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Credit relations between the English merchants and the Colonial merchants and planters in the eighteenth century online

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ing debtors not in prison into inroluntary banlcruptoy. The Board admitted the

act to be just and equitable in abstract principle; yet^ it added^ esqperience

had shcfvn that such acts afforded opportunities for fraudulent practices even

in England vhere most of the creditors were on the spot* "In a colony vhere

it is ccnpnted that not abore a tenth part of its creditors reside, a Banlcrupt

Lair had hitherto been deemed inadmissible on account of the injustice of its

operation vith respect to the other nine-tenths of the creditors residing in

Great Britain*" In other words, a banknptcy law was liable to objection

and disallowance upon general principles. In this connection the Board took

occasion to state that the insolTcncy act of 1757 passed in Massachusetts had

been disallowed upon general grounds.

The Boajrd had looked upon the act as affecting the property of British

merchants, and had therefore invited the principal merchants of London trading

to Yirginia to give their views on the act; the agent of the colony was

included in the invitation. Merchants from Bristol also appeared before the

Board, and memorials were sent in by merchants in Glasgow and Liverpool. The

56
merchants advanced the following objections to the act;



(52) Journal, House of Burgesses, 1761-1765, pp. 171-172.
(58) A* P. C, Col. 8er., 1745-1766, p. 563.

(54) Ibid ., p. 563.

(55) lH7., pp. 568-564.

(56) Ibid., pp. 564-565.



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1. Th» in»olT»nt del»tor had powr to clear hlMelf Iqr a Toliwtary
•urrender of all hi» affect*, which the ereditora were obl||^ed to accept;
hut they had no aeaaa of oonqMlllng hin to aueh aurrender.

2. Within ninety day* after aurrender, the oreditora reaident in
Virginia were, hy majority of number (without regard to ralua aa the
English law requirea) to choose two assi^iees from among themselres,
in Which choice the creditors residing in England could hare no share.

3. These aaaignees were within three months to sell the debtor's
effects hy auction, upon twelre montha* credit. The reeorery of the
whole prodttoe of sueh sale waa thua rendered precarious. And the se-
curity of that which waa receired waa endangered hy the went of any
obligation on the aasignees to appoint a Treaaurer (as is the practice
in England) or to plaee it in other aafe cuatody.

4. Aasignees were to be allowed fire per cent, for their trouble,
whioh was contrary to the practice in England and en unreaaonable ^^nu-
tioo of the insolTont's effects, to the prejudice of his creditors. ^«

5. Creditors in Great Britain might tranamit their elaima, duly
prored, to their agents, whioh being produced at any time before the
dlTidend waa made ahould be allowed. Bat as the act also deelared
that the debtor might diaprore any demsnd and the aaaignees might aet
respeetiTe debta againat each ether, and allcsr no more than appeared
to be due on the balanee, the merchants i^yprehended that they were
expoaed to Ihe poaaibility of great injuatiee by making them debtors
for eonaignaints from Virginia whioh might nerer hare been reeeiTod,
or for prieea irtiich the eonnoditiea, though reeeiTed, might nerer hare
netted the plantera.

6. The asaigneea might make a diTidend at the end of the twelTO
mootha after aale of the debtor 'a eatate, but they were obliged to
Mke a final diridend within eighteen months after their i^pointment,
end from thenceforth the inaoWent waa free and elear, where^ the
British creditor, if he ahould not hare timely notice of hia debtor 'a
inaolrenoy, or if hia power of attorney ahould miaearry, might fre-
quently loae hia whole debt.

7. The act gare to the inaolTcnt an allowance oa dlTidenda without
definite limitation,— an improper encouragement to run into debt. The
Britiah statute limited the maount to 800 pounda.



(57) In thia connection note that the Massachuaetts inadrency acts

prorided for petitioning into inroluntary bankruptcy.

(58) lote that the aaaignees would of necessity be colonial creditors.



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The records of the Yirglnla CoBsalttee of Correspondenoe thror an inter*
estii^ sidelight on the opinion held in the oolony with reference to the insol*
Toney lair of 1762 before it was repealed in 1765. In a letter written in

Ikireh^ 176S« to the agent of the colony in England, the Coonittee pointed oat

60
that the act of 1762 was an inprovement o^er an act passed in 1748 providing

for the relief of certain creditors. The earlier law had prorided for the die*
charge of a debtor prisoner after twenty days* confinement provided he delirered
a schedule of his real and personal estate. The effects thus Toluntarily dis-
closed by 'Uie debtor were nade subject to the payment of the debts due those
creditors at whose suit the debtor had been imprisoned. This provision excluded
from a share in the property all creditors who had not already brought suit,
which meant that foreign creditors were especially liable to unfair restriction.
Under the provisions of the act of 1762, hovever, "full time is giwen for all
creditors to come in and the legislature have regarded the interest of the
British as well as of the Yirginia creditor." The Cenoittee then went on to
add« "You may perceire this is a step towards introducing the £lnglish| Statutes
of bankruptcy amongst us. It appeared that the country was not ready to receive
them in that extent they hare been carried to in our mother country. That
punctuality which is required in the immense trade she is engaged in, the least
failure in which constitutes a bankruptcy, cannot be eipeoted in an infant
country where the rules and conveniences of trade are not well established.
The Assembly therefore thought it not safe to venture any further at this time.

English merchants frequently complained to the Board against the short
periods of time allowed by colonial bankruptcy acts for the presentation of
claims. The Board in one instance stated that "some months notice of distribu-



(59) Virginia Mag. of ffiLst.^ XL, pp. 155-137.

(60) Hening, 7, p. 531.

(61) Here is e^qposed that naiwe recognition with lAiich a debtor ooamunity

acknowledges its sins.

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•61



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tlon and •ighteon montha to naka the dlatribution in would be fair to Brltlah
oraditor a • "^^ Eiighteaa montha waa uaually the BaxlBaQ& extenalcn of tlnei the
■inlnum ailght rary between aix aontha and aixty day a. A lorth Carolina aot of

177S waa diaallcared beoauae it allowed only aixty daya for the preaentation of

63
claina and permitted no fiurther delay for abaent peraona.

A Virginia General Court record of 1761 preaenba an intereating oaae of

colonial oreditora objeoting to exactly the aaaie kind of diacrimination in the

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proriaiona of the Engliah atatutea* A decree had been granted by the general

Court of Virginia againat the aaaigneea of a London firm of merohanta with pro-
perty in the coloniea* The aaaigneea in England appealed the caae to the Priry
Council^ whereupon the Coeanittee of Correapondence in Virginia took the matter up
with ita agent in London* The Coomiittee pointed out that the decree of the
Court had been founded on an aot paaaed in 1744 which prorided for the recorery
of debta due the ixihabitanta of the colony from peraona reaiding out of it. The
act had recelTcd the rpyal confirmation which placed it beyond any future inter*
ference from the Crown* "Thia ia a pointy" the Committee urged, "that you are
to inaiat upon if it ahould be diaputed." The aaaigneea, according to the
Committee, had contended that they were entitled to all the effecta which the
firm poaaeaaed in Virginia, aa well aa thoae in Oreat Britain, to the excluaion
of the righta of the coloniata. It waa at thia point that the coloniata meant
to inaiat upon the legality of their act of 1744 1^ which theae effecta could be
attached for the benefit of local oreditora. The unreaaonableneaa and injuatice
of the contention of the aaaigneea ia apparent, wrote the Committee, aince "the
time limited by the aaaigneea under a commiaaion of bankruptcy ^injEngland for
the oreditora to make out their demanda ia ao abort aa render a it impoaaible for



(62) Ruaaell, p. 128.

(63) lUd., pp. 127-128.

(64) Virginia Mag. of Hiat., ZI, pp. 18-20.
(66) Haning, V, pp. 220-225.



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it66



UB to OQDM in under a oomission and raoeiTa any benefit froa it«" The
Committee went on to proteat that "the eff eota vhioh the merohant of Oreat
Britain hath here often giTos oredit to hie faotor or agents • • • and if the
prinoipal happens to break the bills are protested; • • • if the assignees pre*
Tail in this ease the rery effects here whioh the planter looked upon as a se-
ourity for the psyaent of the bills are swept away by them* • • • Tou are to

engage the best counsel you can to support and defend the force of this act

•67
• • • •

The multiplicity of law suits at times created both distress and conoem

smong the colonists* The Ooremor of Hew Jersey in 1769 receired a petition in

irtiieh attention was called to "the deplorable state of this county and prorinoe

in general^ arising^ as we apprehendt partly from the ezoessiTO scarcity of

money and decay of trade; but chiefly from the multiplicity of law suits j mostly

for debt*"^ The complaint was directed chiefly at "the greedy lawyers" and

suggested that attorneys be "restrained froa bringing writs not warranted by

laWf or gricTous to the subject." Maryland^ at an earlier date» had suffered

froBi an opposite eril* In the debate orer the passage of sn act in 1714 the

statement was made that Sngliah merchants had just cause for complaint on the

grounds that for want of sufficient encouragement giren to colonial attorneys

69
they oottld not get capable men to prosecute their cases* The colony pro**

ceeded to supply "encouragement" 1^ establishing regulations for lawyers* fees

end proTiding that any lawyer refusing to take a suit for the stipulated fee

or asking more, was to be fined fire hundred pounds of tobacco and be suspended



(66) Virginia Mag* of Hist*, XL, pp* 18-20*

(67) Ibid*, pp. 18-20.

(68) 1^ Jersey irohires. First Series (30 toIs*, Newark, Patterson, Trenton,

6omerTiile, lto6-1918), XX7I, pp. 529-631.

(69) Bernard C. Steiner, "The Bestoraticn of the Arcprietary of Maryland and

the Legislation against the Roman Catholics during the Ooremorship of
Capt* John Hart, 1714-1720," in American Historical Association Annual
Reports, 1899, toI. I, pp. 241-242*

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froft praetie# for a yoar* "This bill was found to be of suoh utility that

■•70
it was suooessiTOly re-enaoted dovn to the RerolutioD*"

The deoade 1760-1770 was a period of serere financial depression in the
colonies .^^ This was the deoade of the Stamp Tax, the Sugar Aot, and the Ion-
Ii|>ortation Igreenent* Trade was dull, money soaroe, and indebtedness wide-
spread among farmers, oountry storekeepers, and city merchants* The petition
presented to the Goremor of lew Jersey in 1769, with its ooigplaint against the
■altiplioity of law suits, is a reaction against the hard times* In Virginia

during the years 1757-1763 fifty-eight judgments were secured by persons resid-

72

ing in Chreat Britain* These raried in amount from hi to IilO,600; and of the

fifty-eight judgments secured, six were against two men, eight against four men,
and the remaining forty-four against as many different indiTiduals*

The financial depression was felt by all* The account between William

Allason of Falmouth, Virginia, and his brother in Glasgow shows a debit of

75
U129 in 1760, with a balance due of blS42. 9y 1768 the balance had been

reduced to Iil82, but only by effecting a corresponding reduction in the dibit

or purchase column* William JLllason himself was busily engaged in instituting

suits in Virginia for the reoonrery of debts due him* In 1764 he wrote, "I

believe there never were so many suits depending in this oountry /VirginiiJ as

there is at this time* Scarcely a prison is allowed to stand /enptyj in some

counties *^^ In 1762-1764, his suits against debtors numbered 126; in 1768-1770

they totaled 94*^^

Stephen Collins of Philadelphia found himself heavily in debt to the

English firm of leate and Pigon* In 1762 they wrote to him: "We have lately

(70) Steiner, p* 242*

(71) indrews, pp* 181-182*

(72) Virginia Mag* of Hist*, HI, pp* 1-4.
(75) Qaoted by indrews, p* 187*

(74) Quoted by Andrews, p* 185*

(75) Quoted by indrews, p* 184*



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been so •xtren^ly badly roadtted from Riiladelphia that it puts It out of our
posor to g^TS suoh oxtenslTO credits* • • • It greatly hurts us not to he paid

in time • • • oonsider vhat must becoms of us to be detained out of one hundred

76
thousand pounds perhaps for many months after the imroioe is due.* In 1765

leate and Pigon pointed out to Collins that he oved them U024j all of vhioh was

oonsiderably overdue^ "some of it of three years* and some of it of two years*

standing." They ooiaplained of the unreasonableness of the credit and declared

77
that it was suoh as "requires the Baxdc of England to support." The firm of

Darid and John Barclay declined to open business with Collins in 1768 on the

I ground that they had too many connections with Philadelphia and had been dis*

78
appointed in their remittances. About the same time another English firm

to whom Collins owed bS037 wrote j "Though the money may be safe in thy hands ^

yrt it will not pay our debts here and interest is no equivalent to the dis-

79
appointment in our trade." By 1771 Collins had cleared himself of indebted*

neas to leate and Pigon and in gratitude leate sent him a hamper of porter and

80
a Sorth Wiltshire cheese.^

9y 1773 and 1774 the colonial trading centers were beginning to feel the
approach of the crisis of 1776. The increased tension was shown in the diffi-
culty and delay with lAiich bankruptcy suits were prosecuted. Thomas Adams of
Virginia had undertaken to act for London merohants in a bankz^tcy suit prose-
cuted in the colony^ the progress of which is typical of the delays encountered

in those pre-Berolutionary years« and also those experienced in the more normal

81
years. Adams had attached goods amounting to ten or twelTO thousand pounds^

but there seemed to be a difference of opinion as to whether a person in England



(76) Quoted hy Andrews, p. 186.

(77) Quoted by Andrews, p. 186.

(78) Quoted by Andrews, p* pp. 186-187.

(79) Quoted hy Andrews, p. 186.

(80) Quoted by Andrews, p. 187.

(81) Virginia Mag. of Hist., mil (1914-1915), pp. 62-64. ^ ,

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could aeoure roocfrery under the Virginia aot« certain lavyere aaeerting that
the act vae intended only for colonial creditors irtio could receire no benefit
from the English statutes* In the erent that the point vas decided against
themj it would he adTisable^ idams wrote, "to engage sooie gentleman of charac-
ter and fortune in this [ccftmtryj to enter your security here for prosecuting
an appeal to the King and Council*"

In reference to the delays which were to be expected, Adams wrote, "l
si^pose it will be 18 mos*, perhaps two years, before we shall obtain our first
decree, which will be that so ouch money as appears to be your due, shall be
paid you, CQ your giTing security in this country to refund so much as shall
be the proportion of any claimant who may cone in or be adjudged equally en-
titled with yourself at any time before the passing of a final decree— this

final decree may be 8 or 10 yrs* off." A year later, 1774, the case had not

82
been settled* The courts throughout the colony had been closed, and the

General Court waa unable to proceed with ita business because two of the prin-
cipal counsel, Ifr* Pendleton and Ifr* Henry, were attending the Congress at
Riiladelphia as delegates from the colony* The other lawyers of the colony
had refused to engage in practice out of respect tw the two delegates and
their mission* "I am exceedingly sorry for this drawback on our business,"

wrote Adams* "We shall be only in April where we were in October, and God

83
only knows what is to turn up between this and then*"

The relations between the colonies and the mother country had become

critical by 1775, and the case in irtiioh Adama waa acting waa atill unsettled*

In April of that yaar he wrote to one of hia principala, "I haTC taken erery

atep in c<maequenoe that the lawa of thia country will weirrant to secure your

debt * • • but the alarming accounta from your aide [of the] water bid ua prepare



(82) Virginia Ifag* «f Hiat*, XXIII^ p*178*

(83) Ibid*, p* 170*



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far mournful erents in oon09quenoe# • • • Our General Coix^ontlon held at Ridh-
Bond by their resolTes has shut up our courts exoept in particular oases for
the probate of vills^ deeds, attaohaents on perishable goodsj eto« • • # We
are veil assured your men of war are to line our ooast to protect preyent
our trading elsewhere # Vhen this is the case it will be easy for a man of

your experienoe in the world to conclude that he who cannot sell cannot pay

•84
• • • #

While the courts in Virginia were being closed, the colony of Uassachu-

setts in 1774 passed an act to enable persons to carry to the exeoutire courts

86
of the colony actions of debt upon Judgments reoorered in neighboring colonies.

The act was meant to put a check to the practice of debtors removing to llassa*

ehusetts after Judgment had been rendered against them in other colonies, but

before exeouticn had been taken. This seems to be a step in the direction of

intercolonial co-operation in those matters which affected coanon interests.



(84) Virginia Mag. of Hist., Xnil, pp. 64-65.

(85) Uass. A^ & R., V, p. S2S.



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Chapter Thret
PIFKS MOHET iHD CREDIT RELATIOIS

The unfavorable balance of trade with vhioh the colonies had to contend
vat directly responsible for the accumulaticm of colonial debts in favor of Bag*
landj and indirectly responsible for the appearance of paper money in the colo-
nies # In the absence of a system idiereby credit as such could be exchanged in
the modem fashion^ balances had to be settled by some medium of exchange«*-coins^
bills of exchange, barter. But the \infavorable balance of trade operated to
drain the colonies of hard money, leaving a scarcity of coin for domestic as
veil as for foreign needs; and bills of exchange were ordinarily available only
so long as there vere f av<arable balances in England. Moreover, the colonies
vere forbidden to set up mints for making their ovn coins.

The shortage in hard money, vhich was a problem even in normal times,
vas sharply aggravated in times of stress when the colonies engaged in military
expeditions and wars. The necessity of finding some means of meeting the ex*
penses of military esqpeditions was in neiurly every colony the original pretext
for issuing paper money. The temporary relief afforded by these issues con-
vinced the colonists that in them lay the solution of all their financial ills;
and the practice <mce begun, became a habit. It was this issuing of paper
money, subject to rapid depreciation, with clauses making such currency legal
tenier, that brou^t forth concerted opposition from the Aritish merchants, and
resulted finally in the passing of a law by Parliament forbidding the issuing
of legal tender paper money in the colonies.

From the colonial standpoint, the use of paper bills of credit might be
defended from three points of view. In the first place, funds had to be cre-
ated for replenishing the drains made upon the treasury in meeting the exigen-
cies of war. Massachusetts and South Carolina, e:q>osed on the one hand to the
French and Indians of Canada and on the other to the Spaniards and Indians of

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Florida^ vere natorally among tha first of tho eolonies to Indulgo in istuos
of paper monoy* lorth Carolina rosortod to tho praotioe shortly aftor Ifusa-
ohosotts and South Carolina had set the example, in order to "defray the oharges
of an Indian War then kindled;* and Virginia, among the last to issue paper
money, finally sucoumbed to the praotioe in order to meet the esqpenses of war.

The Board of Trade was foroed to aoknowledge the neoessity of issues of
paper ourrenoy for war purposes and generally approved aots for this purpose.
In seme oases it sanetioned a Tiolation of instruotions prerioasly issued.
Commsnting upon a Sew Jersey aot of 1759 for the emission of bills of oredit,
the Board wrote: *• • • if year Majesty should think proper to require the said
eolony to furnish any nxamber of troops for the general serrioe in Imerioa in the
ensuing year there will be a neoessity of altering your Majesty's instruotions
to the Ooremor by permitting him to assent to a law for issuing a oertain quan*
tity of paper bills of eredit without a suspending olause, or to aequiesoe in a
breaoh of the said instruotions as has been done in the neighboring ool^iies of
lew York and BonnsylTania* • • # Referring to a Bannsylvania aot of 1756 for
emitting 190,000 in bills of oredit, Matthew Lamb, the Crovn*s legal adviser,
wrote, *• # • inasmuoh as there is no olause suspending the exeoution of this
set till his Majesty's pleasure might be known, it is oertainly liable to objeo-
tion, but in the great exigenoies of the present oonjunotion, when supplies are
so absolutely neoessary for oarrying on his Majesty's serrioe" it is suitable
for allowanoe*

Proa a seoond point of riew, the issues of paper money might be defended
on the ground that they eonduoed to the derelopment of trade* Franklin, in his

(1) Channing, II, p« 502«

(2) lo« Car# C. S#, I, p« 838; Charles J« Bullook, The Monetary History of the

United States (Hew York, 1900), p. 129.
(8) William and Mary College Quarterly, XX (1911-1912), p. 227.

(4) A« P. C, Col. 8er., 1745-1766, p. 362.

(5) Pa. Stats, at Large, V, p. 575.



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testimony before the Hoase of Coomoiie In 1766, stated, *# • • I have always
obserred that in erery colony the more plenty of means of remittance to Eng-
land, the more goods are sent for, and the more trade vith England carried
on. And in his Works he remarks, *• • • the colonies that have made use

of paper mcmey haTO been, and are, all in a thriring condition* The debt

indeed to Britain has increased, because their nximbers, and of course their

•7
trade, have increased. • • •" The Board repeatedly conceded that a reason-



able amount of paper currency, properly protected, might prove a benefit rather
than a detriment to trade* In 1794 a petition of some Bristol merchants
against a Hew Jersey act for the emission of MO, 000 in bills of credit was
referred to the Board of Trade, which reported: *The act is confirmed . . .
there is no essential difference between this and a former law to the like pur-
pose, which hath been executed with good effect and proved beneficial to the
prorinee* A Bonnsylvania act of 1759 for re-emitting fc80,000 of bills of
credit stated in the preamble that *• • • it hath been found on experience

that by the bills so emitted the trade of this province to and frcm Great Britain

fltlO
and elsewhere hath been much augmented* • • *" Before acting i^>oq another

Pennsylvania paper money billof 17S9, the Board called in some of the merchants

trading to the colony* They stated that they had no obJeoti<ni to the act, but

rather thought it absolutely necessary for carrying on comBierce*

The prospect of being deprived of the privilege of issuing paper money

caused considerable foreboding aaong colonial merchants # Samuel Rhoads, Jr*

of Philadelphia wrote to an English f ixm in 1764, *The scarcity of money added



(6) Hansard, X?I, p* 136*

(7) The Works of Benjamin Franklin, ed* by Jared Sparks (10 vols*, Chicago,

1882}, II, ppl 342-343.

(8) Bussell, p* 121*

(9) A* P# e*. Col* Ser*, 1720-1745, p* 424*

(10) Pii* Stats* at Large, V, p* 7*

(11) Ibid*, 17, p* 481.



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Online LibraryArthur Shelburn WilliamsonCredit relations between the English merchants and the Colonial merchants and planters in the eighteenth century → online text (page 4 of 7)