Closely allied to the t.i.tle of _d.a.m.num emergens_ was that of _lucrum cessans_. According to some writers, the latter was the only true interest. Dr. Cleary quotes some thirteenth-century doc.u.ments in which a clear distinction is made between _d.a.m.num_ and _interesse_;[1] and it seems to have been the common custom in Germany at a later date to distinguish between _interesse_ and _schaden_.[2] Although the division between these two t.i.tles was very indefinite, they did not meet recognition with equal readiness; the t.i.tle _d.a.m.num emergens_ was universally admitted by all authorities; while that of _lucrum cessans_ was but gradually admitted, and hedged round with many limitations.[3]

[Footnote 1: _Op. cit._, p. 95.]

[Footnote 2: Ashley, _op. cit._, vol. i. pt. ii. p. 401.]

[Footnote 3: Cleary, _op. cit._, p. 98; Endemann, _Studien_, vol. ii.

p. 279; Bartolus and Baldus said that _d.a.m.num emergens_ and _lucrum cessans_ were divided by a very narrow line, and that it was often difficult to distinguish between them. They suggested that the terms _interesse proximum_ and _interesse remotum_ would be more satisfactory, but they were not followed by other writers (Endemann, _Studien_, vol. ii, pp. 269-70).]

The first clear recognition of the t.i.tle _lucrum cessans_ occurs in a letter from Alexander III., written in 1176, and addressed to the Archbishop of Genoa: 'You tell us that it often happens in your city that people buy pepper and cinnamon and other wares, at the time worth not more than five pounds, promising those from whom they received them six pounds at an appointed time. Though contracts of this kind and under such a form cannot strictly be called usurious, yet, nevertheless, the vendors incur guilt, unless they are really doubtful whether the wares might be worth more or less at the time of payment.

Your citizens will do well for their own salvation to cease from such contracts.'[1] As Dr. Cleary points out, the trader is held by this decision to be ent.i.tled to a recompense on account of a probable loss of profit, and the decision consequently amounts to a recognition of the t.i.tle _lucrum cessans_.[2] The t.i.tle is also recognised by Scotus and Hostiensis.[3]

[Footnote 1: _Decr. Greg._ v. 5, 6.]

[Footnote 2: _Op. cit._, p. 67.]

[Footnote 3: _Ibid._, p. 99.]

The att.i.tude of Aquinas to the admission of _lucrum cessans_ is obscure. In the article on usury he expressly states that 'the lender cannot enter an agreement for compensation through the fact that he makes no profit out of his money, because he must not sell that which he has not yet, and may be prevented in many ways from having.'[1] Two comments must be made on this pa.s.sage; first, that it only refers to making a stipulation in advance for compensation for profit lost, and does not condemn the actual payment of compensation;[2] second, that the point is made that the probability of gaining a profit on money is so problematical as to make it unsaleable. As Ashley points out, the latter consideration was peculiarly important at the time when the _Summa_ was composed; and, when in the course of the following two centuries the opportunities for reasonably safe and profitable business investments increased, the great theologians conceived that they were following the real thought of Aquinas by giving to this explanation a pure _contemporanea expositio_. The argument in favour of this construction is strengthened by a reference to the article of the _Summa_ dealing with rest.i.tution,[3] where it is pointed out that a man may suffer in two ways--first, by being deprived of what he actually has, and, second, by being prevented from obtaining what he was on his way to obtain. In the former case an equivalent must always be restored, but in the latter it is not necessary to make good an equivalent, 'because to have a thing virtually is less than to have it actually, and to be on the way to obtain a thing is to have it merely virtually or potentially, and so, were he to be indemnified by receiving the thing actually, he would be paid, not the exact value taken from him, but more, and this is not necessary for salvation.

However, he is bound to make some compensation according to the condition of persons and things.' Later in the same article we are told that 'he that has money has the profit not actually, but only virtually; and it may be hindered in many ways.'[4] It seems quite clear from these pa.s.sages that Aquinas admitted the right to compensation for a profit which the lender was hindered from making on account of the loan; but that, in the circ.u.mstances of the time, the probability of making such a profit was so remote that it could not be made the basis of pecuniary compensation. The probability of there being a _lucrum cessans_ was thought small, but the justice of its reward, if it did in fact exist, was admitted.

[Footnote 1: II. ii. 78, 2, ad. 1.]

[Footnote 2: Rambaud, _op. cit._, p. 67.]

[Footnote 3: II. ii. 62, 4.]

[Footnote 4: _Ibid._, ad. 1 and 2.]

This interpretation steadily gained ground amongst succeeding writers; so that, in spite of some lingering opposition, the justice of the t.i.tle _lucrum cessans_ was practically universally admitted by the theologians of the fifteenth century.[1]

[Footnote 1: Ashley, _op. cit._, p. 99. _Lucrum cessans_ was defined by Navarrus as 'amissio facta a creditore per pecuniam sibi non redditam' (Endemann, _Studien_, vol. ii. p. 279).]

Of course the burden of proving that an opportunity for profitable investment had been really lost was on the lender, but this onus was sufficiently discharged if the probability of such a loss were established. In the fifteenth century, with the expansion of commerce, it came to be generally recognised that such a probability could be presumed in the case of the merchant or trader.[1] The final condition of this development of the teaching on _lucrum cessans_ is thus stated by Ashley:[2] 'Any merchant, or indeed any person in a trading centre where there were opportunities of business investment (outside money-lending itself) could, with a perfectly clear conscience, and without any fear of molestation, contract to receive periodical interest from the person to whom he lent money; _provided only_ that he first lent it to him gratuitously, for a period that might be made very short, so that technically the payment would not be reward for the use, but compensation for the non-return of the money.' At a later period than that of which we are treating in the present essay the short gratuitous period could be dispensed with, but until the end of the fifteenth century it seems to have been considered essential.[3]

[Footnote 1: Ashley, _op. cit._, vol. i. pt. ii. p. 402.]

[Footnote 2: _Ibid._]

[Footnote 3: Ashley, _op. cit._ vol. i. pt. ii. p. 402; Endemann, _Studien_, vol. ii. pp. 253-4; Cleary, _op. cit._, p. 100.]

Of course the amount paid in respect of _lucrum cessans_ must be reasonable in regard to the loss of opportunity actually experienced; 'Lenders,' says Buridan, 'must not take by way of _lucrum cessans_ more than they would have actually made by commerce or in exchange';[1] and Ambrosius de Vignate explains that compensation must only be made for 'the time and just _interesse_ of the lost gain, which must be certain and proximate.'[2]

[Footnote 1: _Eth._, iv. 6.]

[Footnote 2: _De Usuris_, c. 10.]

There was another t.i.tle on account of which more than the amount of the loan could be recovered, namely, _periculum sortis_. In one sense it was a contradiction in terms to speak of the element of risk in connection with usury, because from its very definition usury was gain without risk as opposed to profit from a trading partnership, which, as we shall see presently, consisted of gain coupled with the risk of loss. It could not be lost sight of, however, that in fact there might be a risk of the loan not being repaid through the insolvency of the borrower, or some other cause, and the question arose whether the lender could justly claim any compensation for the undertaking of this risk. 'Regarded as an extrinsic t.i.tle, risk of losing the princ.i.p.al is connected with the contract of _mutuum_, and ent.i.tles the lender to some compensation for running the risk of losing his capital in order to oblige a possibly insolvent debtor. The greater the danger of insolvency, the greater naturally would be the charge. The contract was indifferent to the object of the loan; it mattered not whether it was intended for commerce or consumption; it was no less indifferent to profit on the part of the borrower; it took account simply of the latter's ability to pay, and made its charge accordingly. It resembled consequently the contracts made by insurance companies, wherein there is a readiness to risk the capital sum for a certain rate of payment; the only difference was that the probabilities charged for were not so much the likelihood of having to pay, as the likelihood of not receiving back.'[1]

[Footnote 1: Cleary, _op. cit._, p. 115.]

We have referred above, when dealing with the legitimacy of commercial profits, to the difficulty which was felt in admitting the justice of compensation for risk, on account of the Gregorian Decretal on the subject. The same decree gave rise to the same difficulty in connection with the justification of a recompense for _periculum sortis_. There was a serious dispute about the actual wording of the decree, and even those who agreed as to its wording differed as to its interpretation.[1] The justice of the t.i.tle was, however, admitted by Scotus, who said that it was lawful to stipulate for recompense when both the princ.i.p.al and surplus were in danger of being lost[2]; by Carletus;[3] and by Nider.[4] The question, however, was still hotly disputed at the end of the fifteenth century, and was finally settled in favour of the admission of the t.i.tle as late as 1645.[5]

[Footnote 1: _Ibid._]

[Footnote 2: Cleary, _op. cit._, p. 117.]

[Footnote 3: _Summa Angelica Usura_, i. 38.]

[Footnote 4: _De Cont. Merc._, iii. 15.]

[Footnote 5: Cleary, _op. cit._, p. 117.]

-- 6. _Other Cases in which more than the Loan could be repaid_.

We have now discussed the extrinsic t.i.tles--_poena conventionalis, d.a.m.num emergens, lucrum cessans_, and _periculum sortis_. There were other grounds also, which cannot be reduced to the cla.s.sification of extrinsic t.i.tles, on which more than the amount of the loan might be justly returned to the lender. In the first place, the lender might justly receive anything that the borrower chose to pay over and above the loan, voluntarily as a token of grat.i.tude. 'Repayment for a favour may be done in two ways,' says Aquinas. 'In one way, as a debt of justice; and to such a debt a man may be bound by a fixed contract; and its amount is measured according to the favour received. Wherefore the borrower of money, or any such thing the use of which is its consumption, is not bound to repay more than he received in loan; and consequently it is against justice if he is obliged to pay back more.

In another way a man's obligation to repayment for favour received is based on a debt of friendship, and the nature of this debt depends more on the feeling with which the favour was conferred than on the question of the favour itself. This debt does not carry with it a civil obligation, involving a kind of necessity that would exclude the spontaneous nature of such a repayment.'[1]

[Footnote 1: II. ii. 78, 2, ad. 2.]

It was also clearly understood that it was not wrongful to borrow at usury under certain conditions. In such cases the lender might commit usury in receiving, but the borrower would not commit usury in paying an amount greater than the sum lent. It was necessary, however, in order that borrowing at usury might be justified, that the borrower should be animated by some good motive, such as the relief of his own or another's need. The whole question was settled once and for all by Aquinas: 'It is by no means lawful to induce a man to sin, yet it is lawful to make use of another's sin for a good end, since even G.o.d uses all sin for some good, since He draws some good from every evil.... Accordingly it is by no means lawful to induce a man to lend under a condition of usury; yet it is lawful to borrow for usury from a man who is ready to do so, and is a usurer by profession, provided that the borrower have a good end in view, such as the relief of his own or another's need.... He who borrows for usury does not consent to the usurer's sin, but makes use of it. Nor is it the usurer's acceptance of usury that pleases him, but his lending, which is good.'[1]

[Footnote 1: II. ii. 78, 4.]

We should mention here the _montes pietatis_, which occupied a prominent place among the credit-giving agencies of the later Middle Ages, although it is difficult to say whether their methods were examples of or exceptions to the doctrines forbidding usury. These inst.i.tutions were formed on the model of the _montes profani_, the system of public debt resorted to by many Italian States. Starting in the middle of the twelfth century,[1] the Italian States had recourse to forced loans in order to raise reserves for extraordinary necessities, and, in order to prevent the growth of disaffection among the citizens, an annual percentage on such loans was paid. A fund raised by such means was generally called a _mons_ or heap. The propriety of the payment of this percentage was warmly contested during the fourteenth and fifteenth centuries--the Dominicans and Franciscans defending it, and the Augustinians attacking it. But its justification was not difficult. In the first place, the loans were generally, if not universally, forced, and therefore the payment of interest on them was purely voluntary. As we have seen, Aquinas was quite clear as to the lawfulness of such a voluntary payment. In the second place, the lenders were almost invariably members of the trading community, who were the very people in whose favour a recompense for _lucrum cessans_ would be allowed.[2] Laurentius de Rodulphis argued in favour of the justice of these State loans, and contended that the bondholders were ent.i.tled to sell their rights, but advised good Christians to abstain from the practice of a right about the justice of which theologians were in such disagreement[3]; and Antoninus of Florence, who was in general so strict on the subject of usury, took the same view.[4]

[Footnote 1: Endemann, _Studien_, vol. i. p. 433.]

[Footnote 2: Ashley, _op. cit._, vol. i. pt. i. p. 448.]

[Footnote 3: _De Usuris_.]

[Footnote 4: Ashley, _op. cit._, p. 449.]

It was probably the example of these State loans, or _montes profani_, that suggested to the Franciscans the possibility of creating an organisation to provide credit facilities for poor borrowers, which was in many ways a.n.a.logous to the modern co-operative credit banks.

Prior to the middle of the fifteenth century, when this experiment was initiated, there had been various attempts by the State to provide credit facilities for the poor, but these need not detain us here, as they did not come to anything.[1] The first of the _montes pietatis_ was founded at Orvieto by the Franciscans in 1462, and after that year they spread rapidly.[2] The _montes_, although their aim was exclusively philanthropic, found themselves obliged to make a small charge to defray their working expenses, and, although one would think that this could be amply justified by the t.i.tle of _d.a.m.num emergens_, it provoked a violent attack by the Dominicans. The princ.i.p.al antagonist of the _montes pietatis_ was Thomas da Vio, who wrote a special treatise on the subject, in which he made the point that the _montes_ charged interest from the very beginning of the loan, which was a contradiction of all the previous teaching on interest.[3]

[Footnote 1: Cleary, _op. cit._, p. 108; Brants, _op. cit._, p. 159.]

[Footnote 2: Perugia, 1467; Viterbo, 1472; Sevona, 1472; a.s.sisi, 1485; Mantua, 1486; Cesana and Parma, 1488; Interamna and Lucca, 1489; Verona, 1490; Padua, 1491, etc. (Endemann, _Studien_, vol. i. p.

463).]

[Footnote 3: _De Monte Pietatis_.]

The general feeling of the Church, however, was in favour of the _montes_. It was felt that, if the poor must borrow, it was better that they should borrow at a low rate of interest from philanthropic inst.i.tutions than at an extortionate rate from usurers; several _montes_ were established under the direct protection of the Popes;[1]

and finally, in 1515, the Lateran Council gave an authoritative judgment in favour of the _montes_. This decree contains an excellent definition of usury as it had come to be accepted at that date: 'Usury is when gain is sought to be acquired from the use of a thing, not fruitful in itself, without labour, expense, or risk on the part of the lender.'[2]

[Footnote 1: Cleary, _op. cit._, p. 111.]