IMAGE EVALUATION TEST TARGET (MT-3) 1.0 I.I 11.25 m. 125 ■ 2.2 Mi 13. Mb m lis Its lit ■ 2.0 0% y: ^W % '/ /A Hiotographic Sciences Corporation ^ m \ <^ i\ 23 WiST MAIN STREST WIBSTM,N.Y. USeO (716) 172-4503 i CIHM/ICMH Microfiche Series. CIHIVl/ICMH Collection de microfiches. Canadian Institute for Historical Microreproductions / Institut Canadian de microreproductions historiques Technical and Bibliographic Notes/Notas techniques et bibliographiques The Institute has attempted to obtain the best original copy available for filming. Features of this copy which may be bibllographlcaily unique, which may alter any of the Images in the reproduction, or which may significantly change the usual method of filming, are checked below. □ D D D D Coloured covers/ Couverture de cov signifie "A SUIVRE", le symbols V signifie "FIN". Maps, plates, cherts, etc., may be filmed at different reduction ratios. Those too large to be entirely included in one exposure are filmed beginning in the upper left hand corner, left to right and top to bottom, as many frames as required. The following diagrams illustrate the method: Les cartes, planches, tableaux, etc., peuvent Atre filmte A des taux de reduction diff Arents. Lorsque le document est trop grand pour Atre reproduit en un seul clichA, il est film* A partir de I'angle supArieur gauche, de gauche A droite, et de haut en bas, en prenant le nombre d'images nAcessaire. Les diagrammes suivants lllustrent la mAthode. 1 2 3 1 2 3 4 5 6 THE QUESTION OP THK SEIGNIORIAL TENURE OF LOWER CANADA. REDUCED TO A QUESTION OF LANDED CREDIT, BT A. KIERZKOWSKT, ONK OF THK 0IBKCT0B8 OF THB LOWEB CANADA AOBICOLTURAL SOCIRr. MONTREAL: PUNTID BT JOHN LOTZIX, AT HIB BTBAM PBIMTnfO ISTABUSBKINT, 8T. NIOHOIAB BTBIBT 1852. IfSi Ci) /J ^ ■ji/y To Messrs, the President and Directors of the Agricultural Society of Lower Canada, Gentl£mbn and Colleagues. The cause of agricultural progress, to which you devote both your observations and your labours, is impeded by an obstacle, which, so long as it is not removed, will render your efforts for the most part fruitless. The absence of capital, of which farmers might dispose, is the obstacle to which I allude. As is shewn in the following pages, the rotation of crops, the use of manure, drainage, artificial meadows, &c., &c., although undoubtedly great improvements and excellent things in themselves, will always be for the majority of the Canadian farmers, theories of a difficult application, so long as the pecuniary means are wanting, for the outlay which such improvements render neces- sary. 1 felt this, even before I took a share in your labours. Another question, which to Canada is of equal importance, to the improvement of agriculture, and which has taken a still stronger hold of the public mind, has been discussed with great violence for several years past, and does not ar :ar to have made any important advance towards a desirabit nation ; the want of capital which paralyses agriculture, proving also an obstacle to any progress in this direction. In the present state of opinion in Canada, the Seigniorial Tenure can no longer subsist. We have now reached that point when it is the mutual interest of the Seigniors and of the Censitaires to bring the question to a final adjustment. This has been for a long time admitted by every one ; but 11 ■ 1 what progress has the question of the abolition of the Seignio- rial Tenure made since it has been agitated, or what progress is it likely to make hereafter, so long as the eternal obstacle, caused by the want of capital with which to redeem the Seig- niorial dues, has not been removed ? I willingly leave to others the task of pointing out, with more or less impartiality or passion, the evil consequences flowing from the Seigniorial Tenure. I say, like every one, let us do away with it, and my attention is exclusively directed to the means which are proper and necessary to secure the object. The question being considered in the light I view it myself, there will be found, in the observations which I submit to the public, neither that selfishness which perhaps still influences the inmates of some old Manairj nor the invidious declamation of some of those who have pursued the abolition of the Tenure, nor, on the other hand, can they be attributed to a seeking after popularity which has actuated others. I am altogether free from the passions which have mixed themselves up with this important question. Justice is not circumscribed by the limits of any state or country, but belongs to all. The cause of justice and progress I admire and endeavour to further as well in the land which has given me protection for the last ten years, as I did in my own sacred and unfortunate country where I defended it at the price of exile. I have thought, Gentlemen, that I could serve this cause of progress to which we have directed our common labours, by that experience which is only acquired by the person who has intimately associated himself with the life itself of the differ- ent nations, which he becomes in consequence enabled to com- pete with regard to their social and political condition. I flatter myself that I offer to the equally exalted and important question of renovating the soeia* condition of nearly all the inhabitants of this Lower Province — a mode of solution which, at the same time that it conciliates jarring interests, can operate with- out violating the laws of justice. Agriculture alone, however great its importance may be, would perhaps have failed for a long time in drawing the attention of the public to those powerful means of regeneration, and in disposing it to receive favourably a plan as vast in its consequences and its results as that which I submit. But the Seigniorial Tenure, the abolition of which can no longer be delayed, would become a source of incalculable prosperity, should it be the means of bringing those powerful means of regeneration into play. The question of the abolition of the Seigniorial Tenure, con- sidered with regard to the mode of solving it in the above light, ceases to be the cause of the Censitaires alone, and becomes the cause of all those interested in the welfare and prosperity of their country of all those who truly consider agriculture to be the most solid foundation of the wealth of a nation. You, Messrs. the President and Directors, who direct your studies more especially to agriculture, will set a greater value than would many others on this new agent of agricultural progress, and I trust that, like myself, you will see that such an agent exists in the formation of Financial Institutions which place at the reach of the farmer capital and funds which he can return and reimburse with facility and ease. You can understand what vigorous impulse agriculture can receive from the establishment of such Institutions which the Seigniorial Tenure question is alone suf&ciently powerful to create in this country. Agriculture indispensably requires this new source of strength, this new nerve ; and if the abolition of the Seig- niorial Tenure should be the cause of it, let us take advantage of it and thank God that an antiquated and /a/etf institution should 6 serve to the rehabilitation of the rural population. From the greatest evil can thus result the greatest good and the Associations of Landed Credit, after causing the last signs of feodality in Canada to disappear, may long subsist for the advantage of agriculture. Convinced, as 1 am, Messrs. the President and Direc- tors, of your ardent wishes for the amelioration of the condition of the agricultural classes, of the zeal and disinter- estedness which you carry in your labours, 1 have considered it an honour to submit my remarks to the public under your auspices. The call I make to all serious men attached to their country to turn their attention towards the two important questions of Agriculture and the Seigniorial Tenure, will, I am satisfied, by being encouraged by you, partake of that patriotic ardour for which you are so distinguished. I have the honour to be, Messrs. the President and Directors, With great respect your obedient servant, A. KIERZKOWSKl. St. Charles, Riti£:hb Richbueu, June, 1852. It It I (i THE QUESTION OP THI SEIGNIORIAL TENURE OF LOWER CANADA, KIDVOID TO A QUnriON Of LANDED CREDIT. Among the numerous political and commercial reforms, which the interests of the inhabitants of Lower Canada demand, few equal in interest, in importance and in urgency the reform of the old Seigniorial Laws. The necessity of getting rid, as soon as possible, of this Seig- niorial R4gimey which exercises its baneful influence both on past, present and future, is felt by every one, and the urgency of reform in this direction is the greater, that time which, ac- cording to an old saying, has a cure for all evils, seems in this particular instance to have quite a contrary effect. A great deal has been said and written in the way of enu- merating the wrongs, the abuses and the obstacles in the way of general progress, of which this Tenure has been the princi- pal cause ; but those writings, for the most part, have only had the effect of giving a bold relief to the evils of this system, while some of them were mere recriminations, more proper to excite passion than to enlighten reason, and serve as a guide to the solution of the problem of the Reform of the Seigniorial Laws. The following remarks are not embarrassed by those vexed questions, and the author considering only the principal and the most important part of the problem, that which relates to • ' 8 the most convenient and the most practicable mode of obtain- ing the abolition of the Seigniorial laws, thought it unne- cessary to give any attention to the questions which are now in dispute, such as the passing of a new law, the fixing of a uniform rale of rents, &c., in all Seigniories, the mode by which the lods et ventes should be paid, the question of 6a- naliUy &c., questions to which the real or pretended abuses, or inccTrect interpretations of the law^, have given rise after cen- turies, and the discussion of which will have no other effect than to cause precious moments to be lost, and to render more diffi- cult a question already sufficiently intricate. The author, addressing himself to all the inhabitants of Lower Canada, has had for object to be understood by all, and his remarks will be found to be concise and to the point. The question of the Seigniorial Tenure is now fairly before the public ; it has been taken up by Parliament at its last Ses- sion and by the Censitalres, whom the Convention of Delegates represent. But we want the help also of those who make po- litical economy, public administration, and law their studies, for their experience and their learning would prove of g eat be- nefit to all those interested in the question. But let every one remember that, in a question like le pre- sent, in which the points at issue affect interests to a certain degree diametrically opposed, we should avoid appr ling to the passions, and guard against creating prejudices. iut as it must sometimes happen that individuals, influencr , for the most part by personal interest, popularity, or even hatred, should attempt to excite the minds and tc create prejudices, it is the duty of all just and intelligent men not to allow themselves to be carried away by words, or by writings, the pretensions of which are unbounded, and which are often immoral as to their means of persuasion, though they may be pleasing to a great many. !H m 9 Reason alone, supported by justice and equity, should pre- side in all our public acts. To those who should fear that I have viewed with too great partiality the bright side of this reform, and that I resemble many others who always deem the object of their studies the most important in the world, they may listen to me distrustful- ly, but, however, let them listen to me for the subject is far from being devoid of interest. In this pamphlet, I intend shewing by what means the Seig- niorial Tenure, far from being an embarrassment in the present state of the country, might become, on the contrary, a lever with which to give an impulse to agriculture, industry and commerce, and, in consequence, become a source of general prosperity to the mass of the population of Lower Canada ; and no one doubts, that a rational and practicable solution of this question would not only prove a real benefit to the country, but would moreover entitle the statesmen, who would give their attention to it and divest it from the political passions which agitate the country in opposite directions, to public gratitude. The author does not presume to enlighten their wisdom, biit his object is to help all those whom a high public trust, or their own personal interests, oblige to take a part in it. Most of the ideas which he expresses have already been re- alised in other countries — the original discovery does not be- long to him, but he will deem himself happy, should he hap- pen to succeed in this humble but less dangerous undertaking. He only aims at compiling, classifying and indicating a sys- tem, the advantages of which have already been proved by long practice. > • w ■ u. . , ;, The plan, of which we give the principal features, is the faithful application of the principles followed in several parts of Germany and in Poland, modified and ameliorated to suit the political and social constitution of Canada, and we are If i 10 satisfied that such a system would be in many respects more advantageous to Canada than it has been to the above men- tioned countries. There is no danger in this case, that we should be exposed to the shortcomings and errors to which newly broached theor- ies often give rise to ; we only copy a system which is in operation elsewhere, and the details of which have been tested by time. There is, in consequence, no occasion of fearing a hazardous innovation, and we are happy it is so, for fear in such cases is often well founded. If the natural philosopher, or chemist, are at liberty to make and repeat experiments on inert matter, the legislator is bound to be more prudent, his operations are performed on a living body, and society bleeds at every unsuccessful attempt. The question of the Associations of Landed Credit, and that of the old Seigniorial Laws, are two very distinct questions, but considered with reference to their application, and their naturalization in Canada, they are, in our humble opinion, so happily joined and combined, that we are perfectly convinced, that if they are considered in their proper view, they will ren- der inevitable their natural and respective advantages ; the Seig- niorial Laws, which are still in force, will ensure the success of the Associations of Landed Credit, and the latter, in their turn, will be the means of redeeming in an easy and conveni- ent manner the old servitudes or seigniorial rights. But in order that Associations of this character should pro- duce all their advantages of which they are susceptible, it is necessary that the hypothecary system in force in this coun- try, should be, if not entirely remodelled, at least considerably modified ; this system is one which professional as well as business men have pronounced to be extremely imperfect. As it exists in Canada, it meets with an unanimity of votes for its abolition, seldom to be met with. But in this case, again, II as in many others, the fear of hazardous innovations keeps us in statu quOy but at the risk of appearing prolix, we repeat,, that by adopting principles already tested by experience, we cannot be exposed to the evil consequences of wild theories. The imitation of a system, which is in operation in other countries, cannot be attended with the same dangers as the ap- plication of what h simply and purely a theory. Now, as we have said, this system is in operation in differ- ent parts of Europe, as well with respect to mortgages as to landed property ; and it has been recently introduced in France, and in Belgium, and it will depend entirely on the manner in which it will be received in Canada, to give life and motion to public or private credit, or prove its death blow. From the foregoing remarks, we are led to divide the sub- ject, which we have undertaken to treat in three distnct chap- ters. In the first chapter, we will glance at the defects in the hy- pothecary.system in force in this country, and we will point out the inferiority of Landed Credit, compared to Commercial and Manufacturing Credit. In the second Chapter, we will explain the nature of Insti- tutions of Landed Credit, and we will show their salutary in- fluence on the happiness and prosperity of the masses, and more particularly of the agricultural classes. In the third Chapter, we will show what facilities the Insti- tutions of Landed Credit would give to the Censitaires to com- mute the Seigniorial Dues, to which the Seigniors are still en- titled in Lower Canada. If CHAPTER. I. HYPOTHECARY SYSTEM. What are the reasons which, changing and inverting the na- tural data of the problem, have placed Landed Credit in such inferiority, when considered relatively to Commercial and Industrial or Manufacturing Credit ? This is easily answered, and we have only to draw atten- tion to the defective legislation which governs loans secured by mortgages, and to the nature itself of those loans, contract- ed in the present ordinary manner. That the hypothecary laws are vicious and imperfect, is now considered an axiom among lawyers and professional men. Therefore the true, the essential cause of the inferiority of hypothecary credit, is to be found in the want of real security, which investments, secured by mortgages, offer to capitalists, for it very often happens that the purchaser is not sure to be the proprietor, and the person who lends upon a mortgage is not sure of being paid. We direct our attention at this moment, however, to the lender alone, and we say, that, however pnident and cautious he may be, he has reason to fear that hidden rights, the existence of which it is always difficult and sometimes impossible to dis- cover, should turn up and endanger his capital. Whatever security his mortgages may give him, he cannot be sure to be paid when the day of payment comes unless he has to deal with a nan willing to pay, and every one knows that the number of ihem is small. Should the borrower show the least unwillingness, or should there be any embarrassment, however unimportant, in his affairs, the costs and the delays attending a SherifPs sale cause an everlasting interval between 13 the stipulated day of payment and the effective realization of the security. Hence arises a mistrust and feeling of insecurity which are expressed by the increased rate of interest. The want of punctuality in the payment of the interest is then to be added to the want of punctuality in the payment of the capital. This neglect, which is often the necessary cause of the debtor's affairs being embarrassed, has now become a habit with the most solvent debtors. The capitalist finds in it a new cause of mistrust, a new reason for increasing the rale of interest. Capital returns with difficulty to the soil from which it origin- ally came, and, without capital, how is it possible to give fer- tility to the soil, how can a vigorous impulse be given to agriculture ? For this reason many persons in Europe have devoted their attention to the problem of bringing back capital to the soil on favourable conditions. This social problem, as soon as it had acquired a certain degree of maturity, attracted immediately the general attention for the reasons above stated. Two modes of solution, very different in their nature and their consequences, offered themselves. Some sought to mobilise immovable property, others were satisfied with what they called mobilisation of Landed Credit. To mobilise immovable property, that is to say, to render it as easy and convenient an article of commerce as movables which pass from one person to another, is a dangerous under- taking. In such a system, the ideas as well as the words themselves are contradictory — the thing is impossible. •. . Immovable property has its peculiar features, which cannot be considered apart from it ; it will never have the legal nor the economical advantages of movable property. The soil is productive aui generis : capital becomes incor- porated with it, but of itself it can never become capital, and in fact what advantage would there be if it did ? ■ i u In the second system, the mobilisation of Landed Credit, it is only sought to procure to landed property on account of the value of its security, capital at a low rate, and on conditions which may allow it to be turned to advantage to the improve- ment of the soil. Three points are here to be considered : — 1st. The conditions of the contract between the borrower and the lender. 2nd. The mechanism of the operation. Srd. The security offered by the borrower to the lender. The last point is the principal one, for the favour of the terms will be in proportion to the value of the security given, and vice versd. Let us therefore consider the security offered by immovable property. Here the system of droits Nets (rights founded on immov- able property,) inappropriately called the hypothecary system, there being other real rights than those enjoyed by hypothecary creditors, reverts to the mind. This system is imperfect, since by it the speciality and the publicity of mortgages exist but in an imperfect manner. General mortgages are admitted : legal hypothiques produce in part their effect without enregistration, and fully without speciality. Among those who have endeavoured to procure to the soil the support of capital, some submitted themselves, however, reluctantly to this disadvantage; they proposed to establish institutions which would take upon themselves the risk of the system. There is something plausible, and even correct, in this opera- tion, which consists in dividing, as is the case in Assurance Companies, the individual risk on an Association more or less numerous. But in that case it becomes necessary that a pre- mium of Insurance should be paid by the landed proprietor, and consequently loans at a low rate of interest become impos- ■^ 15 or. 08- sible. Such a system endangers the success of the institution. For the premium is either very low, and in that case the whole system will tumble down, for it rests on a hollow foundation ; or it is large, and in that case its effects on L^.nded Credit are injurious. But it must be considered that if we must submit to evils which human foresight cannot prevent, and accidents at sea, hail and fire are evils belonging to that class, the case is very different when the evil arises from a defective legislation, which it is in the pc wet of the legislator to improve. But the Associations of Landed Credit of Poland and Germany are conducted on very different principles. To place landed credit on a new basis, to make it share in the advantages of pub- lic credit, and by that means to draw it from that inferiority in which it stands when compared to Commercial Credit, to pro- vide capital to those who are in want of it, and to furnish them with an easy and convenient mode of investment, such is the object they proposed to themselves, and this object, we must say, they have completely attained. Why should not Canada embrace such a system, and, more- over, what prevents it from obtaining foreign capital ? All that is wanting or necessary is to establish a good hypothecary sys- tem, and to give a more simple form to investments on immov- able property. It is clear that the defects in the hypothecary system are the cause of the increase of the premium of assurance which must be added to the rent or sum paid for the use of capital, for the first is in proportion to the risk run by the lender, and the second to the profits he could make on the money lent, did he retain it. These vices in the legislation thus prevent the establishment of Institutions of Landed Credit, which are founded with no view of profit or speculation, and which are always secure from loss, because they never can realise any profits. i 1* 16 t But the attempts made in France to this day, with the view of benefiting landed proprietors, and which have proved un- successful, might create an unfavourable impression on those who are not familiar with the mode of operation of Institutions of Landed Credit. If the Banque Territoriale and the Caisse Hypothccaire in France have failed, it is owing to the incorrect and incomplete application of the principle of the mobilisation of landed credit ; ihey have failed because they have endeavoured to convert immovable property into a medium of exchange of the nature of coin, instead of making a consolidated rent of immovable property. The principle of the Institutions of Landed Credit is very dif- ferent from that of those institutions, which can only be remem- bered with regret. To this day the loans on mortgages have been viewed un- favourably, because it was endeavoured to assimilate them to commercial loans. In order that they should be considered at their proper value, it is first necessary that they should fall into their natural condition. Agricultural industry absorbs entirely the whole of the capi- tal invested in it, and it is only by means of small instalments at distant intervals, but instalments which are paid regularly, and which we might call continual, that it causes this capital to return. Therefore, if you oblige the proprietor to pay the whole amount of the loan at a fixed period, and at a short delay, it will be with good cause that he will give up all ideas of im- proving his land, for, in order to do so, it is required that he should have a long delay and great facilities and advantages for the payment. , , The ameliorations introduced in agriculture, such as the clearing of wild lands, the drainage of marshes, and the forma- IT lion of artificial meadows, eat up, so lo speak, the capital em- ployed to further and increase the natural fertility of the soil. There will not be found here any of those rapid transformations of capital which give such activity to commercial transactions; the profits which in this case are more certain than those of the manufacturing enterprises seldom reach the rate of the latter. In consequence, the rate of interest which merchants can pay without inconvenience, would crush landed proprietors, and the returning of the capital, which is easy to the merchant or the manufacturer, is but too frequently a cause of ruin for the landed proprietor. But let us suppose the same conditions on which Govern- ment obtains credit to be given to the landed proprietor, that he borrows with a distant term of payment, at a low rate of interest, and that he only repays the capital by successive frac- tions by means of a moderate sinking fund amortiss^ment ; then would the capital, which runs exclusively into the chan- nel of commerce, and very often is lost in unproductive specu- lations, contribute to give fertility to the soil and rapidly cause the rate of interest to lower ; then, and in that case, Canada could produce as cheap as the neighbouring countries, and could wage with them a successful industrial war. To pretend giving to Landed Credit the advantages enjoyed by commercial credit is not awfopia — far from it. The actual superiority of the former over the latter should be better under- stood. Does not the soil offer the best security that can be had ? And does not the very regularity in the profits of agriculture furnish a certainty of the regular payment of interest. The moral security offered by Government itself, is not greater than the real security offered by immovable property, and as to the entire and immediate payment of the capital Government never obliges itself to it. n ■; i B M i A combination as simple as it is rational, will be sufficient to render the engagement of the landed proprietor as seouie and as strong as any security, whatever it may be. The exact payment of interest. , The security of the investment. The facility of the transfers. The voluntary division of capital. All those advantages are found in Institutions of Landed Credit. But in order that these institutions should have a chance of success, a reform in the hypothecary system is necessary ; but it is an important undertaking and one which demands that much time should be devoted to it, and which may meet with many obstacles and be long delayed. On the other hand, the laws on the subject of immovable property in Lower Canada, require an immediate reform with regard to its present situation. In the meantime, and until the hypothecary system is modi- fied, it would be desirable to make special enactments in favour of the institutions, the introduction of which in this country we are advocating. These enactments are few in number, and they relate to the publicity of hidden claims and to the sanction which should be given by law to these institutions for the purpose of ensur- ing the exact fulfilment of the obligations contracted by the proprietors in their favour. The legal and undetermined hypotheques are at the present day one of the most serious obstacles to the development of Landed Credit. The legislator has discovered one way, the purge^ to make them appear at the time of the sale of the im- movable property. The same advantage should be extended to Associations of Landed Credit, which would thus be enabled :fe. IS to know exactly the value of the security offered, and to deter- mine the amount of the monies to be lent on the same. The purge of legal hyptUheqties is attended with costs and formalities which it would be necessary to diminish and simplify. Some will say, " why not in the same maimer allow the purge on contracts of loan, rather than make it an exclusive privilege in favour of the Associations of Landed Credit." We say in answer that the respect due to the rights of the incapa- bles would prevent this being done. When the question is as to a loan of a particular nature, which is to affect at most, and in favour of a society established by law in this Province, one fourth part of the immovable property of the tutor or of the husband, and which necessitates the annual payment of small sums without exposing to the total payment of the capital, the want of registration in favour of the minor or of the husband, cannot prove to them as injurious as if it was sought to mort- gage at their prejudice the whole of the property on which their recourse is to be exercised. A due regard to public interest renders necessary a mea- sure which the incapables could not find fault with, and which could not be to them an occasion of serious loss. Let us there- fore use transitory means, and let us guard from trespassing on the general domain of laws, in a case like this in which it is only sought to place on a secure and solid foundation an institution which is to save immovable property in Canada. The same will be said as to the mode in which the contract is to be executed. One will easily understand that in the case of an ordinary loan, in which the borrower must pay at a short date the whole of the capital, which to him is often impossible, however well disposed he may be to do so, the legislator has thought it proper to give him delay which sometimes is endless, to moderate the progress of the sale, and to delegate \ r! ■f I It w ■ I < 1 (i to the Judge ^i:ut f)ovvcr8 wilh regard to (lie interpretation of the laws. Certainly it must be admitted that Landed Credit has been much injured by those pretended favours showered on immov- able property, and which necessarily cause an increase in the rate of interest for the premium, for the risk run increases and swells the amount of the sum paid for the use of the money. The exactitude and tlie security of the execution on the one hand, and the delays and dangers attending the execution on the other, such is one of the principal causes of the great difTer- ence placed between commercial and Landed Credit, to the great injury of the latter, which is thus deprived, on account of a defect in form, of the natural superiority over the former, which the imperishable nature of the security should secure to it. But from the moment that Institutions of Landed Credit are introduced, the question appears in a very different light. The proprietor, no longer threatened by the necessity of the payment of the whole of the capital at a fixed period, is merely bound to pay regularly small annual instalments, which we can fix at most at 8 per cent, the interest, the sinking fund, amortissements, and all the other costs included, and which only affect one fourth of the value of properly. To oblige the landed proprietor to be strictly exact in his payments is doing him service, and, at the same lime, it is giving to Landed Credit that which it lacks at this moment, that is to say, that mathematical regularity from which commercial Credit derives so many advantages. It would therefore become necessary to give to the Society, as it has been done elsewhere, all the rights of action which would be necessary to secure the regular payment of the instal- ments. The delay in paying those instalments can never be consid- tr orablc, if care be taken to fix the period of those payments at two or three montlis before the time of tiie payment of the interest and of the succcHsive obligations above mentioned — and it will be very seldom tliat it shall be necessary to have recourse, even in a temporary nuinnctr, to stringent steps against debtors in arrear. By this system, the sale always caused by the impossibility of paying up the capital, and never by a protracted neglect in paying the interest, becomes a threat which the Institution is seldom obliged to execute ; but if this should become necessary, then the delays attending the present proceedings must be changed, and a prompt and uncxpensive execution must bo secured to the Association, which would be the case if thr power should be given to the Association of proceeding to the sale par voie parie^ which consists in a stipulation to the eftect that, should the contract in its favour not be fulfilled, it may cause the property mortgaged to be sold without being bound to comply with and follow the formalities prescribed in the case of a seizure of immovable property. Vested with such powers, the Institution of Landed Credit would work with ease, with a regularity which would entitle it to the confidence of capitalists, and would clear landed property in the Province from old debts and from the Seig- niorial Dues. Such powers should be granted to an Institution of this kind without hesitation, because there is no question here of a speculation for the advantage of shareholders, who try to make large profits, but it is a guarantee in favour of the borrowers themselves, who will profit by the terms of the loan being made still more favourable. The possibility of thus discovering hidden rights on a mort- gaged property would secure the Society from any mistake, and the exactitude in the performance of the obligations contracted, 28 ri 1' > protected by the salutary coersion of a prompt and expeditious execution, would place private credit on a level with public credit. By this system, the happy interposition of the Institution of Landed Credit between the proprietor who would borrow, and the capitalist who would lend, would improve the condition of both. The proprietor would see the rate of interest diminish on account of the security offered. He would have his choice between the whole number of capitalists instead of having to deal with one particular isolated lender, who imposes on him his conditions, and would, in consequence, be secured from any exaction. Instead of keeping inactive, or depositing in an unsafe place the sums destined to pay up the capital, and to meet the maturity of the obligation, he would pay off annually and insensibly a part of his debt and enjoy the powerful advantages arising from compound interest which would operate in his favour, and bring nearer the day of a complete liberation. Besides, as will be seen afterwards, the borrower retains the power to liberate himself, either partially or totally, before the period of maturity, according to the means he has acquired. Being a free and voluntary contributor to the Society of Landed Credit, he gets into the habit of discharging, with punctuality, the annual instalnients which he pays to this Central Bank. The creditor, on the other hand, transacts only with the Bank, which, instead of giving him a mere hypothecary con- tract which is of difficult and expensive realization, delivers to him a real inscription of territorial rent which bears interest payable regularly, and he is assured of a reimbursement in full of his capital at par. This new Institution would therefore unite all the advantages to be found scattered in the different modes of investments. 8S We have, we believe, sufficiently explained the most striking points of the defects in the hypothecary system, without going into minute details which the plan of this pamphlet does not admit of, and of which besides the development belongs to professional men and lawyers ; we have also sought to point out the causes of the inferiority of Landed Credit, which are a consequence of the defects in the hypothecary system, and after ha-ing made a few remarks beforehand, and furnished a few data by which its present condition might be improved, we will pass to the second Chapter, the object of which is the description and the constitution of Societies of Landed Credit, and their beneficial influence on landed property and on the agricultural classes. f 24 ■Ai CHAPTER II. iNSTITUTIOirB OF LaND£D CrEDIT. — THEIR OrIOIN. The first Institution of Landed Credit, established in Ger- many, was that ot Silesia, and it dates from 1770. We see them afterwards introduced in : La Marche de Brandebourg in 1777. In Pomerania in 1781. At Hamburg in 1782. In Western Prussia in 1787. '* Eastern Prussia in 1788. '* the priocipality of Lunebourg in 1791. '* Esthonia and Livonia in 1803. '« Schleswig and Holstein in 1811. " Mecklenbourg in 1818. •* the grand duchy of Posen in 1822. " the Kingdom of Poland in 1836. " the principalities of Kalenberg, Grubenhagen and Hildesheim in 1825. " the duchies of Bremen and Verden in 1826. « the kingdom of Bavaria in 1826. " the kingdom of Wurtemberg in 1827, " the electorate of Hesse- Cassel in 1832. " Westphalia.. in 1832. " Galicia (Austria) in 1841. " Hanover in 1842. " the kingdom of Saxony in 1844. " the kingdom of Belgium in 1852. " France, in March last in 1852. This table, which shows the slow but uninterrupted progress of those institutions, is a strong proof of Iheir usefulness. In Great Britain and Ireland no Institutions of Landed Cre- dit, properly so called, exist. The banks in England, as well as those in Ireland and Scotland, advance money to agricultu- rists, manufacturers and merchants, but the principal object of these institutions is to benefit private and agricultural credit. The English government has granted large suras to be em- ,\. 25 ployed in improving the cultivation of the soil, and more espe- cially for drainage. History of* the Institutions of Landed Credit. After the peace of 1763, Ficdcric the Great, king of Prussia, with a view of improving the miserable condition of the Sile- sian proprietors, whose debts were enormous, and who were daily threatened with the sale of their lands at the suit of their creditors, by an edict of mercy, gave them a delay of three years for the payments then due and exigible. This measure of course was a total disregard of the interests of the creditors, but no other plan at first oflcred itself to tliat Prince. The necessary efi'ect of such a measure was that it should ruin, and in fact it did ruin, the private credit of all those who took advantage of it. Capital was altogether withdrawn from the soil — usury alone remained to hasten its fall. Some proprietors borrowed at ten per cent., and apart from this perpetual interest had to pay 2 or 3 per cent, premium. It was under those circumstances, and in order to stop those tlisastrous effects, that Frederic the II, on the proposition of a merchant of Berlin, named Kaufmann Biiring, adopted the idea of Collective Credit by means of intermediary agents. This Silesian association, which at first was very imperfect, was improved in course of time, and greatly ameliorated by the most important reform of all, the payment of the debt by means of a sinking fund. The Society of Landed Credit of Poland has n(;ariy the same origin as that of Silesia. It was established for tiie purpose of clearing the landed property of the mortgages which had ac- cumulated on it, in the Grand Duchy of Varsovy, in conse- quence of the wars of the French Empire. But in most of the German states, the Assoc;iations of Landed c f %^ 26 Credit had a different origin. In Hanover, the institute of Hypothecary Credit of the Duchy of Liinebourg, established at Zelle in 1791, was founded with the view of providing pro- prietors with capital at a low rate of interest, and to apply to the liquidation of debts, the system of sinking funds imported from Great Britain, both countries at th.rt lime being governed by the same sovereign. Another Hanoverian Association, that of Landed Credit, for the whole kingdom, founded in 1S42, look the place of the es- tablishment which had been founded for the redemption of tithes, servitudes, &c., &c. This institution, after having cleared the land of the seig- niorial or fendul charges, has provided the capital necessary for its cultivation and for its other wants. Such also is the origin of the Caisse of Territorial Credit of the electorate of Hesse-Cassel, founded in 1832. In ihe other states of Germany, but especially in France and in Belgium, advantage has been taken of the successful ex- periments and trials made in Prussia, Poland and Hanover, lo establish similar institutions in which new combinations were introduced. MECHANISM AND FUNDAMENTAL PRINCIPLES OP THE INSTITU- TIONS OF LANDED CREDIT. The institutions which are not under the direction of govern- ment are formed by a society of proprietors or by an associa- tion of capitalii?ls. In the first case, they are loan agencies which, in exchange of hypothecary contracts, issue bonds, the negotiationq of which cost nothing, and which bear small interest, and are payable every six months by shares. In the second case, they are created for the advantage of the borrowers, by means of a banking organisation combined with U INSTITU- associa- 87 the operations of hypothecary loans. Such is the Bank of Bavaria, the German associations for the most part belong to the first class. Entrance in the Association. So long as the proprietor has not borrowed, it is optional for him to become a member of the association or not, but this option c6ases the moment the loan is made. Eastern Prussia is an exception to this Rule. Every proprie- tor is a mcmoer of the association. In consequence, he can claim as a right his share of credit. Demand of Credit. Whoever wants to borrow is bound to present to the Director of the Association the certificate of the mortgages on his pro- perty which have been registered. The valuation of the pro- perty is then made. Valuation. In order to arrive to as correct and impartial a valuation as possible, distinct and different principles of valuation have been established for each District, and these principles agree with the distinctive character of the locality. As a general rule, no consideration is paid to floating and variable elements of property, such as Cheptel^ utensils, &c. Loans are obtained with more difficulty on buildings than on landed property. Opening of Account. When the average price of the immovable is once found, the Association grants to the borrower credit which usually does not exceed one-fourth, one-third, or at the very most half of the value of the immovable. In general, money is lent only on a first mortgage. ^1 If * ; m "it ii n I f'l fl i JH I i-:^ i 38 When a prior mortgage exists, it must be first cleared or converted into lettres dc gage, if the creditor consent. Lettres de Gage. In order to do this an hypothecary bond, called lettre de gage, (Phand Briefle,) signed by the Director in the name of the Association, is given to the borrower. In some countries lettres de gage, or hypothecary bonds, en- dorsed with the words " not convertible," cannot be negotiated. By these simple words the proprielor can guard against the consequences of a fraudulent substraction. The lettres de gage give the privilege of summary execution. They are made payable to bearer. Their nominal value varies from 20 to 2000 thalers, (75 to 7,500 francs). Political changes influence them less ihan other negotiable paper. One of the most admirable effects of the Institution is, that, while it facilitates the buying and the selling of the bonds it has created, it very seldom gives an occasion to ^-peculation. The mode of issuing lettres de gage varies in the different countries. In some States the Association delivers those letters to the borrowers, who have to negotiate them themselves. In others the reverse is preferred, that is to say, the Associa- tion places itself directly between the capitalist and the pro- prietor. It becom(!s the immediate creditor of the borrower ; it gives to the lender ihe bond whicii repre-^^ents his investments, and pays the interest accrued, and it attends to the payment of the capital by the debtor. Nearly all the modern Societies have thought proper to adopt this latter system. It is certain that an Association constituted with all the guarantees imaginable, is in a better position to find capitalists disposed to change their specie for lettres de, gage than private individuals. i \^\ 29 ll is for this reason that one of the Rules of the Bank of Bavaria is that, " all loans made by the Association are to be in cash," and we will show in the following chapter that it is not only the best mode applicable to Canada, but that it is the only one calculated to draw foreign capital in the Province. Liberation. The borrower liberates himself b^ an arumal or scmestrial instalment in which is included the interest, the cost of admin- istration and the sum afl'ected to the sinking fund which in Germany varies from one ^ to 2 per cent. He can also liberate himself by payments in account, which he can make either in cash or in bonds. When one-fourth part of the debt is discharged, he can demand the partial radiation of the mortgage. Payment of the Bonds. The payment of the bonds cannot be demanded by the lenders. The experience of the dangers which sinmltaneous demands of payment have caused to the Institutions, has brought on this improvement in their statutes. The bonds are paid, in general, by the Hrage au sorl^ at the rate of the value of the stock paid up, or amount of sinking fund. Security. Their security consists, apart from the immovable property mortgaged, and the other property of the debtor, in the mutual responsibility of all the members of the Society, and, in some countries, in the guarantee of the State, or that of the Provin- cial States. But the precautionary measures prescribed by the Rules and |: 30 Statutes of the Institutions, as observed by the Directors, are so great that this recourse is never exercised. The right of the bearer in this respect is a deud letter, which serves only to increase ihe confidence inspired by the Bonds issued by Ihe Society. Right of the Bearer. jii!iHr In order to obtain the payment of the interest, the bearer does not call on the borrower himself personally ; he is paid by the Association, whose duty it is to discharge it by means of the payment of the instalments due by the proprietors. Rights of the Association. The Associations cannot force any of the members to refund the sums lent, so long as the interest is punctually paid, but as the exactitude of the operations and the maintenance of their credit depends on the regular payment of the interest, the Law gives the Associations the right of proceeding rigorously and summarily against debtors who fail to execute their obligations. As soon as the term has expired, and a repeated request to pay has had no effect, the Association enters into possession of the property mortgaged, and cause a guardian to be named to it. The seizure holds good until the debt in interest, capital, and costs is totally discharged, unless the Rules should order the sale of the property at a period fixed beforehand, or should give to the proprietor the right of liberating himself by farming his lands. The Society besides is authorized to contract, in the name of the proprietor, a loan, secured on the immovable property seized in the interval, and until the period of the sale and the payment of the debt. However, it would be unjust to enforce such strict rules, I 31 when great misforlunes, which it is impossible to foresee or guard against, prevent the proprietor from paying regularly the instalments in arrear. In such a case, after notice has been given of tiie accident to the Directors, and an enquiry institut- ed, the latter, according to the circumstances, do not hesitate lo grant to the debtors a further delay, and even advance fur- ther sums of money, in order lo prevent the total ruin of the land in cultivation- Reserve Fund. ' In order to meet accidents and unforeseen casualties, each Institution has a Reserve Fund. This Fund is composed of different elenieiits, principally of a small proportional contri- bution paid once for all at the time of the loan. The reserve is placed in such a manner as to be available for use. Privilege. The Associations enjoy important privileges. In Bavaria ithe notes of the Society have a legal currency, but to a fixed amount, and with very wise precautions. These Institutions are exempted from all Registry Fees, from costs of Deeds, &c., &c. They are authorised to use as Bonds the Capital of Towns, of Tutorships, of Corporations, of Savings Banks, &c., &c. Help from the State. Besides most of these Institutions receive grants from Govern- ment. In this way Frederick the II. advanced to the Silesian Asso- ciation the bum of 300,000 thalers at 2 per cent., which, by means of an investment sented to it, which will allow it to place at least 26,000 francs, yearly, at compound interest, which in 20 years constitute a fund of 1,339,421 francs, and in 99 years, 38,278,190 francs." Grants have also l)een made to the Associations of Galicia, Saxony and Posen. Administratio^t. *;B I The direction of the Institutions of Landed Credit is usually composed of a Board of Directors, charged with the ordinary business of several clerks, and of a Committee which meets at certain times, of special Commissions in the different Dis- tricts in the Province, and finally of all the members of the Association. Government keeps a very scrupulous watch over ell the acts of the administration, but all the Institutions, of which the foregoing pages contain an analysis of the rules, have been founded by private industry. Those founded and controlled by Government, such as the Caisses of Hesse-Cassel, Denmark, and Belgium, are based upon a similar combination. We will not allude to an establishment of this kind whi^h exists is Prussia, and which is happily framed to work in con- nection with the Landed Associations of that country. It is the Royal Institution of Landed Credit, which was founded in 1835. The following is the object of that establishment : — It had been observed that the proprietor members of the Association, when the half of their immovable properly waa S3 mortgagod on bonds, found diificultios to borrow now sumsi on fiivourablo conditions. It wast in order to remedy this incoiivenionco, and to increase the credit of the fanners, that the Prussian Government oriranis- ed a Bank, to which it made a j^rant of 1,125,000 francs. The mortgaiijes which it gives, and which are secured by the guarantee of the State, extend to the third-part of the value of the immovable property, and take rank immediately after the Provincial Bonds. Such are the general principles on which the different Asso- ciations of Landed Credit in Europe have been founded. Results obtained from the Associations of Landed Credit. If the Associations of Landed Credit cannot create capital, they at least caused it to circulate and produce a more even division of it, and induce foreign capitalists to invest in coun- tries in which a want of it is felt. Considered in this view, they have the cfTect of real cir- culating machines. Collective Credit can more easily than individual Credit diminish the evil conseqTiences arising from a crisis, if it cannot altogether prevent it. Wherever they are established, they clear properly from mortgages, they provide to the soil instruments for its improve- ment, and they stop excessive division. In Germany, as well as in certain parts of Poland, the lands of the agriculturists were encumbered with an immense quan- tity of feudal charges, as well real as personal in favour of the nobility. Since 1815, divers laws have authorised the redemp- tion of the greater part of those incvimbranoes. The Banks of Landed Credit have made this redemption possible and extremely easy, the payments being made at a distant term, and by means of small instalments. These operations, though they are not yet completed, have. , : I «P- ■ ' K / !i I i II > I I . '\v. t ' ■}'. i; H nevertheless, ulrt-ady in general, Treed the land, and the farmer, whih? he gets richer, has rendered the soil more productive. ^Ve will now sum up the advantages which the Associations of Landed Crc^dit ofl'er as well lo the Ijorrower as the lender and to the countries in general, in which they arc eslabiisht^d. First to the borrower : 1. They cause him to find capital without his being obliged to go to third parties. 2. They secure him from unforeseen demands of payment. 3. They furnish him the means of paying by small instal- ments. 4. By obliging him to pay regularly the interest, they in- spire him with a system of order which becomes an advantage to his general habits, for the association indeed is inllcxiblc, and should the debtor allow his instalments to run in arrears, the seizure follows immediately. 5. They give increased value to immovable property. To the Lender : 1. They oflfer to him a secure investment and a regular payment of the interest. 2. They render unnecessary on his part any attention to the property mortgaged. 3. They save him the trouble of complicated proceedings, the bond being titre pare. 4. They save him the costs of brokerage and other sundry expenses, which always accompany the payment of the in- terest, the refunding and the investment of his capital, &c. 6. They allow him the facility of realising at all times his capital, by the facility of the transfer of the bonds which are always easily cashed. Here is the general effect of these Institutions : 1. They diminish the general rate of interest paid for the use of money. II m d5 2. They arc more eflficaciouH in prrvonling usury than iho most slringiMJt laws with respect to it. 3. They place agriculture on tho^sanie footing with indus- try and commerce. 4. They turn capital in the direction of the soil, and pre- vent farmers from leaving the country. 5. They oppose to the cutting up luiJ division of pro- perty, an efficient obstacle. 6. They render possible the conversion of old debts con- tracted with unfavourable conditions into a new debt with much more favourable conditions, and which give to the debtor the means of acquitting himself of the capital, by continuing, dur- ing a certain number of years, the payment of the instalment, which, under the operation ot the old coatrf ct, would, at most, enable him to pay the interest, and would keep him saddled with the whole of the principal. 7. They render the production of agricultural products easier and cheaper, and without injuring agriculture ; they di- minish, for the common advantage, the costs of the alimentary products. CURRENCY OF THE BONDS. In order to have a correct idea of the success of the Institu- tions of Landed Credit in Germany, it is interesting to be ac- quainted with the rates at which the bonds have been nego- tiated at diflferent epochs, and more particularly during the period following the Revolution of February, 1848, in France, and during the agitarions it had produced in all Germany. The report of Mr. Royer, the inspector of agriculture in France, made by order of government in 1845, makes us ac- quainted with the rates of the different associations from 1803 to 1843, that is to say during three periods. 1. The period of depreciation caused by the wars with tho French empire. 86 2. That of prosperity after the wars and before the con- version. 3. That which followed the conversion of the bonds, that is to say, the redaction of the interest at 3^ percent., and the sup- pression of the right which the creditor had of exacting the payment in full of the capital. During the first period, the depression has been smaller than it was for the public funds and other stocks. During the second, the bonds have in general been negoti- ated above par. Finally, the conversion this capital measure adopted in 1839, has not had a material effect on the rates, and th" bonds, after a momentary depression, have quickly risen above par. In February, 1848, the French Revolution has depressed the value of all kinds of property ; in consequence, the average rate of bonds, bearing 3 J per cent., was : In Silesia and Pomerania, 93. " Western Prussia, 83. " Eastern Prussia, 96. But in order to judge rightly of those rates, they must be compared to the rates of the other kinds of public property which had experienced a frightful fall since the 24th February, 1848. The Prussian rents were quoted at an average of 03 p. cent. The shares of the Prussian Bank at an " " 63 p. cent. The Railroad shares from 30 to 90 per cent. The comparison is therefore altogether favourable to the landed bonds, especially if regard be had, in the consideration of the rates of these landed bonds, to the different public loans which have successively been made in Prussia. In 1850, the comparison can be made with as much advan- tage. For instance, while the public debt of Prussia (3| per cent.) was at 86^ (rate of the 30th April, 1850), the landed 37 cent, cent. bonds of the difibront Prussian bonds (3| per cent.) were quoted at from 95 to 95| per cent ; the Innded bonds of Posen (4 per cent.) were negotiated last year at 102 ; I hose of Meek- lenbourg at 103 ; and notwithstanding the opposition whieh the loan of 70 millions contracted at Hamburg after tlie fire of 1842, makes to the latter, they are eagerly sought for. The amount of Landed Bonds in circulation by the prineipal Institutions of Landed Credit in Germany is another conclusive proof of the advantages which they procure to immovable r)ro- perty. The preceding statements, and those that follow, have been collected by order of the French Government, and were published last year in the Report of Mr. Josseau. " _. . -. Countries. PorLLATlON. YliAllS. Amount ok ClRc:UI.ATi(iN. PRUSSIA. Provinct'H of: Silesia, IVovincial Association. Silesia, Uoyal Institute, nrandebourg J'rovincial Association. 3,065,809 2,000,08:5 1830 18:^8 1837 l.';3 232.218 fr. 3,337,500 4-1.537,330 Pomerania, do. Western Prussia do. Easlern tlo , do. i,it;5,07;j 1,010,105 1,480.818 1 837 1837 1837 55,002,844 38,830,3.10 42,104,250 Posnania, do. Wcslplialia, do. OTIIEU STATES. l,364,;Ji)0 1844 Unknown 50,80~',500 Hanover, all tlie Associations togetber. Mecklenbourg, do. 1,758,^47 024,477 1814 1S40 34,000,000 about 15.013,080 '^axonv, do. 1,830.48;$ 1840 3,750,188 i3avaria do. Wurteinberg, d to place their stock in the Institution. With such security and a good constitution, the Canadian Association of Landed Credit might contract in England a loan ou conditions at least as favourable as those obtained for the grea line of Railway on the Continent of British North Ameri- ca, that is to say, 3J per cent. If such should be the case, as every thing seems to show, we would have 2^ difference, that is, between that rate of 2» per cent., and the legal rate of this country, which is 6 per cent. These 2^ per cent., used as a sinking fund of the capital, would pay the latter by means of the well known operation of compound interest in 25 years and 4 months, supposing that the Crown would give up its claims to the right of Quint, and to the Seigniories which actually belong to it. The value of the latter would serve for a grant made by Government to the Canadian Association of Landed Credit, which would be used as — 1st. A Reserve Fund for the Society. 2nd. To pay the ex- penses of administration. 3rd. To pay the difference of exchange between England and Canada. The difference in the interest 2^ per cent, (from 3i to 6 per cent.) would be a gain to the Censitaires, that is to say, ad- mitting the capital borrowed to be £1,250,000, their annual 40 guin would be £31,250, which sum, placed at compound in- terest in their favour, would pay this capital in 25 years and 4 months. The following table gives an exact idea of the dnninution of the capital, by means of the payment of yearly instalments of 2;', per cent., 100 being taken as the principal. The first year Capllal lui) Instnlinoiit of 97 60 2 3 4 5 6 7 8 9 :o 11 12 13 14 15 16 17 13 19 20 21 22 23 24 26 2 50 pai.) ill worth 97 60 2 6'J •• 01 91 2 C8 «( 92 23 2 77 t« 89 4a 2 87