Offsetting Obligations of a Deceased | Various Rabbis | Beit Midrash

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(based on Shut Noda B’Yehuda I, Choshen Mishpat 7)

Case: Reuven, who was a business partner with his brother Shimon, died. His widow, Sarah, approached Shimon about receiving payment for her ketuba (the brothers shared "movable objects," not real estate assets). Shimon said that he first has to pay debts (with contracts) that he and Reuven owe and that Sarah would be paid from that which remains. Since the debts were incurred after the ketuba was written but before Reuven died, does Sarah or the creditors get paid first?

Ruling: Actually, if Sarah’s ketuba does not indicate that there was an obligation made on movable objects along with real estate, then Sarah does not have a claim regarding those objects that precede those of later creditors, even if she seized them for payment (see Rama, Even Haezer 102:2). That is regarding the basic ketuba obligation, but for the part of the ketuba that corresponds to that which Sarah brought into the marriage, she has the same status as any creditor, including precedence if she preceded them. In any case, it is quite standard to obligate payment from movable objects, in which case Sarah should have precedence.

P'ninat Mishpat (801)

Various Rabbis

375 - Offsetting Obligations of a Deceased

376 - Offsetting Obligations of a Deceased

377 - Appraising Relatives

The situation is arguably different because Shimon was holding on to the money and wants to use it to pay the other debts. The Shulchan Aruch (CM 104:5) says that if the later creditor grabs payment first, we take the payment back from him, whereas the Shach (60:8) brings proofs that we do not take it back. It is hard to extract payment (on behalf of Sarah) in the face of such an even machloket. An exception would be regarding assets in the form of unpaid bills of debt that others owed to Reuven, to which later creditors could lay claim. However, if the bills of debt were written with Reuven as the recipient, then since the debts were not written over to Shimon, Sarah would have precedence (see Shulchan Aruch, CM 104:3).
However, there is a different reason to empower Shimon. Specifically, since Reuven and Shimon started their partnership long ago, the merchandise Shimon possessed was not the original property of the two. Therefore, in regard to new merchandise received after all the debts were incurred, the seizing of the later creditor would work.
The remaining question is whether to view Shimon’s possession as comparable to a later creditor seizing payment. After all, Reuven did not owe Shimon, just that the two together owed others, so that Shimon is like a guarantor of Reuven. Thus, Shimon cannot seize on his own behalf but on behalf of the creditors. Although it is possible for a guarantor to seize property of the borrower if he has grounds for concern that he will have to pay on the borrower’s behalf and not be reimbursed, that only allows him to hold property as a guarantee, not to take payment (see Shulchan Aruch, CM 73:10). Possession in that context does not advance a late debtor to have rights before the earlier one. Therefore, Shimon’s possession is significant only if Reuven owes him too, for then just as he can seize for himself he can take for others, even if he seized more for others than he had coming to himself. Otherwise, Sarah should be paid before the other creditors who borrowed money after the partnership was already obligated.

P'ninat Mishpat