Chapter VI.
The Legal Nature of Debt.—(Continued.)
Some persons may not have been convinced, by the arguments already offered, that debt is but a bailment. The doctrine is also too important to be dismissed without offering all the arguments that go to sustain it. Some further explanations of collateral questions are also necessary. These additional arguments and explanations have been reserved for a second chapter, for the reason that, to many minds, I apprehend, they will be unnecessary, and therefore tedious; and for the further reason that the matter will be simplified by presenting them separately from those in the preceding chapter.
There remain two lines of argument, which go to prove the same point, to wit, that debt is but a bailment—and which, for the sake of distinctness, will be presented separately. It will be impossible, in presenting them, to avoid entirely a repetition of some of the ideas already expressed.
First Argument.
In order to get at the true nature and obligation of debt, it is necessary to consider that a promise to pay money is of no legal importance, except as evidence of debt. It does not, of itself, create the debt. It only aids to prove it.
Neither do the true nature and obligation of debt consist in, nor even rest at all upon, the merely moral obligation of a promise to pay. A naked promise to pay money is of no obligation, in law, however sincere may have been the intention of the maker to fulfil it. The legal obligation of debt never arises from the fact that a man has made a promise to pay money. It is entirely immaterial to the validity of a debt, whether the debtor have made any promise or not. The debt does not arise from the promise; the promise is only given as evidence of the debt.
The legal obligation of a debt, then, is something entirely distinct from the moral obligation of a promise, or the moral obligation to keep one’s word. The promise is given merely because the debt is due, and as evidence that the debt is due. It is no part of the legal obligation of the debt itself.
If a promise be made when no debt is due, the promise is of no importance in law. On the other hand, if a debt be due, and no promise have been given, the debt is equally valid, as if a promise had been given. These facts show that the promise is nothing material, either to the existence or to the obligation of a debt. A debt may be created without giving a promise; and a promise may be given without creating a debt.
In order, therefore, to get at the true nature of debt, it is necessary to separate it entirely from the idea of a promise. It is this false idea of the legal obligation of a promise, that interposes itself before our minds, and prevents our seeing the true nature and obligation of the debt.
But it is said by the lawyers, that when a man has “received value,” as a “consideration” for his “promise,” his promise is binding. But it is an entire misstatement of fact, and conveys wholly erroneous ideas of the nature of debt, to say that the debtor receives value, as a consideration for his promise. A man never pays a consideration for a promise—for a promise, as we have seen, has, of itself, no legal obligation, and is of no consequence to the validity of a debt. To say, therefore, that a man pays a consideration for a promise, is equivalent to saying that a man pays his money for nothing—for that which has no value of itself, and is of no legal obligation.
If, then, the creditor do not pay “value” to the debtor as a consideration for the debtor’s promise, for what does he pay it to him? Obviously as the consideration, or price, of the thing promised—that is, as the price of the equivalent, which the debtor sells to him in exchange. If, for instance, A sells to B a horse for an hundred dollars, and takes B’s promissory note therefor, he does not sell the horse for the note, but for the hundred dollars; and he takes the note merely as evidence that he has bought the hundred dollars, and paid an equivalent (or value) for them, and that they are therefore now his, by right of property; also as evidence of the time when they are to be delivered to him.
This brings us to a perception of the fact, that the “value received” by the debtor from the creditor, and the sum, or value, which the debtor promises to pay or deliver to the creditor, are merely equivalents, which have been mutually sold or exchanged for each other.
If these equivalents have been mutually sold, or exchanged for each other, each equivalent has bought and paid for the other; and, of necessity, the right of property in each equivalent passed to its purchaser, at the same time that the right of property in the other equivalent passed to its purchaser—that is, at the time of the contract.
But that, which makes one of these parties the debtor of the other, when there has been merely an exchange, or a mutual purchase and sale of equivalents, between them, is simply this, viz., that the value, which is sold by one of the parties to the other, is, by agreement, to remain, for a time, in the hands of the seller, for his use.
A debtor, therefore, is one, who, having sold value to another, and passed the right of property in it to the purchaser, retains it for use until a time agreed upon for its delivery. At the end of this time, the creditor can claim this value, because it is his, he having previously bought it, and paid for it—and not because the debtor has promised to deliver it at that time. The debtor’s promise to pay, or deliver, this value to the creditor, at the time agreed upon, is not of the essence of the contract, by which the creditor acquired his right of property to the value promised; and it is of no importance whatever except as evidence that the value, thus promised to be paid, or delivered to the creditor, has been already sold to him, paid for by him, and now belongs to him; and that the debtor has no right to retain it, for use, beyond the time when he has promised to deliver it. The promise, therefore, instead of being evidence that the right of property, in the value promised, has not passed to the creditor, is only evidence that it had (in point of law) passed to him before the promise to deliver it was made.
The right of property, in the value to be paid by the debtor, must have passed to its purchaser, the creditor, at the same time that the right of property, in the “value” paid by the creditor, passed to its purchaser, the debtor—that is, at the time of the contract; else the creditor would have parted with his “value,” or property, (that which he paid to the debtor,) without receiving any equivalent for it. He would merely have received a promise, which, as we have seen, is of no legal value, of itself, and could be used only as evidence. And it could be used as evidence only to prove that the creditor had paid value to the debtor in exchange for an equivalent; that he had thus bought the equivalent; and that he was then, of course, the owner of the equivalent thus bought and paid for—notwithstanding it were still remaining in the hands of the debtor.
The promise, therefore, would be of no avail, even as evidence, unless the right of property in the value promised to be paid, or delivered, had already passed to the creditor—for that is the only fact, (in case of debt,) which the promise can be used to prove.
But perhaps it will be said, (and this is all that can be said on the other side,) that the promise, and the acknowledgement of the receipt of value, by the debtor, may be used to prove that the creditor has paid value to the debtor in exchange for an equivalent, which the debtor was to deliver, or pay, to the creditor at a future time. True it may; it can be used for that purpose, and no other. But that is, in reality, only asserting, instead of contradicting, what has already been stated, viz., that the promise may be used to prove that the creditor has bought value of the debtor, and paid for it; and that it, (the value thus bought and paid for,) is therefore now his, (the creditor’s,) by right of property, and has been his ever since he bought and paid for it, to wit, ever since he paid his value to the debtor—for (as has before been mentioned) it is absurd to say, when a man has bought and