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The Insolvency Law of Ancient Rome, Part I

The Insolvency Law of Ancient Rome ©


By Theodor C. Albert[1]

December, 2005


I. Introduction

It is said nowadays that the new Bankruptcy Abuse Prevention and Consumer Protection Act of 2005[2] represents an unprecedented swing of the legal pendulum away from the protection of debtors in favor of creditors. We are also told by some critics that this new law was “bought and paid for” through massive and persistent lobbying efforts in Congress by the credit card industry and other lobbying groups. I find it comforting to remember that this pendulum has actually been swinging in both directions for a very long time. For at least the last 2500 years, Western Civilization has been grappling with some of these same issues between creditor and debtor, and as we will explore below, this latest Act is hardly the first time that politics has played a large role in the enactment of debt legislation.

One can read that our American bankruptcy laws had their roots in English common law, and that the “Act against such persons as do make bankrupts”, enacted in 1542 during the reign of Henry VIII, and another statute passed in 1570, were the first statutes dealing with bankruptcy as we understand it[3]. This is only partly true. What is not as often mentioned is that not only the English but in fact virtually all Western societies borrowed principles and procedures for their laws dealing with debt very heavily from ancient Rome[4] . As the Romans extended their empire by military conquest throughout much of Europe, North Africa and the Near East two millennia ago, a byproduct was Rome’s developed system of interconnecting roads, seaways and universal exchange of money. Rome’s was an economic system fueled in part by the comparatively free extension of credit. Not only did a class of professional financiers evolve, but also wealthy Romans began viewing the lending of money at interest, for the development of local and distant farms, vineyards, olive groves and tradesmen’s shops, and for the shipping of goods throughout the empire, as a suitable sideline to the traditional agrarian and land-owning pursuits of the patrician class.[5] It is not difficult to infer that an evolving legal system, providing ever greater breadth and subtlety in its protection of both debtor and creditor, was a factor in this growing system of credit extension .[6]

As Rome grew from a small city-state on the Italian peninsula to the nerve center of a vast military and economic empire, the ancient Romans found it periodically necessary to reexamine their laws governing debt collection, and to ameliorate the harsher consequences of default in order to keep the extension of credit freely flowing .[7] Consequently, their laws by the time of the late empire (circa 350 CE) had evolved to quite a remarkable degree and had become almost “modern” in their subtlety, complexity and scope. In many ways King Henry’s laws of 16th Century England, and even those of the early United States, were primitive in comparison. In the discussion following you may be surprised at how often our modern statutes and procedures echo the same or similar approaches as when these same issues were dealt with so long ago.


II. Insolvency Law in the Early Republic

A. The Twelve Tables

The first known law dealing with debt collection in Rome was found in the Twelve Tables (circa 450 BCE). These were written by a commission of noblemen, the Decemviri Consulari (“the ten Consuls”), in the midst of perennial friction between the two classes of Roman citizens, the plebeians and patricians. One of the plebian complaints concerned the seeming arbitrariness of Roman justice. These Twelve Tables, inscribed originally in wood, later in bronze tablets, and posted prominently in the forum, provided a written and accessible source of law. These laws governed property rights, inheritance, public administration, the prosecution of crime and procedures whereby injured parties could seek redress in civil disputes. This writing down of a formal legal code in contrast to what before had only been collective oral traditions of the community was a landmark departure from the earlier systems solely based on the ad hoc interpretation of judges. This rudimentary code of the Twelve Tables formed an important foundation for all subsequent Western civil and criminal law, and represents one of Rome’s greatest legacies for future generations.

The early treatment of debt as described in The Twelve Tables was severe. Among these provisions was Table III. The following translation is only one of several available. Many of the translations differ from each other in important respects ;[8] some of the significant additional language which appears in some of the translations is added in brackets:

“When debt has been acknowledged, or judgment about the matter had been pronounced in court, thirty days must be the legitimate time of grace.[9]
After that, then arrest of debtor may be made by laying on hands. Bring him into court. If he does not satisfy the judgment, or no one in court offers himself as surety on his behalf, the creditor may take the defaulter with him [for a period of at least 60 days]. He may bind him either in stocks or in chains; he may bind him with weight not less than fifteen pounds or with more if he shall so desire. The debtor, if he shall wish it, may live on his own. If he does not live on his own, the person [who shall hold him in bonds] shall give him one pound of grits for each day. He may give more if he shall so desire. On the third market day,[10] creditors shall cut [the debtor’s body into][11] pieces [or the debtor could be sold as a slave][12] . Should they have cut more or less than their due, it shall be with impunity”[13] (The first and last two sets of brackets contain material found in other translations added for this article.)

Commentators have debated whether Table III can be construed to have permitted actual bodily dismemberment of the debtor, a remedy harsher than any dreamed of by Shylock of The Merchant of Venice.[14] However, I am persuaded that the early law did actually permit capital punishment of the debtor at the discretion of creditors although it perhaps was rarely used in practice. I base this belief on two factors; first, all of the commentators agree that Table III provided that if creditors “cut more or less than their due…” they were absolved of any responsibility. Assuming this “cut” was symbolic and meant anything other than spilling the debtor’s blood, then it would appear to have been something that could later be rectified. But language as used in Table III implies, in contrast, that at the point this extreme remedy was exercised, there could be no future blame ascribed to a creditor exercising this right, a “free pass” if you will, because there was no going back. This only makes sense in the context of an irremediable act, such as an execution of the prisoner. Second, an ancient legal commentator, Aulus Gellius,[15] writing admittedly some five centuries after the enactment of the Twelve Tables, but much closer to the sense of the times than most modern commentators, cites to The Twelve Tables, and confirms that the unfortunate debtor could indeed be cut into pieces. Gellius asserts that although he had never personally heard of the extreme remedy being used, he lauds the in terrorem effect such a “cruel” and “fearful” remedy might have. Such terror had its place not only in “making faith sacred” and in persuading the debtor and his friends, patrons, family and associates to do all that was possible in coming to the debtor’s financial assistance, but also in deterring defaults generally .[16] Gellius contrasts this to the more ”modern” approaches of his day in dealing with debt and perjury, which he clearly thought only encouraged laxity and corruption. [17]

Under the Twelve Tables, after the grace period, the remedy involved a “laying on of hands” by the creditor, the manus injectio, but it is not clear whether the creditor had to first file an action with the praetor (a special magistrate), or whether self help was authorized as a preliminary to court proceedings.[18] If the debtor contested the debt he could send a vindex or representative to court, but he could not lawfully resist being taken into custody of the creditor.[19] If no defense were given, or if the debtor did not prevail in court, an order of the praetor issued whereby the debtor was assigned over to the creditor(s) in addictio for a period of 60 days.[20] The unfortunate debtor so “addicted” during this interim period was brought into the public marketplace, or before the praetor, or both, on successive occasions in the hope that friends, family or others could be persuaded to come to the debtor’s financial assistance.[21] If no adequate assistance were forthcoming the debtor was either sold as a slave trans Tiberium ( “across the Tiber”)[22] or executed. In this era there does not appear to have been any half-measure of indenture for only a period of years as a judicial remedy, but several commentators have opined that the addicted debtor could still be redeemed once the debt was paid, and returned to his former free status.[23] However, how this emancipation would work in the event that the addicted debtor had been already sold as a slave to a third party is not explained.[24] It is possible that the debtors’ right to work off their indebtedness and obtain freedom from incarceration, which existed formally centuries later in Roman law, may have evolved from some earlier form existing at the time of the Twelve Tables, but this is not clear from any original sources.[25]

B. Nexum, Mortgage of the Body

In early Republican Rome, in addition to the judicial remedy described of manus injectio, there also developed a kind of voluntary mortgage upon the debtor’s person , or upon the person of his guarantor, called nexum which permitted the creditor, on default of an obligation, to seize the defaulter’s body and hold him as a slave. In early times, there was an elaborate ceremony that accompanied the contract of nexum involving five witnesses, the weighing out of raw copper used in early years as a medium of exchange (or coinage in later years) by a libripens (literally,” balance holder” or “scale bearer”)[26] and a solemn oath from the debtor .[27] As a result of the Servian reforms (circa 570 BCE.), apparently the nexum contract was not only to be accompanied by this elaborate ceremony, but was also required to be published in some manner[29} as a condition to later enforcement. Publication was intended to protect debtors from overreaching by creditors. Manus injectio and addiction seems in early law to have resulted in permanent enslavement. Whether the nexum, in contrast to the judicial remedy, could be only for a term of years, is unclear. However, since the origin of the remedy was purely in contract and seems to have had less of the penal aspects of the judicial remedy, it is also presumed that creditor and debtor could bargain for the lesser remedy of servitude upon default for a limited term[30] although there is no surviving record of this .[31]

The nexi were abolished as the result, we are told, of a particularly egregious example of creditor “lust and cruelty”. The historian Livy[32] reports that in 326 BCE. a “usurer”, Lucius Papirius, held as nexus one Gaius Publilius, a handsome youth who had unfortunately either guaranteed the loan of his father secured by a nexum contract, or perhaps was pledged by the father. Reportedly, Gaius spurned the lewd advances of Papirius, despite reminders of his servile status. The scorned Papirius then had the youth “stripped and scourged”. “The boy, all mangled with the stripes, broke forth into the street, crying out upon the money-lenders lust and cruelty…”[33] A throng of outraged Romans marched to the Forum and into the Curia, demanding that the Senate change the law. From this was enacted the Lex Poetelia Papiria. This law abolished contracts for servitude as security for defaulted debt and provided that thereafter only the debtor’s goods could be mortgaged as security for debt.[34] However, addiction for debt as a judicial remedy persisted well after the Lex Poetelia Papiria.[35]

C. Bonorum Venditio, Ancestor of Involuntary Bankruptcy

Commencing in about the second century BCE, an alternative remedy developed which bears a resemblance to our involuntary bankruptcy. Upon default of any debt an action by a creditor or creditors could be filed before the praetor for an order permitting seizure of the debtor’s goods, the bonorum venditio .[36] This appears to have involved a public edict or proscribere of the praetor[37] for creditors to meet and appoint one of their number as curator bonorum[39] to perform much as trustees do today in seizing the debtor’s property. Immediate entry upon the debtor’s property was allowed as a security precaution under another order of the praetor, missio in possessionem. If the debtor’s assets were in multiple provinces, several curators could be appointed.[40] The creditors could direct the choice of the curator bonorum, and presumably influence the actions of the curator, by a majority vote ,[41] possibly weighted according to the respective amounts owed. After at least a thirty day holding period the curator bonorum would sell all of the debtor’s property en bloc to the highest bidder, proceeds to be (eventually) divided among creditors according to their due.[42] However, at least in some cases, bids were not expressed in terms of the highest money price, but in terms of the highest dividend on claims.[43] The curator, or creditors in possession before the curator was appointed, were empowered to manage the debtor’s properties which included the right to enter into leases and to sell crops, and to pay early any obligation that would otherwise accrue a penalty.[44] Curators could be sued by creditors if they missed an opportunity to maximize revenue, or for other defalcation.[45] Among assets seized would be not only tangible property but any rights of action that the debtor possessed, which the curator could bring on behalf of creditors up to one year following the seizure.[46] If the right of action was not reserved, it passed to any buyer if part of a sale.[47] The curator was expected to prepare a report on his income and expenses, and his expenses were recoverable from the debtor’s assets.[48] The proceeds of any of the debtor’s property against which there might have been a pledge or hypothica, were paid on a segregated basis to the secured creditor rather than divided pro rata.[49] There were “privileges” recognized which were paid before the general unsecured creditors and roughly parallel our modern system of priorities and exemptions.[50] If the proceeds of estate assets were insufficient to pay all debt, the debtor remained liable for any deficiency.

Some manner of public announcement of commencement of the bonorum venditio proceedings issued, probably by postings in the forum and in marketplaces .[52] This edict included a deadline, similar to a modern claims bar order, for participation in the proceedings by creditors. This deadline was two years from commencement for creditors residing within the same province as the debtor, or four years for those without.[53] A late-joining creditor could also participate in the proceeds from a sale of debtor’s goods, but apparently only on a pro rata basis from proceeds received after his first participation.[54]

Much of the above should seem very familiar to modern bankruptcy practitioners. However, there were some fundamental differences from our modern involuntary bankruptcy. There was no requirement that the debtor be actually insolvent, or that he be alleged to be insolvent, or even that he be alleged generally to be not paying debts as they come due.[55] Any one creditor could initiate the proceedings. Moreover, there was clearly a punitive aspect to the bonorum venditio[56] as typified by the case where a debtor fled to avoid a creditor; the debtor could suffer this “selling up” of all his goods even though the individual debt in default might be relatively small.[57] Moreover, the bonorum venditio made the debtor infamis, a crucial loss of social status.[58] While certainly a bankruptcy on one’s credit record is not a good thing in our modern world, any modern stigma pales in comparison to the stain of infamia in ancient Rome, with its capitis deminutio(“loss of status”), as discussed further below.

A parallel to the modern procedure for execution sale of limited items of debtor’s property to produce proceeds sufficient to satisfy a single debt did not appear until well after the Republican period.[59] However, there first appeared by senatus consultum (decree of the Senate) of uncertain date a version of this limited execution where a clara persona (illustrious person) such as a senator (or a senator’s wife) found himself in a position where his property would be sold up, a curator could be appointed to sell only that portion of the distinguished debtor’s goods necessary to satisfy creditors.[60]

III. Julius Caesar and Debt Reforms at the End of the Republic

The next stage of development in Rome’s laws dealing with debt adjustment was greatly influenced by the cross currents of social upheaval, political turmoil and civil war which dominated the decades from the end of the dictatorship of Sulla, circa 78 BCE, to Julius Caesar’s death in 44 BCE. To understand how these events translated into laws dealing with debt it is first necessary to understand two related aspects of Roman society in the era, the concept of infamia and the escalating cost of maintaining the prestigious public persona expected of the Roman elite.

A. Bread, Circuses and Dignitas, on Credit

Infamia was the antithesis of the Roman concepts of virtas and dignitas- the qualities of a good Roman, which were a complex blend of ancestry, wealth, civic contribution and individual merit.[61] Although public office was nominally unpaid ,[62] it was expected of all patricians and equites[63] to hold periodic magistracies within the government of the Roman Republic, known as the cursus honorum (“sequence of offices”) with ascending levels of dignitas. These positions might include as quaestor, aedile, prefect, tribune or praetor, with membership in the senate upon the conclusion of office. Provincial governorships and generalships were also prized. Consulship was at the pinnacle, and the leadership of the senate was comprised almost exclusively of ex consuls.[64] Attainment and retention of office was directly tied not only to a citizen’s existimatio (reputation) and to his fides (trustworthiness, faith) but also to his wealth. To qualify for the Senate, a man must have attained a minimum census of 400,000 sesterces[65] and he could be banned from the senate by the censors if his properties were too heavily mortgaged, as this put his fides in question.[66]

Even so it was not unusual for Roman aristocrats to borrow heavily from each other, or from professional moneylenders, in order to finance games to coax votes from the plebs urbana, to place strategic bribes, or even to lend to other ambitious and influential Romans to strengthen their web of alliances. Advancing a political career in the last decades of the Republic became enormously expensive. Indebtedness itself was not morally objectionable. Indeed, extension or refinance of the debts of a friend and fellow noble was expected , so long as his fides was intact. Cicero’s letters are full of references to his debts, to those of his associates and to their continuing efforts to liquidate assets to meet obligations, substitute one debt for another or to obtain refinancing.[69] The ambitious aristocrat was constantly looking for means to spread, refinance or postpone payment to delay the moment of reckoning in the prospect of some new and lucrative position, which would, if attained, afford repayment of all with interest. A good example is Julius Caesar. Caesar borrowed heavily from other nobles, notably Marcus Lucinius Crassus, to finance his aedilian games in 65 BCE .[70] Later, Caesar was offered a bribe by his political rival, Catalus, in the form of the repayment of his debts in return for Caesar’s withdrawal of his candidacy for the office of pontifex maximus (chief priest). But Caesar was able to borrow elsewhere and so was elected to the office in 62 BCE. He confessed to his mother that he would either that day be elected pontifex maximus or he would be exiled (and ruined) .[71]

In 60 BCE, Caesar was reportedly in debt for 25,000,000 sesterces which he had spent in advancing his career.[72] Only after his conquests in Gaul (circa 51 BCE) with its troves of gold plunder, was Caesar reckoned among the richest men in Rome. However, if the luck of an ambitious aristocrat turned and he could not keep up pretences, this was the end. As we have seen, the consequences of becoming involved in legal proceedings over debt were severe.[73] Further, involvement as a debtor in bonorum venditio or other debt proceedings also meant infamia, and with it exclusion from society and from many civic functions.[74] For the Roman of noble birth, infamia was political and social death .[75] Cicero argued passionately in 81 BCE court proceedings over the abject humiliation of infamia imposed unjustly on his well-born client, Publius Quinctius, who allegedly was tricked into involvement as a debtor in venditio bonorum proceedings. Cicero describes infamia as being “erased from the list of men” and proclaims eloquently:

“When a man’s goods are taken possession of according to the praetor’s edict, all his fame and reputation are seized at the same time with his goods. A man about whom placards are posted in the most frequented places, is not allowed even to perish in silence and obscurity; a man who has assignees and trustees appointed to pronounce to him what terms and conditions he is to be ruined; a man about whom the voice of the crier makes proclamation and proclaims his price- he has a most bitter funeral procession while he is alive, if that may be considered a funeral in which men meet not as friends to do honor to his obsequies, but purchasers of his goods as executioners, to tear to pieces and divide the relics of his existence…”[76]

B. The Plight of Debtors and Catiline’s Conspiracy

While this system of deft manipulation and postponement of indebtedness benefited some ambitious aristocrats in their accumulation of dignitas, like Caesar, it ruined others. One such disappointed patrician was L.Sergis Catilina, known as Catiline, who led a conspiracy against the Republic. Catiline had endured politically motivated criminal trials and, despite his substantial bribes paid and money spent, was still blocked from the consulship in 66, 65 and then again in 63 BCE. Catiline became the champion for the disaffected and indebted among the Roman nobility. Many aristocrats found themselves deeply in debt whether as a result of failed political ambitions or sheer profligacy and debauchery. Some might have extricated themselves from financial straits by sale of their ancestral land, but were loathe to liquidate their patrimony as land ownership was the traditional measure of income, wealth and fides in Roman society .[77] Catiline also had a following among veterans of Sulla’s>b>[78] campaigns. These ex-soldiers had been given the appropriated lands of Sulla’s enemies, but many had not managed to make a living as gentlemen farmers and found themselves hopelessly in debt to moneylenders but unable to liquidate the dubious titles to their lands. To such men, who had once profited by the sword, the prospect of change by violent upheaval was not unattractive.[79] In addition, there may have been a liquidity crisis in or about the mid 60s BCE. since moneylenders pressed for liquidation of debts at home to finance more profitable ventures overseas. Therefore, many accustomed to borrowing for political purposes found that credit had tightened considerably.[80] Finally, a bill proposed in 63 BCE. for the government to purchase lands of debtors and to redistribute the land to ameliorate the plight of the dispossessed and urban poor was defeated. A similar proposal of a tribune in 63 BCE to formally reduce or eliminate debt[81] came to nothing and may have led many debtors to conclude that no legal means remained open to avoid personal ruin.[82]

To this disparate group of the discontented, Catiline promised tabulae novae (literally “new tables” or new laws) which would have abolished debts and more equitably distributed wealth. During Cicero’s consulship in 62 BCE the conspiracy was exposed, the uprising easily defeated and the ringleaders slain or executed. Cicero and others denounced the conspirators as the “dregs of society”, profligate aristocrats who had squandered their patrimony, disgruntled veterans or lowest criminals and paupers “with nothing to lose”, whose base motivations were only of avarice, lust and envy.[83] These vilifications were probably no closer to the truth than the sanctimonious justifications for the conspiracy attributed to Catiline.[84]

Propaganda aside, there is little doubt that the Catiline conspiracy brought to the forefront of debate the grievances of the heavily indebted from many classes. Although Catiline’s espoused ends enjoyed much sympathy, the means chosen by the conspirators had little general acceptance. But the Roman economy had become inflated and fragile from the overextension of credit and the interests of debtors had become an important political issue. The interests of the creditor classes and the status quo continued to be staunchly defended by the old guard aristocrats, such as Cato[85] and ambitious novi homines (“new men”) such as Cicero. These critics decried attempts at debt reform, describing them as the practical equivalent of robbery. They also denounced the efforts of ambitious politicians (such as Caesar) in this vein as undermining the very foundations of the Republic.[86] Although the Republic withstood the attack of a minor demagogue like Catiline, it was ill-prepared for the ensuing confrontations with more serious warlords like Caesar and Pompey .[87]

C. Civil War and Caesar the Reformer

In 49 BCE the Republic was plunged into civil war as Caesar’s legions crossed the Rubicon and marched on Rome while Pompey and his senatorial allies retreated to the south. Financial instability followed the political turmoil. Debtors and creditors could be found simultaneously on both sides of the Pompey/Caesar divide. Confiscation of lands of political enemies under Sulla’s dictatorship was still a vivid memory to many, although Caesar proclaimed a policy of clementia. Predictably, the prices of land plummeted as many attempted to liquidate their holdings into less vulnerable forms such as currency .[88] In addition, both Caesar and Pompey liquidated much of their immense land holdings at deep discounts in order to raise coin to keep their armies immediately paid.[89] Buyers were hard to find at any price and credit tightened as debts were being called in throughout the empire. Caesar gained an advantage over his rival when he seized the aerarium (Rome’s treasury)[90] and was thus able to keep his own troops paid in gold. For everyone else coin was nearly impossible to obtain. Caesar’s own officers and his frightened civilian creditors were obliged to content themselves with even more IOUs.[91] Compounding this shaky financial situation was a scarcity of imported corn and the urban poor’s difficulties in paying rents .[92 In sum, 49 BCE saw a full-fledged financial crisis, with the severity of the laws concerning debt hanging over nearly everyone’s heads, noble and commoner alike.

Caesar was proclaimed dictator by the remaining Senate upon the flight of Pompey and his allies from Rome. Caesar triumphed over the legions of Pompey in 48 BCE and consolidated to himself virtually all political power. He was eventually proclaimed dictator for life by the Senate shortly before his assassination in 44 BCE. It is, of course, because Caesar as lawgiver turned to alleviation of the debt crisis that we remember him in this article. Even before Caesar’s elevation to dictator the tribunes had attempted to alleviate the debt problem by lowering the usury rates; but this measure was wholly insufficient. Coin was impossible to obtain and many debtors found that, because prices had so badly collapsed, even ancestral lands offered in payment would still leave a deficiency and exposure to ruination under the debt laws.[93] But, unlike Catiline, Caesar was careful not to embrace the more radical debt cancellation proposals of some.[94] Instead he issued a decree that assessors should make valuations of land at pre-war prices and that creditors were obliged to accept these in settlement of debt, in the expectation that prices would eventually return to normal levels.[95] To help alleviate the liquidity crisis, Caesar discouraged hoarding by renewing an older law forbidding the holding of more than 60,000 sesterces in gold or silver coin.[96] In about 47 or 48 BCE Caesar cancelled all rents accrued for one year to up to two thousand sesterces, cancelled all interest that had accrued since the civil war began, and further directed that any payments previously made on account of interest since the war would be added to the pre-war valuations of properties when given in settlement of debt.[97] In all it was reckoned these measures accounted for about a one fourth forgiveness of debt.[98]

Caesar’s approach was a measured one, striking a balance between the demands for total debt forgiveness from some prominent politicians ,[99] and the demands for return to status quo ante from conservatives in the creditor class, such as Cicero.[100] Caesar sought at first some method to allow the crisis to ease by temporary measures. If coin were unavailable then debtors, many of whom presumably had not been insolvent before the crisis, should be able to honorably repay by their only available means, such as the turnover of properties. Since prices had fallen, pre-war prices would apply to pre-war debts. But still some recognition of debt was fair and necessary to maintain fides, and so as not to completely alienate the many influential members of the creditor class who were by these measures required to take some losses. Caesar’s approach was to share the pain. Debt relief was to be given in measured doses so that the economic system could right itself without undue hardship or bloodshed and without long-term damage to the financial system now heavily dependent on credit. Caesar’s temporary relief measures gave something to creditors and debtors alike.[101] However, the shock and dislocation of the civil war and following debt crisis showed clearly that the severity of the old laws needed amendment given the real possibility that even the finest names in Rome could become infamis.

IV. The Innovation of Cessio Bonorum, the Ancestor of Voluntary Bankruptcy

Some of the principal aspects of Caesar’s temporary measures became permanently embodied in a new law which is the ancestor of much of our modern bankruptcy jurisprudence, the Lex Julia de bonis cendenis (“Lex Julia”). This law is also known by the description of it as a remedy, cessio bonorum (“cession” or “assignment” of goods). Unfortunately, no text of the Lex Julia survives and scholars are left with only obscure references to the law in the writings of ancient jurists and in some surviving statutes written centuries after. We are also not certain whether this next milestone in debt reform came just before or shortly after Caesar’s assassination in 44 BCE. There are many scholars who attribute this law directly to Caesar and surmise that it was enacted around 46-45 BCE as a logical and timely extension of his measures already discussed above. Many others infer that Caesar’s successor Augustus must have been the author, largely because the law was not explicitly mentioned in any surviving writings by Cicero or other of Caesar’s contemporaries who were much opposed to his debt reforms, and who would have been expected to comment on such a momentous change.[102]

Regardless of its authorship, cessio bonorum was a profound innovation. There had already existed a form of extra legal composition arrangement whereby the debtor would profess insolvency and creditors and the debtor could stipulate to an assignment of goods and forbearance from further suit. These are sometimes referred to as cessio bonorum extra ius[103 and probably also relate to the decoxit creditoribus suis arrangements that are spoken of in ancient sources, although it is unclear whether the debtor escaped infamia under these composition arrangements.[104] But unlike the decoction agreements, cessio bonorum did not depend on the voluntary forbearance of creditors. Instead, this was a proceeding in iure to compel debt relief, although apparently the granting of relief by the praetor was discretionary.[105] In return for assignment of all of his properties to a curator, except an amount necessary to sustain some minimal livelihood, the debtor would become exempt from actions in addictio against his person and free from any future actions on the debts ,[106] unless he came into future possession of significant additional property.[107] Moreover, the debtor who filed a cessio bonorum proceeding would avoid infamia.[108] Consequently, cessio bonorum was a landmark change in debtor-creditor relations and a beginning recognition of debtors’ rights.

Just as in modern bankruptcy proceedings, a prerequisite to relief in cessio bonorum was a showing that the debtor was in good faith, that is, absent fraud. This meant that all assets had to be accounted for and that no loans could have been obtained by fraudulent means.[110] However, whereas only the discharge might be lost if the debtor were determined to have committed fraud in modern proceedings, the administration of assets might still continue if in the interest of creditors.[111] In contrast, proceedings in cessio bonorum were denied altogether if fraud were detected in summary proceedings conducted by the praetor.[112] This conclusion can be drawn from papyrus 75 at the John Rylands Library containing a decree of L. Munatius Felix, the Roman prefect in Alexandria circa 150 CE, in the case of one Glycon, son of Dionysius:

“From the minutes of Munatius. The 13th year of the deified Aelius Antoninus[113] , Pharmouthi 22 .[114] Glycon son of Dionysius and Apollonius son of Glycon, having been brought in, during the course of the proceedings Archelaus, advocate, said: ‘Glycon is without means and resigns his property.’ Munatius said: ‘His means shall be inquired into; there is however a principle
according to which I have often given judgment and which seems to me to be equitable in cases of persons resigning their property, namely that, if they have done anything to defraud their creditors, the resignation shall not be valid.’”[115]

An account of a similar case appears in a second part of Papyrus 75, which although fragmentary, has been translated as follows:

“From another of the same praefect. The 13th year of the deified Aelius Antoninus, Pharmouti 22. Sarapion son of Ptolemaeus having been introduced, &c., Apollonius, advocate, said: ‘Sarapion resigns his property.’ Asclepiades said: ‘He contracted fresh loans…’ Munatius said: ‘If he be found to have contracted fresh loans with intent to defraud, it shall be invalid.’”[116]

By “fresh loans…with intent to defraud” we infer that a creditor alleged that the debtor incurred loans while knowingly insolvent. These passages, and the commentary of many scholars, suggest that cessio bonorum was viewed as a beneficium, (a privilege) only available to deserving debtors .[117] Some scholars have suggested, for example, that having at least some remaining goods to assign as a quid pro quo was also a prerequisite , although there is little support in any original sources for this theory and such a requirement is openly doubted by others . .

Less clear is whether there was also a “hard luck” prerequisite to cessio bonorum.
Several scholars have inferred that only those debtors who could prove that they were the victims of some unforeseeable calamity such as “robbery, shipwreck, fire or other causes” were eligible for cessio bonorum. Professor Pakter argues persuasively that no such prerequisite existed and that such inferences arise from a misreading of, and dubious linkage of, two primary sources, i.e. the Code of Theodosius and a passage from Seneca. The Code provides:

“No debtor at all of the fisc, or any debtor and unjust holder of another’s property in gold and silver and other moveable objects, by making a cession of his goods shall escape as a name free from the fullest payment, but by appropriate and deserved severity of punishment he shall be forced to the payment of the amount due, unless perhaps he should prove the destruction of his own fortunes that have been swept away by robbery, overwhelmed perhaps by shipwreck or fire, or shattered by some misfortune and loss produced by the onset of an overwhelming force.” (emphasis added)
Code Theod. 4.20.1(C. Pharr trans.)

Seneca in de Beneficiis writes:

“Tell me, do you suppose that our forefathers were so foolish as not to understand
that it was most unjust to consider a man who wasted in debauchery or gambling the money he had received from a creditor to be in the same class with one who lost the borrowed property along with his own in a fire, or by robbery, or some other major mishap? Yet they accepted no excuses in order to teach men that a promise must be kept at all costs; in their eyes it was better that a few should not
find even a good excuse accepted than that all should resort to excuse….”(emphasis added)
de Beneficiis, 7.16.3 (Basore trans.,Harvard Univ. Press 1935)

Professor Pakter believes that the references in the two passages to similar language about “robbery, shipwreck, fire ….” cannot be read as some kind of citation to the now lost provisions of the Lex Julia, but are instead likely just a coincidence. Moreover, read carefully, neither provision says anything about a “hard luck” prerequisite to cessio bonorum. Code of Theodosius, section 4.20.1 merely provides that two specific kinds of debts, i.e. taxes and debt arising from loss of bailed property , would not in a cessio bonorum proceeding be discharged but would remain the subject of “punishment” to coerce collection unless the prerequisite calamities were proven. Similarly, Seneca merely argues in moralistic tones that legal forgiveness of even a single debt was thought inadvisable by his Roman forefathers so as to not encourage excuses even if the debt arose from the enumerated calamities and without debtor’s culpability. But as professor Pakter argues , this is slender evidence for the imposition of a “hard luck“ prerequisite to cessio bonorum proceedings, particularly considering that the debtor’s assignment of his assets to a curator had as well substantial benefits for creditors in that it avoided the ‘every man for himself’ struggle and provided weaker creditors a fair shot at the pot. Presumably, if cessio bonorum were denied, venditio bonorum would follow upon petition of any creditor, with resulting infamia.

With the advent of cessio bonorum we can see how far the law had evolved from its harsh beginnings under the Twelve Tables. Debtors were seen as having basic rights as human beings to dignity, peace and some minimal subsistence, irrespective of ability to repay their debts. Debtors who filed cessio bonorum proceedings in good faith could expect that liability for past debts would be confined to past assets and only so much of future assets as became available above the subsistence level. While we cannot speak of a “discharge” as we understand it in modern terms, under cessio bonorum creditors were considerably restrained. The absolutist approach of the earlier era had given way to the more humane view that, in any borrowing transaction, there is some risk inherent that things will not work out as planned, and that both sides must assume some measure of that risk. Cessio bonorum introduced limitations of decency as implicit in all such transactions. At least insofar as cessio bonorum was utilized , Roman law would no longer approve of collection efforts that went beyond property to afflict the debtor’s person. This fundamental change of attitude underlies all modern approaches to insolvency law. However, a similar degree of liberality would not reemerge until some 1400 years after the fall of Rome.

V. Avoidance Actions in Roman Law


In one of his earliest extant letters (65 BCE), Cicero writes to his friend Atticus to report that both the creditors and fraudulent transferee of a debtor, one P. Varius, had approached Cicero. Cicero, in the midst of a political campaign, prudently declined representation of either side, both of which were apparently politically influential. Similarly, in his Apologia, Apuleius describes in biting but humorous prose the villainy of his enemy Rufinius, who allegedly squandered 3,000,000 sesterces received as a fraudulent conveyance from his insolvent father:

“What else should the wretch do? He has lost a considerable fortune, though I admit that he only got that fortune unexpectedly through a fraudulent transaction on the part of his father. The latter, having borrowed money from a number of persons, preferred to keep their money at the cost of his own good name. Bills poured in on every side with demands for payment. Every one that met him laid hands on him as though he were a madman. ‘Steady, now!’ says he, ‘I can’t find the cash.’ So he resigned his golden rings and all the badges of his position in society and thus came to terms with his creditors. But he had by a most ingenious fraud transferred the greater part of his property to his wife, and so, although he himself was needy, ill-clad and protected by the very depth of his fall, managed to leave this same Rufinius —I am telling you the truth and nothing but the truth— no less than 3,000,000 sesterces to be squandered on riotous living. This was the sum that came to him unencumbered from his mother’s property…”

Even the illustrious Cicero, who had decried all of Caesar’s debt reforms, found himself in financial extremis and warned his family that the freedom of their slaves he had recently manumitted might be in jeopardy if the manumission were held to be a fraudulent conveyance.

Clearly the Romans were well acquainted with the various dodges which debtors have ever employed to either evade their creditors or to favor friends and relations at the expense of full payment to all. The Romans were careful to make their laws both wide reaching and flexible enough to deal with virtually all manner of ingenious but dubious transfers. A statement of this broad approach can be found in the Praetor’s edict on fraudulent conveyances (“Edict”):

“The Praetor says: ‘I will grant an action to the curator of property, or to anyone else to whom it is necessary to grant one, in a case of this kind, within the year in which he has a right to institute such a proceeding, where any act has been committed for the purpose of fraud with anyone who was not ignorant of said fraud, and I will also maintain this right of action against the party himself who committed it.’
(1) The Praetor was compelled to introduce this Edict in order to protect the rights of creditors by revoking any alienations of property which had been made for the purpose of defrauding them.
(2) The Praetor says, ‘where any act has been committed for the purpose of fraud’. These words have a general application and include every kind of fraud which is committed, as well as every alienation, and every contract. Therefore, everything that is done for the purpose of committing fraud, no matter what it may be, is considered to be revoked by these words, for they have a broad application. If, therefore, the debtor should alienate any property, or give a release from liability for a debt to anyone or release anyone from an agreement…”

It is also important to understand that “fraud” or “in fraud of creditors” (in fraudem creditorum) as used by the Romans to describe various kinds of acts and transfers had a slightly different meaning from “fraud” as used in modern English. “Fraus” is the root in Latin, which can be translated as willful “prejudice” or “disadvantage” whereas fraud, with the modern connotation of deceit, was dolus in Latin. This point is raised because the discussion of avoidance of “fraudulent acts…committed against creditors”(emphasis added) as described in Justinian’s Digest regarding the Edict must be wider than our modern conception of the term. In modern law we combine both intentional fraud (dolus to the Romans) and “constructive fraud”, (a species of fraus) under the common rubric “fraudulent conveyance.” But I would suggest that avoidance actions in Roman Law parallel not only actions to avoid at least these two species of fraud, but certainly a third and possibly a fourth kind of action that we recognize in modern bankruptcy law to avoid other conveyances that “disadvantage” creditors, as discussed below.

A. Fraudulent Conveyances, Constructive and Intentional

Either the curator bonorum, or any creditor or group of creditors affected by the transfer deemed in fraudem creditorum, could bring an action to set aside the transfer within one year. It is not entirely clear when the year’s limitation began to run. At least one translation of the Edict provides that the action could be commenced “Within a year after there has been opportunity for discovering the facts….”(emphasis added) However, this pinpointing of the commencement of the limitation period to coincide with discovery does not appear in all translations. The commencement of the year’s limitation was marked from the date of the “sale” (possibly the date of the pre petition transfer but probably date of the bonorum venditio sale, see notes 138 and 139, infra) but it is left unclear whether this period was extended dependent on whether the facts were discoverable by creditors. Moreover, clearly there was tolling of the period under certain circumstances (not fully explained) as the “year” was calculated only to include the period “during which suit can be brought”. Commencement of an action to avoid a fraudulent conveyance probably need not have awaited sale of the debtor’s assets in bonorum venditio proceedings, but could be commenced either by creditors at any time within the limitations period, or by the curator upon commencement of the insolvency proceedings, presumably within what remained of the limitations period. However, in a somewhat curious and contradictory passage, the praetor would not enforce the year’s limitation against suit to obtain rescission and return of property, or profit obtained, still in the possession of the fraudulent transferee; to allow such a defense, apparently, offended the Roman sense of equity.

In fraudem creditorum (in fraud of creditors), as used in the Edict could mean not only a sale or transfer at an insufficient price, but also virtually anything else intended to hinder, delay or defraud creditors, such as allowing a right of action to lapse, failing to exploit an easement or abandonment of property. Fraudulent manumission of slaves and other releases of property or debts were all described as avoidable in commentaries on the edict.

The key issues for the Romans in these avoidance actions were intent, knowledge and unjust enrichment at the expense of creditors. If the immediate transferee in a sale were in good faith (i.e. absent knowledge of the fraud), he was immune from an avoidance action in most circumstances. The Romans also considered the case of the subsequent bona fide transferee, who was likewise immune from suit although the mediate transferee with knowledge of the fraud was liable for the price received. The immediate transferee who lacked good faith had to return the property transferred, including any rents, crops, and offspring of female slaves or profits realized after the transfer, less costs necessarily incurred. The purpose of the action, sometimes referred to as the “Paulian action” was to restore the estate to exactly, or as near to exactly as possible, the assets for the benefit of creditors as though the transfer had not occurred. The action was apparently one in rem to affect title to the fraudulently conveyed assets in the hands of the transferee; this conclusion follows from a Greek paraphrase of the Institutes of Justinian:

“There is also another action in rem introduced by the praetor to the following effect. A debtor had several creditors. He alienates some of his property and since he has the title, he transfers his title to the grantees. The creditors, who have taken possession of the debtor’s property under a judgment of a magistrate, may bring an action against the holder of the alienated property, since the alienation is in fraud of them. This action is called the ‘Paulian Action’. Its issue is framed as follows: ‘If it appears that if the transfer by the debtor had not taken place, these goods would have remained the property of the debtor, etc.”

Whether the transferee could receive a refund of any part of the consideration he paid was referred by the praetor to a iudex (trial judge) for a case by case determination based on fact (actio in factum). Apparently the refund depended on whether the price was traceable to assets still in the debtor’s possession such that the refund would not subject anyone to prejudice. The recipient of a fraudulent gift from an insolvent, in contrast, found that good faith was no defense. The donee was instead liable to return the amount of the unjust enrichment irrespective of any knowledge of the debtor’s insolvency; the harm done in fraud of creditors outweighed any disappointment the good faith donee might suffer.

In modern bankruptcy law the trustee as successor to the avoidance rights of certain creditors under 11 U.S.C.§544(b) may resort to the longer limitations period available under state fraudulent conveyance statutes; but it is necessary that the trustee prove that at least one such creditor still remains who was a creditor when the target transfer occurred. If such a creditor exists, then the whole of the transfer is avoidable for benefit of all creditors. The Romans had nearly the same concept of a “triggering creditor”:

“Besides, in regard to the statement that what has been alienated in fraud of creditors can be recovered, we must recall that the question arises there whether the creditors are the same. And if one of the creditors survives of those who were defrauded, or if he was then the only creditor, or if when the others were satisfied, he remained the only unsatisfied creditor, it is demonstrable that the action will lie.”

In such a case, just as in modern law, it was no defense if the transferee merely tendered the payment due the single “triggering creditor”. Moreover, in certain cases, even absent a remaining “triggering creditor”, the praetor would still allow an action to rescind the fraudulent conveyance where the monies used to retire the original group of creditors came from the existing creditor body.

In modern bankruptcy law, intent can be inferred from circumstances. If a transfer is made while the debtor is insolvent, or if the debtor becomes insolvent as a result of the transfer, intent to defraud creditors is presumed and the creditors need not prove intent as an element of their case. This is called “constructive fraud”. Moreover, so-called “badges of fraud” such as transfers of all property and inter-familial transfers for less than fair consideration, can raise a presumption of fraudulent intent. The Romans had similar concepts as illustrated by the following from the Digest:

“All debtors who are released for the purpose of defrauding creditors are, by this action, restored to their former liabilities.
(1) Lucius Titius, having creditors, transferred all his property to his freedmen, who were also his natural children. The opinion was given that, although it was not suggested that Titius proposed to commit fraud, still as he knew that he had creditors, and alienated all his property, he should be understood to have had the intention of defrauding them; and, therefore, although his children were not aware that this was the intention of their father, they would be liable under this action…”

This provision makes clear that fraudulent intent of the debtor could be presumed from the circumstances (i.e., all property transferred to family members), and regarding the filial transferees, this provision represents a departure from other provisions where lack of knowledge by the transferee was deemed a complete defense. Although not given as a specific example in the Digest, we can readily infer a similar result where the transferees were family members or close associates. As in modern law, the Romans regarded certain circumstances as so inherently suspicious that intent to defraud would be inferred.

The Romans counted as avoidable fraudulent conveyances those transfers of any nature whereby the debtor diminished his property to the detriment of his creditors. But, in yet another parallel to our modern law, the refusal by the debtor of an inheritance or devise was not avoidable “because the debtor has declined to add anything to his estate, but he has not lessened it.”

(c)Reprinted with permission of the California Bankruptcy Journal ... continued in Part II ...

The Insolvency Law of Ancient Rome ,Part II

The Insolvency Law of Ancient Rome, Part I