Title insurance TB Baba Metzia 14

Yesterday I wrote that the rabbis always ruled you do not return a lost IOU note to either the borrower or the lender. You allow the court to sort out the matter. On today’s daf TB Baba Metzia Shmuel gives the rabbis underpinning reason.

“Shmuel said: What is the reason for the opinion of the Rabbis, who say that one can collect a debt from liened property even if the promissory note does not include a property guarantee? They hold that omission of the property guarantee from the promissory note is a scribal error, as one would certainly not lend money without a property guarantee.” (Sefasria.org translation) Even if not explicitly stated, every loan document contains title insurance to protect the lender. If the borrower sells a piece of property, defaults on the loan that that property was liened against, the lender has the right to seize that piece of property.

At first glance Shmuel seems to be contradicting himself. “Rava bar Ittai said to Rav Idi bar Avin: Did Shmuel actually say this; i.e., that the omission of this clause is considered a scribal error? But doesn’t Shmuel say that enhancement, superior-quality land, and a lien require consultation? When a scribe writes a deed of sale for a field he must ask the seller whether to write explicitly that if there is a lien on the field, and the field is then is repossessed from the buyer, in which case the seller must compensate the buyer for any enhancement of the value of the field that occurred while it was in his possession, that this compensation will be made from superior-quality land, and that he liens all of his land as security for this sale. This indicates that Shmuel holds that a property guarantee is not written in every promissory note. (My emphasis-gg)” (Sefaria.org translation)

Shmuel is not contradicting himself at all. He is describing two different kinds of documents. The first is an IOU and the second is a bill of sale. “This is not difficult. Here, where Shmuel said that the omission of a property guarantee is a scribal error, it was with regard to a promissory note, as a person does not give away his money for nothing. When one lends his money, he requires a property guarantee. There, by contrast, where Shmuel said that a scribe must consult with the seller with regard to writing a property guarantee, it is with regard to a case of buying and selling land, as a person is apt to purchase land for a day. It is conceivable that the buyer is willing to risk that there is a prior lien on the land, thinking that even if he owns the property only for one day he can earn a profit.” (Sefaria.org translation)

 No lender would foolishly lend money without some guarantee that title insurance ensures. Without that title insurance there would be no way for him get his money back. On the other hand, some people are willing to take a risk investing their money in property without doing their due diligence in the hope of making a profit.

Although the case is not exactly similar, I can imagine why bonds companies are reluctant to post such an enormous bond that Trump needs while he appeals his cases to a higher court. Without an ironclad guarantee, these companies would have little hope of ever recouping their money.