Victim pays damages to tortfeasor: the when and wherefore.

• Author: Shmueli, Benjamin
• Position: Continuation of III. Ex Post Version of Rule 4 B. The Ex Post Option Alongside the Ex Ante Option: A Comparative Perspective 1. The Talmudic Ex Post Model through Conclusion, with footnotes, p. 303-331

The Mishnah then turns to the law of a tree already planted within the area that later becomes a town site: "However, if the tree was there first, he must nevertheless cut down the tree, and in this case [the town] pays compensation." (77) This rule indicates that if the tree were present before the town was established, the town may still cut down the tree. However, the owner of the tree must be compensated since, when he planted the tree, it was permissible for him to do so. Therefore, the sages required the tree's owner to cut it down first, and, if the town's residents did not pay, he could demand compensation in court. (78) Those responsible would then be able to collect the money to pay him. (79)

Some commentators explain that although the tree was planted legally, it must be cut down because the public interest, that is, the beauty and amenities of the town, takes precedence over the rights of the individual. (80) Nevertheless, according to this Talmudic version of the rule, the tree's owner is compensated for his loss. This rule stands in contrast to the law of a tree that was planted legally and afterward became a nuisance to an individual neighbour. In that case, the tree would not be cut down. (81)

The Mishnah, then, concerning the matter of the tree, touches on a situation identical with that of the polluting factory that preceded the residential neighbourhood (as mentioned by Calabresi and Melamed) as well as the scenario in Spur. The Jewish sources have chosen the same solution suggested by Calabresi and Melamed, that being the application of Rule 4, but the Jewish sources actually applied what we call the ex post version of the rule. In the Mishnah, the elimination of the nuisance is the cutting down of the tree. In these cases, a property issue is at stake--who was there first? If the tree was there first, the tree is cut down and the victim compensates the injurer. But cutting down the tree need not await the payment of compensation. By contrast, if the town was there before the tree, the owners of the nuisance must cut down the tree without receiving compensation (Rule 1). The cutting of the tree is reminiscent of modern-day expropriation and nationalization, as discussed by Calabresi and Melamed within the context of the rule. Both there and here the rule is applicable in principle.

A more in-depth examination of the topic is found in the Talmud, which contains an instructive consequentialist-behaviourist elucidation of when it is necessary to apply the ex ante version and when it should be used in the ex post format described in the Mishnah. The Talmud notes that "it was indicated in the Mishnah: If the tree came first and the city was built afterward, he must cut down the tree, and [the city] pays compensation." (82) The Talmud describes the difficulty presented by this ruling in this way: "But let [the tree's owner] say to [the city's residents] : 'Pay me first and I will then cut down the tree."' (83) Why must the tree's owner cut down the tree before he receives payment? Since the tree was planted legally before the city was built and he is forced to cut it down with compensation for the sake of the city's beautification, he is, in effect, selling his tree to the city. As such, he should not be required to cut it down until he receives payment. (84)

It appears from the question raised by the Talmud that the sages were definitely aware of the possibility of using the ex ante version. They ask, therefore, why not choose a solution whereby the injurer does not have to stop the activity causing the nuisance unless the victim pays him in advance? One Talmudic commentator indicates that at issue is the sale of the injurer's earlier property right to perform on his land various activities--in this case, the planting of a tree--to the victim. In the words of that source, "[according to the law, because the tree was first ... [the tree's owner] can tell [the victims]: pay me compensation first and only then will I cut down the tree, for it is as if he sold it to them." (85) Nevertheless, although the required result should have been that the residents of the town pay him before he cuts down the tree, similar to the ex ante version, the Mishnah ruled on a reverse order of operation, that is, an ex post version. In this case, the Talmud asks why that is the case. This question appears to be a moral one of the first order. If the activity of planting trees is desirable in principle, and the owner of the tree cuts it down first, he is likely to face difficulties and delays in collecting the payment to which he is entitled.

Rav Kahana resolves this difficulty with an answer that appears to be based on a criterion of efficiency. This solution is relevant precisely to the difficulty in collecting payment. As Rav Kahana explained: "[A] pot in the charge of two cooks is neither hot nor cold; each one relies on the other to do the necessary work" (hereinafter PCT). (86) This was a popular folk saying in Talmudic times and is relevant to the collective action problem in our times as well. (87) Indeed, PCT is similar to the collective action problem. It means that were the owner of the tree entitled to let the tree remain until he was paid, it would never be cut down because none of the town residents would consent to be the first to pay, as in the EC case. Indeed, the tree is cut down before payment is rendered, because, otherwise, no one will take it upon themselves to advance the money for payment and the tree will not be removed. PCT is thus the Talmudic version of the modern transaction or administrative costs and collective action problems.

If the owner of the tree could delay the cutting down of the tree until receiving payment, it would never be cut down because the bureaucrats of the town count upon each other; each one relies on another to collect the money from the citizens and pay it to the owner of the tree. This means that the transaction cost is high.

The PCT principle, then, can be justified from an economic perspective. There are apparently many instances of damage to the public where even if it is appropriate to apply the rule, it must be done differently than in the ex ante version. The Talmud explains that, unlike in the ex ante version, there are situations in which, despite the fact that the residents of the town can stop the nuisance and cause the tree to be cut down, and the owner of the tree must receive compensation, it is preferable to stop the damaging or polluting activity first and only then collect the compensation and pay it to the polluter. It is important to emphasize this point, which also sharpens the elements of the ex ante version. Note that in the context of the rule, Calabresi and Melamed also presented a similar case to the one that appears at the end of the Mishnah--the factory case. (88) In that case, the factory had been using cheap coal prior to the construction of the housing surrounding it and now the neighbours claim that the factory pollutes (a situation similar to the one in Spur). But unlike the Talmudic analysis, Calabresi and Melamed's analysis did not examine which of the two versions of the rule, ex ante or ex post, should be applied.

As noted above, in the ex ante version there is a risk that the injurer will make exaggerated demands and even extort the victim in order to receive a high price for eliminating the nuisance. This fear appears to be more justified in the ex ante version than in the Talmudic ex post version because according to the latter, in the case of public nuisances, the nuisance is eliminated first and the injurer has no opportunity to extort. Thus, according to the Talmud, the owner of the nuisance is in an inferior position than he would be if the rule were applied in its ex ante version. This situation makes the elimination of the nuisance contingent upon receiving proper compensation. This difference is likely to also be manifested in the amount of compensation the owner of the nuisance receives. According to the ex post version, there is less fear of the owner of the nuisance extorting payment by not agreeing to stop the activity until he receives high compensation because his manoeuvring space and ability to extort are greatly limited. Therefore, it is reasonable to assume that he will receive less because, first and foremost, he is obligated to remove the nuisance.

So far, the decision on whether to use Rule 4 in its regular ex ante version or in the ex post version shown here appears to be based solely on considerations of efficiency. Although these considerations are significant for assigning cases pertaining to Rule 4 to the ex ante or ex post versions, as we have tried to show so far, we suggest that at least according to Talmudic sources, the point of view is not only one of efficiency. The sources of Jewish law reveal that it is also possible to explain the idea of PCT and the application of Rule 4 in its ex post Talmudic format according to both consequentialist and behavioural theories. It is vital to take these other perspectives into account when creating a model that offers a correct division and classification of cases by ex ante and ex post versions.

Some scholars based Rule 4 in its Talmudic ex post version on various consequentialist considerations. Thus, Yehoshua Liebermann based the solution offered by the Talmud in the PCT case on transaction costs. (89) Zvi Ilani presented a somewhat different economic justification. (90) Liebermann and Ilani mainly emphasized the economic foundations of the rule. But it appears that at the basis of the Talmudic ex post rule there is also a purely behavioural idea--the phenomena of social laziness and of free riders, which are also mentioned by Calabresi and Melamed. (91) In what cases will there be differences in the application of Rule 4 in its ex post Talmudic format between the situation in which the consequentialist theory serves as a basis for the PCT...