Libro Segundo · Título V Capítulo III. Prenda común

The contract of pledge gives the creditor the right to be paid in preference to other creditors from the price at which the pledge is sold.

Any agreement authorizing the creditor to appropriate the pledge or to dispose of it by himself in case of non-payment is void.

An object may be given in pledge to several persons successively, with prior notice in authentic form to the creditors who already hold the same security. The creditors shall follow the order in which the pledges have been constituted for purposes of preference in payment. The first creditor shall have the right to substitute the depositary.

The pledged property, upon constitution of the security, shall be deposited with the creditor or with a third party designated by the parties, or with the debtor himself if the creditor consents thereto.

The person who receives the pledge has the obligations and rights of depositaries.

The pledge of nominative titles shall be constituted by means of endorsement upon execution of the contract that is the object of the guarantee, and the debtor shall receive a receipt in order to record the object of the endorsement. In this case the debtor shall give notice of the pledging to the issuing institution so that no transfer of the pledged titles is made while they are subject to the obligation they secure.

The pledge of bearer titles is made by the mere delivery thereof, describing them in the respective contract, and the debtor shall receive a receipt for their own guarantee.

Whenever the pledge is a credit, the depositary shall be obliged to do whatever is necessary so that the right it represents is neither altered nor impaired. The depositary shall apply any amounts received to the amortization of interest and principal, if applicable, except as the parties may agree in the contract.

The debtor is obligated to provide warranty for the thing given in pledge, but if it involves credits or other securities, he shall be liable only for their existence and legitimacy at the time of pledging.

The debtor may not claim restitution of the pledge while it has not paid the totality of the debt, unless, several properties being pledged, the interested parties shall have agreed to assign to each thing the amount for which it must answer.

Property given in pledge shall not be used without the consent of the owner and the creditor. Nor shall it be removed from the place of the agricultural, livestock or industrial exploitation or that indicated in the contract, nor be exported without the written authorization of the creditor.

The possessor of the things given in pledge who in any manner disposes of them and the third party who acquires them, if the encumbrance is registered in the register, shall likewise remain obligated and liable to the creditor, civilly and criminally.

If the depositary abuses the pledge, he shall be liable in case of loss or deterioration and the debtor shall have the right to have it deposited with another person.

The change of creditor does not alter the conditions of the contract.

If the pledge is lost or destroyed, it shall be paid by the depositary, who may only be exempted from this obligation by proving that it was neither lost nor destroyed through his fault.

When the loss is due to accident or fortuitous event occurring after the credit has been paid or the principal obligation has been performed, the depositary shall pay the value of the pledge if he had no just cause for delaying its return.

The creditor who without legal cause previously refused to accept payment of his credit has equal liability.

If the thing given in pledge deteriorates or diminishes in value, the creditor or the debtor may request that it be sold at public auction, or at the current price. The diminution or the sufficiency of the guarantee shall be assessed by the judge in an oral trial.

If the sale of the pledge is effected, its proceeds shall substitute the thing, but if, the amount of the principal and interest having been calculated up to the expiry of the time limit or the date of payment, a surplus results, such surplus shall be delivered to the owner.

The debtor may oppose the sale and obtain restitution of the thing, constituting another guarantee declared sufficient by the judge, hearing experts. This right is unwaivable.

The debtor may also request the sale in the same manner of the pledged thing or things, if an advantageous opportunity to do so should present itself to the debtor, in which case, once the sale has been effected, the procedure shall be as provided in the second paragraph of Article 898.

The indemnities relating to the pledged property remain allocated to payment of the pledge credit.