REAL AND PERSONAL SECURITY J H M. van Erp and L P w. van Vliet IIA 3 Introduction In this report' we will present, given the space available, a brief overview of Dutch law in regard to real and personal security. First we will discuss the law of rea security followed by a discussion of the law of personal security. We will focus on questions as to which practical and/or theoretical uncerta int ies exist. Although a major part of the books on patrimonial law of the Dutch Civil Code entered into force 10 years ago, already case a w is developing in areas where the codified rules proved to be unclear or imprecise and where legal practice needed solutions which were not laid down in the Civil Code. a general provision which immedately gave rise to considerable uncerta inty in legal practice is the rule in art. 3: 843)CC: the so-called fiduca ban, a ban on fiducia cum creditor: 'A juridical act which is intended to transfer property for purposes of security or which does not have the purpose of bringing the property into the patrimony of the acquirer, after transfer, does not constitute valid title for transfer of that property,3 Transfer of ownership for security purposes is, therefore, not allowed. The Dutch legisla tor already a ccepted that this provision should not be applied in the case of foreign trusts which have to be recognised under the Hague Trust Convention+and in the case of so-called repo-transactions'between large financial institut ions. 5 Furthermore, the fiducia bar will not be adopted in the new Netherlands Antilles and Aruba Civil Code, which is J H M. van Erp is professor of civil law and European private law, Maastricht Univers ity, the Netherlands L P W. van Vlietis lecturer in private law, Maastricht University, the Netherlands I. We will use the following abbreviations: Fw. (Faillissements wet; Insolvency Act), HR(Hoge Raad; Netherlands Supreme Court, NJ(Nederlandse Jursprudente; law reports), Rvdw ( Rechtspraak van de Week, law reports), Stb.( Staatsblad; Bulletin of Acts and Orders), Trb (Tractatenbad; Bulletin of Treates ) WPNR(Weekblad voor Privaatrecht, Notariaat en Registrate). Recentlegislativematerialcanbefoundonthefollowingwebsitehttpwwwoverhed.nvop/and recentcase-lawonhttp://www.rechtspraaknl eading manuals are: F HJ. Minssen and P. de haan, Asser's Handleiding tot de beoefening van het Nederlands burgerlijk recht vol 3 1, Goederenrecht, Algemeen gpederenrecht 14th ed, Kluwer, Zwolle 2001 F H.J. Mijnssen and AA van Velten, Asser's Handleiding tot de beoefenng an het Nederlands burgerlijk recht, voL. 3 IlL, Zakenrecht, Zekerheidsrechten, 12th ed, Kluwer, Zwolle 1994; W.H.M Reehus et al, Goederenrecht, ll th ed, Kluwer, Deventer 2001; H.J. Snijders and E B. Rank-Berenschot, Goederenrecht, 3rded., Kluwer, Deventer 2001 The Engl sh translation of Civil Code provisons is based upon PP C Haanappel/E Mackaay Nieuw Nederlandse Burgerlijk Wetbock, Het Vermogens recht, Kluwer Law and Taxation Publishers, Deventer/Bos ton 1990, and upon P. Haanappel/E Mackaay/H Warendorf/R. Thomas, Netherlands Business Legslation, Kluwer Law Intemational, The Hague/London/Boston(boose leaf dition) Trb. 1985, 141 and Trb. 1996,9, see art 4 of the Act implementing ths convention, the Wet conflictenrecht trusts, Stb. 1995, 508. See art. 5 Wet vervangingreferentierentes, Stb. 1998, 716
REAL AND PERSONAL SECURITY J.H.M. van Erp* and L.P.W. van Vliet** II A 3 1 Introduction In this report1 we will present, given the space available, a brief overview of Dutch law in regard to real and personal security. First we will discuss the law of real security,2 followed by a discussion of the law of personal security. We will focus on questions as to which practical and/or theoretical uncertainties exist. Although a major part of the books on patrimonial law of the Dutch Civil Code entered into force 10 years ago, already case law is developing in areas where the codified rules proved to be unclear or imprecise and where legal practice needed solutions which were not laid down in the Civil Code. A general provision which immediately gave rise to considerable uncertainty in legal practice is the rule in art. 3:84(3) C.C.: the so-called ‘fiducia ban’, a ban on fiducia cum creditore: ‘A juridical act which is intended to transfer property for purposes of security or which does not have the purpose of bringing the property into the patrimony of the acquirer, after transfer, does not constitute valid title for transfer of that property’.3 Transfer of ownership for security purposes is, therefore, not allowed. The Dutch legislator already a ccepted that this provision should not be applied in the case of foreign trusts which have to be recognised under the Hague Trust Convention 4 and in the case of so-called `repo-transactions’between large financial institutions.5 Furthermore, the fiducia ban will not be adopted in the new Netherlands Antilles and Aruba Civil Code, which is * J.H.M. van Erp is professor of civil law and European private law, Maastricht University, the Netherlands. ** L.P.W. van Vliet is lecturer in private law, Maastricht University, the Netherlands. 1. We will use the following abbreviations: Fw. (Faillissementswet; Insolvency Act), HR (Hoge Raad; Netherlands Supreme Court), NJ (Nederlandse Jurisprudentie; law reports), RvdW (Rechtspraak van de Week; law reports), Stb. (Staatsblad; Bulletin of Acts and Orders), Trb. (Tractatenblad; Bulletin of Treaties), WPNR (Weekblad voor Privaatrecht, Notariaat en Registratie). Recent legislative materials can be found on the following website: http://www.overheid.nl/op/ and recent case-law on: http://www.rechtspraak.nl. 2. Leading manuals are: F.H.J. Mijnssen and P. de Haan, Asser’s Handleiding tot de beoefening van het Nederlands burgerlijk recht, vol. 3 I, Goederenrecht, Algemeen goederenrecht, 14th ed., Kluwer, Zwolle 2001 F.H.J. Mijnssen and A.A. van Velten, Asser’s Handleiding tot de beoefening van het Nederlands burgerlijk recht, vol. 3 III, Zakenrecht, Zekerheidsrechten, 12th ed., Kluwer, Zwolle 1994; W.H.M. Reehuis et al., Goederenrecht, 11th ed., Kluwer, Deventer 2001; H.J. Snijders and E.B. Rank-Berenschot, Goederenrecht, 3rd ed., Kluwer, Deventer 2001. 3. The English translation of Civil Code provisions is based upon P.P.C. Haanappel/E. Mackaay, Nieuw Nederlandse Burgerlijk Wetboek, Het Vermogensrecht, Kluwer Law and Taxation Publishers, Deventer/Boston 1990, and upon P. Haanappel/E. Mackaay/H. Warendorf/R. Thomas, Netherlands Business Legislation, Kluwer Law International, The Hague/London/Boston (loose leaf edition). 4. Trb. 1985, 141 and Trb. 1996, 9; see art. 4 of the Act implementing this convention, the Wet conflictenrecht trusts, Stb. 1995, 508. 5. See art. 5 Wet vervanging referentierentes, Stb. 1998, 716
VAN ERP/VAN VLIET based on the new Dutch Civil Code Case aw in regard to the fiducia ban will be re detail in the part on pled Pledge and mortgage(pand'and'hy potheek') 2.l The provisions on pledges and mortgages(Title 9 of Book 3 CC, are structured in the following way: Section 1 contains general provisions on pledge and mortgage, Sections 2 and 3 contain the provisions on pledge and Section 4 the provisions on mortgage. It should also be noticed that the rules of the previous titles of Book 3 might also apply to pledges and mortgages, especally Title l(general provisions), Title 2 juridical acts)and Title 4 (acquisition and loss of property). Title 4 is specifically made applicable mutatis mutandis to the creation, transfer and abandonment of a lim ited real right on such property, unless otherwise provided by law. This means that as to the creation of pledge and mortgage art. 3: 84(1)and (2) applies Necessary are(a )a legalact of creation, (b)pursuant to a valid legal ground, (c)by a person who has the power to dispose of the property. The legalact of creation is a so-called real agreement (goederenrechtelijke overeenkomst)in which the pledgor or mortga gor declares to give a right of pledge or mortgage to the pledgee or ortgagee, and in which the pledgee or mortga gee dechres to accept this interest. 0 he application of the rules as kid down in Title 4 also means that the conditions as to delivery apply mutatis mutandis: for the creation of a mortgage the following requirements have to be fulfilled: I a notarial deed drawn up between the parties i which a mortgage is granted to the creditor, followed by its entry in the pub lic land register. In the case of pledges specialrules apply which will be discussed belot Generally speaking, the following stages are distinguished in the creation of a right of pledge or mortgage: the promise between the future pledgor/mortgagor and pledgee/mortga gee to create such a right(the legal ground ), the agreement by which the pledgor/mortga gor grants a right of mortgage to the pledgee/mortgagee(the real A note as to terminology: we will be us ng pledge to refer t the dutch legal term pand and ortgage to refer to the Dutch legal term hypotheek See P H M. Gerver, Het recht van hypotheek, W.EJ. Teenk Willink, Deventer 2001; WG luigen, commentary on art 3 227 ff, n: JH Nieuwenhuis(et al, eds ) Burgerlifk Wetbock Tekst Commentaar, Kluwer, Deventer 1998; W. Heuff and w.G. Huijgen, Hypo theek, 3rd ed, Kluwer, Deventer 2000: F Molenaar, Algemene bepalingen zekerhedsrechtenop gpederen, 3rd ed, Kluwer, Deventer 1 999 8. The Dutch CC. I divided into books. Each book is divided into chapters (tiles)and subchapters(sections). References to articles must also contain a reference to the book The legal ground will commonly consist in an obligation to grant security laid down n the contract of loan. If the contract of loan which constitutes the legal ground is voi or s avo ded with retroactive effect, the creation of the security interest i vod as well: no such interest has come into being Such a system of creation of limited realrights is called a causal See Hr 29 June 2001, Rvdw 2001, 126. See also L P.w. van vliet Transfer of movables in German, French, Englishand Dutch law, Ars Aequi Libri, Nijmegen 2000, ch 5$2 Art. 3: 89. see also art. 3: 260
VAN ERP/VAN VLIET 2 based on the new Dutch Civil Code. Case law in regard to the fiducia ban will be discussed in more detail in the part on pledge. 2 Pledge and mortgage6 (‘pand’ and ‘hypotheek’) 7 2.1 General provisions The provisions on pledges and mortgages (Title 9 of Book 3 C.C.)8 are structured in the following way: Section 1 contains general provisions on pledge and mortgage, Sections 2 and 3 contain the provisions on pledge and Section 4 the provisions on mortgage. It should also be noticed that the rules of the previous titles of Book 3 might also apply to pledges and mortgages, especially Title 1 (general provisions), Title 2 (juridical acts) and Title 4 (acquisition and loss of property). Title 4 is specifically made applicable mutatis mutandis to the creation, transfer and abandonment of a limited real right on such property, unless otherwise provided by law. This means that as to the creation of pledge and mortgage art. 3:84(1) and (2) applies. Necessary are (a) a legal act of creation, (b) pursuant to a valid legal ground,9 (c) by a person who has the power to dispose of the property. The legal act of creation is a so-called real agreement (goederenrechtelijke overeenkomst) in which the pledgor or mortgagor declares to give a right of pledge or mortgage to the pledgee or mortgagee, and in which the pledgee or mortgagee declares to accept this interest.10 The application of the rules as laid down in Title 4 also means that the conditions as to delivery apply mutatis mutandis: for the creation of a mortgage the following requirements have to be fulfilled:11 a notarial deed drawn up between the parties in which a mortgage is granted to the creditor, followed by its entry in the public land register. In the case of pledges special rules apply which will be discussed below. Generally speaking, the following stages are distinguished in the creation of a right of pledge or mortgage: the promise between the future pledgor/mortgagor and pledgee/mortgagee to create such a right (the legal ground), the agreement by which the pledgor/mortgagor grants a right of mortgage to the pledgee/mortgagee (the real 6. A note as to terminology: we will be using ‘pledge’ to refer to the Dutch legal term ‘pand’ and ‘mortgage’ to refer to the Dutch legal term ‘hypotheek’. 7. See P.H.M. Gerver, Het recht van hypotheek, W.E.J. Tjeenk Willink, Deventer 2001; W.G. Huijgen, commentary on art. 3:227 ff., in: J.H. Nieuwenhuis (et al., eds.), Burgerlijk Wetboek Tekst & Commentaar, Kluwer, Deventer 1998; W. Heuff and W.G. Huijgen, Hypotheek, 3rd ed., Kluwer, Deventer 2000; F. Molenaar, Algemene bepalingen zekerheidsrechten op goederen, 3rd ed., Kluwer, Deventer 1999. 8. The Dutch C.C. is divided into books. Each book is divided into chapters (‘titles’) and subchapters (‘sections’). References to articles must also contain a reference to the book. 9. The legal ground will commonly consist in an obligation to grant security laid down in the contract of loan. If the contract of loan which constitutes the legal ground is void or is avoided with retroactive effect, the creation of the security interest is void as well: no such interest has come into being. Such a system of creation of limited real rights is called a causal system. 10. See HR 29 June 2001, RvdW 2001, 126. See also L.P.W. van Vliet, Transfer of movables in German, French, English and Dutch law, Ars Aequi Libri, Nijmegen 2000, ch. 5 § 2. 11. Art. 3:89, see also art. 3:260
REAL AND PERSONAL SECURITY agreement)and the fulfilment of certain additional formalities. The real agreement is the legal act which creates the security interest, yet the interest comes into being only after the additional fomalities have been fulfilled. These formalities vary according to the type of security interest to be created (possessory pledge, non-possessory pledge or mortgage)and the security object(in regard to pledges a distinction should be made between movables and chims ) 12 Before the fulfilment of the additio fomma lit ies the real agreement is valid, yet has no effect even between the parties The effect of the real agreement is postponed until all formalities have been fulfilled In the case of a mortgage, e.g., the agreement has to be laid down in a notarial deed which must then be registered in the public land register. The right of pledge and the right of mortgage are both lim ited real rights, intended to provide recourse against the property subjected to such right and with preference over other cred itors, for the payment of a sum of money. If such a right is established upon registered property it is a called a right of mortgage, if esta blished upon other property it is called a right of pledge. Registered property is e.g. land, but it can also be a sea- vessel, an inand-vessel or aircraft, 3 although it should be remem bered that in the cases of registered ships or registered a ircraft special rules apply 14 The rights of pledge and mortgage entail a right of pledge upon all ckimsfor compensation, including claims resulting from its deprecation, which take the place of the burdened property. Such a legal right of pledge has priority over other rights of pledge established on the cla im. 5 The rights of pledge and mortgage confer upan the holder of such right the power to sell the encumbered property. o In the case of a right of mortga ge this has to be done in public before a notary ha ving authority to do so. 17 It is possible, according to art. 3: 231, to establish a right of pledge or mortgage for a future claim. The chim must be sufficiently deem inable. In the case of a mortgage the notarial deed in which the mortgage is laid down ought to mention the maxmum amount of the chim for which recourse may be taken on the mortgaged property I8 Establishing a right of pledge or mortgage for a future debt should be A descripton of these three stages as to the creaton of mortgage can be found in Gerver, Het echt van hypotheek, pp. 2 1 ff 3. See artt3:10,8:193ff,8:783fand8:130ft.CC. In the case of registered aircraft Dutch law accepts two types of lmited real rights which are unknown outside this area art 8: 1308 creates a real rightof acqusition and art. 8: 1309 creates areal right of lease. The frst mentoned lmited real right establishes a real right in favour of the buyer to become owner of the aircraft after, e.g, full payment of the purchase price. The real right as lad down by art. 8: 1309 allows the lessee under a lease contractof at least 6 months toregister the lease contract with effect against third parties. Cf for a further analys sof these articles, also in the light of the draft UNIDROT convention on security nterests in mobile equipment: B.P. Honnebier, Het eenvomige zekerhedenregime van UN DROIT waarborgt de Neder lands rechten van de houder van een luchtvaartuig, WPNR 6449(2001) 16 For pledge seeart. 3: 248, for mortgage seeart. 3: 268C. C. 17. In the case of a night of mortgage, exceptionally a private sale is allowed, provided the President of the District Court gives permission to dose Art3:260(1)C
REAL AND PERSONAL SECURITY 3 agreement) and the fulfilment of certain additional formalities. The real agreement is the legal act which creates the security interest, yet the interest comes into being only after the additional formalities have been fulfilled. These formalities vary according to the type of security interest to be created (possessory pledge, non-possessory pledge or mortgage) and the security object (in regard to pledges a distinction should be made between movables and claims).12 Before the fulfilment of the additional formalities the real agreement is valid, yet has no effect even between the parties. The effect of the real agreement is postponed until all formalities have been fulfilled. In the case of a mortgage, e.g., the agreement has to be laid down in a notarial deed, which must then be registered in the public land register. The right of pledge and the right of mortgage are both limited real rights, intended to provide recourse against the property subjected to such right and with preference over other creditors, for the payment of a sum of money. If such a right is established upon registered property it is a called a right of mortgage, if established upon other property it is called a right of pledge. Registered property is e.g. land, but it can also be a sea -vessel, an inland-vessel or aircraft,13 although it should be remembered that in the cases of registered ships or registered aircraft special rules apply.14 The rights of pledge and mortgage entail a right of pledge upon all claims for compensation, including claims resulting from its depreciation, which take the place of the burdened property. Such a legal right of pledge has priority over other rights of pledge established on the claim.15 The rights of pledge and mortgage confer upon the holder of such right the power to sell the encumbered property.16 In the case of a right of mortgage this has to be done in public before a notary having authority to do so.17 It is possible, according to art. 3:231, to establish a right of pledge or mortgage for a future claim. The claim must be sufficiently determinable. In the case of a mortgage the notarial deed in which the mortgage is laid down ought to mention the maximum amount of the claim for which recourse may be taken on the mortgaged property.18 Establishing a right of pledge or mortgage for a future debt should be 12. A description of these three stages as to the creation of a mortgage can be found in Gerver, Het recht van hypotheek, pp. 21 ff. 13. See artt. 3:10, 8:193 ff., 8:783 ff. and 8:1302 ff. C.C. 14. In the case of registered aircraft Dutch law accepts two types of limited real rights which are unknown outside this area: art. 8:1308 creates a real right of acquisition and art. 8:1309 creates a real right of lease. The first mentioned limited real right establishes a real right in favour of the buyer to become owner of the aircraft after, e.g., full payment of the purchase price. The real right as laid down by art. 8:1309 allows the lessee under a lease contract of at least 6 months to register the lease contract with effect against third parties. Cf. for a further analysis of these articles, also in the light of the draft UNIDROIT convention on security interests in mobile equipment: B.P. Honnebier, Het eenvormige zekerhedenregime van UNIDROIT waarborgt de Nederlandse rechten van de houder van een luchtvaartuig, WPNR 6449 (2001). 15. Art. 3:229 C.C. 16. For pledge see art. 3:248, for mortgage see art. 3:268 C.C. 17. In the case of a right of mortgage, exceptionally a private sale is allowed, provided the President of the District Court gives permission to do so. 18. Art. 3:260(1) C.C
VAN ERP/VAN VLIET distinguished from creating such a right on future clams(e. g accounts receivable be created on future property, a right of mortgage cannot. 9 It is further allowed to create a right of pledge or mortgage for the benefit of a third party: in that case the pledgor or mortga gor is not the debtor of the underlying loan(so-called third party pledge or third party mortgage ). 20 Any clause allowing appropriation of the pledged or mortgaged property by the ledgee or mortgagee(lex commissoria )is null. 2l An agreement to that effect can be made only after the debtor's default. Thus, in principle, exercising the pledge or mortgage involves a forced sale. The pledge or mortga ge may also be exercised by the pledgee or mortgagee in the debtor's insolvency 22 The pledgee and mortgagee take a high rank; they may, in principle, take a way(separate)the burdened property and sell it in execution The rights of pledge and mortgage are rights depending upon the existence of an underly ing loan. As a result the right of pledge or mortga ge ceases to exist when the creditor's claim against the debtor falls a way, e.g. as a result of payment. Similarl if the claim is being transferred the new creditor acquires the rights which are attached to the chaim, such as the rights of pledge and mortgage.3 They are therefore called accessorialrights. These two principles also apply in the case of suretyship 2 Pledge The 1992 Civil Code abolished fiducia cum creditor. 25 Security ownership had been recognised by the Dutch Supreme Court in 192926 because a mortgage on movables was needed (ie a non-possessory security right ). Besides a silent assignment of a personal claim by way of security was recognised (i.e. without notification to the debtor of the claim ) The 1838 Civil Code required the pledgor to give actual power ver the object to the pledgee or a third person hold ing it for the pledgee. a pledge on a claim had to be notified to its debtor One of the ma in reasons for abolition was that security ownership gives the Cf artt. 3: 236(2)and 3: 97(1)CC Art.3:23l(1)CC. See art. 3: 235C C 22 Art. 57Fw Cf artt. 3: 7 and 6: 142C. C See also art 7 851(I)CC. These principles have led to various problems in situations where a large goup of(changing)cred itors exists. In such cases sometmes a security trustee s appointed, who will, e. g, be the mortgage for the benefit of the creditors. As a result the mortgagee and the cred itor are not identical persons. We shoul dstingush this fiom a third party mortgage n which themortgagor and the debtor are not identical persons. See for an elaborate discuss ion of the various questions whch can arise: S.C.J. I Kortmann/MHE Rongen/HLE Verhagen, Zekerheidsrechten 2s op naam vaneen'trustee'(D), WPNR 6459 and (ID), WPNR 6460(2001) F.HJ. Minssen and P de Haan, Asser's Handleiding tt de beoefenng van het Nederlands burgerlijk recht, vol 3 1, Goederenrecht Algemeen gpederenrecht, ch. 12, W.HM. Reehuis, Roerende zaken als zekerhed: leven n de brouwerij!?, Groninger Opmerk ngen en Mededelngen 1997,p30462. 26. HR 25 January 1929, NJ1929, p 616, HR2I June 1929,NJ 1929, p 1096
VAN ERP/VAN VLIET 4 distinghuished from creating such a right on future claims (e.g. accounts receivable in the future). Whereas a right of pledge can be created on future property, a right of mortgage cannot.19 It is further allowed to create a right of pledge or mortgage for the benefit of a third party: in that case the pledgor or mortgagor is not the debtor of the underlying loan (so-called third party pledge or third party mortgage).20 Any clause allowing appropriation of the pledged or mortgaged property by the pledgee or mortgagee (lex commissoria) is null.21 An agreement to that effect can be made only after the debtor’s default. Thus, in principle, exercising the pledge or mortgage involves a forced sale. The pledge or mortgage may also be exercised by the pledgee or mortgagee in the debtor’s insolvencey.22 The pledgee and mortgagee take a high rank: they may, in principle, take away (separate) the burdened property and sell it in execution. The rights of pledge and mortgage are rights depending upon the existence of an underlying loan. As a result the right of pledge or mortgage ceases to exist when the creditor’s claim against the debtor falls away, e.g. as a result of payment. Similarly, if the claim is being transferred the new creditor acquires the rights which are attached to the claim, such as the rights of pledge and mortgage.23 They are therefore called accessorial rights. These two principles also apply in the case of suretyship.24 2.2 Pledge The 1992 Civil Code abolished fiducia cum creditore. 25 Security ownership had been recognised by the Dutch Supreme Court in 192926 because a mortgage on movables was needed (i.e. a non-possessory security right). Besides a silent assignment of a personal claim by way of security was recognised (i.e. without notification to the debtor of the claim). The 1838 Civil Code required the pledgor to give actual power over the object to the pledgee or a third person holding it for the pledgee. A pledge on a claim had to be notified to its debtor. One of the main reasons for abolition was that security ownership gives the 19. Cf. artt. 3:236(2) and 3:97(1) C.C. 20. Art. 3:231(1) C.C. 21. See art. 3:235 C.C. 22. Art. 57 Fw. 23. Cf. artt. 3:7 and 6:142 C.C. 24. See also art. 7:851(1) C.C. These principles have led to various problems in situations where a large group of (changing) creditors exists. In such cases sometimes a security trustee is appointed, who will, e.g., be the mortgagee for the benefit of the creditors. As a result the mortgagee and the creditor are not identical persons. We should distinguish this from a third party mortgage in which the mortgagor and the debtor are not identical persons. See for an elaborate discussion of the various questions which can arise: S.C.J.J. Kortmann/M.H.E. Rongen/H.L.E. Verhagen, Zekerheidsrechten op naam van een ‘trustee’ (I), WPNR 6459 and (II), WPNR 6460 (2001). 25. F.H.J. Mijnssen and P. de Haan, Asser’s Handleiding tot de beoefening van het Nederlands burgerlijk recht, vol. 3 I, Goederenrecht, Algemeen goederenrecht, ch. 12; W.H.M. Reehuis, Roerende zaken als zekerheid: leven in de brouwerij!?, Groninger Opmerkingen en Mededelingen 1997, pp. 30-62. 26. HR 25 January 1929, NJ 1929, p. 616; HR 21 June 1929, NJ 1929, p. 1096
REAL AND PERSONAL SECURITY creditor more than needed: ownership ra ther than a limited real right. Gradually during many decades following the recognition of security ownership in 1929, the Supreme Court reduced the security owners rights to the rights of a pledgee. It held that the owner is under a duty to sell the security object in execution and satisfy himself from the proceeds of sale. Any surplus money had to be given to the debtor It was thus accepted that security ownership was different from normal owners Another im portant but closely related drawback of security ownership was ack of legal certainty: the concept had developed in practice and was not to be found in legislation. As a result it took many decades to get any certa inty about the rights and duties of the security owner Fiducia cum creditor was repaced with a pledge on movables(art 3: 237 CC)or claims(art. 3: 239 CC). The pledgor remains in actual power of the movables, or, in the case of a claim, the pledge will not be notified to the debtor of the claim. A silent pledge on movables or claims requires a private deed registered with the tax department or, alternatively, a notarial deed. These fomalities prevent antedating but do not aim at making th The register at the tax department is not a public register. The old types of overt pledge on movables and chims(art. 3: 236 CC)are ma inta ined. In certan cases the pledgee may tum the silent ty pe into an overt type In the meantime the Dutch Supreme Court tuned back the a bolition of security ownership to a large extent by acknowledging sale and lease back by way of The causal system for the transfer of things also applies to the creation of limited real rights. As a result the pledge needs a valid legal ground (e.g. a contract requiring the debtor to create a pledge). In principle the pledge, like the mortgage, is a dependent or accessorial right (afhankeli k or accessor recht ). This means that the right of pledge depends on the claim secured by it. Conseq uently the pledge falls away if the chim falls away (e.g. payment or compensation) and the pledge will follow the secured claim when the claim is assigned to a new creditor. However exceptions have been made for example to create a pledge to secure cred its on current accounts, often called bank-pledge or current account pledge. This is ma possible by art. 3: 231 prov iding that a pledge may be created as security fora future claim In principle exercising the pledge involves a forced sale. The pledge may also be exercised by the pledgee in the debtor's insolvency(art. 57 Fw). The pledgee takes a high rank: he may in principle take away(separate)the pledge object from the insolvency proceedings and sell it in execution. For this reason the pledgee, like the mortgagee, is called a separatist a pledge may be created in advance on so-called future objects: movables which do not yet exist or have not yet entered the pledgor's patrimonium, or claims which do not yet exist. The legal act of creation (a real agreement different from any nderlying contract; goederenrechtelike overeenkomst)will be made under a ay 1995, NJ 1996/119. Fiducia cum aio s reoognsed to some extent, yet ownership cannot be split nt legal ownershp and beneficial nterests as n the Engl ih common
REAL AND PERSONAL SECURITY 5 creditor more than needed: ownership rather than a limited real right. Gradually, during many decades following the recognition of security ownership in 1929, the Supreme Court reduced the security owner's rights to the rights of a pledgee. It held that the owner is under a duty to sell the security object in execution and satisfy himself from the proceeds of sale. Any surplus money had to be given to the debtor. It was thus accepted that security ownership was different from normal ownership. Another important but closely related drawback of security ownership was lack of legal certainty: the concept had developed in practice and was not to be found in legislation. As a result it took many decades to get any certainty about the rights and duties of the security owner. Fiducia cum creditore was replaced with a ‘silent’ pledge on movables (art. 3:237 CC) or claims (art. 3:239 CC). The pledgor remains in actual power of the movables, or, in the case of a claim, the pledge will not be notified to the debtor of the claim. A silent pledge on movables or claims requires a private deed registered with the tax department or, alternatively, a notarial deed. These formalities prevent antedating but do not aim at making the security interests public. The register at the tax department is not a public register. The old types of ‘overt’ pledge on movables and claims (art. 3:236 CC) are maintained. In certain cases the pledgee may turn the silent type into an overt type. In the meantime the Dutch Supreme Court turned back the abolition of security ownership to a large extent by acknowledging sale and lease back by way of security.27 The causal system for the transfer of things also applies to the creation of limited real rights. As a result the pledge needs a valid legal ground (e.g. a contract requiring the debtor to create a pledge). In principle the pledge, like the mortgage, is a dependent or accessorial right (afhankelijk or accessoir recht). This means that the right of pledge depends on the claim secured by it. Consequently the pledge falls away if the claim falls away (e.g. payment or compensation) and the pledge will follow the secured claim when the claim is assigned to a new creditor. However, exceptions have been made for example to create a pledge to secure credits on current accounts, often called bank-pledge or current account pledge. This is made possible by art. 3:231 providing that a pledge may be created as security for a future claim. In principle exercising the pledge involves a forced sale. The pledge may also be exercised by the pledgee in the debtor's insolvency (art. 57 Fw). The pledgee takes a high rank: he may in principle take away (separate) the pledge object from the insolvency proceedings and sell it in execution. For this reason the pledgee, like the mortgagee, is called a separatist. A pledge may be created in advance on so-called future objects: movables which do not yet exist or have not yet entered the pledgor's patrimonium, or claims which do not yet exist. The legal act of creation (a rea l agreement different from any underlying contract; goederenrechtelijke overeenkomst) will be made under a 27. HR 19 May 1995, NJ 1996/119. Fiducia cum amico is recognised to some extent, yet ownership cannot be split into legal ownership and beneficial interests as in the English common law