Section 747. A pledge is a contract whereby a person, called the pledgor, delivers to another person, called the pledge, a movable property as a security for the performance of an obligation.
Section 748. The pledge is a security for the performance of the obligation and for the following accessories:
- Compensation in case of non-performance of the obligation.
- Costs of enforcement of the pledge.
- Expenses for the preservation of the pledged property.
- Compensation for injury caused by non-apparent defects of the pledged property.
Section 749. The parties to a pledge may agree that the pledged property shall be kept by a third person.
Section 750. If the pledged property is a right represented by a written instrument, the pledge is void unless such instrument is delivered to the pledge and the pledge is notified in writing to the debtor of the right.
Section 751. If an instrument to order is pledged, such pledge cannot be set up against third persons unless its creation is endorsed upon the instrument.
No notification to the debtor under such instrument id necessary.
Section 752. If an instrument issued to a named person and not transferable by indorsement is pledged, the pledge must be stated on such instrument, and cannot be set up against the debtor under such instrument or third persons, unless it is notified to such debtor.
Section 753. If a named certificate for share or debenture is pledged, such pledge cannot be set up against the company or other third person, unless the creation of the pledge is entered in the company's book in accordance with the provisions of Title XXII relating to the transfer of shares or debentures.
Section 754. If the pledged right becomes due before the obligation for which it is security is due, the debtor of such right must deliver to the pledge the property which is the subject of the right and it becomes pledged in lieu of the pledged right.
If the pledged right is an obligation to pay a sum of money and becomes due before the obligation secured, the payment must be made jointly to the pledge and pledgor; if they cannot come to an agreement, each of them is entitled to demand that such sum be deposited in Deposited Office for their common benefit.
Section 755. If a right is pledged, it cannot be extinguished or modified to the injury of the pledge without the consent of the pledgee.
Section 756. Before the obligation is due, any agreement that the pledge shall, in case of non-performance, become the owner of the pledged property or disposed of it otherwise than in accordance with the provisions concerning Enforcement of Pledge, shall be invalid.
Section 757. The provisions of this Title XIII apply to contracts of pledge entered into with licensed pawnbrokers only in so far as they are not contrary to the Laws or Regulations concerning Pawnbrokers.
RIGHTS AND DUTIES OF PLEDGOR AND PLEDGEE
Section 758. The pledge is entitled to retain all the pledged property until he has received full performance of the obligation and accessories.
Section 759. The pledge is bound to keep the pledged property in safe custody and take as much care of it as a person of ordinary prudence would take of his own property.
Section 760. If, without the consent of the pledgor, the pledgee usues the pledged property or lets a third person have custody over it, he is liable for any loss or damage to the pledged property, even caused by force majeure, unless he proves that the loss or damage would have happened in any case.
Section 761. Unless otherwise provided by the contract, if the pledged property procedures legal fruit or fruits, the pledgee shall appropriate them in payment of any interest that may be due to him, and, if no interest is due, in payment of the principal of the obligation secured.
Section 762. The pledgor is bound to reimburse the pledgee for any expenses which were necessary for the preservation or maintenance of the pledged property unless otherwise provided in the contract.
Section 763. The following actions cannot be entered later than six months after the return or sale by auction of the pledged property:
- An action for compensation for damage caused to the pleged property by the pledge.
- An action for reimbursement of expenses incurred for the preservation or maintenance of the pledged property.
- An action for compensation for injury caused to the pledge by non-apparent defects in the pledged property.
ENFORCEMENT OF PLEDGE
Section 764. On enforcement of the pledge the pledgee must first notify the debtor in writing to perform the obligation and accessories within a reasonable time to be fixed in the notice.
The pledgee must notify the pledgor in writing of the time and place of the auction.
Section 765. If notification is impracticable, the pledge may sell the pledged property by public auction after one month from the time the obligation became due.
Section 766. The pledgee of a bill shall, without previous notification being necessary, collect it on the day of its maturity.
Section 767. On enforcement of the pledge the pledgee must appropriate the net proceeds to extinction of the obligation and accessories and must return the surplus to the pledgor or any person entitled to it.
If the proceeds are less than amount due, the debtor of the obligation remains liable for the difference.
Section 768. If several properties are pledged as security for one obligation, the pledgee may sell such of them as he may select, but he may not sell more than is necessary for the satisfaction of his right.
EXTINCTION OF PLEDGE
Section 769. A pledge is extinguished:
- When the obligation secured is extinguished otherwise than by prescription, or
- When the pledgee allows the pledged property to return into the possession of the pledgor.