Civil Code

A pledgee has the right to possess a thing received from an obligor or a third party as security for their claims and to have their own claims paid before other obligees out of that thing.

A thing that cannot be transferred to another person may not be made the subject of a pledge.

The creation of a pledge becomes effective through delivery of the subject matter of the pledge to the obligee.

A pledgee may not allow a pledgor to possess the thing pledged on behalf of the pledgee.

A pledges secures the principal, interest, penalties, expenses of enforcing the pledge, expense of preserving the thing pledged and the compensation of damage arising from failure to perform obligations or latent defects in the thing pledged; provided, however, that this does not apply if the act establishing the pledge provides otherwise.

The pledgee may retain the thing pledged until the claims provided for in the preceding Article are satisfied; provided, however, that this right may not be duly asserted against an obligee that has priority over the pledgee.

The pledgee may subpledge the thing pledged within the duration of the pledgee's right, upon the pledgee's own responsibility. In this case, the pledgee is responsible for any loss arising from the subpledge even if the same is caused by force majeure.

The pledgor may not, either by the acts establishing pledges or by contracts made before the due dates for the obligations, allow the pledgee to acquire ownership of the thing pledged as satisfaction of the obligations, nor promise to allow the pledgee to dispose of it in any manner other than is prescribed by law.

The provisions of Articles 296 through 300 and those of Article 304 apply mutatis mutandis to pledges.

If a person that creates a pledge to secure an obligation of another person performs that obligation or loses ownership of the thing pledged due to the enforcement of the pledge, that person has the right to reimbursement from the obligor in accordance with the provisions regarding guarantee obligations.

A pledgee of movables may not duly assert the pledge against third parties unless that pledgee is in continuous possession of the thing pledged.

A pledgee of movables may, if the pledged thing is usurped, recover the same solely by filing an action for recovery of possession.

If the claim of a pledgee of movables is not satisfied, the pledgee may make a request to the court seeking the immediate appropriation of the thing pledged for the satisfaction of that claim in accordance with the evaluation of an appraiser only when there are reasonable grounds. In this case, the pledgee of movables must notify the obligor in advance of the request.

If more than one pledge is created with respect to the same movables, the order of priority of those pledges follow the chronological order of their creation.

The pledgee of immovables may use and profit from the immovables that are the subject of a pledge in line with the way the relevant immovables are used.

The pledgee of immovables pays the expenses of management and otherwise bear burdens in relation to the immovables.

The pledgee of immovables may not demand interest on the relevant claim.

The provisions of the preceding three Articles do not apply if the acts establishing pledges provide otherwise or enforcement against earnings from secured immovable property (referring to the enforcement against earnings from secured immovable property provided for in Article 180, item (ii) of the Civil Execution Act; the same applies below) has been commenced.

The duration of pledges of immovables may not exceed 10 years. Even if a longer period is provided for in the act establishing the pledge, the duration of the same is 10 years.

The creation of pledges of immovables may be renewed; provided, however, that the duration of the same may not exceed 10 years from the time of the renewal.

Beyond what is provided for in this Section, the provisions of the next Chapter (Mortgages) apply mutatis mutandis to pledges of immovables, provided that it is not inconsistent with the nature of the same.

A pledge may have a property right for its subject.

Beyond what is provided for in this Section, the provisions of the preceding three Sections (General Provisions, Pledges on Movables and Pledges of Immovables) apply mutatis mutandis to pledges referred to in the preceding paragraph, provided that it is not inconsistent with the nature of the same.

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The creation of a pledge over a claim (including a pledge over a claim which has not yet arisen) may not be duly asserted against a third party obligor and other third parties unless notice of the creation of the pledge is given to that third party obligor in accordance with the provisions of Article 467, or unless that third party obligors gives consent to the same.

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If there has been a failure of performance with respect to the claim secured by a pledge, the pledgee may directly collect the claim that is the subject of the pledge. In this case, if the value of the benefit received by the pledgee exceeds the amount of the claim secured thereby, the pledgee must pay money equivalent to the difference to the pledgor.

A third party obligor may assert against the pledgor or any other third party performance or any other cause for extinguishing the obligation that was effected with respect to the pledgee after the time when the notice was given or the consent was made pursuant to the provisions of Article 467, paragraph (1), which are to be complied with pursuant to the provisions of Article 364 with regard to the creation of the pledge. In this case, the pledgee is not required to pay the pledgor money equivalent to the value of the benefit received until the pledgee's own claim becomes due and payable.

In the case referred to in the first sentence of the preceding paragraph, if the pledgee's claim becomes due and payable, the pledgee must pay the pledgor the balance obtained by deducting the amount of the pledgee's own claim from the value of the benefit received.

If monies are the subject matter of the pledged claim and its due date arrives before a failure of performance occurs with respect to the claim of the pledgee, the pledgee may have the third party obligor deposit with official depository that amount to be paid to the pledgee. In this case, the pledge exists over the amount so deposited.

If the subject of the pledged claim is the delivery of a thing, the pledgee has the pledge over the thing received for the satisfaction of the claim. In this case, the provisions of the second sentence of paragraph (1) and paragraph (3) do not apply.