Religion and Bankruptcy: Sturges v. Crowninshield

One of the activities that the CLR co-sponsored last year was the conference by our excellent bankruptcy colleagues Ray Warner and Keith Sharfman (who together run the Center for Bankruptcy Studies at St. John’s) on Religion and Bankruptcy.  You can see some discussion of the conference here, here, here, and here.

As often happens to me, I came upon a neat topic of discussion months after the conference was over.  Sturges v. Crowninshield (1819), authored by Chief Justice Marshall, dealt in part with New York’s power to create a “bankrupt” law (a bankruptcy law) or instead “whether the power is exclusively vested in the congress of the United States” pursuant to Article I section 8 which gives Congress authority to enact “uniform Laws on the subject of Bankruptcies throughout the United States.”  It’s not my area, and so I am likely missing lots of important details (please fill them in), but I’m apprised by some bankruptcy folks that the old rule was that states could have bankruptcy rules so long as Congress did not pass a federal one, which meant that for much of the period  before 1898, states did have, and could have, their own bankruptcy laws.

Crowninshield is a long and extremely complicated case, involving the Contracts Clause as well.  But I thought to highlight one interesting piece of dicta in a later portion of the decision involving the relationship of bankruptcy and the religious ideas of the discharging of debt, expiation, and the alleviation of public misery and poverty.  Note also the natural law language used by Marshall in discussing the states’ “inherent” power to achieve these aims, as well as the way in which the Court wrestles with the problems of prison, debt, and freedom in the cultivation of good citizenship.

The states, then, in exercising the natural, inherent and indispensable power of discharging poverty, distress, and absolute indigence and inability from payment, have not only conducted themselves lawfully and constitutionally, but the omission to have done it, would have been impiously absurd; and it is an unjust imputation upon the constitution of the United States, to suppose a prohibition against the exercise of such a power somewhere in society. As to insolvencies, congress connot exercise it; as to bankruptcies, they refuse; the states, therefore, must exercise this power. The obligations of natural law, and the injunctions of our religion, which religion is a part of our common law, impose it as a duty, that the wants of the poor should be relieved. Strange, indeed, is it, that the laws should, at the same moment, press upon society two duties, so inconsistent and contradictory, as that of exacting for the payment of his debts, what the impoverished and imprisoned debtor has not; and obliging those who have something, to give him a share of what they have, to save him from suffering or death. Although it has been strenuously insisted, that the abstraction of the remedy is a violation of the contract, yet it has also been intimated, that if erroneous in this particular, the substance of the argument on the other side would still remain correct, inasmuch as not only the person of the debtor, but the debt itself, was discharged. It may, perhaps, be doubted, whether, though the person be discharged from the debt, the debt itself be extinguished. At the utmost, the tendency of the doctrine contended for, would be, but to give the creditor a right to the miserable chance of the future acquisitions of the insolvent, by a future action; and that chance, rendered the more desperate by the consideration, that arrest, that is, imprisonment, is almost the only mode of instituting actions in the United States. Grant that the remedy may be given, or withheld or modified, by the legislatures of the states, and the difference between us, in practical result, is not worth contending for. This could not be what the convention had in view. According to the doctrine on the other side, you discharge the debtor from prison, to condemn him to work in the mines, and that too, with his chains upon him. You remit the lesser, to inflict the greater punishment. You take him from a life of listless indolence, where you are obliged to maintain him, and doom him to a life of labor, without hope. Nay, worse, you so place him as to have every step watched by a lynx-eye avarice; every morsel he puts into his mouth counted and weighed; every personal indulgence censured; every family sympathy scanned and reprimanded. Well was it said by a learned judge, that such freedom would be a mockery: nay, worse, it would be aggravated slavery and complicated misery! It is admitted, that the state has a right to the service of its citizens. It may open its prison-doors even to criminals; what services can ever be rendered by him who is pressed down to the earth by a poverty that must be hopeless and interminable? The state wants the services of its citizens, to fight its battles on the land and ocean, to cultivate its fields, to enlarge its industry, to promote its prosperity, to signalize its fame. It does not want a heartless, purposeless, mindless being-but half a man-a worse than slave; it wants a citizen, with all his worth and all his energies of body, mind and soul.

There’s lots more in Crowninshield — a difficult and rich decision involving many fascinating issues of constitutional power and duty.

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