Creditors' rights against corporate debtors

In general, creditors' rights against corporate debtors are no different from their rights against real persons. They have the right to sue upon the debt, to secure a judgment, and to levy upon the assets through a writ of execution.

The aforesaid writ, however, can only reach assets that are property at common law. To levy upon "equitable" assets a creditor has the further remedy of a creditor's bill in equity or "supplementary proceedings." To the degree that their claims are unpaid creditors have the right to insist that shareholders contribute to the corporation full value for their shares.

Fraudulent conveyances apply to corporations in essentially the same way as to real persons. To allow a hurried and piecemeal liquidation of the corporation's assets to satisfy creditors may yield less towards their claims than the sale of the corporate debtor's assets as a unit. Consequently equity courts often appoint receivers to hold the property intact with a view to its sale as a unit for the benefit of all concerned. Receivership is theoretically an ancillary remedy of creditors rather than a mode of relief for embarrassed corporate debtors. Until comparatively recent times, however, it was the normal vehicle for the reorganization of failed corporations at the instigation of "friendly" creditors, because in no other way could the assets be held together from the onslaught of creditors seeking payment. The ultimate sale of the assets as a unit by the receiver was usually to the reorganization committee.

The position of the receiver

Pending final disposition of the debtor's estate the receiver assumes full jurisdiction over it. The receiver derives his power from the court and his function is to conserve the assets and protect them in the interests of all parties involved. He is in no sense a representative of the interests of creditors even though they have brought about his appointment by their actions. Since the public welfare may be involved directly or indirectly the receiver is often charged with operating the corporation, e.g., a railway company. And incident to the power granted by the court to operate the company, the receiver was sometimes given the power to borrow money through the sale of securities known as receiver's certificates. During his incumbency the receiver is charged with operating the property efficiently and collecting the revenues therefrom in the interests of all parties concerned.

Since, theoretically at least, the purpose of the receiver is to protect creditors' rights and not nullify them permanently, he must ultimately dispose of the property by sale for the benefit of creditors. And here an important point emerges. It will be recalled that one of the prime reasons for appointing a receiver initially was to prevent the dissipation of asset values through dismemberment and piecemeal sale. Now if the same end result of dismemberment is not to follow, the receiver must dispose of the corporate assets as a unit. But if the corporation be large, the number of possible purchasers at the receiver's sale will be rather narrowly restricted; for few individuals, obviously, will be able to tender a very large sum in payment for the assets as a unit. As the practice has developed it has been only the parties already in interest in the debtor's estate that offer a bid. During the interim of the receivership the various parties in interest usually would have worked out a scheme of compromise between them, the so-called plan of reorganization, and the receiver's sale was a mere step in carrying this plan into effect. Just what the reorganization plan would be was determined in each case by a multitude of considerations: ordinarily, however, the strict letter of the applicable creditors' claims was modified.

Before the receiver's sale actually took place the court fixed a minimum price, called the "upset" price, below which it would refuse to confirm the sale of the assets. From the point of view of the reorganization committee this was an advantage since it indicated roughly how much cash would have to be provided for those claim-holders against the corporation who did not assent to the reorganization plan. The payment of the upset price (or occasionally something more) was not made by the reorganization committee mainly in cash, but in the form of the claims the committee already held against the corporation. Cash was only provided in the amount necessary to pay off the non-assenters their proportionate amount of the sale price of the assets of the corporation. Thus, finally, through the receiver's sale, the creditors were able to levy their claims against the corporate assets that had been temporarily restrained from enforcement by the appointment of the receiver.

The purpose in appointing a receiver for a corporate debtor's property

As just observed, the common law and equity procedures do not provide for any pro rata distribution of a debtor's assets among his creditors. The equity courts enter the picture merely as an aid to the achievement of justice at law, and since the law allows creditors to obtain preferences, the equity courts could scarcely alter the arrangement except on special showing. There is yet a further remedy, however, that is often invoked as an aid to the realization of creditors' rights and claims, namely, the appointment of a receiver. What is the purpose of receivership and under what circumstances may the court appoint a receiver for the assets of a debtor?

Particularly in the case of large corporate enterprises with durable and specialized assets, the pressure of creditors to secure payment of their claims may result in such a hurried dismemberment of the corporate assets that a substantial fraction of their value is destroyed. Under the circumstances, asset values tend to decline or disappear as a direct consequence of the procedure provided at law and equity for the payment of creditors. That is to say, the individualized actions of creditors defeat the common aims of creditors as individuals. In view of the purposes which equity courts are designed to serve -- namely, to promote justice in situations where the law leaves something to be desired -- it would be surprising if an equitable remedy had not been developed to obviate the bad result of creditors defeating their own ends. That remedy is the appointment of a receiver for the debtor's assets.

It must be emphasized that the appointment of a receiver for the debtor's assets is definitely regarded as a form of relief in aid of, and subsidiary to, the remedies of creditors already described. At least this is the general theory underlying the appointment of receivers. As a consequence the appointment of a receiver is discretionary with the court; and furthermore, a creditor requesting receivership must give evidence that he has exhausted his legal remedies. Although receivership is usually associated with insolvency a corporation need not be insolvent, in the sense of having an excess of liabilities over assets, before the court will appoint a receiver. It is sufficient if the debtor be unable to meet his obligations as they fall due.

Many states, however, have endeavored by statute to codify the conditions warranting the appointment of receivers; for the federal courts, however, there is no ruling statute and the historic principles governing the appointment of receiver hold.

From the point of view of creditors, the main consequence of placing the affairs of a debtor corporation in the hands of a receiver is that they are prevented from pursuing their ordinary remedies against it during the duration of the receivership. For the time being creditors may not dismember the property. And it is worth emphasizing that historically and in strict theory the appointment of a receiver was regarded as an action taken in the interests of creditors.

Receivership does not destroy any priorities or liens that may have been secured by particular creditors prior to receivership; it does, however, prevent the granting of additional preferences and restrain the exercise of priorities already ceded.

Since the appointment of a receiver for the assets of a debtor corporation is a creditors' remedy, not a mode of relief for hardpressed debtors, a petition for receivership must emanate from a creditor, at least formally. And furthermore a petition for the appointment of a receiver in the creditors' interests was always addressed to the discretion and wisdom of the court. This restriction led to the somewhat anomalous procedure called "friendly" or "consent" receiverships. Although now comparatively rare among ailing corporations because of the superiorities of reorganization in bankruptcy under the revised Bankruptcy Act, the consent receivership is yet worth describing briefly. In its fullest stage of development the consent receivership came to be more a form of relief for debtors than an ancillary remedy of creditors.

The procedure adopted was somewhat as follows. Let us assume that a corporation saw approaching difficulty in meeting creditors' obligations and feared the consequences of creditors' attachments. In the circumstances, the corporation would seek out a "friendly" creditor whose obligation was unpaid and have him request a court of equity to appoint a receiver for the corporation's assets. The creditor's "prayer" to the court would contend that the said corporation was unable to pay the debt and request that the court (in its discretion of course) appoint a receiver for the benefit of all interested parties. At the same time the corporation would file an answer to the creditor's contentions, admitting without argument his allegations, and urging likewise the necessity for the appointment of a receiver for its affairs. The court would then consider the creditor's petition and the corporation's answer, and unless it appeared that receivership would clearly not conserve the assets, or that the action was not bona fide, it would appoint a receiver. Thus, while the formalities of procedure still retained the fiction that receivership is wholly a form of creditors' relief, it cannot be denied that, in fact, a receivership came to operate as much in the interests of debtors as of creditors. To what degree this end result was achieved as a consequence of the almost inevitable necessity of receivership for embarrassed quasi-public corporations is hard to say.

But it must have been realized at an early date that the ordinary creditors' remedies were both inadequate and unsuitable for dealing with railroads or public utilities, for instance, in which the public welfare is superior to mere creditordebtor interests. To break up such corporations would be an empty remedy for creditors. At the same time cessation of operations and dismemberment of the property would be clearly intolerable from the point of view of the general welfare. When the basic philosophy of receivership had been developed with respect to corporations "vested with a public interest," its extension to other corporations of large size was probably an easy step; for their very size and ramifications implied semi-public considerations.

The granting of preferences

Where a debtor has more than one creditor an important matter is his right to grant preferences between them. The common law procedure and the ancillary relief afforded by courts of equity for the collection of debts do not pretend to restrain debtors from preferring one creditor to another. And subject to whatever modifications the individual states may have introduced by statute, a corporate debtor as any other may allow one or more creditors a preferred position over others.

Hence, so far as the law and equity courts are concerned, the general rule is "first come, first served" and creditors are entitled to payment according to their finishing positions in what has been called the "race of diligence."

To leave them [debtors] to the rude methods of common law debt collections would mean financial death to them and, because of the frightful waste which accompanies these methods, loss to creditors as well. More than this, creditors were forced by self-interest into a race to be first in at the death. Many a debtor was thus pushed into insolvency which might have been averted.

In other words, the ordinary procedures for the collection of debts do not prevent corporate debtors from preferring creditors one to another. And it has been stated that corporate assets do not form a "trust fund" for the benefit of creditors to be equitably divided among them unless proceedings for the "winding up" of the corporation have been undertaken.

Fraudulent conveyances and corporations

The prohibition against fraudulent conveyances in general operates with respect to corporations in the same manner as against real persons. A fraudulent conveyance may be said to consist in the transfer of assets by the corporation with "the intent or with the effect of hindering, delaying, or defrauding creditors." An instance of fraudulent conveyance peculiar to corporations is the payment of a dividend which renders it insolvent. Dividends, however, are probably a relatively unimportant instance of fraudulent conveyances. The Uniform Fraudulent Conveyance Act has simplified and expedited the remedies of creditors where fraudulent conveyances are demonstrated and proven, and the Act, of course, applies to corporate debtors as well as others. This statute which has been enacted by many states apparently permits the creditor to levy directly upon assets fraudulently conveyed-without the former necessity of first having them returned to the debtor-and then to follow the regular procedure in law and equity for the collection of claims already described.

Creditors' right to insist upon full value contribution by shareholders

Shareholders are obligated on various theories to contribute full value to the corporation for shares received. Both the trust fund theory and the holding-out theory seek to emphasize shareholders' responsibilities to creditors. While jurists have more or less abandoned the trust fund doctrine as untenable it may be emphasized none the less that even that doctrine gave creditors no right to insist upon full payment for shares unless they had "exhausted their remedies at law."

Nevertheless, the creditors, if their claims are unpaid, might well insist that shareholders contribute full value for their shares on the grounds that the incorporation statute has been violated: i.e., on the grounds of the statutory-obligation theory. All this, of course, is on the assumption that the corporation is solvent. An insolvent corporation is in a different position; and here, perhaps, the trust fund doctrine has greater cogency. As the United States Supreme Court once said:

Solvent, it [the corporation] holds its property as an individual holds his, free from the touch of a creditor who has acquired no lien; free also from the touch of a stockholder who, though equitably interested in, has no legal right to, the property. Becoming insolvent, the equitable interest of the stockholders in the property, together with their conditional liability to the creditors, places the property in a condition of trust, first, for the creditors, and then for the stockhold- ers. Whatever of trust there is arises from the peculiar and diverse equitable rights of the stockholders as against the corporation in its property and their conditional liability to its creditors. It is rather a trust in the administration of assets after possession by a court of equity than a trust attaching to the propety, as such, for the direct benefit of either creditor or stockholder.

The Inherent Rights of Corporate Creditors

Creditors' procedure in law and equity to obtain payment

A creditor, qua creditor, is entitled merely to collect from the debtor the sum of money owed to him. In the broad and general sense his status as a creditor in nowise confers upon him any right to the specific property of the debtor. He is entitled to the payment of the sum of money owed him, to be sure; but in the absence of default the mode by which the debtor comes into funds with which to pay the claim is not his concern. Thus, the simple existence of a debt does not in and of itself set in motion any legal machinery. Although there is the familiar distinction between secured and unsecured creditors, it must be emphasized that the security is in reality "but an incident to the debt it secures, and a mortgagee is nothing more than a creditor secured by a mortgage." In other words, secured creditors are not a class entirely apart, but simply creditors who have definable rights against some of the debtor's assets over and above those possessed by simple creditors.

In the ordinary run of events, of course, debts are paid when due and the inherent rights of creditors have no occasion for exercise. In the case of non-payment, however, by what procedure does the creditor seek the enforcement of his claim?

If a debt is due and unpaid then the creditor may sue at common law for its payment. If the case be clear, i.e., there is no question of the money being owed, then the suit at law will result in a judgment. Now the importance of the judgment is notable. In the first place the judgment gives the creditor a "claim upon the debtor" which, in the legal sense, he did not possess previously, i.e., the debt is determined at law to be owing and unpaid. That is, for legal purposes, there is no longer any question of the validity of the debt, of the fact that its due date has arrived, and that it has not been paid. In the second place, the judgment sets in motion certain machinery which will presumably lead to the payment of the creditor's claim. For a creditor who has had his claim reduced to a judgment, a "judgment creditor," is entitled, by means of a "writ of execution" which accompanies the judgment, to secure payment of his claim from the sale proceeds of whatever property of the debtor the sheriff finds it necessary to sell in order to meet the claim. The creditor's claim at law upon the debtor's property grows out of the judgment in an important sense: the judgment gives the creditor the right of realization upon his debt. Armed with his judgment and the writ of execution the creditor's position is greatly strengthened.

The judgment and the ensuing writ of execution, however, only extend to those assets of the debtor which a common law court may recognize as property It must be emphasized, though, that not everything of value which a person would regard as an asset falls within the category of property at common law. For instance, a person's interest in a trust estate or an equity of redemption in a mortgage would not be property at common law. The usual practice among legal writers is to refer to such assets as "equitable assets," meaning thereby that jurisdiction over them resides in courts of equity as opposed to courts of law. Sometimes equitable assets are also called "choses in action." A recent writer describes these as follows:

This is the nondescript remainder -- the choses in action. They consist of all less than present possessory rights which are nevertheless recognized at law. They are rights (and therefore "things") of a most highly incorporeal nature because no present possession is conceived to adhere to them. Thus in actual fact they represent little more than a right to bring an action. On the other hand the very reason for the right of action is itself the basis of their status as "things" -- incorporeal "things" -- for, as a class, they are all conceived to represent the right of the dispossessed to be repossessed-his persisting property in an object, possession of which he has temporarily surrendered or failed to gain. The recovery is of this object or its equivalent. Choses in action are thought of along somewhat the same lines as the future estates in land, which are at first included with them. They are slices of a right of possession which has been "protected upon the plane of time." In order for the sheriff to assume control over property by writ of execution that property would have to be "the subject matter of a common law possessory action."

Fortunately for our purposes it is not necessary to indicate all the various kinds of property which fall within the definition of equitable assets. It suffices to recognize that certain of the debtor's assets in the ordinary meaning of that term cannot be reached by a writ of execution at common law.

But if the creditor's claim remains unpaid despite the writ of execution and the debtor has other assets, his equitable assets, which the writ cannot reach, what further remedy is available to the creditor in order to obtain payment?

Until comparatively recently the creditor's further prosecution of his claim was via a creditor's bill in equity. That is, a judgment creditor whose judgment was returned unsatisfied, or, as frequently expressed, a "creditor who had exhausted his remedy at law," could invoke the assistance of a court of equity by means of a judgment creditor's bill which, in effect, asked that the court compel the debtor to turn over to a receiver (a court appointee) those assets, unreachable at common law proceedings, which would yet permit the payment of the creditor's claim. This somewhat circuitous procedure, however, has been shortened in recent times by statutory enactment so that the creditor may now achieve the same net result of filing a creditor's bill in equity by merely initiating so-called "supplementary proceedings" to his legal action.

In other words, the two proceedings are joined in a manner to expedite the relief available to the creditor. In this way, then, creditors are placed in a position to enforce their claims upon debtors by being able to reach out after both their common law and their equitable assets.

Still leaving special contractual relations for subsequent consideration, is there anything peculiar in the situation when the debtor is a corporation? Do creditors of a corporation hold any special rights which do not obtain against real persons?

The Rights and the Remedies of Corporate Creditors

While both shareholders and creditors provide capital for corporate enterprises the relation of creditors to the corporation and its assets is different in many important respects from that of shareholders. Creditors possess certain general rights and remedies which may be invoked in pursuit of their claims. And likewise these too may be refined and extended by contract. There is one notable difference, however: creditor-debtor relations between persons in the absence of special contract are, in general, not unique simply because one (or both) of the "persons" happens to be a corporation.

That is to say, creditor-debtor relations in no sense spring from the existence of the corporate form; they would exist, at least in their simpler forms, had the corporation as we know it never developed. The concept and implications of stock ownership, on the other hand, are, in a very real sense, directly associated with and dependent upon the presence of the corporate form. If only the ordinary rights of creditors were involved there would be no reason to include here a special chapter dealing with creditors' rights. It so happens, however, that the application of the time-honored principles of creditor-debtor relations to corporations has brought about important extensions of the basic ideas and practices commensurate with the marked complexity of the modern business corporation. While the underlying philosophy has persisted, its application to involved situations has led to forms and procedures that are unique in important respects: the idea of receivership, for instance, is simple enough; but an understanding of the basic idea itself gives but a faint suggestion of what receivership may mean for a large corporation.

Again, since corporations, unlike real persons, may attain perennial existence, there are not the same obstacles to very long-time creditordebtor relations. It would be unusual for real persons to draft a contract calling for the repayment of a large principal sum a century hence, yet such distant due dates are a commonplace among corporate debtors. Furthermore, legal ingenuity has developed a means whereby a corporation through a bond indenture may deal with a number of identically situated creditors as if they were one. Indeed, the relative permanency of corporate existence and its associative character have permitted an enormous ramification and elaboration of the simpler creditor-debtor relations between real persons. And it is mainly these which give corporate creditor relations the status of a special study within the broader field.
It is helpful, notwithstanding, first to take cognizance of the underlying position of creditors respecting debtors' property in the absence of special contract.

Measuring the Interest Rate Risk Exposure of Savings and Loans

Casual observers of the savings and loan industry identify the basic cause of current industry problems as the fact that interest rates have risen substantially in the last few years. This statement is true but somewhat of an over simplification. There are benefits which accrue to savings and loans when interest rates rise. Unfortunately, the disadvantages from the rise far outweigh the advantages.

For these reasons, an examination of the consequences of interest rate changes for savings and loans is in order. One of the best tools for this examination is a statistic referred to as duration. The emphasis of the discussion is on the intuitive concept, so any reader unfamiliar with the mathematics of the various formulas should nonetheless be able to grasp their significance. Once the meaning, significance, and limitations of duration have been clarified, we proceed to the concept of "immunization," which refers to the process of reducing or eliminating the effects of interest rate changes on the net worth of SLAs.

One of the most important features about duration is that no value is unique to a single bond. In other words, there is an infinite number of combinations of yield-to-maturity, term-to-maturity, and coupon rate that will produce the same duration number. Hence a bond with some particular yield-to-maturity, termto-maturity, and coupon rate can be described as having price risk equal to that of another bond whose yield-to-maturity, term-to-maturity, and coupon rate are all different from those of the first bond.

For every combination of bonds which have the same duration, there is always one easily identifiable bond. It is the one referred to as a zero-coupon bond. A zero-coupon bond is one which provides no interest payments but has a redemption value, and it is sometimes referred to as a pure discount bond.

The duration of a zero-coupon bond is equal to its term-to-maturity. The validity of this last statement is easily demonstrated algebraically.

Property Divided at Divorce

In any event, the actual value of such goods is probably very small, when it is not exactly zero. It must be kept in mind, too, that we are not merely reporting the answers of the wife regarding her own property; this is the amount of property which she reported as available for division between the two.

It is true that in some cases she will not have known how much money the man had accumulated in his own bank account, or how many bonds he may have bought out of his savings at his place of work. Yet wide discrepancies between the reality and the guesses of the wife are probably not common. The wife almost always knows very well the income of her husband, even when she has little control over how he spends much of it. The wife might actually exaggerate the amount of property available, in view of some of the resentments expressed by the wife against the husband, and accuse him of taking it away. We do not believe, therefore, that this table is far from the reality. We shall comment further on these estimates when we discuss the property division at divorce.

Naturally, couples who divorce during the present inflationary period would have accumulated somewhat more property than these couples. There are also regional differences. On the other hand, the period of marital conflict and separation before the divorce decree is relatively long. During this later period the value of accumulated propertly doubtless declines. The demands of double households, the refusal on the part of one or the other to continue payments on house or furniture, a feeling on the part of both that any property accumulated might as well be expended now, the desire to hurt the other through dissipation of goods or money -- all of these factors would reduce whatever value of property there had been before the serious phases of conflict began.

However, the amount of property "accumulated by time of the divorce" is not an adequate reflection of the level of living during the course of the marriage. The family may have been living relatively well, even though, when debts are liquidated and the furniture goes back to the furniture company for failure to make the payments, there is absolutely nothing left in the bank and the couple may be said to have accumulated no property at all. The respondents may tell us about their level of living, but we could not be satisfied unless we could actually see the family in operation as it was before the divorce conflict began. Then we might have a clearer notion as to the economic life of the couple, or the more specific class aspects of the economic life.

It has been shown that the divorced, in conformity with their occupational distribution, are concentrated in the lower income brackets. In addition, it seems clear that the divorced husband is likely to have experienced considerable unsteadiness of employment. This finding is in agreement with studies of marital happiness. Some of these divorced women always or usually held full-time jobs during the marriage, and some always or usually held part-time jobs. These figures seem to be higher than the average for all married women in the U. S. Finally, it is clear that very little property was accumulated by the divorced couple prior to the breakup of the marriage. Forty percent claimed that there was no property at all to be divided at the time of the divorce. Consequently, whatever economic problems the average divorced mother faces after the divorce, she has already had a long history of economic difficulty even before the divorce.

Divorce in Early Roman Law

The three main roots of Western marriage and divorce law are the Hebrew and Christian doctrines, primitive Teutonic customs, and Roman law. 1 Having considered the origins in the Mosaic Code and in the teachings of Jesus we turn next to a review of the beginnings of divorce regulation in the early history of the Romans. While no complete Roman law code has come down to us there are fragments and commentaries sufficient to show the general situation at that time.

The Roman family at the beginning of the historic period was organized on the patriarchal basis in the most highly developed form to be found among early civilizations. The patria postestas or paternal sovereignty over the household was virtually absolute. Nowhere was this power established and exercised so completely, nor the status of wife and children so nearly that of slaves. Except as a matter of grace they enjoyed no privileges whatsoever.

Originating at some time prior to the regal period and lasting well toward the end of the Republic, manus marriage prevailed. At the time of marriage the bride passed from under the manus of her paterfamilias to that of her husband to whom, from that time on, she sustained a like relationship.

Three forms of manus marriage were recognized at the time of the formulation of the Twelve Tables, 450 B.C. The first was the patrician or semi-sacramental type of confarraetio, in which the essential ceremonial feature was the eating of a sacred cake in common--magically symbolic of the newly created unity of the wedded pair. The second was coemptio--a fictious form of sale--the survival of a former practice of wife-purchase but which no longer existed. The third was usus, a form of common law marriage which became legal and passed into manus if the wife remained in the domicile of her husband for a year without absence for three consecutive nights.
But there are evidences in the Twelve Tables of the breakdown of this highly developed system and of the emergence of the order of "free marriage" or marriage without manus. Just when the process of change began we do not know, but by the end of the Republic, manus marriage, largely had been superseded by the new type. In this form mutual consent was recognized 'and sometimes legally required, and while the wife was not completely absolved from the manus of her father, she was from that of her husband. Thus Professor L. T. Hobhouse remarks: "The Roman matron of the Empire was more fully her own mistress than the married woman of any earlier civilization, with the possible exception of a certain period of Egyptian history, and it must be added, than the wife of any later civilization down to our own generation."

Here, as elsewhere, divorce conformed to the nature of marriage. In the early manus form the husband's theoretical right to divorce his wife was practically absolute, except as he was restrained by property considerations, public opinion, or by the "advice" of the Censors. The wife had power neither to institute, to require, nor to prevent divorce.

Procedure was more or less rigidly prescribed. Marriage by confarreatio could be dissolved only by the countersacrifice of differeatio, which Plutarch described as an "awful rite" and which Fowler assumed to have been "used only for penal purposes." Coemptio and usus marriages were dissolved legally by the ceremony of remancipatio, which Rudolph Sohm suggests "was not so much an act of divorce as an act of discharge or repudiation."

It appears that at no time was Roman marriage indissoluble and that provision was made in the law for its dissolution, but all historians agree that at this period it was extremely rare. Professor Hobhouse says: "In practice marriage was so nearly indissoluble that the divorce of his wife by Spurius Carvilius Ruga in B.C. 231 was declared to be the first instance known since the foundation of the city. On the other hand, it must be remembered that the unfaithful wife might be put to death without trial, and that the husband who had other good causes of complaint would be supported by the family council in executing or in repudiating her. This claim of infrequency if construed literally was probably an exaggeration. Ruga's wife was divorced for sterility by order of the Censor and Lord Bryce contends that the sweeping statement of the authorities meant merely that it was the first instance of divorce in which no crime was alleged.

For some time, however, certain limitations upon the right of the husband to divorce his wife were growing up in the form of prescribed causes. According to Patrick Colquhoun, "The Law of Romulus permitted the husband to repudiate his wife for three causes--adultery, preparing poisons, and the falsification of keys." Concerning the law of the Twelve Tables, the same author says:

"We are not aware what were the valid grounds of divorce by the law of the Twelve Tables. That the reciprocal right of repudiation is certain; that the restrictions of Romulus were enlarged admits of just as little doubt; and it may be inferred that any divorce, or at least repudiation, insisted upon for causes other than those mentioned, was visited by the fine to which Spurius Carvillius Ruga was exposed, namely, the forfeiture of half his property to Ceres, and of the other half to the woman; at any rate, the censors and the public opinion appear to have exercised a wholesome restraining influence, tending to check liberty and temerity."

The conditions which produced the change from manus to free marriage affected likewise a radical change in the status of divorce. The process was the work of centuries but in the end the results appeared as little short of revolutionary. Just as marriage became a simple private agreement on the basis of mutual consent, so divorce likewise became an informal transaction without court or magisterial intervention, by joint agreement, or at the behest of either party. "To this liberty," says Professor G. E. Howard, "there was but one exception, the freedwoman might not repudiate her patron, her former master, who had taken her in marriage. In all other cases the divorce, however arbitrary or unjust, was legally effective."

Another aspect of the transition is described by Westermarck: "The rules of divorce which were recognized in the case of free marriage were afterwards extended to marriage with manus. A wife in manu could not, it is true, directly affect the extinction of the manus by means of a repudium; but according to the view of the later times, the wife's repudium operated indirectly to dissolve even marriages with manus, by compelling the husband in his turn to take all necessary steps for the purpose of extinguishing the manus. And in the end marriages with manus fell into disuse altogether."

Thus from a condition in which divorce was almost non-existent the situation had changed to that in which it had become one of exceptional frequency, which called forth satirical comments by Tacitus and other writers.

On the changed legal attitude involved, Professor Munroe Smith says:

"Until some modern statute-maker shall allow the husband to repudiate the wife at his own good pleasure without judicial proceedings, on the sole condition that, if the repudiation be on other than certain legally specified grounds, he surrender all the property which she may have brought with her and make over to her any property which he may have settled on her for the event of widowhood-until that time the Roman divorce legislation, even in its most restricted phases, will hold the record of latitude." In the course of time, quite naturally, there grew up a mass of restrictive legislation embodying current attitudes toward divorce, defining the appropriate grounds upon which the parties might sue.

The following summary of divorce acts in the Code of Justinian, 533 A.D. is given by Colquhoun:

"Mutual consent would not effect a divorce bona gratia, although it was allowed for impotency. If it was to be effected mala gratia, or by one party, the legal grounds were sufficient without the interference of the clergy, and these grounds may have consisted in a certain incompetency, or in the delict of one party called divoritum ob indignationem. Six of these grounds were in favor of the man as against the woman: for conspiracy against the state without his knowledge, which Justinian terms the most damnable of crimes; for adultery; for attempting her husband's life, or even not protecting him from danger; for absenting herself covertly from the house; for attending public spectacles without his permission; for holding assignations with men or bathing with them for licentious purposes. In like manner five applied in favor of the woman as against the man: For conspiracy against the state, or concealment of conspiracy; for attempting her life, or omitting to protect her against the attempts of others; for attempting to prostitute her to others; for falsely accusing her of adultery; for not quitting the intimacy of other women after two warnings."

Divorce: The Teachings of Jesus

Although not constituting in any sense a legal code, the teachings of Jesus have been so fundamental in shaping the ideas and ideals of the Christian Church throughout its entire history and in its relation to the development of Western civilization that we feel justified in including a study of them in this survey.

Marriage, as Jesus viewed it with remarkable historical insight, finds its origin neither in the sanctions of religion nor in civil law, but in the basic fact of sex, which constitutes it an organic rather than a formal union. Thus it is a relation founded upon the basis of natural law. Furthermore it should be remembered that in his day neither the State nor the Jewish Church had as yet arrived at the concept of marriage as a legalized institution, and it was his belief that man should not interfere, either in his legal or in his ecclesiastical capacity, to dissolve this natural relationship which theoretically consisted in a complete merger of personalities. Hence his statement:

"Hath ye not read, that he who made them from the beginning made them male and female, and said, For this cause shall a man leave his father and mother, and shall cleave to his wife; and the two shall become one flesh? So that they are no more two, but one flesh. What therefore God hath joined together, let not man put asunder."

Jesus' attitude toward divorce, however, seems to have been influenced profoundly by the conditions of the social life of his age. Powerful influences were making for the disintegration of the family. Jewish divorce scandals were agitating the minds of the people. The Doctors of the Law were divided in their opinions on legal interpretation. John the Baptist had been beheaded for speaking his mind freely on the subject. "For Herod had laid hold on John, and bound him, and put him in prison for the sake of Herodias, his brother Philip's wife. For John said unto him, It is not lawful for thee to have her . . . and he sent and beheaded John in the prison."

Moreover in Rome the tide of domestic disorder was beyond the control of the law. Against this gloomy and forbidding background of chaotic family life Jesus, as a moral reformer, cast up the alluring picture of the ideal family. Marriage he had defined as a relation creating a physical unity and therefore indissoluble: "Whosoever shall put away his wife, and marry another, committeth adultery against her: and if she herself shall put away her husband, and marry another, she committeth adultery."

In the two parallel passages from Matthew there is a qualifying clause "except for fornication," but since this exception is not found in Mark and Luke nor in St. Paul's reference to Jesus' teachings on the subject of divorce, and still further because any exception is inconsistent with the former statement, "What therefore God hath joined together let not man put asunder," many Scriptural exegetes believe that this exception was an interpolation inserted by compilers of the Matthew text. At any rate, the Pharisees who were interrogating him, construed his statement as an assertion of the indissolubility of marriage for any cause and challenged his inconsistency with the law of Moses by the query: "Why then did Moses command to give a bill of divorcement, and to put her away?" In defense he was ready with the reply: " Moses for your hardness of heart suffered you to put away your wives: but from the beginning it hath not been so." This latter remark probably was not intended as a historic allusion but as a statement of the principle to which he adhered.

It has been asserted on the theory that he made the exception in the case of adultery, that in his teaching on divorce Jesus did not advance beyond the Jewish theory that divorce was the sole right of the husband, and that this probably was due to the fact that his utterances on this subject were in answer to the question, which it would have occurred to no one to put the other way: "Is it right for a man to put away his wife for every cause?" This assertion overlooks the fact that in his statement as recorded by Mark he assumes that either the husband or the wife may divorce the other, and thereby places them upon an equal footing while he condemned the action of both. This, however, may have been nothing more than an allusion to the practices allowed by Rabbinical interpretation or to the current Roman customs.

The issue of the conflict which has been waged throughout the centuries over the interpretation and application of these recorded teachings of Jesus on the subject of divorce has been one of literalism versus liberalism--a controversy similar in kind to that which we found among the Jews concerning the strict construction of the divorce laws of the Torah or Written Law. The issue there was settled, as we observed, not by formal decision but by the progressive adaptation of the law through judicial interpretation to the needs of a growing civilization.

The question here is, are we warranted in assuming that Jesus intended his teachings on divorce to constitute another Law, abrogating the edicts of his own people in the Torah and in the Talmud on the subject, and constituting an unalterable code for Church and State for all future time? Or, should we assume that he enunciated ideal principles like those of the Sermon on the Mount and the Golden Rule to be worked out in harmony with human experience in the moral struggle of mankind for the actualization of the Kingdom of God on earth?

In response to the question whether the teachings of Jesus constitute an absolute maxim of Christian morals from which there can be no possible deviation, Rev. Newman Smyth says:
"Our answer will depend very much on two considerations. The first will be our general habit of reading the New Testament as another law, or of interpreting its precepts to the best of our understanding in what we may judge to have been the spirit in which they were spoken, remembering the Master's own saying that his words are spirit and they are life. The other consideration will be our confidence in the correctness of the premise that the special sin alleged, by which the marriage union has been violated, is the full moral equivalent of adultery."

Summarizing a wide range of views it seems possible to reduce them to three fairly typical attitudes:

First, that Jesus evidently intended his declarations on divorce to be accepted and applied literally, and without modification on the basis of his divine authority both in the doctrines and discipline of the Church and in civil legislation as the "secular arm" of the Church in so far as the Church has power to secure that result.

This is substantially the position taken by the Roman Catholic Church and in much of the ecclesiastical legislation of Protestant Churches.

Second, that the State has its own separate and legitimate sphere of secular control, and since its primary function is the preservation of the public order and the promotion of the temporal well-being of its citizens it is proper to concede to it the right to declare marriage a civil contract and to grant divorces upon such grounds as it may decree in what it may regard as the best and most enlightened interests of society.

This represents the view of those who hold that the Church functions predominantly, if not exclusively, in the domain of spiritual matters and exercises its control alone over its adherents.
Third, that Jesus did not commit himself to any definite political or ecclesiastical policy and that he did not intend, in expressing his views on divorce, any more than he did upon any other subject of economic, political, or social importance, to legislate either for the Church or for the State, but that he enunciated great ethical principles as standards of both individual and social behavior, here as in every other domain of human interest. From this it follows that, while the duty of religious leaders is clear in the matter of upholding high ideals in regard to marriage and the family as among the most important concerns of life, the Church may not legitimately insist in his name upon the incorporation of any interpretation of his views into State or ecclesiastical codes except as it applies them to other moral questions such as temperance, truthfulness, chastity, and the like.

This last may be regarded as a dangerous doctrine by some, but it finds increasing adherence on the part of many of the most progressive religious and moral leaders of modern times.

Divorce in The Mosaic Law

No more important law code for the student of comparative social institutions can be found than that contained in the Hebrew Scriptures and in other documents of rabbinical literature. The Jewish Law is embodied in the Pentateuch, or the Torah, which tradition assigned to Moses as he received it from Jehovah at Mt. Sinai. It is known as the Written Law. Accompanying this are the commentaries upon the written law by a succession of learned rabbis and judges. These are compiled in the Mishna and later embodied in the Talmud. Professor David Amram says: "The study of the laws of the Bible without the use of the Talmud is the study of the law without the commentary; it is an attempt to understand the character of a nation by reading its statute book, and disregarding the judicial interpretation and application of its laws to the daily life of the people."

The origin of Semitic family life is shrouded in the mists of antiquity, but there are traces in the Old Testament of the prior existence of matrilineal descent and of motherright. It is probable that the primitive culture of the Hebrew nomadic tribes was modified and enriched by Chaldean, Egyptian, and other early and more advanced civilizations with which they came in contact in the course of their wanderings. At any rate, by the time they emerged in history they had arrived at a fully developed patriarchal family system similar to that which we found among the Babylonians and Aryan Hindus. By virtue of his rank the husband and father was the supreme lawgiver and judge over his wife, his concubines and slaves, and his children.
Marriages were arranged with the bride's father or nearest male kinsman by a form of purchase-contract which involved a dowry, or by the rendering of service in the case of impecunious suitors. Although the authority of the father was never abrogated, it appears that the wishes of daughters were not always entirely ignored. At marriage the bride passed out of her father's family and became the chattel of her husband. Divorce was an orderly and rigidly prescribed procedure, the voluntary prerogative of the husband only, involving in every instance the writing of a "Bill of Divorcement," called the get--a unique institution among the Hebrews. Even at a later time when the wife acquired the right to sue for divorce it still had to take the form of requiring her husband to write her the get and to free her from the marriage. She never could divorce him.

The position of authority accorded the head of the household in patriarchal society generally, was strengthened among the Hebrews by the theological tradition concerning the creation of man and by the method of the introduction of evil: "And the man said, This is now bone of my bones, and flesh of my flesh: she shall be called Woman, because she was taken out of Man. Therefore shall a man leave his father and his mother, and shall cleave unto his wife: and they shall be one flesh."

As a penalty for her importunity, Eve is assigned to an inferior and dependent position: "Unto the woman he said, I will greatly multiply thy pain and thy conception; in pain thou shalt bring forth children; and thy desire shall be to thy husband, and he shall rule over thee."

Upon the ground of this priority, absolute authority in the matter of divorce rested originally entirely within the right of the husband, and this right, so far as legal theory was concerned, remained throughout the subsequent Jewish history, although in practice, under rabbinical interpretation, as we shall see, it was modified greatly. He was not even required, at first, to assign the cause upon which his action was based; it was quite a private matter:

"When a man taketh a wife, and marrieth her, then it shall be, if she find no favor in his eyes, because he hath found some unseemly thing in her, that he shall write her a bill of divorcement, and give it in her hand, and send her out of his house. And when she is departed out of his house, she may go and be another man's wife."

It would seem that the husband was the sole judge of what was "unseemly," although throughout the period of the Mishnah it occasioned a sharp dispute between the schools of Shammai and Hillel over the construction put upon the term--the school of Shammai holding to the view that "something unseemly" alluded only to sexual immorality, while that of Hillel contended that it meant "anything offensive to the husband." In any event the divorce was absolute and afforded the wife the privilege of remarriage. Josephus commenting upon the matter says:

"He that desires to be divorced from his wife, for any cause whatsoever; and many such causes happen among men, let him in writing give assurance that he will never use her as his wife any more; for by this means she may be at liberty to marry another husband; although before this bill of divorce be given, she is not to be permitted to do so."

Josephus further cites two instances in which the sole right of the husband to divorce his wife was infringed. This was due, quite obviously, to the influence of Roman customs, prevalent at the time, which permitted women the free right to divorce their husbands.

The first instance is the case of Herodias, who "took upon her to confound the laws of our country, and divorced herself from her husband, while he was alive, and was married to Herod her husband's brother." The second case was that of Salome, the daughter of Herodias, who after quarreling with Costoborus, her husband, "sent him a bill of divorce, and dissolved her marriage with him. Though this was not according to Jewish laws: for with us it is lawful for a husband to do so; but a wife, if she depart from her husband, cannot of herself be married to another, unless her former husband put her away. However, Salome chose to follow not the law of her country, but the law of her authority; and so renounced her wedlock."

We observe, furthermore, that the absolute patriarchal right of the husband in matters of marriage and divorce was undergoing a process of abridgement at an early date. There were two definite limitations prescribed in the Torah, both based upon the misconduct of the man. The first was in the case of the newly wedded husband's false accusation against the bride of antenuptial incontinence. In case of proof that his charge was slanderous: "The elders of that city shall take that man and chastize him; and they shall fine him a hundred shekels of silver, and give them unto the father of the damsel because he hath brought up an evil name upon a virgin of Israel; and she shall be his wife; he may not put her away all his days." The second instance, was in case of rape: "If a man find a damsel that is a virgin, that is not betrothed, and lay hold on her, and lie with her, and they be found; then the man that lay with her, shall give unto the damsel's father fifty shekels of silver, and she shall be his wife, because he hath humbled her; he may not put her away all his days." A modification of this latter provision appears in another place to the effect that if the father refuses to give his daughter to the ravisher, then the guilty man "shall pay money according to the dower of virgins."

To these two limitations provided in the Written Law, the Oral Law added three others, namely, in case the wife had become insane, during any period in which the wife might be in captivity, and if she were too young to understand the nature of her get.

In addition to these legal limitations was the existence of the law requiring the husband to return the wife's dowry in case he "put her away" which acted constantly as a restraining influence.

According to Philo, an interpretation by judicial decision had been placed upon the statutory requirement that the man who had falsely accused the bride of antenuptial incontinence had no option in regard to marrying her and without the right to divorce her, to the effect that the bride might not be compelled to live with the man whose conduct had been extremely odious to her, and that she might exercise her discretion in the matter of leaving him and of requiring him to divorce her.

While the theory of the law which gave exclusive right to the husband to divorce his wife, and in which she enjoyed no reciprocal privileges never was abrogated, it was modified for practical purposes in the Talmud by the assumption that the wife, for adequate reasons, might sue for divorce by the indirect method of requiring her husband to write her a Bill of Divorce and to set her free.

The basis for this interpretation was found in the Torah: "And if a man sell his daughter to be a maid-servant, she shall not go out as the men-servants do. If she please not her master, who hath espoused her to himself, then shall he let her be redeemed: to sell her unto a foreign people he shall have no power, seeing he hath dealt deceitfully with her. And if he espouse her unto his son, he shall deal with her after the manner of daughters. If he take him another wife, her food, her raiment, and her duty of marriage, shall he not diminish. And if he do not these three unto her, then shall she go out for nothing, without money." The assumption here is that there was some lawful authority to which she might appeal in justification of her rights.
This principle of protection of the rights of women once established, it readily became expanded by rabbinical authority and the Mishna inscribes numerous grounds upon which wives could demand gets from their husbands, among which are: refusal of conjugal rights, impotence, loathesome disease, malodorous occupation, refusal to support, desertion, apostasy, licentiousness.

The very striking resemblances between the Jewish divorce law and the Code of Hammurabi will have been noted. There are two probable explanations of these parallelisms. Either the two peoples, though widely separated in time and territory, nevertheless passed through similar processes of development, or the Jews were influenced greatly by historic knowledge of the Babylonians. Most scholars are inclined to the latter opinion.

Divorce in the Laws of Manu

It has been claimed that the early Eastern civilization of the Hindus bears a closer resemblance to Western civilization than many others because of the influence of Aryan culture. However this may be, we find that the Indian family life at the dawn of the historic era was typically patriarchal. In the heroic age of the Vedas the father was master and owner of his entire household. The laws of Manu is an ancient compilation of institutional ordinances attributed to the legendary Hindu lawgiver of uncertain date. The code in its present form is regarded by the best authorities to have been assembled about the beginning of the Christian era. It contains many regulations in regard to marriage and divorce which doubtless had their origins in ancient usages.

Women at all times are under the complete tutelage of men. Their subserviency is absolute and their right to divorce specifically is denied, and no redress for wrongs is provided by that method:

"In childhood a female must be subject to her father, in youth to her husband, when her lord is dead to her sons; a woman must never be independent."

"She must not seek to separate herself from her father, husband, or sons; by leaving them she would make both (her own and her husband's) families contemptible."

"She must always be cheerful, clever in (the management of her) household affairs, careful in cleaning her. utensils, and economical in expenditure." "Him to whom her father may give her, or her brother with the father's permission, she shall obey as long as he lives, and when he is dead, she must not insult (his memory)."

"She who shows disrespect to (a husband) who is addicted to (some evil) passion, is a drunkard, or diseased, shall be deserted for three months (and be) deprived of her ornaments and furniture."

By surrounding marriage with religious sanctions the Brahman law sought to improve its status. First, by doing away with forcible abduction and especially with marriage by purchase which formerly had been extensive. "No father who knows the law must take even the smallest gratuity for his daughter," and he that does so is a "seller of his offspring." Nevertheless marriage by purchase was not eliminated, but ultimately it took the form of a marriage gift from the husband which was settled on the wife and became her dowry, and which passed to her family at her death. Second, although the wife remained under the complete domination of her husband an effort was made to soften her lot by religious appeal.

"Women must be honored and adorned by their fathers, brothers, husbands and brothers-in-law, who desire (their own) welfare." "Where women are honored, there the gods are pleased; but where they are not honored, no sacred rite yields reward."

"Let mutual fidelity continue until death; this may be considered as the summary of the highest law for husband and wife."

"The husband receives his wife from the gods, (he does not wed her) according to his own will; doing what is agreeable to the gods, he must always support her (while she is) faithful."

According to most interpreters marriage under the Laws of Manu was a kind of religious sacrament which never wholly could be dissolved. Even where the marriage was annulled or where the wife was "superseded" it does not seem to have implied more than divorce a mensa et thoro. "Neither by sale nor by repudiation is a wife released from her husband; such we know the law to be, which the Lord of Creatures (Pragapati) made of old." It appears that remarriage for the wife never was allowed whereas the husband exercised that privilege.

The husband was accorded the right to annul a marriage for certain reasons and to abandon his wife: "Though (a man) may have accepted a damsel in due form, he may abandon (her if she be) blemished, diseased, or deflowered, and (if she have been) given with fraud." There were other conditions on which, however, he might either desert or supersede her:

"For one year let a husband bear with a wife who hates him; but after (the lapse of) a year let him deprive her of her property and cease to cohabit with her" . . . "She who drinks spirituous liquor, is of bad conduct, rebellious, diseased, mischievous, or wasteful, may at any time be superseded (by another wife)" . . . "A barren wife may be superseded in the eighth year, she whose children (all) die in the tenth, she who bears only daughters in the eleventh, but she who is quarrelsome without delay." In still other instances the right of the husband is restricted in the use of his ordinary prerogatives:

"But she who shows aversion to a mad or outcast (husband), a eunuch, one destitute of manly strength, or one afflicted with such diseases as punish crimes, shall neither be cast off nor be deprived of her property." "But a sick wife who is kind (to her husband) and virtuous in her conduct, may be superseded (only) with her own consent and must never be disgraced."

It appears, therefore, that while the patriarchal power of the husband was almost absolute, there was growing up at the time this law was promulgated a certain amount of limitation in the wife's favor, and while it did not offer her the privilege of divorce it did afford her a definite degree of protection. Although the husband's right to take as many wives as he chose seems scarcely to have been restricted, he could not, with inpunity, dismiss existing wives except on the grounds of the defects enumerated.

Divorce in the Code of Hammurabi

Babylonia was one of the earliest civilizations of recorded history. Many inscriptions date as far back as 4000 B.C. The ancient Code of Hammurabi, King of Babylon, about 2300 to 2250 B.C. was discovered by M. de Morgan at Susa in 1901, and is probably the oldest law code in existence. It shows how, at this early date, the subject of marriage and divorce already had become matters of regulation by the state. From this code we learn that the family organization, as was the case in practically all early civilizations, was patriarchal. Marriage, it appears, was a modified form of purchase, arranged with little respect for the wishes of the bride. It consisted in the exchange of gifts, a form found among many primitive races, in which presents were made both to the bride and to her father and in turn the father settled a dowry upon his daughter.

Similar "commercial transactions" appeared in respect to divorce. While the husband could divorce his wife at will without assigning cause, a wife and even a concubine had certain pecuniary guarantees against arbitrary dismissal. Thus: "If a man set his face to put away a concubine who has borne him children, or a wife who has presented him with children, he shall return to that woman her dowry and shall give to her the income of field, garden, and goods and she shall bring up her children . . . and the man of her choice may marry her."

The presence or absence of certain stipulated causes such as barrenness, disloyalty, neglect, or disease determines the status of the divorced wife, settles the question of compensation, and, if required, fixes the amount.

"If a man would put away his wife who has not borne him children, he shall give her money to the amount of her marriage settlement, and he shall make good to her the dowry which she brought from her father's house and then he may put her away." . . . "If there were no marriage settlement, he shall give to her one mana of silver for a divorce." . . . "If he be a freeman, he shall give her one-third mana of silver." . . . "If the wife of a man who is living in his house, set her face to go out and play the part of a fool, neglect her house, belittle her husband, they shall call her to account; if her husband say, 'I have put her away,' he shall let her go. On her departure nothing shall be given to her for her divorce. If her husband say: 'I have not put her away,' her husband may take another woman. The first woman shall dwell in the house of her husband as a maid servant." . . . "If a man take a wife and she becomes afflicted with disease and if he set his face to take another, he may. His wife who is afflicted with disease, he shall not put away. She shall remain in the house which he has built and he shall maintain her as long as she lives." . . . "If that woman do not elect to remain in her husband's house, he shall make good to her the dowry which she brought from her father's house and she may go." Adultery on the part of the wife does not seem to be a cause for divorce but is subject to severer penalty. "If the wife of a man be taken in lying with another man, they shall bind them and throw them into the water."

This treatment is carried out unless the king pardons his "servant" or the "owner" his wife.
The wife does not "put away" her husband but she has the equivalent right of leaving him for sufficient reasons and of demanding that he divorce her with the return of her dowry. In such cases, however, the husband is protected against blackmail by the requirement that the wife must be of good character: "If a woman hate her husband, and say: 'Thou shalt not have me,' they shall inquire into her antecedents for her defects; and if she have been a careful mistress and be without reproach and her husband have been going about and greatly belittling her, that woman has no blame. She shall receive her dowry and shall go to her father's house" . . . If she have not been a careful mistress, have gadded about, have neglected her house and have belittled her husband, they shall throw that woman into the water.

As to the probable frequency of divorce Professor George A. Barton says: "Among the Babylonians the frequency of divorce is not so easy to trace . . . Nevertheless, in the few marriage contracts and records of Babylonian divorce which have been studied, a sufficient number of instances appear to make it clear that divorce was not uncommon . . . The fact too, that provisions for divorce were usually introduced into the marriage contracts of those women who married without a dowry, is clear proof that divorce was so common in Babylonia that women were compelled to protect themselves against it in the marriage contract. Where the woman carried to the husband a dower, this was not necessary, since in Babylonian law the dowry was always hers, so that in case the husband divorced her he would lose it. In such cases the self interest of the husband was thought to be a sufficient protection to the wife."

Goals of a Bankruptcy Procedure

Nothing so far implies that the formal bankruptcy procedure needs to be provided by the state rather than by the parties themselves. In a world of costless contracting, debtors and creditors would anticipate the possibility of default and the consequent collective action problems and specify as part of their initial contract what should happen in a default state--in particular, whether the company should be reorganized or liquidated and how its value should be divided up among various claimants.

In practice, transaction costs may be too large for debtors and creditors to design their own bankruptcy procedure contractually, particularly in situations where debtors acquire new assets and new creditors as time passes. Instead, parties may prefer to rely on a 'standard form' state-provided bankruptcy procedure. It is a long way from this observation, however, to any conclusions about the nature of an optimal standard-form procedure. The problem is that a satisfactory analysis of an optimal procedure requires a theory both of why contracts are incomplete, and of how the state can overcome this incompleteness.

As mentioned above, the analysis does not proceed from first principles. However, economic theory suggests that the following are desirable goals for a bankruptcy procedure.

1. A good bankruptcy procedure should achieve an ex post efficient outcome (that is, an outcome that maximizes the total value of the proceeds--measured in money terms--received by the existing claimants).

2. A good bankruptcy procedure should preserve the (ex ante) bonding role of debt by penalizing managers adequately in bankruptcy states. However, bankruptcy should not be soharsh that managers try to avoid it at any cost, e.g. by 'gambling' with the company's assets.

3. A good bankruptcy procedure should preserve the absolute priority of claims; that is, the most senior creditors should be paid off before anything is given to the next most senior creditors, and so on down the ladder (with ordinary shareholders at the bottom).

Separation: Separation Without Agreement, Separation By Agreement

It is a matter of common knowledge that divorces are on the increase throughout the Western world and particularly in the United States. This phenomenon has challenged the attention of socially minded persons--moralists, religionists, scholars, and statesmen. There is probably no single subject within the range of public interest upon which there is greater misapprehension as to its real meaning and significance, which is calculated to prevent clear thinking and useful action, than that of divorce. Divorce simply dissolves the legal contract between the parties and it is usual to resolve financial issues between a couple at the same time, invoking the powers of the court to vary property rights if they cannot be resolved by agreement. This means that the ownership by a husband or wife of a house, shares or money in a building society or bank can be varied by the court when it decides how the financial claims are to be met.

Separation Without Agreement

Separation is often an established fact before either party takes legal advice as to its consequences for the marriage. Absence of information about the consequences may put the party who has left at a disadvantage. It might have dire consequences where one party has resources which are spirited abroad and have disappeared by the time divorce proceedings are taken.

The cost of separate living is greater than the cost of living together but any attempt to return to the matrimonial home may cause further problems, such as an application to oust the returning partner. The time which has elapsed since the separation began is a factor which the spouse who remains in possession of the house may wish to use to bolster his or her position, particularly if children are involved.

Separation By Agreement

It is often the case that couples separate by agreement so that they will be able to divorce when two years have elapsed from the date of their separation. If financial matters are not resolved in an agreement made at the time of separation or shortly afterwards they will be resolved after the divorce. The court exercising its powers to vary property rights takes into account the financial circumstances of the parties at the time of its decision. One of the parties may have changed jobs or inherited a substantial legacy, or rearranged his or her financial affairs in such a way as to present a very different financial picture from the one which would have applied if the divorce had taken place earlier.

There are several benefits for couples who negotiate a separation agreement. First, they may wish to make financial arrangements based on an immediate division of their capital or provision for the proportion of home and money which each will have. They may also wish to ensure that arrangements for paying for children are recorded and that there is no dispute about where the children are to live and how much time they will spend with each partner. It is usual when providing for future housing arrangements and spousal and child maintenance to record the couple’s intentions, and the terms of the agreement become the terms of an agreed order when the divorce takes place. The reason why legal advice is desirable is to ensure that each party has given full financial disclosure to the other so that the agreement is made in full knowledge of the overall position. Otherwise the agreement could be set aside.

There is no guarantee that, after an agreement has been made, the parties will not fight over financial matters or the children in the divorce proceedings, but it is less likely; if a financial application is made because one party’s circumstances have wholly changed, the other would ask the court to take account of the separation agreement as a factor in determining the issues. The effect of a separation agreement is that while the parties remain married they are relieved of the obligation to live together.

The alternative to separation is immediate divorce. This requires allegations of unreasonable behaviour or adultery. Both are likely to engender or perpetuate bad feeling at a time when emotions are at their most volatile. Disputes over children and money are likely to be exacerbated and the costs increased.

One of the problems about separation, and the reason why it is relatively little used, is that poorer couples, particularly women with children, cannot afford it. The proposal that people should be able to divorce even if not separated and without having to blame the other is expected to be the cornerstone of reform of the divorce process. Obviously there will continue to be cases where parties want to separate and make their arrangements first where they can afford to live separately.

Divorce in Ancient Law Codes

From earliest times and among all peoples, as qe have seen, marriage and divorce have been human experiences around which group habits or folkways have accumulated. These have grown into publicly approved customs which have been handed down as social traditions and have in turn become imbedded in civil law. Thus we find in the early law codes of ancient civilizations many of the customs of preliterate peoples preserved either in similar or in modified forms.In a few of the lower, and in most of the higher, levels of civilization the ideal of marriage is that of a lifelong union of husband and wife. For many reasons this ideal has never wholly been realized in actual experience. The relations entered into at marriage frequently cease. In order to redefine the status of the separated parties, to provide for offspring, and to determine the rights of property, societies have been under the necessity of developing experimentally habitual procedures and of enacting them into rules and regulations. This has been the chief function of law in regard to divorce. Ancient law is far more the codification of emergent behavior uniformities than it is a means of imposing upon the group the arbitrary dictates either of an individual or of a collective will.

A cursory review of the divorce procedures of a few of the ancient codes will be instructive. It will disclose the attitude of ancient historic societies in regard to the subject and their methods of dealing with it. Our chief object in presenting this survey of ancient legislation, aside from its historical value, is to strengthen the position already taken in reference to the secular nature of marriage and divorce. If in any instances regulations are modified by religious influences, it is in the same sense that economic and other social institutions generally are so modified. In the digest of the codes herewith presented we shall see how competent societies have felt themselves to be to deal with the matter.