This case arose in New York. A, being desirous of raising money upon a note, drawn by himself, and indorsed for his accommodation by B and C, authorized a broker to buy an additional name or guaranty, for the purpose of getting the note discounted, and application was accordingly made to D, who thereupon indorsed the note, receiving a commission of two and a half or three per cent therefor; it was held that the taking of the commission by D did not render the transaction usurious, and D was bound for the whole amount. The earlier cases, however, seem to have held that the compensation thus received must not exceed the lawful rate of interest for the time the paper has to run.

SECTION V.

OF COMPOUND INTEREST.

COMPOUND interest is sometimes said to be usurious; but it is not so; and even those cases which speak of it as "savoring of usury," may be thought to go too far, unless every hard bargain for money is usurious. As the authorities now stand, however, a contract or promise to pay money with compound interest cannot, generally, be enforced. On the other hand, it is neither wholly void, nor attended with any penalty, as it would be if usurious; but is valid for the principal and legal interest only.

Nevertheless, compound interest is sometimes recognized as due by courts of law, as well as of equity; and sometimes, too, by its own name. Thus, if a trustee be proved to have had the money of the party for whom he is trustee (who is called in law his cestui que trust) for a long time, without accounting for it, he may be charged with the whole amount, reckoned at compound interest, so as to cover his unlawful profits. If compound interest has accrued under a bargain for it, and been actually paid, it cannot be recovered back, as money usuriously paid may be. And if accounts are agreed to be settled by annual rests, which is in fact compound interest, or are actually settled so in good faith, the law sanctions this. Sometimes, in

cases of disputed accounts, the courts direct this method of settlement.

. Where money due on interest has been paid by sundry instalments, the mode of adjusting the amount which has the best authority, and the prevailing usage in its favor, seems to be this: Compute the interest due on the principal sum to the time when a payment, either alone or in conjunction with preceding payments, with interest cast on them, shall equal or exceed the interest due on the principal. Deduct this sum, and upon the balance cast interest as before, until a payment or payments equal the interest due; then deduct again, and

so on.

CHAPTER XVIII.

OF BANKRUPTCY AND INSOLVENCY.

SECTION I.

OF THE HISTORY OF THE LAW OF BANKRUPTCY.

CENTURIES ago, dealers in money, or "exchangers," as they were called in England, sat behind a bench, on which lay heaps of the coin they bought or sold; and some remains of this practice may now be seen in various parts of the old continent. This bench, or "banco," in the Italian language, gave its name to the moneyed institutions of deposit, or of currency, of which the earliest of great importance, if not the first in time, was the "Bank" of Venice. When such a trader became insolvent, or unable to meet his engagements, those who had charge of such things, whether as a police or as an association or guild of such dealers, broke his bench to pieces, as a symbol that he could carry on that business no longer. In Italian, the words "banco rotto" mean a broken bench; and from this phrase antiquarians suppose that the word "bankrupt " grew.

In this we see nothing of alleged criminality, or of punishment. But the laws of England went to an earlier source than the Italian commerce of the Middle Ages, and found in the Roman law the principle which governed, and perhaps still governs, their system of bankrupt laws. This principle is, that the bankrupt may be presumed to be dishonest and criminal, and treated accordingly.

By the original English common law, the body of a freeman could not be arrested for debt, whether he was a trader or not. And the earliest processes of that law included none for imprisonment for debt. This was of later origin. In the reign of Edward I. a law was passed authorizing an arrest of a defendant in certain cases, for the purpose of more effectually sccuring the performance of commercial contracts. This was

extended in its operation by a law of Edward III. and sundry statutes followed, applying further regulations to this subject, until late in the reign of Henry VIII. (1544) a statute was passed so nearly resembling a modern statute of bankruptcy, that it is generally considered the first bankrupt law. In a statute of the 13th year of Queen Elizabeth, the operation of the law was confined to traders; or, in the words of the law, "to such persons as had used the trade of merchandise in gross or in retail." And thus an important principle was introduced, which has since been adhered to, although somewhat liberally construed.

In those, and in still earlier days, there was perhaps more reason for regarding a mercantile bankrupt as a criminal than there is now. Even at present, many insolvencies are undoubtedly fraudulent, and the innocent bankrupt generally, if not always, owes his failure to guilty intent or guilty imprudence in some quarter. But it is also certain, that, in the vast complications of the commercial world, all who engage in business are subject to casualties, which imply no crime, and which no sagacity could avert. By the Roman law, the merchant who failed in business was expelled from the college (or guild) of merchants, and never suffered to trade again; if that law prevailed here, many of our most eminent and useful merchants would have lost the opportunity of retrieving their affairs by ultimate success, and paying off, by the fruits of a later industry, the debts of an early insolvency.

The community are now sensible of this. And to this conviction we owe the gradual, but of late years rapid, change in the spirit of our laws for the collection of debt. Now the endeavor is made to discriminate carefully between an innocent and a wrongful insolvency; and to treat the latter only as criminal. That our laws do not yet effect this purpose perfectly, and without any injurious result, may be true; but the purpose and the principle are certainly right.

The Constitution of the United States authorizes Congress to pass a bankrupt law. But not until eleven years after the adoption of the Constitution was a bankrupt law passed, in 1800, which, by its own terms, was limited to five years, but was in fact repealed after it had been in operation two years

and eight months. Sundry attempts were made from time to time for a new one; and whenever the vicissitudes of trade pressed more heavily than usual on the community, these efforts were more urgent. And to the general decay of trade in the country, or rather the wide prevalence of actual insolvency, was due the law which was passed in 1841, after an earnest but unsuccessful endeavor in the year previous.

If the amount or number of applications for the law is a true measure of its need or its utility, this law was not passed too soon. In Massachusetts, for example, there were 3,389 applicants for relief, and the creditors numbered 99,619; more than a third of the adult male population of the State, and the amount of their claims exceeded thirty millions of dollars, averaging about three hundred and fifty dollars to a creditor.

This law was repealed March 3, 1843, one year six months and fourteen days after it was enacted; and in this short period it affected more property, and gave rise to more numerous and more difficult questions, than any other law has ever done, in the same period. It was repealed because it had done its work. The people demanded it, that it might settle claims and remove encumbrances and liens and sweep away an indebtedness that lay as an intolerable burden on the community. When it had done this, it began, or was thought to have begun, to favor the payment of debt by insolvency too much, and the people demanded its repeal.

We shall prob

We have no national bankrupt law now. ably never have one until another similar national emergency shall arise; and perhaps not then, because the State insolvent laws are now so well constructed and systematized, that they effect, though not quite so well, nearly all the purposes of a national law.

But these State laws are entirely independent of each other; and their provisions are so different, that it is difficult, or indeed impossible, to present a view of the bankrupt law of the United States which can have the unity and system of such a view of the laws of any nation, in which these laws are made. by one legislature for the whole people, as in England, for example. But there is enough of system and of similarity, and enough of principle running through the whole, to make it