State Control of Pre-Modern Bankruptcy

At the end of my turn, I want to thank the Credit Slips bloggers for the opportunity to talk about some of my work and the readers for putting up with my long posts.

With my last post, I want to turn away from stories and air an issue about which I admit I am rather confused. I hear some modern bankruptcy scholars calling state control the defining characteristic of bankruptcy, and I am not sure what that means, or at least, I am not sure how to explain the way the state and the bankruptcy procedure intersected historically if state control is the defining characteristic. I will agree that from the first, bankruptcy has been a fundamentally statutory system. Not completely, mind you, because medieval northern Europe had a customary debt relief system that was something like bankruptcy, and some of the elements of what became modern bankruptcy were developed customarily in medieval northern Italy. Also, a great deal of English bankruptcy law was judge-created expansion and explanation of the statutes. But at its base, bankruptcy was built on statutes. Thus, even though for centuries the procedure was often run by the creditors, they operated in the shadow or under the compunction of the statutes, and more importantly under the threat of state-imposed punishment for not following the statutes. Given this caveat, I still think that indiscriminately labeling the various shades of state involvement “state control” is to homogenize what was a varied situation. By homogenizing under one descriptor, we lose a sense of important differences. What follows are a few very, very sketchy and selective observations about the public-private coexistence of bankruptcy procedure in several times and places. My question for readers is: what is the role of the state in bankruptcy procedure? Where is it vital and where is it, perhaps, optional?

Hanging Bankrupts

As previously promised, today's post is an overview of the history of the use of capital punishment for fraudulent bankruptcy in England.

The English instituted capital punishment for fraudulent bankrupts in 1707, but they were not the first to do so. In 1560, Charles IX of France legislated that “All bankrupts and those who failed (feront faillite) fraudulently are to be punished . . . capitally.” The royal ordinance of 1579 seems to have stepped back from the death penalty, but the punishment was reinstated in the royal edict of May 1609 on account of concerns that the multiplication of bankruptcies would lead to the ruin of commerce. Capital punishment remained the legal penalty for fraudulent bankrupts in the 1673 French national commercial code and until the time of the Revolution. In reality, the French courts often tried to avoid sentencing fraudulent bankrupts to death, but the law was not an empty threat. In 1602, two bankrupts were tortured and hanged. In 1637, a fraudulent bankrupt was tortured then condemned to be led around with a signboard around his neck reading, “Fraudulent Bankrupt,” prior to being strangled to death. But some judges preferred a more humane punishment. In 1673, for instance, a prominent bankrupt in Paris was sentenced to be led around by a rope around his neck, carrying a signboard advertising his crime, pilloried for three days, and then enslaved on a galley ship for nine years, and—to add insult to injury—made to pay court costs.

Perrott Bankruptcy, Part 3: Lord Mansfield, a Dead Prostitute, and Hidden Banknotes

This is the final installment of the Perrott bankruptcy story begun here and continued here.

Perrott was not pleased about being sent back to Newgate, so he turned to the courts.  In September 1760, he brought a writ of habeas corpus in King's Bench arguing that he should be released because he had answered the commissioners’ questions.  Lord Mansfield remanded Perrott to Newgate.  This case resulted in no published report, but Perrott's next two habeas attempts did.  In Rex v. Perrott, 2 Burrow's Reports 1122, heard on February 10, 1761, Perrott again argued that 1) he had already given a full answer to the commissioners’ questions; and 2) the commissioners' jurisdiction to question him, and therefore to commit him to prison, lasted only for the statutory 42 days that the bankrupt had to surrender himself and be examined.  Mansfield summarily dismissed point one, saying that Perrott’s answer to the commissioners was "very insufficient and unsatisfactory."  On question two, he pointed out that Perrott's counsel was reading the relevant statute (5 Geo 2 c. 30) selectively, for one section clearly permitted the commissioners to commit the bankrupt until he made a full answer. "The objection has been strongly argued," Mansfield said, "but there is no case to support it.  It is a new invention, and would entirely defeat the end and intention of the bankrupt-acts."

Finding himself still stuck in Newgate, Perrott agreed to submit to another examination by the commissioners.  This time he explained that about six years previously he had become acquainted with a certain Sarah Powel.  During 1759, he had lavished money upon her to the amount of 5000 £.  He provided an exact accounting of this money, each entry listing the month in which he sent Powel the money and the place to which he sent it.  Each entry was in round numbers:  100 £ at Christmas 1758, 500 £ in January 1759, 400 £ in February 1759, etc.  The commissioners were not persuaded.  First, Perrott could not provide any details about the money he spent on Powel during the first four years of their acquaintance, nor could he remember where she lived during those years, even though he claimed to have visited her often and to have written her.  Second, Perrott claimed that all of the money he sent to Powel came from his agent Henry Thompson.  None of it came from bank notes, and therefore none of it was traceable.  Unfortunately, Thompson had since died.  Conveniently, so had Powel, who had died penniless of consumption about ten months earlier (meaning that Perrott had known of her death when he gave his previous accounting on June 5, 1760).  In fact, Perrott could provide no evidence at all of giving enough money to Powel to keep her in luxury for many years.  On the contrary, the commissioners dug up evidence that Powel had complained to others of Perrott's parsimony.  To make matters worse, the commissioners discovered that Powel, aka Rachel Sims, was a prostitute and a drunk, or as a contemporary account put it, she was "in keeping, as the fashionable term is, by different persons, but was deserted at the time of Perrott’s meeting her.  She had contracted an habit of drinking, an habit not uncommon to ladies of her profession and disposition. . . ."

Perrott Bankruptcy, Part 2: Mysterious Packages and a Lot of Missing Money

(This is a continuation of my post from yesterday here )

In deposing Perrott's agent, Henry Thompson, the commissioners learned that the day after the commission was sued out, Perrott had his apprentice deliver a package to Thompson for safe keeping.  The package was sealed with three seals, and Perrott told Thompson it contained personal papers unrelated to the bankruptcy.  On February 27, Perrott asked Thompson to bring the package back to him, which he did.  An account of Perrott's case here adds the following alert, "it is necessary to advertise the reader, to keep in his memory the paper parcel sealed with three seals . . . as it was principally owing to the same paper parcel, that this complicated scene of iniquity was at last unraveled."  Perrott later told the commissioners that the package contained "'nothing but letters from the fair sex;' which he had since destroyed."

The commissioners also received a tip leading them to a certain Patrick Donnelley, a peruke, or wig, maker, who told them that on March 13, Perrott sent him two large boxes, claiming the boxes contained his clothing and asking Donnelley to hold onto them while he looked for lodging.  Several days later, Perrott instructed Donnelley to deliver the boxes to rooms in a house in one of the fanciest parts of town, on Queen Street in Holborn.  The house was occupied by a Mrs. Mary Anne Ferne.  Ferne was interviewed.  She claimed she had known Perrott for about a year but had received no money, banknotes, or other effects from him, and the matter was dropped.

When the commissioners finally got to examine Perrott again on April 19, they presented him with the following written interrogatory, "As you do admit that you have spent the last week . . . with Mr. Maynard, one of your assignees[,] to settle and adjust your accounts and to draw up a true state thereof, to enable you to close such your examination; and do likewise admit . . . there is a deficiency of the sum of 13,513 £ . . . .  Give a true and particular account; What is become of the same, and how, and in what manner you have applied and disposed thereof?"

Perrott Bankruptcy, Part 1: The bankruptcy Opens

Thank you to Bob Lawless for the far too generous introduction and to the Credit Slips bloggers for the opportunity to regale you with stories of bankruptcies past.  I know this a bit out of the usual stream of discussion on this blog, but I will try to keep things interesting. 

One of the things that strikes me about the history of bankruptcy (to say nothing of modern bankruptcy rhetoric) is the omnipresent ambivalence about the bankruptcy mechanism.  On the one hand, countries that developed bankruptcy laws did so because the elite perceived it to be good for commerce—pre-modern bankruptcy only being available to traders.  At the same time, though, people were offended by the notion that debtors could get away without honoring their commitments. 

This ambivalence comes out forcefully in the fear of “fraudulent bankruptcy.”  This concept meant different things in different countries.  French law, for instance, distinguished between those honorable debtors who were forced into insolvency (in French called faillite, or "failure") through circumstances not of their own making, and those dishonorable debtors whose irresponsible spending and borrowing habits caused their downfall.  The latter were called banqueroutiers, and were considered to have perpetrated a fraud on their creditors and were consequently subject to criminal prosecution. Seventeenth- and eighteenth-century England did not make a comparable distinction between types of bankruptcy.  Instead, one would commit the crime of fraudulent bankruptcy by failing to follow the requirements set out in the statutes, for instance by refusing fully to disclose assets.  In principle, the punishment for this crime was death by hanging.  In a later post, I will talk more generally about the use of capital punishment for fraudulent bankruptcy in England.  For sheer entertainment, I want to start with a multi-post account of the bankruptcy and eventual execution of John Perrott in London in 1761.  In 1819, this case was remembered by a parliamentary commission debating the abolition of capital punishment for bankruptcy as the most famous fraudulent bankruptcy of them all.