Case 10. Fraudulent Preference

Julius lent his friend Caius, a merchant, one thousand pounds sterling; but when the business did not prosper, Caius was compelled to surrender his goods. A few days before he directed a petition to the court, Caius, on account of their old friendship, as he said, handed the thousand pounds in full to the grateful Julius. Afterward, however, his goods, distributed among the other creditors, scarcely equaled half of the sum owed to each. Hence Julius, a very good Catholic, moved by scruples, approached a confessor, who, when he had heard everything, compelled Julius, as a cooperator with Caius in the unjust damaging of the other creditors, to make restitution to them. Hence it is asked:

1. What are the roots of restitution?

2. When a debtor is not solvent, to what is he bound, whether by natural law or by municipal law?

3. Can a confessor, relying upon a probable or even a more probable opinion, impose the obligation of restitution upon a penitent?

4. What is to be said of the case?

1. This question is answered above, p. 270.

2. When a debtor is not solvent, what is he bound to do by natural or municipal law?

As soon as a debtor recognizes that he can not pay his debts in full, and that there is no reasonable probability of his being able to do so, he is bound to take steps to enter into a composition with his creditors, or to have himself declared bankrupt. If he goes on to contract new debts after recognizing that he is hopelessly insolvent, he does an injury to his creditors and renders himself liable to have his discharge suspended, if not altogether refused.

3. Can a confessor impose an obligation on a penitent of making restitution when there is a probable, or more probable opinion, in favor of the obligation?

No; he can not. An obligation must not be imposed unless it is morally certain that it exists.¹

1 St. Alphonsus, book i, nos. 26, 87; book vi, no. 604.

4. The case. Caius by a fraudulent preference just before bankruptcy paid a debt of £1000 in full owed to his friend Julius. The other creditors received hardly half of what was owing to them. Julius mentioned this in confession, and his confessor compelled him to restore on the ground of co-operation in the unjust action of Caius.

The confessor did wrong, for Julius had a right to the money, and he did no injustice to the other creditors by taking it when it was offered by Caius. Caius indeed had obligations toward the other creditors on account of his contract with them, and if he could not pay all in full, he was bound to pay all ratably. They had all a certain indefinite claim against his estate. Caius did wrong in preferring Julius, but when it was offered, Julius could lawfully take the £1000; it did not belong to anybody else; it became his on acceptance as payment for his debt. His co-operation with Caius was material, not formal, and lawful as it is lawful to accept a usurious loan from a usurer. There is at any rate good ground, both intrinsic and extrinsic, for this view.²

2 Lehmkuhl, vol. i, no. 1027.