Hypothec

Despite its Greek name, hypothec has a Roman origin. It was a real security, similar to the pignus, but without transfer of possession (pignus conventum). Anything - movable or immovable, corporeal or incorporeal (e.g., usufruct), even future things (e.g., a future harvest) - could constitute a hypothec.

The origin of the institution of hypothec is connected to the leasing of land. It was common practice for a tenant to pledge his properties, such as farming implements, cattle, or slaves, to his landowner as security for future rent. The praetor gave the landowner the so-called interdictum Salvianum (Gaius 4.147) to claim possession of the items in question if the rent was not paid. Later, the praetor extended the protection of the landowner by granting an action in rem (called actio Serviana) against anyone who had the possession, even if he was not the tenant. An additional development extended the protection of the actio Serviana to all pledges, whether possession had been transferred or not.

The great advantage of the hypothec over the pignus was that hypothec did not deprive the pledgor of possession, and as a result, successive hypothecs could be established over the same property to secure different debts to the same or different creditors. The generally applicable Roman rule was that the hypothec constituted earliest in time prevailed in law (prior tempore potior iure). Thus, each consecutive creditor had to be informed about the precedent hypothecs and the value of the charged debts.

A way to register hypothecs did not appear until the end of the fifth century. This lack of publicity was probably the greatest disadvantage of the Roman system of hypothecs.

Fiducia

In contrast to the loan for use, deposit, pledge, and hypothec, fiducia was a formal transaction that implied the transfer of ownership. Gaius did not mention fiducia as a contract, but it is possible that it became a real and formal contract in the classical period. Fiducia was created by a mancipation or in iure cessio with an additional agreement (pactum fiduciae) according to which the thing had to be restored to the transferor (usually a debtor) under specific circumstances. The recipient acquired full ownership and was pro­tected with the vindication. If the transferor was not the owner, the recipient could gain ownership by usucaption after one year, even if it was land (Gaius 2.59). The transferor could bring an actio fiduciae against the recipient when the latter failed to restore the thing to him. On the other hand, the transferor had a contra claim (actio fiduciae contraria) to recover damages and expenses caused by the thing mancipated.

Gaius (2.60) divided the fiducia into two classes: cum creditore and cum amico. Fiducia cum creditore was the earliest form of real security the Romans knew. It consisted of the transfer of ownership of a debtor’s property to the creditor. The reconveyance could be demanded only on payment of the debt. The fiducia afforded a powerful real security in favor of the creditor, but it involved a great risk for the debtor who had lost ownership. Furthermore, like the pignus, and in contrast to the hypothec, fiducia could be produced only once.

Fiducia cum amico was a transfer of ownership to a friend for different purposes (e.g., use, safekeeping, managing) and under different circumstances, with a trust for reconveyance. In contrast to fiducia cum creditore, the fiducia cum amico required return of property on demand. Suppose that Titius decided to transfer the ownership of his slave Stikus to Caius because Titius planned to be out of town for three years. According to the fiduciary agreement, Caius would have to restore the slave when Titius returned. The advantage of this agreement was that Caius would be protected as an owner against third parties. The disadvantage was that Titius surrendered ownership based on nothing more than trust.

Fiducia disappeared in postclassical times when the required mancipation and the in iure cessio also disappeared. The compilers eliminated the expres­sion fiducia cum creditore and replaced it by pignus; the expression fiducia cum amico was replaced by the terms deposit, loan for use, or precarium.