Loans (Mutuum and Commodatum)

575. Definition. Mutuum (Darlehensvertrag) is a contract by which a thing consumable by the first use is handed over to another, with the obligation of returning another thing of the same nature and goodness at the established time.

a. The name mutuum is taken in a twofold sense: in the formal sense, in which it signifies the contract described above, and in the real or objective sense, in which it signifies the thing which is handed over to another by way of mutuum (Darlehen).

b. He who hands over the thing to another is called the lender, or giver of the mutuum; but he to whom the thing is handed over by way of mutuum is called the borrower.

c. Mutuum is a real contract, which is perfected only by the handing over of the thing; from mutuum must be distinguished the promise of giving a mutuum, which ordinarily precedes the mutuum itself.²

d. The object of mutuum is a thing consumable by the first use; but not only a thing which is physically destroyed by use, as grain, wine, oil, is said to be consumable by use, but also a thing which indeed physically remains as to substance, but perishes for the user, so that the same thing in its individuality cannot be returned, as money, which is destined to be spent, and wood which is used for building a house.

e. The borrower becomes the owner of the thing lent by mutuum: for by force of the mutuum the right of using the thing handed over is conceded; but the right of using a thing consumable by the first use is the same as the right of destroying the thing; but the right of destroying a thing pertains to ownership of the thing. If therefore the thing lent by mutuum perishes in any way, it perishes to the borrower, because the thing perishes to the owner; therefore when the thing perishes, the borrower is not freed from the burden of restoring a thing of the same kind. Likewise the fruits, if the thing lent by mutuum produces any, are acquired by the borrower, because the thing bears fruit for the owner.

f. Mutuum differs: alpha. from commodatum and lease, because in mutuum a thing consumable by the first use is handed over, ownership of the thing is transferred, and a similar thing or a thing of the same kind is returned; but in those contracts a thing not consumable by the first use is handed over, ownership of the thing is not transferred, and the same thing in species or individuality must be returned; beta. it differs from exchange, because in exchange, for example in sale, a thing of a different kind is returned; gamma. it differs from exchange of money, because in exchange of money the thing is handed over immediately, not after some time.

¹ St. Thomas II-II, q. 78; Lessius, De iustitia, l. 2, c. 20; Lugo, De iustitia, disp. 25; Benedict XIV, De synodo, l. 10, c. 4; his encyclical Vix pervenit, Nov. 1, 1745; Fr. Zech, Rigor moderatus doctrinae pontificiae circa usuras etc.; Alb. Weiss, Soziale Frage und soziale Ordnung (Freiburg: Herder, 1892); Fr. X. Funk, Zins und Wucher (Tubingen: Laupp, 1868); the same author, Zur Geschichte des Wucherstreites (Tubingen: Laupp, 1901); H. Pesch, Zinsgrund und Zinsgrenze, Zeitschrift fur kath. Theol. (Innsbruck, XII, 1888), pp. 36, 393; J. Diederlack, Der Darlehenszins (Vienna: Mayer, 1898); A. Vermeersch, Quaestiones de iustitia^2 (Bruges: Beyaert, 1904), n. 357-385; Van Roey, De iusto auctario ex contractu crediti (Louvain: Van Linthout, 1903).

² From C.A. Section 983 a promise of giving a mutuum produces a civil obligation; likewise from C.G. Section 610.

576. On the gratuitousness of mutuum. Mutuum of itself is a gratuitous contract, so that it is not permitted to impose any other burden on the borrower, except that he return a thing of the same kind and goodness at the due time, without anything being required for the lending itself. Indeed he who requires gain for the thing lent by mutuum requires a price for the use of the thing lent by mutuum: for since the thing lent by mutuum is consumed by the first use, nothing is found in the mutuum which can be judged estimable by price except the use of the thing; but he acts against justice who requires a price for the use of the thing lent by mutuum: for if the lender were to require anything for the use, since the borrower becomes owner of the thing, he would require something for a thing not his own. Moreover the use of a consumable thing does not have a value distinct from the value of the thing, just as the use of purchased wine does not have a value distinct from the substance of the wine. Therefore he who requires a price for the use of the thing lent by mutuum is like a seller of wine who separately sells the wine and the use of the wine.¹

a. Therefore he who requires anything for the mutuum itself or for the lending and use of the thing lent by mutuum sins against justice and is bound to restitution. And a contract whose object is gain to be received from the mutuum itself is invalid as illicit and unjust. Therefore the Church by most severe laws prohibited any gain beyond the thing lent by mutuum from being received by reason of the mutuum itself.

b. Against the proposed argument this cannot be excepted: the lender, by lending to the borrower, performs a service which is estimable by price. For if by the name of service is understood the thing lent itself, this is restored in the same kind and the same goodness; but if by the name of service is understood the use of the thing, this in a consumable thing does not have a value distinct from the thing itself; if finally there is understood the utility which the borrower receives from the use of the thing, it is wrong to require a price for the utility which someone receives from his own thing. Nor can this be excepted: he who concedes a mutuum to another deprives himself of his own thing; but the burden which someone undergoes by this privation is estimable by price. For the burden itself by which someone deprives himself of his own thing, where this privation is not conjoined with a special detriment, is not worth more than the thing itself of which he deprives himself; and since this is restored, nothing remains which is estimable by price. The same privation is also had in sale, without a price being able to be required for it. The following exception returns to the same point: to lack one's own thing for a certain time is estimable by price. For to lack an unfruitful thing, which has no other use except consumption, is not estimable by price, where the lender receives a similar thing when he himself has need of it. The obligation which the lender contracts of not reclaiming the mutuum for a certain time is likewise not estimable by price, where the thing lent by mutuum is not necessary to the lender. He indeed deprives himself of the liberty of reclaiming the thing lent by mutuum; but this inconvenience, whatever it be, is abundantly compensated by another advantage, namely that the borrower undergoes the danger of losing the thing lent by mutuum while the obligation of restoring a similar thing remains: for the mutuum perishes to the borrower.² The lender does not suffer damage, because he lends an unfruitful thing which he himself does not need. He would suffer damage if, from circumstances not foreseen, the borrower lost the power of restoring; but he can meet this danger by demanding a surety, who, if the borrower fails, will restore the thing.

¹ Cf. St. Thomas, II-II, q. 78, a. 1.

² Therefore this proposition (42) was condemned by Alexander VII: It is licit for a lender to require something above the principal if he obligates himself not to reclaim the principal until a certain time.

577. On external titles. An external title is called a cause placed outside the essence of mutuum, on account of which the lender in a particular case can require a price for the mutuum. Now four titles of this kind exist: ceasing profit, emergent damage, danger of the principal, and conventional penalty.

From these titles, with the Church itself approving, some gain beyond the principal could already in ancient times be licitly required. But it was necessary that these titles really exist, that a special pact distinct from the mutuum be entered between the lender and the borrower, and that certain conditions be observed, especially that the due proportion of equality not be exceeded between the gain and the title from which the gain was to be received.

1. Ceasing profit is the loss of a price which the lender would have gained if he had used his thing in another licit contract or business; now hope of gain is estimable by price and is external to the mutuum; therefore because of ceasing profit it is permitted to accept something above the mutuum.

2. Emergent damage is a positive detriment which the lender must undergo because he gives his thing to another by mutuum; but it is manifest that compensation can be required for damage which someone undergoes in favor of another.

3. Danger of the principal is a special danger which is prudently feared, lest the lender not recover his own thing. This danger is external to the mutuum and estimable by price; wherefore, if the lender truly must undergo it, he licitly requires something for it, and the greater the danger of losing the principal is, the greater compensation he can require.

a. For the common danger to which any thing whatsoever, and therefore also the thing lent by mutuum, is subject with the lender, it is not permitted to accept anything, because this danger is internal to the mutuum; but for the special danger to which the thing is exposed with the borrower, it is permitted to accept something beyond the mutuum, because this danger is estimable by price and external to the mutuum.

b. Danger of the principal can arise either on the part of the thing lent by mutuum, if, for example, it must be transported through dangerous roads, but the borrower cannot restore it if the thing perishes; or on the part of the borrower, if he is a man little trustworthy, negligent, or fraudulent, whereby it happens that the mutuum cannot be recovered without troubles and lawsuits.

4. Conventional penalty is a money fine to be paid by the borrower from agreement if he does not return the thing accepted by mutuum at the established time; but nothing prevents contracting parties from mutually obligating themselves to paying a certain penalty if they fail in contracts.

578. Civil law or legal reward. From the seventeenth century onward civil laws here and there admitted a certain interest to be received from mutuum and compelled the borrower by civil action to pay it. From that time there was much discussion among theologians whether, with other titles lacking, the title of civil law alone suffices in conscience for receiving gain from mutuum licitly.¹ The chief reason of those who affirmed that this is licit is this: civil authority can validly transfer ownership of material goods from one person to another where the necessity or great utility of the common good demands it; but the common good of our time demands great facility of lending money by mutuum for fostering and increasing commerce; and since this facility cannot be universally obtained among men in another way except by permitting interest as a kind of reward for money given by mutuum, civil authority can permit this and transfer ownership of the interest to the lender.

This title of civil law, about which theologians in the eighteenth century sharply disputed and still dispute, the Church seems not at all to have reprobated, but rather to have approved; for it decrees both that the faithful who receive interest established by civil law from mutuum are not to be disturbed, and that confessors who teach that it can be licitly received are not to be disturbed, provided they are prepared to stand by the mandates of the Holy See if it defines anything on this matter.²

Nevertheless the Church by these things did not wish to settle the question agitated among present-day theologians concerning the force and efficacy of this title: for they dispute whether civil law itself, with no other title existing, renders the agreed interest licit, or whether it is rather itself an argument for the existence of some external title on account of which interest can be licitly received. Many are of this latter opinion, which Ballerini briefly presents in this way: the law "does not make just the gain received from mutuum, but finds it just."

¹ Cf. Fr. Zech, Rigor moderatus, c. 1, sect. 5.

² Concerning the title of civil law there are two decrees of the Holy See, one of Sept. 16, 1830, the other of Jan. 17, 1838.

579. Notions. Money is the principal object around which today the contract of mutuum turns; but because of the nature of money, very diverse from other things which are customarily given by mutuum, this species of mutuum deserves particular consideration.

1. Pecuniary mutuum (Gelddarlehen) is a contract by which money is handed over to another with the obligation of returning other money of the same value at the established time.

a. Money which is given by mutuum is usually called in the schools the principal, but now commonly capital.

b. Pecuniary mutuum is a gratuitous contract if money is handed over to another gratuitously, and it is an onerous contract if it is handed over to another with the burden of paying interest.

2. By reason of the end which the borrower intends, pecuniary mutuum is divided into consumptive mutuum, which is handed over to another for procuring for himself things necessary for his use; and productive mutuum, which is handed over to another for making gain, as if it is given to a merchant for trading, or to a rich man for increasing his goods, or to a farmer for improving his fields.

¹ Van Roey, De iusto auctario ex contractu crediti (Louvain: Van Linthout, 1903).

580. Nature of money. In the proper sense money is sterile; but improperly it is potentially fruitful, and in present times per accidens can simply be called actually fruitful.

a. Since a fruitful thing in the proper sense is said to be that which produces fruits from itself by internal fertility, as a tree, vine, field, money cannot properly be called a fruitful thing, but in the proper sense it is sterile, since money does not beget money.

b. In the improper sense a thing is called fruitful which is equivalent to fruitful things, because it can be exchanged for fruitful things, or which serves as a means and instrument for procuring gain for oneself; but money can be exchanged with any other things whatsoever and substituted for them. Therefore money itself, insofar as it can be substituted for things fruitful in themselves, is equivalent to fruitful things; moreover, by the aid of industry and commerce, it serves as a means and instrument for procuring gain for oneself.

c. Although money was always of itself apt to be exchanged with fruitful things or to be employed as the means of a lucrative business, nevertheless in ancient times the economic conditions were not such that this could have been done easily and frequently; but now, both because of the very easy communication among diverse regions and because of the very great extension of industry and commerce, economic conditions are such that everywhere money can easily be substituted for fruitful things or employed as the means of lucrative trade. Wherefore money, which in ancient times was not held as a fruitful thing and could not be held as such except potentially, must now be called an actually fruitful thing.

581. Gain from pecuniary mutuum. In the economic conditions which now exist, it is licit for each person to accept payment for pecuniary mutuum, unless by the law of charity he is bound to lend gratuitously.

a. There exist many responses of the Holy See by which today permission is positively conceded to all, both ecclesiastics and laymen, independently of the existence of an external title, to receive moderate gain from mutuum, as will be said below.

b. Since money from the conditions of our time is a fruitful thing, by the common estimate of all there belongs to it a special value, on account of which it can bring profit and utility to its possessor. Therefore he who concedes a mutuum to another deprives himself, together with the money, also of this value which now inheres in money; but it is permitted to require compensation for a special value. The circumstances of the time today are such that money commonly has for all the value of a fruitful thing: for all to whom even a modest sum of money is available easily find occasion of procuring gain and utility for themselves from it. Therefore it is licit for all to accept interest, and indeed from any mutuum, even from consumptive mutuum.

c. Just as charity requires that we assist a neighbor constituted in grave necessity through alms, so the same charity can require that to a neighbor who needs a mutuum we not only furnish it, but also furnish it gratuitously, if he is unable to pay compensation, provided this can be done by us without grave inconvenience: From him who wishes to borrow from you, do not turn away.¹

Ordinarily, however, this very inconvenience excuses the rich from furnishing mutuum to the poor where there is question of a larger sum: for ordinarily they expose themselves to the danger of losing the principal, which certainly is a grave inconvenience. Practically therefore the rich in this case satisfy their obligation by bestowing a small alms on the one seeking a mutuum.

¹ Matt. 5:42.

Certain laws merely refuse an action to vindicate a claim or bar the remedy. Such laws do not annul or invalidate any natural right which may exist in the case; the law cannot produce an effect which was never intended by the legislator, and which is repudiated by those who administer the law. A debt, then, which is barred by statute still remains a debt, and must be paid; an unstamped document may suffice to prove an obligation in conscience, though it would not be admitted in a court of justice until the defect was made good; contracts seriously entered into and completed will bind the conscience, even though the law will not enforce them because they are not in writing, or because there is not the consideration which is required by law. Points of Church Law, 25. Codex juris canonici, passim. See Slater,

The question of order of payment among creditors also arises when a debtor is insolvent and cannot pay all in full, for if he can pay all in full, order of payment is not of consequence. If a man cannot pay his debts as they become due, he will be adjudicated a bankrupt, and his property will in general be divided ratably among his creditors. Some debts, however, have priority according to English law, and must be paid in full if the assets are sufficient for the purpose; otherwise they will abate equally among themselves. These are (1) Rates and taxes. . . . (2) The wages or salary of any clerk or servant, not exceeding £50, in respect of services rendered during four months prior to the receiving order. (3) Wages of any labourer or workman, not exceeding £25, for services, whether time or piece work, rendered during two months prior to the date of the receiving order.”’¹

“A secured creditor has four courses open to him: (1) He may rest on his security and not prove. (2) He may realize his security and prove for the deficiency. (3) He may value his security and prove for the deficiency, after deduction of the assessed value. (4) He may surrender his security and prove for the whole debt.”’” The debts of a person lately deceased must be paid by the executor or administrator in the following order: ‘‘ First, the funeral expenses; next, the expenses of probate or taking out administration, including the costs of an administration action and other executorship expenses; and then the debts of the deceased are payable out of legal assets in the following order:

(a) Crown debts due by matter of record, a surety to the Crown having the like priority; (b) debts having priority by statute—e.g., under the Friendly Societies Act, 1896, sec. 35; (c) debts of record consisting of judgements in courts of record and recognizances; (d) debts by specialty and simple contract.”²

If, however, the deceased died insolvent, on the petition of one or more of his creditors, whose debt would have been sufficient to support a bankruptcy petition against him if he 2 bid. had been alive, his property will be administered as in bankruptcy according to English law.

If a debtor makes a payment of money or a delivery of property to a creditor not in the ordinary way of business and without any pressure or demand on the part of the creditor, knowing that his circumstances are such that bankruptcy will be the probable result, he is guilty of a fraudulent preference in English law. Such fraudulent preference is void against the trustee in bankruptcy, if made within three months before the bankruptcy petition is presented. There is a similar provision in American bankruptcy law, but the period is four months instead of three.

Those who are on the verge of bankruptcy should not, of course, give such preferences to any of their creditors merely with the intention of favouring them at the expense of other creditors. If they cannot pay their debts in full, the claims of justice are the same for all, and all creditors should share alike. If such a preference has been given, the property must, of course, be surrendered to the official receiver or trustee on his demand, But supposing that he does not come to the knowledge of it, and makes no demand for it, is the preferred creditor bound to surrender the property of his own accord ? There would seem to be no obligation in conscience to do so. He has only received payment of what was due to him, as we suppose; he might have demanded payment, and then the insolvent debtor might lawfully have paid it. No valid reason can be urged to show that in accepting full payment of his debt before the debtor’s bankruptcy the preferred creditor commits an act of injustice against the other creditors. If he does not commit an act of injustice against them, he is not bound to make restitution to them, At least, this opinion would seem not to be destitute of all probability in its favour.

¹ Encyclopedia of Laws, s.v. Bankruptcy.

² [bid., s.v. Executors and Administrators.

ECONOMIC goods may be divided into those which are meant for immediate consumption and those which are meant to subserve our wants by repeated use. In the first category are articles of food and drink, in the second are commodities which are capable of rendering continued services, such as a saw, a sewing-machine, a house. It is with the first class of goods that we have principally to do in this chapter. They are sometimes called fungibles because any amount is interchangeable with the same quantity and quality of the same commodity (mutua vice funguntur). Thus, if I lend a bushel of wheat, I shall be satisfied if I get back a bushel of the same quality; I do not expect to receive back the same identical grain. The matter of the contract of mutuum is something fungible, which is consumed in the very first use of it.

It is obvious that such commodities may be the matter of many different contracts. They may be the matter of the contract of sale, or gift, or exchange, or loan. The contract which was called mutuum in Roman and canon law was a gratuitous loan of a fungible commodity on condition that after a certain period of time the borrower should restore to the lender an equal quantity of the commodity and of the same quality. Unfortunately, we have no term in English which is the precise equivalent for mutuum. We use the term Joan of lending a horse, which we expect to be restored to us in specie, and of lending a bottle of wine, which we do not expect back but another instead of the same size containing the same quality of wine. As an equivalent for mutuum we may make use of the expression loan for consumption as distinguished from Joan for use.

In all contracts justice requires that values which are given in exchange should be equal. A sin against justice is committed by charging an unreasonable price for a horse. What the reasonable price is depends on the demand, on the available supply, and on a great variety of factors, but it is proximately determined by the common estimation of intelligent men at a fixed time in a certain place. The fair price of a fungible commodity which is consumed in the first use of it is the money equivalent of the value which that use has, The commodity is for consumption, and the only value that it has is the value of that consumption. There is no other use in the commodity which can give it any additional value. The fair price of a bottle of wine is the money equivalent of the value which the wine has for drinking. In other words, the value of the first consumption of the commodity is the value of the commodity.

On the other hand, commodities which are not consumed in the first use of them, but which continue to render repeated services, have a value over and above that of the first use. The value of a house is greater than the value of the lease of it for a year, because the house will continue to render services and be valuable after the year’s lease of it expires. The fair price, then, of a commodity which is not consumed in the first use of it will be greater than the value of that first use.

All this seems evident, yet with a view to the deductions which we shall presently make, it is well to strengthen what has been said by the words of a modern professor of political economy. Dr. G. Cassel writes: “‘ All economic goods may be divided into two categories: those which satisfy our wants in being consumed at once, and those which afford a series of useful services before they are worn out. Food is an instance of the former category, houses of the second. This line of subdivision is one of the most fundamental in economic science. The price paid for an article of immediate consumption is, of course, the same as the price paid for the use of this article. This is not so in the case of an article belonging to the second category. The price paid for the single useful service it affords is one thing; the price paid for the article itself is quite another.”¹

¹ The Nature and Necessity of Interest, p. 86 (1903).

Money considered as a medium of exchange is a fungible; it is a commodity whose use is exhausted for the owner of it when he has paid it in exchange for value received. It is not, under this respect, a commodity which is susceptible of repeated use by the same owner. Money, then, may be the matter of a contract of loan for consumption, and, if a sum of money be thus lent, justice requires that an equal sum be returned at the end of the term, and justice will not allow a greater sum to be exacted in return. For the whole value of the sum of money is the value it has for making exchanges, the value which it has in the first expenditure of it; and if, over and above the sum lent, a further sum were demanded for the use of the money, the same thing would be charged for twice over. An equal sum is due in return for the use of the money; a further sum would be a second payment for the same use. Thus when money is regarded merely as a medium of exchange a sin against justice is committed if an additional sum besides the principal is exacted for a loan; it is called the sin of usury, money unduly exacted for the use of money. This is the reasoning of Aquinas,¹ and it seems as cogent to-day as it was in the thirteenth century. By this argument he defended the doctrine concerning usury which the Fathers and Doctors drew from Holy Scripture and tradition. Benedict XIV sums up the constant teaching of the Church on usury in his celebrated encyclical, Vix pervenit. There the Pope says: “‘ The sin which is called usury consists in this, that from the loan for consumption (which of its own nature requires that only so much as was received should be returned) the lender desires more to be returned to him than the borrower received, and therefore contends that some gain, over and above the principal, is due to him merely on account of the loan. For whoever, when once a sum equal to the debt has been repaid, is not ashamed to exact something more from the borrower on account of the mere loan, which has been repaid by the equal sum, such a one stands convicted of acting against the obligation imposed by a loan for consumption, which requires equality between the sum lent and the satisfaction for it ” (cf. Can. 1543).

This argument is valid when money is regarded as a means of exchange for articles of consumption and a measure of their value. Until modern times this was the chief function of money, but now we find that the above argument does not impress us with convincing force because in modern society money is not only a means of exchange for articles of consumption and a common measure of value, but also the most convenient form of storing capital. Within the last hundred or hundred and fifty years modern society has become capitalistic, and money is the chief form of capital. No wealth-producing object of importance can be undertaken without a supply of money, and money is now readily exchangeable for land, machinery, means of distribution, and other instruments for the production of wealth. Capital is one of the factors necessary for the production of wealth, and it is the chief instrument of its production. Money, then, looked upon as capital, is not a mere fungible; it is not a commodity which is consumed in the first use of it; it is the main instrument necessary for the production of wealth, and it thereby acquires a new function; it becomes virtually productive and puts on the nature of land and machinery, with which it is so readily exchangeable. Indeed, nowadays land can hardly put forth its natural productivity without the aid of capital, and machinery cannot be worked for the production of wealth without it. It follows, then, that nowadays money is not merely a means of exchange; it is also an instrument of production, and just as money may be charged for the use of land, or of a house, so money may be charged for the use of money. Money now has its fair and reasonable price like any other commodity, and the sin of usury is committed not by taking a fair and reasonable interest for a loan, but by exacting excessive interest. What is a fair and reasonable interest is a question whose solution depends upon circumstances, and, proximately, on the common estimation of intelligent men, like the fair and reasonable price of other commodities.

The foregoing seems to be the true solution of the old and much-disputed question of usury. It rests on historical facts and economic truths which are commonly admitted by modern theologians and economists, and it furnishes a satisfactory explanation of the changed attitude towards the taking of interest for money loans which the Church has adopted in modern times. Canon 1543 rests the title for taking moderate interest for money on positive law.

Although the use of money as capital was known in particular places and especially in centres of commerce in former ages, yet this use was exceptional and could: not characterize money in general, The capitalistic function of money was of very gradual growth, and we have to wait till the latter part of the eighteenth, or the first part of the nineteenth, century before the capitalistic era was fully developed even in the most advanced nations of Europe. It may be well to quote one or two passages from economists of standing in proof of this. Dr. Cunningham writes: “ In dealing with the Christendom of earlier ages we have found it unnecessary to take account of capital, for, as we understand the term in modern times, it hardly existed at all. In the fourteenth and fifteenth centuries we may notice it emerging from obscurity, and beginning to occupy one point of vantage after another, until it came to be a great political power in the State, . . It would be still more hopeless to try to treat the intervention of capital as an event which happened at a particular epoch, or a stride which was taken within a given period. It is a tendency which has been spreading with more or less rapidity for centuries, first in one trade and then in another, in progressive countries.. We cannot date such a transformation even in one land; for though we find traces of capitalism so soon as natural economy was ceasing to be dominant in any department of English life, its influence in reorganizing the staple industry of this country was still being strenuously opposed at the beginning of the present century [the nineteenth].’’²

The following is from Professor Cassel’s book, The Nature and Necessity of Interest: ‘‘ Interest paid for the use of capital, not for the use of money. ... The question For what is interest paid ³ was taken up again, a few years afterwards, and treated in the most successful way by the eminent French economist, Turgot. He rejects the old idea of a ‘ price of money,’ and defines interest as the price given for the use of a certain quantity of value during a certain time—a formula never afterwards surpassed in clearness and definiteness. He shows how this price is fixed by demand and supply, and he gives special attention to the causes which govern the demand for capital. What he has to say on this subject is even in our days of the highest value, and should not be neglected by any serious student of the theory of interest. He puts capital— i.e., the use of a certain quantity of value during a certain time— as a factor of production on the same line with the other factors.

Thus historical fact and scientific explanation of the rise of the capitalistic age and the theory of interest on money as capital synchronize with the beginnings of the change in the Church’s teaching on the lawfulness of interest on loans. In the year 1830 the Holy Office gave answer to a question of the Bishop of Rennes that confessors were not to be disturbed who absolved penitents in spite of their taking interest on money lent to merchants. Similar answers followed in quick succession, so that now there is no practical difficulty as to the lawfulness of taking moderate interest for money loans, though the Church has not yet formally settled the general question.

In England the usury laws, dating from Edward the Confessor, were repealed in 1854, owing to the prevalence of the opinion that such laws were economically unsound and practically ineffectual. Experience, however, has shown that the rapacity of usurious moneylenders requires curbing, and the Moneylenders Act, 1900, empowered courts of justice to grant relief from any usurious bargain which, in the opinion of the court, was harsh and unconscionable.

Canon 1543 is as follows: “‘ If a fungible be so given to another that it becomes his and afterwards as much is restored in the same kind, no gain can be received on account of the contract itself; but in the lending of a fungible it is not per se unlawful to make an agreement about the lawful interest, unless it is certain that it is immoderate, or even about a greater interest, if there be a just and proportionate title.”

¹ Summa, 2-2, q. 78, a. I.

² Western Civilization, n. 114.

³ Page 20.

BAILMENT is a contract by which the possession of chattels is delivered by one person (the bailor) to another person (the bailee) either to be delivered by the bailee to a third person or to be redelivered to the bailor when the purpose of the bailment is at an end.

According to the common enumeration there are six kinds of bailment—depositum, commodatum, locatio et conductio, vadium, locatio operis faciendi, and mandatum. Of these depositum and mandatum are for the benefit of the bailor alone, and the bailee is liable only for gross negligence in the performance of his duty. Commodatum is for the sole benefit of the bailee, who is therefore liable for even slight negligence. The other kinds are for the benefit of both bailor and bailee, and the bailee will be liable for ordinary neglect. The foregoing degrees of negligence are required by law to make the bailee liable, but by express agreement he may bind himself to more or less care, and then he will be held liable accordingly. Moreover, when a bailee possesses any special skill, the omission to use that skill in the execution of the trust committed to him will be imputed as gross negligence even if he derived no benefit from the bailment.

A deposit is a bare naked bailment of goods delivered by one man to another to keep for the use of the bailor without reward. The depositary in general is not allowed to use the deposit, for it is given to him to keep for nothing; he is bound to exercise the same care of the deposit as he does of his own goods, but he will only be answerable for gross neglect.

A mandate is the delivery of goods or chattels to somebody who is to carry them or do something about them gratis. The mandatary, like the depositary, is liable only for gross neglect, but if his situation or profession is such as to imply skill, the failure to use that skill will be imputable as gross neglect.

A loan is the lending of goods or chattels to another to be used by him gratis. As the borrower obtains the use of the thing lent for nothing he will be answerable for even slight negligence, and he is not justified in using it for a longer time or for other purposes than was agreed upon. He is not responsible for reasonable wear and tear. The lender on his side is responsible for defects in the chattel with reference to the use for which he knows the loan is accepted, of which he is aware, and owing to which directly the borrower is injured.

In the contract of hiring where goods are lent to a person in consideration of payment, the hirer is bound to use ordinary care of them such as a prudent man would take of his own goods, and he will be responsible for ordinary negligence.

Pawn or pledge is a contract by which goods or chattels are delivered to another to be security to him for money borrowed of him by the bailor. The pawnee must use ordinary diligence in the custody of the pledge which he is not permitted to make use of except when its keep entails expense, as in the case of a horse, and then the pawnee may make reasonable use of it so as to indemnify himself for its keep.

The pawnee may recover his debt by giving notice to the pawner that he will sell the subject of the pledge, or he may sue for his debt, or if he pleases he may adopt both remedies. A pledge differs from a lien in that this only gives the right to retain property, and from a mortgage of personal estate which passes the actual property in the goods to the mortgagee.

Pawnbrokers form a special kind of pawnees, but although transactions dealing with loans above ten pounds are governed by the common law, loans of ten pounds and less are subject to the Pawnbrokers Act, 1872. By this Act every pledge must be redeemed within twelve months from the day of pawning, with seven additional days of grace. If a pledge is not redeemed within that time, and the amount for which it was pledged does not exceed ten shillings,’it becomes the absolute property of the pawnbroker; if it was pledged for above ten shillings, it may be redeemed until actual sale, and such sale must be by public auction, and the surplus after the costs of the sale and the amount of the pledge and interest must be accounted for.

The pawnbroker is made liable for loss in case of fire, against which he may protect himself by insurance, and he may treat the person who produces the pawn-ticket as entitled to redeem the pledge.

The last species of bailment is a contract by which goods or chattels are delivered to be carried, or something is to be done about them for a reward to be paid by the bailor to the bailee. With regard to the liability of such bailees a distinction is made between persons exercising a public employment, such as public carriers, and private persons. The former are responsible for all losses except such as happen through the act of God and the King’s enemies. The latter are only bound to exercise the reasonable care which is to be expected from a skilled storekeeper acquainted with the risks to be apprehended; and this care must be shown not only in obviating the risks, but in taking all proper measures for the safety of the goods or of a portion of them when the risks have occurred. There are special laws which govern the liability of railway companies and innkeepers.

Let the words of St Paul serve us as a preface, who are about to treat this unseemly matter briefly: "Let the husband render the debt to his wife," says the Apostle, "and in like manner the wife also to the husband.

The woman hath not power of her own body, but the husband; and in like manner the husband also hath not power of his own body, but the wife. Defraud not one another, except perhaps by consent for a time, that you may give yourselves to prayer; and return together again, lest Satan tempt you for your incontinency." Accordingly the use of marriage is not only lawful, but the debt must be rendered in justice, under grave obligation, to the other party asking seriously and reasonably. Although this is most certain, causes are nevertheless admitted which excuse from this obligation, so that there is no obligation of rendering the debt when it cannot be rendered without danger of life or of grave illness, or when it is not reasonably asked — as by one insane or drunk — or when it is asked too often, as several times in the same night. Even to one half drunk it seems lawful to refuse the debt, especially because of the danger of grave defects, both bodily and moral, in the offspring that might be conceived, unless quarrels, discord and incontinence on the part of the one asking are thereby feared. It has been said that in these circumstances there is no obligation of rendering the debt; indeed it would of itself be unlawful to render it with proximate danger to life or health. Nevertheless, if the disease were long-lasting and not tending proximately to death, such as syphilis, the healthy party is permitted to render the debt with danger of infection, in order to avoid incontinence or to foster conjugal love.

A greater difficulty arises when, in the judgment of a physician, the offspring to be conceived would be death to the mother. Such cases, however, are not easily to be admitted; and indeed physicians pronounce judgment about danger to life the more readily because they see that women are angling for it. Unless, therefore, the case be altogether special, a confessor will safely give this counsel to a woman alleging such a judgment of a physician: that she study to please her husband, and commit herself to God with great confidence.

Since married persons are bound to render the debt to one another, it is clear that they are as a rule bound also to live together, except when necessity does not allow it, or when by mutual consent it is otherwise arranged without danger of incontinence and without scandal. To married persons who are old or weak, and who often perform the act only imperfectly, the use of marriage is not to be denied, provided there is some hope that they can duly complete the act.

¹ 1 Cor. vii-3-5.

I. Liberative prescription can be constituted in a twofold way, namely, either so that it truly extinguishes the debt itself, or so that it excludes only a judicial action against the debtor. In what way it is constituted for different debts, draw from the law and jurists of one's country.

I. Notion. Mutuum is a contract by which someone yields to another a certain quantity of fungible things under this law, that the other afterward return an equal quantity of the same nature and quality (St. Alphonsus, III, 754). By its nature it is a gratuitous contract; this nevertheless does not prevent - as we shall explain afterward - the lender from stipulating, for example, an increase; when this is done, another contract is added to the contract of mutuum. It is said:

1. Yields to another, that is, transfers into the ownership of another. Therefore it differs, for example, "from commodatum and letting, because in these ownership is not transferred, but only use" (St. Thomas, II-II, q. 58, a. 1; St. Alphonsus, III, 754).

2. Of fungible things, that is, of things which are consumed by first use, and this either physically, as wine, wheat, etc.; or morally, as money, which perishes for the one using it, and thus is as it were consumed for him (St. Thomas, loc. cit.; St. Alphonsus, loc. cit.).

3. An equal quantity, etc.; wherefore compare what is to be said below under V.

II. Division. A twofold mutuum can be distinguished: mutuum of consumption and mutuum of production. The former is had when a thing is given by loan, for example wine, whose use consists in physical consumption. The latter, when someone gives by loan a thing whose use, with human industry added, can produce profit. Money especially belongs to things of this kind.

III. Obligation of giving a loan. An obligation of charity is present per se if someone is greatly in need of your thing, while you rightly expect the return of the principal granted, and do not prefer to aid the needy person in some other way.

IV. Obligations and rights of the one giving a loan. The one giving a loan:

1. Is bound to disclose harmful defects of the thing, if he knows any; likewise, not to demand what is owed to him before the time concerning which agreement was made (St. Alphonsus, III, 754).

2. Cannot, by reason of the contract itself, receive any profit, in other words anything beyond the principal. First, this is clear from Sacred Scripture.¹ Ecclesiastical documents are added, namely: cap. Praeterea, 7, De usuris, and cap. Consuluit, 10, same title; the Lateran Councils III² and V;³ the Constitution of Benedict XIV Vix pervenit;⁴ likewise the Code of Canon Law, which establishes thus: If a fungible thing is given to someone in such a way that it becomes his and afterward only as much in the same kind is restored, no profit can be received by reason of the contract itself (can. 1543). Finally, reason confirms the same thing; for if it were licit by reason of the contract itself to demand something beyond the principal, this would be permitted either because of the principal given up, that is, because of being deprived of the principal as such, or because of being deprived of the principal for some time. But the principal given up is compensated by the principal to be returned in equivalent form; and deprivation of the principal for some time as such is not worthy of compensation, as is clear in one who, for the entire time during which he will lack the thing, most certainly is not going to use it. Hence proposition 41 was condemned by Innocent XI: "Since counted money is more precious than money to be counted, and there is no one who does not value present money more than future money, a creditor can demand something beyond the principal from the borrower, and by that title be excused from usury"⁵ (St. Alphonsus, III, 759).

St. Thomas says thus: It must be known that there are certain things whose use is the consumption of the things themselves; as we consume wine by using it for drink, and consume wheat by using it for food; whence in such things the use of the thing ought not to be reckoned separately from the thing itself; but to whomsoever the use is granted, by this very fact the thing is granted; and for this reason in such things ownership is transferred by mutuum. Therefore, if someone should wish to sell wine separately, and should wish separately to sell the use of the wine, he would sell the same thing twice, or he would sell what does not exist; whence he would manifestly sin by injustice. And by a similar reason he commits injustice who lends wine or wheat, asking that two compensations be given, one indeed the restitution of an equal thing, but the other the price of the use; and this is called usury (II-II, q. 78, a. 1). But note:

a) As we have already noted from St. Thomas, profit received by reason of the contract which is called mutuum is called usury. Hence Benedict XIV in the Constitution Vix pervenit: "That kind of sin which is called usury, and which has its proper seat and place in the contract of mutuum, is placed in this, that someone, from the mutuum itself, which by its own nature demands only that as much be returned as was received, wishes more to be returned to himself than was received; and therefore contends that some profit beyond the principal is owed to himself by reason of the mutuum itself. Therefore every profit of this kind, which exceeds the principal, is illicit and usurious."

b) But profit received in this way is usury even if it is demanded as owed from benevolence and gratitude, and not as owed from justice. This follows from proposition 42 condemned by Innocent XI: "It is not usury when something beyond the principal is demanded as owed from benevolence and gratitude, but only if it is demanded as owed from justice."⁶ The reason is that gratitude considers more the affection of the giver than the thing given, and therefore the recipient satisfies by a similar affection of doing good indeterminately. Therefore, when the lender demands something as owed from gratitude, he fictitiously appeals to gratitude, since there is no such debt of gratitude, but under the cloak of gratitude he hides the strict obligation which he tries to impose on the borrower. Therefore the Vatican thunderbolt strikes this fictitious obligation of gratitude⁷ (cf. St. Thomas, II-II, q. 78, a. 2, ad 2; St. Alphonsus, III, 764, 780).

c) However, someone can hope for some gift, not "as if owed, but as gratuitous and to be rendered without obligation; and thus he who lends can licitly do so; just as one who does a service for someone trusts that he will in friendly fashion do him service in his own time" (St. Thomas, q. 13, De malo, a. 4, ad 13).

3. The lender can, if titles extrinsic to the contract are added, demand beyond the principal as much as the title is worth. That extrinsic titles can be present is recognized both in the encyclical Vix pervenit and in the responses of the Holy Office and of the Sacred Penitentiary;⁸ likewise in canon 1543 of the Code. They are: risk of the principal, emergent damage, ceasing profit, conventional penalty; concerning others there is dispute.

a) Risk of the principal,⁹ that is, the risk of not recovering the thing, and that greater than if he did not give the thing as a loan. "The reason is that to expose yourself to such a true risk is estimable by price" (St. Alphonsus, III, 765; St. Thomas, II-II, q. 77, a. 4, ad 2; Opusc. 73, cap. 6, at the end).

b) Emergent damage, that is, the detriment which he is going to undergo because of the thing given by loan, for example because for this reason he will have to buy the thing more dearly. The reason again is that, besides the principal, he suffers another damage which is estimable by price (St. Thomas, II-II, q. 78, a. 2, ad 1; St. Alphonsus, III, 768).

c) Ceasing profit,¹⁰ that is, the profit which he is not going to receive because of the thing given by loan, for example because for this reason he is not going to trade with the money. The reason is that, besides the principal, he loses the hope of profit; and this is estimable by price; but in the case only as much can be sought as the hoped-for profit is worth (St. Alphonsus, III, 768). The mind of St. Thomas is disputed.¹¹

Since money today, although in itself sterile, can be employed in innumerable ways for trading and thus for making profit, for example by buying a fruitful thing, or a thing which can at least be sold more dearly, or shares in an industrial or mercantile company, therefore one who gives money by loan can commonly stipulate an increase under the title of ceasing profit.

d) Conventional penalty, that is, a penalty to be paid by the borrower if he does not return the principal at the established time. A convention or contract of this kind is just, because it conduces to forestalling the negligence of the borrower. Further, in order that the lender be able to demand the penalty, it suffices that the borrower, with juridical fault, has not returned the thing at the established time; indeed sometimes, according to the mind of the contracting parties, no fault is required. But the penalty seems to be owed before the sentence of a judge, because it has more the nature of a pact than of a penalty (St. Alphonsus, III, 766, 767); nevertheless, unless the contrary intention of the contracting parties is established, the petition of the one giving the loan can be awaited.

Question 1. Whether a law which permits an increase is a reason for demanding something beyond the principal.

Response. It must be affirmed, because the State, by force of high ownership, licitly permits it if grave reasons for doing so are present. But grave reasons are present; since a mode of acting of this kind creates the faculty of receiving money by loan, and this faculty promotes commerce. But the State can proceed in this way, whether another title, on which the law rests, is always present, or whether another title is lacking here and now. Canon 1543 says thus: "In the furnishing of a fungible thing it is not per se illicit to make an agreement concerning legal profit, unless it is established that this profit is immoderate, or even concerning greater profit, if a just and proportionate title supports it."

Question 2. Whether the benefit furnished to the borrower by the one giving a loan is a title for demanding something beyond the principal.

Response. The benefit furnished consists either in the action of giving a loan, or in the fact that a thing is given by loan which will be specially useful to the borrower. Now the action of lending is intrinsic to the loan, nor is it any more estimable by price, separately from the thing given by loan, than the action of donating or selling is estimable separately from the thing donated or sold. But the fact that the thing given by loan is specially useful to the borrower depends on the condition and circumstances of this borrower, not on the one giving the loan; and the one giving a loan cannot receive something for a thing which is not his.

Question 3. Whether the obligation of not demanding back the principal up to a certain time is a title for demanding something beyond the principal.

Response. This must be denied, with regard to proposition 42 condemned by Alexander VII: "It is licit for one lending to demand something beyond the principal if he obliges himself not to demand back the principal up to a certain time."¹² The reason is that deprivation of the principal for a time as such, and consequently also the obligation of lacking it as such, is not worthy of compensation (p. 594); nevertheless if someone obliges himself not to demand back the principal except after a long time, an extrinsic title for demanding something besides the principal will hardly be absent, since a lender who must wait for a long time will easily suffer damage or deprivation of profit.

Question 4. Whether the faculty of making profit, today commonly annexed to the possession of money, is a title for demanding an increase.

Response. It seems to be affirmed, because the said faculty, according to common estimation, has a value distinct from the commutative value of money, and therefore deserves to be compensated.

Corollary. Likewise, on account of the just titles explained, it is licit to demand interest from unpaid interest, that is, anatocism, because unpaid interest is equated with principal handed over.

¹ Cf. Ps. 14:1; Luke 6:35.

² Cap. 25.

³ Session 5.

⁴ November 1, 1745.

⁵ Denzinger-Bannwart, n. 1191.

⁶ Denzinger-Bannwart, n. 1192.

⁷ Billuart, De iure et iustitia, diss. IV, art. 4.

⁸ Collectanea (n. 1393).

⁹ Lateran Council V (session 10), Bull Inter multiplices, in the year 1515; it is found in Labbe, tom. 19, col. 906.

¹⁰ L. 13, ff. Rem ratam hab.; Benedict XIV, encyclical Vix pervenit, § 3, n. 3.

¹¹ Cf. Billuart, De contractibus, diss. 4, a. 5.

¹² Denzinger-Bannwart, n. 1142.

V. Obligations of the borrower. The borrower is bound to return a thing of the same species and quality;¹ but if he cannot return what must be returned in kind, let him give back an equivalent. As regards quantity, the same must be returned if the value, whether of money or of another thing to be returned, is the same at the time of return as it was at the time of the contract begun. If the value is different, what was said concerning contracts in general must be said, namely:

1. If there is question of ordinary or - so to speak - normal changes, the contract as it stands must be put into execution, because the contracting parties are judged to have consented to changes of this kind.

2. If there is question of a greater change, it must be said thus:

a) If law, or an express pact, or custom assigns a norm, one must stand by these. As regards law or pact, the matter is clear; as regards custom, it follows from the fact that the contracting parties are judged to have contracted according to custom.

b) Law, express pact, and custom being excluded, the one who suffers damage by executing the contract is bound to undergo this if there is question of a case which could have been foreseen or feared; otherwise, at least more often, if there is question of a case which could not have been foreseen, such as war or a disturbance of public affairs. The reason is that every contract entered into in the way assigned in the question has something of an aleatory contract; once this is posited, the former cases are judged to be comprehended in the contract, but not the latter.

c) Sometimes from the circumstances it is clear that the same quantity must always be returned, and that the same quantity always suffices; for example, if a farmer out of friendship gives by loan to another farmer some quantity of wheat.

As regards pacts which are licitly entered into, note these things:

a) If it is doubtful whether the value of the thing given by loan will be increased or diminished, they licitly agree about returning the same quantity; since to the contract of mutuum there is added a legitimate aleatory contract (St. Alphonsus, III, 782).

b) If it is foreseen that the value of the thing given by loan will be increased, it is not licit to agree about returning the same quantity, except on account of emergent damage or ceasing profit; as if, the loan being excluded, you would have kept your thing until the time of the increased value and of the principal to be returned; likewise if, your thing having been given by loan, you are compelled to buy another more dearly. The reason is that otherwise you receive profit from the loan (St. Alphonsus, III, 782).

c) If it is foreseen that the value of the thing given by loan will be diminished, the lender can agree about a greater quantity being returned. The reason is that the lender, by receiving the greater quantity, does not become richer than he was at the time of the contract begun, so that he is not enriched from the loan or by reason of the contract.

¹ Nevertheless it is not repugnant, for example, that wheat or wheat of lesser quality be given by loan, by stipulating that another thing of the same value, or wheat of better quality in lesser quantity, be returned.

VI. Obligation and penalties of usurers. 1. It is clear that usurers are held to restitution, namely to the borrowers or their heirs.

2. Canon 2354 establishes: A layman who has been legitimately condemned for the delict of usury is held by the law itself to be excluded from legitimate ecclesiastical acts and from any office, if he has any in the Church, with the burden of repairing damages remaining firm. But a cleric who has committed the delict of usury is to be punished by an ecclesiastical tribunal, according to the diverse gravity of the guilt, with penances, censures, privation of office and benefice, dignity, and, if the matter requires it, even deposition.

I. Notion. Hypothec is a real right by which another's immovable thing is obligated to the creditor as security of a debt. The right of hypothec commonly arises from contract.

Forms of Contract.—The chief forms of contract are the following:

(a) gratuitous contracts, which are those that confer advantage on only one of the contractants, or those in which no payment or compensation for his acts or goods is made to one party by the other party. They include unilateral contracts, which produce obligation on one side only (e.g., a promise, gift, testament), and bilateral contracts, which produce obligation on both sides. The bilateral contracts are also known as bailments, or understandings whereby a thing or business is transferred from one person to another in trust, on condition that a return will be made to the owner, They include the following contracts: loans, in which return must be made of the identical things borrowed (commodatum), or of a thing similar in kind (mutuum); deposit, in which a thing must be returned after safekeeping (depositum); an agency, in which one conducts the business of another with the obligation of making returns, either from express contract (mandatum) or from imputed agreement (negotiorum gestio). In commodatum and mutuum the advantage is had by the bailee, in the other three by the bailor;

(b) onerous contracts of certain event, which are those that confer an advantage on both parties, and in which the thing agreed on is certain and definite. They include contracts in which one party transfers ownership to the other (e.g., buying and selling, barter, loan at interest, contracts for annuities, stocks and bonds) or useful dominion (e.g., lease of property, contractor’s agreement, hire of labor), and contracts in which both parties transfer rights to a moral person of which they are the members (partnership);

(c) onerous contracts of uncertain event, which are those that confer advantage on both parties, but in which the thing agreed on is contingent and uncertain. Examples are insurance, wager, gaming contracts, lottery, and stock market speculation;

(d) subsidiary contracts, which are those that are made in order to give security to principal contracts to which they are annexed or for whose sake they are made. Such are guaranty and surety, pledge and pawn, and mortgage.

Sinful Contracts.—There is no form of contract that may not be made sinful as to its substance on account of the wicked offer or consideration (e.g., sale may deal with immoral objects, labor may be given to criminal projects), but there are certain forms of contract that are particularly open to abuse and hence are frequently associated with evil circumstances or results. Some contracts are often illicit according to natural law.

(a) Thus, a gift is sinful, on the part of the donor, when it is made by an employer for the purpose of seducing a servant, and on the part of the servant, when it is accepted for the purpose of encouraging the unlawful attentions of the employer; but if the gift is unconditional, there is no obligation in justice to return it.

(b) Borrowing is sinful, when the lender is in greater need, or when one becomes unduly obligated to the lender; lending is sinful when the lender cannot afford to part with the thing loaned, or when the borrower is encouraged in thriftlessness, or when he will make evil use of the thing borrowed, etc.

(c) Wagers are frequently sinful, since many of them are incitements to sin (e.g., a bet that another is afraid to get drunk), or results of sinful motives (e.g., bets made in order to deceive, or to satisfy avarice, or to live without work), or causes of great evils (e.g., destitution of families, frauds, scandal, and corruption).

(d) Gaming is sinful when the form of the sport is objectionable (e.g., the ancient gladiatorial fights in which the combatants killed each other), or when the motives or circumstances are wrong (e.g., to play as a professional gambler so as to avoid work, to play cards all day Sunday, to play for higher stakes than one can afford, to spend time in “gambling hells”).

(e) Lottery is sinful when the object is bad (e.g., the raffle of an important office with the risk that incompetent persons may be chosen), or when the circumstances are bad (e.g., if persons are led into superstition or idleness and prodigality).

(f) Speculation is sinful in many instances, since it often brings on a gambling fever that makes the speculator useless to himself and his dependents, and causes poverty and crime.

(g) Pawning of property is often unjustifiable, since it makes persons deprive themselves of necessary property in order to indulge in some useless or extravagant whim with borrowed money.

What is mutuum? Mutuum is sometimes taken for the thing itself given as a loan, but sometimes and more often for the contract itself by which that thing is given as a loan to another; and it is defined: a contract by which, through delivery, ownership of a thing consumable by use is transferred to another, with the obligation of returning only as much in the same species and goodness after some space of time. Through delivery, so that it may be indicated that it is a real contract, which is perfected by delivery of the thing. Wherefore a promise of mutuum is not mutuum. C. A. 983; C. B. 610. Ownership is transferred; for he who receives a thing by mutuum can use it; otherwise it would be a mere deposit.

But he cannot use it unless he has ownership, since that thing is consumable by use, and no one can consume another's thing at will. - Consumable, whether physically as bread, or morally as money, which, although by use it does not perish in itself, nevertheless perishes for him who hands it over to another. - With the obligation of returning as much, otherwise it would be a donation. In the same species, otherwise it would be sale or exchange, if in a different species; commodatum or lease, if the identical thing and in the individual had to be returned. And goodness, lest the lender suffer detriment from the benefit. - After some space of time, by which it is distinguished from exchange, by which immediately gold, for example, is given for silver. - L. 754; L. 2 de Reb. cred.; C. I. 1819; C. G. 1892; C. A. 983; C. H. 1740; C. B. 607; C. L. 1523, 1524; E. M.

Whether there is a precept of lending? - As there is a precept of giving alms to the poor, so there is a precept of granting a loan to the rich who, on account of a peculiar circumstance, are in the greatest need of it. The reason is that the precept of charity binds us toward all human beings, even the rich, and requires that we gladly furnish this which we would wish to be furnished to us in an equal case, if nevertheless we can assist them by a loan without grave inconvenience. "No one," says Benedict XIV in the Encyclical Vix pervenit, "can be unaware that in many cases a man is bound to assist another by a simple and bare loan, especially with Christ Himself warning: From him who wishes to borrow from you, do not turn away," Matt. 5:42.

What are the obligations of the borrower in mutuum? - 1. By force of mutuum the borrower becomes owner of the lent thing, which, in whatever way it perishes, perishes for him. L. 9 de Reb. cred.; C. I. 1820; C. G. 1893; C. H. 1740, 1753; L. 755. 2. The borrower must restore the thing lent in the same species and in the same quantity, quality, and established time; and, in defect of the thing, he must pay its value, according to the established time and place. C. I. 1828; C. G. 1902; C. L. 1524 ff.

If no time and no place have been established, restitution must be made according to the value corresponding to the time at which he is constituted in delay according to C. I., or at which the loan was made according to C. G. 1903. - The borrower cannot return money before the predefined time if it has been credited to him with legal interest; but if, from some agreement made, it exceeds the measure, he can do so only after five years, and with the creditor warned six months before, according to C. I. 1832. L. 2, 22 de Reb. cred.; C. B. 247. 3. Money given by mutuum must always be restored in the same numerical sum expressed in the contract. And whether the value of coins is increased or diminished, the same numerical sum must be restored in the species current at the time of payment. C. I. 1821; C. G. 1895; C. L. 1638. It is lawful, however, even in the forum of conscience, to give banknotes for silver or gold coins, any law or pact to the contrary having been removed.

Italian Law of May 1, 1866; S. Poenit., Jan. 21, 1873. But when gold or silver money has been given by mutuum with a pact of restitution in the same species and quantity, and its intrinsic value is modified, the equivalent must be returned according to the value at the time the loan was given. C. I. 1822; C. A. 988, 989. Cf. C. H. 1170, 1754; L. 782, 791; Gousset 814. 4. If the borrower does not restore the thing, or its value according to the established pact, interest is owed from the day of judicial petition. C. G. 1904. Indeed, if he is in culpable delay, he is also liable for the damages of which he is the cause. C. H. 1108.

What are the obligations of the lender? 1. He is bound to warn the borrower concerning a defect of the thing handed over, if there is one; likewise concerning imminent damage, ceasing profit, and danger of the principal, unless he wishes to lend gratuitously; otherwise the borrower does not consent, and sustains an injury which the lender will be bound to repair. C. I. 1824; C. G. 1898; L. 754. 2. He cannot demand the thing back before the established time. C. I. 1824; C. G. 1899; C. B. 609; L. 754. If the time of restitution was not established, the judge can grant delay to the borrower according to the circumstances. C. I. 1826; C. G. 1900. But if it was established that the borrower should pay when he can, or when he has means for this, the judge will establish a term according to the circumstances. C. I. 1827; C. G. 1901; C. L. 1524 ff. 3. He is bound, per se, not to receive more than the lent thing was worth when it was given by mutuum; because mutuum per se is a gratuitous contract in this sense, that it imposes no other burden on the borrower than that he return in species, at the due time, that which he received. L. 754, 755.

Whether you can receive the thing lent in the same measure and quantity if its price increases during the loan? Whether you can demand more if it decreases? If, when the thing is handed over by mutuum, there is equal doubt on both sides whether at the time of restitution the thing will be worth more or less, it is lawful to make an agreement that, with the same goodness and measure preserved, it must be returned at its time, even if its price has been greatly increased. The reason is that, since there was equal danger on both sides, equality is already preserved by that very fact. - The aforesaid pact is not lawful per se if it is certainly established, or is far more probable, that at the time of payment the value will be increased. The reason is that equality is not preserved in this way, but more is demanded than is given at the time of the loan. Hence, if a modius of wheat is now worth three francs and will be worth four at the time of restitution, it is not lawful to agree that just as much be paid. Exception, however, unless you had determined to preserve the thing until the time of the price; because then more is demanded by reason of ceasing profit.

If you foresee diminution of value or price, you can demand only as much, and the borrower must pay as much, as the thing was worth when it was handed over by mutuum; because in reality you do not demand more than you gave. - According to C. I. 1823; C. G. 1897, if metallic bars or saleable things are given by mutuum, they must always be restored in the same quantity and quality, although their price is increased or diminished. L. 782, 791; La-Croix 910 ff.

Note: "That a loan furnished to a Church, Pious Cause, or University cannot be demanded back unless it is proved to have been turned to its utility. L. Civitas ff. Si certum petatur. And the same is said of a loan given to a minor, who otherwise is not bound, even when made an adult, to restore. L. 3 C. Quando ex facto tut. If nevertheless a Prelate, with the consent of the chapter, and the same is said of a governor with the consent of officials, receives a loan in the name of the church, the church itself is always bound to pay; since Prelates with the chapter can rightly alienate movable things of the church.... - That a loan given to sons of families, regarded as such and lacking castrense goods, without at least tacit consent of the parents, need not afterward be restored by them, at least in the external forum. L. 14 C. de S. C. Maced. Sons can use this privilege, even if they renounce it.... Exception: 1. If the loan is in things other than money, of which the law speaks. 2. If the son swore to pay; although after payment he has an action for reclaiming it; indeed he can procure for himself relaxation of the oath. 3. If the loan was given with the father knowing and not contradicting, or was turned to the utility of the father or children in things which the father was bound to furnish to him.

Likewise if the lent thing still exists, or if the father was accustomed to pay the debts of the children. - It is doubtful whether sons of families in the first case posited are free from restitution of the loan not only in the external forum but also in the internal. Bonacina, etc., deny it, because Civil Law does not take away natural obligation.

But Lessius, etc., affirm it sufficiently more probably, because the law with just cause can indeed take away a natural obligation, and is judged to have done so in this case in order to provide against the damage of parents and to avert the wickedness of usurers. But it does not seem that it can be denied that the supreme human power, on account of the high dominion which it has, can indeed, for the common good, transfer ownership of things from one to another, as is clear in the law of prescription." L. 756, 757, 918; C. I. 1307; C. G. 1312; C. H. 1263, 1304; C. A. 152; C. L. 1535, 1536. Cf. here 953.

What are usury and a usurious contract? Resp. To the 1st: Usury is profit immediately arising from mutuum as something owed. Profit immediately arising from mutuum; for usury is properly committed when the lender seeks profit immediately because of the mutuum, and precisely under the title of mutuum, or something above the principal and the substance lent. Therefore, although he also who sells a thing above the highest just price, or leases it to another for use, sins against justice, nevertheless he is not said to commit usury strictly so called. Profit is understood as whatever can be estimated by price; whence, if, in giving a mutuum, you demand, e.g., that the other return to you what from another source he owes you by justice, it is not usury. As something owed, namely by justice, or by a pact of grateful spirit or benevolence. Wherefore, if the borrower, precisely from a natural grateful spirit and without an intervening pact, liberally gives something beyond the principal to the lender, or even from fear lest otherwise a loan be denied to him in the future, or lest he be judged ungrateful, the lender can accept this without the vice of usury. - C. L. 1636.

Resp. To the 2nd: A usurious contract is a pact by which the lender obliges the borrower to give something estimable by price above the principal from the title of mutuum alone. Hence simple mutuum, or mutuum without usuries, is distinguished from mutuum with usuries, which is called fenus and fenerari. L. 33 de Reb. cred.; L. 758, 761-765, 774, 777-781, 791; St. Thomas 2. 2. q. 78. a. 2; E. M.

Of how many kinds is usury, and what are its names? Resp. To the 1st: One usury is mental and another real. The former is that by which the lender, without an externally manifested pact, either formally intends profit, not to be offered gratuitously, but as though owed under the title of mutuum; or virtually, for example if he internally hopes for profit in such a way that such hope is the principal motive of lending. But the latter is that by which the lender brings profit into an external pact, whether expressly or tacitly. Real usury is either open or disguised. Open usury, or express and formal usury, is when in the contract of mutuum itself something beyond the principal is demanded under this title. Disguised or virtual usury is that which is cloaked by another distinct contract, in which profit because of the mutuum is involved; as would happen if a merchant sold goods at a dearer price than is just precisely from the fact that he must wait for payment, for thus a greater profit would be virtually demanded because of the mutuum. - L. 761, 762; St. Thomas 2. 2. q. 78. a. 2; De Malo q. 13. a. 4.

Resp. To the 2nd: As regards the names of usury, centesimae were usuries in which the hundredth part of the principal, that is, one for a hundred, was paid each month, and accordingly twelve for a hundred each year, twelve percent; by this reckoning in the hundredth month the usury equaled the principal. This was the gravest of usuries, and as it were the as, from which the lesser usuries were called by the names of the parts of the as: the very least usury, semunciaria, one half percent per year; uncia, unciaria, one percent; sextans, sextantaria, two; quadrans, quadrantaria, three; triens, trientaria, four; quincunx, five; semissis, semissalis, six; septunx, seven; bes, bessalis, eight; dodrans, nine; dextans, ten; deunx, eleven; centesima, twelve; double centesimae, twenty-four; triple, thirty-six; quadruple, forty-eight; quintuple, sixty.

Whether usury is licit? Usury is prohibited by natural, divine, and ecclesiastical law. - By natural law. "For the evidence of this, it must be known that there are certain things whose use is the consumption of the things themselves; as we consume wine by using it for drink, and we consume wheat by using it for food. Hence in such things the use of the thing ought not to be counted separately from the thing itself; but to whomever the use is granted, by this very fact the thing is granted; and on account of this, in such things ownership is transferred by mutuum. Therefore if someone should wish separately to sell wine, and should wish separately to sell the use of wine, he would sell the same thing twice, or he would sell what does not exist; whence he would manifestly sin by injustice. And by a similar reason he commits injustice who lends wine or wheat, asking that two recompenses be given to him: one, indeed, the restitution of an equal thing; but the other, the price of the use, which is called usury. But there are certain things whose use is not the very consumption of the thing, as the use of a house is habitation, but not its destruction. And therefore in such things each can be granted separately, as when someone hands over to another ownership of a house, reserving to himself the use for some time; or conversely, when someone grants to another the use of a house, reserving its ownership to himself. And on account of this a man can licitly receive a price for the use of a house, and besides this demand back the house lent, as is clear in the hire and lease of a house. But money, according to the Philosopher in Ethics 5, ch. 5, middle, and Politics 1, chs. 5 and 6, was principally invented for making exchanges; and thus the proper and principal use of money is its consumption or alienation, according as it is expended in exchanges. And on account of this, in itself it is illicit to receive a price for the use of lent money, which is called usury; and just as a man is bound to restore other things unjustly acquired, so he is bound to restore the money which he has received through usury." St. Thomas 2. 2. q. 78. art. 1; Quodl. 3. a. 19. "It is certain," says St. Alphonsus 759, "that usury is illicit even by natural law." "But a certain modern author in a recently published book laboriously attempted to prove that money of itself is not sterile and unfruitful, as other things consumable by use are; since, as he asserts, from the common commerce of men we observe very many profits to arise from money. Hence he infers that, apart from the just titles of danger, loss, etc., something can licitly be demanded from a loan of money beyond the principal, provided the profit is moderate, and provided the borrower is rich and expends that money in increasing his goods. But deservedly this new opinion was interdicted by Benedict XIV in the Encyclical Letter Vix pervenit. The certain reason is that the profit which is received from money arises entirely not from the money itself, which, since it is altogether sterile, cannot bear fruit, but arises from the mere industry of men. Nor, because my money will profit another through his industry, can I demand from him anything beyond the principal." L. 758; Collectan. S. C. de P. F. n. 2130.

By divine and ecclesiastical law. Thus Ezekiel 18:10, 13 said: "If he has begotten a son who is a robber, shedding blood ... giving at usury and receiving more, shall he live? He shall not live ... since he has done these detestable things, he shall die by death; his blood shall be upon him." And "the Lateran Council, sess. 10 under Leo X, condemns as usury any profit perceived from an unfruitful thing, with the title of labor, or expense, or danger, however, excluded. When, namely, in the words of the Council, from the use of a thing which does not germinate, with no labor, no expense, or no danger, profit and fruit are sought to be acquired." L. 765. Whence it is evidently clear that usury is not condemned because it is exorbitant, or because it is demanded even from the poor, or for another similar extrinsic reason, but because it is usury. Thus Benedict XIV also openly pronounces illicit any profit arising from a mutuum by reason and force of that same mutuum, in his celebrated Encyclical Vix pervenit ad aures. Add the whole title de Usuris in the Corpus of Canon Law, from which also the usurer, if he is public and notorious, is kept from Communion, is deprived of absolution for the forum of penance, is regarded as infamous, and, if he dies impenitent without having made satisfaction, is deprived of ecclesiastical burial. Add propositions 41 and 42 condemned by Innocent XI, and 42 condemned by Alexander VII. - Benedict XIV, de Syn. 1. 10. c. 4; Catech. Rom. 11; E. M. Hence "the usury of money which we receive is not in the fruit, because it is not from the body itself, but from another cause, that is, a new obligation." L. 121 de Verbor. signif. Nor indeed, for the intrinsic licitness of usury, is it valid to say that he who gives money as a loan furnishes a benefit which is worthy of a fee; that he himself undergoes a burden while he deprives himself of his thing, which again is estimable by price; that mutuum in reality is nothing other than the lease of money, since in money not the body but the value is considered, and ownership of this always remains with the lender; whence it is that the borrower is truly said to be and is burdened with another's money; that finally, with attention to the present increased commerce of things, constant and always progressing in modern Society, by the force precisely of money, and of the incredible facility of transmitting and exchanging it, money in reality today can no longer be called sterile and unfruitful, but fruitful and most fruitful. But all these things are worth only as much as nothing. For to a benefit considered formally a fee is not owed, but gratitude of spirit. But the benefit here considered materially is worth no more than the lent thing itself; therefore, when this has been restored in the same quantity and quality, all things return to the equality which commutative justice intends and makes. Likewise deprivation of one's thing is estimated not at more, but at as much as the thing itself of which one is deprived is estimated. Therefore, when it is restored, that burden is entirely compensated according to equality. Otherwise it would have to be said that in the sale of a thing, besides the price of the thing itself, the seller would have to receive another price equivalent to the deprivation of his thing; and since this deprivation in sale is forever, he would have to receive not only a doubled or tripled price, but one multiplied several times, so that perpetual deprivation of the thing might be compensated. If the borrower were not truly owner of the money, not only materially but also formally considered, he certainly could not expend it according to its monetary value. The formal value of money is in reality inseparable from the money itself materially considered. And if this formal value did not pertain to the borrower himself, but to the lender, the borrower could enter into no onerous contract in his own name from the money. But that he is said to be burdened with another's money certainly does not mean that the borrowed money is not his, but that it is not his absolutely, namely without the obligation also of restoring as much. Another's money has never indeed signified stolen money, deposited money, leased money, etc., but has signified and does signify debts to be paid, from whatever source those debts arise, whether from mutuum, or from another contract, or from another title. That present commerce of things has not rendered money fruitful is as true as it is true that present commerce is governed more by credit, as they say, than by material money; and credit is from one's own industry, talent, labor, and trust acquired among public merchants, especially from honesty of life. Moreover, especially at present, it is seen that poor workers, laborious and industrious, in a short time gather enormous riches; on the contrary, very wealthy noble men, because of defect of labor and due industry, are reduced to extreme poverty. Therefore it is not money which is fruitful, but one's own labor and one's own industry. - Nor indeed are business and commerce something new; but ancient, most ancient; and nevertheless usury had always previously been regarded as illicit from its nature. Increased business and increased commerce could not change the intrinsic nature of things. L. 758, 759, 764; St. Thomas 2. 2. q. 78. a. 2, q. 106; De Malo q. 13. a. 4; Gousset 815 ff.; Collectan. S. C. de P. F. n. 2119, 2121, 2122, 2124, 2133; C. B. 138.

He resolves: Both the usurer and his cooperators are obliged to restitution of the usury received. For a usurious contract is altogether null; and the bare delivery of the thing does not transfer ownership. L. 761, 783, 791 ff.; St. Thomas 2. 2. q. 78. a. 3.

In doubt whether the borrower gave something above the principal gratuitously or not, can you retain it? Resp. Affirmatively, with the common and more probable opinion, if you accepted it in good faith and the doubt supervenes; negatively, if you accepted it with negative doubt. But if with positive doubt, or with probability, you are bound to restore, commonly speaking; since in doubt the borrower ought to be presumed, speaking per se, to have given under compulsion, not gratuitously; for men with difficulty lavish their own things gratuitously. But you are by no means bound to restitution if from the circumstances a donation can truly be presumed. - According to C. H. 1256, a borrower who has paid interest not in the least stipulated can neither reclaim it nor impute it to the principal. L. 761.

Whether the lender can retain what the borrower gave from fear lest otherwise a loan be denied to him? - Resp. More probably affirmatively. The reason is that for usury it is required that it be given by force of a pact, or as something owed by justice. Thus more commonly. L. 763; St. Thomas 2. 2. q. 78. a. 2.

Whether a donation of antidoron, or one which is made from a grateful spirit, can be brought into a pact? - Resp. Negatively. The reason is that from pacts a title of justice necessarily arises, but not a donation merely given from a grateful spirit. L. 764; St. Thomas 2. 2. q. 78. a. 2.

Whether for an obligation to which the lender would submit himself, of not demanding back the loan except after a long time, he can demand something beyond the principal, even if no inconvenience comes to him from the delay? There are three opinions. The first common opinion denies, and Lessius, Viva, Laymann, and Lugo hold this; they call the contrary opinion most false and commonly rejected by others. The reason is that such an obligation is intrinsically annexed to mutuum, that it not be demanded back at once; therefore, just as something cannot be demanded because payment is awaited for some time, so neither for such a long time; otherwise, they say, in this way usury could easily be disguised many times by demanding it not for the mutuum, but for the obligation of awaiting payment. And the condemnation of proposition 42 proscribed by Alexander VII seems to favor this. The second opinion says that, although in mutuum there is an obligation of awaiting payment for some time, nevertheless when the obligation is of not demanding it back except after a long time, say for three years, then, since that is not intrinsic to mutuum, something can licitly be demanded. Thus Medina, Serra, and Ledesma apud Salm. n. 25; and there Trullench, Henriquez, and Bassaeus think it probable, and Sporer thinks it not improbable. And this opinion truly does not seem to lack its probability. For if he who is obliged to give a mutuum after a long time can licitly demand something, as the doctors more commonly teach with Molina apud Viva on the condemned proposition 42, n. 5, why cannot he who is obliged not to demand back his own except after a lengthy time? See what will soon be said below. The third opinion, not much unlike this second opinion, which the Salmanticenses hold with Banez, etc., says that, although, by adhering to the first opinion, to demand something precisely for time is usury, nevertheless, since it is morally impossible that, by waiting for a long time, the lender should not suffer some danger, loss, or inconvenience, or at least not be impeded from exercising some act of liberality or another decent operation, for that reason he can receive and contract for something beyond the principal. To any mutuum there is indeed intrinsic the obligation of waiting for some ordinary time; nevertheless to a particular mutuum, with a pact of waiting for an extraordinary time, such an obligation is not intrinsic, but altogether extrinsic; and therefore that obligation does not proceed from liberality, but from justice, which obliges him to wait for so much time. Hence, if the lender receives something for such an obligation, he receives it rightly, not by reason of the convenience of which he is deprived, but by reason of the burden imposed on him by the pact, which burden indeed is estimable by price. L. 760.

This intrinsic and extrinsic obligation of not demanding the principal back for some certain time can be declared from another title, namely from danger to the principal, which likewise can be intrinsic and extrinsic to the mutuum; whence from it some increase beyond the principal is illicitly or licitly perceived. Cf. Instruct. S. C. de P. F. part II. Quaeri nunc potest. - C. B. 609; E. M.

What are Montes pietatis, and are they usurious? - Resp. To the 1st: Montes pietatis are certain treasuries, whether public or private, which were instituted so that the needy might have recourse to them as to a mountain of refuge, to receive money on loan for a pledge, lest they be compelled to receive money from usurers with greater damage to themselves; yet in such a way that they must leave a certain profit to the Monte pietatis, and unless, e.g., within a year they redeem the pledge, it falls into the ownership of the Monte itself.

Resp. To the 2nd: Montes pietatis, duly instituted, are not usurious. This is clear from the authority of Leo X, who in the Lateran Council, sess. 10, by the Bull Cum inter nonnullos, approved such Montes pietatis as licit and free from the stain of usury. But the reason of the response is that the moderate profit which the borrower must leave to similar Montes or public treasuries is not demanded under the title of mutuum, but for paying the salaries of officials and conserving a similar treasury; and accordingly such profit is not usurious. - Duly instituted.

For 1. that profit which is received must be moderate and proportionate to the expenses to be made for the ministers of that Monte, whose labor is truly estimable by price. 2. Sufficient time must be conceded to borrowers so that they can redeem the pledges and not be compelled to abandon them. 3. An equivalent pledge, or one not greatly exceeding the thing lent, should be demanded; for since those pledges, unless, e.g., they are redeemed within a year, fall under the ownership of the Monte, disguised usury would intervene if those pledges were appraised at too cheap a price and then sold for much more, without any refund made to the pledger. L. 765; Benedict XIV, de Syn. 1. 10. c. 5; A. S. S. v. 4. p. 27 ff.; E. M.

What is the just interest of the lender? - In mutuum, usury is one thing, fenus, just interest or the just interest of the lender, another: for usury properly exists when the lender immediately because of the mutuum demands something beyond the principal; but the just interest of the lender exists when he, from another just extrinsic title, which accidentally occurs in the mutuum, demands something beyond the principal in compensation for such title, or cause estimable by price. For this reason that increase which is demanded is not demanded by force of the contract of mutuum, but by force of another contract annexed to the mutuum. This interest can also be called usury, but less properly and only in a broad signification, insofar as it is beyond the principal. But a contract must intervene; otherwise, although a just title of demanding something is present, nothing can be justly demanded. Thus expressly C. H. 1755, and it is clearly deduced from C. I. 1829, 1830; C. G. 1902, 1903; C. A. 984; C. B. 608. L. 765, 773; E. M.

Whether it is lawful for a lender to demand his interest because of the title of emergent loss or ceasing profit? Resp. Affirmatively. For in two ways, says the Angelic Doctor 2. 2. q. 62. a. 4, someone can be damaged: in one way, by taking away from him what he actually has, and this is called emergent loss; in another way, by impeding him from acquiring what he was on the way to having, and this is called ceasing profit. Moreover, both because of emergent loss and because of ceasing profit it is lawful for the lender to demand from the borrower what concerns his interest on account of the loan, if the due conditions are present. The same Angelic Doctor gives the reason, 2. 2. q. 78. a. 2 ad 1, teaching that this is not to sell the use of money, but to avoid loss. And certainly equity does not allow that someone lose profit or suffer loss from conferring a benefit: in the Law it is read, No one ought to suffer expense from that from which he seems to have deserved a reward. Add that this is expressly approved by Benedict XIV in the Encyclical Letter on usuries.

If the due conditions are present. The conditions are: 1. That the interest be brought into the pact from the beginning, though not demanded immediately, with the borrower also warned concerning the title of emergent loss and ceasing profit, or another title, if any exists, for which he wishes to demand something beyond the principal; for after the contract the lender can no longer demand anything, even if he had forgotten emergent loss and ceasing profit; for an interpretative or conditional will does not suffice for a contract, but an actual or virtual will is required, or at least one sometime had and not retracted: he ought to have provided for himself, says the Angelic Doctor, q. 3 De Malo a. 4, concerning the lender in such a case, lest he incur detriment; nor ought he who receives the mutuum to incur loss from the foolishness of the lender.

Nevertheless, even if emergent loss was not brought into the contract, if the borrower culpably delays payment beyond the established term, he is bound to repair to the lender whatever damage arises from such delay; for according to Rule 25 in 6: His own delay is harmful to each person. 2. That the lender not demand more than the loss which he suffers, or the profit which he hopes for from another licit contract, according to the estimation of hope and danger, and with expenses deducted; for this is the whole reason for the exaction.

Hence interest cannot be demanded for the whole quantity of profit which the lender could hope for; for this profit, since it can often be impeded, must be estimated at less; indeed the lender would have had to concur toward it through his own labor, the lack of which likewise is estimable by some price. Whence the value of ceasing profit must be estimated according to the judgment of prudent men; and this is well to be observed. - 3.

That the mutuum is actually the cause of the emergent loss or of the ceasing profit. Whence, if someone had no occasion at all of making some profit by business, or even when the occasion was given did not wish to engage in business, he could not demand interest precisely from the title of ceasing profit, although he could from other titles. L. 768, 799; St. Thomas 2. 2. q. 62. a. 4; Gousset 819; Collectan. S. C. de P. F. n. 2133; E. M.

Whether the lender can demand compensation for emergent loss if he himself freely offers to give the mutuum? Resp. More probably affirmatively. "The reason is that the lender then does not offer the loan absolutely, but under the condition that ceasing profit be compensated to him; and thus the borrower, by accepting the loan, is the true cause of the cessation of profit, and truly impedes the lender from justly making profit from his own money." L. 760, 807; E. M.

Whether it is lawful for the lender to make an agreement from the beginning about a certain profit to be perceived, if the emergent loss is only probably future? It is common that something can still be demanded above the principal, while nevertheless the proportion between the fear of loss or hope of profit and the increase which would be received in the hypothesis is considered and carefully preserved. The reason is that due equality is already preserved thence; for just as, if the loss does not occur, the lender would profit, so on the contrary, if it does occur, the borrower would profit. Nor does it matter that the foreseen loss does not occur; for the pact concerning the increase is not made for the loss, but for the danger of it, which is actually supposed and is estimable by price. A fisherman who sells the cast of a net does not indeed sell the fish, which perhaps will not be caught at all, but sells the probable hope of them, which actually exists and is estimable by price. L. 770; E. M.

Whether you can demand something by reason of ceasing profit because of a loan of money, if you keep other idle money? Resp. Affirmatively, "if you had reserved that other money for the use of the family ... because you are not bound by reason of the loan to neglect your own providence." Also probably affirmatively, if without such inconvenience you can substitute other money for the money destined to business. For, with this posited, that you had determined to destine this money alone to business, you can licitly ask ceasing profit; "because the lending is truly the cause that the hoped-for profit from that money ceases for you." L. 771, 772.

Whether it is licit to demand something above the principal by reason of the danger of losing it? Resp. Affirmatively. The reason is that the lender is not bound to give a loan with danger of losing the principal, and such probable danger is estimable by price; just as the labors perhaps necessarily to be undertaken and expenses to be made for recovering the principal are also estimable by price, if, e.g., it is later necessary to go to the judge. And accordingly, if proportionate interest is demanded because of this danger, such a contract is contrary neither to the virtue of liberality nor to justice. St. Thomas 2. 2. q. 78. a. 2; L. 765. Exception: 1. If the borrower is poor, because then the precept of lending from charity urges. 2. If the borrower secures the principal by pledge, because thus the danger ceases. E. M.; Collectan. S. C. de P. F. n. 2135.

What conditions must be observed in the aforesaid title? - In order that interest be just from this title, two things must be attended to: 1. The danger of losing the principal must not be precisely possible, but also probably future; either by reason of the borrower, who is not sufficiently known, or is of doubtful faith, or conducts dangerous business; or by reason of the principal, which is to be carried elsewhere with danger to the lender. 2. The quantity of the interest itself must be proportionate to the quantity of the danger. Each is clear from the response of the S. C. de P. F., which in the year 1645, having been questioned by Missionaries from the Chinese Kingdom in a similar doubt, and having been convoked by mandate of Innocent X, responded: "They judged that by reason of mutuum immediately and precisely, nothing is to be accepted beyond the principal sum; but if they accept something by reason of danger probably arising, as in the case, they are not to be disturbed, provided account is taken of the quality of the danger and of its probability, and proportion is preserved between the danger and that which is accepted." La-Croix n. 856; L. 765.

Whether in a mutuum it is licit to make an agreement about a penalty to be paid by the borrower if he does not return the principal at the defined time? Resp. Affirmatively.

The reason is that in this way provision is made for the firmness of the contract, and at the same time the negligence of the borrower is guarded against. L. 766. Nevertheless it must be observed that this pact is not licit unless 1. the delay of the debtor is notable and culpable; notable, for some delay is intrinsic to mutuum; culpable, for he who has not sinned is not to be punished. 2. The intention of profiting through that attached penalty is absent; and this is presumed to be present if the debtor is burdened with the obligation of restoring the principal at that time at which it is certainly known that he is by no means able to pay. 3. The penalty is moderate and proportionate to the fault; otherwise it would be unjust. But more probably it is owed before the sentence, for it has more the nature of a pact than of a penalty, although it also is a penalty. L. 44 de Usur.; L. 766, 767, 775.

Whether civil law supplies a just title for demanding something above the principal, even with any other title excluded? - C. I. 1829; C. G. 1905. Resp. Affirmatively. And, when written law is lacking, legitimate existing custom, which has the force of law, supplies. - Proof: 1. For since ordinarily in a mutuum an extrinsic title of just interest is not lacking, by reason of danger to the principal, ceasing profit, and emergent loss, civil authority can well determine by law the increase which can justly be demanded, to impede the unjust extortions of wicked men, to render the contract of mutuum easier for all, and also to impede lawsuits and controversies, not without grave damage to the parties. - 2. Public authority can, by reason of the common good, transfer the ownership of private persons, as is seen in the law of prescription. Therefore the same authority can transfer ownership of an increase above the principal, which in this case is freely and willingly given by all, by reason of the public and private good, to which, as has been discovered by experience itself, facility of lending especially contributes. 3. The same is evinced from the Responses of the Sacred Congregations, namely that those who accept the profit conceded by law, even without any other title, are not to be disturbed. Collect. cit. 2141; E. M. Legal interest or fenus of this kind is in the manner of civil fruits, L. 34 de Usur. et fruct., and can also be called usury, but less properly and in a broad signification. Cf. 1086, 1095. As civil law, so consequently legitimate custom, and as the S. Penitentiary has it, April 18, 1889, the common practice observed by men of fearful conscience in their respective places and times, can determine the just interest to be received from mutuum. E. M.

What kind is the fenus, or interest, constituted by positive laws?

According to C. I. 1831; C. G. 1907 and the Law of Sept. 3, 1807, one interest is legal, another conventional. Legal interest is five per cent in civil matter, six per cent in commercial matter; or civil usuries are quincunces, mercantile are semisses. Nevertheless by the Law of June 22, 1904 in Italy, and the Law of Apr. 7, 1900 in France, legal interest is four per cent in civil matter and five per cent in commercial matter. Conventional interest according to the cited French Law cannot exceed the aforesaid quantity; according to C. I. it depends on the judgment of the contracting parties; but if it exceeds legal interest, it must be established by a written act; otherwise no interest is owed. Nevertheless the debtor after five years from the contract can always restore the sums accepted with interest to be paid exceeding the legal, notwithstanding any contrary pact, but with written notice given six months before. C. I. 1832. Cf. 1833. According to C. H. 1100, 1109, in civil matter likewise one interest is legal, another conventional. Legal interest is six per cent. In commercial matter one must stand by the Commercial Code. But in it commercial contracts are treated, arts. 50-63. According to C. L. likewise one interest is conventional, another legal, and this is five per cent, art. 1640. According to C. A. 994, 995, one interest is legal, another conventional. The first is four per cent, and among merchants six per cent. The other cannot exceed five per cent in a loan with pledge, and six per cent in a loan without pledge. But by the Law of June 14, 1868, the predefined limits for conventional interest of this kind were abrogated. C. B. 246, 247. Legal interest is four per cent. Conventional interest can exceed this quantity. But if it exceeds six per cent, the debtor can restore the capital after six months, with a prior delay of notice of six months. As regards Roman Law, cf. L. 36. E. M. de Usur. C.

Whether from positive laws interest also from interest, anatocism, is constituted? - According to Roman law it is prohibited. L. 29 de Usur.; L. 27 de Re iud.; L. 28 de Usur. C. - According to C. I. 1232, 1233; C. G. 1154, 1155, interest from interest is owed after a year, if the creditor juridically seeks it, or by a particular agreement, after the prior interest has already become due. But it can also be demanded from the beginning from revenues of estates, perpetual or life-long. Gousset Cod. comm. on art. 1154. According to C. H. 1109, legal interest from interest is likewise owed after this is owed and the former is juridically sought. According to C. A. 998, only interest which is owed from two or more years can, by means of an agreement, constitute a new capital. Likewise according to C. L. 1642, cf. C. A. 1335, it is required that interest already owed be constituted as capital by a new contract. According to C. B. 248, an agreement made in advance that interest which is owed should be productive of new interest is null. - E. M.

Whether legal interest is sometimes to be paid even without agreement? Civil law itself, apart from every agreement, establishes legal interest to be paid sometimes by reason of delay and loss; sometimes by reason of fault and injury; sometimes by reason of natural equity. By reason of delay, e.g., of a debtor who does not restore at its time money credited to him, C. I. 1231; C. G. 1153; C. B. 288; by reason of fault and injury, e.g., of a guardian who did not invest the money of a ward, C. I. 291; of a mandatory or depositary who used another's sum, C. H. 1724, 1770; C. B. 698, etc. This interest is in the manner of a penalty, and accordingly before the sentence of the judge it is not owed; after it, it is owed even in the forum of conscience, even if because of only civil fault.

By reason of natural equity, e.g., if a dowry has been constituted in counted money, if the buyer of a house or estate does not pay the price on the established day, and the thing sold and handed over produces fruits, etc. C. I. 1397, 1509; C. G. 1548, 1652. This interest does not need the sentence of a judge in order to be owed. Cf. n. 1114. 2, 3. The cases in which, according to C. I., legal interest is owed by the law itself are: 1. The remaining sum owed by the guardian, once accounts have been rendered, C. I. 308. 2. The dowry owed by those promising from the day of marriage, C. I. 1397. 3. The dowry to be restored from the day of the dissolved marriage, C. I. 1415. - 4.

The sum owed by a partner of a partnership, C. I. 1710. 5. The sum which the surety paid, C. I. 1915; C. H. 1838. 6. Advances made by a mandatory, C. I. 1755. 7. A legacy from the death of the testator, if it is a legacy of a farm, capital, or a fruitful thing, C. I. 865. 8. Whenever a sold thing produces fruits, the price not yet having been paid, C. I. 1509. 9. Whenever an agent of affairs has made expenses for the utility of another, C. I. 1144. 10. Whenever someone in bad faith has received what was not owed, C. I. 1147. 11. Whenever reduction of a donation is juridically sought as regards the excess of the disposable part, C. I. 1094. C. B. 256, 288, 289, 290, 291, 347, 452, 641, 668, 698, 849, 1834; C. H. 1724, 1770.

Whether a borrower paying interest not owed can reclaim it according to positive laws? - Although in the Law there is generally given a reclaiming of what was not owed, C. I. 1237; C. G. 1235; C. H. 1895, nevertheless here it is not given. C. I. 1830; C. G. 1906; C. H. 1756. Wherefore the borrower who pays interest which was not agreed upon, or beyond what was agreed upon, cannot reclaim it, nor impute it to the principal.

To whom is it lawful to receive 5 or 6 per 100, by reason of commerce, according to civil laws? It is certainly lawful for merchants lending money to other merchants, because it is altogether a matter of commerce. It is also lawful for merchants with respect to others who are not merchants, because the law intends to favor commerce; but it favors it by permitting merchants to receive a greater rate from lent money. If it concerns others who are not merchants with respect to merchants, it is disputed. More commonly they deny that it is lawful, and report that such is the decision of tribunals. The reason is that the law which intends to favor merchants would rather be harmful to them, if they had to pay greater interest. Nevertheless several, even among jurists, affirm it. Their reason is: 1. Because the words of the law are general: in matter of commerce; nor is it established what the genuine sense of those words is. 2. Because it is expedient for commerce that the law be so understood: for thus merchants much more easily find money with greater utility to themselves and to commerce.

Whether it is lawful to exceed the legal rate in a mutuum by reason of emergent loss or ceasing profit? - Resp. Negatively, with respect to the poor or others who seek a loan in necessity, and who would be oppressed by a greater increase. Nevertheless you do not seem to be bound, with great inconvenience to yourself, to grant them a loan. Charity does not oblige with grave inconvenience.

If money is handed over for the utility, but not for the necessity, of another, it is disputed, and a twofold opinion is given. The first opinion affirms by reason of indemnity or just compensation. The second opinion denies. The reason is that compensations for losses arising from a pecuniary obligation can be demanded according to the legal rate. This opinion indeed can have place if the lender compels or obliges another to receive a loan from himself; otherwise the reason does not appear why the lender should undergo the detriment of emergent loss for the favor of another. In many places, from the common practice even of the timorous, the legal rate is exceeded; nor for that reason is it believed that sin is committed. For emergent loss, ceasing profit, and the danger of losing the principal must be estimated variously from the various circumstances of places, things, and persons. Hence generally in great cities it is thought to be less than in small towns; and in the former semis usuries, six per cent, and in the latter septunx usuries, seven per cent, are often tolerated. Those which exceed these must be judged from particular circumstances. But those which exceed the decunx, ten per cent, seem immoderate, regularly speaking, and to be rejected. And since Governments themselves rather reduce legal interest, and in titles of public debt in reality pay only three and four per cent and even less, private interest among themselves of a dextans or ten per cent now seems excessive also, speaking per se, at present. Cf. 1087.

Whether it is lawful to receive the legal increase where it exceeds 5 or 6 per 100? Resp. Affirmatively, if the law, after all circumstances have been weighed, and especially the practice and custom of the timorous, seems just, that is, if equality appears between the profit permitted by law and the value of the use of money or the dangers to the principal, etc. For no absolute rate can be established, but attention must be paid to the various circumstances of places, and also to the dearness of money, from which its price and therefore its use increases, as in Africa, in India, etc.

What must be said of institutions which are commonly called Savings Banks or Banks of Thrift? Not only are institutions of this kind to be tolerated, but they are also to be praised, since they assist widows, servants, maids, and the poor, while their modest money is accepted by loan and proportionate interest is paid back to them.

To be treated: 1. the nature of the contract of mutuum; 2. profit received from mutuum, or usury; 3. titles excusing from usury.

1. Ascanius gives money as a loan for consumption with interest of eight, nine, ten per cent, according as the borrowers flourish less or more in resources and industry.

2. Gaspar gives money as a loan for consumption, requiring by a prior agreement, for interest, ten per cent. For he says that the law permits even conventional interest besides legal interest, and leaves it to be defined by the free consent of the contracting parties.

3. Ernestus gives money as a loan for consumption, constantly requiring for interest ten per cent; because, he says, this is the practice of the place, almost commonly observed even by honest men.

4. Iovianus, having an occasion of gaining from trading twenty per cent, asks a large sum of money from Iovinus, spontaneously offering to him ten per cent, that he may obtain it more easily. Iovinus accepts, saying: to one knowing and willing, no injury is done.

5. Cornelius, altogether inculpably, lost an immense sum of money received as a loan for consumption. Hence he wishes neither to restore the capital nor to pay the legal interest owed by agreement; saying, as to the capital, that the thing perishing without any theological fault of his perished for its owner; but as to the interest, that since the thing brought no fruits, he owes nothing to the owner of the capital; for a thing fructifies for its owner.

6. "Whether it is lawful for a Religious Community, which receives a loan for consumption with an increment of four or five per cent, to lend those same monies received as a loan for consumption to some other person with an increment of ten per cent?"

Q. What as to the cases?

R. Ascanius acts illicitly and unjustly. For from the fact that the borrower flourishes more or less in resources and industry, since this thing is altogether the borrower's and depends only on him, it does not furnish a title to the lender for receiving a greater increment. Hence Benedict XIV, Encycl. Letter Vix pervenit, says: "Nor indeed, to purge the stain of usury, can any aid be summoned either from the fact that that profit is not excessive and too much, but moderate; not great, but small; or from the fact that he from whom that profit is demanded on account of the loan alone exists not poor but rich; nor that he is not going to leave idle the sum given to him as a loan, but is going to spend it most usefully for enlarging his fortunes, or buying new estates, or carrying on profitable business." Wherefore Ascanius is held to restitution. Benedict XIV ib.

Gaspar, by title of a mere agreement completed, cannot require ten per cent, an interest exceeding by double the legal interest. The reason is that the law indeed permits conventional interest which exceeds legal interest, but that agreement, in order to be able to have force, must be otherwise honest and just. Such it certainly will not be when there would be no other title for that excess except the agreement itself made, as in the case; for then that agreement would in reality be without a just title, and therefore unjust. On the contrary, an agreement of a greater increment to be paid would be lawful, if the lender truly suffered extraordinary detriment, the compensation of which he can legitimately require. Wherefore Gaspar, suffering no special damage and nevertheless requiring by pact a greater increment, is held to restitution. I. M. 1109; Scav. l. 2. n. 443, 569.

Ernestus does not seem to be disturbed, if that is truly the custom of the place. For the legal tax can be determined by written law and by custom. Just as written law, constituting a tax, defines the compensation commonly to be made, with attention to the common conditions of emergent damage, of ceasing profit, of risk of capital, and of the common good to be promoted by easy trading and commerce, so also common practice and custom can define and determine this same thing. Enchir. Moral. 1095; I. M. 1095, 1103, 1109; G. 893 seqq.

If Iovinus required that greater interest for the greater profit of Iovianus in his trading, he would act altogether illicitly and unjustly, and would be held to restitution, as was said in the first case. But since Iovianus himself, altogether spontaneously and not asked, offers that greater increment, it does not appear why it cannot be accepted. For in the case there is truly a free and full donation of the borrower. G. 905; Scav. l. 2. n. 571; Kenrick.

Cornelius is altogether held to the restitution of the capital, and to paying legal interest, according to the agreement made, as is supposed. For the money lent by force of the mutuum passed into his ownership, and did not remain in the ownership of the lender. Hence consequently the thing perished for him, and for him also ceased every emolument to be received on the occasion of the money lent and by his personal industry. Hence there remains entire, by force of the previous contract of mutuum, the obligation of restoring the capital, and, by force of the previous agreement, the obligation of paying legal interest. G. 891, 892; I. M. 1080, 1095.

"It is not lawful for Communities of Regulars to give to others, at a greater agreed usury, money received with the burden of paying four or five on each hundred." S. O. 4 and 18 March 1784; Collectan. S. C. de P. F. n. 2121. ad 7; M. E. v. 7. p. 2. p. 258.

7. Fridericus in France received as a loan for consumption one hundred gold scutata, to be restored in the same species. Since the extrinsic value of gold has increased, so that one hundred gold lire are worth one hundred twenty lire of paper money, Fridericus indeed wishes to restore to the one seeking them one hundred gold scutata, in the same species of money, but only eighty, not one hundred.

Q. Does Fridericus act rightly?

R. Affirmatively. For, apart from a special agreement, when money has been given as a loan for consumption, it suffices that the same extrinsic value be restored, and indeed in the same species of coin, as in the case, even if the coin which was handed over has meanwhile increased or decreased. For, where the question concerns counted money, its extrinsic value is attended to under the aspect of money, not its intrinsic value under the aspect of gold or silver. For the object of the contract in money is not gold and silver, but its value insofar as it is money.

Except, unless it has been agreed that restitution ought to be made in the same species and quantity, if the question concerns silver and gold money, namely that as many silver or gold coins in number, and of the same species, be restored as were lent, whether their value has increased or decreased. - But if the monies, at the time of restitution, cannot be found, or are no longer in commerce, then there is paid, in current money, what corresponds to the value which they obtained at the time when they were lent. - I. M. 1082, 1084; C. G. 1895; Gousset in h. a.

8. Titius, when the Italian Government had not yet prescribed the compulsory use of paper money, gave to Sempronius as a loan for consumption one hundred gold coins, under the condition that as many be restored in their species, every other bronze coin and every other representative of money being excluded.

This the borrower promised, now for then renouncing the benefit of the law, if anything should have been established concerning this matter. But if the law does not admit renunciation, the borrower obligates himself to compensate every damage, either by paying gold money, or by adding over and above the paper money as much as is required at the time of restitution, that they may be equated with the gold according to the difference. Moreover the law of 1 May 1866 appeared, by which it is established: National banknotes shall be given and received as sounding money according to their nominal value, in paying within the State ... notwithstanding any contrary disposition of law or conventional pact.

Q. 1. Does the simple condition added in the chirograph, concerning restitution to be made in no other way than in sounding money, lose its force even in the forum of conscience through that subsequent civil law invalidating it? - 2. And insofar as affirmatively, can Sempronius in this case, that is, on account of the special conditions stipulated as above, safely conform himself even in the internal forum to this civil law so useful to himself, when this law, even in these circumstances, would have supported him in the external forum?

R. "To the 1st. Regularly, affirmatively, unless peculiar circumstances stand in the way, concerning which recourse will have to be made in particular cases, with the same diligently set forth. - To the 2nd. Attention being paid to the quality of the pacts, and also attention being paid to the tenor of the law of which there is question in the case, negatively." S. Poenit. 21 Jan. 1873, Acta S. Sed. v. 7. p. 209 seqq. Namely, just as the law abrogates any contrary preceding law, not a future one, so also it abrogates preceding pacts, not future ones. But it by no means abrogates preceding pacts also by which it had been explicitly agreed that the debtor would not use the benefit of the law, if some future law should abrogate pacts of this sort concerning money to be returned in its proper species. Therefore the law abrogates only pacts made simply before that law concerning restitution to be made in real coins.

9. Rufus in Italy gave to Rufinus as a loan for consumption the sum of 10,000 lire, by a legitimate agreement, that the loan would last for ten years, and that throughout this whole time interest would be paid to him of twelve per cent, whether because that sum was being given in gold money, or because all others more or less commonly require the same interest. But when the decade was completed, the same sum of 10,000 lire was altogether to be restored according to the same species and quantity of money, express renunciation having been made of any benefit of law concerning a mode of restitution of this sort. Rufinus indeed hoped that he would gain thirty and more per cent. But after six months Rufus, knowing that the commerce of Rufinus was not succeeding well, wishing to secure for himself the sum of money lent and unwilling meanwhile altogether to lose hope of that rich interest, urgently simulates a business of commerce and asks from Rufinus as a loan for consumption the sum of 10,000 lire, to be restored as soon as possible, in turn meanwhile promising him legal interest of five per cent. Thus Rufus, recovering his capital, still continued to receive a profit of seven per cent. But Rufinus, using the good occasion, by a written agreement, gave the aforesaid sum as a loan for consumption to Rufus. But Rufinus, considering the matter, afterward refused to pay the constituted interest, saying that a legal compensation had been made between both loans for consumption. And since a year had not yet passed from the loan received, he adds that he owes no interest. But since the intrinsic value of that gold money had meanwhile been diminished by ten per cent, new coins of that species having been struck, Rufinus gains one thousand lire by the mere change of monies; and he is sufficiently content with this notable and easy profit.

Q. 1. Could Rufus lawfully have made the first agreement concerning interest of twelve per cent on account of the reasons alleged? - 2. Could Rufus lawfully have made the other agreement by which he himself would still receive interest of seven per cent? - 3. Can Rufinus lawfully exempt himself from every obligation of the loan received, and receive the profit of one thousand lire?

R. To the 1st. That the aforesaid sum was given in gold money certainly is not a reason for requiring more than double the legal interest. If the value of the gold money is greater, that excess can indeed be computed in the very sum given as a loan, and the legal interest which is required can be increased proportionately. Hence, if the excess of the gold money had been 15 or 20 per 100, then Rufus in reality would not have required twelve, but ten per cent in reality by reason of the loan. But the better reason for requiring the aforesaid interest is the common practice and custom in that place, which, since it is common to all, certainly is a practice observed also by men of timorous conscience. S. Poenit. 18 Apr. 1889. Hence, such a legitimate custom of the place being supposed, Rufus could lawfully make the first agreement.

To the 2nd. Since Rufinus, from the case, altogether spontaneously consented to less interest to be received from the money lent, and another contract of mutuum truly intervened, as is elicited from the very objection made by Rufinus to Rufus, it does not appear why, the prior agreement legitimately made persevering, Rufus cannot still receive seven per cent.

To the 3rd. Rufinus illicitly exempts himself from every obligation of the loan. For legal compensation has no place in the case. For each debt is not equal on both sides as to the interest to be paid, nor can it be immediately exacted and restored as to the capital, since in the first agreement the contract must last for a decade; in the other agreement the money lent is to be restored as soon as possible. If he does not wish to lack the advantage of his money, let him indeed seek its restitution as soon as possible. Yet he cannot exact it before at least one year has elapsed, since meanwhile he consented that legal interest be paid before its restitution, which is owed only after a year. But only after five years can he himself, from the Italian Code, restore the capital, since its interest exceeds legal interest. But as to the one thousand lire which Rufinus thinks he gains from the diminished intrinsic value of the gold coin, the profit first would still be uncertain; for the matter depends on the value which the aforesaid coin will have then, when Rufinus restores the money lent to Rufus after the decade has elapsed, or at least after the five-year period, unless Rufus should beforehand consent to the rescission of the contract. Then Rufinus will be able to receive no profit from it. For it is established by the law itself that, if gold or silver monies have been given as a loan, an agreement having been made of restitution in the same species and quantity, if their intrinsic value is altered, an equivalent to the intrinsic value of the same coins at the time of the loan must be restored. - C. I. 1286, 1287, 1822, 1826, 1832.

But the condition of Rufinus is better from the French Code. For first, Rufinus, from art. 3 of the law of 3 Sept. 1807, cannot be obligated to pay conventional interest exceeding legal interest. Likewise nothing special is determined from this Code as to a loan for consumption of gold or silver coin. The borrower is held only for the numerical sum designated in the contract, and in the species current at the time of payment. C. G. 1290, 1291, 1895, 1907.

The condition of Rufinus is also better from the Spanish Code. For from this Code also nothing is determined as to a loan for consumption of gold or silver coin, except that restitution is to be made in the agreed current species. C. H. 1170, 1195, 1196, 1754, 1755.

From the Austrian Code, conventional interest cannot exceed the limits constituted by the law itself. Yet by the law of 14 June 1868, the limits predefined in a mutuum for conventional interest of this sort were abrogated. But as to the change of monies it is established that changes of coins, by force of law, without alteration of their intrinsic value, are for the advantage or damage of the lender. For he receives the same coins in species, and the same number of them which he gave. But if the intrinsic value is altered, payment is to be made according to the intrinsic value which the coin had at the time of the money lent. C. A. 988, 989, 994, 1438, 1439; I. M. 1082, 1104, 1471.

10. Augustus, a son under paternal power, more than once received money as a loan for consumption with immense usury from a Jewish man, yet with faith first given to him that he would never use the privilege of age, and would restore all things after the death of his father. Augustus spent the aforesaid money in games and a freer life. Meanwhile the father of Augustus dies, and Augustus, having returned to good fruit and having become more prudent, refuses to restore anything to the Jew, opposing in judgment the privilege of the age in which he had received the loan.

Q. What as to the case?

R. Augustus uses his right: for he can use the favor of the law. Nor can the faith given be opposed; otherwise the aforesaid law would in practice be altogether frustrated, since all would require such a promise. This law is consigned in Roman Law, lib. 14, Cod. tit. 6, de Senatus Consulto Macedoniano: "It pleases that no action and petition be given to anyone who had given money as a loan to a son under paternal power, even after the death of his parent in whose power he had been." Where it must be noted that "although by the words of this Senate decree only the civil obligation seems to be removed ... nevertheless more probably the natural obligation also is removed; so that in the forum of conscience he is never held to restore such a loan, if he wishes to use this privilege ... And this the law established, both as a punishment of those who would lend to such persons, and so that every occasion of wicked machination against parents by sons would be cut off. Whence also the son cannot renounce this privilege, because it is more in favor of the parents than of himself ... Yet notice that there are many cases in which the son is held: 1. If he has military goods, or quasi-military goods. 2. If he was publicly thought to be of his own right. 3. If he received as a loan not money, but another thing, such as wheat, wine, and the like; for the law speaks only of a monetary loan, unless he did this in fraud of the law, so that from it he might collect money. 4. If the money was turned to the utility of the father. 5. If the father ought to have supplied it according to right reason, as if the son, absent for the sake of studies, receives a necessary loan so that he may live, so that he may buy necessary books, so that he may pay the teaching fees ... 6. If the son swore that he would pay ... because an oath made in favor of another must always be observed, when it can be observed without sin ... Yet relaxation of this oath can be sought from the prelate, because it was opposed in fraud of the law, and otherwise the law would easily be rendered useless; and it being obtained, he will be able not to pay." Lessius l. 2. c. 20. d. 2.

The same in the case is established from the Italian Code 1307: "No one can claim the restitution of what he paid to a minor, interdicted person, or incapacitated person, or to a married woman, by force of an obligation which has remained void, unless he proves that what was paid was turned to their advantage." The same is had in Cod. Gall. 1312; Cod. Hisp. 1304; Cod. Austr. 152. Wherefore Augustus does not seem to be disturbed, if, using the benefit of the law, he invokes the sentence of the judge, that the obligation contracted may be rescinded. I. M. 565, 953, 970, 1085; S. Alph. 757. Cf. G. 771, 772.

11. Celina, a woman bound to a husband, received money as a loan for consumption, offering a mortgage over part of her dowry, entirely without the knowledge of her husband, to extinguish debts contracted by a freer life. But the children, when both parents were dead, obtain from the judge a sentence by which they are exempted from every payment.

12. Sophia, having paraphernal goods, sought money as a loan for consumption to pay debts common to herself and her husband. This payment having been made, her husband and children were able to continue commerce to the great advantage of the whole family.

13. Generosa, having a husband gravely ill and oppressed by debt, without the consent of her husband sought money as a loan for consumption, to pay his debts, that she might provide for the honor of the family. But she did not obtain it except with a special obligation undertaken, and this only on the condition that she herself would restore it, either from the goods of her husband himself, if they sufficed, or also from her own, even from dotal goods, even after the death of her husband, if the husband should die of that illness, as in fact happened after a few months.

Q. What as to the cases?

R. The children of Celina can legitimately use the benefit of the law, lest they pay; since they suffer no advantage, but truly damage, from the aforesaid loan. I. M. 953; G. 774.

Neither Sophia, nor her husband, nor her children can invoke rescission of the obligation contracted. For the loan truly turned to their advantage. I. M. 678, 679, 953; G. 873.

Generosa is altogether held to restore the money received as a loan. The reason is that she herself truly perceived emolument from the loan, and because she obligated herself to restitution by a special contract. I. M. 953; G. 755. - C. I. 134; C. G. 217; I. M. 677, 678, 679; G. 1009.

1. On Mutuum. 1. Notion. Mutuum is a real contract by which dominion of some fungible thing is transferred from the lender into the borrower, with the obligation of restoring the same thing similar in species and goodness. If the contract is real, it has its beginning from the handing over of the fungible thing. But nothing prevents the parties from having agreed beforehand about making a mutuum: which would be a promise of mutuum.

What a fungible thing is was said in n. 384. But for the most part mutuum is made concerning things which are consumed by the first use; among which is money, which, although it does not perish in itself, nevertheless perishes for the one spending it; yet sometimes fruitfully.

Because dominion is transferred to the borrower, he himself sustains the risk of the thing: the thing perishes for its owner.

2. There is no special obligation of the lender: he merely must reverence the right in the thing which he conceded to another. Except in certain cases foreseen by the law itself, as if the debtor becomes unable to pay, he cannot demand payment before the time.

But, because the day is often constituted for the utility of both, he ought not accept anticipated payment.

At the end of the mutuum, the borrower must return the same thing in quantity or quality.

What if, meanwhile, the thing has increased or decreased in price? From the law of nature, the intention of the parties must be consulted. If the consideration of the matter was principal, i.e. if the thing was handed over and must be returned on account of its intrinsic utility, a quantity of the same measure and quality is to be restored or paid; if the contracting parties rather looked to the price, or were solicitous about the value, a quantity of the same price will have to be restored. Wherefore, as Aertnijs-Damen says, I, 905, money is to be returned according to the value which it had when it was given as a mutuum. What, then, if the civil law, as the Code of Italy art. 1821. 1822, or jurisprudence, as in Belgium and in France (cf. Colin and Capitant, II, 80 and 641), declares it sufficient that the same numerical sum be returned, neglecting consideration of value? We have examined and resolved the question above, where payment was treated.

But what if, when titles to the bearer were given as a mutuum, the law or tribunals permit titles of the same nominal value to be returned?

Because now there is another reason of possessing titles than money; because, from the beginning, it was known to the parties that titles sometimes increase or decrease very much in value, we think here that one can more simply stand by the statutes of positive law, since the parties are judged to have committed themselves to chance.

3. Positive laws agree sufficiently among themselves, when there is question of metals or merchandise, so that already from the very definition of mutuum they establish that it is required and sufficient that the same quantity, of the same species and quality, be restored.

Concerning moneys we confess that the laws do not seem to us so clear, if you except the Italian Code. Cf. the Austrian Code, 988, which nevertheless seems to establish the same thing as the Italian; Brazilian Code, 917 and 1258; Dutch, 1793; German, 211 and 607; Spanish, 1751 compared with 1170; Swiss, 312; Mexican, 2690, etc. Besides, they do not contemplate the case in which paper money has been substituted for true or metallic money. For between metallic moneys of one time and another, no great difference of value is to be feared.

4. The contract of mutuum is gratuitous by its nature; nevertheless present-day laws permit stipulations of interest or usuries to be added, concerning which immediately.

5. Obligation of giving money as a mutuum or a thing consumable by use. The necessity of neighbor can make grave, from charity, the obligation of giving a mutuum. Yet rarely will there be absent a grave inconvenience excusing; except if the other needs for a brief time money which he will easily restore.

This is the counsel of beneficence, that we distinguish the mutuum by which, for an upright and suitable neighbor, a way of exercising an honest and fruitful trade is prepared, and the mutuum which is given to a needy person who already seems to be an overburdened debtor. A loan prudently granted for the sake of a trade [OCR uncertain: the printed word before artis causa appears as invalidae:; context indicates a useful/productive trade] is to be placed among the best and most useful works of beneficence; but a mutuum given to an overburdened debtor usually profits only the creditors, and not rarely sows discord between the benefactor and the obligated person. Wherefore then it is better to bestow some lesser thing by title of open alms or under the color of a covered mutuum, than truly to lend money which, useless to the borrower, will with moral certainty perish for the lender.

Preliminary note. The doctrine concerning loan for consumption and usury today presents almost no practical difficulty for the confessor. Therefore we treat this matter briefly, indicating the summary heads of this doctrine. Almost innumerable works have been written concerning loan for consumption and usury. Among modern moralists Tanquerey⁹⁰ has treated this matter most sufficiently.

⁹⁰ De iust. n. 864-906.

284. A loan for consumption⁹¹ is a contract by which ownership of a thing consumable by its first use and fungible is delivered to another with the obligation that a thing of the same value be returned at its proper time.

It is said: "of a thing consumable by its first use and fungible," to distinguish a loan for consumption from a loan for use and from hiring, in which a non-consumable thing is given with the obligation of returning the same thing individually. A loan for consumption is likewise distinguished from a deposit and the other contracts enumerated in the preceding paragraph for the same reason, and furthermore because the thing lent, under this its individual form, immediately passes into the ownership of the recipient, which does not occur in contracts of loan for use, deposit, etc.

Therefore the object of a loan for consumption is a thing consumable by its first use and fungible, e.g., wine, oil, and especially money. Every such thing, however, is unfruitful in itself. A thing can be fruitful: 1. naturally, as a tree produces fruits; 2. artificially or industrially, as a merchant with the aid of money buys merchandise, from the sale of which he makes profit; 3. civilly, as a leased house produces the price of the lease. Cf. above, n. 208.

⁹¹ Contract of loan for consumption (Darlehensvertrag).

285. Usury is defined by St. Thomas as "the acceptance of a price for the use of a thing lent for consumption,"⁹² or, considered objectively, "the price of the use of a thing lent for consumption." The Fifth Lateran Council, session 10, explains this definition more broadly: "For this is the proper interpretation of usuries: when, namely, from the use of a thing which produces nothing, without labor, without expense, and without risk, gain and offspring are sought to be acquired." Therefore the essence of usury consists in the acceptance of gain from a pure loan for consumption. For if gain is accepted by reason of another extrinsic title, e.g., emerging loss, risk, etc., it is not usury. Likewise, it is not usury if gain is indeed accepted from a loan for consumption, but by a gratuitous and not an onerous title.⁹³

Although according to the force of the words usury and interest are not distinguished, nevertheless, for the sake of clarity, it is better that usury always be taken in a bad sense, but interest (or return, or increase) in a good sense. Therefore usury is either gain from a pure loan for consumption or excessive gain⁹⁴ received from money lent, e.g., 30 percent. But interest is gain licitly received from a loan for consumption. Interest is distinguished as either legal, which is determined by the law of the country; customary, which is established by common usage in some business; or conventional, which is determined by agreement of the lender and borrower. Legal and customary interest is judged to be just. Conventional interest, however, is not just unless, after consideration of the circumstances of places, times, and persons, it corresponds to the gain ceasing and the risk to the principal which the lender must undergo. No other more exact measure can be given concerning the amount of interest. On April 18, 1889,⁹⁵ the Sacred Penitentiary, to the question whether it was lawful to receive eight or ten percent interest, responded: "Since it is dangerous to determine the fruit of money by way of a rule, the Venerable Father in Christ, the bishop making the request, is to decide the matter in individual cases according to the common practice observed by men of conscientious conscience in the respective places and times." I think that in our times, under ordinary conditions, interest exceeding 20 percent is usurious and unjust,⁹⁶ because it greatly exceeds the amount established in public banking institutions, commonly called banks. From this, however, I do not wish to condemn shares of industrial companies which give 30 percent or even 50 percent annually, because such an increase is not interest properly so called, but the fruit of commerce conducted. Usury taken in this evil sense is gravely punished also by civil codes⁹⁷ and induces an obligation of restitution.

⁹² S. theol. 2, 2, q. 78, a. 1.

⁹³ Cf. Billuart, De contract. diss. 4, a. 1 and 2.

⁹⁴ Usurious interest (Wucherzins). Usury is often taken in a broader sense for the abuse of any need of one's neighbor. Thus, e.g., we speak of a usurious price, a usurious wage, etc.

⁹⁵ Collect. de Prop. Fide n. 1702.

⁹⁶ In his time D'Annibale taught (Summula Theol. mor. II, 535): "As a rule, I would say that interest of seven percent is not immoderate; above ten percent, immoderate."

⁹⁷ Cf. German Penal Code § 302.

286. Principle. Usury properly so called is contrary to positive divine law, ecclesiastical law, and natural law.

Thus the most common opinion, which Benedict XIV in the book On the Diocesan Synod⁹⁸ calls the doctrine of the Catholic Church, and which almost only D'Annibale⁹⁹ contradicted in these words: "It is established by no manifest law, whether natural or divine, that usuries are illicit in themselves or otherwise forbidden. Indeed, rather, the contrary is inferred from the manner of acting of the Catholic Church."

Proof 1. It is contrary to positive divine law. From the many texts of Sacred Scripture¹⁰⁰ we select only two. It is said in Psalm 14: "Lord, who shall dwell in Thy tabernacle?" Among others there is enumerated: "He that hath not put out his money to usury." Therefore usury excludes from heaven. In the Gospel¹⁰¹ it is said: "Lend, hoping for nothing thereby." Concerning the meaning of this passage, see Billuart.¹⁰²

Proof 2. It is contrary to ecclesiastical law. There are five ecumenical councils which prohibited usury, namely, the Third, Fourth, and Fifth Lateran Councils, the Second Council of Lyons, and the Council of Vienne.¹⁰³ Likewise, Sixtus V reproved "the abyss of usuries, hateful to God and men, condemned by the sacred canons, and contrary to Christian charity." Alexander VII proscribed proposition 42: "It is lawful for the lender to demand something beyond the principal if he obliges himself not to reclaim the principal until a determinate time."¹⁰⁴ Cf. also propositions 41 and 42 condemned on March 2, 1679, by Innocent XI.¹⁰⁵ But Benedict XIV especially established a certain doctrine concerning usuries in his encyclical Vix pervenit of November 1, 1745.¹⁰⁶ The Code of Canon Law, canon 1543, also proposes the same doctrine.

Proof 3. It is contrary to natural law. Therefore St. Thomas says: "To accept usury for money lent is in itself unjust."¹⁰⁷ He proves this thesis in this manner: it is contrary to justice, and consequently to natural law, to sell that which does not exist or to sell the same thing twice. But the usurer does this. Therefore he sins against justice and natural law and consequently is bound to restitution. The major is evident. The minor is proved: in fungible things consumable by their first use, which are the proper object of usury, the things themselves and their use are morally the same. Therefore, just as it would be plainly ridiculous and unjust if a merchant, after selling wine for a just price, wished in addition to sell the use or consumption of the wine, so would one act unjustly if, besides the wine lent for consumption, he demanded something else for the use of that wine. Moreover, money, concerning which usury principally exists, is manifestly not morally distinguished from its use. Therefore nothing can be sought for the use of money lent for consumption; and if something has nevertheless been accepted, it must be restored. St. Leo the Great says beautifully: "Interest on money is the funeral of the soul."¹⁰⁸

⁹⁸ L. 10, c. 4, n. 2.

⁹⁹ L.c., n. 533.

¹⁰⁰ E.g., Ex. 22:25; Lev. 25:35-37; Deut. 23:19f.; Ez. 18:8 and 13.

¹⁰¹ Luke 6:35.

¹⁰² L.c.

¹⁰³ The texts are cited by Lehmkuhl, Theol. mor. I, n. 1302.

¹⁰⁴ Denz. n. 1142.

¹⁰⁵ Ibid., n. 1191f.

¹⁰⁶ Ibid., n. 1425ff., or better in the instruction of the Sacred Congregation for the Propagation of the Faith of 1873, where several decrees concerning usury are given (Collect. de Prop. Fide n. 1393).

¹⁰⁷ S. theol. 2, 2, q. 78, a. 1.

¹⁰⁸ Sermon 17 (16), Migne, Patr. lat. 54, 181.

287. Extrinsic causes legitimating interest. Although usury is never lawful and a loan for consumption properly so called must always be gratuitous, nevertheless extrinsic causes are present on account of which some increase or interest can be demanded in a contract of loan for consumption. St. Thomas¹⁰⁹ already sets forth such causes, and Benedict XIV¹¹⁰ expressly teaches this. Four causes or titles are wont to be enumerated: 1. risk to the principal; 2. a conventional penalty; 3. gain ceasing or emerging loss; 4. civil law or legal premium.

1. Risk to the principal¹¹¹ is a special, not general, danger by which it is prudently feared that the lender may not recover his property. Such a special danger is often present, especially if someone entrusts his money to certain banking institutions or debtors who are not very secure. It is evident that some interest can be accepted on account of such danger.¹¹² For a thing possessed outside danger is valued more than the same thing placed in danger.

2. A conventional penalty is established for the case in which the borrower, through culpable delay, defers the repayment of the principal beyond the stipulated time. For this cause to be sufficient and just, it is required that the penalty imposed be moderate and that the delay in payment be truly culpable.

3. Emerging loss and gain ceasing. Gain ceasing is the failure of some proximately expected gain which the lender certainly would have had if he had assigned the money lent to other uses at hand. Emerging loss, however, is the positive detriment which the lender must undergo because of the contract of loan for consumption. That these causes also suffice for demanding proportionate interest in a loan for consumption is evident of itself and is admitted by all today.¹¹³

¹⁰⁹ S. theol. 2, 2, q. 78, a. 2 ad 2: "He who gives a loan for consumption can without sin bring into the agreement with the one who receives the loan compensation for loss."

¹¹⁰ De synod. dioec. l. 10, c. 4.

¹¹¹ The principal (sors) is the same as what today is commonly called "capital."

¹¹² Thus also the Sacred Congregation for the Propagation of the Faith declared in 1645 (Collect. de Prop. Fide n. 117 ad 3).

¹¹³ Older authors disputed very subtly concerning these two titles of a loan for consumption. Cf. Cajetan, Comm. in 2, 2, q. 78, a. 2. Indeed, some doubted whether St. Thomas admitted gain ceasing as a sufficient title for a loan for consumption. Today those disputes are of little practical usefulness, since in the lending of money sufficient titles for moderate interest are always present. Billuart, De contract. diss. 4, a. 5, discusses the individual titles of interest excellently. D'Annibale (Summula theol. mor. II, n. 531) quite undeservedly cites St. Thomas (De malo q. 13, a. 4 ad 14) as though not even emerging loss were a sufficient title for receiving interest.

288. 4. Legal premium or civil law. From the sixteenth century onward it was sharply disputed whether civil law, in the absence of other titles, could render usury lawful. Today this dispute seems to be ended. For to the doubt: "Whether penitents who, on the title of law alone, received moderate gain from a loan for consumption in doubtful or bad faith can be sacramentally absolved without any burden of restitution imposed, provided they sincerely repent of the sin committed because of doubtful or bad faith and are prepared with filial obedience to stand by the mandates of the Holy See," the Holy Office responded on January 17, 1838: "Affirmatively, provided they are prepared to stand by the mandates of the Holy See."

In the same sense the Sacred Penitentiary responded several times, e.g., August 14, 1831; November 11, 1831; February 11, 1832; November 23, 1832.¹¹⁴ The Sacred Congregation for the Propagation of the Faith, gathering almost all the resolutions of the Sacred Congregations issued up to the year 1873, concludes in these words: "Although all other titles may be lacking ... the title of civil law alone can also be regarded as sufficient in practice, both by the faithful and by their confessors, who consequently are not permitted to disturb their penitents concerning this matter so long as this question remains under judgment and the Holy See has not explicitly defined it."¹¹⁵ The Code of Canon Law, canon 1543, establishes the same: "In the furnishing of a fungible thing, it is not in itself illicit to agree upon legal gain, unless it is clear that this is immoderate, or even upon greater gain if a just and proportionate title supports it."

The reason is that, by force of high dominion and by reason of the public good, there belongs to the supreme legislator the right of transferring ownership of this increase from the borrower to the lender; and this all the more because the subjects consent spontaneously. And in truth, in present times commerce would be impossible and the public good would be gravely injured if a moderate increase or interest were not permitted.

Other authors¹¹⁶ proceeded otherwise, thinking moderate interest to be lawful even without extrinsic legitimating titles. For in present times an increase or interest is demanded and accepted almost solely for money lent. But money today is not altogether sterile, but is truly, as it were, fruitful. Certainly money does not beget money as a cow begets a calf; but just as a rented house produces gain, so in almost the same way does money lent. Furthermore, money today is the principal instrument of trade and can immediately and without any difficulty be converted into fruitful things. Hence a contract by which money is delivered to another under the condition of legitimate interest is no longer a proper loan for consumption or usury, in which a sterile thing is delivered, but a contract of its own kind.¹¹⁷ Consequently, the most grave prohibitions enacted against usury can no longer be applied to money lent. Whether this opinion is true does not clearly appear. For although money today can much more easily be converted into fruitful things than in ancient times, it does not yet follow from this that it has changed its nature and of itself has become fruitful.

For practice. All, whether clerics or laity, can with a safe conscience receive moderate interest, indeed even compound interest or interest upon interest,¹¹⁸ from money lent, so that there is never an obligation of restoring such interest received. For today the extrinsic titles indicated above are always present. But what interest is moderate depends upon risk to the principal, gain ceasing, and emerging loss. Therefore, in regions where there is a legal rate or an admitted custom, this is to be followed. Indeed, something more can be accepted if the money is delivered to those companies commonly called joint-stock companies, sociétés par actions. But it is never lawful to abuse the need of the borrower in order to extort immoderate interest, since otherwise both justice and charity are injured.¹¹⁹

¹¹⁴ Cf. Denz. n. 1612 and note 1.

¹¹⁵ Collect. de Prop. Fide n. 1393.

¹¹⁶ Lehmkuhl, Theol. mor. I, n. 1313; Weiss, Apologie des Christentums IV, 794ff.; Tanquerey, De iust. n. 902; Henry Pesch, Lehrbuch der Nationalökonomie V, 226ff.

¹¹⁷ It is called a contract of credit (Kapitaldienstvertrag).

¹¹⁸ Compound interest (Zinseszins, intérêt d'intérêt, compound interest).

¹¹⁹ Since in ancient times grave penalties were established against every usury, some attempted to evade these penalties through disguised usury by entering into the triple contract or the "Mohatra" contract. The triple contract is one contract of partnership and two contracts of insurance. E.g., Peter asks Paul for 10,000 francs to carry on some business, promising him a portion of the gain, namely, 1,000 francs. Behold the contract of partnership. For Peter and Paul conduct a business in which Paul furnishes the money and Peter the work. When this contract has been made, Paul, who fears risk to the principal, offers Peter 300 francs so that he may be willing to insure the principal. Behold the first contract of insurance. Paul, furthermore fearing for the profit, offers Peter another 200 francs so that he may be willing also to insure the profit; and this is done. Behold the second contract of insurance, by which the triple contract is completed. Therefore, for the 10,000 francs lent, Paul receives 500 francs, or 5 percent; cf. the constitution of Sixtus V, Detestabili avaritiae, 1586. - The Mohatra is a species of purchase for disguising usury. Behold an example: Peter asks Paul for 1,000 francs. Paul responds that he can neither lend this money gratuitously nor with usury, since usury is gravely prohibited; but he proposes this manner of acting: I sell you my horse for 1,100 francs, and you give me a promissory note in which you promise that after a year you will pay this sum. Immediately you sell the horse back to me for 1,000 francs, which sum I deliver to you. Therefore Peter has the 1,000 francs sought, but after a year he must pay 1,100 francs, or 10 percent, for the money lent. On March 2, 1679, Innocent XI condemned proposition 40: "The Mohatra contract is lawful, even with respect to the same person and with a contract of resale entered into beforehand, with the intention of gain" (Denz. n. 1190).

289. Scholion 1. On montes pietatis, savings banks, and banks.

A mons pietatis is a fund of money or other lendable things collected for this purpose: that the poor, upon giving a pledge and moderate interest, may receive from it on loan those things which are necessary for them. Today they are called pawnshops, Pfandhäuser, monts de piété. The Fifth Lateran Council¹²⁰ and the Council of Trent¹²¹ approved montes pietatis, first established at Orvieto in 1463 or Perugia in 1467. At that time they existed for the relief of the poor, since only very moderate interest was demanded; but now, since these montes pietatis have often passed to private persons and the interest demanded is not rarely excessive, for various reasons montes pietatis are sometimes rather mountains of iniquity. It is greatly to be desired that the government diligently supervise and restrain institutions of this kind.

Savings banks (Sparkasse, caisse d'épargne, savings-bank) are established either by municipalities or by private persons to receive sums of money, not of such great quantity, and to pay suitable interest for the money received. The purpose of these institutions is to foster thrift, especially among persons of moderate fortune; this is certainly excellent. It is lawful to place money in these savings banks, as the Sacred Penitentiary expressly declared on February 25, 1836.

Banks (Bank, banque, bank) exist everywhere in the world and are of great service to commerce of different kinds. Nevertheless, as experience proves, they can also produce no small inconveniences and losses. Since it happens not rarely that a priest, especially if he is a pastor, must administer money or that his counsel is sought in monetary affairs, it will be very useful if he endeavors to know the different kinds of banks. According to modern practice all persons, even priests, can place money in these banks and purchase both "shares" and "bonds,"¹²² provided scandal, cooperation in evil, and speculation on the stock exchange properly so called are avoided. Whether money belonging to churches and other pious causes can be placed in savings banks or banks depends both upon the condition of those institutions and upon particular ecclesiastical statutes.

¹²⁰ Session 10 (Denz. n. 240).

¹²¹ Session 24, c. 8ff., De reform.

¹²² Cf. Holy Office, April 15, 1885.

290. Scholion 2. On the contract of census. A census (Rente) is a right of receiving an annual pension from a thing or person. This annual pension was called a canon or revenue. There was distinguished a reservative census, arising from the delivery of an immovable thing; a consignative census, or census simply so called, purchased by delivery of some "capital," e.g., I deliver 10,000 francs to you on the condition that until death I receive 800 francs annually; a real census, which is, as it were, a servitude imposed upon some thing and is almost the same as emphyteusis,¹²³ e.g., I deliver these fields to you so that you and your heirs may pay me 100 francs annually from their fruits. There are still other divisions, such as personal, pecuniary, and fructuary census, redeemable and irredeemable census, etc.¹²⁴ Whatever may be true of the old laws, today a census is lawful, provided there is a just proportion between the census and the price. For a census is after the manner of interest. But today interest or a loan for consumption is lawful, provided it is moderate.

¹²³ Hereditary lease (Erbpacht).

¹²⁴ Cf. Billuart, De contract. diss. 5, a. 1.

571. Credit (credere alicui, to trust someone, to have faith in someone; handelsvertrouwen) indicates faith given to someone, or confidence in his truth and honesty; hence it signifies a thing whose use is conceded and entrusted to another, or a thing exchanged against the promise of another to return it. Therefore the contract of credit (toevertrouwing) is a real contract by which a thing is handed over to someone under the obligation of returning it afterward, whether the same in individual, or an equivalent in species; or an agreement by which one entrusts the use of his own thing to another, who after some time is held to restore it.

By reason of foundation, one kind is real if the confidence is founded on the things of another, namely, of the debtor, which are brought in for the security of the thing handed over (credit garanti; gewaarborgd vertrouwen of krediet); another is personal if the confidence is founded only on the personal qualities of the debtor.

By reason of object, it is specified according to the diverse nature of the thing credited, which can be non-consumable by first use and non-fungible, whose use alone is conceded but dominion is reserved, and which must be returned in individual; and then it is called commodatum. Or it can be a fungible thing and consumable by first use, whose use is not without alienation of dominion, which therefore is conceded with it, whence it must be returned in species, and then it is mutuum (a. 1874).

S. Th. II-II, q. 78; I-II, q. 105, a. 3, ad 3; III Sent., d. 37, a. 6; Q. D. de Malo 13, a. 4.

574. Mutuum¹ (pret de consommation, simple pret; verbruikleening, leening tot verbruiking of in verbruiksartikelen) is the concession for a time of a fungible thing or of a thing consumable by first use (a. 1892); whence three things are required for its essence:

¹ There is an immense literature on mutuum and usury among theologians, philosophers, jurists, and economists; among Catholics, Protestants, Jansenists, rationalists, socialists, etc. We indicate only certain special writings which can be more useful to priests: Alb. Weiss, Soziale Frage und soziale Ordnung; Pesch, Zinsgrund und Zinsgrenze; A. Vermeersch, in Quaestiones de Iustitia; E. Van Roey, De iusto auctario ex contractu crediti; A. Rijcken, De Leer en de Praktijk der Kerk in zake leenrente; J. De Wit, Het Renteverbod in de middeleeuwsche economie.

1. A fungible thing, consumable by first use, which someone cannot use except by consuming it, either naturally, namely, by destroying it, for example, food and drink; or morally, namely, by alienating it, for example, money, which, if you pay it, perishes for you;

2. The handing over of that thing: for it is a real contract;

3. The obligation of restoring it in the same species, quality, and quantity after some time.

Hence mutuum differs:

1. From commodatum, letting, and deposit: a) because in mutuum the thing must be fungible, otherwise in the others; b) because the thing is not to be returned in individual; c) because in mutuum the dominion of the thing is transferred, and not in the others; and therefore d) in mutuum the thing perishes for the one receiving, in the others for the one handing it over (a. 1893);

2. From donation, in which a thing is handed over to another without any obligation of restoring it;

3. From sale and exchange, in which the thing is to be returned not in the same but in another genus;

4. From exchange, in which one money is immediately given for another diverse money, for example, gold for silver.

575. Obligations arising from mutuum are:

A. For the lender:

1. To hand over a good and whole thing; but if the thing labors under a harmful defect, he must manifest it; otherwise, if he knew it, he is held concerning damages, for example, if he hands over wine which soon turns sour;

2. Not to demand the thing back before the established time, or the time defined by the judgment of prudent men;

3. In itself and with special circumstances excluded, not to demand more than the borrowed thing was worth (a. 1898-1901).

B. For the borrower:

1. To return the thing received in mutuum, at the established place and time or at the place and time defined by the judgment of prudent men, in the same species, quality, and quantity, whether the price has increased or decreased; and therefore, for money, it suffices to give the same numerical sum (a. 1895);

2. But if it is impossible to return in the same species, he must restore the value for the time and place in which the thing is to be returned;

3. If he does not return the thing or its value at the due time, he is held to pay the rate of legal interest from the day of summons or juridical demand (a. 1895-97; 1902-04).

We must treat: 1. of the nature of loan for consumption; - 2. of profit not to be perceived from loan for consumption, or of usury; - 3. of titles excusing from usury, or of loan for consumption with stipulation of interest; - 4. of certain loans for consumption in species.

1099. • NOTIONS. Loan for consumption (pret de consommation ou simple pret) is a contract by which a thing consumptible by the first use is handed over to another, with the obligation of returning a similar thing, in its own time and in the same species and goodness.¹¹

It is a real contract, which is perfected only by the handing over of the thing. - He who gives the loan for consumption is called the lender; he who receives it, the borrower; what is given is called the principal.

The profit which is licitly perceived from a loan for consumption is called interest or increment, commonly interesse; but what is illicitly perceived is called usury. Interest is either legal, indicated by law, or vulgar, commonly received among men, or conventional, established from contract.

1100. The object of loan for consumption is not, as in lease and loan for use, things which can be preserved, whose use therefore can be distinguished from the thing, but things consumptible by the first use, which therefore are destroyed by the use of consumption to which they are naturally ordered, for example grain, wine, etc. In these, use cannot be separated from ownership; wherefore the thing lent for consumption necessarily passes into the ownership of the borrower, as St. Thomas says (2. 2, q. 78, a. 1). Money can be computed among things consumptible by the first use, because money of itself is ordered to making exchanges; whence it is alienated by the one using it, and perishes for him, and is morally consumed by the first use (III, 754).

1101. PRINCIPLE. There is given a precept of charity of conceding a loan for consumption to those who are situated in necessity and will have whence to restore. For charity obliges one to assist a neighbor constituted in necessity, by conceding to him either the thing itself which he needs, or at least the use of the thing. Hence, a loan must be made even to the rich who, on account of a peculiar circumstance, for example to avoid litigation, need a loan; but not to those who ask the same in order to increase riches. The words of the Lord make for this (Matt., 5:42): From him who wishes to borrow from you, do not turn away. - The reason for the limitation is that it belongs to the nature of loan for consumption that a similar thing be returned; wherefore the contract of loan for consumption cannot have place with those who do not even have in hope whence they may return. Therefore these must be assisted by alms (see n. 488).

The precept of furnishing a loan rarely presses, on account of the very grave annoyances of recovering what was conceded by loan.

VARIOUS OBLIGATIONS arise from the contract of loan for consumption entered upon:

1. The lender is held to warn about a vice of the thing; otherwise he must repair damage. Likewise, he is held not to reclaim the thing before the time, unless he himself is in equal necessity. But if the time was not prefixed, it must be defined by the judgment of prudent men; otherwise, the loan would harm rather than profit the borrower (III, 754 ff.).

2. The borrower is held to furnish for fortuitous chance, and to return the thing in the same quantity and quality at its own time or when the lender has asked. Indeed, restitution must be made to one not asking, if it is not asked on account of forgetfulness, reverence, or distance. Yet the lender who does not ask, when he easily can, is considered to indulge a delay (III, 755).

1102. • DEFINITION. In the broader sense, usury is called every profit which someone perceives from money handed over to another in any way whatever, for example for constituting a census, for entering upon partnership, etc. In the strict sense, as it is taken here, usury is profit immediately proceeding from loan for consumption (III, 758), that is, precisely by force of the loan, another title being excluded, or, to use the words of the Fifth Lateran Council: Usury is the profit which one endeavors to acquire by no labor, no expense, no peril (Sess. X, Bull Inter multiplices).

DIVISION. Usury is twofold: 1. real, which is expressed by pact; - 2. mental, which is intended in the mind, without express stipulation.

Usury is called palliated or implicit when it lies hidden under another contract, for example purchase, lease, etc. (III, 761).

1103. • PRINCIPLES. I. Usury, or profit precisely by force of loan for consumption, is altogether illicit. In other words: Loan for consumption is an essentially gratuitous contract, and both Positive and Natural Law prohibit that one endeavor to acquire profit from a loan for consumption by force of the loan. The first is established from the Encyclical of Benedict XIV, Vix pervenit (1 Nov. 1745), by which the Supreme Pontiff confirms all laws previously enacted, especially those of the Council of Vienne (1313), the Fifth Lateran Council (1515). Cf. Lehmkuhl, I, n. 1301; Bucceroni, Ench. mor., p. 97. - The reason for the second is that it is unlawful to exact profit for the use of a thing not one's own. There is indeed no injustice if, for the utility which the lender loses, he exacts compensation, likewise for the burden which perhaps he undertakes, or which is included in his action (cf. n. 1035); but to exact profit solely because of the utility which the borrower perceives is nothing other than to exact the profit of a thing which has already passed into the ownership of another through handing over, indeed which in many cases already does not exist, since through its use it has already been consumed (III, 759).

Do not say: To furnish another the occasion of acquiring something, or to lack some thing which profits another, are estimable by price. We deny both assertions, on account of the reason given n. 1035, namely that only that is estimable by price which contains some burden in itself. Besides, how could the lack of a plainly useless thing, as is supposed, which immediately passes into the ownership of the borrower, and the imposition of the burden of returning a similar thing at its own time, be called estimable by price?

Therefore usury does not consist in the oppression of the poor alone; even when made toward the rich, it is bad. Read the words of the Bull of Benedict XIV.

Note. The things just said have force for real usury and for mental usury, namely if the loan for consumption were made principally on account of hope of gain, although hoped for from mere benevolence, so that without such hope the loan would not be given. And hence it is why this 42nd proposition was condemned by Innocent XI: "It is not usury when something beyond the principal is exacted as owed from benevolence and gratitude." The reason for the condemnation is that benevolence can never oblige to furnishing gain, since it can be shown in many other ways (III, 762; H. Ap., X, 143).

1104. • II. Usurers and their cooperators are held concerning usuries exacted as concerning a stolen thing. The reason is that a usurious contract is null by every law; but the naked handing over of a thing does not transfer ownership of it (III, 783). See the things said concerning the possessor of bad faith (n. 940 ff.).

Yet the lender can retain what the borrower gave beyond the principal merely gratis, or so that he might show himself grateful, or so that he might prepare for himself a new loan (III, 763).

In the case in which the lender doubts whether the borrower gave gratis or as the price of the loan, one must distinguish: when the lender received in good faith and afterwards, when doubt supervenes, cannot become certain, then he can licitly retain it for himself. But otherwise, if he already received in doubt, whatever others say; because with doubt no one can legitimately begin possession. For the rest, if the borrower was not poor, nor illiberal, nor gave moved by some demand or threats of the lender, then it can be presumed that he gave gratis (H. Ap., X, 144).

1105. PRACTICAL RULE. For discerning what pacts in a loan for consumption are licit and what are illicit, when no extrinsic title accedes, one must attend to the rule which St. Thomas hands down: "Every burden estimable by price, imposed in a loan for consumption as a debt from justice, is true usury" (2. 2, q. 78, a. 2).

Hence: 1. If what is exacted is not measured by money, as benevolence, friendship, it is not usury; provided that in sign of benevolence some benefit in particular is not exacted, as is clear from the 42nd proposition mentioned above.

2. It is not usury to exact something already otherwise owed from justice, for example that the borrower cease from vengeance, from unjust vexation, etc.; because a new burden is not imposed. But it would be usury to exact a debt which is owed from charity alone, for example that the borrower buy from oneself or from one's relatives; because, when such a pact has been placed, a burden of justice is added, which is estimable by price (cf. above n. 1036, Quaer. 2, n. 2). See St. Alphonsus, III, 774, 780, 781; H. Ap., X, 158-160.

1106. IT IS ASKED. What can the lender recover when THE VALUE OF THE THING grew or decreased during the time of the loan?

Resp. 1. If in good faith attention is not given to the increase or decrease which will supervene upon the thing lent, a pact can be made in such a way that the thing be returned in the same quantity. Likewise, if it is equally doubtful whether the value of the thing is to be increased or diminished. The reason is that, since the peril is equal on each side, equality by this very fact is already preserved in the contract.

2. If it is certainly or more probably foreseen that the value of the thing is going to be increased, it is not licit to agree that it be returned in the same quantity: for example, if a bushel of wheat is now worth three lire, and is going to be worth four at the time of restitution, it is not licit to agree that just as many be paid, or that a whole bushel be returned. The reason is that, in this way, more would be accepted than was given.

Except unless the lender had determined to preserve the thing until the time of increased price; because then he can exact more by reason of profit ceasing. Yet the valuation of peril, or of expenses for preserving the thing, must be deducted.

3. If certainly or probably the thing at the time of restitution is considered going to be of less value, the lender will be able to seek a greater measure, so that he may preserve himself unharmed (III, 782; H. Ap., X, 160).

As concerns money, it suffices that it be restored according to the same value, "because in money one does not think of the bodies, but of the quantity." Yet a pact is licit that it be returned in the same species and in the same number of coins, at least if the peril of increase or decrease is common (Sacred Penitentiary, 21 Jan. 1873; A. S. S., vol. 7, p. 221).

TITLE, as it is taken here, is a certain circumstance extrinsic to the loan for consumption, with regard to which it is licit to exact something beyond the principal. Several titles are commonly admitted by theologians, namely: 1. damage emerging; - 2. profit ceasing; - 3. peril of the principal; - 4. conventional penalty. To these today the title of civil law has acceded.

1107. PRINCIPLES. I. Damage emerging and profit ceasing are legitimate titles of perceiving something beyond the principal. For no one is held, at least from justice, to undergo some detriment for the favor of another, without due compensation. If damage emerging or profit ceasing is not certain, but only probable, something beyond the principal can still be exacted, according to the estimation of the peril of damage or of the hope of gain (III, 768, 770).

Hence, it is probably licit to exact something beyond the principal if the loan for consumption is made for a long time, for example for three years. For it is morally impossible that the lender, on account of prolonged waiting, should not suffer some peril, damage, or inconvenience, or at least that he should not be impeded from exercising some act of liberality or of another becoming operation.

Note. To exact interest of this kind, three things are required: a) that the loan for consumption truly be the cause of damage or of profit ceasing; b) that no more be exacted than is the gain which is hoped for from another licit contract, according to the estimation of hope and peril, and after expenses have been deducted; c) that the interest be drawn into pact from the beginning (III, 760, 769; H. Ap., X, 149 ff.).

1108. II. Extraordinary peril of losing the principal is a just title of exacting something beyond the principal. The reason is that to expose oneself to such peril is truly estimable by price. Whence St. Thomas says thus (opusc. 73, c. 6, fin.): "Things which are possessed outside peril are valued more than the same things existing in peril." It is confirmed from the words of the Fifth Lateran Council already cited: "Usury is the profit which one endeavors to acquire by no labor, no expense, no peril"; and from the declaration of the Sacred Congregation de Propaganda Fide, of the year 1645, where peril of the principal is numbered among the titles excusing from usury (Bull. S. Congr. de Prop. Fide, I, 124, 131).

But it is required: a) that the peril be extraordinary, and this by reason of the loan alone: for example, if the borrower is of slight fortune, a prodigal, etc.; for nothing can be exacted on account of common peril, for example of fire, to which any sublunary thing is exposed; b) that it not stand by the lender why the principal is not secured, for example through pledge or suretyship (III, 765).

1109. • III. Conventional penalty is similarly a just title of exacting something beyond the principal. Reason: an accessory pact is licit, by which provision is made for the firmness of the contract, and the negligence of the other party is averted. But conventional penalty consists in this, that the borrower obligates himself to paying something beyond the principal if he does not restore within the predefined time.

Now it is required: a) that the delay of the debtor be notable and culpable; - b) that the mind of gaining through the appended penalty be absent; which mind is presumed if the time is constituted at which the debtor is known not to be able to pay; c) that the penalty be moderate and proportionate to the fault. But the penalty is to be paid before the sentence of a judge, because it is a pact rather than a mere penalty (III, 766, 767).

1110. • On the title of civil law, or of custom.

I. EXISTENCE OF THE TITLE. Today's laws, through a formal disposition, commonly attribute to lenders the right of accepting some increment from a loan for consumption; and where such law is lacking, CUSTOM, everywhere, concedes the same faculty. Nor nevertheless is the disposition of the law everywhere the same. For in some places, a legal rate has been established, beyond which nothing can be exacted; while in other places, the stipulations of the parties are circumscribed by no limits. But a certain vulgar increment is observed almost everywhere, not otherwise than as a price for other wares. For determining this, what is transacted in the mercantile forum (bourse; stock exchange), which is published daily in public sheets, especially makes.

In France,⁰¹ the legal rate is five percent in civil matter, and this cannot be exceeded; only in commercial matter is a conventional rate admitted.

In BELGIUM the French law has been abrogated; liberty of perceiving whatever increment is conceded.

In AUSTRIA,⁰² a rate of five percent can be constituted if in the contract the increment was stipulated without determination, or if interest is owed by force of law.

In SPAIN,⁰³ a conventional rate is admitted, in defect of which nothing can be exacted. Yet by reason of culpable delay, the legal rate of six percent is in force.

In GERMANY,⁰⁴ the legal rate, in defect of a conventional one, is four percent. A conventional rate is also admitted, which, if it exceeds six percent, the borrower can free himself after six months by restoring the principal, nor can any pact take away this right.

In ITALY, besides the legal rate which, in defect of agreement, can be exacted, that is, five percent in civil matter, six percent in commercial, a conventional rate is admitted, which civil law indeed (art. 1831) leaves free to each one to define; but natural law always forbids an immoderate or usurious rate.

1111. II. LEGITIMACY OF THE TITLE. Whether civil law, or prevailing custom, is a just title of perceiving something beyond the principal?

1. The mind of theologians. On this question, theologians go into diverse ways. There are those who deny it; because civil law can never permit what divine and natural law forbids.⁰⁵ There are those who more rightly affirm it; but the patrons of this opinion by no means agree in alleging reasons.

Some explain the matter from the end of lending, which on the part of the lender can be either gratuitous or gainful.⁰⁶ - Others say that the furnishing of consumptible things, such as is had in loan for consumption, can become the matter of an onerous contract, if this is pleasing to the contracting parties; whence, when the nature of the contract has been changed, nothing now stands in the way of perceiving a price from such furnishing, that is, from the leasing of money.⁰⁷ Others opine that to the supreme legislator, by force of high ownership, or by reason of the public good, belongs the right of transferring ownership of the increment from the borrower to the lender, the more so because subjects spontaneously consent, on account of the benefit coming thence to the whole society. For the nerve of commerce, they say, is loan for consumption, under its multiple form, by which it comes in a purchase-sale made, money not having been counted out. Therefore, once the aforesaid right of the legislator is admitted, the conclusion is now in the open: namely, that by force of civil law what is conceded beyond the principal can licitly be perceived.⁰⁸

Others flee to the triple contract, which they contend is in loan for consumption, at least when the borrower enters upon it for making gain.⁰⁹ Cf. n. 1159, note.

Finally, others, with whom we agree, teach that the present-day title of civil law or custom is not diverse from the other titles commonly received from ancient times, but rests altogether on them and exhibits their index and summary, attending especially to profit ceasing and to peril of the principal. And indeed, in our times, the conditions either of the state or of the economic value of money are altogether changed, insofar as money today is valued from the hope of fruitful consumption and the trust which it wins. From this it has happened that lenders not only generally intend that they make gain for themselves in whatever licit mode, but also require compensation for this hope, or profit ceasing, through interest. Add that in the handing over of a loan, peril of the principal is by no means fictitious, as is demonstrated from daily experience. Therefore the law, or custom, furnishes only one thing: namely, it indicates the value of money, according to common estimation, determines the interest which today corresponds to this value and can licitly be perceived.

Nor does it stand in the way that in some particular case no title is present from the commonly received titles; for that defect is compensated abundantly by a greater good, that is, by the common good, which, by the observation of some universal norm, is more efficaciously promoted, the more so because through it oppressive usuries are eliminated. Whence, the law remains just, although, not otherwise than was said about prescription, the presumption on which it rests fails in a particular case.

1112. 2. The mind of the Holy See. What the Church taught in ancient times, "that nothing can be perceived by the lender by force of the loan for consumption," this it firmly holds even now. Yet by reason of circumstances, especially from the fact that those titles which formerly were annexed to this contract only rarely are universally connected with loan for consumption, the Holy See today generally permits moderate interest to be stipulated and perceived. But in the decrees there is added the most weighty clause: "(It is permitted to perceive an increment) until the Holy See has issued a definitive decision."

Here is the sum of the Responses which have been published up to now:

a) The faithful who in good faith perceive interest according to the legal rate without another title are not to be troubled (Sacred Penitentiary, 16 Sept. 1830). - Similarly, those are not to be troubled who follow the practice introduced of accepting eight percent of annual gain from moneys given in loan (Holy Office, 18 Dec. 1872). The Bishop in individual cases, when it is a question of an increment surpassing the legal rate, is to decide the matter according to the practice of the timorous (Sacred Penitentiary, 18 Apr. 1889). But those who in bad or doubtful faith used the benefit of the law sinned, acting against conscience, but they are not held to restitution (Sacred Penitentiary, 17 Jan. 1838).

b) Priests are not to be troubled who contend that the law of the prince is a sufficient title of perceiving something beyond the principal, without another title (Sacred Penitentiary, 16 Sept. 1830). Priests conduct themselves more harshly and severely toward the faithful if they deny absolution to those who perceive an increment according to the norm of the law (Sacred Penitentiary, 11 Nov. 1831). Cf., with respect to the aforesaid Responses: Lehmkuhl, I, 1316, note; Gaude, ed. op. mor. St. Alph., II, p. 221 ff.; Schindler, II, p. 636; Bucceroni, Enchir. mor., n. 858; Crolly, II, 458.

From the things said you will resolve: 1. It is licit to perceive the legal increment, unless this is evidently unjust; for presumption stands for it. When the legal rate is lacking, one must stand by the vulgar: for the prevailing custom of upright persons has the force of law, and

common estimation is a sufficient argument of justice in the affairs of this age (Crolly, II, n. 465 ff.).

2. It is licit, in a loan for consumption, to exceed the legal or vulgar rate, if this is less than that which would be permitted to be perceived on account of common titles. Justice of itself does not seem to prohibit this, provided titles for the excess of increment are evidently present, and the borrower is forewarned. For such excess is not perceived except by title of compensation for the inconvenience by which the lender is burdened. But compensation of itself can be made to equality (Crolly, II, 465).

It is said: a) justice ... does not seem to prohibit this; for often charity forbids it, namely if the borrower is easily oppressed by such an increment and cast into misery; b) of itself; for by accident this can be prohibited, even by reason of justice, for example when the sentence of a judge accedes reducing the increment to the legal rate; c) provided titles are evidently present; for the danger of hallucination is very great, since greed of possessing easily invents for itself titles which are plainly lacking; - d) provided the borrower is forewarned; otherwise he does not seem to consent to the excess.

BEFORE THE FACT, therefore, it must with the greatest difficulty be indulged that someone exceed the legal or vulgar increment. AFTER THE FACT, this doctrine must be used prudently, lest restitution be imposed to which the lender is not held.

Note. On the conventional rate, D'Annibale, II, 535, writes these things: "I would say that interest of seven percent is not immoderate; above ten percent, immoderate; but what stands between these must be judged from peculiar adjuncts, but cautiously and soberly."

3. Anatocism is licit, that is, the perception of interest from interest itself not yet paid. This is permitted from civil law,⁰¹ but not in Germany, unless it is a question of savings banks, credit banks, and banks.⁰² And more probably it also has force for the forum of conscience, provided the new interest is liquid. For that which has not been paid obtains the aspect of principal. Yet for this it is required that either a pact concerning interest of this kind has preceded, or damage comes to the creditor from delay of payment, or it is decreed by law as a penalty against borrowers culpably in delay (Gousset, in French Civil Code, art. 1154).

Under this title we shall briefly discuss: 1. Mounts of piety; - 2. savings banks; - 3. banks.

1113. I. On Mounts of piety. A Mount of piety can be defined: an accumulation of moneys or other lendable things collected for this, that the poor, a pledge having been given, may be able to receive from it by loan those things which are necessary to themselves.⁰³

The conditions of Mounts are the following: 1. Whatever is given by loan from them must be given for a certain time, for example for a year; but nothing for an indeterminate time. 2. It is licit to furnish loan to the poor only, unless the Mount is so abundant that, without damage of the poor, others also can be satisfied. 3. The borrower must hand over an equivalent of the thing or money lent; and this, unless he returns the thing or money at the established time, must be sold at auction. Then, when the price which is owed to the Mount has been retained, the remainder is restored to the owner of the pledge, if he can be found, or to other poor persons, or even to the Mount itself, if it is poor (III, 765; H. Ap., X, 135).

It is useful to note: a) The Fifth Lateran Council approved the Mounts of piety first erected at Perugia, and the Council of Trent (Sess. 22, c. 8) committed them to the care and visitation of Bishops. It is more probable that they can also be instituted by private persons, unless civil law stands in the way, for example in France, art. 411. b) In them some increment is licitly exacted by title of the expenses and burdens which are sustained by them. Indeed, from the concession of the Holy See, from time to time something more is perceived for other pious uses; yet in such a way that this perception made from another title be made clear to borrowers, and be distinguished from usury from the loan (A. S. S., IV, p. 27-32; Can. Cont., 32, p. 592).

1114. • II. On Savings Banks. A savings bank is called a certain chest instituted in most cities, into which craftsmen, servants, and others contribute money, about to perceive thence some modest gain.

Money collected in this way is expended by a group of men who have bought shares or entered upon a society, a hypothec having been accepted on immovable goods, so that they may seek greater gain. Thus, for example, six coins for a hundred come to the curators of the Bank who give the money credited to them by loan; four are given to depositors; two being retained for expenses and any damages (Kenrick, tr. XI, n. 116).

The placements of money which are made in Banks of this kind are licit. For the societies to which those moneys are committed sell to the depositors a right to an annual redeemable pension, and sometimes also a right to be shared in indeterminate gains; therefore, under the name of loan, there is a true sale and purchase of a census. Hence, when the Sacred Penitentiary was asked about this matter, on 25 Feb. 1836, it responded: "As already at other times, nothing stands in the way."

1115. III. On Banks. Public banks of bankers exist by force of a contract of society entered upon among several persons contributing money, which they do not have power to reclaim, but from which they expect an uncertain annual census; namely that part of the fruits of the money which the directors of the Bank shall have adjudged to them every six months. - The part of the money contributed by individuals is called a share. Individuals indeed can alienate this, but the society is not for that reason taken away; for he to whom the share has been transferred occupies in the society the place of the other who withdrew. From competent authority power is given to the society of issuing chirographs (Crolly, II, 604; Bouvier, de Contr., c. 3, a. 3, § 1 and 2).

The ends of Banks are: 1. that the money of merchants and of others be deposited with them, either for the sake of security or even of a modest increment, which afterwards can be withdrawn according to the rules either of deposit or of loan for consumption; - 2. that money can be accepted from them by loan, at legal interest; 3. that exchanges be moderated.

1116. The directors of Banks (banquiers) and those cooperating with them sin: a) If they continue to accept deposits after they know that they are unequal to paying; for they deceive the trust of depositors, with grave damage to them. b) If they issue chirographs beyond the limits designated in the charter of incorporation; for thus they seek gain from monetary paper issued without legitimate authority, and cause it to become cheapened. c) If they exact excessive increment, or from bills of exchange a gain greater than that which the general consensus of money-changers bears. d) If they use deposited money for promoting their own utilities, whether because from it they buy shares in another Bank, or because they use it in any other way against the laws of the Bank; for thus they abuse the confidence of the creditors or partners of the Bank, and perhaps expose the money to risk (Konings, 931-956).

You will ask: what can BANKERS receive by occasion of loan?

Resp. They can receive at least six percent, according to the rate established for merchants; for they exercise the commerce of money. - Indeed, in several places, seven percent is legitimately conceded to them, on account of the various perils and labors which they must undergo for securing the money or transferring it elsewhere (Gury, I, 930).

It must be treated 1° concerning the nature of the contract of loan for consumption; 2° concerning profit perceived from loan for consumption, or concerning usury; 3° concerning titles excusing from usury.

Note. - Lender and one lending in this Chapter is understood as "the lender"; borrower, "the borrower"; to lend, "to lend."

928. • The word loan for consumption, according to the force of the name, signifies that something from mine becomes yours and reciprocally that yours, which you have received, again becomes mine. Sometimes it is taken for the very thing handed over by loan for consumption; but sometimes, and more often, for the contract by which that thing is handed over to another for use. In this last sense it is accepted here.

Loan for consumption is usually defined as a contract by which a thing consumable by first use is handed over to another, with the obligation at the stated time of returning a thing, not indeed individually, but the same in species and goodness.

Things consumable by first use (fungibles) are those which by their nature are destroyed and consumed for assisting human necessities, as bread, wheat, wine, oil, salt, fruits, etc. Likewise money, which, although it is not consumed nor perishes in itself, nevertheless perishes for the one expending it.¹

Hence loan for consumption differs from loan for use, lease, and deposit: 1° because in loan for consumption the thing ought to be consumable by first use, otherwise in the others; 2° because the thing is to be returned not in individual, but only the same in species; 3° because in loan for consumption the dominion of the thing is transferred, and not in the others; 4° and for this reason in loan for consumption the thing perishes for the receiver, in the others for the one handing over.

Moreover, the reason why in loan for consumption strictly and properly so called the dominion of the thing is transferred is that, since the borrowed thing is consumable by first use, a use of this kind would not be licit without dominion itself. Hence all expenses and perils of the thing handed over fall to the borrower, as to the true owner. (m) p. 482.

929. Principles. - I. There is given a strict precept of lending with respect to the poor who are in true necessity and will have that from which they may restore. The reason is that there is present a strict obligation of charity of assisting a neighbor placed in that necessity according to the rules and principles established where charity toward neighbor was treated.

More often the precept of loan is absent toward the poor, from the fact that they are not presumed to be going to have that from which they can return an equivalent. But then the precept urges of some alms to be bestowed on them. I have said: of some; because you are not bound to furnish as much alms as the poor person was asking for as a loan. For there are also others who can and are bound to help.

II. There is given a precept of granting a loan also to the rich who, on account of a peculiar circumstance, need it exceedingly; but not to those rich persons who request the same in order to increase wealth. The 1st reason is that the precept of charity binds us toward all men, even the rich, and demands that we willingly furnish this which we would wish to be furnished to ourselves in a like case, at least if we can assist them by loan without inconvenience. But the 2nd reason is that rich persons of this kind are constituted in no necessity, and therefore no precept of charity urges toward them.

930. Questions. - Query 1° What are the obligations of the lender and borrower?

Resp. to the 1st. The obligations of the lender are the following:

1° He is bound to warn the borrower concerning a defect of the thing handed over, if there is any; likewise concerning imminent damage, ceasing profit, peril of principal, unless he wishes to lend gratuitously, or condone that which by the titles of emergent damage, ceasing profit, etc., he could justly have exacted; otherwise the latter does not consent and sustains an injury, which the one lending will be bound to repair. Cf. nevertheless n. 935, II.

2° He is bound not to seek back the thing before the stated time, or before a time to be defined by the judgment of prudent men, with attention to the circumstances and the end on account of which the thing was given by loan. Yet he is bound to receive the thing if it is brought before, when the time was conceded for the mere favor of the borrower.

3° He is bound of himself not to receive more than the thing lent was worth when it was given by loan, because loan for consumption of itself is a gratuitous contract, from which there exists for the borrower only the obligation of returning a thing the same in species and goodness at the due time. Thus of itself it would not be licit for a lender to exact that metallic money be returned to him for paper money, although at the time of the loan each happens to be equal in value; for it would be a burden estimable by price imposed on the borrower. Yet St. Alphonsus warns that a contract customary in some region, and usually celebrated by upright men, is not easily to be condemned.¹ "But it would be plainly unjust," adds Kenrick,² "to lend certain money-tickets which are worth less, and to exact that gold or silver be returned" (or the price of gold), "as if they were of the same value."

Resp. to the 2nd. As to the obligations of the borrower:

1° However the thing lent perhaps perishes, the borrower is not freed until the lender has received what is his, either by himself or through another designated; the reason is that the debt is not concerning the thing in individual, but in species, or if money was given as a loan, concerning the value.

2° He ought to return the thing at the appointed time and in the same physical species, measure, number, weight. But as to money, which is judged to perish only morally, it suffices (unless agreement was made concerning the same species of money to be returned) that it be restored according to the same value; because in money attention is paid rather to value than to species. (A) p. 476.

931. • Query 2° Can you receive back the thing lent in the same measure and quantity, if its price increases during the time of the loan? Can you seek back more if it decreases?

Resp. 1° If when a thing is handed over by loan there is an equal doubt on each side whether at the time of restitution the thing will be worth more or less, it is licit to contract that, with the same goodness and measure observed, it ought to be returned in its own time, even if its price has greatly increased. The reason is that since on each side there was equal danger, by that very fact equality is already preserved.¹

Resp. 2° The aforesaid pact is not licit of itself if it is certainly established, or is by far more probable, that at the time of payment the value is going to be increased. The reason is that thus equality is not observed, but more is exacted than is given at the time of the loan. Hence if a bushel of wheat is now worth $3.00, and is going to be worth $4.00 at the time of restitution, it is not licit to contract that the same amount be paid. Yet except unless you had determined to preserve the thing until the time of the increased price; because then more is exacted on account of ceasing profit (n. 937). Yet then the estimation of peril, or of expenses in preserving the thing, must be deducted.²

Resp. 3° If you foresee diminution of value or price, you can seek back only so much, and the borrower ought to pay so much, as the thing was worth when it was handed over by loan, because in reality you do not exact more than you gave.³

Usury, taken in a broad sense, is called every profit perceived from loan, or on occasion of it, whether with a title or without a legitimate title. But usury in the stricter sense is profit immediately proceeding from loan, that is, precisely by force of the loan and without another just title. Yet the crime of usury is not present if someone expects something for a loan, not as owed, but from mere benevolence (provided implicit usury does not underlie it), or if he exacts a thing already owed from elsewhere by justice, since thus in fact no new burden is imposed.¹ - If it exceeds the limits of a just title, or is exercised toward the poor (such in reality and hope), it is called oppressive usury.

932. Principles. - I. Usury perceived by force of a loan in a thing consumable by first use, as in wine, wheat, etc., ... is utterly illicit. The reason is that "in a thing" consumable by first use, "as wine, wheat, money, there is not present a use of the thing distinct from dominion, since the use of the thing is the very consumption of the thing, and therefore in loan for consumption from its nature the dominion of the thing is transferred to the borrower: therefore, if something were exacted for the use of a consumable thing, it would indeed be exacted unjustly, says St. Thomas,² and all, because it would be exacted for a thing which does not exist," or, as Scotus says, for a thing not his own.³

II. Oppressive usury is repugnant to natural right, whether it is done toward the poor or toward the rich: 1° if it is done toward the poor, because the one lending is bound from charity to give the loan gratuitously; 2° if it is done toward the rich beyond the limits of a just title (or at least of legal rate), because justice requires that there be a proportion between this title and the profit perceived from it. This is established from various texts of Scripture. (m) p. 482.

III. Usury will not be unjust if there is present a title extrinsic to the loan, for example, emergent damage (n. 935 sq.). The reason is that then profit is not taken by force of the loan, but by reason of the extrinsic title. For it is licit for you to receive as much as you handed over; moreover, if from one hundred coins given you lose ten, in some manner you expend one hundred and ten: therefore you can receive one hundred and ten.

IV. Usurers and their cooperators are bound from Justice to restitution, since they injure commutative justice just as thieves themselves do; therefore the rules handed down in the Treatise on Restitution must be applied to them.

933. Questions. - Query 1° In doubt whether the borrower gave something beyond the principal gratuitously or not, can you retain it?

Resp. Distinguish; for you accepted either in good faith, or in doubtful faith. If the former, a doubt supervening, and after due inquiry remaining, you can retain what was accepted; if the latter, speculatively speaking you cannot, because you cannot begin possession with doubt; in practice deference must be given to that party for which there is the stronger presumption, and thus the borrower can be presumed to have donated gratuitously if he is not poor, or avaricious, or did not give impelled by fear, or from annoyance or petition of the one lending.¹

Query 2° Can the lender retain what the borrower gave from fear, lest otherwise the loan be denied to him?

Resp. More probably affirmatively. The reason is that, for usury, it is required that it be given by force of pact, or as owed from justice. - Thus more commonly. St. Alphonsus in H. A. goes over to this opinion.²

934. • Query 3° Is it usury if you lend on this law, that the borrower buy necessaries for himself at a just price in your shop?

Resp. Affirmatively, if this is brought into pact. The reason is that a burden is imposed on the borrower and his liberty is restricted, which is illicit and unjust.³ Yet otherwise it must be said if the burden imposed is owed from elsewhere by the borrower. Thus you can propose to another that you will give him money as a loan, provided he include in a promissory note what he owed you before. Thus likewise you will be able to give money as a loan by this pact, that the other abandon an unjust lawsuit which he had instituted.

Query 4° Can an ANTIDORAL donation, or one which is made from a grateful mind, be brought into pact?

Resp. Negatively. The reason is that from pacts there necessarily arises a title of justice, but not a donation bestowed merely from a grateful mind. - St. Alphonsus⁴ and others commonly. Hence with him to whom you give a loan, you cannot contract that he obtain some gift for you. But nothing forbids asking that he interpose his prayers, but it is very dangerous.⁵

Four principal ones are numbered, namely 1st emergent damage; 2nd ceasing profit; 3rd peril of principal; 4th conventional penalty.

935. • Emergent damage is the detriment which the one lending suffers on occasion of the loan furnished to his neighbor.

I. If by reason of the loan the lender suffers damage, it is a legitimate title of accepting something beyond the principal. The reason is that it is not equitable that you bear damage from the loan; for no one is bound to furnish a benefit with his own damage except in the necessity of a neighbor. - Thus all.¹

II. For this, however, the following conditions are required: 1° that the loan be the cause of the damage; 2° that equality between the damage and its compensation be preserved; 3° that the increase be brought into pact from the beginning.² The reason for the first and second condition is clear of itself; but the reason for the third condition is this: that, since the contract of loan for consumption by its nature is gratuitous, when an express or tacit pact is lacking, nothing beyond that which was given by loan can be exacted. But an express pact is not required if it is a question only of a legal increase or, this lacking, a common increase; for concerning this increase today there is always present a tacit pact, since from a usage common today, known and accepted by all and permitted by the Church, the legal or common increase on occasion of loan is judged to be owed. See Kenrick.³

936. Questions. - Query 1° Can the lender exact compensation of emergent damage if he himself voluntarily offers himself for lending?

Resp. More probably affirmatively, with St. Alphonsus,⁴ etc. The reason is that even then the borrower, when he accepts the loan, is the true cause of the emergent damage. For the lender does not offer absolutely, but conditionally, namely under the condition of compensation to be obtained.

Query 2° Is it licit for the lender from the beginning to contract concerning a certain profit to be perceived if emergent damage is only probably going to occur?

Resp. Affirmatively, provided proportion according to the probability of the damage is observed.¹

While we establish these things concerning emergent damage, we altogether prescind from the various contracts by force of which perhaps some profit from money lent to another could be legitimated, as will be clear from what is to be said. This same observation ought also to be valid for the other titles soon to be explained, of ceasing profit, etc.

937. • I. Ceasing profit is that which the one lending would have gained by preserving his thing or money, if he had used it in another licit contract.

Ceasing profit is a legitimate title of exacting something beyond the principal. The reason is 1° because then truly emergent damage is had; 2° because the hope of profit is extrinsic to the loan, and at the same time estimable by price.

II. Required conditions: 1° they are the same as in the preceding title; 2° the lender ought to have had the mind of expending his money in business; for otherwise the profit would not cease.²

Query. Can you exact ceasing profit on account of the loan of money which you destined for business, if you preserve other idle money?

Resp. 1° Certainly affirmatively, if you had reserved this for the use of the family, or lest you expose your state to danger, because by reason of the loan you are not bound to neglect your own thing.³

Resp. 2° Probably affirmatively also in the other cases, provided that when you give the loan you truly have the intention of not exposing that other money to business, because the loan is the true cause why profit ceases.⁴

938. • Peril of principal is prudent fear lest the principal cannot be recovered. Peril of principal, provided it is true and extraordinary, according to the more common and more probable opinion is a legitimate title of some profit. The reason is both because, if abdicated hope of profit is estimable by price, a peril of probable damage will be estimable a fortiori; and because things placed in safety are valued more than things placed in peril; 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. - See St. Alphonsus.²

Except 1° If the borrower is poor, because then the precept of loan from charity urges; 2° if the borrower guards against the peril of the principal by a pledge, etc.³

I have said: provided ... the peril is extraordinary. For the common peril, for example, fear lest all the goods of the borrower perish by fire, etc., is intrinsic to the loan, and therefore cannot be separated from it. But it would be extraordinary, for example, if a loan were given to a prodigal, or to a man of doubtful faith, or to one sailing, or if great expenses in recovering the principal were feared.

939. • You will object: Either the principal will perish, or not; if the former, the lender will accept nothing, namely neither the principal nor the stipulated increase; if the latter, he will in fact suffer no detriment: therefore he ought to exact nothing.

Resp. 1° Even if the principal is going to perish, it does not necessarily follow that the lender will receive absolutely nothing; for it can happen that the principal does not perish at once, and then the interest which meanwhile is paid will be held as a certain compensation for the principal.

Resp. 2° Although the lender suffers no damage in fact, nevertheless he can perceive something beyond the principal; for he truly undergoes a peril estimable by price. Certainly by equal right, one who agrees with another concerning the price for insuring a ship can indeed exact it, although in fact the ship has not perished. Therefore by parity, etc.⁴

940. • Conventional penalty consists in this, that the borrower obligates himself to paying something beyond the principal, if he does not restore it at the prefixed time.

I. Conventional penalty is a legitimate title of accepting, besides the principal, that concerning which agreement was made. The reason is that thus provision is made for the firmness of the contract, and at the same time the negligence of the borrower is guarded against.⁵

II. The required conditions are: 1° that the delay of the debtor be notable and culpable; 2° that the penalty be moderate and proportioned to the fault; 3° that the mind of profiting through the penalty be absent, for example, by burdening the debtor to return at a time at which he is foreknown to be unequal.⁵

941. Questions. - Query 1° What today concerning those who, caring nothing whether one of the aforesaid four titles is present or not, perceive from money given by loan the profit rated by civil law, or, this lacking, by the custom of the timorous?

Resp. From various responses of the Holy See (see p. LI sq.) it is clear that they are not to be disturbed, i.e. that this is positively permitted to them, provided it is a question of a loan not owed from charity, and they are prepared to obey the Holy See, which hitherto has put forth no definition concerning that matter.

Theologians have labored much to compose this declaration of the Holy See with natural right. 1. Some say that today scarcely not always one of the extrinsic titles thus far set forth is present, especially of ceasing profit, since scarcely anyone keeps money idle at his place. 2. Others, distinguishing between a loan of a fungible thing (consumptive loan) and a loan of a thing fruitful in any way whatever (productive loan), teach that, on occasion of the former loan, no profit can be exacted unless one of the titles set forth is present; but from the latter it can; but that money, if it is lent so that from it things destined to sustain life may be compared, must be numbered among fungible things; but among fruitful things if it is sought by loan for gain. Thus, they say, St. Alphonsus is to be understood, who, although in L. IV. n. 759 he denies that money is fruitful, nevertheless in n. 904 of the same Book by no means corrects Busembaum writing: "to some things suitable for gaining, or fruitful, as money, etc." 3. There are not lacking those who think that the Republic, on account of the common good which is promoted through the easy furnishing of money, is not lacking the power of permitting by law that the borrower pay something to the lender beyond the principal: among these, some hand down this doctrine crudely; others with the addition that borrowers willingly accept this law as profitable to themselves. 4. Finally others have recourse to the triple contract, as probably licit and similar to the pact concerning increase (n. 1015).

942. • Query 2° Is it licit to exceed the legal or common rate by reason of greater emergent damage or ceasing profit?

Resp. 1° Negatively with respect to the poor or others who seek a loan in necessity, and who would be oppressed by a greater increase, as is established from what has been said. Yet you are not bound to concede a loan to them if the detriment which you ought to undergo on account of ceasing profit or emergent damage is not light; because charity alone then obligates you, but charity does not obligate with grave inconvenience.

Resp. 2° If money is handed over for the utility, but not the necessity, of another, it is controverted, and a twofold opinion is brought. The 1st Opinion affirms by reason of indemnity or just compensation. Thus among others Kenrick¹ and Pages of Lyons, although in the matter of usury he has become known by a most noted reputation for severity. - The 2nd Opinion denies. The reason is that compensations of damages arising from a monetary obligation can be exacted only according to the legal rate. This opinion indeed can have place if the lender compels or obligates another to accept a loan from him; otherwise the reason does not appear why the lender ought to undergo the detriment of emergent damage for the favor of another.

943. • Query 3° Is it licit to subtract the increase from the beginning from money given by loan?

Resp. Of itself negatively, because the borrower, if the increase is subtracted from the beginning, pays it for a sum greater than that which he truly accepted.² "Yet," says Kenrick³ (and therefore I have said: of itself), "the custom has been received in money-tables that the increase is thus deducted from the beginning; and since it is approved by the common consent and usage of all, perhaps it can be excused on this account. The same is done whenever money is given by private persons for a promissory note."

944. • Query 4° Is it licit to perceive INTEREST from INTEREST itself (interest upon interest or compound interest)?

Resp. 1° Affirmatively by civil law. But it is required, that the agreement be made after interest has become due; an original agreement, though not void, would prevent the party from recovering the interest either at law or in equity.⁴

Resp. 2° It also seems it must be affirmed for the internal forum: 1° if an agreement preceded, whether explicit or implicit; because revenue, after the term has elapsed, is added to the capital sum: for it is altogether the same thing that I leave to the debtor my money, which he already has from loan, or hand over other money to him; 2° if from delay of payment damage comes to the creditor.

945. • Query 5° What must be said concerning institutions which are commonly called SAVINGS BANKS (savings banks)?

Resp. Such institutions are not only to be tolerated, but also to be praised, since they assist widows, male servants, maidservants, and the poor, while their modest money is accepted in a certain way by loan, and interest is repaid to them. It is confirmed from the Response of the Sacred Penitentiary, 17 Dec. 1832, in Kenrick.¹

946. Resolutions. - 1° Those who do not exceed the legal or common rate by reason of profit perceived from loan can be absolved, indeed are to be absolved; since it is by no means established that they are guilty of injustice, and therefore they cannot be obligated to making any restitution.

2° Although therefore anyone can defend the opposite opinion concerning profit arising from loan as speculatively more probable, nevertheless he cannot condemn the adverse opinion as contrary to Catholic doctrine, nor exact restitution, absolution being otherwise denied. Indeed, one who would urge a penitent to restitution would himself have to be forced to repair the damage of the penitent; since, from commonly received doctrine, a confessor rashly prescribing undue restitution is bound to repair damage inflicted.

3° Nor are those penitents to be obligated to restitution who accepted profit according to law with bad faith, that is, thinking that they could not perceive such profit; because from the fact that they sinned by acting against conscience, it does not follow that they were guilty of injustice.

4° Penitents from the clause added in most responses of the Sacred Congregation ought always to be prepared to submit themselves to the judgment of the Holy See; but they are not necessarily to be questioned by the confessor concerning such a disposition: 1° because this is not exacted in the aforesaid responses; 2° because the confessor ought to presume that the penitent, as a good Catholic, is placed in such a disposition, unless the contrary is established. Indeed, says Kenrick,² the Holy See has already become accustomed to omit this condition.

947. • 5° The profit perceived from money lent even to a poor man who does not suffer grave necessity, and who does not rashly hope that with the help of that money he will become so rich that he can easily restore the principal with a moderate increase, is not to be condemned as unjust. For the precept of lending gratuitously then does not urge, and money even then retains utility and its own price.

6° If no profit ought to be perceived from money lent to a poor man for sustenance, this happens because the lender by force of the precept of charity is bound to will that the money lent by him be applied to the sustenance alone of the poor man.

7° Profit exceeding the legal or common rate is illicit and unjust, and therefore liable to restitution. Except unless the reason of greater emergent damage or ceasing profit persuades otherwise, according to what was said and the limitation, n. 942.

948. • 8° Likewise, he who accepts money by loan according to the rate of law, for example at 5%, cannot for this reason exact 10% by lending the same money again to another, because the title for accepting the five superfluous is lacking; but it does not seem against civil or natural law of itself that someone accept money by loan for 3 or 4, and lend the same again for 5 in 100.

9° An increase exceeding the legal or common rate can be accepted from a borrower who, with regard to a greater profit, and with no necessity of household affairs compelling, offers it with a glad mind; for consent heals the defect of title. Thus Kenrick.¹

10° "In money-tables money is commonly given as a loan to be paid after sixty days: but if someone seeks a delay of six months, it is sometimes conceded with a greater increase accepted; but, lest the law seem to be violated, shares are sold at a greater price, which the buyer is going to pay after six months; or bank-notes of another, which are worth less, are given. This manner of acting plainly smacks of usury." Thus the same Kenrick.²

11° A title for accepting a greater increase can sometimes be taken from the uncertain condition of things, "by which it happens" that the credit of almost no one, even the richest, "is established," since by the fall of others he "can" become unequal to paying, or, with the help of laws, weave delays.... Hence "it happens" that on account of the narrowness of things money is "sought" as a loan, with an increase of two offered each month for one hundred; ... but since this is wont to happen "not by the fraud of one or another or from necessity by which" a few are pressed, "I do not dare to condemn those who, while such is the condition of things, give" money as loans, with the increase accepted which "then" is given; "although I confess that the matter is not lacking in the appearance of evil, and that the very condition of things is far removed from a right rule of trading." Thus again Kenrick.²

12° Absolutely nothing can be exacted from the poor seeking a loan from necessity, notwithstanding the title of civil law; and therefore, if any profit has been perceived, it must be restored; since civil law, which cannot destroy an obligation of natural right, is not judged to comprehend this case, and therefore neither to transfer dominion of the profit into the lender.

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.

I. QUESTION I. What is a loan? ANSWER. It is the delivery of a consumable thing into the use of consumption, and the dominion thereof, that after some time has elapsed just as much be restored. The matter subject to loan is by its own nature consumable, and delivered into the use of consumption. These two things are necessary to a loan. If coins were delivered not for consumption but for display and pomp, it would be a loan for use; if for custody, a deposit, not a loan. Since to the nature and essence of a loan it is required that the thing lent be consumable and delivered for consumption: although money be not consumed materially, it is nevertheless consumed formally while it is put away: for the same in number is not restored to the lord, just as neither the same wheat, nor the same wine, and so forth. But in a loan for use the same thing in number is restored. The consumption of things is twofold. One natural, by which the thing itself perishes, as wine, corn, oil, and the like. The other civil, in which the thing is alienated, as money, which while it passes into another's dominion perishes to its own lord, and becomes another's. The last particle, that after some time has elapsed just as much be restored, signifies that some time ought to flow between the delivery and the restitution. For he who lends spontaneously imposes upon himself the obligation of demanding back the thing delivered, not at once, but after some time. If a point of time be prescribed, when it has elapsed restitution ought to be made, otherwise the debtor will be tardy. And if no day be appointed, the circumstances of the giver and the receiver being regarded, restitution ought to be demanded. For a certain rule cannot be prescribed. The thing to be restored ought to be of the same value as the thing received, and of the same species: as wine for wine, money for money. In this restitution, nevertheless, not so much the physical species is attended to, unless it were agreed upon, as the formal value. A thing lent increases and decreases to the borrower. Wherefore if the value of money be increased or diminished, it turns to the advantage or loss of the borrower. Things which theologians call consumable the jurists call fungible, that is, those which in their own kind admit of function, that is, consumption. The definition explained all Catholics approve, diversity of words being removed.

II. The chief property of a loan, which necessarily follows from its nature, is the transfer of dominion. For if things subject to loan are consumed by use, and by force of the loan are given for consumption, it follows that he who gives things on loan confers also the right of consuming, putting away, and alienating them. Money alone is consumed by alienation; other fungible things lent perish by consumption. He who receives moneys on loan buys wares with them: the seller of the wares becomes absolute lord of the moneys. Whence does he acquire that dominion? Assuredly from the borrower. He therefore was lord of the moneys, because no one can transfer more right to another than he himself has.

III. The heretics Salmasius and other patrons of usuries confess that the dominion of the bodies, but not of the quantity, is transferred in a loan. Those who are wont to deride the little distinctions of the casuists do not blush to produce this witty fiction. Everyone would most gladly receive the bodies of gold pieces, the quantity being left to Salmasius. Bodies are so bound up with quantity that they cannot subsist without it. Therefore while the bodies are alienated, the quantity is alienated, which cannot be separated from the bodies. The lender therefore loses the dominion of the thing lent, but retains the right of demanding back just as much. This right the patrons of usuries too grossly confound with dominion, since they are two things altogether distinct. Since indeed dominion is a right in the thing, and the faculty of using it at the lord's discretion. Of this dominion of the thing lent the lender is destitute; but he retains a right or action of demanding back just as much, and this right or action he can sell, bequeath, and give. All these things are clear.

IV. Hence a loan differs from a sale, in which a price is paid for a ware; from exchange, in which one thing is delivered for another; from donation, in which no right of demanding anything back is retained; from letting, in which a price is paid for the use of a thing; from a loan for use, in which dominion is not transferred but only use, and the same thing in number is to be restored; from a deposit, in which a thing is consigned to be kept; from a pledge, which is given for the sake of security, without transfer of dominion, with the burden of restoring altogether the same thing.

I. A few things concerning the monti di pietà, which by another name are called monti di Cristo or apostolic deposits, I shall touch upon. A mons pietatis is a sum of money gathered from the alms of pious faithful for the relief and support of the poor, that it may be delivered on loan to the needy, a pledge being deposited, and with a contribution of an accession by which the ministers are maintained.

II. The Lateran Council celebrated under Leo X approved these sacred monti. To the decree of the Council all the theologians subscribed, except Cajetan and Soto, who with too great daring indeed did not cease, even after the Council's decree, to accuse these monti of usury. And as regards this, although we are Dominicans, we disapprove their error, because we are not respecters of persons, nor do we take up arms against persons, of whatever institute they be, but against errors.

III. The Council declared that the accession above the principal is exacted for the expenses of the ministers alone, and for the conferring of the other things pertaining to the said monti, as is set forth, for their indemnity only, above the principal, without gain to the same monti. If the accession turned to the gain of the monti, it would be usurious.

IV. Three conditions are required. First, that the money be delivered to the poor within the limits of a fixed sum, to be restored within a determinate time. Second, that a pledge be exhibited by the debtors, which ought to be kept by the ministers themselves. If at the fixed time the money be not restored, the pledge is sold at auction, and, the price which is owed to the mons being retained, that which is over is restored to the lord of the pledge. Third, that a slight accession above the principal be exacted, for the wage of the ministers and the expenses of the monti which must be made for the renting of houses and other things. If anything be left over from the accessions, it is to be converted not to the increase of the monti, but either to the borrowers themselves in proportion, if it can be done, or to be redeemed, or into alms for the poor.

V. QUESTION I. Do those who are not truly poor, nor receive money on loan from a sacred mons for the relieving of poverty, sin and are held to restitution? ANSWER. Some, inflamed with avarice, allured by the slight accession to be paid to the sacred mons, receive moneys on loan from the same, either that they may apply the same to trade, or that they may deliver them on loan to others with a greater accession. All these are guilty of theft and of avarice. For with a fraudulent mind they deceive the mons, and filch money destined for the relieving of the needs of the poor, that they may indulge their own avarice. They are bound at once to restore the money to the mons, and to compensate the loss, if any befall.

VI. QUESTION II. Can those who place moneys in these monti lawfully receive an accession, no title being present? ANSWER. Fr. Pasqualigo, decision 504, contends that gain can be perceived from money conferred to the monti di pietà, apart from the title of emerging loss or ceasing gain. In some monti di pietà, which they call mixed, they seek out moneys that they may relieve the poor. To the contributors of the moneys they pay a pension beyond the principal. It has begun to be disputed whether this accession be lawful. All theologians and canonists have condemned it as usury. Fr. Pasqualigo strove to purge the same from usury, whom Bassaeus and Pignatelli followed. That he may establish his opinion, Fr. Pasqualigo obtrudes letters of Paul III by which this is granted to the mons of Ferrara. But Fr. Peter Ballerini in his opusculum On These Monti, § 3, proves by unanswerable arguments that these letters are apocryphal and supposititious.

VII. Paul III in letters given for the mons of Modena in the year 1541, Julius III for the mons of Vicenza in 1550, Pius IV for the mons of Verona in 1563, grant that an accession be paid to none others save to those who, led by a zeal of charity, and for the relief of the poor, not with a mind of taking interest, deposit moneys at that time when they would have wares ready and estates ready for buying, from whose revenue they could perceive four and more per hundred. Wherefore false to me is Fr. Pasqualigo's opinion, which asserts an accession of this kind to be lawful, every title being removed.

VIII. What is to be said of those who place moneys in those monti, not from a zeal of relieving the poor, but from a cupidity of gaining? Lest they should have them idle at home, that they may gain, they lay them up in the monti di pietà, to be demanded back at once as soon as an occasion of buying estates or rent-charges, or of exercising trade, shall have offered itself. All these are manifest usurers.

IX. What is to be said of the ministers of those sacred monti? These monti, as I have said, are called apostolic deposits, and the patrimony of the poor. Their ministers are ministers of the poor, and hired at the poor's wage, and are fed at the poor's stipend. And yet it not rarely happens that these ministers are splendidly clothed and richly nourished. These not rarely absorb a great portion of the accessions, and are fattened with the blood of the poor. In respect of them, these monti are not of piety but of impiety. Corruptions of this kind were the cause why Cajetan and Soto inveighed against those monti. But in this they erred, that they did not distinguish the abuses and vices of men from the thing itself, which is honourable and pious. But assuredly they err no less who under the paint of human kindness make honourable such enormous abuses.

Mutuum is said from this, that what is mine becomes yours, l. Mutuum, ff. si certum petatur. And thus it is defined: A loan (mutuum) is the transfer of a thing as to dominion, whereby it at once becomes the recipient's, with the obligation of returning at a future time another thing of the same kind.

It is gathered from D. Bonaventure in 6 Luke at those words: Et si mutuum dederitis. It is given by Caspens. tract. 19, disp. 3; Bassaeus v. mutuum; and the others ex l. 1, 2, ff. si certum petatur.

But it differs from the Commodatum: for in the latter only the use of the thing lent is transferred, not dominion, as is found in the Institutes, Quibus modis re contrahitur obligatio. Hence if the thing borrowed perishes, it perishes to the borrower; but the thing lent for use, if it perishes without the fault of the one who borrowed it, perishes to the lender.

Next, in the commodatum the same thing is returned, say the same horse, etc. But in the mutuum another is returned, say other wheat, etc., of the same price, the same kind, and quality. By which means it differs from sale, exchange, and other contracts, in which there is not returned a thing of the same quality and kind, but a thing altogether different, as money for wheat. This difference is to be noted gravely, because where there is no mutuum, Usury cannot subsist.

Usura is said from usu aeris, as the holy Doctor says in speculo animae, chap. 2, §. the third of the principal fruit of injustice, etc.; for there are certain things whose use is the consumption of the thing, and whose dominion is transferred to the recipient, as money, and grain, and wine. Whence he who sells the use of such things is called a usurer, and has the character of mortal sin against justice, because he sells to others what is not his own, the dominion having been transferred.

Thus usury is defined by the holy Doctor in the Explanation of the Terms of Theology: It is avarice acquiring something from a loan beyond the principal. This definition is followed commonly, as is seen in Valencia disp. 5, question 21, puncto 1. But this word is taken by Theologians and Jurists for the action itself which is called the sin of Usury.

But the word Usury is also accustomed to be taken for the proper object of the usurious transaction itself, and thus usury is nothing other than that gain which one receives above the principal in the use, namely for the use of the money which he gives in loan. This gain is also called Foenus from foetura (bringing forth), because, as Aristotle says, in the first Politics, chap. 7, in usury money begets money, and in this sense usury is wont to be said to be restorable. See Valencia above; Molina tract. 2, disput. 303.

Therefore Usury is gain proceeding from a contract which is called mutuum, not from elsewhere, nor under another title, but as the cause of the loan. But he who gives the loan is called the Mutuans; he who receives it, the Mutuatary; the thing given in loan is called Sors (principal), in which sense it is taken in 14. quaest. 3, cap. Plerique, and often elsewhere in Canonical law; which name is derived from the contract of Partnership, in which each of the partners casts in his sors, or share, and draws it out at the time of partition, and then receives the part of the gain which beyond the sors pertains to him. The sors is also wont to be called Capitale or Principale; but the gain or access above the sors is called Usura, if it accrues by force of the mutuum, as Caspensis notes tract. 19, disput. 3, sect. 1, n. 4; Bassaeus V. Usura.

But Usury is divided commonly by the Doctors after D. Bonaventure in the cited place of the Speculum, into Real and Mental, or Exterior and Interior (others call it conventional and non-conventional). Real or conventional usury is that in which there intervenes some pact or convention concerning gain beyond the Sors by reason of the loan. But this pact is twofold: one express; the other tacit or implicit.

Express, when the lender agrees with the borrower in express words to give him something beyond the sors, and on this pact lends to him.

Tacit, however, when a convention is made not in express words, but in veiled and palliated ones, by which he hints that he wishes something beyond his sors; as if he should say: I will lend you a hundred, but you know the custom. Or: I entrust my money to you in the confidence that it will not return to me empty. Or: I know you to be a grateful man, etc.; and the borrower is silent, or hints that he consents.

Mental usury is when, no pact intervening, neither explicit nor implicit, concerning the returning of something beyond the sors, one lends with that mind and intention that he may receive gain from the loan, not from the gratitude or liberality of the borrower, but from fear lest the loan be otherwise denied him; which intention, however, he does not express, and it is said to be in hope. Of this usury the text is understood in cap. consuluit, de usuris, where the consultor puts the question: Whether he who, every convention ceasing, gives a loan with that mind that he may receive gain from it, is to be judged a usurer in the judgment of conscience. And he answers that in the forum of the soul he is to be judged a usurer and compelled to restitution.

Others divide usury into open and palliated: Open, when the mutuum is formal, and gain is intended from it, whether an express or tacit pact intervenes. But when the mutuum is not formal, but only virtual, lying hidden under another species of contract, the gain intended is called palliated usury, as happens when one sells a thing dearer on account of the postponement of the payment of the price, as the holy Doctor says. These things posited:

I ASSERT first, that Usury is a sin forbidden by natural, divine, and human law. So with D. Thom. question 78, art. 1; S. Bonaventure in the places to be cited; it is the common consensus of Theologians, as Valencia relates question 21, puncto 1; Molina Tract. 2, disp. 304; Tanner. disp. 4, question 7, n. 75, contra Molinaeum, tract. de commerc.

That it is against natural law is proved by D. Bonaventure in the cited place of the Speculum, and in the passage adduced to 6 Luke, because it is against Commutative Justice, to which it belongs to establish an equality between what is given and what is received: But injustice is forbidden by natural law. The antecedent is proved, because it is against commutative justice in any contract whatever to exact more than is given; but he who receives gain for a loan exacts more than the thing is worth: Therefore. The assumption is proved by the holy Doctor, because money lent is not deteriorated by the accommodation: Therefore it ought not, according to commutative justice, to owe something beyond itself. Next, because that money of itself bears no fruit, but the whole reason of fructification is from the industry of the user. Why, then, is more owed? Finally, rather it devastates and consumes, without affording from itself anything that replenishes.

Moreover, the dominion of the thing lent passes to the borrower. Therefore the lender exacts gain from a thing not his own. Finally, because the borrower bears the whole risk of the thing; but the advantage accrues to the lender; from which the holy Doctor also draws the further inference, that money is loved more than one's neighbor.

Another argument the holy Doctor brings in the cited place of the Speculum, by which D. Thomas strives. By natural law it is forbidden to sell the same thing twice, or to sell what is not, or for what is not, what is one's own; to exact fruit; but he who receives gain from a loan sells the same thing twice, because he receives an equal value and further gain; or he sells what is not, if he receives gain for the use, since such use is not distinguished from dominion, nor is it given without it. Scotus also uses this argument, 4 distinct. 15, question 2. To whom Molinaeus ridiculously answers, that I can even receive for what is not mine, but another's, if it is owed to me. But how do you prove that that is owed to me with gain, O stupid head!

THAT Usury is forbidden by positive divine law is proved by the holy Doctor in the places alleged, from many Scriptures of the New and Old Testament.

Psalm 14: Domine, quis habitabit in tabernaculo tuo? aut quis requiescet in loco sancto tuo? Qui pecuniam suam non dedit ad usuram. Weighing which passage, the Fathers of the Council of Nicaea, can. 18, relate thus: Many clerics following shameful gains have forgotten the Divine precept, which says: Qui pecuniam suam non dedit ad usuram; and in the same way this passage is understood in the Roman Council of Pope Martin, and is related in 14. quaest. 4, C. si quis oblitus. The same is forbidden in Exodus 22: Si pecuniam mutuam dederis populo meo pauperi, qui habitat tecum, non urgebis eum, quasi exactor, nec usuris opprimes. The same the holy Doctor proves on Psalm 71, in those words: Ex usuris, et iniquitate redimet animas eorum.

So Ezech. 18 pronounces the sentence of death upon the usurer, saying: Non vivet, cum universa haec detestanda fecerit, morte morietur.

PROVERBS 28: Qui coacervat divitias usuris, et foenore liberali in pauperes congregat eas, etc. oratio eius erit execrabilis.

HE URGES especially that of Luke 6: Peccatores peccatoribus foenerantur. Mutuum date, nihil inde sperantes. By which testimony Urban III proves it in C. Consuluit, extra de usuris. And the Lateran Council under Leo X, session 10, not far from the beginning, where the supreme Pontiff, with the holy Council approving, says thus: Dominus noster, Luca Evangelista attestante, aperto nos praecepto obstrinxit, ne ex dato mutuo quidquam ultra sortem sperare debeamus.

THE SAME the holy Fathers gravely affirm from the aforesaid Scriptures.

BASIL, on Psalm 14, pondering that passage: Qui pecuniam suam non dedit ad usuram, says: Do you not know that a greater heap of sins presses upon you than is the increase of wealth which you hunt from usuries.

S. GREGORY of Nyssa, homily 4 on Ecclesiastes: He who has called usury another robbery and parricide will not have strayed far from what is fitting.

S. AUGUSTINE, on Psalm 36: Do not be usurers, and therefore I do not will it, because God does not will it. Whence does it appear that God wills this not? Qui pecuniam suam non dedit ad usuram, Psalm 14. And how detestable, how odious, how execrable it is, I think even the usurers themselves know.

S. JEROME, on Psalm 54, at that passage: Non defecit de plateis eius usura, et dolus, says: All things that are forbidden in the Law have grown up to a heap of sin. In the Law they are forbidden to receive usury. Usury is to receive more than one gives.

THAT Usury is also forbidden by human law is proved by D. Bonaventure in the Confessionale, chap. 5, particula 54, from the whole title de usuris, which is evident also in 14. quaest. 4 and 47 dist., by many chapters, where usurers are forbidden under grave penalties, and lastly are deprived of Ecclesiastical burial. See Sylvestra, verb. Usura, 1. §. 9.

Usuries are forbidden also by CIVIL law; for the Authent. de Eccles. tit., at the beginning, commands the decrees of the Council of Nicaea to be observed, in which usuries were forbidden by canon 18, and it is related in C. Quoniam, 47 distinct., and in the Leg. cunctos populos, Cod. de Sum. Trin. et fide Catholica, Justinian commands all subject to him to follow the faith of the Roman Church and to render obedience, by whose authority it stands established in the aforesaid decrees that usury is forbidden. The Gloss uses this argument on Cap. Quid dicam, question 14, 4.

LET THESE THINGS be heard by those who say that usuries are not a sin; for they are condemned as heretics in the Clementina unica, de usuris, in C. Vien. under Clement V. Perish, therefore, the Albanenses and the Greek Schismatics, who denied this. Away with Carolus Molinaeus, who foolishly in his Tract. de Commerciis, et usuris admits some usuries, and erects certain silly little objections to obscure a doctrine so clear in the light of nature — a doctrine which even Aristotle, 1 Politic., chaps. 6 and 7, and 4 Eth. chap. 1, and Cato in Cicero, book 2 de offic., and others perceived by the mere twilight of nature, confessing it to be against nature; so much so that the most wise Cato called it the killing of men, at which Ausonius alludes, Eydil. 15, singing:

— Turpia lucra Foenoris, et velox inopes usura trucidat.

YOU WILL OBJECT first, Deuter. 23: Non foeneraberis fratri tuo, sed alieno. Since, therefore, it concedes giving usury to foreigners, that is, to the Gentiles, it does not seem forbidden by natural law.

Conradus answers, quaest. 24, de contract.; Medina, question 2, de usura; Caspens., number 11: that it was conceded because God had already transferred dominion over the things pertaining to those Gentiles to the Hebrews. And so, as he conceded to them to carry off the treasures of the Egyptians, so also he had transferred the foenerari — the interest and principal of the Chanaanites — to them, so that they could exact it. Conaruv. subscribes, 3 variar. cap. 1; and it is taken from St. Ambrose, book de Tobia, chapter 15.

D. Bonaventure answers in the passage adduced to 6 Luke; D. Thom. question 78, art. 1; Alens. 3 p. quaest. 36, membr. 4; Sotus book 6 de Iust., question 1, art. 1; and Valencia: that the Jews sinned in lending thus at usury, but that it was permitted with impunity on account of their obstinacy; just as also the bill of divorce; and to wash away this guilt of theirs the Psalmist sings of the Messiah to come, Psalm 71: Ex usuris, et iniquitate redimet animas eorum. The Hebrew text pleases as rendered by Pagnino, where the exclusive particle (but) is not found: Non foeneraberis fratri tuo usura pecuniae, usura cibi, usura omnis rei, qua foenerabitur extraneo תַּשִּׁיךְ (the verb by which) he will lend at usury; where he seems gravely to rebuke the Jews, saying: Let it be far from you, nor let Usury be named among you, which you exercise so obstinately with the Gentiles. Therefore he permitted it that a greater evil might be avoided, as the holy Doctor says.

YOU WILL OBJECT secondly, that of Luke 6: Mutuum date, nihil inde sperantes. But this is a mere counsel, as is gathered from those preceding words: Si benefeceritis his, qui vobis benefaciunt, quae vobis est gratia? The same is gathered from the following words: Et erit merces vestra multa. So Sotus book 6 de Iustitia, quaest. 1, art. 1.

The holy Doctor answers, whom Couar. follows, book 3, var. cap. 1, num. 5; Nauar. in the Manuale, chap. 17, num. 107; and Valencia; nay, Urban III in C. consuluit, extra de Usuris; Leo X in the Concil. Later., sess. 10: that it was defined there, as Medina notes, quaest. 2, de Usura, that there is a precept forbidding usury; otherwise Alexander III would not assert with sufficient certainty in the Lateran Council — which is related in cap. Quia, extra, de usuris — that Usury forbidden in the pages of both Testaments, nor would he say solidly in cap. super eo, of the same title: Usuram utrumque Testamentum detestari. For there is hardly any other passage in the New Testament reproving usuries. Add also the Roman Penitential, far more ancient than Alexander III, where it is read: If anyone receives usuries, he commits robbery; and therefore whoever exacts it shall do penance for 3 years, one year on bread, namely, and water.

NOR does Sotus satisfy when he says that both Testaments forbid usuries only insofar as they forbid theft. For the contrary is the case; for the alleged Pontiffs prove from that text that usury is specially forbidden. The same is interpreted by the Fathers adduced, and by Beda on chap. 6 of Luke.

The holy Doctor proves this OPTIMELY, and Valencia after him; for he had premised the natural precepts in general: Prout vultis faciant vobis homines, et vos facite illis similiter; but soon adds the singular natural precepts of doing good in necessity, not only to friends, but also to strangers and enemies, and he also sets down the precept forbidding usury, which is against the natural precept of not doing to another what you do not wish done to yourself. Besides, the declaration of the Church is enough for me, and more than enough, which is the column and firmament of truth. If the condemned Molinaeus does not receive it, good Catholics at least receive it. But this declaration, beyond the places assigned, is found clearly in the Fourth Council of Carthage, can. 67; the Council of Calchitensis in England, cap. 17; the Council of Paris in the year 819; that of Meaux in the year 845, can. 55; the Capitulary of Aix-la-Chapelle, cap. 5; the Council of Crolseiano in the year 909, etc.

I say first: if it is doubtful whether the thing will be worth more or less, one may lend wheat for that time, for instance the month of September, so that it be returned in the month of February. See Molina disp. 311. and Caspensis sect. 6.

Truly, if it be morally certain that the wheat, wine, etc. will be worth more at the time of payment, and the lender was not keeping wheat until that time, he cannot lend without usury wheat which is now worth less by condition, so that just so much be returned at the time when it will be worth more. So expressly D. Bonavent. in speculo animae, cap. 2. supra citato, quaest. 5. whom they follow commonly, in Caspensis sect. 6. The Holy Doctor infers the same of one who lends an old thing so as to receive a new one of greater price. The reason is, because gain is received from the loan without any foundation.