Suretyship (Guaranteeing a Debt)

I. Notion. Suretyship is a contract by which someone, the surety, binds himself to fulfilling another's obligation if the principal debtor does not satisfy him.

II. Form. The form of the contract is to be drawn from civil law.

III. Subject. Those who can dispose of their goods and are not excluded by positive law can validly and licitly act as sureties. As regards clerics, canon 137 establishes: "A cleric is prohibited from acting as surety, even concerning his own goods, without consulting the local Ordinary"; by this precept, with attention paid to canon 592, religious also are bound.

IV. Obligations of the surety. The surety is bound to pay in default of the debtor; nevertheless regularly he cannot be sued for payment unless, after the principal debtor has been exhausted, it is clear that the latter is unable to pay. For the rest, the obligation of the surety, as being real, passes to heirs.

V. Rights of the surety. The surety, once payment has been made, acquires the rights of the creditor, and therefore has recourse against the debtor for whom he paid, and from him can recover both the principal sum and, if the debtor culpably did not pay, restitution of expenses and damages, if any have followed (St. Alphonsus, III, 912). Thus with attention paid to natural law; what civil law adds, see in the code of one's country.

Can a wife sometimes stand surety for the husband? - R. Affirmatively, namely so that she may provide for domestic necessities. But otherwise negatively. Thus commonly. The reason is that the former is sometimes required by the good itself of the family, but the latter is excluded by this same good. Hence it follows that a wife is bound to pay debts legitimately contracted by the husband in the name of the wife, with her knowing and consenting, for the good and convenience of the family itself. L. 454. From C. I. 1405; C. G. 1558, the authority of the judge is required, or from C. He. 177, the consent of tutelary authority.

What is suretyship? "Suretyship is a contract by which someone undertakes another's obligation to be fulfilled, if the principal debtor has not paid." L. 912; C. I. 1898 ff.; C. G. 2011 ff.; C. A. 1344 ff.; C. H. 1822 ff.; C. L. 818 ff.; C. B. 765; Inst. l. 3, t. 21. According to C. B. 766, for the validity of the contract the security must be consigned in writing. According to the same C. 778, he who gives a mandate of furnishing credit in his own name to a third party is held toward the mandatary as surety of the obligation of the third party arising from that credit furnished. - Gousset 899.

Whether it is licit to receive a price for suretyship? "For suretyship it is licit to receive a price, even if no danger is feared, because of itself it is estimable by a price. This is common and altogether seems to be held." L. 912; C. H. 1823. - Lugo, Resp. Mor., l. 6, d. 9.

What is the obligation of the surety like? The surety cannot be obliged to more and in more than the principal debtor. "For his obligation is an accession to the principal obligation; nor can there be more in the accessory than in the principal thing. But conversely he can be obliged for less." Inst. t. 21, § 5; C. I. 1900; C. G. 2013; C. H. 1826; C. B. 707. - Suretyship for an invalid obligation of the principal debtor is invalid. R. 42 in 6; C. A. 1351. But it is valid for an obligation which is rescindable, but valid, e.g., in the case of minority of age, C. I. 1899; C. G. 2012; C. H. 1824; L. 912. "And indeed it does not matter whether the obligation to which the surety is added is civil or natural." Inst. t. 21, § 1.

The obligation of suretyship, insofar as it is real, is transmitted to the heirs themselves, but by no means insofar as it is personal. - Once the principal obligation has been extinguished, suretyship, which is accessory to it, is naturally extinguished. Suretyship is extinguished by the office of the judge if the surety is judicially sued for payment; if the established time of the suretyship has passed; if the principal debt can be demanded because the time agreed for payment has already passed; if the debtor has ceded his goods, or is about to cede them; if the principal obligation does not have a fixed term, after ten years have elapsed. C. I. 1919; C. G. 2032; Inst. t. 21, § 2; C. B. 775, 777; C. G. 2017.

What does the surety owe to creditors; what if there are several sureties? A surety is held toward creditors concerning all the obligations of the debtor, but only in his default, or impotence, and indeed juridically proved, C. I. 1907; C. G. 2021; C. H. 1830; C. A. 1355; C. B. 770, 771; L. 912. According to C. I. 1911-1913; C. G. 2025-2027, if there are several sureties of one debtor for the same debt, each is obliged for the whole debt. - Nevertheless each of them, unless he has renounced the benefit of division, can demand that the creditor first divide his action, seeking from each his own part. If, when some surety requested division, certain ones were then not solvent, that one is held to a part, account also being taken of this defective payment; but thereafter, even if other payments fail after the division, he can no longer be disturbed. - If, however, the creditor himself freely divided his action, he can no longer withdraw from it, however much before this very division certain sureties were not solvent. - According to C. H. 1837, if there are several sureties of one debtor for the same debt, each is obliged only for his part. - According to C. A. 1359, in the same case, each is obliged for the whole debt. But if someone pays the whole debt, he has recourse against the others. - Inst. l. 3, t. 21, § 4; C. B. 678, 769, 733, 776.

What are the rights of the surety? A surety who pays for the debtor is subrogated to all the rights of the creditor, and therefore has recourse against the same debtor, so that he may claim back from him whatever he was compelled to pay in his place. Inst. l. 3, t. 21, § 6; C. I. 1915, 1916; C. G. 2028, 2029; C. H. 1838, 1839; C. A. 1358; L. 912. According to C. I. 1919, 1920; C. G. 2032, 2033; C. H. 1844, when there are several sureties of the same debtor for the same debt, he who has paid the debt has an action against the other sureties, each for his own part. Yet this action belongs only in certain cases. - Instit. t. 21, § 4; L. Fideiussoribus, Dig. de Fideiussoribus, etc.; L. 11, C. de Fideiussoribus; C. 2, 3, 5, de Fideiuss.; C. B. 774. The surety is freed if by the act of the creditor he cannot be subrogated into the mortgages and privileges of the same creditor.

C. I. 1928. "But this surety is freed if, when the creditor could have proceeded against both the principal debtor and the pledges, he neglected this and was the cause why the principal debtor fell into worse condition. Let the creditor impute it to himself if, when he could have obtained the whole credit from elsewhere than from the surety, who was only subsidiarily obliged, he delayed bringing troubles against the principal debtor until he slipped from his resources and the pledges ceased to be suitable. For in this case, although he does not have the credit safe, nevertheless, since this proceeds from his own cause, it is the same as if he had it safe, since someone is not said to suffer damage when he gave cause for the damage." Voet in Pandect. lib. 46, tit. I, n. 38.

Whether suretyship can be given in a criminal cause? Sureties can also be given in criminal causes, either when treated civilly, or even criminally, provided the penalty is no other than a pecuniary fine, which either the principal debtor or the surety can pay. De Angelis, Praelect. Iur. Canon., l. 3, t. 22, n. 1.

What is mortgage; what is its nature? - It is a contract by which an immovable thing is obliged to the creditor, so that from it he may be able to pay himself if the debtor has not paid. C. H. 1858; C. L. 888 ff.; C. A. 448; C. I. 1967; C. G. 2118. An immovable thing; for the creditor will be able to pursue a movable thing in the hands of a third party only with difficulty. - Mortgage is indivisible, and subsists wholly over all the goods obliged, and any one of them, and any part of them. It moreover inheres in the goods, and follows the same before any possessor. C. I. 1964; C. G. 2114; C. H. 1860. According to C. G. 2115, 2134, mortgage has place only in cases and according to forms prescribed by law. According to C. I. 1965, 1981, 2007, a mortgage does not produce effect unless it is published, and cannot subsist except over goods specially indicated and for a certain sum of money. According to C. H. 1875, the document by which the mortgage is constituted must be inscribed in the Register of property. Among several creditors, the mortgage prior in time of legitimate inscription is stronger in right. C. I. 2007; C. G. 2134. Mortgage confers a real right not only for the capital, but also for the interest of the preceding two years, of the current year and following years, as well as for expenses made. C. I. 2010. According to C. I. 2001, a mortgage lasts for 30 years; according to C. G. 2154, for 10, unless in the thirtieth year or tenth the inscription is renewed. C. B.

1113 ff.

1. Philippus plays cards with Iosephus, most skilled in the game, although he himself knows his own lack of skill, nor is Iosephus ignorant of it. Nevertheless he plays daily, and daily loses now four, five lire; now nine, ten lire.

2. Ioannes, playing cards with Iacobus, lost fifty lire, which he paid, ignorant of the civil laws, which concede no action.

Hence he thinks of reclaiming from Iacobus what he paid, and secretly compensating himself, if Iacobus refuses to return what was paid.

Q. What as to the case?

R. 1. Neither is Philippus held to pay the money promised in the game, nor can Iosephus receive it. The reason is that, since in the case one is subject to no danger of damage because of his skill, and because of the other's lack of skill, there is lacking, as it were, the thing which is bought by a price in a game, namely the uncertain hope of profit with the danger of damage on both sides. Nor is it valid to say that Philippus prudently and knowingly plays, knowing his own lack of skill, because the thing is still lacking, just as even if someone knowingly buys glass, but buys it as a precious gem, the thing is lacking, and there is no sale. But if Iosephus had sufficiently forewarned Philippus, and nevertheless he obstinately wished to play, restitution would not have to be urged in practice, because there would be absolutely no deceit on the part of Iosephus, but Philippus, forewarned and still playing, is judged spontaneously to renounce his right. I. M. 1247, 1350; G. 1028.

2. Ioannes cannot reclaim from Iacobus what was paid, nor consequently can he compensate himself in any way. The reason is that, although from games no action is given by the laws, nevertheless no reclaiming of what was paid is conceded. - And hence it is plain that one is held per se to pay what he lost in a game. For the contract is void neither by natural law nor by the positive law itself. - But what if Ioannes is a son under paternal power? In such a case reclaiming is conceded to him. I. M. 1247, 1249, 1251; G. 1021, 1024.

3. Fidelis made suretyship for Felix. Unhappy Felix is compelled to make a cession of goods. Before this happened, Fidelis admonishes the creditor of Felix to constitute a mortgage over his goods, and thus render his credit secure. But when the creditor neglected to do this, and Felix has now ceded all his goods, he now demands payment from Fidelis. Is Fidelis held to pay?

R. Negatively. For, since the creditor was admonished at an opportune time concerning the unstable state of Felix, he could obtain his credit through a mortgage. Since by his own fault he neglected to do this, he himself is the cause of his own damage. Besides, the surety is not held to paying except subsidiarily, in default of the principal debtor; namely, if he does not pay, after first being pursued by the creditor, when the debt is already mature, C. I. 1907; C. G. 2021; and when the debt is not yet mature, if by the act of the creditor himself there can no longer be place for subrogation into the mortgages and privileges in favor of the surety himself. C. I. 1928; C. G. 2037.

4. Azor and Paulinus were disputing about the ownership of a certain house, and the lawsuit was being conducted in the tribunals for several years with great expenses for each. Finally, by mutual consent, they determine to cease from the lawsuit, and that Azor keep for himself the upper part of the house, Paulinus the lower. This private transaction having been made, Azor, looking through the old writings of his family, finds an authentic contract of sale of the house, by which it was established that the father of Azor had bought the house from the father of Paulinus, and that the whole price had been paid to him.

Q. Can Paulinus keep the part of the house?

R. Negatively. For from C. I. 1777, a transaction is null when it regards only one object, and a new document found proves that one or the other party has no right over the same object. From C. G. 2057, a transaction of this sort is also null. For truly it is not reasonably presumed that the parties wish to consent to a transaction even in the case in which there is present a certain and evident document and right proving one of the parties. The transaction then would not truly be founded upon a doubtful matter, but upon ignorance, or upon error concerning a thing altogether certain. I. M. 1283; G. 962.

936. • Suretyship is a contract by which someone takes upon himself the obligation of another, if the principal debtor does not pay.

937. Rules of suretyship. - 1. No one can be a surety unless he has free administration of goods. From Gallican law it is required besides that the surety dwell in the territory of the royal court where the suretyship must be provided (Art. 2018).

2. Those who cannot be obligated principally cannot be sureties: such are a ward, a minor, a Religious, a wife, at least without the consent of tutor, curator, Superior, or husband.

3. The surety is bound toward creditors concerning all the obligations of the debtor, but only in the latter's default, or impotence, and indeed juridically proved.

4. The surety who pays for the debtor is subrogated to all the rights of the creditor, and therefore has recourse against the same debtor, so that he may reclaim from him whatever he was compelled to pay in his place.

5. The obligation of the surety is transmitted to his heirs, because it is a real obligation, not merely a personal one. - See Cases, n. 1007.

A subsidiary or insurance contract (contractus subsidiarius sive cautio) is one by which one contracting party takes upon itself a certain danger or risk for the benefit of the other, in consideration of a specified payment. The principal kinds of subsidiary contracts are: insurance, security, and bailment (pawn or pledge).

1. Insurance contracts are contracts by which the insurer undertakes to make good any loss suffered by the insured through the happening of some accident, in consideration of the payment of a fixed sum, either at once or at periodical intervals, or promises to pay a given sum to another upon the happening of a particular event contingent upon the duration of human life.¹ These contracts (contractus assecurationis) are called subsidiary.²

¹ Slater, A Manual of Moral Theology, Vol. I, p. 554.

² J. P. Gury, S. J., Comp. Theol. Mor., Vol. I, n. 878: “Those contracts are called subsidiary because they are employed for the security of another contract.”—Cfr. H. Busembaum, Medulla Theol. Mor., l. III, tr. 5, c. 3, dub. 15: “A contract of insurance is one by which someone assumes the risk of another’s property, binding himself either gratuitously or for a fixed price to compensate for it if it is lost. If this is done gratuitously, it is a gratuitous promise; if for a price, it is as though a purchase, by which the insurer sells his obligation to keep the other’s property free from loss. For its justice it is required that the outcome concerning the property be uncertain to both parties, at least with respect to the knowledge they have of it, because otherwise equality would not be preserved.” (Tournai 1876; I, 267).—Cfr. Göpfert, Moraltheol., Vol. II, pp. 206 sqq.

a) The insured party (assecuratus) is bound to pay the stipulated premium. The insurer (assecurator), on the other hand, pays the sum agreed upon only in case the accident in question actually happens.

To render an insurance contract valid it is required that the insured object really exists, that all circumstances material to the contract are made known to the insurer in order to enable him to form an accurate judgment as to the risks and merits of the case; that the insurer is able to pay the promised insurance if and when it falls due, that the premium paid is in proportion to the risk incurred, and that the stipulated terms of the contract contain nothing illicit.³

³ Gury, op. cit., I, n. 882: “The conditions required for insurance are the following: 1. That the price be proportionate to the risk; 2. That the risk be real and equally known to both parties; 3. That the insured observe all the conditions of the contract; 4. That the insurer have the means from which he can pay.”

According to the nature of the accident against which insurance is taken we may distinguish marine, fire, hail, storm, and accident insurance.⁴

⁴ The various conditions under which insurance is issued are defined by statutory law and for the U. S. are summarized, e. g., by Boles in Putnam’s Handy Law Book, pp. 6, 37, 124 sqq., 167 sqq., 302.

A special kind of insurance is that by which the insurer guarantees to pay a stipulated sum either to the insured if he lives out the determined period, or to his heirs or beneficiaries if he dies before its expiration (life insurance). Not a few present-day insurance policies are really no more than savings accounts.

b) Insurance contracts generally have been devised with the object of relieving undeserved misfortune. They do not indicate a want of confidence in Divine Providence, but are merely proofs of a prudent foresight and means of self-help.⁵

⁵ See this Handbook, Vol. III, pp. 109 sqq.—Cfr. G. v. Hertling, Kleine Schriften, pp. 341 sqq.

“The social advantages of insurance,” says Linsenmann, “are best attained if the practice is extended as widely as possible, because in that case the effects of serious catastrophes are distributed amongst many and consequently felt less severely by the individual, and for the further reason that the contribution of the individual becomes smaller, whereby the danger of fraud is minimized and participation in the benefits of insurance is made easier. The contribution of the individual beneficiary then appears like a slight tax, by paying which he not only acquires a feeling of security, but likewise aids more effectively than he could possibly do by alms, in assisting those who suffer from untoward events. Who does not feel relieved when he hears after a destructive fire that those whose property was destroyed were adequately insured?”⁶

⁶ F. X. Linsenmann, Lehrbuch der Moraltheol., p. 581.

c) Some writers refuse to regard life insurance as a contractus assecurationis because it does not in their opinion safeguard the subject against danger or risk. But on closer inspection we shall find that life insurance is insurance against danger or risk. “He who insures his life,” says a recent writer, “does two things: He invests his savings with an insurance company and receives as an equivalent the promise that the company will, in case he dies prematurely, pay out to his heirs the amount paid in, plus the amount necessary to make it equal to the sum which the insured would have received had he attained the age stipulated in the contract, or which he has to expect according to the mortality tables. Conceived thus as a savings account combined with an insurance contract, life insurance clearly partakes of the nature of a contractus assecurationis.”⁷

⁷ Cfr. V. Cathrein, S. J., Moralphilosophie, Vol. II, 5th ed., pp. 385 sq.—Huppert, Der Lebensversicherungsvertrag, pp. 169 sqq.; K. Wagner, Das Problem vom Risiko in der Lebensversicherung, Jena 1898; A. S. Bolles, Putnam’s Handy Law Book, pp. 167 sqq.

Life insurance is of great help to farmers and merchants, to whom it affords a means of paying their debts without amortization, within a reasonable period of time, if the obligation is not excessive and the premiums can be met. Under these suppositions life insurance aids in the payment of debts and strengthens the credit of the insured.

d) There has been talk of late of the advisability of insuring workingmen against unemployment.

“It is the duty of the State,” says Fr. Cuthbert, “to see that security against unemployment enters into the bargain between employers and employed, and it is not jeopardized by merely arbitrary action of either employer or worker. Thus, for instance, when new processes or methods are introduced into any industry, the State should insist that the change be made so as to minimize the danger of the worker finding himself without employment as a consequence of the change. The proper action of the State is, however, limited. It cannot so control the conditions of industry as to leave no personal freedom to either employer or worker in the control of labor; for that would cut at the very root of personal responsibility and consequently of real personal liberty. But it can protect both employer and worker against the mere arbitrariness of physical or moral force, and it can also give opportunities which conduce to the fulfilment of moral obligations. The giving of these opportunities is indeed its most positive contribution to economic freedom, and more directly constructive than any restrictive or ‘police’ intervention.”⁸

⁸ The Ethics of Labor, pp. 17 sq.

In working out a practicable system of unemployment insurance those concerned should take proper precautions to safeguard the interests of the diligent and sober workman, so that he will not be compelled to carry an extra burden because of the sloth and extravagance of his fellow-workmen.

e) Insurance against the risks of child-birth is another new idea. This no doubt has certain advantages, provided it be so carried out that it does not become a premium upon fornication and that deserving mothers are not forced to bear the burdens of undeserving prostitutes.⁹

⁹ Göpfert, Moraltheol., Vol. II, p. 210.—Cfr. A. Buckeley, Zur Frage der Mutterschaftsversicherung, Ratisbon 1908; J. Mausbach, Der christliche Familiengedanke im Gegensatz zur modernen Mutterschutzbewegung, Münster i. W. 1908.

2. Giving bail or becoming surety for the debt of another if he should fail to pay, is a contract commonly called by moralists fideiussio. It can be made only by one who is qualified to act in his own name and who has ample means to satisfy the obligations incurred. Minors cannot become surety without the consent of their guardians, nor religious without the permission of their superiors, nor wives without the consent of their husbands.¹⁰ To give bail knowing that one is not qualified to do so, or has not sufficient means to meet the obligation assumed, is a mortal sin whenever it is doubtful whether the debtor himself will be able to pay.¹¹ He who has become surety for another (fideiussor) must satisfy the creditors (creditores) if the debtor (debitor) is unable to do so, but has the right of recourse if the latter recovers financially. A fideiussio also binds the heirs of the surety. The debtor is bound to repay his surety as soon as he is able and, in addition, must indemnify him for whatever losses he may have sustained through the debtor’s fault.¹²

¹⁰ Ecclus. VIII, 16; XXIX, 27.—Cfr. Gury, Comp. Theol. Mor., Vol. I, n. 879, 1: “No one can be a surety unless he has the free administration of goods sufficient for this, as is evident. . . . Those who cannot be principally bound cannot become sureties; such are a ward, a minor, a religious, and a wife, at least without the consent of guardian, curator, superior, or husband.”—Ibid.: “Those who cannot be principally bound cannot become sureties; such are a ward, a minor, a religious, and a wife, at least without the consent of guardian, curator, superior, or husband.”

¹¹ P. G. Antoine, Theol. Mor. Univ., tr. De Contract., P. II, c. 10, qu. 3, n. 5: “He sins gravely who, certain of his inability to pay for another, makes himself that person’s surety, thinking it possible that the debtor may be unable to pay. For he unjustly deceives the creditor by offering a false security for the matter and gives him an occasion of danger and loss.” (Douai, 1751, Vol. III, 601).

¹² Prov. XX, 16; XXVII, 13.—Cfr. Gury, op. cit., I, n. 879, 3: “The surety is bound toward the creditors for all the obligations of the debtor, but only upon the latter’s default. A surety who pays for the debtor is subrogated to all the creditor’s rights and consequently has recourse against this debtor, so that he may recover from him the things which he was compelled to pay in his place. The surety’s obligation is transmitted to his heirs, because it is a real obligation, not a merely personal one.”—A. Lehmkuhl, Theol. Mor., Vol. I, p. 780.

To become surety for another may be a true act of charity, but carelessness in this regard is anti-social, as it not only favors recklessness in business, but is apt to ruin both creditor and debtor.¹³ It is wrong to borrow if one does not know whether one will be able to repay the debt; least of all should one borrow from a person who is himself in need.¹⁴

¹³ Prov. VI, 1–5; XI, 15; XVII, 18; Ecclus. XXIX, 18–24.

¹⁴ Cfr. G. E. Lessing, “Minna von Barnhelm,” Act III, Scene 7.

3. Pawn or pledge is a contract by which goods or chattels are delivered to another (pawnee) as security for money borrowed from him.¹⁵ The pawn is called pignus. If it is an immovable object, which is not actually transferred, but merely given over in writing, it is called mortgage (hypotheca).

¹⁵ Slater, A Manual of Moral Theol., Vol. I, p. 540.

As regards the respective rights and duties of pawner and pawnee, the following rules may be stated:

a) The pawner must pledge an object that is fit to serve the purpose;¹⁶ he must indemnify the pawnee for any expense the latter may incur for the preservation of the pawned object, and he may not demand that object back before the debt is paid, except in case the pawnee makes wrong use of it.

¹⁶ Busembaum, Medulla Theol. Mor., l. III, tr. 5, c. 3, dub. 16: “Things which cannot be sold cannot be pledged, e. g., churches. Immovable things, as also precious movable things dedicated to divine worship, e. g., chalices, chasubles, etc., cannot be pledged except in necessity, because then they can also be sold, so that aid may be given to the church and the needy.”

b) The pawnee is bound to take ordinary care in the custody of the pledge (pignus), he may not use it without the consent of the pawner, must deduct any fruits derived from it, and may not sell the pledged object unless the pawner is guilty of inexcusable negligence, and even then only after giving him due warning.

When the debt for securing which the pledge has been given, is paid, the pawnee must restore the pawn with all its accruing fruits to the pawner, but he may deduct necessary expenses.¹⁷

¹⁷ St. Alphonsus, Theol. Mor., l. III, nn. 913–916 (ed. Gaudé, II, 317 sqq.).—Cfr. Gury, Comp. Theol. Mor., I, n. 880.

c) Pawnbrokers form a special kind of pawnees, whose business in most countries is regulated by statutory law. The statutes usually fix the rate of interest which the pawnbroker may charge, and also determine the time after which he can dispose of the article pawned. In many States, says Fr. Michael Martin, S. J., on sums of one hundred dollars or less, three per cent. per month for the first six months is charged, and two per cent. per month for the following six months. When the sum loaned exceeds one hundred dollars, two per cent. per month for the first six months, and one per cent. for the next six months is the usual charge.

Pawntickets are generally good for one year only, but may be renewed upon payment of the interest.¹⁸

¹⁸ See Slater’s Manual of Moral Theol., Vol. I, pp. 541 sq.

The sale of goods entrusted to a pawnbroker is usually regulated by statute; if no law exists, and there is no agreement between the parties, the sale must be public, after due notice of time and place. If there is any surplus from the sale, the pawnee must pay it to the pawner and not apply it to another debt that he may owe.¹⁹

¹⁹ Bolles, Putnam’s Handy Law Book, p. 47.

d) The practice of pawning chattels is open to many objections, moral as well as economic. Pawnbrokers as a rule are only too ready to take advantage of the necessity of the poor and to charge usurious rates of interest. Ease in obtaining money on chattels leads many to be extravagant, and Linsenmann is therefore right when he says that, from the economic point of view, it would be better, as a rule, to sell an article outright than to pawn it, because one would realize more for it than at the pawnbroker’s, where as a rule it remains unredeemed. Pawning necessary articles, such as household goods, is generally the beginning of economic ruin.

e) Borrowing money on a mortgage is a different matter. Whereas a pawned chattel must be regarded as an unproductive thing, a farm or a house is of the nature of capital and bears immediate fruits. As a consequence, the creditor is secured against loss, as he runs no risk (periculum sortis), and therefore can be satisfied with a lower rate of interest, while the debtor has a chance of paying back his debt out of the revenues of the property itself without employing extraordinary financial means, which is not the case with chattels.²⁰

²⁰ Linsenmann, Lehrbuch d. Moraltheol., p. 578.

f) Montes pietatis are charitable institutions, usually conducted under ecclesiastical auspices, which lend money at a low rate of interest, or without interest, upon objects left in pawn, with a view to protecting the poor from usurers. Being charitable institutions, they lend only to people who are in need of funds to pass through some financial crisis, as in cases of general scarcity of food, misfortunes, etc. They originated in the Middle Ages, when it was difficult to obtain money, both on account of its scarcity and because of the prohibitions by which Christians were bound in relation to usury. Their establishment and dissemination is one of the brightest glories of St. Francis of Assisi. At first the montes met with opposition, but this was gradually overcome, and Leo X and the Fifth Lateran Council declared them to be in no way illicit or sinful, but, on the contrary, meritorious, and whoever preached or wrote against them was threatened with excommunication.²¹ To-day the montes pietatis flourish especially in Italy, where, in 1896, there were 556 of them with combined resources of nearly 72,000,000 lire. Msgr. U. Benigni, to whom we are indebted for this information, discusses the advantages and disadvantages of this peculiar form of charity as follows: “It is held that they promote carelessness in contracting debts, that they destroy love for labor, incite to theft, are often the cause of financial ruin, and, lastly, that they are contrary to the principle of free competition. On the other hand, they are a necessity; for without them the needy would be exposed either to the extortion of private lenders or to ruin, into which they might be plunged by some misfortune from which a momentary loan might save them. Their disadvantages are undeniable, but disadvantages are common to all human contrivances. For the rest, the montes pietatis, besides the relief that they brought to the poor, exerted great influence upon the ideas concerning interest on loans; for the rigid views of the theologians of the Middle Ages in that connection underwent a first modification which prepared the way for a generalization of the principle that moderate interest might justly be charged, and also the mere existence of the montes pietatis compelled private speculators to reduce their rates of interest from the usurious rates that had hitherto prevailed.”²²

²¹ Conc. Lat. V, sect. 10 (Denzinger-Bannwart, n. 739).—Cfr. Conc. Trident., Sess. XXII, c. 8, De Ref.; H. Holzapfel, O. F. M., Die Anfänge der Montes Pietatis, pp. 15 sqq., 32 sqq.

²² U. Benigni, article “Montes Pietatis” in the Catholic Encyclopedia, Vol. X, p. 534 sqq.; P. Cleary, The Church and Usury, pp. 106–113.

In this country we have no montes pietatis, and rapacious “loan sharks” ply their trade freely in spite of existing laws. Whether publicly controlled pawnbrokers would be an advisable substitute for the private harpies now robbing the poor, is a question which does not belong to Moral Theology.²³

²³ Benigni, ibid., p. 536.—Linsenmann, Lehrbuch d. Moraltheol., p. 579.

READINGS.—Sporer-Bierbaum, Theol. Mor., Vol. II, 2nd ed., pp. 902 sqq.—St. Alphonsus, Theol. Mor., l. III, nn. 911–916 (ed. Gaudé, II, 305 sqq.).—V. Cathrein, S. J., Moralphilosophie, Vol. II, pp. 167 sqq.—J. E. Pruner, Lehre vom Recht, Vol. I, pp. 424 sqq., 463 sqq.—J. Schwane, Die theol. Lehre über die Verträge, pp. 173 sqq.—D. Barry, “The Ethics of Insurance” in the Irish Theol. Quarterly, Vol. VIII (1913), No. 30.

1. Notion. Suretyship is a contract by which someone undertakes to fulfill another's obligation, in place of the principal debtor who is unable.

2. Effects. The surety is not bound except insofar as the principal debtor is bound, and of itself insofar as the latter's inability is juridically established. Remission of the debt conceded to the borrower frees the surety, but not conversely. It happens not rarely in practice that the creditor, consulting his own convenience, immediately seeks payment from the surety.

The obligation of the surety is of itself estimable by price.

Clerics are forbidden from suretyship, without consulting the Ordinary, c. 137. Cf. III, 17.

Suretyship pertains to the contracts which we call secondary, because they suppose another contract to which they are attached, so that they may strengthen its efficacy.

The two other secondary contracts, pledge and hypothec, were treated above where accessory real rights were discussed, n. 362-364.

Some things to be observed concerning contracts. 1. In present-day laws this is the general principle, which in these words is promulgated in the Brazilian Code, art. 129: "The value of declared will depends on no peculiar form unless that is expressly required."

Wherefore few contracts are solemn. In French patrimonial law there are only donation (931); nuptial agreements (1394); hypothec (2127); payment of a debt by which the one paying is at the same time subrogated to the creditor in his right (1250); subrogation in the legal hypothec which a married woman enjoys (art. 9 of the law of 23 May 1855). In Italian law art. 1314 enumerates eight cases of form imposed under penalty of nullity: which form can be a public instrument or a private writing.

In English law and U.S.A. law, the only solemn contracts are those by which dominion over immovable things is transferred {deeds and mortgages}.

2. The nullity of an act is not usually so great that it is non-existent, but it brings about that it can be declared infirm and void by a judge. Therefore he who possesses a thing from an invalid instrument nevertheless does not have it without title.

3. A condition of nullity must be accurately distinguished from a condition of proof. Thus in French law obligations which surpass 500 fr. in value cannot be proved in the civil forum, unless at least an initial written proof is had.

4. A condition of validity must especially also be distinguished from a condition to be fulfilled so that the contract can be opposed to third parties. Thus a contract concerning an immovable thing must be copied in a public office.

(Bond, Bail-bond, Security, Recognizance.)

1032. • Suretyship is a contract by which someone takes upon himself another's obligation, if the principal debtor does not pay. -

1033. Rules of Suretyship. - 1° A surety is not obliged more strictly than the debtor; for the accessory follows the nature of the principal: wherefore if the obligation of the latter, on account of a vice in the title of the creditor, is invalid, that of the former will also be invalid.

2° He is held toward the creditor for the whole and only the obligation which he undertook, but with the benefit of discussion or order, i.e. regularly he is not obliged before the creditor has juridically sought the debt from the principal debtor, and it is clear that this man is unable to pay. - I said 1: for the... only, etc. Therefore the force of suretyship ceases if anything is renewed in the obligation without the consent of the surety. E.g. you became surety for a debt to be paid after a month. If between the creditor and the principal debtor, without your consent, it has been agreed that the debt be paid after 36 days, or, a part of the debt having been accepted, he has promised that the remainder will be paid at another time, your obligation will cease. "If the holder of a promissory note takes upon himself to give further time for payment, or receives a part of the money and gives time for the rest, the nature of the transaction is essentially changed, and the endorser is no longer responsible."¹ - I said 2: regularly not, etc., i.e. unless the surety has renounced the benefit of discussion, or has denied the suretyship by bad deceit, or has not presented in judgment within the term prefixed by law an absent debtor who does not have liquid goods by which satisfaction may be made to the creditor. - "Besides, if someone cannot provide the damage for which he exhibited himself as surety without the calamity of himself or his own, he is not to be condemned if he provides for himself and his own, as to those things which are necessary for support, if this can be done without fraud and danger of perjury."

3° A surety who pays for the debtor is subrogated to all the rights of the creditor, and therefore has recourse against the same debtor, so that he may seek back from him whatever he was compelled to pay in his place.

4° The obligation of the surety, as being real, passes to his heirs: but as legal only, if that for which someone became surety is owed from legal justice alone, as in the case of suretyship concerning a defendant to be presented in judgment or concerning peace and legality to be preserved (to keep the peace).

5° If several become sureties together, each one is held only for a pro rata part, unless they have obliged themselves in solidum by clear words: which among us is generally done. "An obligation of two individuals running thus: 'We bind ourselves, our heirs, executors and administrators, and every of them firmly by these presents,' is joint and several. - 4 Watts, 50."²

1034. You will resolve. - 1° Those who became sureties by inscribing their name on another's bills of exchange or note, when the principal debtor does not pay, are held from justice to fulfill the obligation assumed; but they can recover the money which they are compelled to pay, and all expenses, from the principal debtor, or from another who earlier inscribed his name on the bills of exchange or note.

2° Those who provided themselves as sureties for public officials cannot make themselves immune by compensation, even if by the fraud of the officials they undergo great damage.

3° Those who became sureties that a defendant would be presented for judgment, or concerning peace and legality to be preserved, if, the defendant fleeing, or peace and laws being violated, they hide their goods, or avoid paying the fine to which they are subject, do not seem to violate commutative justice, unless it is a question of a debt or an injury to be estimated by price. Yet they are guilty of perjury who falsely assert that they are worth as many coins as the judge demands for bail; for among us they must assert this under the faith of an oath.

Note. - It is licit to accept a price for suretyship, even if no danger is feared; because of itself it is estimable by price.

606. Accessory or subsidiary contracts are those which essentially suppose a principal contract, to which they accede for its security and execution, and on which they depend in some way according to the axiom: the accessory follows the principal.

There are three principal ones: suretyship, by which an obligation is undertaken by one in place of another; pledge and hypothec, by which an obligation is undertaken in place of another obligation.

607. Suretyship (fidem iubere, to give one's word; cautionnement; borgstelling, borgtocht, a. 2011) is a contract by which one or more take upon themselves another's obligation, if the principal debtor does not pay. It can be undertaken gratuitously; something can also be accepted for it, so much the more as the danger that the debtor will not pay is greater; indeed, even if there is no danger or trouble, because to take such an obligation upon oneself is estimable by price.

It is a contract which essentially depends altogether on another; whence the surety (la caution) obliges himself only subsidiarily, indeed conditionally, for the case in which the debtor does not satisfy.

Hence:

1. The obligation of the surety depends on the obligation of the principal debtor, and therefore does not exist unless this itself is valid (a. 2012);

2. He is not obligated to more than the principal; and therefore, if the latter's obligation ceases, the surety is freed (a. 2013);

3. He is not held to pay the debt unless the principal debtor has first been exhausted before a judge; except if he himself has renounced the benefit of excussion, or constituted himself an equally principal debtor (a. 2021).

No one can be a surety except one who has the free administration of goods sufficient for this; such as a ward, a minor, a religious, and in many regions a wife do not have, at least without the consent of tutor, curator, superior, or husband. Moreover, from our civil law it is required that he dwell in the territory of the royal court (cour d'appel) where the suretyship is to be paid (a. 2018).

He is held toward creditors concerning all obligations of the debtor (a. 2016), but only in his default or inability, and indeed juridically proved (a. 2021), that is, not except after the sentence of a judge. The obligation is real, and therefore passes to heirs (a. 2017).

If the surety pays for the debtor, he by that very fact becomes a creditor and has recourse against him in order to demand back those things which he was forced to pay in his place (a. 2028-2030). The principal debtor is held to keep the surety indemnified, unless the latter paid without forewarning the debtor, and thus was the cause why the debtor either paid a second time, or could not pursue the extinction of the debt (a. 2031); but then the surety has action against the creditor.

The surety can act against the debtor: 1. when he himself is summoned before a judge to pay; 2. when the debtor yields into insolvency or is unequal to paying; 3. when the debtor has bound himself to free him at a certain time; 4. when the time of payment has elapsed; 5. after ten years, if the time of payment was not determined, unless there is question of guardianship and other obligations which cannot be extinguished by lapse of time (a. 2032).

608. Pledge or pawning (nantissement; pandgeving, a. 2071) is a real contract by which the debtor, or another, hands over some thing to the creditor, or to a third party, for the security of the debt; so that payment can be sought from it before other creditors, if the debtor does not pay. If this thing is movable, it is called a pledge (gage; onderpand); if immovable, antichresis¹, which is given in writing (verpanding).

¹ German Code a. 1213: for antichresis, no distinction is made between a movable and an immovable thing.

The debtor is held toward the creditor to hand over a suitable pledge, to refund necessary expenses which were made for the conservation of the thing, and not to demand it back before he has paid the whole debt, unless the creditor abuses it.

The creditor must guard the pledge diligently, otherwise he is held to repair damage; he must count fruits received from it toward diminution of the debt; nor can he, except with the consent of the debtor or judge, use the pledged thing, nor sell it to obtain payment, unless the debtor is in culpable delay and has first been warned (a. 2073-2091).

609. Hypothec (grondpand, kusting) is a contract by which an immovable thing,² remaining with the debtor, is obligated to the creditor for the security of the debt. Consequently the word also designates the immovable thing obligated, and the right of demanding the debt from it; it is a real right, in the thing, and indivisible, so that if the debtor has neglected to pay, the creditor can satisfy himself from all the obligated things and from each part of them, by whomever they may be held (Belgian law 16 Dec. 1851, a. 41).

² An exception is made for maritime hypothec, by which ships with their instruments and goods can be hypothecated (Commercial Code and Maritime Insurance, a. 37); by Italian law (a. 1967), titles of obligations of the State are also subjected to hypothec.

It differs from pledge in this: that the pledge is handed over, but the hypothec is secured only by bare agreement. It is threefold (a. 43-44; C. C., a. 2116):

1. Legal or implicit, which is induced by force of law in favor of communities, wife, son, and minor upon the goods of administrators, husband, father, and tutor (a. 45 and 47);

2. Judicial, which proceeds from the decree of a judge in favor of him who has obtained a sentence against another;³

³ This no longer subsists in Belgium.

3. Conventional, which depends on the mutual will of the contracting parties; to this accedes testamentary hypothec (a. 44), which is established by a testator upon immovable goods specially designated in the testament, for the insurance of legacies which he prescribed to be made (a. 44).

It can be special, namely, when someone obligates a determined thing, for example, such a piece of land; or general, by which someone obligates all goods. Legal and judicial hypothec can embrace all present and future goods, but conventional and testamentary hypothec only present goods.

Hypothec in Belgium is ruled by the law of 16 Dec. 1851, according to which only those are capable of conventional hypothec who are capable of alienating the goods which are subjected to hypothec (a. 73). It cannot be conceded except by an authentic act entered into before a notary, or by a private act acknowledged before a judge or notary (a. 76). Nor is it valid unless in the act constituting it, or in another authentic act, the nature and location of each good subjected to hypothec is specially declared (a. 78), and in the act itself a certain and determined sum is expressed. But if the debt is conditioned, mention of the condition must be made in the inscription (a. 80): for, that a hypothec may have its full force, it must be inscribed in the register with the conservator of hypothecs of the region in which the goods subjected to hypothec are situated (a. 81).

There are two principal effects or privileges of hypothec:

1. The right of preference, by which the creditor has the right of obtaining payment from the goods before merely chirographic creditors, and even before those who took care to have hypothecs inscribed only on the following day;⁴

⁴ Thus by French, Belgian, and other law they take order from the day of inscription; elsewhere from the inscription itself, but Italian law (a. 2008) provides that those who present a document at the same time are placed under one number of inscription.

2. The right of pursuit, by which the creditor can pursue the hypothecated good, into whosever hands it has come (a. 96). Except for legal hypothec, which always endures without being renewed, the inscription of the hypothec must be renewed from civil law before a certain term has elapsed; otherwise the aforesaid privileges would be lost (a. 81-90).

In France the inscription must be renewed within 10 years; in Belgium within 15; in Italy within 30; in Spain within 20; in Germany it does not have to be renewed.

Hypothec is extinguished: 1. by the extinction of the principal debt; 2. by renunciation of the creditor; 3. by prescription; 4. by observation of the formalities and conditions which are prescribed so that goods may be freed from hypothec (purge des hypotheques).

For the holder of a hypothecated good who is not personally obligated can free himself: a) either by paying all inscribed debts; b) or by abandoning the good without any reservation; c) but if he does neither, any creditor can obtain that the good be sold after 30 days from the demand which he must make both to the primitive debtor and to the present holder. Then, however, one means remains, namely, recourse to what they call la purge des hypotheques, by force of which the holder can obtain that he be freed by paying the price of the hypothecated good (a. 97-107; 109 sq.).

610. Transaction (compromis; dading, schikking in der minne, overeenkomst) can be reduced to subsidiary contracts. It is an onerous contract by which a doubtful and uncertain matter is composed between parties, or by which two or more compose a doubtful contestation that has arisen among them, or prevent one about to arise. Thus C. C., art. 2044, according to which it must be made in writing; this, however, is not required for solemnity or validity, but for mere proof.

That someone may enter into this contract, it is necessary that he be able to dispose of the thing about which the contestation turns. But this must be doubtful, because if the right of the other party were certain, it would be unjust to propose to him a transaction by which he would have to renounce that right. Nevertheless it is not required that the contestation has already arisen, but it suffices that it be foreseen; in which case it can be made on account of fear, provided the fear is founded and renders the rights uncertain. Transaction puts an end to contestation, and has no less authority than a definitive sentence of a judge (a. 2052), unless it is discovered that the things alleged were false (a. 2055-2056).