In the years leading up to the American Revolution, many Americans were deeply in debt to British lenders, and getting more deeply so all the time. In particular, many Southern planters were mortgaged to the hilt. I have always suspected that part of the motivation of Southern planters for participating in the revolution was the prospect of escaping this debt. Certainly these debts were a source of resentment.
However, the text of the Treaty of Paris which ended the war seems to make provision for the survival of such debts:
Does anyone know whether this provision was given any practical effect? Were British mortgage holders able to pursue American debtors in American courts after the Revolution? Successfully? Hard to imagine them getting a fair hearing.
Is anyone aware of any scholarly research on this subject?
There were a few famous cases on the issue, I can think of 2 right off.
Hite v. Fairfax – Hite had been granted a parcel of land by the Virginia government that had been previously granted to Lord Fairfax by the English government. Hite ended up winning but it took so long all the parties had died.
Ware v. Hylton – a Virginian owed a debt (almost 3,000 pounds!) to a English citizen. A Virginia law of 1779 allowed the state to confiscate such debts. The Supreme Court enforced the treaty of Paris and overturned the state law.
The decision does affirm the authority of British creditors to sue American citizens in American courts for recovery of pre-war debts. I still wonder if such suits often succeeded, particularly in cases where facts were in dispute.
This was a bone of contention between GB and the US for many years. The British refused to evacuate their forts in the American Northwest (now the upper Midwest) on the ground that Americans weren’t living up to their promise to honor debts to Britons.
The issue was finally addressed in Article VI of the Jay Treaty of 1795:
The treaty goes on to describe a commission to arbitrate claims; so far as I know the commission operated to the satisfaction of both sides and the issue was finally laid to rest.
Interesting that it’s actually the US government guaranteeing the (private) debts. The Jay treaty would still have allowed private debtors to avoid paying their British creditors (at Uncle Sam’s peril).
I wonder how many Southern planters managed to wriggle off the hook for pre-war debts to British creditors. I wonder if any of the big names (Washington, Jefferson, Madison, Henry) did so.
I researched a Scottish merchant named Lachlan McGillivray whose considerable properties around Savannah were confiscated when he returned to England (he was a Tory and left Savannah when the British evacuated at the end of the war). I was surprised that the man who bought one of his plantations also inherited the debt (to a British shipping company) on the same. Apparently there was some honor.
Something that happened several times in Savannah (a city very divided in its loyalties) was that property was pingponged a bit during the war between Loyalists and their Revolutionary relatives, who often resided in the same house, to avoid confiscation- first to keep the Brits from seizing it and then to keep the new government from seizing it. (Whatever their political loyalties, most families were families-with-vested-interests-in-keeping-the-holdings-in-the-family first.)
Upon further investigation, I see that the commission established by the Jay Treaty wasn’t the end of the story. The commission met from 1797 through 1799 and broke down in disagreement.
The American and British governments had to negotiate a second agreement, the Convention of 1802:
In other words, what would have been payment from private Americans to private Britons became first (by the Jay Treaty) payment from the American government to private Britons and finally (in 1802) payment from the American government to the British government. The Brits presumably then had to settle up with the disgruntled creditors.
Sounds like a lot of American debtors may have finessed their debt via the Revolution. I sure would like to find some numbers on that. It has the makings of an interesting book, I think. Or at least an interesting article.
Also:
Knowing that in the years prior to the Civil War many Southern planters again found themselves deeply in debt, I also have to wonder whether escape from debt wasn’t one of the motivators behind secession. And whether the zeal to preserve the Union was partly a zeal to collect those debts.
That’s been theorized, by Gore Vidal among others. Not sure what the verdict is.
Certainly for a lot of the Founders if it did absolve them it was only a temporary reprieve (especially for the southern planters). Thomas Jefferson (1826), James Monroe (1831), James Madison (1836 [largely due to his stepson’s mangling of his finances]), Alexander Hamilton (1804), James Wilson (1798), Robert Morris (1806), Aaron Burr (1836 [if you count him as a founder]), and others all died broke and deeply in debt. (Certainly not all did: Franklin and Adams both died in quite comfortable circumstances, Washington died cash poor but more than solvent [due in part some speculate to some expense account padding], Gouverneur [sp?] Morris was still very rich [read about his lovelife and his marriage sometime for some weird history], but they seem more exception than rule.)
Yes, it does. The place to start researching would probably be a book on the Jay Treaty, which in turn would have a lot of source citations for the debt controversy in the 1780’s. The proceedings of the treaty commission from 1797 to 1799 would no doubt make interesting reading. I wonder how much they got into individual cases --“Planter Hodgkins accepted manufactures from Merchant Adams in 1775, and still hasn’t paid!”
I don’t think so. As I say in the other thread, I don’t think there was a huge amount of inter-regional capital flow before the Civil War. One reason (among others) that I think so is the lack of Northern argument about capital. I’m not aware of anyone arguing either, “If we allow the South to secede, I’ll never collect my debts!” or “If we go to war to prevent the South from seceding, I’ll never collect my debts!”
Yeah, but I think you wouldn’t have heard those arguments. Not in public, anyway. “Go collect my debt!” is hardly an effective rallying cry for foot soldiers. So you dress it up as “Preserve the Union!”
I’m just thinking hypothetically, of course, since I don’t know if debt was an unspoken issue in the minds of secessionists.
I think there was more interstate banking than you may realize, particularly since parts of the South (Mississippi and Alabama and Texas, for example) had only recently emerged from frontier status. The financing for the plantations there probably didn’t come from established, in-state institutions. (Not ultimately, anyway.)
Also, in the pre-war years there was actually a surprising number of Northerners coming down and setting up plantations in those states. I once did a case study of a Connecticut family that set up a plantation in Alabama, for example.
The Confederate general Joseph Wheeler was from two New England families who relocated to Augusta just before he was born. Eli Whitney was another New England Yankee with deep Georgia business interests. On the individual basis it happened a lot.
The Virginia statute at issue in Ware v. Hylton is interesting for another reason.
Virginia was this first state to pay off its war debts after the Revolution. (Virginia later objected loudly when it was proposed that the US assume the war debts of the states, because Virginia didn’t have any debt for the US government to assume.) I wonder if this statute is the mechanism by which Virginia raised the funds to pay off its debt.