To which of several creditors must restitution be made first?

The question arises when the debtor cannot satisfy all his creditors; for if he could satisfy all, it would matter nothing whether he restituted to one rather than to another, provided he restituted to all.

I say: In the first place, a thing existing in its own species, whose dominion the debtor has not acquired, however he may hold it — whether justly, as a pledge, a thing given in commodatum, hired, deposited, found, bought in good faith; or unjustly, by theft or rapine — must be given back to its owner, all other creditors being set aside, so that, even if the owner is unknown, it must be spent according to his presumed will on pious uses; because the thing cries out for its owner, and the debtor cannot restitute to his creditors from the goods of others, but from his own.

In the second place, privileged debts must be paid before all the others, even before mortgaged debts. Privileged debts are: 1° necessary and moderate funeral expenses for a husband, wife, child, or another person whom the debtor was bound to bury, L. penult. de Relig. sumpti. fun. 2° Expenses for drawing up and opening the will, for making the inventory, for physicians, surgeons, and apothecaries, l. ultima, c. de iure deliberandi.

3° Necessary expenses for preserving the debtor's goods or the house of the deceased. The reason of these, besides the laws cited, is partly that most of them are for the benefit of the creditors, partly that they are necessary and not to be omitted, so that satisfaction may be given to the creditors. Now no one is found who would be willing to provide them unless he were certain of repayment. And for this reason, in certain provinces, debts incurred for necessary food enjoy the privilege of priority, likewise the wages of servants and maids ^{430 430} Ita Cod. Gall., art. 2101.

Roman law, as regards the expenses mentioned above, passed into the modern laws, in which among privileged credits are ranked judicial expenses, funeral expenses, medical expenses for the last illness, the wages of servants, debts for maintenance, and the fees of architects and workmen for the construction of buildings.

Privileges affect either movables, or immovables, or both at once, according as the creditor has the right that what is owed to him be paid out of these before all others. Moreover, privileges are general or special, according as they extend to all movables or immovables, or only to certain of them.

The order among privileged creditors is fixed not by priority of time, but by the quality of each credit, to which the law assigns its place or degree of precedence. Regard must be had to the law of each region. ^{431 431} Cod. Gall., art. 2095-2113; Ital., 1952-1963. In Austria viget lex 15 dec. 1868; in Germania, lex 10 febr. 1871.

In the third place follow mortgaged debts.

Note. — A hypothec exists when a thing is given or assigned in security of a debt. If the thing is movable, it is called a pledge; if immovable, a hypothec. It is twofold: general, when all the debtor's goods, both present and future, are assigned or bound in security of the debt; particular, when a definite part of the goods is assigned, for example, this house or this estate. Again, one kind is express, when the stipulation concerning it is made expressly in the contract and before a magistrate; another tacit, which by force of the laws is inherent in certain contracts even though it is not expressed in the contract. Thus, if someone lends money for building, preserving, or repairing a house, a ship, etc., the house, ship, etc. remain bound to the lender by disposition of the law, l. Qui potiores, and l. Licet, c. eod. tit.

[A judicial hypothec is further distinguished, established by the judge's sentence in favor of those who have won their suit, by which all the immovable goods of the condemned party are burdened with the charge of repairing the damage.]

Mortgaged debts, therefore, whether express or tacit, general or particular, are to be preferred only to simple or chirographary debts, privileged debts excepted, of which we spoke in the preceding number: both because the hypothec or pledging was introduced by law so that the creditor might have priority or security for his debt; since the mortgage creditor has bound not only the person of the debtor but also his very property, while non-mortgage creditors have only the person of the debtor bound.

When, however, there are several mortgage creditors, regard being had to the nature of the thing, such is the order among them. Those holding an express hypothec are preferred to those holding a tacit one, and those holding a general one to those holding only a particular one.

Among several holding a similar hypothec, the earlier is preferred to the later; for in this case that rule of law above all prevails, 54ª in 6°: « Qui prior est tempore, potior est iure, » he who is first in time is stronger in right. And the reason is that a later hypothec cannot take away a right previously acquired by another.

I said, « regard being had to the nature of the thing; » because by disposition of positive law several cases are excepted, in which a tacit hypothec is preferred to an express one, and a later to a prior. Consult our greater Work, or the jurists, about these cases.

[Under the new laws: 1° the mortgage privilege avails only from the day of inscription in the registry of the conservator of mortgages. 2° No order is observed among those who inscribe on the same day, or under the same number, but they come in together, each for a proportional part of his credit. For the others, however, who inscribe on different days, or under different numbers, the rule of law cited above holds ⁴³²] ⁴³² Cfr. Cod. Gall., art. 2114-2203; Ital., art. 1964-2075.

You will ask 1° whether debts from delict and from onerous contract ought not to be restituted before debts from gratuitous contract, for example, promise, donation, etc.

I answer affirmatively; because no one reasonably intends to bind himself by a gratuitous contract to the detriment of those to whom he is bound in justice. Hence every gratuitous contract includes this tacit condition, unless something stands in the way of the promised thing being handed over.

You will ask 2° whether there is any order between debts from onerous contract on one side and debts from delict on the other.

I answer, more probably in the negative; because positive law nowhere establishes any order between these debts, nor does any reason show that an order must be established by the natural law. Since on both sides there is an equal unjust detention of another's property, the obligation is equal on both sides, for the obligation arises from the unjust detention. ^{433 433} S. Lig., lib. IV, n. 688.

You will ask 3° whether the creditor who, among creditors neither privileged nor holding a mortgage, is the first to press his claim is to be preferred?

I answer affirmatively; because, according to the laws, l. Pupillus, l. Quae in fraudem creditorum, lib. 42, tit. 8, « diligence made his condition better, » and it acquired for him the right of preference; for « the civil law was written for the vigilant. »

[If that creditor presses his claim juridically, there is no doubt; because the sentence of the judge confers the privilege. Outside of court, he exercises a personal action against the debtor, and by demanding the whole debt he pursues his right; and if the debtor is in default toward the other creditors, this must be imputed to their negligence. This solution, which St. Alphonsus ⁴³⁴ calls the more probable, seems to us certain. ⁴³⁴ Lib. IV, n. 692.

You will ask 4° whether a poor creditor can be given precedence over a rich one.

I answer with St. Thomas, Opusc. LXXII, c. 18: « If one man is rich and the other poor and more in need of those things of which restitution must be made, and it is equally clear in both cases, restitution can justly be made to the poor man sooner than to the rich man, because he was more injured by the taking away of his goods, and because he stands more in need. » For the rich man would without reason object. What is said of restitution for damage inflicted must be said a fortiori of the payment of a debt arisen from a just cause. This, however, is understood on the supposition that by this payment the debtor does not become unable to pay the other debts integrally.

You will ask 5° whether a debtor who knows that he is already unable to pay all his debts can fully satisfy even a creditor who is not pressing his claim.

I answer in the negative; because since all creditors are equal in right, and none of them pursues his right, and consequently none of them has been made the stronger claimant by his diligence, natural equity demands that integral payment not be made to anyone to the prejudice of the others. ^{435 435} Id., ibid., 3°.

You will ask 6° whether a creditor who in this case received integral payment is held to restitution toward the others.

I answer. It is disputed. Some deny it; because a creditor holding a personal right, since he can juridically press for payment, does not sin the more by accepting it when freely offered. Others affirm absolutely; because no creditor has the right to be paid integrally to the detriment of the others. Others distinguish. If the creditor accepted in good faith, he may keep it; for he is not held to restitute, neither on account of an unjust acquisition, because the acceptance was not formally unjust; nor on account of an unjust detention, because he acquired dominion over the thing paid. On the natural law the affirmative opinion seems truer, because all the creditors had an equal right to payment pro rata of the means remaining in the debtor's hands. ^{436 436} Id., ibid., n. 693.

There is no doubt if such payment is declared invalid by positive law. Thus in France, by the law of 28 May 1838, payment made within, or after, the ten days elapsed before the cession of goods declared by the commercial tribunal is altogether invalid.

In practice, since it would be difficult to persuade a creditor who in good faith received integral payment before the legally fixed time that he is held to restitution, he is commonly left in his good faith: both because positive law does not constrain him to restitution, and because an opinion not lacking probability supports him. But to the one who received after the time fixed by law, restitution is to be imposed absolutely, even if he was in good faith; because the payment was invalid.]