Beit Midrash

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Lost Collateral


Various Rabbis

Reuven lent money to Shimon, and Shimon gave him valuable collateral worth more than the value of the loan. The collateral has disappeared and was most likely stolen. The question is whether Reuven not only loses rights to receive the loan money in return but also has to pay Shimon the difference between the value of the collateral and the amount of the loan.
Assuming that the collateral was stolen, the machloket (Bava Metzia 81b-82b) whether a borrower who is watching collateral has a status of a paid watchmen (shomer sachar) or a free watchman is crucial. This is because the former is obligated to pay if the watched object is stolen and the latter is exempt. The final halacha on the matter is unclear. The Shulchan Aruch (Choshen Mishpat 72:2) says the lender is considered a shomer sachar and must pay the borrower. On the other hand, the Rama (ad loc.) says that out of doubt which opinion is correct, we cannot extract money from the lender (while the lender cannot force payment of the loan from the borrower). The Shach (CM 72:22) also leaves the matter as a doubt but says that as a result of the doubt, if the borrower were to seize (or otherwise have control over) funds from the lender, he could keep the amount that is arguably due to him.
Therefore, if we were to rule according to the strict classical halacha, Reuven would swear that the collateral was indeed stolen, and he would not have to pay Shimon. Beit din does not administer oaths in our times but invokes compromise to compensate for the lack of an oath. Therefore, in this case, the compromise should also take into consideration the fact that even if the object was indeed stolen, Reuven would still be obligated to pay according to many opinions. This would cause us to raise the amount that Reuven would pay as a compromise.
In this case, there is somewhat of a question about the need to swear, as in the first place, Shimon originally said that he trusted Reuven that the collateral was stolen, although he now says that he does not trust Reuven. It seems that Shimon has the right to retract his belief in Reuven until the case is decided unless a kinyan was made to finalize his waiving of the need for an oath. Although a litigant who accepts the testimony of an invalid witness cannot back out of it after the testimony has been heard (Rama, CM 22:1), that is because it is thereby considered as if the witness were valid, in which case the testimony is permanent and even the witness cannot retract it (see Tumim 22:4). However, regarding accepting a claim of the opposing litigant, since the litigant can change his own claim, certainly to his detriment, the other litigant’s accepting of his word is also not permanent.
Furthermore, it is not clear that Shimon believed Reuven that he watched the collateral sufficiently well. It is not even clear that according to Reuven’s own story, he was not negligent. Therefore, it is proper for the dayanim to make Reuven pay two thirds of the value by which the collateral exceeds the loan.
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