CHAPTER 2 - OF PAWN

Art. 3154. One may pawn every corporeal thing, which is susceptible of alienation.

One may even pawn money as a security for performing or refraining to perform an act.

Art. 3155. One may, in fine, pawn incorporeal movables, such as credits and other claims of that nature.

Art. 3156. When a debtor wishes to pawn a claim on another person, he must make a transfer of it in the act of pledge, and deliver to the creditor to whom it is transferred the note or instrument which proves its existence. [Amended by Acts 1981, No. 315, §1]

Art. 3157. The pawn invests the creditor with the right of causing his debt to be satisfied by privilege and in preference to the other creditors of his debtor, out of the product of the movable, corporeal or incorporeal, which has been thus burdened.

Art. 3158. A. But this privilege shall take place against third persons only in case the pledge is proved by some written instrument, in which shall be stated the amount of the debt intended to be secured thereby, and the species and nature of the thing given in pledge; or the description of the thing pledged may be contained in a list or statement annexed to the instrument of pledge and giving its number, weight, or descriptive marks.

B.(1) When a debtor wishes to pledge promissory notes, bills of exchange, bills of lading, stocks, bonds, policies of life insurance, or written obligations of any kind, he shall deliver to the creditor the notes, bills of exchange, bills of lading, stocks, bonds, policies of life insurance, or other written obligations, so pledged, and such pledge so made, except as hereinafter provided with regard to life insurance policies, shall without further formalities be valid as well against third persons as against the pledgor thereof, if made in good faith.

(2)(a) All pledges may be made by private writing of any kind if only the intention to pledge be shown in writing, but all pledges, except of a life insurance policy in favor of the insurer, must be accompanied by actual delivery.

(b) The pledge of a life insurance policy must also be evidenced by a written assignment thereof as security to the pledgee and by delivery of the pledge or assignment to the insurer and, unless the beneficiary thereof may be changed upon the sole request of the insured, or unless pledge or assignment without the consent of the beneficiary be specifically provided for in the policy, must be accompanied by the consent of any named beneficiary who is not the insured or his estate.

C.(1) Whenever a pledge of any instrument or item of the kind listed in this Article is made or has been made to secure a particular loan or debt, or to secure advances to be made up to a certain amount, and, if so desired or provided, to secure any other obligations or liabilities of the pledgor or any other person, to the pledgee, or its successor, then existing or thereafter arising, up to the limit of the pledge, such as may be included in a cross-collateralization clause, and the pledged instrument or item remains and has remained in the hands of the pledgee or its successor, the instrument or item may remain in pledge to the pledgee or its successor, or without withdrawal from the hands of the pledgee or its successor, be repledged to the pledgee or its successor to secure at any time any renewal or renewals of the original loan or any part thereof or any new or additional loans, even though the original loan has been reduced or paid, up to the total limit which it was agreed should be secured by the pledge, and, if so desired or provided, to secure any other obligations or liabilities of the pledgor or any other person to the pledgee or its successor, then existing or thereafter arising, up to the limit of the pledge, without any added notification or other formality, and the pledge shall be valid as well against third persons as against the pledgor thereof, if made in good faith; and such renewals, additional loans and advances or other obligations or liabilities shall be secured by the collateral to the same extent as if they came into existence when the instrument or item was originally pledged and the pledge was made to secure them.

(2) Such cross-collateralization clauses include but are not limited to pledges securing obligations of more than one person; pledges securing more than one obligation or future obligations; or any combination of these, whether such obligations are direct or indirect, absolute or contingent, liquidated or unliquidated, or otherwise. Such clauses are not and never have been against the public policy of Louisiana.

D.(1) The assignment or transfer of the principal obligation does not: extinguish the pledge; constitute a new pledge or issuance; or affect the retroactive effect given by this Article for obligations to the original pledgee or its successor. In all cases, if the pledge at the time of its delivery, issuance, or reissuance was intended to secure obligations that may arise in the future, the pledge relates back to the time of delivery, issuance, or reissuance if and when such future obligations are incurred, as long as the pledgee, the pledgee's agents, or the pledgee's successors have maintained possession of the pledged item.

(2) Such future obligations include but are not limited to:

(a) Lines of credit;

(b) Situations where monies have been advanced, paid in whole or in part, one or more times, and readvanced pursuant to one or more obligations that the pledge was given to secure; or

(c) Situations in which the pledgor or any other persons could not have required the pledgee or its successors to advance funds under one or more obligations that the pledge was given to secure.

E. The delivery of property on deposit in a warehouse, cotton press, or on storage with a third person, or represented by a bill of lading, shall pass to the pledgee by the mere delivery of the warehouse receipt, cotton press receipt, bill of lading, or storage receipt, showing the number, quantity or weight of the thing pledged; and such pledge so made, without further formalities, shall be valid as well against third persons as against the pledger thereof, if made in good faith. Such receipts shall be valid and binding in the order of time in which they are issued for the number, quantity, or weight of the things pledged, if there should not be enough to meet all receipts so issued.

F. Nothing herein contained shall be construed to repeal any part of Title 9, Sections 4301 to 4382, both inclusive of the Louisiana Revised Statutes of 1950. [Amended by Acts 1900, No. 157, §1; Acts 1952, No. 290, §1; Acts 1989, No. 137, §17, eff. June 22, 1989]

Art. 3159. Acts of pledge in favor of any banks in this State, whether State banks or National banks, shall be considered as forming authentic proof, if they have been passed before the cashiers of those banks, and contain such description of the objects given in pledge, as is required by the preceding Article. [Amended by Acts 1900, No. 157, §2]

Art. 3160. [Repealed. Acts 1988, No. 243, §2]

Art. 3161. [Repealed. Acts 1900, No. 157, §4]

Art. 3162. In no case does this privilege subsist on the pledge, except when the thing pledged, if it be a corporeal movable or the evidence of the credit if it be a note or other instrument under private signature, has been actually put and remained in the possession of the creditor, or of a third person agreed on by the parties.

Art. 3163. When several things have been pawned, the owner can not retake one of these without satisfying the whole debt, though he offers to pay a certain amount of it in proportion to the thing which he wishes to get.

Art. 3164. The creditor who is in possession of the pledge, can only be compelled to return it, but when he has received the whole payment of the principal as well as the interest and costs.

Art. 3165. The creditor cannot, in case of failure of payment, dispose of the pledge; but when there have been pledges of stock, bonds or other property, for the payment of any debt or obligation, it shall be necessary before such stocks, bonds or other property so pledged shall be sold for the payment of the debt, for which such pledge was made, that the holder of such pledge be compelled to obtain a judgment in the ordinary course of law, and the same formalities in all respects shall be observed in the sale of property so pledged as in ordinary cases; but in all pledges of movable property, or rights, or credits, stocks, bonds or other movable property, it shall be lawful for the pledger to authorize the sale or other disposition of the property pledged, in such manner as may be agreed upon by the parties without the intervention of courts of justice; provided, that all existing pledges shall remain in force and be subject to the provisions of this act. [Amended by Acts 1872, No. 9]

Art. 3166. Until the debtor be divested from his property (if it is the case), he remains the proprietor of the pledge, which is in the hands of the creditor only as a deposit to secure his privilege on it.

Art. 3167. The creditor is answerable agreeably to the rules which have been established under the title: Of Conventional Obligations, for the loss or decay of the pledge which may happen through his fault.

On his part, the debtor is bound to pay to the creditor all the useful and necessary expenses which the latter has made for the preservation of the pledge.

Art. 3168. The fruits of the pledge are deemed to make a part of it, and therefore they remain, like the pledge, in the hands of the creditor; but he can not appropriate them to his own use; he is bound, on the contrary, to give an account of them to the debtor, or to deduct them from what may be due to him.

Art. 3169. If it is a credit which has been given in pledge, and if this credit brings interest, the creditor shall deduct this interest from those which may be due to him; but if the debt, for the security of which the claim has been given, brings no interest itself, the deduction shall be made on the principal of the debt.

Art. 3170. If the credit which has been given in pledge becomes due before it is redeemed by the person pawning it, the creditor, by virtue of the transfer which has been made to him, shall be justified in receiving the amount, and in taking measures to recover it. When received, he must apply it to the payment of the debt due to himself, and restore the surplus, should there be any, to the person from whom he held it in pledge.

Art. 3171. The pawn can not be divided, notwithstanding the divisibility of the debt between the heirs of the debtor and those of the creditor.

The debtor's heir, who has paid his share of the debt, can not demand the restitution of his share in the pledge, so long as the debt is not fully satisfied.

And respectively the heir of the creditor, who has received his share of the debt, can not return the pledge to the prejudice of those of his coheirs who are not satisfied.

Art. 3172. If the proceeds of the sale exceed the debt, the surplus shall be restored to the owner; if, on the contrary, they are not sufficient to satisfy it, the creditor is entitled to claim the balance out of the debtor's other property.

Art. 3173. The debtor who takes away the pledge without the creditor's consent, commits a sort of theft.

Art. 3174. When the creditor has been deceived on the substance or quality of the thing given in pledge, he may claim another thing in its stead, or demand immediately his payment, though the debtor be solvable.

Art. 3175. The creditor can not acquire the pledge by prescription, whatever may be the time of his possession.