Conflicting Documents, Conflicting Loans

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by R. Gidon Rothstein

Choshen Mishpat 85

Battling Documents

We start with conflict. Sarah (not her real name) produces a shetar chov, a document declaring a loan Leah owed/owes. Leah has one of her own, showing Sarah sold her some other property, says she must have already paid the loan, otherwise Sarah would never have sold her the field. Sarah counters that she sold the field only to recover the money Leah had successfully avoided paying by hiding assets.

[It’s not clear to me how Sarah recovers the loan that way, since she loses a field; I think, either, she overcharged for the field enough to cover the loan, or she needed the money and something was better than nothing. If the latter, she could have sold the field to someone else, unless she didn’t find other buyers.]

It’s a long paragraph, with the upshot that our reaction depends on whether sale documents are written before or after money is paid. If the buyer has to pay before, we believe Leah, because Sarah, once given the money, should have pulled out her loan document, said sorry, that was a way to get this money, and ended the sale. This is true even if the original loan had protections for the lender, since agreeing to a sale without collecting the loan first implicitly admits the loan has been paid off.

Where sales complete before payment, we believe Sarah that she was trying to ensure Leah had some property from which to collect the original loan (she would foreclose on this land, take it back for the loan, and then also have clear proof Leah owes her for the land).

The court gives Sarah’s claims more credence if the loan was not yet due, or even due that day; she can say she needed money, and collecting a loan takes time. Nor is a borrower believed to say s/he paid early, unless s/he has a receipt documenting such repayment.

The Proof Involved

Se’if two points out this whole discussion arises only when the sale of the land came with a shetar, a deed of sale, signed by witnesses. Without, the lender’s admission s/he had sold land does not matter, since there’s a migo, the lender could have denied the sale of land and still collected the loan. Similarly, proof the lender sold chattel (movable property) has no impact on the loan, because the lender can say such sales aren’t usually publicized, so s/he had no worry it would affect his/her ability to collect the loan.

Witnesses to the sale still don’t damage the lender’s position, because courts will accept the claim s/he was anxious to sell the items for whatever reason, where halachah assumes people only sell real estate because of financial pressure.

Where the “Lender” Paid

Flip the direction of the sale, and the borrower has more legal ground. For sales where the money is paid only after the deed is written and the sale completed, a court would accept the borrower’s claim s/he must have paid off the prior loan, since the lender would not have paid if there was a debt outstanding.

Where money is paid before, some authorities still thought the borrower could question the lender’s buying the field instead of collecting it in payment for the loan. Others thought the borrower could reasonably say s/he wanted the property, and collection might have been paid in money, after which the borrower might decide not to the desired property.

The first opinion would counter that had the lender indeed bought property, s/he was harming his/her own ability to later collect the loan. If the borrower has plenty of other properties, though, that would not be an issue.

Mutual Loans

Where our lender later borrowed money from the borrower, after the time the first loan had come due, the borrower has a much stronger claim: why would you borrow money from me, if I owed you that money? As long as the shetar of the original loan is unimpeachable. [And, as some public figures have shown with their history of legal actions, unimpeachable documents can be few and far between, and the process of collection long and tortured.]

Where there might be doubts about the original loan document—AH mentions it might have had some kind of asmachta to it, been dependent on future events and therefore perhaps not an enforceable commitment by the borrower—the lender can say s/he did not try to collect it for fear it would be a drawn out and/or failed process.

[I’m skipping se’if five, about when the money of a loan was given relative to the writing of the document, and its affect on this case.]

Where the two loans stand, are for the same amount of money, and the two either have money to pay or would foreclose on land of the same relative value, they just tear up the documents. (Same relative value refers to the status of land; halachah categorizes land quality, highest, middle, lowest; usually, loans are collected from idit, highest quality. Where there is no idit, any other quality level is fine, an idea elaborated on in siman 102). Where one does have idit land, and the other not, they will trade properties, because they are each foreclosing on loans attested to by shetarot, and the one who until now owned only low-quality land will somewhat profit from the exchange.

I’m not going to go into all the details, but where one loan has slightly more advantageous terms for one of the parties, we definitely separate the loans, both would be paid off, rather than mutual forgivenss.

[Two important points: the idea of idit, etc., of different qualities of land, has nothing to do with price. Occasionally, you can find online articles about what some sum of money will buy in housing markets across the US. Where one gets less expansive a property for the money shows it to be idit, people are paying more for each part of it. Would you rather have a swanky apartment in a high priced neighborhood, or its equivalent value in land in the middle of nowhere? Certainly some people prefer the land, but in general, that’s ziborit as compared to the more generally desired property.

Second, they trade foreclosures only if the two sides insist. In an ideal world, we prefer compromise. To be remembered.

Last, but not important at all, it reminds me of a bitter joke from World War II, where someone noted the Germans were bombing London and the British Berlin. Bemoaning the waste of fuel, he suggested instead, “Let the British bomb London, the Germans Berlin!”]

Where the terms of the original lender’s loan from the original borrower ends before the first loan, the borrower has no claim, because the lender plausibly found him/herself in need of cash, and could not wait until the loan came due, se’if seven tells us.

Claims Belied by Earlier Actions

The borrower might point a loan the lender had recently repaid him/her, the borrower, to prove the original loan must have been paid off, because otherwise the lender should have kept the money in payment. The lender has multiple ways to deflect the claim. S/he can say s/he trusted the borrower to pay up when the time came, with the migo (the underlying possibility of a stronger claim) s/he could have denied repaying, or could have said s/he repaid before the other loan came due, so it wasn’t right to withhold this loan for that one.

For loans without a shetar, even if one had the explicit condition to be repaid only in front of witnesses, the lender would not be believed, and the borrower could validly claim s/he must have already repaid the other loan. With some complications I choose to skip (such as whether we say migo le-hotzi, whether one litigant’s having a stronger claim to have made supporting his/her actual claim is strong enough to extract money), so we can finish this siman this time.

Rema had quoted a responsum of Rosh about a woman who donated a property to hekdesh (classically, the Beit HaMikdash, but more loosely for any communal organization), with the explicit condition her daughters could live there, paying rent. Should one of the daughters later pull out a shetar matanah, a gift deed, dated before the donation to hekdesh, and claim the property to be hers, the other sisters can refute her claim, because why had she paid rent all this time?

Good question, but Rosh did allow for amatla, for her to offer an explanation; if reasonable [what a loaded term!] we would need to accept it. Let’s leave out se’if twelve, what happens with an estate (and minor heirs) in these situations.

A Workaround on Non-Collection

Se’if thirteen points up a weakness in the plan to have each one tear up the loan, where they were the same and the lands involved would have been largely the same. If one party sells his/her loan to a third party, the other lender/borrower cannot dismiss this purchaser by saying these loans were slated to cancel each other. Although that’s what would have happened in practice, the loans are not inherently mutually cancelling.

Rather, the purchaser of the loan would collect, and the lender would then have to go back to the original borrower, get money or other properties. If the borrower is insolvent, the lender would recover the other property from that third party (who would now be exposed as a fool for mixing in). With additional details I am once again skipping (such as if the land collected by the third party was the very land given for a lien to that loan, which came after the first loan and therefore was committed independent of the other loan. It gets involved).

Delay Doesn’t Always Work

Where Sarah owes Jane two hundred dollars, but wins a case where she proves Jane owes her a hundred, Jane will reasonably want to deduct it from Sarah’s loan. Sarah, however, might say we haven’t had that court case yet, I think I’ll win that case and be exempt from those two hundred. If a court-established shetar attests to the larger loan, we legally assume the debt is valid, and Jane will not have to pay the hundred, will be able to deduct it from Sarah’s obligation.

(Doesn’t mean Sarah might not win the later court case; she might. It means we have reason now to assume she won’t so, for now, Jane’s plan works. If Sarah indeed wins later, Jane will have to pay the hundred.)

Where the document is not mekuyyam, wasn’t executed in front of a court, Jane woudl have to pay now, and then, if she won the case about that loan, receive her two hundred.

Some, by far not all, the claims and counterclaims should life complicate financially.

About Gidon Rothstein

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