PLEDGE, RIGHT OF. —
I. NOTION
It is the ius in re by which the creditor has a special security over movable property and constitutes one of the legitimate grounds of preference. The debtor must answer for the performance of the obligations undertaken with all his present and future assets; as a general rule, creditors have an equal right to be satisfied from the debtor’s assets. Nevertheless, this principle of equal ranking of creditors (general security) vis-à-vis the common debtor is subject to limitation when legitimate grounds of preference arise. In such a case, not all creditors rank equally in the satisfaction of their claims; rather, some of them may satisfy themselves from a specific asset of the debtor with priority, thereby excluding the claims of the other creditors (specific security).P. is one of the means by which this specific security is implemented; it consists in a real right over the movable property of another, possession of which is transferred to the creditor as security for his claim, with the right to satisfy himself from its value in preference to every other creditor.
II. IN ITALIAN LAW
The p. is usually constituted by a contract to which the creditor and the constituent, called the pledgor, are parties. The pledgor, in addition to the debtor, may also be a third party (provider of the p.). In that case, the parties to the (accessory) pledge contract differ from those to the (principal) contract being secured.For the contract to be perfected and the real right of p. consequently to arise, it is an essential condition that possession of the property constituting the object of the p. be transferred to the creditor or to a third party jointly designated by the parties (art. 2786, paragraphs 1 and 2); this transfer in fact serves the particular function of creating a special form of publicity parallel to that produced by registration mortgage (v.). It is for these reasons that, for purposes of priority, actual possession of the thing in the hands of the creditor or the third party is required (art. 2787, second paragraph). Moreover, for the constitution of the p., it is necessary that the contract be evidenced by a document bearing a certain date, which must also contain a sufficient indication of the claim and of the pledged property.
Only movable property (not entered in a register), of whatever nature, may be the object of a p.: thus movable things, claims (pignus nominis, art. 2800), as well as shares, copyright, negotiable instruments, rights of usufruct over movable property (art. 2806), and universals of movable property, that is, picture galleries, libraries, collections, etc. (art. 2784). It is disputed whether the p. of businesses may also be admitted.
The characteristic effect of the p. is to confer upon the pledgee a right of priority. In exercising this right, the creditor may not proceed directly, but has the power to initiate proceedings directly aimed at having the encumbered property expropriated; in the event of default, he may have the thing received in p. sold (ius distrahendi) in accordance with prescribed procedures (arts. 2796 and 1769). Similarly, the creditor may request the sale of the thing given in p. if it deteriorates and may become insufficient to secure the claim. The same power is granted to the constituent in the event of deterioration and when a favorable opportunity presents itself (art. 2795, paragraphs 3 and 4).
The sale is therefore provided for by the Code in pursuit of two different ends: as an enforcement act for the benefit of the creditor (art. 2796), and as a preservative act protecting the interests both of the creditor and of the constituent (art. 2795).
The p. is extinguished when the obligation has been fully satisfied or has otherwise been extinguished for causes other than performance. It is also extinguished when possession of the property given in p. is subsequently lost; in that event every guarantee effect ceases, but the law (art. 2789) grants the creditor the right to recover possession of the thing; once this has been done, the p. is revived.
Once the p. has been extinguished, the creditor must return the pledged thing, unless another debt arose subsequently to the p. and fell due before the earlier debt was paid. In that case, the creditor has the right of retention and security for the new claim (art. 2794, second paragraph).
There is also the so-called irregular p., when the security concerns fungible things. In that case ownership of the object of the p. is transferred, and upon termination of the relationship the creditor must return the tantumdem eiusdem generis et qualitatis. An application of the irregular p. is provided for by art. 1851, concerning bank advances secured by p., but it may also be extended to non-banking relationships.
III. MORAL PRINCIPLES
1) Between creditor and debtor, before the judge’s sentence, private agreements may also be made that contravene the provisions of positive law, without prejudice to the right, as a matter of strict justice, to invoke the provisions of the law whenever one wishes. The first right is granted by natural law, the second by positive law.2) In order for it to be lawful to assert the rights inherent in attachment in the hands of a third party, positive law must be respected; otherwise, the third party would be deprived of a right legitimately acquired on the basis both of natural law and of positive law. A third party who has acquired the thing under a valid title may legitimately retain it before the judge’s sentence, unless, at the time of acquisition, he implicitly consented to its return.
3) The priority granted by positive law to certain creditors cannot be fraudulently undermined by others; but since every creditor has the right to be satisfied, an inferior-ranking creditor who, without fraud, asserts his right before a higher-ranking preferred creditor cannot be condemned.
IV. IN CANON LAW
The giving in pledge, involving as it does almost the danger of losing the thing, is subject to special safeguards.Thus, when ecclesiastical goods are to be pledged, in addition to a just cause, the permission of the legitimate Superior is required (in accordance with can. 1532); he must require that the opinion of those concerned be heard and must moreover ensure that the debt be paid as soon as possible (can. 1538). For the rest, reference is made to the law of the individual nations, also with regard to ecclesiastical goods.