Bankrupt Bill.

The joint resolution directing a survey of certain routes between Baltimore and Philadelphia, for a post road, was read a third time, and PASSED, by yeas and nays, as follows, the President giving the casting vote in the af-effect. It was but justice to those who felt interested in

Mr. KING moved to lay the bill on the table, with a view of calling it up at a future time, if the business of the The question was then taken on the indefinite postponeSenate should permit. He expresed his intention of vot-ment of the bill, and decided in the negative, by yeas and ing in favor of the bill: but Mr. K. withdrew his motion nays, as follows: at the request of

Agreeably to the special order of the day, the Senate then proceeded to consider the bill to establish a uniform

The Senate, having resumed the consideration of the bili "to amend the several acts for the establishment of a territorial government in Florida ;" and the question be-system of Bankruptcy. ing on Mr. ROWAN'S motion to amend the bill by exempting the act granting divorces from the clause which annuls and repeals various acts passed by the Governor and Council of the Territory

Mr. JOHNSTON, of Louisiana, inquired the dates of the acts respecting divorces.

Mr. HAVNE said, he rose to address the Senate on this subject with peculiar diffidence, and no ordinary anxiety— diffidence, the most unfeigned, of his ability to do it justice--and anxiety for the fate of a measure on which the prosperity of a large portion of the community materially depends. I feel (said Mr. H.) most deeply the disadvanMr. HOLMES replied, that they were all dated No- tages of my situation, and the difficulties by which I am rember or December, 1825. Mr. H. read the acts, and environed. The lamented illness of the learned Senator said, it was probable the individuals were men who had from Delaware, (Mr. VAN DYKE) under whose auspices become dissatisfied with their wives, and had run away to this ineasure has been twice introduced, and once passed Florida and got a divorce there, perhaps without their the Senate-and the absence of the gentleman from Maswives knowing it. Mr. H. alluded to some other acts of sachusetts, (Mr. MILLS) who had promised us his aid on the Governor and Council, and said he had the returns of this occasion, are fearful omens. The late period of the these Legislative Councillors as to their travelling expen- session, also, and the numerous important subjects now ses. For a distance of two or three hundred miles, some pressing on our attention, are but too well calculated to had charged ten, some twelve, and one thirteen hundred excite that impatience of calm and deliberate investigation, and fifty miles travel. The Governor of the Territory, which, magnifying difficulties, often leads deliberative aswhose duty it was to have certified the distance, had at- semblies to seek refuge from embarrassment, by postpontached to the certificate of each of their charges of travel, ing the whole subject "to a more convenient season." that the person whose account was here certified did at. Sir, I earnestly beseech gentlemen not to adopt such a tend so many days, and that he lived at such a place, tak-course on the present occasion. If it is not due to those. ing care to leave out every fact about the distance actu- who have devoted days and weeks to the preparation of ally travelled. Mr. H. said he never had seen such fraud this bill, it is surely due to the feelings and wishes of a committed on any Government. He did not know that the large and most respectable portion of the community that Governor was to blame; when he was before the Senate it should now be acted on, and, if possible, finally disposhe was considered as a respectable man ; but he ought to ed of. Thousands of our fellow-citizens, in our commerhave certified to all the facts. Mr. H. said, if these laws cial cities, have their eyes now turned to this spot, and are were not repealed, they would, as soon as Congress ad- waiting, with anxious hopes and fears, our decision on journed, become laws, and go into operation. this question. Numerous creditors, condemned to wit

most inconceivable.

Mr. ROWAN said, these acts were laws already, by theness the fraudulent conduct of their debtors, without havcharter of the Territory; they were laws the moment the ing any power, under existing laws, to check their proGovernor signed them; and they only ceased to be law gress in the road to ruin, are now calling upon us to afford when they were revoked by Congress; and, he argued, them an efficient remedy for the recovery of their just dethat, by repealing these laws granting divorces, a princi- mands; while, on the other hand, an immense number of ple would be established that might affect all the States. unfortunate men, overtaken by unavoidable calamities, The moment that the marriage contract was declared to be and compelled to wear out their lives in the worst of all within that clause of the Constitution which forbids any servitudes-the servitude of debt-are looking up to us, State passing laws impairing the obligation of contracts, with aching eyes and throbbing hearts, for some relief the great depths of public repose would be broken up, from their unnier.ted or unavailing sufferings. I will inand the judicial power would be increased to an extent al-dulge the hope, therefore, that an honest effort will now be made to dispose of this bill; and, should embarrassMr. BERRIEN said, he thought there was no groundments present themselves in our progress, I pledge myself for the apprehensions of the gentleman from Kentucky, to consent to lay it on the table, the moment it is ascerthat the annulment of these laws by the Congress of the tained that the question cannot be decided during the preUnited States could be construed into the adoption of a sent session. principle that that clause which inhibits any State from passing laws impairing the obligation of contracts, would be extended to cases of divorce. This subject had been considered by the Supreme Court, and that tribunal had expressed an opinion that cases of divorce did not tall within the terms of that inhibiting clause of the Constitution of the United States. Mr. B. then proceeded to argue that the Legislative Council had no intrinsic authority to pass such a law, under the grant of powers given by the act establishing the Territorial Government.

I shall now proceed, Mr. President, as briefly as I may, to state the evils for which we propose to provide a remedy, and to give a plain and practical exposition of the principles embodied in this bill. The first question which presents itself for consideration is, the necessity of a Bankrupt law. It is asked, "whether the laws of the States on this subject are not adequate to the object?" I answer, decidedly and unequivocally, that there exists the most pressing nesessity for now establishing "uniform laws on the subject of bankruptcy throughout the United After some further discussion between Messrs. BERRI- States;" and that the laws of the States on this subject are EN and ROWAN, the question on Mr. ROWAN'S motion inefficient, unjust, and rumous, in their operation. In the was decided in the negative, by yeas and nays, as follows: remarks I am about to make on this branch of the subject, YEAS-Messrs. Bouligny, Harrison, Hendricks, John- I wish to be distinctly understood as confining my obserson, Ky. Johnston, Lou. Kane, King, Noble, Reed, Row-vations to the effect of the State insolvent laws, on persons an, Sanford, Smith, Thomas, White-14. concerned in trade. It is from the operation of these laws

on the commerce of the country that those evils flow, which demand a speedy and effectual remedy.

[MAY 1, 1826.

call it, if he cannot provide for himself, he invariably takes care of his friends; and, while, by the transfer of properThere now exists, Mr. President, in the several States ty to them, he pays them twenty, nay, sometimes thirty, of this Union, upwards of twenty distinct systems of shillings in the pound, the rest of his creditors are cut off bankruptcy, or insolvency, each differing from all the rest without a farthing. When assignments are executed, the in almost every provision intended to give security to the assignees selected are these very favored creditors, (uncreditor, or relief to the debtor-differing in every thing less, indeed, clerks, just of age, or other persons under which touches the rights and remedies of the one, or the the personal influence and control of the debtor, are preduties and liabilities of the other. ferred,) and it is a very common occurrence for such perBy the laws of some of the States, debtors cannot be ar-sons to commence their operations by appointing the rested, either on mesne or final process; by others, per-bankrupt himself their agent to conduct the business and sonal property may be held in defiance of creditors; wind up his concerns. while, by others, real estate cannot be touched. In some The creditor, in the mean time, finding that the law instances, executions are suspended; in others, the courts permits preferences, and that it allows the debtor to make of justice are closed, or, which is the same thing, delays trust deeds, and to choose his own assignees, is without a are sanctioned, which amount to a denial of justice. In remedy. Even if he suspects collusion, he has no redress some States, a few creditors, in the immediate neighbor- but by commencing a suit in Chancery-(a proceeding in hood, are suffered, by attachment, or other legal proceed- this country, as in England, more easily begun than endings, (often the result of collusion with the debtor) to se- ed, and in which the oath of the defendant is received.) cure to themselves the whole estate of an insolvent debtor. The creditor, therefore, though conscious of being cheatIn several States, persons arrested for debt are permitted ed, submits quietly to his fate, and leaves to the debtor and to "swear out," (as it is called) after a notice of a few his friends the undisturbed division of the spoil. days; while, in other States, they are required to lie in jail for three or four months. In some instances, the relief extended is confined to the discharge of the debtor from arrest in the particular suit ; in others, from arrest in all suits; and, in some few cases, the attempt has been made to release him from all future liability on existing contracts. These various systems, unequal and inconsistent as they must be admitted to be, are rendered still more objectionable by being perpetually fluctuating. It was the opinion of one of the ablest Judges that ever sat on the English bench, or any other bench, that it was better for the community" that a rule should be certain than that it should be just;" for the obvious reason, that we can shape our conduct or our contracts in reference to any known and settled rule, so as to avoid its injurious effects; but, when the rule is uncertain, we cannot avoid falling under its operation.

In the absence of such relief as a bankrupt law ought to afford to debtors, they sometimes practise a curious stratagem to extort a discharge by the consent of their creditors. The thing is thns managed: a deed of assignment is executed for the benefit of those who shall come in, by a certain day, and release the debtor; the creditor, without any information, and often deceived by false lights, has now to steer his course in the dark, between Scylla and Charybdis ; he has to choose between the chance of getting something, he knows not what, under the assignment, and the hope of obtaining more by holding on to his demand. The thing is so conducted, however, as to induce him to take the wrong course, and he loses every thing. I appeal to gentlemen from the commercial cities whether these are not matters of every day's occurrence. Let me not be misunderstood. I entertain the most unqualified respect for the commercial character of this country-the highest admiration for the enterprise, talent, and liberality, of our commercial men. I believe our standard of honor and honesty to be more elevated than that of any other country on the face of the globe. The proof of it is to be found in the existence of credit at all, under a system which could not be endured in any other country for Not a year, hardly a month, passes by, which does not a single day. But, nevertheless, sir, we, too, have our witness numerous, and, in many instances, radical chan-fraudulent traders-foreigners and natives-and their numges, in the insolvent systems of the several States. It is ber has greatly increased, is daily increasing, and will confound utterly impracticable to conform to them, or to tinue-no, sir, I hope not-but surely ought to be diminguard against them. It defies the wisdom of the Bench, ished.

We are told that it was felt as a grievance, by the Roman People, that the tyrant should write his laws in a small character, and hang them up on high pillars," so that it was difficult to read them; but that grievance would have been rendered still more intolerable if the inscriptions had been varied with the rising and setting of the sun.

or the learning of the Bar, to give certainty or consistency It may be asked, why these evils are not remedied by to a system of laws upon which twenty-four different Le- the States themselves? It would be sufficient for our gislatures are constantly acting, and almost daily innovat-purpose to show that they exist-that they have not yet ing-a system when changes with a rapidity that deceives been, and are not likely to be remedied-in order to make the mental vision, and leaves us in the grossest ignorance. For every essential practical purpose, the most experienced merchant in this country can never be acquainted with the force and effect of the laws which regulate the collection of debts-laws which fix his rights and prescribe his remedies, in relation to all his contracts in other States. He enters into such contracts, therefore, as a man would engage in a game of hazard, who, having ventured his stake, must abide by the cast of the die.

But there is another evil arising under the laws of the States on this subject, compared with which those I have noticed shrink into insignificance. I allude to the UNJUST PREFERENCES which debtors are permitted to give; the right they possess under the laws, (I believe of every State in this Union) of making partiul assignments, providing for one class of creditors in preference to others, and selecting individuals as the special objects of favor, to the total exclusion of all other creditors. Now, when a debtor finds himself "going down," as the merchants would

out a fair claim for the interposition of our constitutional authority on the subject. But I will go further, and attempt to show that these evils are inseparable from leaving the subject entirely to State Legislation. The States cannot, it is obvious, ESTABLISH UNIFORMITY. As each State inust prescribe its own rule, it is natural that they should be anxious not to permit foreign creditors to possess any rights which their own citizens do not possess in other countries. It is quite natural that South Carolina should not permit a citizen of Massachusetts to have any remedies against his Carolinian debtor, which a Carolinian creditor would not have against his debtor in Boston; and, on the same principle, care would be taken to extend relief to our own debtors, at least as far as it is extended to debtors elsewhere. Preferences are permitted in New York, therefore we must admit them in Charleston: for, if not, our merchants would manifestly stand on a most disadvantageous footing. When a New York merchant fails, he would, next to his friendly endorsers, naturally

prefer his New York creditors; and, therefore, the Charleston merchant must act on the same principle. An honorable effort has lately been made by some of the leading merchants in New York to put down, by a voluntary agreement, this monstrous system of preferences. But, sir, it never can succeed. It is one of the vices inherent in the system, that can never be eradicated but by a uniform bankrupt law.

[SENATE.

The New Orleans merchant, therefore, finding that he can have relief only in the State court is, of course, tempted to guard against his being carried into the United States courts, where he could obtain no release. This he does by securing the foreign creditors and the Bank of the United States, at the very threshold; and then, when he fails, the domestic creditors alone suffer. The pres sure in England, arising from the cotton speculations of last year, re-acted powerfully on New York, Charleston, and New Orleans the great cotton markets of the United States; and I have recently received information that, in consequence of the state of things I have noticed, the foreign creditors and the Bank of the United States will get the whole estates of those who have failed in New Orleans. One of the Judges of the Supreme Court of that State, in allusion to this subject, writes, "the conflict between the judicial powers of the United States and the individual State courts, in relation to Bankruptcy, demands the prompt interference of Congress to pass a general bankrupt law."

It is manifest, Mr. President, that the States are now reduced to the necessity of entering into a competition with each other in restricting the rights of creditors and impairing the liabilities of debtors; and this, too, in a matter in which, as it is impossible to mark the exact line of equality, there must be great danger of their advancing, step by step, until every thing is unsettled. I am persuaded that nothing but the constitutional prohibition on the States, against "impairing the obligation of contracts," and the general, I might almost say the universal, belief, that they have no right to pass an efficient bankrupt law, have hitherto prevented such an interference between debtor and creditor as would have given a fatal blow to Under the existing laws on this subject, the banks, commercial credit and enterprize. I will put a case, sir, generally, and especially the Bank of the United States, and make this matter plain: Suppose any State in this have most decided advantages over other creditors-adUnion, South Carolina, for example, convinced of the po- vantages of which I think they ought to be divested, so licy of sacredly preserving the rights and remedies of cre- far at least as to secure to all creditors, whether private inditors, and of rigidly enforcing the obligations of debtors, dividuals or corporations, an equal portion of the estates should adopt the provisions of this bill-what would be the of insolvents. I am no enemy to banks-I believe that bankeffect? Why, sir, while creditors from abroad would ing, on sound principles, is eminently serviceable to evehave the means of arresting the career of such of their ry commercial country-but specie payments must be seCarolina debtors as might be in failing circumstances, and cured, and over issues prevented. They should be conwould have a prompt remedy for the recovery of their fined to their legitimate uses, the enlargement of the comdebts, and be entitled to an equal distribution of the es-mercial capital of the country, so as to enable the merchant, tate and effects of the insolvent, the Carolina creditor by anticipating his resources, to go into the market and would have none of these advantages in the other States. buy the produce of the farmer, without waiting for slow If a Charleston debtor, then, had claims abroad, being returns of his adventures. But, as credit, in a great meacompelled to make prompt payment, while he was unable sure, now depends on the banks, it is obvious, that the to make collections, his ruin would be inevitable. Not privilege of giving preferences will always be used to seone of the States, therefore, ever will adopt efficient laws cure them, (or, what amounts to the same thing, to secure on this subject, until other States shall consent to do the the endorsers on notes discounted in the banks,) in presame. A system may be wise and just, pervading all ference to all other creditors. And thus the banks are the States, which would operate most injuriously in a par- made the instruments of giving a fictitious credit to insolticular State. Let us take another view of the subject: vent men, and thereby enabling them to ruin those who, In Great Britain there is a bankrupt law, under which a deceived by false appearances, lend money, or sell goods, British merchant is discharged from all his debts. The to such men. The preventing preferences would destroy American merchant has no such privilege. In the mutual this fictitious credit, and bring back the trade of the dealings, therefore, between the merchants of the two country to a sound and wholesome state. Nothing is countries, while the American merchant has his claims on wanted but a wise and uniform bankrupt law. his English debtors cancelled, by operation of law, he There appears to me, Sir, to be two defects, in all our himself remains liable for ever. To put our own merchants, State insolvent systems, which must forever render them therefore, on a footing of equality, in this respect, with worse than nugatory. The first is, that they are not those of other countries, it is absolutely necessary to have granted at the instance of the creditor, but only on the a bankrupt law. To put the citizens of the different application of the debtor. The second, that the relief does States on the same footing, and to give them equal advan- not, and cannot extend, under the Constitution, to the entages in their commercial dealings, you must establish a tire discharge of the particular debt, much less of all ex, bankrupt system, equal and just in its provisions, and uni-isting demands. The creditor is thus left entirely at the form in its operation.

mercy of the debtor, until the whole estate is dissipated and then the debtor remains forever after at the mercy of the creditor. Thus, all mutual confidence is destroyed. The one is tempted to practise fraud and concealment, and the other cruel oppression. There naturally grows up between them a spirit of distrust and hostility, which soon banishes all commmon sympathy. Debtors are thus tempted to become cheats, and creditors Shylocks.

I must here notice a most curious state of things, which has lately grown up at New Orleans, furnishing a forcible illustration of the truth of my remarks, and affording to my mind a moral demonstration of the inefficacy of all State Legislation on this subject. Louisiana has passed a bankrupt law, borrowed chiefly from the French system, and, in its general features, bearing the deep impress of wisdom, justice, and humanity. As I understand that But let us take a closer view of this subject-let us now system, there is, perhaps, but one radical error in it, examine, a little more minutely, the situation of a debtor, which is, that it extends relief only at the instance of the under these State insolvent laws. When a merchant debior. Now, this law is held to be unconstitutional by finds himself, no matter from what cause, in embarrassed the Courts of the United States, while it is enforced by circumstances-when, on casting up his accounts, he the State Courts. We all know there are only particular makes the unwelcome discovery that his debits exceed his classes of persons authorized to sue in the courts of the credits-in what situation is he placed? He knows that United States, to wit: citizens of the other States, or of the laws have put him beyond the reach of his creditors foreign countries, and the Bank of the United States. they cannot levy on his goods-they cannot imprison Creditors at home are bound to go into the State courts. I his person. All they can do is, to commence an action,

the times."

[MAY 1, 1826.

which will not be determined in one, perhaps in two or periously demandnd a wise and beneficent policy than three years. In the mean time, he can carry on his trade the present. The last and the present year have been as before. Should he, under the influence of "some fruitful of the most calamitous events in the commercial compunctious visitings of nature," feel disposed to stop world; and we already hear the distant rumblings of that short in his career, and deliver up to his creditors the moral earthquake, which may shake this country to its wreck of his estate, he is checked by the consideration centre. Would to God, Sir, that, looking back on the that, in so doing, he throws himself entirely on the mercy past, and forward to the future, we could resolve to be of his creditors, who, if they should not receive their prepared for the worst. If coming events ever "cast whole demands to the last farthing, may hold him in bond-their shadows before," we cannot mistake the "signs of age for the remainder of his days; and, though nine-tenths of the creditors should assent to his discharge, the others, not being bound, may refuse to grant him any indulgence. Having, therefore, nothing to gain, and much to lose, by bringing his business to a close, he is naturally tempted to go on to engage in dangerous enterprises-to put every thing to the hazard, and to risk his fortune and his future hopes on a single adventure. If he should succeed, he is saved-and, if he fails, he can only perish; which, as ruin already stares him in the face, will not render his condition much worse than it is. Being driven by the force of circumstances to this determination, the means of executing it are at hand. He has friends-the banks are open to them-loans are obtained, by means of the endorsements of men in good credit, under a solemn pledge that, come what may, there shall be no departure from the modern code of honor, which makes it the most sacred of duties to secure the friendly endorser, no matter at whose expense, or at what sacrifice of feeling or of principle. With a fictitious crelit, thus created, and thus supported, the debtor engages boldly in a species of commercial gambling. The luck is against him, and his doom is sealed.

The effect of the whole system of State Bankrupt and Insolvent laws, have been such as might have been anticipated. The rights and remedies of creditors varying in every State in the Union, contracts are rendered uncertain-credit is impaired, and frauds practised, to an extent, which under a wise and efficient system of laws, could not possibly exist in such a country as ours-rich in every thing which constitutes the moral and physical wealth of nations. The right to give preferences, in almost every instance, secures the whole estate of a bankrupt to a few preferred creditors. When the debtor, therefore, chooses to apply to the courts for such reliefas the laws afford, he has nothing to surrender. His schedule contains "a beggarly account of empty boxes," furnishing no temptation to the creditors even to come into court to prefer a claim; and the consequence is, that the swearing out of the debtor, under the State laws, is a mere formthe completest farce that ever was acted in the face of a court of justice. I will trace this no further, but will content myself with stating a few facts, which speak volumes on the subject, and render argument superfluous. When the Bankrupt Bill was before the other House a few years But, though he must perish, he resolves to fall with ho- ago, an old and highly respectable member of the bar, nor. He goes into the market, and, on the strength of the of a neighboring city, (certainly one of the most moral and credit obtained, by the countenance of his friends, pos- industrious in the Union,) explained the operation of their sesses himself of the goods of others-then fails, and insolvent laws, by stating, in his place, that "it was the assigns his whole estate, including the goods thus obtain-" practice of the court in that city to appoint only one or ed, to these very friends, and leaves all others to their two days for one or two hundred cases of Insolvent debtfate. Perhaps it is not too severe a punishment for such" ors-that he had known one hundred of them sworn off men, that they should drag out the remnant of their days "in a morning-he had seen them sworn off by six or in poverty and wretchedness-that they should become" eight of them taking the book at a time; and added, vagabonds and outcasts on the face of the earth. And yet, it is under a strong temptation that they fall. You have, by your inefficient laws, seduced them to their ruin; and perhaps it is not quite just-not altogether consistent with humanity-certainly not with public policy-to And now, what is the remedy for all this? Ianswer, conleave them in this wretched condition, without any incen- fidently, that the only effectual remedy is to be found in tive to industry, or any tie to bind them to society. But the exercise of our constitutional power of establishing a the evil stops not here: one failure makes many, and a UNIFORM SYSTEM OF BANKRUPTCY. It was for this purpose single such case involves perhaps twenty others, of inno- that the power was conferred, and the great end is no cent persons, too, who have fallen victims to the frauds otherwise attainable. If we look into the proceedings of permitted, if not sanctioned by the laws. Sir, this whole the Convention, or examine the commentaries on the Concountry is filled with unfortunate debtors, who owe their stitution by the great men who framed it, we will find failure to such causes. I have no hesitation in declaring abundant reason to believe that the article which gives to it to be my firm belief and settled conviction, founded on Congress power over this subject, was designed to prevent some personal knowledge, and information derived from frauds. The journals of the Convention show, that, on those well acquainted with the subject, and worthy of the 29th August, 1787, it was moved to commit the folentire confidence-that, from these causes, there is a mass lowing proposition, to wit: "To establish uniform laws of talent, industry-ay, Sir, and virtue too-in our coun- on the subject of Bankruptcy, and respecting the damtry, idle and useless, and that their number is daily and ages arising from the protest of foreign bills of exchange;" rapidly increasing. Thousands of individuals, who, in which passed in the affirmative, by a yote of eight States the commercial vicissitudes of the last twenty years, have against two: Connecticut, New Jersey, Pennsylvania, become bankrupt-sometimes from fraud, oftener from Delaware, Maryland, Virginia, North Carolina, South Caimprudence, but most frequently from misfortune, are rolina, and Georgia, voting in the affirmative, and New now struggling out a miserable existence, a burden to Hampshire and Massachusetts in the negative. On the their friends and to their country. They live without first of September following, Mr. RUTLEDGE, of South hope, and will die without regret. And is it no object to Carolina, (from the committee) reported and recommenda young country like ours, to restore to society the labored the insertion of the following words, viz: "To estawhich is now paralyzed the enterprise which slumbers-blish uniform laws on the subject of Bankruptcies" the talent which is crushed-the virtue which is trampled which, on the 3d of September, was agreed to by Yeas in the dust? No gentleman who now hears me, will say and Nays, every State voting in the affirmative except Permit me to add, Mr. President, that there never Connecticut. The gentleman who made this report was was a crisis,in the affairs of this country, which more im- the celebrated JoHN RUTLEDGE, the Carolina Dictator-the

So.

that of the many thousands, so discharged, he had ne"ver known one who afterwards paid his debts." Sir, what must be the character of a system which produces such fruits?

1