§ 2. Doctrinal Notions

363. Concerning the loan for consumption (mutuum). 1. It can be described: A real contract by which a fungible thing is given under the law that after a certain time the same be returned in kind; or, more briefly: The temporary grant of a thing consumable by its first use.

We have taken the former definition almost entirely from Zech, work cited, diss. 1, § 30, with whom the interpreters of Roman law and the Scholastic doctors agree. For since it is nowhere defined in the canonical laws, it was necessary to derive its true rationale from common use and Roman law.

Three things, therefore, are contained in its essence: a) A fungible thing, that is, one which functions in kind, or whose own individual body is regarded less than its kind, for example, grain or money. More precisely, you would say: a thing consumable by its first use, or one which you cannot use except by consuming it either naturally, as when you eat food, or civilly, as when you pay money. It then perishes, not indeed in itself, but for you.

b) The handing over of that thing to another who has the right to consume it. Therefore, money or sweetmeats loaned for the sake of display, or merely to adorn the table or the front of a shop, are not the object of a loan for consumption. That thing, however, can be oil, wine, etc.; most frequently it is money. The question now chiefly concerns a loan of money for consumption.

c) The obligation of returning the kind after some time. Of returning the kind, that is, the same quantity of a thing similar in quality or goodness, not the very individual thing received; after some time, for, of itself, he who grants money as a loan for consumption extends credit, or cannot demand his thing back before a certain day.

This has seemed to some to be an obligation of the creditor, on account of which the loan for consumption should be assigned to bilateral contracts. Thus Rev. Fr. Pesch, place cited, p. 57. Yet because it is rather a necessary effect of the right transferred and merely pertains to this, that the right not be violated, the practice of regarding the loan for consumption as a unilateral agreement is better retained.

2. Ownership of the money lent belongs to the borrower, since in fact he has the right to use and consume the thing.

This was so certain to the ancients that from it they gathered a fictitious etymology of the word: “The giving of a mutuum was so named because from mine it becomes yours.”¹ But certain more recent writers began to doubt this. Yet when they wish acutely to distinguish ideal being, the value of the thing, and its physical being; or when they argue from the fact that the money is called aes alienum [another’s money; debt], etc., they do nothing other than obscure by a fiction the plain truth, which comes down to this: the borrower is obliged to pay; therefore, there belongs to the creditor not a right in the thing (ius in re) but a right to the thing (ius ad rem). Since there inheres in this right some weight worthy of valuation, according as the promised payment appears more or less certain, it is therefore reckoned among the goods of the patrimony and can be designated by the name of a value. But for the same rationale, the very price of something sold is already regarded as increasing the seller’s patrimony according to the hope of payment. Would you therefore say that the coins themselves, once the agreement concerning the price has been made, have already changed owner? Besides, it suffices for us that, as cannot be doubted, the borrower can physically dispose of the thing, so that we may have the means of gathering what we wish concerning the gratuitous character of the loan for consumption. Cf. Rev. Frs. H. Pesch, place cited, pp. 44, 45, 55, 56, and Lehmkuhl, vol. 1, no. 1091; and, from the opposing side, Rev. Dr. Funk, Tübinger Quartalschrift, 1879, pp. 25-27, and Ballerini, Moral Work, vol. 3, tract 8, pt. 3, nos. 223 and 328 ff.

¹ Law 2, § 2, Digest, On Things Credited (XII, 1). Donellus, On Civil Law, bk. 14, chap. 1, no. 6, charmingly but not more truly completes this explanation: “There is in this word a reciprocation of mine and yours, that is, this force: that mine become yours and, in turn, yours become mine.”

3. From this consequence these other two corollaries immediately follow:

a) In a loan for consumption, the borrower bears the risk of the thing. This is also proved by this other rationale: that the kind never perishes;

b) The borrower acquires the fruits of the thing, if any are said to exist, since a thing fructifies for its owner.

364. Concerning usury. 1. In the general acceptation, it signifies whatever beyond the principal is to be paid by the borrower by force of a formal or tacit agreement. Whatever, I say, whether it be money or any other thing capable of valuation at a price,² whether it be much or little.

² In this manner the Holy Fathers said, for example, St. Ambrose, On Tobit, chap. 14: “Usury is whatever is added to the principal.”

Under this rationale, it is per se excluded from the loan for consumption in Roman law, as is already derived from the single word usura, τόκος, by which among the Romans and Greeks any interest whatever was designated, while in modern languages l’intérêt et l’usure [interest and usury], Zins und Wucher [interest and usury], interest and usury, and interesse ed usura [interest and usury] are distinguished. Under this rationale also, the Church prohibited the exaction of usuries by force of the loan for consumption itself.

2. In a more particular acceptation, in certain laws of an earlier, but nevertheless Christian, age, usury designated “profit owed or exacted by agreement from a loan for consumption,”³ that is, from the use of a consumable thing; under this rationale, usury was condemned without qualification by the canons of the Church.

³ St. Raymond, Summa, bk. 2, tit. 7.

Here fits the description which, in the constitution Inter multiplices, approved by the Fifth Lateran Council, session 10, Leo X inserted incidentally as an argument of the adversaries of the Mounts of Piety:⁴ “This is the proper interpretation of usuries: when, namely, profit and offspring are sought from the use of a thing which does not beget, with no labor, no expense, and no danger.”

⁴ Hardouin, vol. 10, col. 1773. Take care, therefore, not to accept these things as a definition of the Council itself; Schmalzgrueber, on bk. 5, tit. 19, no. 8, fell into this error when he regarded as a decision of the Council these other words which, in the same preface, also belong to the adversaries: “Christ the Lord, as Luke the Evangelist attests, bound us by an open precept that from a loan for consumption given we ought not to hope for anything beyond the principal.”

Usury understood in this way is sometimes called lucrative and is distinguished from moratory or punitive usury, which was exacted as a penalty for delay in paying; and from compensatory or restorative usury, which was repaid for the creditor’s interest, for example, from emergent loss (damnum emergens), profit ceasing (lucrum cessans), or the danger of losing the principal. Cf. Schmalzgrueber, place cited, nos. 91-92.

Therefore, certain authors wrongly judge that the Council of Trier in the year 1310 (Mansi, vol. 25, col. 289) designated interest strictly so called by the words moderate interest, which must be understood merely of compensatory usury.

3. The sin of usury can be committed either by exacting that a greater sum (principal, capital) be returned than was handed over; or by annexing burdens or unjust modes to the obligation of returning; or, properly, by exacting interest without a title or beyond the title. Here usury is had in the stricter sense.

4. Lucrative usury is distinguished:

a) Into real and mental, almost as in simony, so that mental usury is that of one who, without a formal external agreement, intends, from the loan for consumption which he grants, to oblige the other from justice to pay usuries.

b) Into formal or open, and disguised, which is clothed, as it were, with the cloak of another honest contract. Hence the controversies, once fervent, whether this or that contract—for example, a redeemable rent contract (census)—disguised usury or not.

Such usury often lay hidden in purchase and sale through various agreements of resale. Only historically must the famous Mohatra, or Baratra, be recalled, which consisted in this: someone sold on credit, at a high price, merchandise not needed by the buyer Titius, which Titius immediately sold back to him at a low price but for ready money. When the day arrived, the first seller received that high price from Titius. For example, Titius buys a clock for 150 francs, to be paid after a year, and immediately, having sold the clock to the same seller, obtains 120 from him. When the year has elapsed, Titius must return 150 to the seller.

As is evident, this resale, if it is done by agreement, contains disguised usury (proposition 40 among those condemned by Innocent XI); and on account of the very great danger of abuse, even without an agreement it was often prohibited. Cardinal de Lugo, disp. 26, nos. 204-208.

c) Into interest on the principal, or perpetual interest (intérêts simples [simple interest]), and interest upon interest (intérêts composés, intérêts des intérêts [compound interest, interest upon interest]), which Cicero also calls renewed interest, anatocism (in French also: anatocisme).

d) From quantity they were called unciariae, centesimae, etc.

The maximum usuries which could be exacted by stipulation in Roman law were the hundredths,⁵ one for each month, and therefore 12 percent. They consequently constituted, as it were, the usurious as (consisting of 12 unciae), or the unit to which the lighter rates were referred. Hence the appellations:⁶ interest ex deunce, or usurae deunces (11/12) = 11 percent; ex dextante (10/12) = 10 percent; ex dotrante (9/12) = 9 percent; ex bessale (8/12) = 8 percent; ex septunce (7/12) = 7 percent; ex semisse (6/12) = 6 percent; ex quincunce (5/12) = 5 percent; ex triente (4/12 = 1/3) = 4 percent; ex quadrante (3/12 = 1/4) = 3 percent; ex sextante (2/12 = 1/6) = 2 percent; ex uncia, or usurae unciariae (1/12) = 1 percent.

⁵ Nevertheless, as soon as the sum of usuries owed equaled the principal—as happened with hundredth usuries after one hundred months—the usuries ceased, so that usuries could not be sought beyond double the principal. Cf. law 26, § 1, Digest, On the Recovery of What Is Not Owed (XII, 6), and law 4, § 1, Digest, On Maritime Interest (XXII, 2).

⁶ They were often understood wrongly; for example, by St. Raymond, who in the Summa, bk. 2, tit. 7, equated hundredths with interest at 100 percent; and by Concina, On Usuries, p. 382, and, after him, by Devoti, Canonical Institutes, bk. 4, tit. 16, no. 1, note 2; so that they confused the unciariae, which were the minimum, with the bloodstained or hundredth usuries.

365. Concerning the sterility of money. 1. A thing is called plainly sterile or unfruitful when it bears no fruits, either fruits properly so called, such as the apples of a tree, wool, or the offspring of sheep, or fruits so called broadly, which correspond to a utility distinct from its destruction or consumption, such as habitation in a house or the cutting action of a knife. The use of a sterile thing is said to consist in its consumption (abusus), because its use is its consumption. (II-II, q. 78, art. 1, corpus.)

These things are called consumable by their first use; and, because they are generally fungible things, the two names are often intermingled.

2. But the very destruction or consumption of a thing of this kind can either have power to generate other things, whether similar or even of greater value, or immediately diminish the patrimony. Therefore, the consumption itself is distinguished into fruitful, such as the consumption of coal in a workshop, by which motive power is generated; and sterile, such as the consumption of coal by which someone heats a room.⁷

⁷ Take care, however, not to value things economically solely from profitable consumption. For since it would be a vicious circle to refer man, to whom inferior things are referred as to their end, back to those things as a means, things are ordered mediately or immediately to a non-economic use, and finally they are sometimes capable of valuation insofar as they are useful to man. (Again against Bastiat.)

3. The metal, indeed, from which money is made, although it does not bear fruits—whence the saying, Money does not beget money—has a use distinct from consumption. But that is not the formal use of money. Similarly, there is “a secondary use of money . . . if someone were to grant coined money for display” . . . (which use can licitly be sold); “but the principal use of silver money is the alienation of money in exchanges,”⁸ “δαπάνη καὶ δόσις” [expenditure and giving], as Aristotle says, Ethics, IV, 7. By this use it does not indeed perish physically, but it perishes for the possessor.

⁸ St. Thomas, II-II, q. 78, art. 1, ad 6.

Hence money is sterile in itself; but by exchange it becomes all the things into which it is converted. Therefore, from the things which are commonly obtained for money, or are known to be capable of being obtained, the economic value either of money itself or of its use must be judged. In this manner St. Thomas had already wisely admonished, on Ethics, V, lect. 9, at the end: “It makes no difference, however, whether five beds are given, or only what five beds are worth.”

We say the things which are commonly obtained or are known to be capable of being obtained, because we have demonstrated that common estimation is founded upon common utility, from which objective value proximately flows. Besides, we by no means deny that a special utility can also be added here which makes possession of money more estimable to someone.

366. Concerning extrinsic titles. An extrinsic title, strictly speaking, is called a cause added to the essential rationale of a loan for consumption and, moreover, connected with a peculiar condition of the creditor or debtor, on account of which moderate interest can justly be exacted in a loan for consumption. Therefore, a cause on account of which an increase can be sought accidentally by all lenders of money, although coming to the loan for consumption from without, will nevertheless not properly be called an extrinsic title.

Therefore, in order that you may justly exact interest on account of this title, it is necessary that it truly support you, and that the debtor, aware of the matter, consent to this payment.

These titles, from Paul de Castro († 1447),⁹ who was regarded as their author, are sometimes called the Castrensian requisites. They are chiefly:

⁹ He himself seems to have been the first to dispense a merchant and a man accustomed to conduct business from a strict demonstration of profit ceasing.

1. Danger to the principal, when either the loss of the principal or difficulties and expenses in recovering it must be feared. And because undertaking such a burden is capable of valuation at a price, moderate interest can be received even if the principal is afterward returned. Thus, certain authors—whom Rev. Fr. Weiss still follows, work cited, pp. 692-693 and 708, at the end—entirely without merit regard that interest as a kind of security which must be returned as soon as, the money having been restored, the danger has passed away.

According to the quality of the danger, a greater or lesser usury will be licit.

2. A conventional penalty, proportioned to the culpable delay of the debtor; for there is no question of a penalty which compensates for foreseen or probable damage which any delay could bring to the creditor.

3. Emergent loss (damnum emergens) and profit ceasing (lucrum cessans). When it is likely that the creditor, from the lack of money, will suffer damage in his affairs (for example, he would have repaired a house which is now collapsing), either of two things can be agreed upon between the parties by stipulation: either that the whole damage which follows be compensated afterward, or also that, according to the valuation of the risk, a fixed interest be established which is paid each year. Similarly, he who wishes to conduct business and, in order to conduct it, needs the money which he gives as a loan for consumption, can stipulate that, according to the valuation of the hope and danger and with the expenses deducted, moderate interest be paid to him.

In admitting compensation for emergent loss, the Scholastic doctors, if perhaps Scotus is excepted, do not seem to have experienced difficulty. Profit ceasing was doubted for a longer time, although already in Roman law that which was of interest to me was understood as “how much is lacking to me and how much I could have gained” [law 13, Digest, On a Matter Being Ratified (XLVI, 8)]. St. Thomas seems to favor it little (Opusculum 21, On Usuries [whether genuine?]; II-II, q. 78, art. 2, ad 1; q. 62, art. 4). By the end of the sixteenth century, however, this controversy had been concluded. Danger to the principal was disputed for a still longer time. Cf. Funk, Geschichte des kirchlichen Zinsverbotes [History of the Ecclesiastical Prohibition of Interest].

4. Scarcely different formally from these titles is the cause which St. Alphonsus regards as probably just and which is derived from the long time for which the loan for consumption is given. For over a long span of time, it seems that one of the enumerated titles will not be absent.

5. Concerning the title of civil law, there was much dispute: some denied that a gain unjust in itself could be made honest by civil law; others invoked the right of high dominion, from which the Prince has the faculty of transferring ownership for a just cause pertaining to the common good; finally, others rejected the fact itself and did not concede that the legislator had willed to supply a nonexistent title, but had permitted usuries merely from the presumption of a true title.

Nothing has been defined in this matter by the Church. It does not indeed seem to us that the Prince’s faculty of conceding some interest can be denied, if, on account of the common good, the willingness to lend ought truly to be encouraged by this as by a reward; but this necessity will scarcely arise except in those circumstances in which we shall soon establish that it is universally licit to lend money at interest. Thus, approximately, Rev. Fr. Lehmkuhl, vol. 1, no. 1102, whom you may consult concerning all these titles. Ballerini-Palmieri, vol. 3, tract 8, pt. 3, no. 242 ff., also disputes these at length.

367. Definition of the question. 1. WE DO NOT HAVE TO TREAT: a) Extrinsic titles, or moratory and compensatory usury, since the classical doctors have treated them excellently and the controversy has been removed by the very consensus of the learned;

b) The obligation of charity, whose principles easily become known, but rather the necessity of justice;

c) The specification of the sin of usury. For this matter is sufficiently clear, since it is established that mercy is offended if the poor man is harassed; but that an injury, if there is any, is theft or even robbery, according as a thing of an owner reasonably unwilling has merely been taken away, or force has also been inflicted upon his person.

2. BUT IT IS ASKED: a) Whether or not exacting lucrative usuries is unjust, that is, contrary to the equality owed in an agreement by which a fungible thing is lent, just as the request for an excessive price is repugnant to the equality to be preserved in a sale.

b) How the discipline of the Church is to be interpreted and vindicated from calumnies. For her laws concerning usuries seem to incur various reproaches and, at first appearance, to conflict somewhat with one another.