Sunday, October 10, 2021

Rembrandt van Rijn - The Bankruptcy of 1656 - The Art, Loves and Insolvency of a Great Artist

Judge Scott Clarkson (Bankr. C.D. Cal.) gave a fascinating talk on the art, loves and insolvency of Rembrandt van Rijn. While this talk may not have a lot of practical import, Judge Clarkson tells a great story.


Rembrandt van Rijn was born in Leyden in the Dutch Republic in 1603. The Dutch Republic dates back to the late 1500s and is the oldest continuous republican government in Europe. The town of Leyden, where he was born, was besieged by the Spanish and held them off. In return, William of Orange offered them ten years free from taxes but they asked for a university instead. 
The young Rembrandt attended Latin school where, among other things, he learned Bible stories that would form some of his later work. He was apprenticed to an artist and also attended university. To be a painter and a printmaker, he had to understand chemistry to work with oil paints and the properties of metal to work with copper plates.

As an artist, he was known as a hyper realist because he painted what he saw. It was said of him "he seeks the ugly." He learned to create depth in his art by using light and shadow in a technique called chiaobscuro. In his paintings, the light is generally shown on the left hand side of the canvas because he was right handed and didn't want to smudge the art. About 10-20% of his paintings were self portraits so that he wouldn't have to pay a model.

Rembrandt was originally quite an astute businessman. He would sell an oil painting for 400 guilders plus materials, which was a years' wage for a workman. He also did commercial art. Different guilds would pay him to do a painting including their members to be hung in their guild hall. If someone didn't pay his share, he would be painted out of the picture. One of these corporate paintings might sell for 1,000 guilders.  His painting The Night Watch, done for a local militia, was controversial because it showed the figures in action instead of rigorously posed. While this made for a more exciting painting, it did not showcase his patrons who were paying for the work.

He also developed printmaking as a business. Unlike other artists, he would etch directly onto the copper. A print was more affordable to the general public, going for 20-30 guilders each but he could make many copies. His etching of Christ Healing the Sick was so popular that prints went for 100 guilders a piece.  

Bankruptcy of Rembrandt

Rembrandt filed bankruptcy in 1656. One cause was his complicated tragic personal life. His first wife died from disease shortly after their son was born. Under Dutch law, he was required to pay half of his assets to his son. His lawyer convinced the wife's family to delay this payment. He brought in a wet nurse named Gertie to feed the child and she became his lover. Later, he took up with his much younger housekeeper and sent Gertie away. She took him to court and was awarded an allowance of 200 guilders per year. However, with the connivance of Gertie's family, she was sent to an asylum and he only had to pay the cost of her confinement. 

His house was also a cause of his downfall. While many scholars thought that buying the house caused his losses, Judge Clarkson concluded otherwise. He bought the house with a Consol or perpetual bond. He only paid one-fourth of the cost of the home down and then had to pay 5% interest on the bond without the principal ever coming due except in the event of default. This was essentially an annuity and was a common financial vehicle. Thus, although the purchase of the house did not lead to his bankruptcy, the fact that the house was sinking and tilting did. All of the neighbors agreed to jointly pay to stabilize the row of houses. However, Rembrandt did not pay his share.

He also lost money as his art went out of fashion. He was sued by purchasers of his art who felt that they did not get what was promised or did not receive anything in the case of a painting lost during a time of war.  He also was a profligate spender. He would go to sales and buy up whatever he thought he could use in his paintings, such as a suit of armor.

Realizing that he was in dire financial straits, he went to Orphans Court and got an order to transfer the house to his son. However, to do that, he had to clear the mortgage from the property. To do this, he borrowed 7,000 guilders from the Mayor, which he did not pay back. 

Facing pressure from lawsuits, his neighbors and the Mayor, he filed a cessio bonorum, which means a cessation of goods. He could not receive a discharge but he would avoid jail. Under the cessio bonorum, he surrendered his goods and agreed to pay all of his future earnings to his creditors above the amount of bare necessities. This combined the most burdensome elements of today's Chapter 7 and Chapter 13. 

His trustee sued his son to get the house back under Amsterdam's recently passed fraudulent transfer law. The trustee won but the judgment was reversed before the funds could be disbursed because the fraudulent transfer law was not retroactive. Although he lost the house, the money that he and his son received back was more than the total of what he had paid on the house. Thus, he achieved what many debtors today seek--a free house--although he did not get to keep it.

To avoid the requirement that he pay his future earnings to his creditors, his mistress and son formed a corporation and Rembrandt worked for it, receiving only enough pay to cover his necessities. After his bankruptcy, he had new financial success. In 1658, he painted Phoenix Rising. It was said that the Phoenix represented Rembradt. He died in 1669 at the age of 63.

It is clear that Judge Clarkson is passionate about art and history and he told a good yarn. It also had enough bankruptcy content to (I hope) qualify for CLE credit.


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