Revista de Historia Interdisciplinaria, l:2 (Otoño, 2019), 237–264.
Lisbeth Rodrigues
Debt Litigation and the Performance of Law
Courts in Eighteenth-Century Portugal Ever since
the publication of North’s seminal work, scholars have recognized
the fundamental role played by institutions—both formal and
informal—in relation to economic growth, arguing that their pri-
mary goal is to reduce uncertainty and therefore transaction costs.
Recent years have witnessed a flurry of research using financial
data to study the relationship between institutions and economic
desarrollo. Economists and economic historians have viewed
formal institutions, en general, and the law courts, En particular,
as useful observatories for assessing the impact of institutions on
the economic performance of different countries. A pesar de la
evident difficulties in measuring the quality of the judiciary, eco-
nomic theory argues that efficient law courts may indeed promote
investment and lead to economic growth.1
Although European historiography has recently begun to
explore the link between law courts and economic performance,
the information available about the uses made of justice in early
modern Portugal is still limited. Hasta ahora, research on formal legal
institutions has dwelt mainly upon three main topics—the organi-
zation of the judiciary and the magistracy and the functioning of
specific courts, such as the high courts (Casa da Suplicação and
Desembargo do Paço) and those dealing with crimes against faith
(Tribunal da Inquisição) or matters of conscience (Mesa da Consciência
e Ordens). Except for Reis’ work, which focuses largely on the
credit market and the judiciary in the second half of the nineteenth
Lisbeth Rodrigues is Research Fellow at the Social and Economic History Research Unit (CSG/
GHES), Lisbon School of Economics and Management, Lisbon University. She is co-author, con
Isabel dos Guimarães Sá, of “Sugar and Spices in Portuguese Renaissance Medicine," Diario de
Medieval Iberian Studies, I (2015), 1–21.
© 2019 por el Instituto de Tecnología de Massachusetts y The Journal of Interdisciplinary
Historia, Cª, https://doi.org/10.1162/jinh_a_01411
1 Douglass North, Instituciones, Institutional Change and Economic Performance (Nueva York,
1990). For the relationship between the judiciary and economic growth, see Rafael La Porta
et al., “Legal Determinants of External Finance,” Journal of Finance, LII (1997), 1131–1150;
ídem, “Law and Finance,” Journal of Political Economy, CVI (1998), 1113–1155; Edward Glaeser
et al., “Do Institutions Cause Growth?” Journal of Economic Growth, IX (2004), 271–303.
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| L I S B E T H RO D RI G UE S
siglo, Portuguese historiography has fallen far short in its study
of the relationship between formal legal institutions and the func-
tioning of financial markets.2
This article represents a first step toward filling this gap. It ad-
dresses the question of how well Portuguese law courts enforced
loan contracts in the eighteenth century. It starts from Reis’ as-
sumption that nineteenth-century Portugal offers an example of
markets with high levels of risk, due to the inefficiency of the
law courts. According to Reis, lenders charged a premium in con-
tracts with or without adequate collateral, signaling “a collective
perception that the judicial system was not adequately protecting
the contractual rights of creditors.” In his view, the problems of
the Portuguese judicial system were rooted more in the judges,
who were “captive and venal,” rather than in the rules or insti-
tutions themselves. Admitting that his conjecture applies to the
eighteenth century, this article explores a different method for
measuring the “quality” of law courts. Hasta ahora, historical research
on this topic has used the interest rates of contracts to assess the
performance of formal legal institutions. Sin embargo, the analysis
herein relies mainly on lawsuits, placing greater emphasis on two
variables that are also considered to be good indicators of the qual-
ity of law courts: (1) the length of time that judicial proceedings
normally took (quantitative variable) y (2) the execution of the
collateral that secured the loans (qualitative variable). Such an em-
phasis makes it possible to assess not only the efficiency of the
courts—their authority to execute contracts correctly with a min-
imal expenditure of effort, tiempo, and other resources—but also
Ver, among others, António Hespanha, As vésperas do Leviathan: instituições e poder político.
2
Portugal, século XVII (Coimbra, 1994); José Subtil, O Desembargo do Paço (1750–1833) (Lisbon,
1996); ídem, Dicionário dos desembargadores: 1640–1834 (Lisbon, 2010); Nuno Camarinhas, Juízes
e administração da justiça no Antigo Regime: Portugal e o império colonial, século XVII e XVIII
(Lisbon, 2010); Stuart Schwartz, Burocracia e sociedade no Brasil colonial: O Tribunal Superior da
Bahia e seus desembargadores, 1609–1751 (São Paulo, 2011); Nuno Camarinhas, “Justice Admin-
istration in Early Modern Portugal: Kingdom and Empire in a Bureaucratic Continuum,"
Portuguese Journal of Social Science, XII (2013), 179–193. For the credit market and the judiciary
in Portugal, see Jaime Reis, “The Portuguese Judicial System in the Nineteenth Century:
Rules, Risks, and Judges,” in Debin Ma and Jan Luiten van Zanden (editores.), Law and Long-Term
Economic Change: A Eurasian Perspective (stanford, 2011), 277–299; ídem, “Institutions and
Economic Growth in the Atlantic Periphery: The Efficiency of the Portuguese Machinery of
Justicia, 1870–1910,” in Hadi Salehi Esfahani, Giovanni Facchini, and Geoffrey J. D. Hewings
(editores.), Economic Development in Latin America: Essay in Honor of Werner Baer (Londres, 2010),
73–101.
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D E B T L I T IG A T I O N | 239
their efficacy, particularly their ability to produce the expected
outcome (executing the collateral given in the contracts).3
This article looks closely at the credit activities of the Lisbon
Misericórdia, a lay brotherhood founded in the late fifteenth cen-
tury. The crucial advantage of studying this institution is that it was
far from being an irrelevant creditor in Lisbon during the eigh-
teenth century. A recent study has shown that the volume of
credit granted by the Misericórdia represented, on average, 24 por-
cent of the total amount of credit formally awarded by one of the
eighteen public notaries operating in the city. The second advantage
is that the Misericórdia’s credit activity involved little asymmetrical
información. Whereas previous studies about the enforcement of
contracts have examined impersonal credit relationships, the current
case involves parties who knew each other beforehand, since the
Misericórdia (creditor) preferably loaned money to its members
(debtors). Es decir, both parties played the game according
to the same rules; creditors and debtors knew each other in advance,
participated in an associational life, shared the same socioeconomic
fondo (grandees), had equal access to the law courts, and en-
joyed similar means of directly obtaining royal grace and favor.4
3 Reis, “Portuguese Judicial”; van Zanden, Jaco Zuijderduijn, and Tine De Moor, “Small Is
Beautiful: The Efficiency of Credit Markets in the Late Medieval Holland,” European Review
of Economic History, XXVI (2012), 3–22; Zuijderduijn, “On the Home Court Advantage:
Participation of Locals and Non-Residents in a Village Law Court in Sixteenth-Century
Holanda,” Continuity and Change, XXIX (2014), 19–48; Timur Kuran and Jared Rubin,
“The Financial Power of the Powerless: Socio-Economic Status and Interest Rates under
Partial Rule of Law,” Economic Journal, 118 (2018), 758–796.
4 For the Portuguese credit market in the eighteenth century, see Maria Manuela Rocha,
“Crédito privado num contexto urbano (Lisboa, 1770–1830),” Análise Social, XXXII, 145
(1998), 91–115; Nuno Luís Madureira, “Crédito e mercados financeiros em Lisboa,” Ler His-
tória, XXVI (1994), 21–44; Rocha and Rita Martins de Sousa, “Moeda e crédito,” in Pedro
Lains and Álvaro Silva (editores.), História Económica de Portugal (1700–2000), I (Lisbon, 2005),
209–236. For the analysis of Barbuda Lobo’s notary bureau, one of the eighteen public
notaries operating in Lisbon, see Leonor Freire Costa, Rocha, and Paulo Brito, “Notarial
Activity and Credit Demand in Lisbon during the Eighteenth Century,” GHES Working
Papers Series, LI (2015), 1–28, disponible en https://ideas.repec.org/p/ise/gheswp/wp512014.
html; ídem, “Money Supply and the Credit Market in Early Modern Economies: The Case
of Eighteenth-Century Lisbon,” ibid., l (2014), disponible en https://ideas.repec.org/p/ise/
gheswp/wp522014.html; ídem, “The Alchemy of Gold: Interest Rates, Money Stock, y
Credit in Eighteenth-Century Lisbon,” Economic History Review (2017), 1–26. For the sig-
nificance of the Lisbon Misericórdia as a creditor, see Rodrigues, “O incumprimento do
crédito no século XVIII: o caso da Misericórdia de Lisboa,” in Bruno Lopes and Roger
Lee de Jesus (editores.), Finanças, Instituições, Crédito e Moeda em Portugal e no Império (Séculos
XVI–XVIII) (Coimbra, 2019), 231–262.
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Following the work of Bourdieu, scholars have argued that
given certain norms, información, and attitudes, social relationships
generate intangible “resources,” granting individual and collective
returns. The maintenance of social ties, or “social capital,” via re-
iterated transactions with the same parties can foster mutual trust
and cooperation. The economic literature has imported the con-
cept of social capital as a suitable label for markets and organizations
in which the risk of moral hazard is limited. The idea is that social
capital matters for the working of the markets in at least two ways:
(1) It facilitates the exchange of information between parties to a
contract and (2) it permits the resolution of conflict without the
intervention of a third party (law courts).5
Bearing these features in mind, the aims of this article are
twofold—first, to assess how eighteenth-century Portuguese civil
law courts dealt with economic transactions and, segundo, to eval-
uate the quality of formal legal institutions in settling disputes
about loan contracts. Respectivamente, this article is driven by three
hypotheses: (1) Given that information was not a critical issue in
relation to the Misericórdia’s credit activity, we expect to find that
minimal use was made of the law courts. Since parties not only
shared the same socioeconomic background but were also mem-
bers of the same confraternity, the number of disputes resolved via
legal means must have been low. (2) If the law courts had inter-
vened, their efficiency would have been guaranteed through their
non-observed conditions for making partial decisions. (3) If the
law courts were competent, judicial proceedings would not have
taken a long time; the collateral would have been executed; y
creditors would have been refunded. Lengthy judicial proceedings
and the non-execution of collateralized assets would indicate that
the law courts performed poorly in the protection of creditors’
property rights and the fulfilment of contracts. With the exception
of Zuijderduijn’s recent chapter, scholars have tended to overlook
the question of the execution of collateral in credit agreements.
5 The literature about social capital is extensive. Ver, Por ejemplo, Pierre Bourdieu, "El
Forms of Capital,” in John Richardson (ed.), Handbook of Theory and Research for the Sociology of
Educación (Nueva York, 1986), 241–258; James Coleman, “Social Capital in the Creation of
Human Capital,” American Journal of Sociology, XCIV (1988), s95–s120; Robert Putnam, Bowl-
ing Alone: The Collapse and Revival of American Community (Nueva York, 2000). This journal
published a two-part special issue entitled “Patterns of Social Capital,” Journal of Interdisciplinary
Historia, XXIX (1999), 339–782.
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D E B T L I T IG A T I O N | 241
Por lo tanto, this article seeks to discover how easy it was to execute
collateralized assets and to assess the extent to which foreclosure
meant the protection of creditors’ property rights and the re-
imbursement of loans.6
The findings in this article are based on a newly assembled
data set that includes both the loan contracts established by the
Lisbon Misericórdia and 990 lawsuits from the Misericórdia’s pri-
vate court of law (exclusive jurisdiction). This data set contains in-
formation about the duration of individual judicial proceedings,
the subject-matter of the litigations, the profile of the litigants,
and the amounts of money at stake. The article further analyzes
the deliberations of the Misericórdia’s advisory board in order to
appraise informal mechanisms of contract enforcement.
A detailed scrutiny of the Lisbon Misericórdia’s credit activity
and the “quality” of its private law court discovers that, notwith-
standing the reasonably short time for the court’s proceedings and
its routine execution of collateral, the Misericórdia was never able
to solve its loan-default problem nor to protect its property rights.
Como resultado, the Misericórdia’s credit activity was subjected to
rationing in 1768 y, shortly afterward, en 1775, the Portuguese
Crown prohibited the Misericórdia from participating in the pri-
vate credit market.
THE LISBON MISERICÓRDIA AND ITS CREDIT ACTIVITY The Portuguese
Misericórdias were lay associations that, acting under royal pro-
tection, performed the fourteen Christian charitable practices
known as the works of mercy. Following the founding of the
first Misericórdia (Agosto 1498), in Lisbon, by Queen Leonor
(1458–1525), many others were established in the kingdom and
its territories. By the end of the sixteenth century, al menos 101
Misericórdias had emerged in Portugal, creating a uniform model
for poor relief. The specific nature of these confraternities helps
to explain such a rapid expansion. Primero, they enjoyed autonomy
from both municipal and ecclesiastical administration, así como
autonomy from one another. Segundo, unlike other European
confraternities, the Misericórdias did not restrict their support
6 Zuijderduijn, “The Other Fundamental Problem of Exchange: Mortgages, Defaults and
Debtors Protection in Sixteenth-Century Holland,” in Chris Briggs and idem (editores.), Land and
Credit: Mortgages in the Medieval and Early Modern Countryside (cham, 2018), 281–307.
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| L I S B E T H RO D RI G UE S
to members only. En cambio, their primary goal was to assist the
poor strata of society (niños, the infirm poor, orphan girls,
poor prisoners, needy travelers, and the “ashamed poor”). Estos
confraternities were designed to provide a complete charitable
programa, not to undertake just one work of mercy, as was the
case with their European counterparts.7
Although different in nature and purpose, the Misericórdias, en
general, and Lisbon’s, En particular, had two features in common with
the guilds, relating to their tendency to foster social capital—
“closure” and “multiplex relationships.” As exclusive networks,
the Misericórdias enacted statutes (Compromisso) that imposed a
numerus clausus on membership (irmãos or brothers), which varied
from Misericórdia to Misericórdia. Once the numerus maximus had
been reached, no one could join the confraternity until a member
either passed away or was dismissed. According to the statutes, half
of the brothers were required to be nobles (referred to as “brothers
of a higher condition”) and the other half were to be non-nobles,
mainly craftsmen. Además, members had to be older than
twenty-five years, able to read and write, and untainted by Jewish
or Moorish blood linked to their names or those of their ancestors.
That women were barred from membership, at least from 1577
onward, conveys that the Misericórdias were confraternities “of
and for men.” All these prerequisites, which screened potential
members for social status, wealth, capital humano, religious back-
ground, y género, gave the Misericórdias the appearance of impor-
tant statutory groups and turned them into closed social networks.8
7 For examples of the extensive literature about the Misericórdias, see Isabel dos Guimarães
Sá, Quando o rico se faz pobre: Misericórdias, caridade e poder no império português, 1500–1800 (Lisbon,
1997); ídem, As Misericórdias portuguesas de D. Manuel a Pombal (Lisbon, 2001); Laurinda Abreu,
The Political and Social Dynamics of Poverty, Poor Relief and Health Care in Early-Modern Portugal
(Nueva York, 2016); ídem, A Santa Casa da Misericórdia de Setúbal de 1500 a 1755: aspectos de socia-
bilidade e poder (Setúbal, 1990); Maria Antónia Lopes, Pobreza, assistência e controlo social em
Coimbra, 1750–1850 ( Viseu, 2000), 2 v.; Maria Marta Lobo de Araújo, Dar aos pobres e emprestar
a Deus: As Misericórdias de Vila Viçosa e Ponte de Lima (Séculos XVI–XVIII) ( Vila Viçosa, 2000);
José Pedro Paiva (ed.), Portugaliae Monumenta Misericordiarum (Lisbon, 2002–2010), 9 v.; Joaquim
Veríssimo Serrão, A Misericórdia de Lisboa: Quinhentos anos de História (Lisbon, 1998); Victor
Ribeiro, A Santa Casa da Misericórdia de Lisboa (Lisbon, 1998); for the number of foundations,
Paiva (ed.), Portugaliae Monumenta Misericordiarum. I. Fazer a História das Misericórdias (Lisbon,
2002), 19. Por 1640, there were at least 300 Misericórdias in Portugal.
8 For social capital and early modern guilds, see Sheilagh Ogilvie, “Guilds, Efficiency and
Social Capital: Evidence from German Proto-Industry,” Economic History Review, LVII
(2004a), 286–333; ídem, “The Use and Abuse of Trust: Social Capital and Its Deployment
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D E B T L I T IG A T I O N | 243
Respectivamente, as Ogilvie noted for early modern guilds, el
Lisbon Misericórdia generated the four forms of value associated
with social capital: (1) a code of shared norms (Compromisso), (2)
spaces of deliberation for the flow of information, (3) regulations
regarding expulsion (risco de irmãos), y (4) collective efforts to ob-
tain privileges from the Portuguese monarchy, one of which was
the ability to have a private judge.9
The Misericórdia was run by an administrative board (Mesa)
consisting of thirteen members—six noblemen, six non-noblemen,
and a chairman, known as the purveyor, also a nobleman—who
were selected each year by indirect election; the main board was
assisted by an advisory body ( Junta or Definitório), also elected annu-
ally. Like the Mesa, the Definitório had a hybrid membership of ten
noblemen and ten non-noblemen, who were generally older mem-
bers with experience in the administration of the brotherhood. El
Definitório dealt with matters relating to membership, dinero
lending, religious ornaments, inheritances, and bequests, así como
matters linked to the deliberations of previous Mesas. In the eigh-
teenth century, Portuguese grandees occupied all the administrative
positions in the Lisbon Misericórdia, and they also comprised the
noble membership of the advisory boards. These individuals be-
longed to the king’s circle and were among his closest advisors. Como
discussed below, their presence may well explain much of the benign
treatment that was afforded to the Misericórdia as a creditor.10
By the eighteenth century, the Lisbon Misericórdia was the
main charitable institution in Portugal, having taken over re-
sponsibility for several of the duties performed by other organiza-
ciones, such as the management of hospitals, visits to poor people in
by Early Modern Guilds,” Economic History Yearbook, XLVI (2005), 15–52; ídem, Institutions and
European Trade: Merchant Guilds, 1000–1800 (Cambridge, 2011). From its founding until 1577,
the Lisbon Misericórdia had 100 miembros; after that date, it had 600 miembros. En 1787, eigh-
teen years after a royal decree that ordered the incorporation of the members of the extin-
guished Jesuit confraternities into the Misericórdia, the Lisbon Misericórdia numbered 1,662
hermanos (262 nobles and 1,400 non-nobles). For the idea that the Portuguese Misericórdias
were confraternities “of and for men,” see Sá, Quando o rico, 94–95.
9 Ogilvie, “The Use and Abuse of Trust.”
“Compromisso da Misericórdia de Lisboa,” in Abreu and Paiva (editores.), Portugaliae
10
Monumenta Misericordiarium. V. Reforço da interferência régia e elitização: O governo dos Filipes
(Lisbon, 2006), 293. For the relationship between the Portuguese high nobility and these
brotherhoods, see Sá, Quando o rico; ídem, As Misericórdias Portuguesas; Abreu, “Purgatório,
Misericórdias e Caridade: condições estruturantes da assistência em Portugal,” Dynamis, XX
(2000), 395–415; Serrão, A Misericórdia de Lisboa.
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| L I S B E T H RO D RI G UE S
prison, and the upbringing of abandoned children. Besides pursu-
ing its charitable purposes, the brotherhood also administered a
vast estate, continuously swelled by the legacies that it received.
The Lisbon Misericórdia’s social functions, as well as its manage-
ment of a large estate, led to its involvement in the credit, land,
and property markets.
Portuguese historiography widely acknowledges the prefer-
ence of these confraternities for the credit market. Although many
Misericórdias faced serious financial problems in the eighteenth
century due to non-performing loans, the interest received from
capital loans was one of the primary sources of their annual income,
at least from the mid-seventeenth century onward. Por ejemplo, en
1757, 85 percent of the Lisbon Misericórdia’s revenue came from its
credit activity in both the private and public market [as stated above,
the money loaned by the Misericórdia represented, on average, 24
percent of the total amount of credit formally registered at any one
of Lisbon’s eighteen public notaries during the first half of the eigh-
teenth century]. Yet even though the Misericórdia was one of the
major creditors in the city, it was neither a craft/religious guild nor
a Monti di Pietà that loaned money to the poor at low interest rates.
On the contrary, the Lisbon Misericórdia, as well as the other
Misericórdias of the realm, specialized in lending money to their
board members, creating an “endogenous” (inner-circle) activity.11
De 1690 a 1799, the Lisbon Misericórdia granted at least
102 loans, of which 94 went to grandees of the realm (amounting
to roughly 548 contos de réis, 94 percent of the total amount of
credit), most of them in the first half of the century. The debtors
were primarily members of the brotherhood who occupied essential
11
Several studies recognize the preference of the Misericórdias for the credit market: Sá,
“Património e economia da salvação,” in idem and Inês Amorim (editores.), Sob o Manto da Miser-
icórdia: Contributos para a História da Santa Casa da Misericórdia do Porto (Porto, 2018), I, 155–214;
Abreu, A Santa Casa, 55; António Magalhães da Silva Ribeiro, As práticas de caridade na Miser-
icórdia de Viana da Foz do Lima (séculos XVI–XVIII) (braga, 2009), 421–422; Inês Amorim,
“Património e crédito: Misericórdia e Carmelitas de Aveiro (séculos XVII e XVIII),” Análise
Social, XII (2006), 693–729; Rute Pardal, “O sistema creditício na Misericórdia de Évora em
finais do Antigo Regime,” Callipole, XVIII (2010), 27–36; Américo Fernando da Silva Costa,
A Santa Casa da Misericórdia de Guimarães (1650–1800): caridade e assistência no meio vimaranense dos
séculos XVII e XVIII (Guimarães, 1999), 106–128, 142–143. For the importance of credit activity
within the Lisbon Misericórdia’s total sources of income, see Rodrigues, “O incumprimento.”
The Misericórdia’s interest rates were similar to those charged in the city’s notarial credit market,
varying from 5 a 6.25% yearly. Lower interest rates were usually applied when the debtor
belonged to a charitable or religious institution. Costa et al., Alchemy of Gold.
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D E B T L I T IG A T I O N | 245
positions within the Misericórdia, either as chairmen or as members
of the administrative or advisory boards. Although the credit activity
of the Misericórdia frequently followed social ties, borrowers were
not exempt from securing their loans by enlisting personal guarantees
(third-party co-signers) or by using their property and other assets as
collateral. As in any loan contract, such guarantees were essential;
they not only mitigated the problem of adverse selection and moral
hazard but also provided the Misericórdia with an estimate of the
amount of money that could be recouped in the event of a default.
Mesa 1 shows the type of collateral offered in return for a
loan by the Misericórdia’s borrowers. Rights over income, finan-
cial assets, inheritances, or debts backed 69 percent of such loans,
and real property backed only 14.7 por ciento. These numbers may
indicate that the Misericórdia preferred assets that could be easily ex-
ecuted, or at least did not depend on the property market. A signif-
icant proportion of these assets were subject to specific laws of
inheritance through entailment (“bens vinculados” and “bens de
morgado”) and thus were indivisible and inalienable. De hecho, mayoría
of these estates and their income were the result of royal grants; en
order for them to be mortgaged, the debtor required a royal licence.
Mesa 1 Type of Collateral Offered for a Loan by the Lisbon Misericórdia’s
Borrowers (1690–1799)
COLLATERAL
Rights over
Real estate
Movable goods
Not specified
Income
Financial assets
Inheritances
Debts
Urban
Rural
Jewels
“Bens livres”a
“Bens de morgado”b
Annual amortization
a“Bens livres” is non-entailed property.
b“Bens de morgado” is entailed property.
SOURCES Cartório, Escrituras; Registo de Escrituras; Juros Particulares (1745–1797) (SCML/
GF/RC/04/02/Lv001); Instrução precisa para o governo e administração da fazenda da Santa
Casa da Misericórdia (1757) (SCML/GF/AC/01/Lv002); Contas correntes dos devedores da
Casa (1756–1832) (SCML/GF/ EJ/03/ Lv001); Portarias e outros diplomas (1767–1797)
(SCML/CR/05/cx001), doc. 43; Cofre da Mesa (1750–1751) (SCML/GF/CO/01/Lv001),
Arquivo Histórico da Santa Casa da Misericórdia de Lisboa (hereinafter AHSCMLSB).
%
51.0
13.3
1.4
2.8
6.3
8.4
0.7
1.4
12.6
2.1
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246
| L I S B E T H RO D RI G UE S
The king could allow a debtor to pledge the assets either for a limited
number of years or “until the total satisfaction of the debt.” The
frequency with which such licences were extended suggests that
many of these loans were of a long-term nature. In any case, porque
the pledged assets related to specific laws of inheritance, the debts
were transferable, passing from one generation to another. Sin embargo,
as will be demonstrated below, despite the inheritable character of
most collateralized assets, debtors defaulted on loans, Resultando en
inconvenience to the brotherhood.12
THE MISERICÓRDIA’S LAW COURT As a result of the re-organization
of Portugal’s poor-relief system in 1564, the Lisbon Misericórdia
took over the management of the hospital of Todos-os-Santos,
the largest hospital in the kingdom. The administration of hospitals
by a local Misericórdia was not confined to Lisbon’s; others were to
follow its example after the mid-sixteenth century. Sin embargo, como
a consequence of this incorporation, in December 1565, Cardinal
Dom Henrique (1512–1580) granted the Lisbon Misericórdia the
right to its own exclusive legal jurisdiction ( Juízo Privativo das Causas
da Misericórdia e do Hospital, o, en otras palabras, a “private court of
law”). This prerogative meant that thenceforth, all lawsuits in which
the Misericórdia and the hospital were entangled, whether as
plaintiffs or defendants, would come before a private judge, specially
appointed to the post. Under the Portuguese system of justice, el
right of exclusive jurisdiction was not uncommon and, by the end
of the Ancient Regime, almost all aristocratic and ecclesiastical
houses enjoyed it. Although these “private courts of law” depended
on a royal concession, the advantages that they brought were widely
Reconocido. Among other things, such courts had jurisdiction at first
instancia, which means that a single judge could take charge of any
proceedings involving those institutions.13
According to the Portuguese law (Ordenações Filipinas), el
Misericórdia’s private judge was one of the judges (desembargadores)
12 For the Portuguese nobilities and the institution of entailment, see Nuno Gonçalo Monteiro,
“17th and 18th-century Portuguese Nobilities in the European Context: A Historiographical
Overview,” e-Journal of Portuguese History, I (2003), 1-15; Ordenações Filipinas, libro 4, título 100;
Manuel de Almeida e Sousa de Lobão, Tratado prático de morgados (Lisbon, 1841).
13 Cardinal Dom Henrique was regent during the minority of the future King Sebastião
(1512–1578). Collecção da legislação antiga e moderna do Reino de Portugal: Leis extravagantes colle-
gidas e relatadas pelo lic. Duarte Nunez do Lião per mandado do Rei Sebastião (henceforth referred
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D E B T L I T IG A T I O N | 247
of the Casa da Suplicação, the High Court of Appeal. Twice a
week, on Thursdays and Saturdays, in one of the rooms of the
Supreme Court, the judge tried all the cases brought by or against
the Misericórdia or the Hospital of Todos-os-Santos. En el caso de
interlocutory decisions, the judge dispatched the lawsuits with the
help of two other magistrates chosen by the governor of the Casa
da Suplicação. Once the case records were completed and the case
was ready for judgment, the private judge wrote his opinion in
latín, followed by the opinion of the other two magistrates. Cuando
the three judges agreed, a sentence was passed and ordered to be
executed, without any leave for appeal, because “those cases of the
said Misericórdia and hospital that are pious are to be dispatched
with no delay, in order to mitigate expenses.”14
Besides this private judge, two members of the brotherhood
(mordomos das demandas) dealt with disputes that involved the
institution directly. Every Friday, these men met with the
Misericórdia’s administrative board in order to acquaint them-
selves with the litigation in progress and to ascertain which stage
the respective lawsuits had reached. Although the statutes (1618)
recommended that these two members not cause the lawsuits to
be lost due to negligence or a lack of attention, it also warned
them “not to show too much eagerness, because it is more impor-
tant for the Misericórdia to maintain its reputation of fairness, jus-
tice, and truth than to acquire new resources with signs of violence
and artifices.”15
Unlike other European countries, where docket rolls contain
summaries of the claims brought before the law courts, Portugal has
no such sources; data had to be gathered directly from the lawsuits.
Between 1700 y 1799, 990 lawsuits directly involved the Lisbon
Misericórdia or the institutions that it ran. En 834 casos (84 por ciento),
the Misericórdia appeared as the plaintiff, and in 156 casos (16 por-
centavo), it appeared as the defendant.
to as Collecção da legislação) (Coimbra, 1786), I, 127; Ordenações Filipinas, libro 1, título 16. Para
the “private courts of law,” see Monteiro, “Poder senhorial, estatuto nobiliárquico e aristo-
cracia,” in José Mattoso (dir.) and António Manuel Hespanha (coord.), História de Portugal
(Lisbon, 1993), IV, 352–353; Monteiro, O crepúsculo dos Grandes: a casa e o património da aris-
tocracia em Portugal (Lisbon, 2003), 414–418.
14 Ordenações Filipinas, libro 1, título 16; Joaquim José Caetano Pereira e Sousa, Primeiras
Linhas Sobre o Processo Civil (Lisbon, 1825), I; Collecção da legislação, 128.
15
“Compromisso da Misericórdia de Lisboa," 297.
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| L I S B E T H RO D RI G UE S
Mesa 2 Type and Value of Claims at the Lisbon Misericórdia’s Law Court
(1700–1799)
Guardianshipa
Inheritances
Internal issuesb
Loansc
Othersd
Property rights
Rent arrears
Total
norte
54
78
17
145
23
44
473
834
%
LITIGATED VALUE (THOUSANDS OF RÉIS)
%
6.5
9.4
2.0
17.4
2.8
5.3
56.7
100
2,013
14,809
26,727
484,626
19,270
1,046
86,186
617,334
0.3
2.4
4.3
78.5
0.3
0.2
14.0
100
aLawsuits initiated by the Misericórdia on behalf of foundlings, claiming unpaid salaries.
bLawsuits relating to administrative issues, such as money owed to the confraternity when the officials settled
their annual accounts.
cPrincipal and interest due.
dJudicial costs and claims of preference.
SOURCES Feitos Findos, Juízo Privativo das Causas da Misericórdia de Lisboa (1700–1799),
Arquivo Nacional da Torre do Tombo; Cartório, AHSCMLSB.
Mesa 2 shows that 90.7 percent of the lawsuits initiated by the
Misericórdia were debt-related (rent arrears, loans, unpaid legacies,
legal fees, and unpaid wages); 8.2 percent were not related to debts
(disputes over property rights, requests for the restoration of buildings,
notifications prohibiting renovation work on urban and rural prop-
erties, eviction notices, petitions for the cancellation of wills, y entonces
adelante); and a further 1.1 percent involved both debts and property
rights. These numbers demonstrate that the Misericórdia used the
law to solve problems associated with financial constraints caused
by another party’s failure to pay an outstanding installment, cual
naturally affected the organization’s cash flow. These results are in line
with European historiography, which points out that early modern
law courts dealt mainly with debt cases.16
16 Richard Kagan, Lawsuits and Litigants in Castile, 1500–1700 (Chapel Hill, 1981), 79–127;
Christopher Brooks, “Interpersonal Conflict and Social Tension: Civil Litigation in England
1640–1830,” in Augustus L. Beier, David Cannadine, and James Rosenheim (editores.), The First
Modern Society: Essays in Honour of Lawrence Stone (Nueva York, 1989), 357–399; Craig
Muldrew, The Economy of Obligation: The Culture of Credit and Social Relations in Early Modern
Inglaterra (Londres, 1998); Elise Dermineur, “Trust, Norms of Cooperation, and the Rural
Credit Market in Eighteenth-Century France,” Revista de Historia Interdisciplinaria, XLV
(2015), 485–506; Griet Vermeesch, “The Social Composition of Plaintiffs and Defendants
in the Peacemaker Court, Leiden, 1750–54,” Social History, XL (2015), 208–229.
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D E B T L I T IG A T I O N | 249
Particularly interesting, sin embargo, is the financial representa-
tiveness of these lawsuits. Rent arrears, which represented a signif-
icant proportion of the cases brought by the Misericórdia, covered
solo 14 percent of the total value litigated in court. Todavía, lawsuits
brought for unpaid loans comprised 79 percent of all the financial
costs that the Misericórdia incurred due to defaulters. In any event,
the data point to a significant financial burden deriving from un-
paid loans and interest, thus suggesting that informal means of
solving payment defaults seem to have been ineffective.
The great noble families (grandees) were predominantly impli-
cated in lawsuits relating to defaults in the repayment of loans (61
por ciento, or forty-seven of the seventy-seven cases). This situation is
particularly significant if we consider the amount of money at stake.
Of the total amount of money claimed by the Misericórdia in court,
69 percent had the high nobility as defendants, y 85 por ciento de
all the money in lawsuits relating to loan repayments pertained to
that elite. Como se ha mencionado más arriba, the heavy presence of the grandees
in the Misericórdia’s credit relations was well known among
Portuguese historians, although the value that these cases rep-
resented as a proportion of the costs incurred by the Misericórdia
in the enforcement of contracts has so far been ignored. El
Portuguese literature shows the eighteenth-century Misericórdias
to have been the main creditors of the aristocracy. Seldom empha-
sized, sin embargo, is the fact that, despite forming part of the admin-
istrative boards, these members of the upper social strata were also
defendants at the law court. Evidently, their profile as insiders did
not bring them any advantage that can be linked to the effective-
ness of informal institutions and social capital in closed networks.17
A pesar de, in theory, the composition of the Misericórdia’s ad-
ministrative board—thirteen men, seven of whom were nobles—
changed each year, the turnover of members does not appear to
have prevented these individuals from redistributing the brother-
hood’s common resources among themselves. The data reveal that
the defaulting debtors were the same people who sat on the admin-
istrative boards. The Mesa frequently made advantageous loans to
these individuals (also grandees), whose high risk of moral hazard
was already known from previous transactions. To put it simply,
17 Monteiro, “O endividamento aristocrático (1750–1832): alguns aspectos,” Análise Social,
XXVII (1992), 263–283.
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250
| L I S B E T H RO D RI G UE S
once they had left their position, they acted no differently in the
brotherhood: Having gained access to the Misericórdia’s loans (de
which they had also benefited in previous years), these noble
debtors obtained favorable treatment from the Mesa, which either
did not request the payment of interest for long periods of time or
simply forgot to collect the debts.
Collusive behavior is typical in professional corporations; el
closed nature of such groups favors the development of monopo-
listic situations. Although the analysis herein is not applied osten-
sibly to a specifically monopolistic setting, the composition of the
administrative boards provided aristocrats prone to malfeasance
with access to a pool of financial resources; they were able to
extract for themselves a sort of rent that derived from their social
ties with the Mesa. Por eso, as far as this case study is concerned, el
shared norms, information flows, punishments, and collective
action that are characteristic features of institutions capable of gen-
erating social capital seem to have been inefficient devices in
reducing opportunism. If such collusive behavior explains many of
the issues, it does not answer the question of why the courts were
summoned to resolve the problems of defaults in the payment of
loans. It does permit, sin embargo, the conjecture that the norms of
the brotherhoods and the status of the defendants served to reduce
the duration of these defendants’ court proceedings, meaning that
recourse to the courts was a last resort.
What remains is to assess the efficiency of the court in settling
disputes over breaches of loan contracts through an analysis of both
the length of time of court proceedings and the execution of col-
lateral. How did the Misericórdia recover its resources and how
did the collateral guarantee the payment of a debt in the event
of default? Did membership or social status have any effect on
the manner in which conflicts were resolved?
THE DURATION OF LAWSUITS As a first step toward analyzing the
resultados, Cifra 1 displays the length of time of court proceedings,
from the moment the lawsuits entered the court until the execu-
tion of the respective sentences.
According to Figure 1, the law court was quick to pass sen-
tence and enforce its decision. Apenas 57 por ciento de la 834 law-
suits brought before the court were settled in less than one year; 70
percent took less than one year; Y solo 15 percent lasted more
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D E B T L I T IG A T I O N | 251
Higo. 1 Length of Time of Proceedings at the Misericórdia’s Law Court
(1700–1799)
SOURCES Feitos Findos, Juízo Privativo das Causas da Misericórdia de Lisboa (1700–1799),
Arquivo Nacional da Torre do Tombo; Cartório, AHSCMLSB.
than five years. Similar rapid results were also prevalent in other
European law courts. As Hardwick, por ejemplo, pointed out, casos
brought before the Nantais provost’s court and the Lyonnais
Sénéchaussée lasted fewer than three months from the plaintiff’s
petition to the court’s judgment. Hayhoe concluded that seventeenth-
and eighteenth-century French intermediate and lower courts
were just as efficient. In the 1750s, those cases reached a settlement
within an average of sixty-four days; those settled in fewer than
three months lasted only an average of 10.5 days in court. El
statutes of the Misericórdia’s law court actually called for cases to
be resolved quickly, because the length of time spent in court
directly affected the poor echelons of society who depended on
the institution for their welfare.18
To explore these results further, Mesa 3 unpacks the different
types of claim at court. The most striking feature is that, a pesar de
being handled expeditiously, the lawsuits concerning defaults on
loans took longer at court than did other types of claims.
The speed with which the court dispatched its cases can be
explained, at least in part, by the kind of sentence that the judge
Julie Hardwick, Family Business: Litigation and the Political Economies of Daily Life in Early
18
Modern France (Nueva York, 2009), 64; Jeremy Hayhoe, Enlightened Feudalism: Seigneurial Justice
and Village Society in Eighteenth-Century Northern Burgundy (Rochester, 2008), 158; Fabrice
Mauclair, La justice au village: Justice seigneuriale en société rurale dans le duché-pairie de La Vallière
(1667–1790) (Rennes, 2008), 559.
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D E B T L I T IG A T I O N | 253
decreed. According to Portuguese law, debts originating from
contracts drawn up by a public notary had to obtain a rapid
(and inexpensive) judicial ruling (summary justice), since the no-
tarial record itself contained the proof of the obligation. On those
grounds, the importance of written contracts should not be under-
estimated. The destruction of the Misericórdia’s notary office by
the earthquake of 1755 brought financial struggles to the brother-
hood because it no longer held the records that certified its invest-
ments and, above all, the property rights owned before 1755. En
1757, when reporting the weak financial situation of the Lisbon
Misericórdia, Lourenço Filipe de Mendonça e Moura (1705–
1788), the count of Vale de Reis and, at the time, the purveyor
of the Misericórdia, emphasized the challenges facing the institu-
tion due to the lack of public deeds and other written evidence.
Mendonça e Moura specified that tenants either refused to ac-
knowledge the Misericórdia as the landowner or, on different occasions,
tried to convince the court that the contracts signed with the brother-
hood had been celebrated in perpetuity (aforamentos) rather than for a
number of lives (emprazamentos). This predicament was also threatening
to credit arrangements; along with the public deeds, the accounts
ledgers had also vanished. Whenever possible, the Misericórdia proved
the obligations through notary certificates. Sin embargo, when written
evidence was missing, disputes persisted, often to the benefit of
debtors, who either denied any financial obligation or asked for a
significant proportion of the debt to be waived.19
19 Gestão Financeira, Administração da Casa, Instrução precisa para o governo e administração
da fazenda da Santa Casa da Misericórdia (1757) (SCML/GF/AC/01/Lv002), fl. 1, Arquivo
Histórico da Santa Casa da Misericórdia de Lisboa (hereinafter AHSCMLSB). Aforamento and
emprazamento were two emphyteutic contracts, by which the landlord conceded the “useful
domain” to a tenant ( foreiro, taker) y, in consequence, received an annual ground rent ( foro).
Despite their long-term character, aforamento was in perpetuity, eso es, with no fixed term, y
emprazamento was in lives, generally three lives. For contracts of this type, see Rui Santos,
“Direitos de propriedade fundiária e estratificação social rural: um contributo sociológico,” in
Álvaro Garrido, Leonor Freire Costa, and Luís Miguel Duarte (editores.), Estudos em Homenagem a
Joaquim Romero Magalhães: economia, instituições e império (Coimbra, 2012), 277–293; idem and José
Vicente Serrão, “Property Rights, Social Appropriations and Economic Outcomes: Agrarian
Contracts in Southern Portugal in the Late Eighteenth Century,” in Gérard Béaur et al.
(editores.), Property Rights, Land Markets and Economic Growth in the European Countryside (13th–20th
Centuries) (Turnhout, 2013), 475–494. According to Portuguese law, if the notarial obligation
were to vanish, the obligation still remained; the interested parties could testify to the existence
of the contract via other means (a copy from the notary records or through certified witnesses)
(Ordenações Filipinas, libro 1, título 78, §19; libro 3, título 60, §6).
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In any event, the law stated that lawsuits “founded on public
deeds, should be concluded briefly.” One of the most common
clauses of these written contracts was the “confession of judg-
mento,” by which debtors (whether tenants, borrowers, or other
parties) recognized and confessed a debt from its inception: “and
for the greater assurance of this loan he [the debtor] desires this
public record to be judged by sentence ( . . . ) and due to this all
his goods and property that are enough to pay everything shall be
seized, for he wishes to be sentenced by precept and for that pur-
pose he confesses this debt in his name and submits the said goods
and property to the said seizure, and wishes this confession and
nomination to be used as a judicial term.” A defendant’s confes-
sion was considered definitive proof, exempting a plaintiff from
the need to present further evidence. In such cases, the judge sen-
tenced the defendant according to precept and under the terms of
his confession.20
After a plaintiff presented the notarial record before the law
court, the liability of the defendant was incontestable, y el
plaintiff could request that the court seize the mortgage offered
in the contract (a general mortgage consisted of all a debtor’s assets,
both present and future; a particular mortgage might be, decir, a
specific piece of land). Creditors had neither the authority to take
possession of the debtors’ assets nor the power to seize them; semejante
seizure required a court order vouchsafed by a judicial officer. En
otras palabras, it was a judicial mechanism that removed the goods
from the defendant to protect them from being hidden, consumed,
or alienated.21
Once a creditor had requested the seizure of assets, a judge
fixed a period of ten days (assinação de dez dias) for the defendant
to pay the debt, to provide proof that it had already been paid, o
to raise objections against the sentence. If the defendant did not
meet the debt or provide satisfactory reasons for its default (o
when the court dismissed these reasons), the judge usually man-
dated the seizure of goods as attachment for the debt, permitiendo
the debtor twenty-four hours to pay or to assign movable or real
property for seizure. Should the defendant not specify the property
20 Ordenações Filipinas, libro 3, título 25; título 66, § 9; título 30. Cartório, Registo de escrituras
(1772–1779) (SCML/CT/09/01/ Lv003), fl. 196v, AHSCMLSB.
21 Ordenações Filipinas, libro 2, título 52, §7; libro 3, título 86, §1.
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D E B T L I T IG A T I O N | 255
for seizure, the plaintiff could ask the judge to select those assets.
Seizures followed a particular order: The authorities first took a
debtor’s movable goods, taking real property only if the sale of
those goods did not provide sufficient funds to cover the debt.
This regimen shows that debtors were protected to some extent
from losing their properties. This observation finds further support
from the fact that certain goods were barred altogether from
seizure, including clothes, agricultural implements, work animals,
legal and educational books, the tools of a debtor’s trade, etc.22
The process of confiscation normally completed within three
meses. If the seized goods or assets proved insufficient, the plain-
tiff could ask the court to initiate new seizure proceedings. Después
seizure, goods were subject to a valuation, which was published in
edicts stating their quality and price—movable property posted for
nine days and real property for twenty days. The highest bidder at
the public auction normally took the assets, but when no one bid,
two solutions were possible: (1) The court would either ask the
defendant to pay the debt or present a bidder or (2) would award
the assets to the lender “for a fair price in payment of the debt.”23
In the study at hand, it is difficult to determine which debts
were reimbursed after a judicial sentence. Disputes about small
claims were probably paid, or at least settled, via unofficial means.
In cases involving small amounts of money, such as rent arrears, el
typical seizure of things like domestic utensils and furniture suggests
that debtors had few assets of their own. Por eso, they may well have
chosen to acknowledge their debts rather than object to them. El
acknowledgment of debts may also indicate that the recourse to
formal institutions was a means of resolving disputes through an
out-of-court settlement; few debtors appealed the judicial ruling
or appeared in court more than once. Altogether, given the short
Ibídem., libro 3, título 25: “Because all the disputes based on a public record should end
22
briefly, we order that if a person brings a case against another for some reason, or for some
sum of money, that he should receive or deliver, and the plaintiff shows the public record of
obligation, or the written charter, signed by the defendant ( . . . ), the judge will adjudicate
that the case shall immediately designate ten peremptory days for the defendant to pay the
plaintiff everything declared in the public record or charter, or to prove within ten days the
reasons for not paying or complying with the public record or charter. Once the ten days have
elapsed, if the defendant does not confirm that he has paid or does not declare the reasons why
he has not paid the sum or complied with the order, the defendant will be obliged to pay.”
Ibídem., libro 3, título 86, §7–8, §14, §23; libro 4, título 57.
23
Ibídem., libro 3, título 86, §14, 18; título 87, §1; libro 4, título 6.
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256
duration of the proceedings, the Misericórdia’s law court seems to
have performed reasonably well.
The end of court proceedings—usually indicating the enforce-
ment of a ruling—did not necessarily mean creditors’ reimbursement,
particularly with regard to lawsuits about loans, which involved
significant amounts of money unlikely to be paid in a single install-
mento. A este respecto, what actually happened after the enforcement of
a judicial sentence? The economic literature stresses that the
assignment of collateral was intended to constitute encouragement
for contract compliance, with the assumption that a default on
loans would lead to the forfeit of the property pledged. Sin embargo,
as Zuijderduijn noted in the case of sixteenth-century Holland,
debtors’ loss of collateral was not inevitable; En realidad, expropriation
occurred only in exceptional circumstances. En algunos casos, el
type of collateral that was provided constituted a severe obstacle
to the effective execution of contracts.24
THE EXECUTION OF COLLATERAL Although Table 3 reveals that
lawsuits relating to the payment of loans were resolved quickly,
it shows nothing about the enforcement of court decisions. Nuestro
information about the protection of creditors’ property rights is
limitado; we do not know the extent to which the law court fa-
vored and protected creditors’ interests. The usual assumption is
that the judicial decision to seize debtors’ assets resulted in their
movable or real property being sold at public auction to provide
compensation for plaintiffs through the sale of collateral. But even
though most cases, especially those involving only small amounts
of money, followed that course, not all obligations evolved in this
way. As will be seen, both the quality and the nature of collateral
were essential in determining how legal proceedings developed
and how creditors fared.
The execution of collateral enables us to assess the quality of
the law court, desde, in theory, a court’s performance depended on
how swiftly and efficiently it performed an execution of collateral.
We mentioned above that the loans granted by the Misericórdia
were secured mostly by the rights over the income deriving from
entailed property (bens de morgadio) and the Crown’s assets. Estates
of this kind were subject to a precise system of inheritance, cual,
24 Zuijderduijn, “Other Fundamental Problems.”
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D E B T L I T IG A T I O N | 257
together with other conditions, prohibited the sale or division of the
property to ensure its transmittal intact to the heirs. As Monteiro
pointed out, in eighteenth-century Portugal, more than half of
the income of aristocratic families derived from royal endowments.
Since this kind of estate formed the central core of aristocratic rev-
enues, it is not surprising that entailed property served as the main
form of collateral for the loans granted by the Lisbon Misericórdia.25
If an entailed estate could not be sold, sin embargo, the Misericórdia
had no right to sell the collateral at public auction. En este caso,
sin embargo, Portuguese law allowed for the seizure of the income
from these assets to refund creditors. Por eso, the judicial sentence
required the payment of the debt in installments, through the con-
signment of rents. At first sight, this form of amortizing the debts
appears to have been favorable for both the Misericórdia, cual
avoided the transaction costs associated with public auctions, y
its debtors, who obtained a gentler way to make payments. Cómo-
alguna vez, most of the time, the situation was more complicated. Incluso
after a judge had decreed the execution of collateral and the con-
sequent consignment of rents to meet the debt, debtors continued
to default on their payments. Debts often remained unpaid for
several decades and, en algunos casos, for more than a century.26
An examination of the execution of movable and immovable
property pledged as collateral requires scrutiny of all the circumstances
surrounding the loans granted by the Misericórdia. At the beginning
of the nineteenth century, the debts owed to the brotherhood
amounted to 1,333,787,611 réis, which reveals the limited effective-
ness of the law court in resolving the problem of defaults in loan
repayments. En 1823, thirty-seven of the fifty-one debtors (73 por-
centavo) still owed more than 50 percent of the principal borrowed;
twenty-four had amortized nothing at all; seven owed less than 10
percent of the principal; and only three had fully paid the principal.
Además, most of these debts were contested by the Misericórdia
at court, receiving a judicial sentence that consisted of the consign-
ment of rents for the payment of the debt in installments.
Given the difficulty of providing a systematic rendering of the
data available for this matter, the selection of a few case studies will
suffice to illustrate how the intervention of a third party did not
25 For the Portuguese grandees’ sources of income, see Monteiro, O crepúsculo, 262–263.
26 Ordenações Filipinas, libro 3, título 93.
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258
| L I S B E T H RO D RI G UE S
always solve the problem of unpaid loans. En 1745, the Misericórdia
loaned 24 contos de réis to Dom Henrique Francisco da Costa e
Sousa, the fourth count of Soure, en 5 percent interest. The written
contract stated that the debtor had requested the money to repay
other debts (estimated at 12.6 contos de réis) with a higher interest
tasa (6.25 por ciento). To secure the loan, he pledged “all his goods
and incomes, with the special mortgage of the revenues from his
morgados” [entailed property]; according to the royal licence, él
could pledge the income from the said morgados to the amount
de 6,000 cruzados (2.4 contos de réis) to pay both the principal and
the annual interest. The notarial record stated that half of the value
of the mortgage would be used to satisfy the current interest
payments and the other half to “kill the principal,” that is, to am-
ortize the loan, so that the Misericórdia would be entirely re-
funded within twenty years.27
Twenty years later, sin embargo, en 1765, when the royal licence
expired, the count had only amortized 1.5 contos de réis, o 6 por-
cent of the principal. En 1768, the Misericórdia’s administrative
board sent him a letter asking for the payment of the accrued in-
terest: “Whenever Your Excellency has any doubts in this matter,
you shall permit the Misericórdia to use the right granted by Law
( . . . ) May God keep Your Excellency for many years.” Yet, el
threats of litigation and the menacing tone of the document seem
to have had little result. En 1769, the Misericórdia went before the
law court to seek redress, executing the pledged incomes offered
by the debtor in the contract.28
According to Table 4, despite the attachment of the collateral,
the brotherhood received little more than half of the annual inter-
est. En 1778, the debtor had paid only 2.9 contos de réis, y el
interest rose to 8.8 contos de réis. The fact that the judicial ruling
did not take into account either the reduction of the principal
or the accrued interest explains why the amortization of the debt
was so small. En este caso, as in many others, the court decision did
not resolve the problem of the debtor’s default in repaying the
27 Gestão Financeira, Administração da Casa, Instrução precisa para o governo e adminis-
tração da fazenda da Santa Casa da Misericórdia (1757) (SCML/GF/AC/01/ Lv002), fl. 64v;
Gestão Financeira, Empréstimos a juros e outras dívidas, Contas correntes dos devedores da
Casa (1756–1832) (SCML/GF/EJ/03/Lv001), fl. 94, AHSCMLSB.
28 Cartório, Certidões, maço 1, processo 21; Cartório, Execuções, maço 2, processo 3,
AHSCMLSB.
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D E B T L I T IG A T I O N | 259
Mesa 4 The Execution of Collateral: The Debt of the Count of Soure
(Thousands of Réis)
PRINCIPAL DUE
ACCRUED INTEREST
PAID INTEREST
Años
1778
1780
1782
1784
1786
1788
1790
1792
1794
1796
1798
Total
21,081
21,081
8,826
2,108
2,108
2,108
2,108
2,108
2,108
2,108
2,108
2,108
2,108
29,907
120
1,336
1,484
1,440
689
1,120
1,430
1,440
1,940
400
0
11,400
SOURCE Gestão Financeira, Receita, Juros Particulares (1745–1797) (SCML/GF/RC/04/02/
Lv001), fls. 16, 208, AHSCMLSB.
loan. Además, it created a new chain of debtors, the tenants of
the seized assets. De hecho, a significant proportion of the rent-arrear
cases brought by the Misericórdia did not stem from its own estates
but from the property pledged by its noble debtors. Cuando el
tenants of the seized properties failed to fulfil their payment of
the rent, the Misericórdia brought new lawsuits against these
tenant/debtors. In the case of the debt of the count of Soure, ser-
entre 1772 y 1799, the brotherhood brought twelve lawsuits
against defaulting tenants, demandante 11 contos de réis of rent ar-
rears. The collection of these rents, sin embargo, proved to be prob-
lematical, since the tenants had no assets or property that could be
seized.
The lawsuit brought against João Gonçalves Serra, the tenant
of a farm at Grizos belonging to the count of Soure, is highly
symptomatic. Various goods belonging to the tenant were seized
and sold at public auction. But because the sale yielded the paltry
sum of 5,540 réis, the judge ordered that the execution be ter-
minated, due to “the lack of property, as stated in the records.”
Unfortunately for the creditors, this sort of outcome was not
uncommon. As Table 4 muestra, at the end of the eighteenth cen-
tury (1798), the count had not even repaid the principal and had
satisfied only 38 percent of the accrued interest. This situation
continued into the first decades of the nineteenth century. En
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260
| L I S B E T H RO D RI G UE S
1834, the count owed the Misericórdia 89 contos de réis, 79 por ciento
of which corresponded to accrued interest.29
The books of Tomás de Távora, third count of São Miguel,
are also indicative of both the good performance of the court and
the limited ability of the judicial sentence to protect a creditor’s
rights. According to Monteiro, in the eighteenth century, el
Lisbon Misericórdia was by far the largest creditor of this aristo-
cratic household (en 1795, the Misericórdia and the Hospital of
Todos-os-Santos granted 76 percent of all its existing debts; mer-
chants granted 15 por ciento; and other religious confraternities
granted about 6 por ciento). Between 1716 y 1721, the Misericórdia
loaned 12.8 contos de réis to the count of São Miguel. To secure the
loan, he pledged several rents designed to amortize both the prin-
cipal and the interest. Due to the count’s heavy indebtedness, el
Supreme Court (Desembargo do Paço) appointed a judicial committee
(a private judge) to supervise the payment of his debts. Seven years
más tarde, en 1782, the Misericórdia’s law court undertook twenty-eight
seizures of small rents that he owned, some of which other creditors
had already seized. Despite these seizures, the value of the consigned
rents corresponded to only 36 percent of the amount of the current
interés. En este caso, también, the pledged income gave rise to a new
chain of debtors, as between 1786 y 1799, the Misericórdia
brought seven lawsuits against defaulting tenants.30
As shown in Table 5, by the end of the eighteenth century, el
count of São Miguel had satisfied only 24 percent of his previous in-
terest in arrears (25 contos de réis). De nuevo, although the law court had
correctly judged the case, its intervention neither resolved the failure
to pay the loan nor safeguarded the creditor’s property rights.
The two cases described above exemplify a common occurrence
among the loan disputes at the Misericórdia’s law court. A small pro-
portion of lawsuits relating to the non-payment of loans did, sin embargo,
have a different outcome. Por ejemplo, en 1744, Fernando Teles da
silva, the fourth marquis of Alegrete, borrowed 8 contos de réis from
the Misericórdia at a 5 percent interest rate. En 1759, the principal
remained unamortized, resulting in a sum of 429,996 réis of accrued
29 Gestão Financeira, Receita, Juros particulares (1745–1797) (SCML/GF/RC/04/02/
Lv001), fls. 16, 208, AHSCMLSB.
30
In the eighteenth century, the king often appointed a private judge for these aristocratic
households. As Monteiro pointed out, one-third of the revenues of the high nobility were
allocated to paying massive debts (Monteiro, O crepúsculo, 407–418).
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D E B T L I T IG A T I O N | 261
Mesa 5 The Execution of Collateral: The Debt of the Count of São Miguel
(Thousands of Réis)
PRINCIPAL DUE
ACCRUED INTEREST
PAID INTEREST
Años
1778
1780
1782
1784
1786
1788
1790
1792
1794
1796
1797
Total
9,791
9,791
16,237
979
979
979
979
979
979
979
979
979
490
25,538
90
556
757
85
522
1,000
1,012
191
481
413
6,106
SOURCES Gestão Financeira, Receita, Juros Particulares (1745–1797) (SCML/GF/ RC/04/
02/Lv001), fls. 8, 180, 184–185, 205, 217, 219, 246, 256, 264, 273, 282, AHSCMLSB.
interés. In view of the absence of any notarial record of this loan
agreement, the debtor’s son, the count of Vilar Maior, “voluntarily
and spontaneously” drew up a new contract with the Misericórdia,
specifying new mortgages and determining that half of their value
was to repay the past interest and the other half to repay the current
interés. En 1760, the Misericórdia used the law court to pursue this
obligation and to seize the collateral. Todavía, despite the seizure, el
Misericórdia remained unpaid, y, in December 1772, the accrued
interest amounted to more than 2 contos de réis.
Three years later, en 1775, after the king had allowed the
Misericórdia to “make adjustments, reductions, transactions and
agreements with its debtors,” Fernando Teles da Silva, the third
marquis of Penalva, grandson of the original debtor, signed a new
contract with the brotherhood, in which he presented new collat-
eral and guaranteed an annual amortization of about 900,000 réis.
This new contract even stated that the whole debt would be satis-
fied within twelve years. Although the debtor started to comply
with the contractual terms immediately, en 1786 he received a royal
favor granting a licence to keep pledging his assets “until such time
as the Misericórdia was fully reimbursed.” Almost fifty years after
the loan was awarded, in February 1791, he finally satisfied the debt,
having paid almost the same amount of money in terms of interest
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262
| L I S B E T H RO D RI G UE S
(7,135,210 réis) as the principal of the loan he had initially asked for
(8,000,000 réis).31
Note that while these cases were still in court, the defendants
approached the Misericórdia with various proposals to change the
terms of their debts. The implication is that the law courts worked
to prevent the debtors from defaulting. As Greif and others have
pointed out, when the judiciary fails to deliver an adequate solution,
extrajudicial means may emerge as a way of resolving disputes. El
few sources that offer information about the informal mechanisms
of conflict resolution reveal that debtors frequently approached the ad-
visory and administrative boards of the Misericórdia to renegotiate
their debts. Most of these individuals had inherited the original debt.
Although they sometimes attempted to deny the financial obligation,
they usually sought special prerogatives to offer additional collateral.
The Misericórdia occasionally released them from the payment of in-
terest in return for the complete repayment of the loan. Sin embargo,
the new credit conditions proposed by the heirs of the original debtors
did not solve the problem of default in the repayment of the loan.32
The cases described above illustrate the limited capacity of both
formal and informal mechanisms to reduce the risk of defaulted debt.
De hecho, the findings suggest that the issue lay less in the effectiveness of
formal legal institutions than in the nature of the collateral. The fact
that the mortgaged assets were subject to specific laws of inheritance—
a saber, the ban on the division and sale of the property—created
severe obstacles for the lenders/plaintiffs. Bear in mind that the
Portuguese credit market suffered from a severe deficiency: the lack
of a general mortgage register. En la práctica, a debtor could pledge
the same property against several loans, without the creditors being
aware of any prior transactions relating to the same property.
31 Cartório, Registo de escrituras (1766–1772) (SCML/CT/09/01/Lv001), fls. 87v–89v;
Gestão Financeira, Receita, Juros particulares (1745–1797) (SCML/GF/ RC/04/02/ Lv001),
fls. 17, 121, 162, 170–171, 247, AHSCMLSB. en septiembre 1771, the king authorized the
Misericórdia to “make adjustments, reductions, transactions and agreements with its debtors.”
See “Provisão régia dispensando a Misericórdia de Lisboa do cumprimento do capítulo treze
do seu Compromisso, autorizando-a a fazer ajustes, reduções, transacções e convenções com
os seus devedores,” in Lopes and Paiva (editores.), Portugaliae Monumenta Misericordiarium. VII. Sob o
signo da mudança: de D. José I a 1834 (Lisbon, 2008), 184–185.
32 Avner Greif, “Contract Enforceability and Economic Institutions in Early Trade: El
Maghribi Traders’ Coalition,” American Economic Review, LXXXIII (1993), 525–548. Órgãos
da Administração, Junta Pequena, Actas da Junta Pequena (1756–1801) (SCML/AO/JP/01/
Lv001), fl. 85v–87, AHSCMLSB.
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D E B T L I T IG A T I O N | 263
The combination of all these factors might have induced the
Lisbon Misericórdia to ration its credit activity. En 1768, the king
even determined that the Misericórdia could lend money at interest
only under the proviso that the mortgages offered by the potential
debtors be published conspicuously. The purpose of this expedient
was to overcome the absence of mortgage registration and to pre-
vent the Misericórdia from acquiring assets that were already mort-
gaged to other creditors. Además, in the same royal decree, el
king restricted the application of the Misericórdia’s loans to specific
activities. Evidently, these measures did not improve the efficiency
of the Misericórdia’s credit activity; en 1775, the king completely
prohibited the Misericórdia from participating in the private credit
market on the grounds of seeking to protect property rights.33
The Misericórdia case study shows that the problem of default
was not so much due to the court’s incompetence as to the nature
of collateral and to the “chronic indebtedness” of certain debtors.
The inability of the law court to protect the Misericórdia’s posses-
sory interests may well have served to undermine the efficiency of
the Misericórdia’s credit activity.
The economic literature broadly looks at the role of institutions—
what has been called, since North’s seminal work, “the rules of
the game”—regarding the likelihood of a party not complying
with a contract (risk of moral hazard). Neo-institutionalist scholars
have claimed that when institutions—either formal (laws and con-
stitutions) or informal (norms and codes of conduct)—are well de-
fined and efficiently enforced, the risk of moral hazard is low, de este modo
promoting the kind of trust that reduces friction between creditors
and debtors and often leads to economic growth. When institutions
fail, sin embargo, opportunistic behavior, as well as litigation, is likely
to ensue, signaling high levels of non-cooperation.
This article’s examination of the Lisbon Misericórdia’s ability
to resolve the problem of defaults in loan repayments partially
“Alvará régio prescrevendo as normas a observar pela Misericórdia de Lisboa, quando esta
33
emprestar dinheiro a juro,” in Lopes and Paiva (editores.), Sob o signo da mudança, 75–77; “Alvará
régio concedendo aos testadores sem parentes até ao 4° grau o poder de dispor de todos os seus
bens a favor da Misericórdia de Lisboa, após consulta régia, e proibindo a mesma Misericórdia
de emprestar a particulares dinheiro a juro,” ibid., 77–79. For the effects of the royal regulation
on the Misericórdia’s credit activity, see Rodrigues, “Os padrões de juro da Misericórdia de
Lisboa, 1767–1797,” Ler História, LXXIV (2019), 137–160.
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| L I S B E T H RO D RI G UE S
264
confirms the hypotheses presented at the outset, in the process
contributing to three strands of the literature: (1) the role of the
justice system, (2) the early modern confraternities, y (3) the re-
lationship between formal institutions and credit markets. The re-
sults of this study agree with those of the European historiography
that most of the cases brought to court related to financial issues—
above all, debt cases. Although rent-arrear cases outnumbered all
other types of claims, lawsuits relating to the non-repayment of
loans were of major importance so far as the legal activity of the
Misericórdia was concerned.
The article also shows that, although creditors and debtors shared
the same sociological background and engaged in a confraternal life,
litigants did not tend to reach settlements out of court. On the con-
trary, despite the low risk of adverse selection and moral hazard that
characterized the Misericórdia’s credit activity, the brotherhood re-
sorted largely to the law courts to resolve their conflicts in relation
to defaults in credit arrangements. These results challenge the assump-
tion that cohesive groups hold high levels of social capital. El
Misericórdia, albeit closed and engaged in multiple ventures,
manifested low levels of social capital, whether assessed through the
efficacy of informal rules or through the law courts. Aunque el
brotherhood was a close-knit social network, it frequently resorted
to the law courts to resolve disputes about credit contracts, not always
with much success. At this point we do not have evidence that such
behavior exploiting the liquidity of the brotherhood had any impact
on the wealth of the brotherhood in the long run.
Además, the Misericórdia case study contributes to the lit-
erature about formal legal institutions and credit markets by drawing
attention to matters besides the “quality” of the law courts. El
findings show that the apparent competence of the tribunal, as in-
dicated by its rapid proceedings and the execution of collateral,
was powerless to solve the problem of default or to safeguard a
lender’s property rights. A key implication is that the quality of
formal legal institutions only partly explains the economic perfor-
mance of the agents involved. Por lo tanto, further studies need to
be undertaken in this area, particularly about the nature and the
characteristics of collateral, to discover more about the way in
which the early modern credit markets functioned.
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