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$ 1100. The power to pass laws on the subject of bankruptcies was not in the original draft of the constitution. The original article was committed to a committee together with the following proposition : “ to establish uniform laws upon the subject of bankruptcies, and respecting the damages arising on the protest of foreign bills of exchange.” The committee subsequently made a report in favour of incorporating the clause on the subject of bankruptcies into the constitution ; and it was adopted by a vote of nine states against one. The brevity, with which this subject is treated by the Federalist, is quite remarkable. The. only passage in that elaborate commentary, in which the subject is treated, is as follows: “The power of establishing uniform laws of bankruptcy 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, that the expediency of it seems not likely to be drawn in question.”
$ 1101. The subject, however, deserves a more exact consideration. Before the adoption of the constitution the states severally possessed the exclusive right, as matter belonging to their general sovereignty, to pass laws upon the subject of bankruptcy and insolvency Without stopping at present to consider, what is the precise meaning of each of these terms, as contradistinguished from the other; it may be stated, that the general object of all bankrupt and insolvent laws is, on the one hand, to secure to creditors an ap
1 Journ. of Conventior., 220, 305, 320, 321, 357. 2 The Federalist, No. 42.
3 Sturgis v. Crowninshield, 4 Wheat. R. 122, 203, 204 ; Rawle on the Constitution, ch. 9, p. 101, 102.
propriation of the property of their debtors pro tanto to the discharge of their debts, whenever the latter are unable to discharge the whole amount ; and, on the other hand, to relieve unfortunate and honest debtors from perpetual bondage to their creditors, either in the shape of unlimited imprisonment to coerce payment of their debts, or of an absolute right to appropriate and monopolize all their future earnings. The latter course obviously destroys all encouragement to industry and enterprize on the part of the unfortunate debtor, by taking from him all the just rewards of his labour, and leaving him a miserable pittance, dependent upon the bounty or forbearance of his creditors. The former is, if possible, more harsh, severe, and indefensible.1 It makes poverty and misfortune, in themselves sufficiently heavy burthens, the subject or the occasion of penalties and punishments. Imprisonment, as a civil remedy, admits of no defence, except as it is used to coerce fraudulent debtors to yield up their present property to their creditors, in discharge of their engagements. But when the debtors have no property, or have yielded up the whole to their creditors, to allow the latter at their mere pleasure to imprison them, is a refinement in cruelty, and an indulgence of private passions, which could hardly find apology in an enlightened despotism; and are utterly at war with all the rights and duties of free governments. Such a system of legislation is as unjust, as it is unfeeling. It is incompatible with the first precepts of Christianity ; and is a living reproach to the nations of christendom, carrying them back to the worst ages of paganism.
See 1 Tuck. Black ('omm. App. 259. 2 See 2 Black. Comm. 471, 472, 473. See also 1 Tuck. Black. Comm. App. 259.
One of the first duties of legislation, while it provides amply for the sacred obligation of contracts, and the remedies to enforce them, certainly is, pari passu, to relieve the unfortunate and meritorious debtor from a slavery of mind and body, which cuts him off fronı a fair enjoyment of the common benefits of society, and robs his family of the fruits of his labour, and the benefits of his paternal superintendence. A national government, which did not possess this power of legislation, would be little worthy of the exalted functions of guarding the happiness, and supporting the rights of a free people. It might guard against political oppressions, only to render private oppressions more intolerable, and more glaring.
$ 1102. But there are peculiar reasons, independent of these general considerations, why the government of the United States should be entrusted with this power. They result from the importance of preserying harmony, promoting justice, and securing equality of rights and remedies among the citizens of all the states. It is obvious, that if the power is exclusively vested in the states, each one will be at liberty to frame such a system of legislation upon the subject of bankruptcy and insolvency, as best suits its own local interests, and pursuits. Under such circumstances no uniformity of system or operations can be expected. One state may adopt a system of general insolvency ; another, a limited or temporary system ; one may relieve from the obligation of contracts ; another only from imprisonment; another may adopt a still more restrictive course of occasional relief ; and another may refuse to act in any manner upon the subject. The laws of one state may give undue preferences to one class of creditors, as for instance, to creditors by bond, or
judgment; another may provide for an equality of debts, and a distribution pro ratá without distinction among all. One may prefer creditors living within the state to all living without; securing to the former an entire priority of payment out of the assets.
Another may, with a more liberal justice, provide for the equal payment of all, at home and abroad, without favour or preference. In short, diversities of almost infinite variety and object may be introduced into the local system, which may work gross injustice and inequality, and nourish feuds and discontents in neighbouring states. What is here stated, is not purely speculative. It has occurred among the American states in the most offensive forms, without any apparent reluctance or compunction on the part of the offending state. There will always be found in every state a large mass of politicians, who will deem it more safe to consult their own temporary interests and popularity, by a narrow system of preferences, than to enlarge the boundaries, so as to give to distant creditors a fair share of the fortune of a ruined debtor. There can be no other adequate remedy, than giving a power to the general government, to introduce and perpetuate a uniform system.'
§ 1103. In the next place it is clear, that no state can introduce any system, which shall extend beyond its own territorial limits, and the persons, who are subject to its jurisdiction. Creditors residing in other states cannot be bound by its laws ; and debts contracted in other states are beyond the reach of its legislation. It can neither discharge the obligation of such contracts, nor touch the remedies, which relate to them in any other jurisdiction. So that the most meri
1 See Mr. Justice Johnson's Opinion in Ogden v. Saunders, 12 Wheat. R. 274, 275.
torious insolvent debtor will be harassed by new suits, and new litigations, as often as he moves out of the state boundaries. His whole property may be absorbed by his creditors residing in a single state, and he may be left to the severe retributions of judicial process in every other state in the Union. Among a people, whose general and commercial intercourse must be so great, and so constantly increasing, as in the United States, this alone would be a most enormous evil, and bear with peculiar severity upon all the commercial states. Very few persons engaged in active business will be without debtors or creditors in many states in the Union. The evil is incapable of being redressed by the states. It can be adequately- redressed only by the power of the Union.
of the Union. One of the most pressing grievances, bearing upon commercial, manufacturing, and agricultural interests at the present moment, is the total want of a general system of bankruptcy. It is well known, that the power has lain dormant, except for a short period, ever since the constitution was adopted; and the excellent system, then put into operation, was repealed, before it had any fair trial, upon grounds generally believed to be wholly beside its merits, and from causes more easily understood, than deliberately vindicated.?
1 2 Kent's Comm. Lect. 37, p. 323, 324 ; Sergeant on Const. Law, ch. 28, [ch. 30 ;] Mr. Justice Johnson in 12 Wheat. R. 273 to 275.
2 See the Debate on the Bankrupt Bill in the House of Representatives in the winter session of 1818 ; Webster's Speeches, p. 510, &c. — It is matter of regret, that the learned mind of Mr. Chancellor Kent should have attached so much importance to a hasty, if not a petulant, remark of Lord Eldon on this subject. There is no commercial state in Europe, which has not, for a long period, possessed a system of bankrupt or insolvent laws. England has had one for more than three centuries. And at no time have the parliament or people shown any inten. tion to abandon the system. On the contrary, by recent acts of parlia