Section IV Certain Kinds of Pledge

1. Pledge of an Immovable (Antichresis)

Article 1114

A pledge of an immovable is only valid as against third parties if, in addition to delivery of the pledged immovable to the pledgee, the contract of pledge is inscribed. The provisions governing the inscription of a mortgage apply to the inscription of pledge of an immovable.

Article 1115

A pledgee of an immovable may lease the immovable to the pledgor without the contract of pledge being less valid as against third parties. If the lease is agreed to in the contract of pledge, it must be mentioned in the inscription of the pledge, but if the lease is agreed to after the pledge, it must be noted in the margin of that inscription. Notation is not necessary if the lease is tacitly renewed.

Article 1116

A pledgee of an immovable must provide for the maintenance of the immovable, pay the expenses necessary for its preservation, the annual taxes and charges, and deduct the amount of these expenses from the fruits he has collected or obtain repayment from the price of the immovable in the rank of privilege accorded by law to such expenses.

He may free himself of these obligations by abandoning his right to the pledge.

2. Pledge of a Movable

Article 1117

A pledge of a movable is only valid against third parties if, in addition to the delivery of the movable pledged, it is constituted by a written contract adequately setting out the amount of the secured debt and the object of the pledge and having an established date. The rank of the secured creditor will be fixed in accordance with such established date.

Article 1118

The rules relating to the effects of possession of material movables and of bearer securities apply to the pledge of a movable.

A pledgee in good faith may, in particular, avail himself of his right of pledge even if the pledgor was not qualified to dispose of the thing pledged. On the other hand, a third party holder in good faith, even after the date of the pledge, may avail himself of the right he has acquired over the thing pledged.

Article 1119

If the thing pledged appears to be in danger of perishing, deteriorating or diminishing in value, to such an extent that there is a danger that it will not suffice to secure the claim of the pledgee, and the pledgor does not apply for the restitution of the thing in exchange for another thing, either the pledgee or the pledgor may apply to the judge for authority to sell the thing pledged by public auction or at its value at the time on the stock exchange or on the market.

The judge shall, when authorizing the same, make an order as to the deposit of the price; in such a case the right of the creditor is transferred from the thing pledged to the price thereof.

Article 1120

If a suitable occasion presents itself for the sale of the thing pledged and the sale is advantageous, the pledgor may, even before the maturity of the debt, apply to the judge for authority to sell the thing. The judge, when authorizing the sale, will fix the conditions and make an order as to the deposit of the price.

Article 1121

The pledgee may, upon failure of payment of the debt, apply to the judge for authority to sell the thing pledged by public auction or at its value at the time on the stock exchange or on the market.

The pledgee may also apply to the judge for an order authorizing him to appropriate the thing pledged in payment of the debt, the value thereof being charged against him in accordance with an estimate by experts.

Article 1122

The preceding provisions apply, in so far as they are not incompatible either with provisions of commercial laws or provisions relating to institutions authorized to lend money on pledge, or with the laws and regulations governing special cases as to the pledge of movables.

3. Pledge of Debts

Article 1123

A pledge of a debt is only valid as regards the debtor upon notification to or acceptance by the debtor of the pledge, as provided for in Article 305.

The pledge is only valid as against third parties if the pledgee holds the title of the pledged debt. The rank of the pledge is fixed as at the established date of the notification or of the acceptance of the pledge.

Article 1124

Nominative bonds and bonds payable to order may be pledged in accordance with the special procedure prescribed by law for the transfer of such bonds, provided that it is stated that the transfer is made by way of pledge; the contract of pledge is completed without notification being necessary.

Article 1125

A debt that cannot be assigned or attached, cannot be pledged.

Article 1126

In the absence of an agreement to the contrary, the pledgee has the right to collect the interest on the pledged debt which falls due after the constitution of the pledge. He has also the right to collect periodical payments appertaining to the pledged debt upon condition that he sets off the amounts so collected by him first against expenses, then against the interest and then against the capital of the debt secured by the pledge.

A pledgee is bound to look to the protection of the pledged debt. If he has the right to collect any part of the debt without the intervention of the pledgor, he is bound to collect such part of the debt at the time and place fixed for payment and immediately inform the pledgor thereof.

Article 1127

The debtor of a debt given in pledge may set up against the pledgee the defenses relative to the validity of the debt secured by the pledge as well as those defenses he may have against his own creditor, to the extent that an assigned debtor may set up defenses against the assignee in the case of an assignment of debt.

Article 1128

If a pledged debt falls due for payment before the actual debt secured by the pledge, the debtor must discharge his debt to the pledgee and the pledgor jointly. The pledgee and the pledgor may each demand the debtor to deposit the amount paid by him, in which case the pledge is transferred to the amount so deposited.

The pledgee and the pledgor must, without prejudice to the rights of the secured creditor, cooperate together for the investment of the amount paid by the debtor to the best advantage of the pledgor, and they must immediately constitute a new pledge in favor of the pledgee.

Article 1129

If the pledged debt and the secured debt fall due, the pledgee who has not been paid may collect the debt pledged up to the amount due to him and demand that the debt be sold or be allocated to him in accordance with the provisions of Article 1121, par.2.