Louisiana Notary

A Civil Law Tradition

Security and Pledge

Security and Pledge – Default

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Security and Pledge – Default

Art. 31258. Enforcement of pledge of a movable. If agreed in a written contract of pledge of a movable, the pledgee may, upon failure of performance of the secured obligation, dispose of the thing pledged at public auction or by private sale, but he shall act reasonably in disposing of the thing and shall account to the pledgor for any proceeds of the disposition in excess of the amount needed to satisfy the secured obligation. Otherwise, the pledgee may cause the sale of the thing pledged only by having it seized and sold under judicial process.

Art. 3140. Nullity of agreement of forfeiture. Unless expressly permitted by law, a clause in a contract providing in advance that ownership of a thing given as security will transfer upon default in performance of the secured obligation is absolutely null. A clause in a contract obligating the owner of a thing to give it to an obligee in payment of a debt upon a future default in performance of an obligation is absolutely null.

Security and Pledge – Pledgee’s right of retention

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Security and Pledge – Pledgee’s right of retention

Art. 3156. Pledgee’s right of retention. If the thing pledged has been delivered to the pledgee or a third person for the benefit of the pledgee, the pledgee is not obligated to return it until all secured obligations have been extinguished.

Art. 3157. Indivisibility of pledge. The contract of pledge is indivisible, notwithstanding the divisibility of the secured obligations, and the pledgor may not demand return of all or part of the thing pledged until all secured obligations have been extinguished.

Security and Pledge – Pledge may be given to secure third party’s obligation

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Security and Pledge – Pledge may be given to secure third party’s obligation

Art. 3148. Pledge securing an obligation of another person. A person may pledge his property to secure an obligation of another person. In such a case, the pledgor may assert against the pledgee any defense that the obligor could assert except lack of capacity or discharge in bankruptcy of the obligor. The pledgor may also assert any other defenses available to a surety.

Security and Pledge – Of the preference granted by the contract of pledge

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Security and Pledge – Of the preference granted by the contract of pledge

Art. 3145. Preference afforded by pledge. Pledge gives the pledgee the right to be satisfied from the thing pledged and its fruits in preference to unsecured creditors of the pledgor and to other persons whose rights become effective against the pledgee after the pledge has become effective as to them.

Art. 3159. Fruits of things pledged. The pledgee is entitled to receive the fruits of the thing pledged and to retain them as security. He may also apply them to the secured obligation, even if not yet due.

Security and Pledge – Property that may be the object of pledge

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Security and Pledge – Property that may be the object of pledge

Art.3142. Property susceptible of pledge. The only things that may be pledged are the following:

(1) A movable that is not susceptible of encumbrance by security interest

(2) The lessor’s rights in the lease of an immovable and its rents

(3) Things made susceptible to pledge by law.

Security and Pledge – General Principles

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Security and Pledge- General Principles

Revision Comments: Art. 3431, comment D. Parties might nonetheless, through the exercise of the freedom of contract recognized by Article 1971 (Rev. 1984), enter into an innominate contract providing  for an arrangement similar to what was previously known as an antichresis, but the contract would create neither a pledge under this Title nor a real right in the immovable enforceable against third persons who acquire rights in it.

Security and Pledge – Security

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Security and Pledge – Security

Art, 3136. Security defined. Security is an accessory right established by legislation or contract over property, or an obligation undertaken by a person other than the principal obligor, to secure performance of an obligation. It is accessory to the obligation it secures and is transferred with the obligation without a special provision to that effect.

Revision Comments: Art, 3136, Comment (b). The concept of security arises in numerous other Articles found throughout the Civil Code. See, e.g., C.C. arts. 474 (Rev. 1978); 571 (Rev. 1976; Amended 2004); 573 and 624 (Rev. 1976; Amended 2010); 1499 (Rev. 1996; Amended
2003); 1514 (Rev. 1996; Amended 2003); 1783, 1884, 1887, 1891, 1913, and 2023 (Rev. 1984); 2557 and 2569 (Rev. 1993); 3047, 3053, 3054, 3062, 3068, and 3070 (Rev. 1987).

Art. 3133. Liability of an obligor for his obligations. Whoever is personally bound for an obligation is obligated to fulfill it out of all of his property, movable and immovable, present and future.

Art. 3134. Ratable treatment of creditors. In the absence of a preference authorized or established by legislation, an obligor’s property is available to all his creditors for the satisfaction of his obligations, and the proceeds of its sale are distributed ratably among them.

Art. 3138. Kinds of security. Kinds of security include suretyship, privilege, mortgage, and pledge. A security interest established to secure performance of an obligation is also a kind of security.

Art. 3185. Privileges established only by law, stricti juris. Privilege can be claimed only for those debts to which it is expressly granted in this Code.

Art. 3186. Privilege, definition. Privilege is a right, which the nature of a debt gives to a creditor, and which entitles him to be preferred before other creditors, even those who have mortgages.