Chapter VI. On Mutuum

Mutuum is sometimes taken for the very thing handed over by loan; but sometimes, and more often, for the contract by which that thing is handed over to another to be used. In this latter sense it is taken here, and is customarily defined: a contract by which a thing consumable by first use is handed over to another, with the obligation of returning a similar thing at the appointed time and in the same species and quality. Hence mutuum differs from commodatum, hiring, and deposit: 1st, because in mutuum the thing must be consumable by first use, otherwise in the others; 2nd, because the thing is to be restored not in the individual but only in the same species; 3rd, because in mutuum the dominion of the thing is transferred and not in the others, and therefore in mutuum the thing perishes to the one receiving, in the others to the one handing over. But the reason why in strict and properly so-called mutuum dominion is transferred is that, since the thing loaned is consumable by first use, a use of this sort would not be licit without dominion itself.

I say, 1st. There is given a strict precept of making a mutuum not only with respect to the poor who will have the means to restore, but also with respect to the rich who, because of a particular circumstance, greatly need it. The reason for each is deduced from the law of charity, which obliges one to come to the aid of a neighbor placed in necessity, and demands that we willingly furnish to him that which in a like case we would wish to be furnished to ourselves. - I said, 1st, who will have, etc.; because otherwise another precept urges, namely that of giving alms, according to the rules set forth above, where charity was treated. - I said, 2nd, also with respect to the rich who because of a particular, etc.; because charity obliges us to nothing toward those rich persons who seek a mutuum for increasing their wealth, since they suffer no necessity.

I say, 2nd. Although the borrower is not freed from restitution, however the thing loaned may perhaps perish, nevertheless he is held to nothing else except to returning a similar thing; nor can the lender exact anything else by force of the mutuum without injuring commutative justice and being held to restitution. - The reason for the first is that, once the contract of mutuum has been completed, dominion of the thing loaned passes to the borrower, and therefore if it perishes, it perishes to him. But the reason for the second is that, as St. Thomas teaches, the use of a consumable thing, since it is the consumption of the thing itself, cannot be distinct from its dominion; and therefore if besides the thing itself something were exacted for the use, by force of the mutuum, a price would be exacted for a thing which does not exist; or in other words, the same thing would as it were be sold twice, which certainly injures justice. There is added the reason taken from the special and repeated prohibitions and declarations made by the Roman See, and especially by Benedict XIV in the Encyclical Letter issued in the year 1745, which begins Vix pervenit. The new code accords:

If a fungible thing is given to someone in such a way that it becomes his and afterwards as much in the same kind is restored, no profit can be received by reason of the contract itself; but in the furnishing of a fungible thing it is not illicit in itself to agree concerning legal profit, unless it is established to be immoderate, or even concerning greater profit, if a just and proportionate title suffices (Can. 1543).

You Will Resolve. - 1st. If sometimes the poor seek a mutuum, and nevertheless they are not presumed to be going to have the means from which they may be able to return the equivalent, then, as has been said, the precept of making a mutuum ceases, but that precept urges of giving some alms. - I said some, because you are not held to furnish so much alms as the poor man was demanding by mutuum, because there are others who can and ought to give help.

2nd. Some grave inconvenience sufficient for excusing from the obligation of giving alms also excuses from the obligation of making a mutuum, but not conversely, since to give a mutuum is much less than to confer alms. Nevertheless the obligation of making a mutuum must be carefully distinguished from that of not exacting something above the principal by force of the mutuum; the first proceeds from charity, the other from justice. The sin of injury to justice committed in such a way is properly called usury, which can be explicit and open if an express agreement occurs; or implicit and disguised if the agreement occurs through consent only virtually manifested or under the species of a contract diverse from mutuum.

3rd. Nevertheless, the crime of usury is not committed if someone expects something for a mutuum, not as owed, but from mere benevolence. - I said expects, for if someone were to exact something from benevolence, he would have to be called a usurer; since Innocent XI condemned prop. 42, which has itself thus: "It is not usury when beyond the principal something is exacted as owed from benevolence and gratitude, but only if it is exacted as owed from justice." Cf. St. Alphonsus, nn. 774 and 777.

4th. A fortiori, however, he ought to be excused from every crime of usury who either expects or even exacts something above the principal, not indeed by force of the mutuum, but by force of some extrinsic title. The reason is taken from the practice of God-fearing faithful, from the implicit approbation of the Church, and from the fact that such a manner of acting is altogether consonant with the rules of justice.

Question 1. What are those extrinsic titles by force of which it is licit to exact something beyond the principal?

Resp. Five principal ones are enumerated, namely: emergent damage, ceasing profit, danger of the principal, conventional penalty, and civil law. Concerning each one it will be said briefly what it is and why it is licit to use it.

1st. Emergent damage is the detriment which the lender suffers on occasion of a mutuum furnished to a neighbor. But that this title is legitimate is established from the fact that it is not equitable that someone should bear damage from a mutuum, since no one is held to furnish a benefit with his own damage, except in the necessity of a neighbor. But for the legitimacy of this title, besides the existence of the damage itself, the following conditions are required, namely: that the mutuum be the cause of the damage; that nothing besides compensation be exacted; and that the increase be brought into the pact from the beginning. - Cf. St. Alphonsus, nn. 768 and 769.

2nd. Ceasing profit is that which the lender, preserving his own thing, would have gained if he had applied it in another licit contract. That this is a legitimate title is proved, because the hope of profit on the one hand is extrinsic to the mutuum, and on the other is truly estimable by price. Cf. St. Alphonsus, n. 771; and Hom. Ap. nn. 149 and following.

3rd. Danger of the principal is a prudent fear lest the principal cannot be recovered. - This title also, according to the more common and more probable opinion, is legitimate. The reason is both because things placed in safety are valued more highly than things placed in danger, and also because it is established from the decision of the Sacred Congregation de Propaganda for the Chinese Missionaries, approved by Innocent X, in the year 1645. Nevertheless except if the borrower secures the principal by pledge, because thus the danger ceases. - Cf. St. Alphonsus, n. 765. - Kenrick, n. 89.

4th. A conventional penalty is as it were a certain fine, which the borrower obliges himself to pay if he does not restore the principal at the prefixed time. But it is proved to be a legitimate title because thus provision is made for the firmness of the contract and at the same time the negligence of the borrower is prevented; but it is required that the delay of the debtor be notable and culpable, and that the penalty be moderate and proportionate to the fault. - Cf. St. Alphonsus, n. 766.

5th. The title of civil law consists in a positive permission made by the supreme legislator of civil society of receiving a certain determined profit, which therefore is diverse according to the diversity of places and laws. Much indeed was previously disputed concerning the legitimacy of this title in the forum of conscience; but today it can scarcely be doubted, although the same explanation is not given by all. For some invoke the force of the high dominion which the supreme authority has over the goods of private persons; but others, far better, have recourse to the right and office which the supreme authority has of decreeing a reward for those who, by supplying money, favor commerce. But natural equity itself dictates that this reward be paid by those same persons who take utility therefrom. Besides, there exist many responses of the Roman Congregations by which it is decreed that those who, relying only upon this title, have obtained some profit are not to be disturbed; nor are priests to be disturbed who contend that this title is legitimate. - Cf. Taparelli, Saggio Teoretico, dissert. 4, cap. 4.

Question 2. Is it licit to exceed the legal rate by reason of special emergent damage, or ceasing profit, or danger of the principal?

Resp. Negatively, with respect to the poor or others who seek a mutuum in necessity and who would be oppressed by a greater increase. But if money is handed over by mutuum not indeed for another's necessity, but only for utility and even for gathering new riches, there is no little dispute among theologians. Very many more recent authors, among whom is our Kenrick, rightly affirm, both by reason of indemnity or just compensation, and by reason of the free consent of the borrower, who, as is supposed, suffers no necessity. - Cf. Kenrick, n. 96. Nouvelle Revue Théol. vol. 21, p. 496.

Question 3. What is to be said concerning those who, when the discussion is only of money to be given by mutuum, after rejecting all the aforesaid titles, rely solely upon its fecundity to legitimize the profit which is taken above the principal?

Resp. Their doctrine does not seem improbable, and it can be reduced to the following heads:

1st. A mutuum, according to all, cannot occur except concerning a thing to be consumed by use, which is evinced from the nature of mutuum itself. But money is not consumed by first use unless it is furnished to a poor man who is going to spend it for his sustenance. For in the handing over of money, only value is transferred and is the object of the contract; but value does not perish when it is spent for increasing the fortune of the borrower. Therefore . . .

2nd. Hence the contract by which money is handed over to a rich man is not mutuum properly so called, but rather commodatum or hiring, according as it is given gratuitously or for a price, and therefore the dominion of the money is not transferred.

3rd. That contract of hiring money is licit in itself, for a price is justly exacted for a thing which has intrinsic value; but the use of money, which is not consumed by first use, has intrinsic value, which can be estimated by price and in human commerce becomes the cause of many emoluments. Therefore the increase of the principal is the just price of that use.

4th. Money, as is established by the experience of merchants, produces fruit and is multiplied of itself, independently of human industry; therefore it is not to be reputed altogether sterile. For the same merchant, in the same circumstances and with the same degree of industry, makes much greater profit if he can spend a much greater sum in commerce; therefore the faculty of spending money in commerce is truly estimable by price.