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By: Rabbi Max Sutton

Al sold his private home to Benny for two-million, three-hundred-thousand dollars. Since Al desperately needed to sell the property, he agreed by contract to enable Benny to put down part of the purchase price, and then to pay the seven-hundred-and-fifty-thousand dollar remainder in two annual installments. At the closing, Benny paid one million five hundred and fifty thousand dollars, and signed the necessary documents obligating him for the seven hundred and fifty thousand dollar balance. When time came for Benny to make his first installment, Benny called Al requesting an extension. Al at first resisted, but when he realized that Benny was simply not going to be paying on time, he agreed to a three-month extension. However, the three-month deadline passed and Benny still did not provide payment. As a matter of fact, over two years passed since the home was sold to Benny and he never did make good on either of the payments. Upon investigation, Al discovered that all of Benny’s assets were in his son’s name, including the private home he had bought from Al. Al was frustrated and upset with himself that he had trusted Benny, and Al knew that the costs of the legal proceedings to collect his money were likely to be exorbitant. Finally, Al found a potential solution. Sam, a merchant who did business regularly with Benny, presently owed Benny six-hundred-thousand dollars. Al summonsed Sam to Bet Din, claiming that Sam was obligated to direct the six-hundred-thousand dollar payment to him, rather than Benny. Sam understood the claim, but was nevertheless unwilling to comply. Sam explained that Benny was known to be a very difficult character. He would undoubtedly press charges against him if he paid Al the money instead, and Sam was by no means interested in getting involved in a lengthily legal dispute with him. Al offered to assist Sam financially in the event that Benny pressed charges, but Sam rejected the offer, since he was uninterested in the financial exposure of a lawsuit.

Is Sam obligated to forward the six-hundred-thousand dollars to Al? How should the Bet Din rule, and why?


 According to the ruling of the Shulhan Aruch a lender has the legal right to collect from the account receivables due to his borrower. Hence, all monies owed to the borrower, whether it is money due from a loan he extended, or even money owed to him on account of a sale, is legally collectable by the lender. This ruling is applicable to all assets found to the credit of the borrower, regardless if they were obtained prior to or after he borrowed from the lender.

Naturally, a Bet Din will not enable collection from a third party unless it is first clearly established that the borrower still maintains an outstanding balance with the lender.

By rule of the Shulhan Aruch, a Bet Din will only collect from a third party that owes the borrower in the event that no other available option exists to collect directly. If however, the borrower is a property owner, a Bet Din will first instruct the lender to collect from him, so as to spare the third party the hassle and anguish of dealing with the matter. This ruling is true even if the debt owed to the borrower is past due. In instances in which the borrower has no assets to collect from, or in which he is a manipulative character preventing collection, a Bet Din will exact payment from a third party on a lender’s behalf. A common example of a borrower preventing collection is the situation in which he transfers title of his properties to a family member. In such instances, a Bet Din will instruct a third party to pay the lender directly, so as to eliminate the costly legal proceedings of collecting from the borrower and his family.

Contemporary halachic authorities explain that it is incumbent upon a third party who owes the borrower to comply with the lender and provide him with payment fфor the outstanding debt. However, in the event that a third party is fearful that the borrower will ultimately press charges against him for such activity, he is not required to pay the lender. The rationale behind this ruling is that a third party who owes the borrower need not sustain a loss in order to enable the lender to collect. He is an uninvolved party who is only required to assist the lender as long as his benevolence does not come at a financial loss.

Nevertheless, if the lender is willing to sustain the possible damages incurred by the third party, it stands to reason that the above rulings are once again applicable. Yet it is clearly insufficient for the lender to merely express his willingness to protect the third party from financial loss. Rather, he is required to put in escrow both the principle sum and the estimated costs of the legal proceedings so as to insure the third party in case of damage. In absence of the money placed in escrow, a Bet Din will not instruct the third party to pay the lender, but will rather advise the lender to proceed in civil court to collect his debt from the borrower.

As a general rule, a Bet Din will summons a defendant to appear for legally binding arbitration by sending him three separate invitations. If the defendant does not respond affirmatively, a Bet Din will direct the claimant to civil court to proceed with his claim.

in Civil Court

Our Bet Din ruled in favor of Sam by instructing Al to proceed in civil court to collect his debt from Benny. Although by Torah law a lender has the legal right to collect from the account receivables of his borrower, nevertheless, in this specific case, Sam was not required to pay Al directly. Although Benny fiendishly transferred the title of the property he purchased to his son and thereby complicated Al’s ability to collect, still Sam is not required to forward the $600,000 payment he owes Benny to Al. As mentioned in Torah law, since Sam is susceptible to a lawsuit from Benny for not providing payment of the $600,000 due him, Sam is not required to risk the financial exposure, which include the cost of the legal fees he may incur. Although Al expressed willingness to cover Sam’s potential legal fees, he was unwilling to tie up the complete $600,000 in escrow along with the additional estimated legal fees. Hence, Sam was not required by law to take the financial risk to assist Al. Our Bet Din sent three separate invitations to Benny to appear for arbitration. When he did not respond, we instructed Al to proceed in civil court to collect the outstanding balance.