Louisiana Notary

A Civil Law Tradition

Civil Law Basics

Security and Pledge – Variations in the lease of immovable property and its rents

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Security and Pledge – Variations in the lease of immovable property and its rents

Art. 3170. Pledge contained in act of mortgage. A pledge of the lessor’s rights in the lease of an immovable and its rents may be established in an act of mortgage of the immovable. In that event, the pledge is given the effect of recordation for so long as the mortgage is given that effect and is extinguished when the mortgage is extinguished.

Art. 3171. Pledge of all or part of the leases of an immovable. A pledge may be established over all or part of the leases of an immovable, including those not yet in existence, without the necessity of specific description of the leases in the contract establishing the pledge. If the pledge is established over leases not yet in existence, the pledge encumbers future leases as they come into existence. The pledge has effect as to third persons, even with respect to leases not in existence at the time of formation of the contract establishing the pledge, from the time that the contract establishing the pledge is recorded in the manner prescribed. by law.

Art. 3172. Pledge of mineral payments by owner of land or holder of mineral servitude. By express provision in a contract establishing a pledge, the owner of land or holder of a mineral servitude may pledge bonuses, delay rentals, royalties, and shut-in payments arising from mineral leases, as well as other payments that are classified as rent under the Mineral Code. Other kinds of payments owing under a contract relating to minerals are not susceptible of pledge under this Title.

Security and Pledge – Pledge of the lessor’s rights in the lease of an immovable

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Security and Pledge – Pledge of the lessor’s rights in the lease of an immovable

Art. 3168. Requirement of contract. A contract establishing a pledge of the lessor’s rights in the lease of an immovable and its rents must state precisely the nature and situation of the immovable and must state the amount of the secured obligation or the maximum amount of secured obligations that may be outstanding from time to time.

Security and Pledge – Pledge as a security agreement under the Uniform Commercial Code

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Security and Pledge – Pledge as a security agreement under the Uniform Commercial Code

Art. 3143. Pledge of property susceptible to encumbrance by security interest. A contract by which a person purports to pledge a thing that is susceptible of encumbrance by security interest does not create a pledge under this title but may be effective to create a security interest in the thing.

Security and Pledge – Effectiveness against third parties

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Security and Pledge – Effectiveness against third parties

Art. 3153. General requirements for effectiveness of pledge against third persons. A pledge is without effect as to third persons unless it has become effective between the parties and is established by written contract.

Art. 3155. Effectiveness against third persons of the pledge of other obligations. If the thing pledged is another person’s obligation not arising under  the lease of an immovable, the pledge is effective against third persons only from the time  that the obligor has actual knowledge of the pledge or has been given notice of it.

Security and Pledge – Formalities of the contract of pledge

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Security and Pledge – Formalities of the contract of pledge

Art. 3149. Formal requirements of contract of pledge. The pledge of a corporeal movable is effective between the parties only if the thing pledged has been delivered to the pledgee or a third person who has agreed to hold the thing for the benefit of the pledgee. The pledge of other things is effective between the parties only if established by written contract, but delivery is not required.

Art. 3150 Acceptance. A written contract of pledge need not be signed by the pledgee, whose consent is presumed and whose acceptance may be tacit.

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.