PLEDGE, Right of. - I. NOTION. - It is the ius in re by which the creditor has a special guarantee over a movable good and constitutes one of the legitimate causes of preference. The debtor must answer for the fulfillment of the obligations contracted with all his present and future goods; as a general rule, creditors have an equal right to be satisfied out of the debtor's goods. However, this principle of the equal concurrence of creditors (generic guarantee) against the common debtor undergoes a limitation whenever legitimate causes of preference arise. In that case not all creditors concur equally in the satisfaction of their claims, but some of them may be satisfied out of a determined good of the debtor with priority, that is, excluding the concurrence of the other creditors (specific guarantee).
The pledge is one of the ways in which this specific guarantee is effected; it consists in a real right over the movable things of another, the possession of which is transferred to the creditor as security for his claim and with the power to be satisfied out of their value in preference to every other creditor.
II. IN ITALIAN LAW
A pledge is usually constituted by a contract to which the creditor and the constituent, called the pledgor, are parties. The pledgor may be not only the debtor but also a third party (giver of the pledge). In that case the parties to the contract of pledge (subsidiary) are different from those to the contract (principal) to be guaranteed.
For the contract to be perfected and the real right of pledge consequently to arise, it is an essential condition that possession of the asset that is the object of the pledge be conferred on the creditor or even on a third party designated by common agreement of the parties (art. 2786, 1st and 2nd paragraph); such conferral in fact has the particular function of constituting a special form of publicity parallel to the publicity to which registration gives rise in the case of the mortgage (v.). And it is for these reasons that, for the purposes of preference, effective possession of the thing in the hands of the creditor or of the third party is required (art. 2787 cpv.). It is necessary furthermore, for the constitution of the pledge, that the contract result from a writing with a certain date, which must also contain a sufficient indication of the credit and of the pledged asset.
Only movable assets (unregistered) of any nature may constitute the object of a pledge: and therefore movable things, credits (pignus nominis, art. 2800) and furthermore shares, copyright, credit instruments, rights of usufruct over movables (art. 2806) and universality of movables, that is, picture galleries, libraries, collections, etc. (art. 2784). It is disputed whether a pledge of businesses may also be admitted.
The characteristic effect of the pledge is the attribution to the pledgee creditor of the right of preference. In the exercise of that right the creditor cannot act directly, but has the power of initiative aimed at having the encumbered asset expropriated; in the event of non-performance he may have the thing received in pledge sold (ius distrahendi) according to pre-established forms (arts. 2796 and 1769). Likewise the creditor may request the sale of the thing given in pledge, in the event that it deteriorates and may become insufficient to guarantee the credit. An equal power is granted to the constituent in the event of deterioration and should a favorable opportunity present itself (art. 2795, 3rd and 4th paragraph).
The sale is therefore provided for by the Code with a view to two different ends: as an executory act for the benefit of the creditor (art. 2796) and as a conservatory act for the protection of the interests of the creditor and together of the constituent (art. 2795).
The pledge is extinguished when the obligation has been entirely satisfied or has in any case been extinguished for causes other than performance. It is also extinguished when the loss of possession of the asset given in pledge has supervened; in that case every effect of guarantee ceases, but the law (art. 2789) grants the creditor the faculty of recovering possession of the thing; this done, the pledge comes back to life.
Once the pledge is extinguished, the creditor must return the pledged thing, unless there exists another debt arisen after the pledge and fallen due before the earlier debt is paid. In that case the creditor has the right of retention and guarantee of the new credit (art. 2794 cpv.).
There is furthermore the so-called irregular pledge, when the guarantee has as its object fungible things. In that case there is a transfer of ownership of the object of the pledge and the creditor, upon extinction of the relationship, must return the tantumdem eiusdem generis et qualitatis. An application of the irregular pledge is provided for by art. 1851, with regard to bank advances on pledge, but extendable also to non-banking relationships.
III. MORAL PRINCIPLES
1) Between creditor and debtor, before the judge's sentence, private agreements may also be made, contrary to the provisions of positive law, without prejudice to the right, in terms of strict justice, to invoke, when one wishes, the provisions of the law. The first right is given by natural law, the second by positive law.
2) In order for it to be lawful to claim the rights inherent in a pledge lodged with a third party, positive law must be respected; otherwise the third party would be deprived of a right legitimately acquired both under natural law and under positive law. The third party who has acquired by valid title may legitimately retain the thing, before the judge's sentence, unless he has implicitly consented to its return at the time of acquisition.
3) The privilege granted by positive law to certain creditors cannot be undermined by fraud by others; but since every creditor has the right to be satisfied, the creditor of lower rank cannot be condemned who, without fraud, asserts his right before the privileged creditor of higher rank.
IV. IN CANON LAW
The datio in pignus, since it entails almost the risk of losing the thing, is subject to special precautions.
Thus, when ecclesiastical property is to be pledged, there is required, besides a just cause, the permission of the legitimate Superior (in accordance with can. 1532), who must require that the opinion of the interested parties be heard and must further ensure that the debt be paid in the shortest possible term (can. 1538). For the rest, reference is made to the law of the individual nations, also with regard to ecclesiastical property.
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Francesco Ercolani