable and alarming extent. I believe con- act of bankruptcy shall be done with intent to de'clusive proof of this might be obtained from ex- fraud or delay a creditor; therefore, an act to 'amining what creditors have proved debts, under benefit him cannot be an act to defraud or delay 'different commissions. In a case before the 10th him. This, says Mr. Montague, "is the whole ' list of commissioners, I was counsel against the foundation of concerted commissions." The bill 'proof of certain debts; almost all of them were will, I have no doubt, produce a plentiful harvest 'brought forward by persons who were or had of the abuses accompanying them, and growing 'been bankrupts. They were defeated, and the out of them. The evidence proceeds: "The credi'parties, as is usual in such cases, compromised,tor sustains by the bankrupt a loss of property, and I heard no more of it. In 1809 a bankrupt,

6

6

6

his feelings are also wounded by the improper conduct of one in whom he confided. He ought, therefore, to have control over the certificate. It is impossible he should explain to any tribunal the nature of the injury he may have sustained by abuse of his confidence. I propose three-fifths ' in number and value of the creditors should control the certificate." In the bill before us the creditor may be heard, but the judge has power to give the certificate peremptorily, and without appeal from his decision. Ought such a power to release any man from the obligation of contracts, to be rested any where? The bill proposes twothirds of the creditors, but it seems designed to dispense with them altogether.

' for whom I was retained in counsel, told me that ' he could obtain the signature of any number of 6 persons to his certificate; that nothing was more 'easy than to obtain the proof of fictitious debts, ' and that there were persons who lived by proving 'debts and signing certificates. There are many 'men in the city of London who obtain capital 'for extensive business out of the trust of assignee. When the creditors become very clamorous, and 'they have been summoned two or three times before the commissioners, at the end of two years, 'or perhaps longer, they will declarea first dividend, 'taking care to keep a considerable sum on hand, ' and this they will do by entering claims against 'the estate, to be proved at the next dividend, and Mr. Montague was asked, "Do you not think ' reserve the amount of such claims in hand at the it extremely common for the most undeserving 'first dividend. After a lapse of another two or bankrupts to obtain their certificates? I do be'three years, they will declare a second dividend.lieve that it is most common for the most undeThe creditors being thus wearied out, a third or serving bankrupts to obtain their certificates by 'final dividend is seldom obtained of assignees of fraudulent and improper means, to the great injury this description. Sir, says a correspondent to of the good creditor, and to the great injury of me, could you see those numerous cases of mal-public justice; and I do think that it frequently 'versation, misapplication, and shameful neglect happens that dishonest bankrupts, from having ' of assignees, that perpetually meet the eye of the recourse to means from which honesty would solicitor, you would be satisfied, with me, they'recoil, have greater facility in obtaining their are a great cause of bankruptcy itself. The certificates than honest men possess." Mr. Mon'practice has now got to such a pitch, that I verily tague, from the 6th volume of Vesey's Reports, 'believe barely one assignee in a dozen, fairly, in- read the following declaration of the Lord Chan'dustriously, and honestly, performs his duty." cellor: "He expressed his strong indignation at After a tedious detail of abuses, which your pa- the frauds committed under cover of the bankrupt tience will not allow me to read, Mr. Montague pro6 laws. The abuses of it are a disgrace to the poses, as a remedy, "that there should be an Ac- country. It would be better to repeal at once all countant General, charged with the disposing of the statutes than to suffer them to be applied to 'the effects, collecting the debts, and making divi-such purposes. There is no mercy to the estate; dends pertaining to all bankruptcies." The bill nothing is less thought of than the commission. before us goes upon the old British system of as- As they are frequently conducted in the country, signees. It is in vain gentlemen hope to escape they are little more than a stock in trade for the these abuses. Are Americans less acute than commissioners, the assignees, and the solicitor. Britons; or have they shown less address in every 'Instead of solicitors attending to their duties as branch of trade? These abuses grow out of the ministers of the court, for they are so, commisspirit of trade; they intrinsically belong to it, and sions of bankruptcy are treated as matter of trafno legislation can avoid the evils if you adopt a 'fic. A taking up the commission, B and C acting bankrupt system. Again, Mr. Montague says: as commissioners. They are considered as stock "In forty thousand bankruptcies, I doubt whether in trade, and calculations are made how many 'there have been ten prosecutions. I believe there commissions can be brought into the partnership. ' have only been three executions, and yet fraudu- ' Unless the court holds a strong hand over a

6

FEBRUARY, 1821.

The Bankrupt Bill.

6

SENATE.

bankruptcy, particularly as administered in the the bankrupt laws continue as they are now, any country, it is itself accessary to as great a nuisance thing, as I have said before, short of bankruptcy, as any known in the land, and known too to pass is desirable." Again, Mr. Lavie answers: "If 'under the forms of its laws." This opinion ex- 'the solicitor, assignee, and the bankrupt, should pressed in 1809, Mr. Montague "conceives to have be in collusion together, proving debts by oath, been greatly strengthened by cases which have where the creditor does not appear, would afford arisen since." The Chancellor, in one case, con- facility for frauds." This avenue is left entirely cludes his judgment thus: "It comes round to this, open in the bill. Sir Samuel Romilly states, in whether in a case where one partner is petition- his evidence, "There is an offence often committed 'ing creditor, another partner the acting commis-under the bankrupt laws, more serious than not sion, another partner the solicitor to the com-surrendering, or concealing property, for which 'mission, and the remaining partner the sole there is appointed a much slighter punishment, 'assignee, the commission can be permitted to to wit: the procuring of a commission, in order, 'stand." It is the Chancellor speaks. Is this a system by means of false and fictitious debts proved under we ought to copy? In the evidence of Mr. Van-it, to obtain a relief from real debts. This has dercorn, a solicitor, he was asked, "If in his ex- 'become very common. This fraud can only be 'perience the greater number of the acts of bank-' perpetrated, by numerous, repeated, and flagrant ruptcy had not been concerted? Answer. I' perjuries. This is an intrinsic vice in the system, 'think they have, the greatest part of them. Do not curable. When you tempt men by your le'you not think the majority of commissions are gislation to commit crimes, your penalties avail 'issued with the concurrence, and at the request nothing. The greatest moral evils must flow from ' of the bankrupt? I think they are." He was any law which offers the hope of a release from asked, "Is it not in the power of an insolvent to debts to a man who is not able or willing to pay." ' delay his bankruptcy, and in the interim misap- Mr. Waithman, a man of great experience in ply property in payment of favored creditors? trade, says: "The great defect in the system has It certainly is. Have you not known, in the arisen from the want of discrimination between course of your professional experience, a great the honest and dishonest debtors. They are on many dishonorable and worthless bankrupts ob- precisely the same footing. I seldom find a bank'tain their certificates? I certainly have. I may rupt fails to get his certificate. I have witnessed ' venture to say, I have hardly known an unfortu- property passing away before the eyes of the nate man who was altogether deprived of his creditor, and he has not been able to lay his certificate, or a dishonest one that did not find the hands on it. I pursued a bankrupt, and had 'means of procuring it." "The man goes with above twenty meetings; fictitious debts to a large "the warrant of seizure," says Mr. Vandercorn; "he amount were proved. The property all disap' is placed below stairs, and knows nothing of what peared in a moment. A vast number of bills ' is going on above. This I believe to be the time were fabricated; they chose assignees, and car'when the greatest peculation prevails. Relationsried all before them. I had twenty meetings at and friends attend for condolence. my own expense; he swore himself out of one most of them take something away. They live thing into another; I at last obtained consent for upon the house and the produce so long as they his commitment; some doubts as to form deferare permitted." Mr. Lavie, a soliciter, on evi-red it until next day, and the man ran away, and dence, says: "The business of bankruptcy is not sought for eagerly by solicitors of eminence and 'character. As the bankrupt laws are at present "managed, they afford advantage to no one except the bankrupt. If solicitors do their duty, they get neither credit nor profit. With regard to creditors, any means short of bankruptcy in honest cases is preferable, and I consider the criterion of a person subject to the bankrupt laws, being desirous of acting fairly by his creditors, is, whe'ther he seeks a bankruptcy, or is desirous to avoid it. Those desirous of making up their affairs ' without a bankruptcy, are certainly to be com'mended; and those anxious to go into the Gazette 'evidently have in view their own relief, not the ' interests of their creditors. Upon all occasions 'I have considered it for the interest of my em6 ployers, whether bankrupts or creditors, to endeavor, in the first instance, by every possible means, to prevent a commission from issuing. The settlement of the affairs of insolvents in my office have been very numerous. Compositions and other modes of arrangements have very much 'increased. The increase of bankruptcies being,' ' in my opinion, solely of petty traders, so long as

I believe

there was end to it." "I have observed, there is hardly ever a man, however atrocious his conduct, who cannot contrive to get his certificate, and go into business again. I have observed, nine times out of ten, the commission is worked for the benefit of the bankrupt, not the creditors." "Do you not, it was asked, think the bankrupt law, as it now exists in this country, is a scandal and disgrace to it? I have long considered it so; and that it has induced much dishonesty. Major Simple said to a Bow-street officer, why I have been a fool all my lifetime. I have not known how to go to work; I have been running the risk of my life for a trifling thing; but, if I were to begin again, I would open a shop as a trader, become a bankrupt, and make my fortune at once." Mr. Cullen, a commissioner: "The bankrupt law was introduced to prevent and punish frauds of debtors, and distribute their property equally among their creditors; but it has not succeeded. 'However wise at first, and modified since, it effects neither of these objects, the property is not forthcoming, or it is wasted. The same frauds still exist, neither diminished nor punish'ed; and a new class has sprung up, engendered

6

SENATE.

6

Proceedings.

6

6

FEBRUARY, 1821.

I shall forbear further remark; neither your patience nor my own strength allow me to proceed. I look for the argument to be supported by friends much better qualified than I am to do ít justice.

When Mr. ROBERTS concluded, Mr. BARBOUR moved that the bill be postponed indefinitely. On motion of Mr. ROBERTS, it was agreed to take this question by yeas and nays. The Senate then adjourned.

WEDNESDAY, February 7.

by the very proceedings instituted to prevent practices, but they are of little effect; and the them, so that the prominent evil of the present bankrupt, who might detect and expose them, is 'day appears to be the bankrupt law itself. With-the party most interested in concealment and 'out it, individual creditors would have the or- silence. The committee have already abundant dinary chance, by better luck, or greater diligence evidence of those criminal combinations and 'to recover their particular debts. But, the bank-perjuries, and of the fictitious bills of exchange rupt law, while it defeats individual right, pro-which are drawn and circulated in order to give 'duces the loss of all under the precious forms of them effect." 'proceeding at the common expense for the common benefit. I am convinced that a majority ' of commissions that issue, may be considered as 6 a sort of conspiracies between the debtor, and 'one or more of his creditors, to plunder the rest. 'Concerted commissions must arise out of this law 'from the nature of its provisions. I would sug'gest whether the certificate should discharge the 'future property, except the estate paid 75 per 'cent. ?" In the evidence of Mr. Grote, a banker, it is stated: "That the improvidence of the bank'rupt; the false statement he gives in at the third 'examination; the want of making the most of his effects; (the account of which he gives in on his The PRESIDENT communicated a report of the 'third examination.) The assignees seldom pay Commissioners of the Sinking Fund, stating that any dividend whatever. I applied within the last the measures which have been authorized by the 'six months for dividend in three instances. In board subsequent to the report of the 5th of Feb'the first £30,000 were proved to exist two years ruary, 1820, so far as the same have been com' after the commission issued. The assignee had pleted, are fully detailed in the report of the Secre 'collected barely £200, which was absorbed in ex-tary of the Treasury to that board, also communi'penses. In a second case I got seven farthings in the pound; and in the third, a dividend of nine pence. I have perfectly made up my mind Mr. WILLIAMS, of Mississippi, presented the ' that I would rather take an offer of two shillings memorial of the General Assembly of that State, and six pence in the pound than my chance for praying that the right of pre-emption may be a dividend if it went to the Gazette. I suggest granted to certain settlers on the public lands with'that no bankrupt should have his certificate un-in said State; and the memorial was read, and 'less he paid a dividend." Mr. Montague says: referred to the Committee on Public Lands. "Bankrupts are induced to conceal their property ' in order to bribe their creditors; they buy goods 'upon credit, after the last act of bankruptcy, in ' order, either to make partial payments to hostile creditors, or to fail full handed; and if the honesty of the bankrupt renders him unable to bribe 'his creditors, they have another resource, by obtaining security from him, or by extorting from 'the compassion of his friends, what they cannot procure from his poverty.

6

Mr. Lockhart, a member of the committee, stated: "that, in almost every commission in I which he had been named, he found the bank'rupt had acted with great injustice towards his creditors, generally with dishonesty and fraud, and always with imprudence and carelessness of 'the wreck of his substance, which is not his, but 'theirs. The cause is found in the facility with ' which the bankrupt goes through his commis'sion. It is proved from the situation he is generally found in after his last examination, the ' appearance he makes, and the connexions he re'news. The want of a due investigation to dis'criminate between innocent insolvents and fraud'ulent ones appears to be a radical defect of our 'law. It is difficult at present to prevent the proof ' of unfounded claims, and which are generally attempted to be proved with a view to the choice of assignees, and the granting of the certificate. There are laws now in force to prevent these

cated as part of the report of said Commissioners; and the report was read.

Mr. JOHNSON, of Kentucky, presented the petition of Joseph G. Roberts, of that State, and late a surgeon in the Navy, praying to be allowed a share of certain prize money; and the petition was read, and referred to the Committee on Naval Affairs.

Mr. WALKER, of Georgia, obtained leave to bring in a bill concerning the process of execution issuing from the sixth circuit court of the United States, for the district of Georgia; and the bill was read, and passed to a second reading.

Mr. ROBERTS, from the Committee of Claims, to whom was referred the bill, entitled "An act for the relief of Rosalie P. Deslonde," and the bill, entitled "An act for the relief of Pierre Dennis De La Ronde," reported them severally without amendment.

The bill from the House of Representatives, entitled "An act making appropriations for the public buildings," was twice read by unanimous consent, and referred to the Committee on the Public Buildings.

The Senate proceeded to consider the motion of yesterday to appoint a joint committee to ascertain and report a mode of examining the votes of President and Vice President, and of notifying the persons elected of their election, and agreed thereto; and Messrs. BARBOUR and MACON were appointed the committee on the part of the Senate.

The Senate proceeded to consider the motion of

SEC. 4. And be it further enacted, That for failure If, said he, the fire which last night broke out to pay the several debts aforesaid, in manner aforesaid, in the city had extended its desolation far and and for the term of three months after the day ap-wide-if the torch of the incendiary had been appointed for the payment of the last instalment thereof, plied in various quarters to the habitations, and in each of the classes aforesaid, the land so purchased, thousands of tenants had been turned houseless or held by the respective persons indebted to the Uni- I into the streets—or if the Great Disposer of events 16th CON. 2d SESS.-10.

SENATE.

The Bankrupt Bill.

FEBRUARY, 1821.

had permitted the baleful pestilence in the course always exercised, permanently or occasionally, by of the past season to sweep over its population; the Legislatures or subordinate magistrates, by and under these circumstances, the survivors of standing or by special laws in the separate States. these disasters this morning filled your galleries Now it can be no longer enforced to any useful and lobbies with their complaints and petitions for end by the State jurisdiction-it has been transassistance; with what alacrity would you proceed ferred to Congress as trustees for all persons, wheto administer whatever relief could be had at your ther creditor or debtor, who have or may have an hands, possessing as you do exclusive jurisdiction interest in such a system. The Supreme Tribunal in this District! Yet those who are now before of the Union has decided that the States can make you with petitions for your humane aid, are suffi- no laws discharging an insolvent person from the ciently numerous, if collected together, to form a demands of his creditors. Of consequence, Conpopulation very many times exceeding that of this gress is bound to execute this trust at some time, city-their accumulated wretchedness would be and in some mode; otherwise the States which found to exceed that of the visitations just supposed, have surrendered that power are caught in a snare and they are equally the subjects of your exclusive and disqualified from relieving the distress of their guardianship under the Constitution of the United own citizens-while vast numbers of unfortunate States. persons are converted into outlaws and deprived of the benefits and protection afforded to the citizen by all civilized communities. This high obligation to execute a trust for the use of all who have the beneficiary interest is a fundamental of all public as well as of all municipal law. Neither the executive or judiciary departments can dispense with the performance of their several duties, constantly and indefinitely, under the pretext of discretion in regard to time and means.

The time, he said, had now arrived in which the parties interested in the passing of a bankrupt act, were entitled not merely to request it as a favor, but with all due respect to demand it as a right. It might be affirmed as a universal proposition, that the acceptance of a trust imposed upon the trustee an obligation to discharge its duties. A sound discretion as to the time and mode of performing such duties were certainly of course implied, but the trustee cannot object to the nature Nor can the right of Congress to withhold relief of his trust. Now the objections of the honorable from the urgent claims of a great portion of their gentleman from Virginia (Mr. BARBOUR) go to the constituents be inferred from their power. It was very essence of the trust itself. His hostility is to for the purpose of giving activity and energy to a bankrupt act at. all times and in all places, and the powers vested in the General Government that to such objections thus openly avowed, the true the Constitution was framed, and not to the end answer is, they come too late. You have accepted that such as could not be efficaciously employed the trust, and are bound by the Constitution. But by the separate States, but were nevertheless of the honorable gentleman from Pennsylvania (Mr. vital importance, should be thrown into a general ROBERTS) resorts to the old system of opposition reservoir of national authority, and therein be perto the measure, and while he objects to the details mitted to remain entirely stagnant. It was not, of the bill, in other words to the mode of executing he repeated, his intention, on the present occasion, the trust, he contends still for the discretionary to go into an investigation of the special provisions power of Congress in the selection of the proper of the bill upon the table. Should this be thought time. There is, however, no real difference be- requisite, after the attention of Congress had been tween objections to the nature of the trust, and so frequently called to that examination, he doubted such objections to the time and mode of execution, not it would be undertaken and performed by as show that he who makes them will never be others to the perfect satisfaction of the Senate. He reconciled to any time or any mode. Will he professed that his object would be merely to illuspledge himself to any fixed time or to any substi-trate, by general remarks, the points to which he tute for the proposed plan? If he will not, he deceives himself, (for it is not to be said that he is insincere to others) in assailing the details of the bill, when his enmity applies to its principle; and in objecting to the exercise of a discretion at this time, which he in his conscience wishes and means should be forever suspended. Thus, the two honorable gentlemen are agreed in their object, and arrive by different routes to the same issue. It is the bankrupt system, under all its aspects, and in every imaginable form, to which they are opposed. It is to the nature of the trust to the execution of a power conferred by the Constitution, for the benefit of a great class of the citizens of the Union, whose trustees you are. This trust, previously to the adoption of the Federal Government, was vested in the separate States. It was a necessary and inseparable incident of State authority claiming to be sovereign. It is a power indispensable to the exigencies of a commercial people. It was

had adverted, namely, the condition and numbers of the applicants for relief-the duty of Congress to provide for it, and to obviate some of the principal objections now urged by the opponents of the measure. Let us first, then, bestow a cursory consideration upon the circumstances, condition, and numbers of those who are interested in the fate of this question.

The debtors may, for this purpose, be divided into three classes. First, persons in actual confinement for debt. These are either such as, in a state of extreme and unqualified pauperism, drag out their wretched existence in the charnel-houses of living misery, waiting for the advantage, so called, of State insolvent laws; or others who are one degree removed from the immediate dangers of hunger and nakedness, by having concealed some paltry remnant of the wreck of their little fortunes, preferring the durance of bolts and bars to the iron grasp of the laws which authorize the