For such a fraud the debtor would be liable to a prosecution for swindling, and would also be liable in damages, if any damages should be suffered by the first creditor in consequence of it; and for these damages his future earnings would be liable forever, as in the case before mentioned, and not merely his present property, as in case of debt.
But the first creditor, in such a case, would have a right to recover, of the second creditor, the amount thus fraudulently paid to the latter by the debtor, on the ground that he (the second creditor) was not an innocent purchaser for value; that he had merely received, on a debt already contracted, value that belonged to a prior creditor; and that he (the second creditor) not having, either innocently or otherwise, paid any additional value to the debtor, as an inducement to the debtor’s payment to him, would be in no worse condition on restoring the value to the first creditor, than he would have been if it had not been wrongfully paid to him.
This right of a prior creditor to recover of a succeeding one, any value that should be paid to the latter in fraud of the prior creditor’s rights, taken in connexion with the debtor’s liability as a swindler, and his perpetual liability for any damages caused to the prior creditor by such fraudulent payment, would be an effectual prevention of such payments. The principle of the prior right of the prior creditor, would thus be firmly established in practice; all those endless frauds, by which the value rightfully belonging to one creditor, is now with impunity appropriated to the payment of another, would be prevented; and credit would be placed on the secure basis of each creditor’s knowledge of the property liable for his own debt.
4. If a creditor should not demand his debt at the time it became due, his neglect to do so would be a waiver of his prior right to payment, and would make it lawful for the debtor to pay a subsequent debt, if the latter should become due before the prior one was demanded.
For this reason, (as has before been mentioned,) the principle of the prior right of the prior creditor, would be no obstacle to banking, by the issue of notes payable on demand; nor to the payment of a subsequent note while a prior one was still in circulation—because a note payable on demand is due as soon as it is issued, and if its payment be not immediately demanded, the neglect is a waiver of the right of priority.
5. If a debt were not paid immediately on its becoming due, the creditor could not take interest for the delay out of the debtor’s property, to the injury of a succeeding creditor—for interest, after a debt is due, is no part of the debt itself; it is only the damage that is allowed for the detention.15 The first creditor holds a prior lien on the debtor’s property only for his debt; and not for any damage he may sustain by reason of his debt not being paid when due. This claim for damage, being a separate matter from the debt itself, would not legally attach to the debtor’s property, until its amount was legally ascertained and adjudged; and it could then attach to it only in its order with reference to other claims, and not to the prejudice of any prior ones.
The effect of this principle would be to make creditors prompt to collect their debts immediately on their becoming due, especially when there was any doubt as to the solvency of the debtors—because, as their claims for damage would not be entitled to the same priority as their debts, they would be liable to lose them entirely, or to be under the necessity of holding them against the debtor until he should have made some accumulations over and above his debts.
But the debtor would choose to pay when due, because for any damage occasioned by his delay, (unless the delay were occasioned by some other cause than fault on his part,) his future earnings would be liable, as in any other case of damage occasioned by his fault.
6. If a creditor should not demand, and, in case of nonpayment, sue for his debt, immediately, or at least very soon after the debt became due, the delay would afford a presumption that the debt was extinct, by reason of the debtor’s inability to pay. And if, at a subsequent time, the creditor should sue for the debt, the burden of proof would then be upon himself to prove that, at the time the debt became due, the debtor actually had means in his hands to satisfy it.
So if a creditor should obtain judgment for his debt, and that judgment should remain unsatisfied for any considerable time, that fact would afford a presumption of the debtor’s inability to pay, and throw upon the creditor the burden of proving that, at the time the judgment was obtained, the debtor had the means of paying it; because a judgment, founded merely on a debt, (and not on a wrong,) would attach only to the property that the debtor had in his hands at the time it was rendered.
7. If a debtor should be unable, when his debt became due, to pay the whole of it, it would be his duty to tender the most that it was in his power to pay. If the amount tendered should not be accepted in full discharge of the debt, it would be his duty to preserve it, (for the creditor’s future acceptance,) separate and distinct, both from subsequent acquisitions of his own, and also from any future loans that he might procure.
In case of a tender made by a debtor, the creditor could afterwards obtain judgment only for the amount tendered, unless he should prove—at least to the reasonable satisfaction of a jury—that the debtor had not tendered all that it was in his power to pay. But it would not be necessary for a creditor, in order to obtain judgment for more than the amount tendered, to prove, by actual witnesses of the fact, that the debtor had a larger amount in his hands at the precise time the debt became due. It would be sufficient for him to show that the debtor had not reasonably accounted for all the property that he had had in his hands either when the debt was contracted, or at any time previous to its becoming due. For these reasons, it would be important for debtors, especially for those who had little or no property in their hands more than enough to pay their debts, to keep such accounts and vouchers of their dealings, as would enable them always to account for any losses that might happen prior to their debts becoming due.
8. If a debtor be merely the bailee of his creditor, then the laws, which, on the death of a debtor, give the property, that was in his hands, to his family, to the prejudice of his creditors, are all void—as much so as would be laws, that should arbitrarily give any other men’s property to the same debtor’s family.
9. If a debtor be merely the bailee of the creditor, a fine imposed upon the debtor by the government, as a punishment for an offence, cannot be satisfied out of property in his hands to the prejudice of his creditors. It can only attach to his property in its order relatively with other claims.
10. If a debtor be the mere bailee of the creditor, his obligations in regard to the preservation of the value bailed to him, are similar to the obligations of bailees in other cases.
The degree of care, which the law requires of a bailee for hire, is that degree of care, (incapable of being measured with perfect accuracy, and therefore only capable of being judged of by a jury in each case separately,) which reasonable and prudent men ordinarily take of their own property. The law, however, does not require of a bailee, that he possess an equal judgment with other men, for the management of property. The bailor, or owner of the property, must take the risk resulting from any defect of judgment, on the part of the bailee—for weakness of mind is no fault; and the bailor, therefore, must judge for himself of the mental capacity of the bailee, before he entrust his property to him. All that the law requires of the bailee is, that whatever judgment he may possess, be exercised honestly, in good faith towards his bailor, and with such care and diligence in the use, custody, and management of the property entrusted to him, as prudent men generally exercise in the use, custody, and management of their own property.
In the case of a gratuitous loan, the bailee is bound to exercise still greater care and diligence, in the preservation of the property bailed, than in a case of bailment for hire.
A bailment of debt, however, differs from other bailments, in this particular, to wit, that the value bailed is merged in, and indistinguishably mixed with, the general property of the debtor. The debtor must, of course, take the necessary subsistence of himself and family