This book began as a project in the sociology of law, a branch of jurisprudence that studies the impact of laws on the beliefs and behavior of society. The development of laws prohibiting fraudulent conveyances first attracted me, as a Renaissance scholar, because legal historians trace modern rules to a statute passed in 1571, during the Elizabethan era. I was curious why the ethical questions the law seemed to have settled – so much so that modern laws echo the wording of the statute of Elizabeth I – were still alive. Not only are US states and federal bankruptcy experts tinkering with these regulations, but the key question of when and why the law should apply did not seem obvious to me or to those people I interviewed for the project, which like most sociology of law investigations depended on attitude questionnaires. Why should not someone subject to a sudden lawsuit be able to protect his assets by putting them in another’s name?
Uncertainty about the nature and working of the law raises cultural as well as legal issues. A comparison between modern and Elizabethan attitudes suggested itself, but since one cannot hand a questionnaire to an Elizabethan, I thought perhaps the literature of the period might provide clues on English thinking about the subject. It turns out that Shakespeare dramatized the issue, and its cloudy morality, in real life when he and his companions floated timbers from the old Theatre across the Thames to evade the grasp of Gyles Allen, who was claiming the building as an attachment to his land after the Burbages’ lease expired. Lawyers may choose sides on this one. A literary example of evading a creditor occurs when Mistress Ford has Falstaff dumped into the same river to save him from the clutches of her jealous husband. She thereby evades her marital debt of loyalty, while the ethical ambiguity of her action is signaled both by Mistress Pages’s language – “convey, convey him out” – and by Falstaff’s sordid experience in a buck-basket of laundry – “ramm’d… in with foul shirts and smocks, socks, foul stockings, greasy napkins” – where he successfully hides until, despite almost drowning, he escapes. Developing this theme, The Merry Wives of Windsor offers a trove of references to fraudulent conveyancing, most of them unrecognized by scholars practicing an older approach to law and literature, which scoured the vocabulary of Elizabethan plays for legal allusions.
Exactly why fraudulent conveyance laws dominated the discourse of the period of history covered by this book – roughly 1571 to 1601 – is not easy to answer. A modern analysis of discursive practices suggests that what everybody did, but could not admit doing, found its sanction in the official insistence that everyone talk about it. This insistence was part of the economy of power wherein a counter-pressure from below met the government’s strictures against distressed Catholics, as lawyers not unnaturally found ways to respond to official policy. Power, as Foucault said, moves in all directions.
The development of fraudulent conveyancing law was part of the process of the centralization of violence in the state. Private settlements easily led to trouble, the riots that Falstaff threatens at the beginning of The Merry Wives of Windsor or that the defendants were found guilty of in Twyne’s Case (1601), the judicial decision that did so much to clarify and solidify English law. Furthermore, the literary expression of law as the conveyance or carrying away of women that I find in the work of Philip Sidney and Edmund Spenser explains why the movement we usually think of from public to private between the medieval and early modern period is also a movement from private to public. The semantic field of fraudulent conveyancing already included the carrying away of women, thereby encouraging literature publicly to portray the private world of debt by narrating stories in which lovers or ravishers or passion carried women away. My argument for concentrating on a seemingly minor set of laws is that debt is more pervasive than sex, at least in the common law. Debt lasts all night.
If twentieth-century jurisprudence has moved from a sociological approach to an understanding of law as cultural discourse, the sociological approach was itself a reaction to earlier schools of thought. Civil societies, as Cicero said, require justice, and it is natural that one should keep promises, pay debts. But natural law does not require the power of a central authority for enforcement. Such legislation is positive law – that is, law established by the legislative power of government. Its goal, as Locke said, is the preservation of society, the maintenance of what the sixteenth century called chevisance or plain dealing.
Contrasting the English tradition, the nineteenth-century German school of jurisprudence regarded the passage of a law as merely an event, perhaps for utilitarian purposes, but not something eternal, not the expression of right reason or comparable to divine law, which the soul can discover for itself. This school regarded law as the product of the pulse of a nation, something everyone in the country feels, a traditional growth. This is not as silly as it sounds. There have been those who have propounded the strict rule of laissez-faire economics. If the laws of commerce are the laws of God, then nothing can be done for the poor; they must starve. But if laws are the sap that flows through the tree of a nation, then economic institutions must work towards strengthening society. Humans must create laws, not wait to receive them from on high.
Besides looking at the circumstances under which the statute of Elizabeth was passed in 1571, this study considers a similar set of laws from Renaissance Italy that happened to be legislated at the time the source story for Shakespeare’s Merchant of Venice was written. Comparative law is the subject of what is called analytical jurisprudence, a method that leads one to believe that whatever political force may have been at work in the drafting of Elizabethan laws, a fundamental sense of fairness seems also to have been present. For if the law, as the economic interpreters believe, is the will of a dominant social class looking to its own self-interest, there are nonetheless cases, as Roscoe Pound noted, where “judicial and juristic idealism has produced and enforced ultra-ethical rules of conduct in advance of the ideas of the dominant or any other class of the lay community.” Particularly in equity cases, where fraud was often an issue, idealism seems to be a controlling force in those legal systems that make unusual advances in justice.
Writing somewhat ironically against such idealism, Oliver Wendell Holmes said that law is not justice or morality but prediction based on the reports, statutes, and treatises of England extending back 600 years. To know the law, look at it as “a bad man, who cares only for the material consequences which such knowledge enables him to predict, not as a good one, who finds his reasons for conduct, whether inside the law or outside of it, in the vaguer sanctions of conscience.” Perhaps in reaction to Holmes, the eminent jurist Benjamin Cardozo argued for an enlightened judiciary, one with a conception of social needs, one who responded to the “spirit” of the law by filling gaps, clarifying ambiguities, mitigating hardships. The common law must be Darwinian, sacrificing mercilessly what does not work; its method is inductive, drawing generalizations from particulars. All rules are hypotheses, not final truths.
Although Twyne’s Case was decided by a group of lawyers – men like Egerton, Coke, and Anderson – who were up to their ears in shady property deals, their judicial decisions reflect some combination of idealism, practice, and powerful social custom. They understood the law methodically and considered its impact on society, and their work benefits from a comparison with American legal realism. Karl Llewellyn, the foremost theoretician of this mid-twentieth-century school of jurisprudence, posed a question that touches my subject: What use is the ability to sue, unless if you win you find that “the other party is solvent and has not secreted his assets?” Just what did Bassanio do with Shylock’s 3000 ducats?
The years this study spans, then, were formative for both the law and literature of early modern England. The fifth statute passed during the thirteenth year of the reign of Queen Elizabeth, known to lawyers and historians as 13 Eliz., c. 5 (1571), was an act voiding fraudulent conveyances made to “delay, hinder, or defraud creditors and others.” The legal effect and force of the law were unclear until 1601, when the chief justices of England handed down their decision in Twyne’s Case. Twyne had received property – a herd of sheep – from a man named Pierce whose purpose in making the transfer of ownership – that is, the conveyance – was to keep his property away from his creditors. The creditors sued to void the transfer, claiming it had been made to defraud them. The issue in the case was how to determine whether Pierce intended to defraud his creditors when he gave his sheep to Twyne and in particular the meaning of the phrase “good consideration” in the statute. In their decision the justices listed what they called “badges,” or indicators, of fraud, and these have been a feature of English and US law ever since. These badges included things like the fact that Pierce was insolvent when he gave away his sheep, that he received no real consideration or payment for them, that he actually retained possession and marked the animals with his mark, and that the piece of paper recording the transfer rather suspiciously said that the conveyance was made in good faith.
Although later law developed the notion of “constructive” fraud, where intention is irrelevant, the law under Queen Elizabeth I explicitly required that element. Since it is usually impossible to know directly what someone is thinking, however, intention had to be demonstrated by circumstantial evidence, such as the badges of fraud provide. During the period covered by this book, it came to be understood that if a fraudulent conveyancing law was to be able to “look backward,” as one Member of Parliament put it, intention had to be analyzed in two parts. Let us say a man gives £5000 to his son. Three days later he declares bankruptcy. Should his creditors be able to void the gift? There is no law against giving property to a family member. The father may even claim to have received consideration in the form of love and affection. But the sudden, ensuing bankruptcy raises the suspicion that he knew that the gift would leave him insolvent. His intention at the time of the gift may be regarded as inchoate – unformed, unclear – until the second act reveals its true purpose. During the period covered by this book, the law was groping its way toward this two part analysis. A few years later, fraudulent conveyancing would become part of bankruptcy law; indeed, such a gift, if it left a debtor insolvent, would be by definition an act of bankruptcy. But this resolution did not occur until the last years of Elizabeth’s reign. The literature of the period reflects not so much the question of intention as the ethical issue of when conveyances should be allowed.
During the period between the passage of the statute and its clarification by the courts, Sir Philip Sidney and Edmund Spenser lived and died as poets. William Shakespeare wrote most of his histories and all of his comedies. Moreover, these authors had reason to be aware of legal developments in the field. Like other prominent Englishmen, such as Sir Walter Ralegh or Shakespeare’s friends the Burbages, they engaged in, or complained about, fraudulent conveyancing. It seems that Sidney had a sophisticated, almost visceral concern with the ethics of fraudulent conveyancing, almost as if by inheritance as a member of the higher nobility. Spenser and Shakespeare in many ways followed the example of Sidney’s Arcadia, the most popular piece of original prose fiction for over two hundred years.
As a legal concept, fraudulent conveyancing is less unified than it appears at first. Yet its diversity gives it a cultural resonance that makes it particularly suitable for literary criticism. The major works discussed in this book – Sidney’s Arcadia, Spenser’s Faerie Queene, Shakespeare’s Merry Wives of Windsor and The Merchant of Venice–have plots that turn on the abduction of women, a form of fraudulent conveyance, broadly defined, that allows the inclusion of references to other, narrower forms of the practice without violating artistic unity.
Perhaps because there will always be a little larceny in everyone’s heart, fraudulent conveyancing is still a problem of debtor–creditor relations today. Four hundred years of advancing legal thought separate us from the age of Shakespeare when laws against fraudulent conveyances were weaker than they are today and as a result the practice was a more signal feature of the culture. Yet new laws produce new frauds, and the problem of defining limits remains. The issue has arisen in US Medicaid law, as elderly people facing enormous costs of nursing home care try to divest their assets, often by giving them to their children, in order to become eligible for need-based payments. One view regards this practice of divestiture as mere “asset planning”; another regards those who transfer for less than full value as lacking a “modicum of decency.” New York has in the past taken a strict approach, drawing on fraudulent conveyance law and looking not just to recent transfers, but to one’s assets over an entire lifetime to determine if patients should be denied Medicaid on the grounds that they conveyed property with the intent to make themselves insolvent and so unable to pay the enormous debts generated by modern medical care. Many people, however, regard Medicaid as a right and see nothing wrong with planning (including asset divestment) in such a way as to make themselves eligible for a program sponsored and paid for by the government. The government, it is felt, has little at stake, whereas the transferor is trying to protect his family’s inheritance and the earnings of a lifetime.
Fraudulent conveyances similarly impact US state exemption standards in bankruptcy. Should a debtor be allowed to convert cash owed to a creditor to a life insurance policy – or, as in Florida and Texas, a homestead of enormous value – that an exemption statute places beyond his creditor’s reach? Another, more complex example of fraudulent conveyance law arose during the merger mania of the 1980s, when it became a key issue in claims against executives who arranged leveraged buyouts (LBOs) of corporations. The point made was that the leveraged company often received nothing of value in return for yielding its assets as collateral to a lending institution. The question occurs not just in bankruptcy cases or shareholder suits against large corporations, but in family law. What about a spouse who hides earned assets in an off-shore bank account, beyond the reach of the US legal process, and then seeks a divorce? Some lawyers are calling this practice a form of fraudulent conveyancing, because it effectively defrauds the abandoned partner. The practice is disturbing, not only because it is morally unfair – usually to women – but because, legally, it works.
Fraudulent conveyances, these examples show, are often not so much fraud in the sense of deliberate misrepresentation as they are a struggle between two parties to define what constitutes fair behavior. So phrased, the issue of fraudulent conveyance is a social concern. The central role played by fraudulent conveyance law in Medicaid, bankruptcy, LBOs, family law, and debtor–creditor relations reinforces the impression that our attitudes to fraudulent conveyance tell us something important about US society today and English society during the Renaissance. In each of these rapidly changing areas, the law is torn between two functions, what some consider the urgent need to regularize and clarify right and wrong, and the opposite jurisprudential function: the need to establish laws that conform to the patterns of conduct that society works out for itself.
Even when society has not formally made up its mind about what is fraudulent and what not, many people are at least partially conscious of wrongdoing when they convey away property to avoid a creditor. Cognitive dissonance is the term psychologists use to describe what results when actions conflict with beliefs. Unconsciously, people seek ways to resolve the dissonance. In the case of fraudulent conveyance, debtors may effect this reconciliation by drawing on myths of popular culture that valorize their individual rights and depersonalize their creditors. The evil creditor can be the unfriendly bank of populist American folklore. It may be the federal government, too big to be hurt by attempts of the average citizen to protect his life’s savings. It may be the impersonal “market,” the faceless owners of stocks and bonds, who are regarded not as suffering losses, but as rewarding the entrepreneurial efficiency of those who prudently manage assets, as in arranging a corporate guarantee or a leveraged buyout. For the Anglo-Norman rebels Spenser knew in Ireland, the faceless and distant power was the queen of England. In The Merry Wives of Windsor, it is a wealthy husband.
The struggle to overcome obstacles suits fraudulent conveyancing to comedy and comic drama. In the plays of Plautus and Terence, the creditor often takes the form of a distant father or husband or brothel owner to whom a girl owes a duty that she seeks to convey to a young man, whom she will marry. In The Ghost, for example, Philematium is in debt to Philolaches for buying her freedom with his own money, so she pays back her debt by loving him exclusively, despite the advice of Scapha, who argues that Philematium overpays her debt, since Philolaches will certainly leave her. In other dramas of Plautus, slave girls are typically conveyed from house to house or given sanctuary to protect them from brothel keepers. Indeed, so suited is conveyancing, as a type of revenge, to comedy that, as Erich Segal observes, young men typically court bankruptcy in the Roman comedies. The lovers’insolvency – like Falstaff’s (who therefore symbolically stands in for Anne Page’s suitor Fenton, who has money enough but lacks the good will of Anne’s parents) – allows comedy to represent the “breaking of restrictions” that is the “heart” of the genre. Like comedy, fraudulent conveyance can take many forms. In Moliere’s Le Festin de pierre, Don Juan gets rid of his creditor Monsieur Dimanche by professing such warm friendship and sharing such solicitude for him that the creditor never gets to demand his money. In Ibsen’s Doll’s House, Nora owes money on a debt that she cannot divulge, leading her into demeaning but essentially comic strategems, like her dancing the Tarantella, to deceive her husband. Tom Wolfe’s comic novel A Man in Full begins with a Falstaffian protagonist facing bankruptcy who seeks a way to shield his assets from an impatient bank and its hilarious hatchetman, the workout artiste. During my original project a local banker assured me that farmers trucked grain to distant relatives in case they could not meet their loans. Wolfe’s brand of fictional realism humorously illustrates a situation bankers regularly confront when debtors like Charlie Croker try to protect what is dear to them:
“What’ll he do next?”…
Harry [the workout artiste] said, “Oh, that’s easy. He’ll try to hide the airplanes.”
“That’s a safe fucking bet,” said Shellnut.
“An ordinary human being can’t imagine how tightly a shithead bonds with his airplanes,” said Harry.
“Yeah,” said Shellnutt, “… Remember that shithead from Cybermax, Harry? Duber was his name, or something like that?”
“Yeah.”
“Fucking hoople sells his King Air, he claims. Turns out he sold it to his sister-in-law for a piece of paper.”
Comedy contrasts to the narrow genre of tragedy, because comedy has an enormous range of plots. The ways of fraud, too, are endlessly inventive.
As in the case of Elizabethan literature, however, the discourse of debt may disguise deeper concerns. Although some debts survive the grave, in the long run death wins. Wolfe’s novel features a millionaire Southern real estate developer who suddenly hears time’s winged chariot at his back. In Scott McPherson’s play Marvin’s Room, where AIDS is the unspoken subtext, the director of a funeral home suggests that to reduce assets and thereby qualify for government assistance, a family buy the biggest tombstone it can find. Both books create a tension between what is and is not a matter for public discourse, between private morality and public ethics.
Readings cited or closely paraphrased or deliberately imitated in this preface include John Locke, The Second Treatise of Government (1690); Oliver Wendell Holmes, Jr., “The Path of the Law,” Harvard Law Review 10 (1897): 457–478; Roscoe Pound, “The Scope and Purpose of Sociological Jurisprudence,” Part I, Harvard Law Review 24 (1911): 591–619; Parts II and III, Harvard Law Review 25 (1912): 140–168 and 489-516; Benjamin N. Cardozo, The Nature of the Judicial Process (1921; New Haven: Yale University Press, 1937); Karl Llewellyn, “A Realistic Jurisprudence—The Next Step,” Columbia Law Review 30 (1930): 431–464. My comments on the German Historical School closely track Isaiah Berlin, The Roots of Romanticism (Princeton: Princeton University Press, 1999), p. 125. Material from Michel Foucault can be found in The History of Sexuality, vol. 1: An Introduction (1976; New York: Vintage, 1990). References to some cases and articles on modern fraudulent conveyancing include Randall v Lukhard, 729 F2d 966, at 969 (4th Cir 1984) (dissent said anyone who transfers assets for less than full value and then applies for Medicaid lacks even a “modicum of decency” and has sunk to “immoral depths”); State v Goffins, 546 A2d 250 (Conn. 1988) (allegation that transfer of Medicaid patient’s property was fraudulent conveyance); Terry Carter, “Counseling Granny Now OK: Ban on Advice on Medicaid Asset Transfers Struck Down,” ABA Journal (November 1998): no pp.; Robert Charles Clark, “The Duties of the Corporate Debtor to Its Creditors,” Harvard Law Review 90 (1977): 505–562; Douglas G. Baird and Thomas H. Jackson, “Fraudulent Conveyance Law and its Proper Domain,” Vanderbilt Law Review 38 (1985): 829–855 (criticizes application of fraudulent conveyance statutes to leveraged buyouts); Credit Managers Ass’n v Federal Co., 629 F. Supp. 175, 179 (C.D. Cal. 1985) (“A firm that incurs obligations in the course of a buyout does not seem at all like the Elizabethan dead beat who sells his sheep to his brother for a pittance”); Douglas G. Baird, “Fraudulent Conveyances, Agency Costs, and Leveraged Buyouts,” Journal of Legal Studies 20 (1991): 1–24, but cf. Kathryn V. Smyser, “Going Private and Going Under: Leveraged Buyouts and the Fraudulent Conveyance Problem,” Indiana Law Journal 63 (1988): 781–824 (traditional policies of fraudulent conveyance law serve to prevent individuals in control of a corporation from benefitting themselves at the expense of the corporation’s creditors); Re Kaiser Steel, 87 B.R. 154 (1985) (court refused argument that fraudulent conveyance did not apply to LBOs because US Statutes on fraudulent conveyancing derive from sixteenth-century English law); Debra Baker, “Castaway,” ABA Travel (October 1998): 55–59 (husband cheated wife by shipping $11 000 000 to the Cook Islands: “Estate Planning or Money Hiding?”). I have also quoted from Erich Segal, Roman Laughter: The Comedy of Plautus (New York: Oxford University Press, 1987), pp. 17–18; Elder Olson, The Theory of Comedy (Bloomington: Indiana University Press, 1968), p. 59; and Tom Wolfe, A Man in Full (New York: Farrar Straus Giroux, 1998), pp. 241–242.