Section 1. The Order Among Creditors from Positive Law

505. In what order restitution or payment must be made to creditors is asked only when a debtor cannot satisfy all his creditors: for if he can satisfy all, it is not necessary that an order be observed in paying debts; but if restitution cannot be made to all, damage is of itself inflicted on some where restitution is made to one before the others.

1. Positive law especially determines the order to be observed in paying debts among creditors, and indeed the law concerning cession of goods (Konkursordnung), of which there will be speech below. That law, which varies in its particular statutes in diverse kingdoms,¹ first generally establishes these two things: a. that satisfaction be made integrally to the prior class of creditors, with no account had of creditors of a later class; b. if the goods do not suffice for paying creditors of the same class integrally, satisfaction must be made to each of them pro rata.

¹ Cf. C.A. Konkursordnung und Anfechtungsgesetz.

506. 2. In particular the law distinguishes four classes of creditors: proprietary, privileged, hypothecary, and common creditors, concerning whom it establishes these things:

a. In the first place satisfaction must be made to proprietary creditors, namely those whose things still exist in themselves with the debtor: for a creditor has a real right in his own thing.

alpha. Therefore before all other debts, stolen, deposited, leased, lent, or found things which still exist in themselves must be restored.

beta. If the thing no longer exists in itself, but only in the equivalent with the debtor, the creditor is not to be preferred to others, because he does not have a real right in the equivalent of the thing, but only a personal right.

gamma. If the debtor retains with himself a purchased thing whose price he has not yet paid, one must distinguish. If by a sale in which the price has not yet been paid ownership of the purchased thing is not transferred to the buyer, from natural law the thing must be restored to the seller, because it is his. But if by sale ownership is transferred to the buyer, even if the price has not yet been paid, the seller indeed is no longer owner of the thing; yet whether nevertheless the thing must be restored to him before satisfaction is made to other creditors is not sufficiently clear. Therefore if positive laws establish something concerning this matter, they must be observed; but if positive laws have nothing, it is probable that the seller can be preferred to other creditors. Whether in the contract of sale ownership in the purchased thing is transferred by the handing over of the thing or finally by payment of the price depends on the disposition of law.

b. In the second place satisfaction must be made to privileged creditors, namely those to whom by positive law, because of the quality of the credit, a special privilege is granted.

alpha. This privilege is a right situated in the very quality of the credit, by force of which the creditor must be preferred to other creditors.

beta. Privileged credits are judicial expenses, funeral expenses, stipends of physicians, wages of servants, debts for food, etc.

gamma. Among privileged creditors themselves, a determined order from the quality of the credit is sometimes established by law; thus the wages of servants are generally privileged before the stipend of physicians.

c. In the third place satisfaction must be made to hypothecary creditors, who by force of hypothec have bound to themselves not only the person of the debtor, but his goods themselves.

If there are several hypothecary creditors, the law determines the order among them, founded in the very nature of the thing, according to the axiom: he who is prior in time is stronger in right. For since the debtor's goods themselves are bound to the hypothecary creditor, an injury would be done to the earlier creditor if payment were conceded to another from goods already bound.

d. In the fourth place satisfaction must be made pro rata to common creditors, concerning whom positive law establishes nothing further.