Juridical Delay of Payment, on Voluntary Cession of Goods, and on Cession in Court

518. Declarations. Cession of goods is said to be that act by which a debtor who is unable to pay all debts hands over his goods to creditors so that from them the debts may be paid to them.

1. A twofold cession of goods is distinguished: one voluntary, by which a cession offered by the debtor is spontaneously accepted by creditors; another judicial, which is made with a judge intervening, and indeed in two ways: either the debtor himself spontaneously yields his goods before a judge, or at the action of one of the creditors he is compelled to yield his goods.

Voluntary cession has those effects about which the debtor and creditors agree. In judicial cession, when the matter has been brought to a judge in whatever way, a concourse is proclaimed, namely the creditors come together to the judge and prove their rights, so that from the goods of the debtor (sold or auctioned) they may receive payment.

2. Cession on the part of the debtor can be culpable or inculpable, according as the debtor has become unable to pay by his own fault or without fault from mere misfortune.

519. Principles. 1. The juridical order of cession of goods, from the common opinion of theologians, obliges in conscience insofar as it is not opposed to natural law.

2. Once cession of goods has been juridically declared, the debtor is deprived by law of administration and free disposition of his goods; but creditors acquire the right of receiving payment from those goods.

a. Therefore it is not permitted to him who has yielded his goods to withdraw his goods or credits, that is, those things which are owed to him by others, from his creditors. Indeed, not even before cession is it permitted to do this, because the debtor thus directly intends to make himself unable to satisfy creditors. Wherefore he acts unjustly who, either before or after an intimated cession, to that end sells his goods to his children or takes care that his credits are transferred to his wife, unless a just cause renders this manner of acting licit, as if the wife belonged to the creditors, or if those things which are transferred to the wife were necessary for support.

b. Hence if a debtor, after cession of goods has been made, makes donations or remits debts, those actions are invalid; likewise debtors of the cessor must pay debts not to the one yielding but to his creditors.

3. The debtor who yields his goods can, by natural right, secretly retain for himself those things which are necessary for the honorable support of himself and his own, if he lives sparingly according to his state:¹ for the obligation of restitution, at least to be made at once, ceases if it cannot be made without grave inconvenience; therefore he is not bound to cast himself into grave necessity, nor to fall from his justly acquired state, in order that he may be able to restore.

a. Therefore he sins against justice who, besides these necessary things, conceals, sells, or in another way withdraws other goods from creditors, for example, more precious things, unless there is question of a thing which those yielding value very highly, for example, on account of memory of parents, but which others do not hold at a great price.

b. He is not to be condemned of injustice who reserves for himself the means by which he can begin another business from small beginnings: for the beginning of some business also pertains to necessary support.

c. When a husband encumbered with debts has died, his heirs, namely wife and children, can secretly withdraw from the goods of the deceased, before creditors receive them, as much as they judge necessary for honorable support.

4. Cession of goods of itself does not extinguish the obligation of paying fully, but only suspends it until that time when the debtor comes to a better condition, unless the creditors have explicitly or implicitly declared that they condone the remaining part of the debt.

a. For the cause excusing from restitution in this case of cession of goods is impotence; but impotence does not excuse altogether, but only as long as it lasts; wherefore when impotence ceases, the obligation of restoring urges again.

b. Among recent laws some expressly establish that the obligation of afterward restoring remains, while others free him who has yielded his goods, in the external forum, from restitution to be made afterward. Hence it happened that theologians began to ask whether he who yielded his goods would also be freed in conscience from the burden of restitution. All indeed concede that he who by his own fault has become unable to pay debts is not freed from the obligation of restoring; but some declare him immune from this obligation who inculpably became unable, unless creditors add the express condition that the obligation of afterward paying remains. Now it can be conceded that the cessor is immune from the obligation where the common persuasion has prevailed that the obligation of restoring itself ceases if civil law, because of cession of goods, denies creditors a judicial action against the debtor: for according to this persuasion creditors are considered to accept the cession unless they expressly declare otherwise.

¹ C.A. in this matter, agreeing with Roman law, does not permit the debtor to retain anything from his goods; yet it cannot take away the right which nature grants to necessary support.

I. Juridical delay of payment consists in this: once it has been pronounced and while it endures, the debtor cannot be forced to pay debts; yet some of these are usually excepted by law. Now juridical delay of payment, as is clear from the nature of the matter, does not excuse from payment to be made afterward, if it can be made; nor from the obligation of applying means, if there are any, by which the debtor may be made capable of paying the debts. For the rest, one must stand by the dispositions of the law and of the judge.

II. Voluntary cession of goods consists in this: that the debtor, with the creditors consenting, cedes his goods so that the debts may be paid from them. It does not transfer ownership of the goods to the creditors, but gives them the right of selling them. For the rest, note:

1. The obligations of him who has made cession of goods are usually determined by the agreement itself.

2. To judge whether or not cession of goods frees from payment of the residue, the agreement should be inspected, and that agreement as ordered by law, and usage. If, after these have been inspected, it is sufficiently evident that the debtor is not freed, neither can condonation be presumed. If law, agreement, or usage does not settle the matter, let it be seen whether condonation by all or some of the creditors can be presumed. If doubt persists, the obligation of paying persists, because in doubt the condition of the creditor is better.

III. Cession in court consists in this: that the goods of the debtor are juridically seized, so that they may finally come to the creditors. For the rest, note:

1. The obligations of him who has made cession in court are determined by the judge in conformity with law.

2. To judge whether or not one who has made cession in court is freed from the residual debt, again the agreement should be inspected, if any has been entered into, and that agreement as it has been ordered by law, and usage. If, after these have been considered, it is sufficiently clear that the debtor is not freed, neither can condonation be presumed. If law, agreement, or usage does not settle the cause, again let it be seen whether condonation by all or by some can be presumed. If doubt persists, the obligation of paying persists.

Corollary I. He who foresees that he will be unable to satisfy his creditors sins against justice by squandering goods, by neglecting means of improving the state of his fortune, and by contracting new debts without necessity.

Corollary II. Likewise he injures justice who by fraud or by other unjust means induces creditors to a composition, or to one more favorable than just.

Corollary III. He who has made cession in court is held to stand by the dispositions of the law and of those who apply the law; and this from commutative justice, because the law justly determines the rights of creditors. Hence, for example, he sins who reserves for himself part of his goods besides those which are granted by the judge. If, however, he justly judges that the law does not sufficiently provide for him, namely so that he and his own may be able to live sparingly, he can secretly retain something for himself, and to the judge interrogating him he can respond that he has concealed nothing, understanding: nothing which it is illicit to conceal; indeed it is also lawful to confirm the assertion with an oath. But here one must proceed cautiously, because those who make cession of goods or cession in court easily exaggerate their necessities; for this reason others should not easily concur with them in concealing goods. Finally note canon 122, which establishes concerning clerics: for clerics who are forced to satisfy creditors, those things necessary for their honorable support, according to the prudent judgment of the ecclesiastical judge, are to be preserved, while nevertheless their obligation of satisfying creditors as soon as possible remains firm.

719. • Q. 5. Whether cession of goods, whether judicial or voluntary, excuses from restitution in perpetuity?

Resp. 1. Altogether negatively as regards judicial cession, because that cession is a mere benefit which the law grants to a debtor of good faith and unfortunate, so that, ceding his goods, he may preserve liberty and become immune from compulsion in the external forum. This is clear from the express terms of both Roman and French Law.

Resp. 2. Indeed negatively also as regards voluntary cession, apart from an agreement either express or at least implicit. The reason is that, although the creditors then compound with the debtor concerning only a certain part to be paid, nevertheless they act thus because they cannot have more, and therefore they do not renounce the right which they have to integral payment, if the debtor should at some time be able to pay. - St. Lig., n. 669. - Billuart, diss. 8, art. 20.

I said, apart from an agreement; because if the creditors expressly liberate, or clearly seem to liberate, the debtor totally, he is held to nothing further.

244. Cession of goods is said to be that act by which a debtor, unable to pay in full, cedes his goods, so that the creditors may receive at least according to some proportion the money owed to them.

1. A twofold cession of goods is distinguished: judicial and extrajudicial. Judicial cession is had when either the debtor himself (judicial cession strictly so called) or one of his creditors (necessary cession) denounces to the judge the debtor's inability to pay. Extrajudicial cession, however, is a cession of goods offered by an insolvent debtor and freely accepted by the creditors. This extrajudicial cession is wont to have place when the debtor, without any fault and from mere misfortune, has been reduced to straits in paying and gives hope that he will pay later; or also in a case in which, through judicial cession, the creditors would suffer even greater damage.

2. Cession, both judicial and extrajudicial, can on the part of the debtor be either culpable or fraudulent, or inculpable.

Second cause. Cession of goods.

The second cause suspending restitution is the cession of goods, or, as others call it, cessio fori, namely when the debtor, unable to pay all his debts, gives up to the creditors what goods remain to him.

Now the privilege of this cession, if it was made without malice, deceit, fraud, etc., but solely through adverse fortune by which the debtor became unable to pay, avails only in the external forum, so that the debtor can no longer be summoned before a judge for his debts, nor be handed over to prison, and if he has been handed over he must be released. But if after the cession he has acquired some modest amount necessary for the decency of his state, he cannot again be sued by his earlier creditors so that these few goods may be sold; otherwise if he has acquired much.

L. Is qui. L. Qui bonis. L. Si debitoris, ff. de Cess. bon., lib. 42.

As regards the forum of conscience, however, a cession of this kind no more excuses from restitution than necessity without cession would excuse it. Hence, if the debtor who ceded his goods later returns to better fortune, he is held to pay what he owes, even if perhaps he settled with them; because ordinarily creditors settle thus unwillingly, from the fact that they cannot now have more, and therefore they are not understood to yield their right to the remainder, should the debtor ever be able to pay.

[Since this case occurs most frequently today, it must be explained more fully.

Cession of goods is either 1° voluntary, that is, freely accepted by all the creditors — and then it has those effects on which the debtor and the creditors agree; or 2° judicial, declared by the sentence of a legitimate judge. This latter kind is a certain benefit granted by the law itself to the unfortunate debtor of good faith, so that, notwithstanding any other stipulation to the contrary, he may be delivered from the molestations of his creditors. ^{442 442} Cod. Gall., art. 1268; Ital., art. 2090; lex Austriacae 25 dec. 1868; lex Boruss. 10 febr. 1877.

Under modern law: 1° Insolvency, that is, the state of a debtor unable to pay integrally, from which the cession follows, is either culpable or blameless. In the former case, if the insolvent person carries on some commerce, the matter is handled before the commercial tribunal where one exists, and it is called in French faillite; otherwise it is called déconfiture, and the matter is handled before the ordinary tribunal. In the latter case, insolvency is adjudged either as a delict, banqueroute simple, or as a crime, banqueroute frauduleuse, and is punished by the correctional or criminal tribunal with proportionate penalties.

Furthermore, by a cession of goods effected without fraud the obligation to restitute is indeed suspended, but not taken away. 1° It is suspended, both in the internal forum, on account of inability, and in the external forum, by concession of the creditors or by benefit of the law. 2° It is not taken away; because, unless it be elsewhere established otherwise, neither the law ⁴⁴³ nor the creditors intend to remit to the debtor what has not yet been paid. Hence, if better fortune later comes to the debtor, he is held to pay the remainder of the debt ⁴⁴⁴; indeed he ought, as far as he can, to labor so that he may be able to satisfy the payment integrally. ⁴⁴³ Cod. civ. Gall., art. 1270; Cod. Comm. Ital., art. 548; lex Austriaca anni 1868, § 5. ⁴⁴⁴ S. Lig., lib. IV, n. 699; Homo apost., X., 117.

It must be noted that this obligation can be extinguished by prescription, like the others, through thirty years, if the creditors have neglected during this lapse of time to demand payment. Indeed it could be extinguished in a shorter time, by the common interpretation of the law which, in view of the public good, can transfer dominion, just as legal prescription does; which is asserted, not improbably, to be admitted in England ⁴⁴⁵ and in North America ⁴⁴⁶. ⁴⁴⁵ Grolly, n. 1201. ⁴⁴⁶ Konings, n. 861.

By the cession of goods the right of the debtor to suitable support for himself and his household is not destroyed. For he is not in a worse condition than the other debtors, for whom the need of their family is a just cause for deferring restitution. ⁴⁴⁷] ⁴⁴⁷ Marc, Instit. moral. Alphons., n. 1021-1023.

The Laws permit Cession of goods, so that in the external forum the debtor may be safe L. Qui bonis, ff. de cessione bonorum, and Cod. de iis, qui bonis cesserunt; yet this cession in the forum of conscience does not free him, except insofar as it excuses his poverty, otherwise it would free him even without such cession, as Navar. notes, cap. 17. num. 86. Medina quaest. 3. cap. 3. Sotus lib. 4. d. Iust. quaest. 7. art. 4. Couar. Lib. 2. variarum, cap. 1. Valentia quaest. 6. puncto 7. Tanner. num. 441. disp 4. quaest. 6. Bassaeus V. Restit. 5. num. 5.

He will still be bound to restore if he comes to better fortune, as the same Doctors teach, and as is had in Leg. 1. and Leg. cum et filii, and Leg. is, qui bonis. Cod. de his, qui bonis, locis citatis. Which Couar. also shows to be true, when that cession of goods is made with some ceremony of ignominy.

Yet Caspensis observes, disp. 1. sect. 13. with Toletus Lib. 1. cap. 16. that a debtor in cession of goods may retain and conceal what is necessary for his own sustenance, that of his wife, children, and others in the first degree; nor are those who know it bound to reveal it, even if a penalty is imposed on one who does not reveal; they may even swear that they do not know where such goods are, understanding within themselves, insofar as they are bound to reveal it; but Petrus Navar. Lib. 4. cap. 4. num. 50. says this is true of one who is compelled without fault to cede his goods; Tannerus subscribes, num. 441.