Mortgages
A common case is where the debtor pledges all he has to the creditor, a pledge usually greatly in excess of the value of the loan and its interest for a reasonable term, but remains in possession himself. Hence the creditor has only a right over the pledge, a lien upon it, but no usufruct. For this he had the bond. This also gives only an eventual possession.
The creditor in free use, within his needs, of pledged property
We often meet with after-pledge. The creditor, being in possession of the pledge, might traffic in its profits. If he held a house as pledge, he was not bound to live in it, but could sublet it. Hence he might pledge the rent of it. Or he could repay himself his loan by repledging the house to another. He could also pledge the loan which was due to him. This makes a rather complicated case.
Possible complications
Thus L makes an advance a to D and receives a pledge p. He may then pledge both a and p. If these are given to two separate persons, a to A and p to P, then P has a cause for uneasiness. If D comes in and pays up a, he has a right to the pledge p which is in P's possession. But the money he advanced is not thereby paid to him. Further, A has a right to the money a just paid in by D, which is all that is in evidence. Hence L will have succeeded in getting two sums, and unless he can succeed in realizing his investments of them, is called on to pay both A and P with [pg 267] one amount. Either A or P may suffer. But if L pledges both a and p to one man C, then C is quite independent of the relations of L to D. Now D simply has to pay C and gets his pledge back. C is sure of his money.
Method of securing the holder of a second mortgage
Such a transfer of the responsibility of D from L to C was effected by handing over to C, with the pledge, also D's bond to L. C now holds this bond, which, with his pledge, D wishes to get back. The following is a complicated case illustrating these points:[699] D had a house and pledged it to L, who lived in it. Two others were guarantees that D would repay the loan. The pledge was antichretic, “rent nothing, interest nothing.” Now L wanted money; so he pledged the house to C. But he did not wish to vacate. So he hired it of C, at such a rate that he would repay C's loan in about five years. It is clear that this house was not good security for C, since D might turn out L at any time by repaying him. L would then owe money to C for which C had no security at all. But L in addition pledged all his own property, his slave, and all his goods in town and country. Further, he not only pledged the house, but handed over D's bond to him. C thus held the house in after-pledge, and the advance with its security in pledge. He was therefore amply secured, since D must pay him.
Now L died and was succeeded by his son M. L had already paid nearly a third of his debt. M thus owed less interest on the loan still due and was accepted by C as tenant at a lower rent. By this means M really made a small profit to himself. In three years M had paid off the whole sum borrowed by his father, and due from him as heir and executor, so he gave back his father's bond to C, also D's bond to L. Now D paid back his loan to M. His bond to L was destroyed. The claim of C on D was annulled, the guarantees of D were free. A final deed of settlement was [pg 268] drawn up, in which C acknowledged that he had no claims on D or M, nor on D's sureties. He had to say this, because he was not only creditor to M, but as long as he held transferred to him the pledge of D, and the credit of L, he was a creditor with claims on D also. Further, M declares that he has no credit on D.[700]
The occasion for guarantees