Works of Honore De Balzac, page 592
“God of mercy!” exclaimed Birotteau; “in the worst of a storm a star guides me.”
Resignation is the last stage of man’s misfortune. From this moment Cesar’s downfall was accomplished; he accepted it, and strength returned to him.
VI
After admitting his insolvency and filing his schedule, a merchant should find some retired spot in France, or in foreign countries, where he may live without taking part in life, like the child that he is; for the law declares him a minor, and not competent for any legal action as a citizen. This, however, is never done. Before reappearing he obtains a safe-conduct, which neither judge nor creditor ever refuses to give; for if the debtor were found without this exeat he would be put in prison, while with it he passes safely, as with a flag of truce, through the enemy’s camp, — not by way of curiosity, but for the purpose of defeating the severe intention of the laws relating to bankruptcy. The effect of all laws which touch private interests is to develop, enormously, the knavery of men’s minds. The object of a bankrupt, like that of other persons whose interests are thwarted by any law, is to make void the law in his particular case.
The status of civil death in which the bankrupt remains a chrysalis lasts for about three months, — a period required by formalities which precede a conference at which the creditors and their debtor sign a treaty of peace, by which the bankrupt is allowed the ability to make payments, and receives a bankrupt’s certificate. This transaction is called the concordat, — a word implying, perhaps, that peace reigns after the storm and stress of interests violently in opposition.
As soon as the insolvent’s schedule is filed, the Court of commerce appoints a judge-commissioner, whose duty it is to look after the interests of the still unknown body of creditors, and also to protect the insolvent against the vexatious measures of angry creditors, — a double office, which might be nobly magnified if the judges had time to attend to it. The commissioner, however, delegates an agent to take possession of the property, the securities, and the merchandise, and to verify the schedule; when this is done, the court appoints a day for a meeting of the creditors, notice of which is trumpeted forth in the newspapers. The creditors, real or pretended, are expected to be present and choose the provisional assignees, who are to supersede the agent, step into the insolvent’s shoes, became by a fiction of law the insolvent himself, and are authorized to liquidate the business, negotiate all transactions, sell the property, — in short, recast everything in the interest of the creditors, provided the bankrupt makes no opposition. The majority of Parisian failures stop short at this point, and the reason is as follows:
The appointment of one or more permanent assignees is an act which gives opportunity for the bitterest action on the part of creditors who are thirsting for vengeance, who have been tricked, baffled, cozened, trapped, duped, robbed, and cheated. Although, as a general thing, all creditors are cheated, robbed, duped, trapped, cozened, tricked, and baffled, yet there is not in all Paris a commercial passion able to keep itself alive for ninety days. The paper of commerce alone maintains its vitality, and rises, athirst for payment, in three months. Before ninety days are over, the creditors, worn out by coming and going, by the marches and countermarches which a failure entails, are asleep at the side of their excellent little wives. This may help a stranger to understand why it is that the provisional in France is so often the definitive: out of every thousand provisional assignees, not more than five ever become permanent. The subsidence of passions stirred up by failures is thus accounted for.
But here it becomes necessary to explain to persons who have not had the happiness to be in business the whole drama of bankruptcy, so as to make them understand how it constitutes in Paris a monstrous legal farce; and also how the bankruptcy of Cesar Birotteau was a signal exception to the general rule.
This fine commercial drama is in three distinct acts, — the agent’s act, the assignee’s act, the concordat, or certificate-of-bankruptcy act. Like all theatrical performances, it is played with a double-intent: it is put upon the stage for the public eye, but it also has a hidden purpose; there is one performance for the pit, and another for the side-scenes. Posted in the side-scenes are the bankrupt and his solicitor, the attorney of the creditors, the assignees, the agent, and the judge-commissioner himself. No one out of Paris knows, and no one in Paris does not know, that a judge of the commercial courts is the most extraordinary magistrate that society ever allowed itself to create. This judge may live in dread of his own justice at any moment. Paris has seen the president of her courts of commerce file his own schedule. Instead of being an experienced retired merchant, to whom the magistracy might properly be made the reward of a pure life, this judge is a trader, bending under the weight of enormous enterprises, and at the head of some large commercial house. The sine qua non condition in the election of this functionary, whose business it is to pass judgment on the avalanche of commercial suits incessantly rolling through the courts, is that he shall have the greatest difficulty in managing his own affairs. This commercial tribunal, far from being made a useful means of transition whereby a merchant might rise, without ridicule, into the ranks of the nobility, is in point of fact made up of traders who are trading, and who are liable to suffer for their judgments when they next meet with dissatisfied parties, — very much as Birotteau was now punished by du Tillet.
The commissioner is of necessity a personage before whom much is said; who listens, recollecting all the while his own interests, and leaves the cause to the assignees and the attorneys, — except, possibly, in a few strange and unusual cases where dishonesty is accompanied by peculiar circumstances, when the judge usually observes that the debtor, or the creditors, as it may happen, are clever people. This personage, set up in the drama like the royal bust in a public audience-chamber, may be found early in the morning at his wood-yard, if he sells wood; in his shop, if, like Birotteau, he is a perfumer; or, in the evenings, at his dessert after dinner, — always, it should be added, in a terrible hurry; as a general thing he is silent. Let us, however, do justice to the law: the legislation that governs his functions, and which was pushed through in haste, has tied the hands of this commissioner; and it sometimes happens that he sanctions fraud which he cannot hinder, — as the reader will shortly see.
The agent to whom the judge delegates the first proceedings, instead of serving the creditors, may become if he please a tool of the debtor. Every one hopes to swell his own gains by getting on the right side of the debtor, who is always supposed to keep back a hidden treasure. The agent may make himself useful to both parties; on the one hand by not laying the bankrupt’s business in ashes, on the other by snatching a few morsels for men of influence, — in short, he runs with the hare and holds with the hounds. A clever agent has frequently arrested judgment by buying up the debts and then releasing the merchant, who then rebounds like an india-rubber ball. The agent chooses the best-stocked crib, whether it leads him to cover the largest creditors and shear the debtor, or to sacrifice the creditors for the future prosperity of the restored merchant. The action of the agent is decisive. This man, together with the bankrupt’s solicitor, plays the utility role in the drama, where it may be said neither the one nor the other would accept a part if not sure of their fees. Taking the average of a thousand failures, an agent would be found nine hundred and fifty times on the side of the bankrupt. At the period of our history, the solicitors frequently sought the judge with the request that he would appoint an agent whom they proposed to him, — a man, as they said, to whom the affairs of the bankrupt were well-known, who would know how to reconcile the interests of the whole body of creditors with those of a man honorably overtaken by misfortune. For some years past the best judges have sought the advice of the solicitors in this matter for the purpose of not taking it, endeavoring to appoint some other agent quasi virtuous.
During this act of the drama the creditors, real or pretended, come forward to select the provisional assignees, who are often, as we have said, the final ones. In this electoral assembly all creditors have the right to vote, whether the sum owing to them is fifty sous, or fifty thousand francs. This assembly, in which are found pretended creditors introduced by the bankrupt, — the only electors who never fail to come to the meeting, — proposes the whole body of creditors as candidates from among whom the commissioner, a president without power, is supposed to select the assignees. Thus it happens that the judge almost always appoints as assignees those creditors whom it suits the bankrupt to have, — another abuse which makes the catastrophe of bankruptcy one of the most burlesque dramas to which justice ever lent her name. The honorable bankrupt overtaken by misfortune is then master of the situation, and proceeds to legalize the theft he premeditated. As a rule, the petty trades of Paris are guiltless in this respect. When a shopkeeper gets as far as making an assignment, the worthy man has usually sold his wife’s shawl, pawned his plate, left no stone unturned, and succumbs at last with empty hands, ruined, and without enough money to pay his attorney, who in consequence cares little for him.
The law requires that the concordat, at which is granted the bankrupt’s certificate that remits to the merchant a portion of his debt, and restores to him the right of managing his affairs, shall be attended by a majority of the creditors, and also that they shall represent a certain proportion of the debt. This important action brings out much clever diplomacy, on the part of the bankrupt, his assignees, and his solicitor, among the contending interests which cross and jostle each other. A usual and very common manoeuvre is to offer to that section of the creditors who make up in number and amount the majority required by law certain premiums, which the debtor consents to pay over and above the dividend publicly agreed upon. This monstrous fraud is without remedy. The thirty commercial courts which up to the present time have followed one after the other, have each known of it, for all have practised it. Enlightened by experience, they have lately tried to render void such fraudulent agreements; and as the bankrupts have reason to complain of the extortion, the judges had some hope of reforming to that extent the system of bankruptcy. The attempt, however, will end in producing something still more immoral; for the creditors will devise other rascally methods, which the judges will condemn as judges, but by which they will profit as merchants.
Another much-used stratagem, and one to which we owe the term “serious and legitimate creditor,” is that of creating creditors, — just as du Tillet created a banker and a banking-house, — and introducing a certain quantity of Claparons under whose skin the bankrupt hides, diminishing by just so much the dividends of the true creditors, and laying up for the honest man a store for the future; always, however, providing a sufficient majority of votes and debts to secure the passage of his certificate. The “gay and illegitimate creditors” are like false electors admitted into the electoral college. What chance has the “serious and legitimate creditor” against the “gay and illegitimate creditor?” Shall he get rid of him by attacking him? How can he do it? To drive out the intruder the legitimate creditor must sacrifice his time, his own business, and pay an attorney to help him; while the said attorney, making little out of it, prefers to manage the bankruptcy in another capacity, and therefore works for the genuine credit without vigor.
To dislodge the illegitimate creditor it is necessary to thread the labyrinth of proceedings in bankruptcy, search among past events, ransack accounts, obtain by injunction the books of the false creditors, show the improbability of the fiction of their existence, prove it to the judges, sue for justice, go and come, and stir up sympathy; and, finally, to charge like Don Quixote upon each “gay and illegitimate creditor,” who if convicted of “gaiety” withdraws from court, saying with a bow to the judges, “Excuse me, you are mistaken, I am very ‘serious.’” All this without prejudice to the rights of the bankrupt, who may carry Don Quixote and his remonstrance to the upper courts; during which time Don Quixote’s own business is suffering, and he is liable to become a bankrupt himself.
The upshot of all this is, that in point of fact the debtor appoints his assignees, audits his own accounts, and draws up the certificate of bankruptcy himself.
Given these premises, it is easy to imagine the devices of Frontin, the trickeries of Sganarelle, the lies of Mascarille, and the empty bags of Scapin which such a system develops. There has never been a failure which did not generate enough matter to fill the fourteen volumes of “Clarissa Harlowe,” if an author could be found to describe them. A single example will suffice. The illustrious Gobseck, — ruler of Palma, Gigonnet, Werbrust, Keller, Nucingen, and the like, — being concerned in a failure where he attempted to roughly handle the insolvent, who had managed to get the better of him, obtained notes from his debtor for an amount which together with the declared dividend made up the sum total of his loss. These notes were to fall due after the concordat. Gobseck then brought about a settlement in the concordat by which sixty-five per cent was remitted to the bankrupt. Thus the creditors were swindled in the interests of Gobseck. But the bankrupt had signed the illicit notes with the name of his insolvent firm, and he was therefore able to bring them under the reduction of sixty-five per cent. Gobseck, the great Gobseck, received scarcely fifty per cent on his loss. From that day forth he bowed to his debtor with ironical respect.
As all operations undertaken by an insolvent within ten days before his failure can be impeached, prudent men are careful to enter upon certain affairs with a certain number of creditors whose interest, like that of the bankrupt, is to arrive at the concordat as fast as possible. Skilful creditors will approach dull creditors or very busy ones, give an ugly look into the failure, and buy up their claims at half what they are worth at the liquidation; in this way they get back their money partly by the dividend on their own claims, partly from the half, or third, or fourth, gained on these purchased claims.
A failure is the closer, more or less hermetically tight, of a house where pillage has left a few remaining bags of silver. Lucky the man who can get in at a window, slide down a chimney, creep in through a cellar or through a hole, and seize a bag to swell his share! In the general rout, the sauve qui peut of Beresina is passed from mouth to mouth; all is legal and illegal, false and true, honest and dishonest. A man is admired if he “covers” himself. To “cover” himself means that he seizes securities to the detriment of the other creditors. France has lately rung with the discussion of an immense failure that took place in a town where one of the upper courts holds its sittings, and where the judges, having current accounts with the bankrupts, wore such heavy india-rubber mantles that the mantle of justice was rubbed into holes. It was absolutely necessary, in order to avert legitimate suspicion, to send the case for judgment in another court. There was neither judge nor agent nor supreme court in the region where the failure took place that could be trusted.
This alarming commercial tangle is so well understood in Paris, that unless a merchant is involved to a large amount he accepts a failure as total shipwreck without insurance, passes it to his profit-and-loss account, and does not commit the folly of wasting time upon it; he contents himself with brewing his own malt. As to the petty trader, worried about his monthly payments, busied in pushing the chariot of his little fortunes, a long and costly legal process terrifies him. He gives up trying to see his way, imitates the substantial merchant, bows his head, and accepts his loss.
The wholesale merchants seldom fail, nowadays; they make friendly liquidations; the creditors take what is given to them, and hand in their receipts. In this way many things are avoided, — dishonor, judicial delays, fees to lawyers, and the depreciation of merchandise. All parties think that bankruptcy will give less in the end than liquidation. There are now more liquidations than bankruptcies in Paris.
The assignee’s act in the drama is intended to prove that every assignee is incorruptible, and that no collusion has ever existed between any of them and the bankrupt. The pit — which has all, more or less, been assignee in its day — knows very well that every assignee is a “covered” merchant. It listens, and believes as it likes. After three months employed in auditing the debtor and creditor accounts, the time comes for the concordat. The provisional assignees make a little report at the meeting, of which the following is the usual formula: —
Messieurs, — There is owing to the whole of us, in bulk, about a
million. We have dismantled our man like a condemned frigate. The
nails, iron, wood, and copper will bring about three hundred
thousand francs. We shall thus get about thirty per cent of our
money. Happy in obtaining this amount, when our debtor might have
left us only one hundred thousand, we hereby declare him an
Aristides; we vote him a premium and crown of encouragement, and
propose to leave him to manage his assets, giving him ten or
twelve years in which to pay us the fifty per cent which he has
been so good as to offer us. Here is the certificate of
bankruptcy; have the goodness to walk up to the desk and sign it.
At this speech, all the fortune creditors congratulate each other and shake hands. After the ratification of the certificate, the bankrupt becomes once more a merchant, precisely such as he was before; he receives back his securities, he continues his business, he is not deprived of the power to fail again, on the promised dividend, — an additional little failure which often occurs, like the birth of a child nine months after the mother has married her daughter.
If the certificate of bankruptcy is not granted, the creditors then select the permanent assignees, take extreme measures, and form an association to get possession of the whole property and the business of their debtor, seizing everything that he has or ever will have, — his inheritance from his father, his mother, his aunt, et caetera. This stern measure can only be carried through by an association of creditors.
