Continuation of older practices

It is remarkable that after it had become settled law that multiple pledges could be granted unconditionally, transactional practices belonging to earlier stages continued to be used.

From opinions by late classical jurists we can conclude that in the legal practice of the late Principate pledges which were confined to the surplus value were still created, and that subsequent pledges were still granted conditionally. Kaser rightly regards this as a symptom of the ‘dogged clinging of practice to outdated types and forms’/⁹ In their interpretations of these transactional practices the jurists are generally guided by the purpose of the parties’ agreements rather than by the literal meaning of the contractual clauses/⁰ The jurists were even prepared to interpret the wordings chosen by the parties against their literal meaning, in the light of the prevailing construction in their time.

A late classical ‘pignoris hyperocha’

There is one text in the Corpus iuris civilis (Tryph. D. 20.2.20) in which the pledge of the surplus is called ‘pignoris hyperocha’.*¹ The term ‘hyperocha’ (surplus) may very well have come from documentary practices in the eastern provinces of the Roman empire and one cannot exclude the possibility that the Roman transactional practice of pledging the surplus originated there.*² The express pledge of the surplus continued to be used in late classical practice, even though in this period, as we have seen, multiple pledges could be created unconditionally and lower-ranking pledge creditors were, in any event, entitled to the surplus by operation of law.

D. 20.4.20. Tryphoninus libro octavo disputationum. Quaerebatur, si post primum contractum tuum, antequam aliam pecuniam tu crederes, eidem debitori Seius credidisset quinquaginta et hyperocham huius rei, quae tibi pignori data esset, debitor obligasset, dehinc tu eidem debitori crederes forte quadraginta: quod plus est in pretio rei quam primo credidisti utrum Seio ob quinquaginta an tibi in quadraginta cederet pignoris hyperocha.

finge Seium paratum esse offerre tibi summam primo ordine creditam. dixi consequens esse, ut Seius potior sit in eo quod amplius est in pignore, et oblata ab eo summa primo ordine credita usurarumque eius postponatur primus creditor in summam, quam postea eidem debitori credidit.

You made a first contract with the debtor, then, before you made a second loan, Seius lent him fifty and the debtor charged to Seius the surplus proceeds of the property pledged to you. Then, you lent the same debtor, say, forty. The question put was whether the surplus realized by the pledged property over the first loan went to Seius for fifty or to you for forty. Suppose that Seius was willing to offer you the amount first loaned? I said that it followed that Seius was preferred as regards the surplus, and, if he offered the amount of the first loan and interest, the first creditor was postponed to him as regards the later loan to the same debtor.

The debtor borrowed money from C1 (‘you') secured by a right of pledge. The text does not disclose the amount of the first loan, but let us suppose this was 60. The first loan was followed by a loan of 50 by C2 (Seius) to the same debtor, which was secured by a pledge of the superfluum of the same property. Then C1 entered into another loan agreement with the debtor for 40. Because the debtor defaulted, C1 enforced the pledge by execution sale for, say, an amount of 100. The question arose who was entitled to the surplus remaining after the original loan was deducted from the proceeds of the execution sale (100 - 60 = 40). The reason why this question was addressed to Tryphoninus must be found in sloppy drafting by the transacting parties or their legal advisers. The parties to the second pledge will still have defined the object of the pledge as: ‘the surplus proceeds of the property pledged to you’. Does this refer to the surplus remaining after C1’s first loan (60) has been deducted from the sale proceeds, or do both loans granted by C1 first have to be deducted? In other words, would C2 be entitled to 40 (100 - 60) or nothing (100 - (60 + 40))?

Tryphoninus advises that C2's claim for 50 outranks Cl's (second) claim for 40, so that C2 would be entitled to the remaining proceeds of 40.

This is motivated with a comparison with the ius offerendi et succedendi. If C2 would have offered to pay Cl's original claim of 60, he would have succeeded Cl as first ranking creditor for this claim. When C2 would then have sold the pledged property by way of execution, he would have been able to apply the proceeds for both Cl's original claim (60) and his own claim for 50. Only if the execution proceeds were more than 110 (60 + 50) would there be something left for Cl's second claim for 40. Tryphonius's view was that the same result would be justified if not C2 but Cl himself would sell the pledged property by way of execution. Tryphoninus's prefers a restrictive interpretation of the parties' reference to the superfluum, because it corresponds with the principle of priority as the central idea for the ranking of secured claims as applied to the ius offerendi et succedendi.^[875]

A late classical conditional pledge

A text from Marcian illustrates that decades after Gaius's recommendation to take a conditional pledge, this construction was still in use as an alternative to unconditional multiple pledges. Its continuing use caused a problem of interpretation, which again was solved in accordance with the principles governing (the now recognized) unconditional multiple pledges.

D. 20.4.12.8 Marcianus libro singulari ad formulam hypothecariam. A Titio mutuatus pactus est cum illo, ut ei praedium suum pignori hypothecaeve esset: deinde mutuatus est pecuniam a Maevio et pactus est cum eo, ut, si Titio desierit praedium teneri, ei teneatur: tertius deinde aliquis dat mutuam pecuniam tibi, ut Titio solveres, et paciscitur tecum, ut idem praedium ei pignori hypothecaeve sit et locum eius subeat: num hic medius tertio potior est, qui pactus est, ut Titio soluta pecunia impleatur condicio, et tertius de sua neglegentia queri debeat? sed tamen et hic tertius creditor secundo praeferendus est.

Someone borrowed from Titius and agreed that his land would be pledged or hypothecated to him.

Then, he borrowed from Maevius and agreed that if the land would no longer be charged to Titius, it would be charged to him (Maevius). Then, a third man lends you money to pay Titius, and agrees with you that the same land should be bound to him by way of pledge or hypothec and that he should take the place of Titius. Is the intermediate man, who agreed that by payment of the money to Titius the condition will materialize, in a stronger position than the third, and should the third be left to regret his carelessness? Even here the third creditor must be preferred to the second.

The debtor successively entered into two loan agreements secured by a pledge over the same piece of land, the first one with Titius (C1), the second one with Maevius (C2). C2s pledge was granted on the condition that C1's pledge would be extinguished. Sometime later, a third party (C3) lent money to the debtor, so that the latter could repay C1. Moreover, it was agreed that the land would be pledged to C3 and that C3 would succeed in C1's (first) rank. The question addressed to Marcian was whose right of recourse prevails, that of C2 or that of C3? This was a question of interpretation of the conditional pledge agreement entered into between the debtor and C2.^[876] This question is raised by the drafting of the condition subject to which the pledge to C2 was granted. Strictly interpreted, what had been agreed entailed that upon repayment of C1, C2's pledge would come into existence as a first ranking right of pledge. In this transaction Titius (C1) was repaid, but with the money borrowed by the debtor from C3. Under a literal interpretation this would have caused the automatic termination of C1's pledge, so that the condition pursuant to which C2s pledge was granted materialized.

Marcian is willing to forgive C3 his ‘carelessness' in failing to take into account the possible adverse consequences for him of the terms of the pledge conditionally granted to C2. Marcian endorses a more flexible interpretation of the pledge agreement between the debtor and C2. The debtor and C2 must have intended that the second pledge would be conditional upon the regular discharge of C1, that is by the debtor repaying the first loan out of his own funds, so that the original pledge and the ensuing rights of recourse are completely extinguished. In other words, the condition subject to which the second pledge was granted to C2 does not materialize when a third party provides the funds with which C1 is paid, in order to take over his ranking/⁵ This interpretation by Marcian reaches the same result as that of multiple unconditional pledges. In that case C3 could have exercised the ius offerendi et succendi and succeed in C1's rank for the amount owed to C1.

85 Kaser 1976: 204.

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Source: Verhagen Hendrik L.. Security and Credit in Roman Law: The Historical Evolution of Pignus and Hypotheca. Oxford University Press,2022. — 448 p.. 2022

Continuation of older practices

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