Settlement and Arbitration

To aleatory contracts can in some way be reduced settlement and arbitration.

I. Settlement is a contract by which parties end a lawsuit that has arisen, or forestall one that is imminent, by cession, promise, or retention of some thing. Its form is determined by civil law.

II. Arbitration is a contract by which parties agree that a lawsuit that has arisen or is imminent be ended through arbitrators. Its form is to be considered in civil law.

What is suretyship? "Suretyship is a contract by which someone undertakes another's obligation to be fulfilled, if the principal debtor has not paid." L. 912; C. I. 1898 ff.; C. G. 2011 ff.; C. A. 1344 ff.; C. H. 1822 ff.; C. L. 818 ff.; C. B. 765; Inst. l. 3, t. 21. According to C. B. 766, for the validity of the contract the security must be consigned in writing. According to the same C. 778, he who gives a mandate of furnishing credit in his own name to a third party is held toward the mandatary as surety of the obligation of the third party arising from that credit furnished. - Gousset 899.

Whether it is licit to receive a price for suretyship? "For suretyship it is licit to receive a price, even if no danger is feared, because of itself it is estimable by a price. This is common and altogether seems to be held." L. 912; C. H. 1823. - Lugo, Resp. Mor., l. 6, d. 9.

What is the obligation of the surety like? The surety cannot be obliged to more and in more than the principal debtor. "For his obligation is an accession to the principal obligation; nor can there be more in the accessory than in the principal thing. But conversely he can be obliged for less." Inst. t. 21, § 5; C. I. 1900; C. G. 2013; C. H. 1826; C. B. 707. - Suretyship for an invalid obligation of the principal debtor is invalid. R. 42 in 6; C. A. 1351. But it is valid for an obligation which is rescindable, but valid, e.g., in the case of minority of age, C. I. 1899; C. G. 2012; C. H. 1824; L. 912. "And indeed it does not matter whether the obligation to which the surety is added is civil or natural." Inst. t. 21, § 1.

The obligation of suretyship, insofar as it is real, is transmitted to the heirs themselves, but by no means insofar as it is personal. - Once the principal obligation has been extinguished, suretyship, which is accessory to it, is naturally extinguished. Suretyship is extinguished by the office of the judge if the surety is judicially sued for payment; if the established time of the suretyship has passed; if the principal debt can be demanded because the time agreed for payment has already passed; if the debtor has ceded his goods, or is about to cede them; if the principal obligation does not have a fixed term, after ten years have elapsed. C. I. 1919; C. G. 2032; Inst. t. 21, § 2; C. B. 775, 777; C. G. 2017.

Who can be sureties? No one can be a surety unless he has free administration of goods and cannot be principally obliged. Such are a ward, a minor, a religious, a wife, an interdicted person, without the consent of the tutor, curator, superior, husband, judge. Moreover, according to C. G. it is required that the surety dwell in the territory of the royal court, and according to C. I. of the court of appeal, where suretyship is to be furnished. C. I. 134, 1904; C. G. 2018; C. H. 1828; C. A. 1349; L. 912. To indulge in suretyships is forbidden to clerics, lest they be entangled in secular business. C. I. de Fideiuss. But if they have made suretyships, they are bound to satisfy.

What does the surety owe to creditors; what if there are several sureties? A surety is held toward creditors concerning all the obligations of the debtor, but only in his default, or impotence, and indeed juridically proved, C. I. 1907; C. G. 2021; C. H. 1830; C. A. 1355; C. B. 770, 771; L. 912. According to C. I. 1911-1913; C. G. 2025-2027, if there are several sureties of one debtor for the same debt, each is obliged for the whole debt. - Nevertheless each of them, unless he has renounced the benefit of division, can demand that the creditor first divide his action, seeking from each his own part. If, when some surety requested division, certain ones were then not solvent, that one is held to a part, account also being taken of this defective payment; but thereafter, even if other payments fail after the division, he can no longer be disturbed. - If, however, the creditor himself freely divided his action, he can no longer withdraw from it, however much before this very division certain sureties were not solvent. - According to C. H. 1837, if there are several sureties of one debtor for the same debt, each is obliged only for his part. - According to C. A. 1359, in the same case, each is obliged for the whole debt. But if someone pays the whole debt, he has recourse against the others. - Inst. l. 3, t. 21, § 4; C. B. 678, 769, 733, 776.

What are the rights of the surety? A surety who pays for the debtor is subrogated to all the rights of the creditor, and therefore has recourse against the same debtor, so that he may claim back from him whatever he was compelled to pay in his place. Inst. l. 3, t. 21, § 6; C. I. 1915, 1916; C. G. 2028, 2029; C. H. 1838, 1839; C. A. 1358; L. 912. According to C. I. 1919, 1920; C. G. 2032, 2033; C. H. 1844, when there are several sureties of the same debtor for the same debt, he who has paid the debt has an action against the other sureties, each for his own part. Yet this action belongs only in certain cases. - Instit. t. 21, § 4; L. Fideiussoribus, Dig. de Fideiussoribus, etc.; L. 11, C. de Fideiussoribus; C. 2, 3, 5, de Fideiuss.; C. B. 774. The surety is freed if by the act of the creditor he cannot be subrogated into the mortgages and privileges of the same creditor.

C. I. 1928. "But this surety is freed if, when the creditor could have proceeded against both the principal debtor and the pledges, he neglected this and was the cause why the principal debtor fell into worse condition. Let the creditor impute it to himself if, when he could have obtained the whole credit from elsewhere than from the surety, who was only subsidiarily obliged, he delayed bringing troubles against the principal debtor until he slipped from his resources and the pledges ceased to be suitable. For in this case, although he does not have the credit safe, nevertheless, since this proceeds from his own cause, it is the same as if he had it safe, since someone is not said to suffer damage when he gave cause for the damage." Voet in Pandect. lib. 46, tit. I, n. 38.

Whether suretyship can be given in a criminal cause? Sureties can also be given in criminal causes, either when treated civilly, or even criminally, provided the penalty is no other than a pecuniary fine, which either the principal debtor or the surety can pay. De Angelis, Praelect. Iur. Canon., l. 3, t. 22, n. 1.

What is a pledge? - A pledge is a contract by which the debtor gives a movable thing to the creditor or to a third party as insurance of the credit. A movable thing; for if he obliges an immovable thing, according to more recent Law it is a mortgage. C. I. 1878, 1882; C. G. 2071, 2072, 2076; C. H. 1864; C. A. 447, 448, 1358; C. L. 855 ff.; C. B. 1204, 1273. According to Roman Law, although pledge and mortgage are taken for the same thing in a broader sense, as in L. 5 § 1 ff. de Pignor. et Hypoth.; nevertheless in the stricter sense they differ, for pledge signifies a thing so consigned to the creditor that it exists physically in the possession of the creditor; but mortgage signifies a thing not handed over, but only transcribed to the creditor, as is expressly had in L. 9 § 1 ff. de Pignorat. act., where it is said: "Properly we call that a pledge which passes to the creditor; a mortgage when not even possession passes to the creditor." Cf. C. A. 451, 1368. - L. 913; E. M.

What are the rights of the creditor? - 1. The creditor has the right of retaining the pledge until the extinction of the whole debt. C. I. 1878; C. H. 1860, 1866. Hence he can vindicate it, if it has been taken from him, from any possessor. C. H. 1866.

2. He can ask from the judge that the pledge be sold under auction if the debt is not paid, or that it remain with him in payment of the debt, up to the concurrence of the debt, according to the estimation of experts. Any pact which gives to the creditor authority of appropriating the pledge to himself, or of disposing of it, a commissory pact, without the prescribed formalities, is null. C. I. 1884, 1894; C. G. 2078, 2088; C. H. 1858, 1859, 1872; C. A. 461, 1371; C. 7 de Pignor. Yet this law rests on the presumption of fact that the pledge is worth more. Wherefore it ceases in the forum of conscience if the pledge truly is not worth more. L. 775; C. 7 de Pignor.

3. If the thing handed over in pledge is in the possession of the creditor or of a third party chosen by the contracting parties, the creditor has the privilege that from it the debt be paid to him before other creditors. If, however, the thing is worth above 500 lire according to C. I., above 150 francs according to C. G., or if incorporeal rights of credit have been handed over in pledge, whatever they may be, a public or private writing is necessary, with the cession of the credit announced to the debtor, or accepted by him by authentic act, C. I. 1879, 1880-1882; C. G. 1690, 2074-2076. - According to C. H. 1865, in order that a pledge have effect against third parties, a public instrument is necessary. - C. B. 233.

4. The creditor is bound to restore the pledge or mortgage to the debtor who pays the whole capital or debt, but not to one who pays only a part. Hence, if the pledge or mortgage comes by testament, action, or contract to several creditors, and one of these retains it with himself, he cannot restore it to the debtor, although he has received from him the part owed to himself, but he is bound to consign it to the remaining creditors who have not yet been satisfied. Likewise, if the debt comes by testament to several, the heir who pays his part cannot reclaim restitution of the pledge unless the others also have fully satisfied the debt. Indeed, not even after the whole debt has been paid is the creditor bound to restore the pledge, if something else without pledge began to be owed after that pledge had been accepted, which can be demanded before the prior debt has been paid. C. I. 1888, 1889; C. G. 2082, 2083, 2087, 2090; C. H. 1860, 1866; C. A. 469; C. B. 1223.

What are the obligations of the creditor? 1. The creditor must not use the thing entrusted to him, unless with the consent of the debtor, at least reasonably presumed. "But the owner is presumed to consent if no damage follows to him." L. 914, 776; C. A. 459. - But if the creditor abuses the pledge, the debtor can seek its sequestration, C. I. 1887; C. H. 1870, or its restitution, C. G. 2082; C. B. 1217 seq.

2. He must diligently guard the pledge as a good father of a household, otherwise he is held concerning damage. L. 14 de Pign. actio. Since the pledge is given for the security of the creditor, and at the same time for the utility of the debtor, the creditor is held concerning it for light fault. Wherefore the creditor must furnish compensation for loss or detriment of the pledge which happens by his negligence. C. I. 1885; C. G. 1137, 2080; C. H. 1867; C. A. 449, 1369; C. B. 1215; Inst. l. 3, t. 15, § 4.

3. He must compute the fruits received from the pledge toward diminution of the debt, in order to preserve equality. C. I. 1852, 1886; C. G. 1936, 2081; C. H. 1868; C. A. 1372; L. 914.

4. He cannot appropriate the pledge to himself, nor can he sell it by his own authority in payment of the debt. He is bound to render the excess of the price to the debtor. C. I. 1884; C. G. 2078, 2088, 2115; C. H. 1859, 1872; C. A. 461, 464; L. 775, 913; C. B. 1219 ff.; E. M.

What are the rights of the debtor? By force of a pledge contract, or mortgage contract, the debtor remains full owner or proprietor and usufructuary of the thing pledged or mortgaged. C. H. 1868, 1869.

What are the obligations of the debtor? 1. The debtor is bound to hand over to the creditor a suitable pledge. C. H. 1857. Cf. C. A. 456. 2. He must refund to the creditor the expenses necessarily made for its conservation. C. I. 1885; C. H. 1867; C. B. 1216. 3. He cannot reclaim the pledge before he has paid the whole debt, unless the creditor abuses it. For then he can ask that it be placed under sequestration. C. H. 1870, 1871.

What is mortgage; what is its nature? - It is a contract by which an immovable thing is obliged to the creditor, so that from it he may be able to pay himself if the debtor has not paid. C. H. 1858; C. L. 888 ff.; C. A. 448; C. I. 1967; C. G. 2118. An immovable thing; for the creditor will be able to pursue a movable thing in the hands of a third party only with difficulty. - Mortgage is indivisible, and subsists wholly over all the goods obliged, and any one of them, and any part of them. It moreover inheres in the goods, and follows the same before any possessor. C. I. 1964; C. G. 2114; C. H. 1860. According to C. G. 2115, 2134, mortgage has place only in cases and according to forms prescribed by law. According to C. I. 1965, 1981, 2007, a mortgage does not produce effect unless it is published, and cannot subsist except over goods specially indicated and for a certain sum of money. According to C. H. 1875, the document by which the mortgage is constituted must be inscribed in the Register of property. Among several creditors, the mortgage prior in time of legitimate inscription is stronger in right. C. I. 2007; C. G. 2134. Mortgage confers a real right not only for the capital, but also for the interest of the preceding two years, of the current year and following years, as well as for expenses made. C. I. 2010. According to C. I. 2001, a mortgage lasts for 30 years; according to C. G. 2154, for 10, unless in the thirtieth year or tenth the inscription is renewed. C. B.

1113 ff.

How many kinds of mortgage are there? A threefold mortgage is distinguished, C. I. 1968; C. G. 2116; C. A. 448. The first is legal, which according to C. G. 2121 is induced by the law itself in favor of wives, minors, interdicted persons, and communities, over the goods of the husband, tutors, and administrators. According to C. I. 1969, it belongs to wives, minors, interdicted persons. It moreover belongs to coheirs, partners, and other co-dividers, over the goods of the inheritance, partnership, common ownership. Likewise it belongs to the State over the goods of those condemned for expenses of justice in criminal or police matters, and to sellers or others alienating, over immovables alienated for the fulfillment of obligations deriving from the act of alienation.

The second is judicial, which results from the sentence of the judge, in favor of him who obtained the sentence against him who lost the case; for by force of that sentence the goods of the condemned person are burdened by mortgage for repairing the damage of the victorious co-party. C. I. 1970; C. G. 2123. The third is conventional, which depends on the mutual will of the contracting parties, or on testament. From positive law this requires persons capable of contracting, or who have free administration of their goods. Hence minors, wives, interdicted persons cannot hand anything over into mortgage. It must be done with the formalities prescribed by law, under penalty of nullity, and can be done only in present goods. According to C. G. 2127, it must be done before a notary. According to C. I. 1978, it requires a public act or a private writing. - C. I. 1974, 1975, 1977 ff.; C. G. 2124, 2127, 2129, 2130.

What goods can be subjected to mortgage? - 1. Immovable goods which are in commerce with all accessories which are held as immovable. 2. The usufruct of the same goods with their accessories, except the legal usufruct of ascendants. 3. The rights of the grantor and of the emphyteuta over emphyteutic goods. 4. Revenues upon obligations of the State. C. I. 1967. Cf. C. G. 2118; C. A. 448; C. H. 1874, 1877; E. M.

What are the rights and obligations of the mortgage-creditor? - The mortgage-creditor has this proper right, that from the mortgaged goods satisfaction be made to him before the other common creditors. C. I. 1964; C. G. 2114. Wherefore if the debtor has alienated the things subjected to mortgage among several, each can be compelled either to yield the thing accepted or to pay the whole debt. C. I. 2013, 2014; C. G. 2167, 2168, 2169; C. H. 1876, 1879. But the mortgage-creditor cannot appropriate the mortgaged thing to himself, or dispose of it. He is bound to free the immovable from the mortgage once the whole debt has been paid to him. C. H. 1859, 1860.

What is antichresis? - It is a contract by which an immovable thing is so obliged to the creditor that it is handed over to him, and the faculty is given to him of receiving the fruits of that immovable thing; but he must impute the fruits received to his credit to be paid to him, namely to payment of the capital and interest. Wherefore the debtor remains only proprietor of the thing, but not also usufructuary. C. I. 1891; C. G. 2071, 2072, 2085, 2114; C. H. 1881, 1885; C. B. 1213, 1214; C. 1, 2 de Usur.; C. 6 de Pignor.; L. 776, 916.

What are the obligations of the creditor? The creditor is bound to guard the thing handed over to him diligently as his own; to pay the annual taxes inhering in the same, unless a contrary agreement has been entered into, and other necessary expenses, but with the right of compensation from the fruits of the same thing. C. I. 1892; C. G. 2086; C. H. 1882. - Antichresis gives no right in the thing to the creditor because of the unpaid debt. Every contrary pact is null. Nevertheless the creditor can juridically seek the expropriation of the debtor. C. I. 1894; C. G. 2088; C. H. 1884.

What are the obligations of the debtor? - The debtor cannot return into the enjoyment of the immovable thing given in antichresis before he has paid the debt wholly. Nevertheless it is within the power of the creditor to withdraw from antichresis at any time and restore the thing to its ownership, unless he has renounced this right. C. I. 1893; C. G. 2087; C. H. 1883.

What is settlement; who can settle; what is the force of settlement? Settlement is a contract by which the contracting parties, by promising, giving, or retaining something, impose an end by mutual consent on some lawsuit which has arisen between them, or prevent a lawsuit which is foreseen as going to arise. No one can settle unless he has the faculty of disposing of the things which fall under the settlement; hence tutors cannot settle concerning the goods of minors, except in cases permitted by law. The same is to be said of wives and other similar persons.

Settlement has the force of deciding the matter finally; hence it can no longer be impugned, either by reason of lesion or of ignorance of law. - A settlement will be null if it has been made concerning a thing subject to no controversy, whether because the controversy had already been ended by the final sentence of the tribunals, which was unknown; or because it was made upon documents which thereafter were recognized as false. - A settlement is rescindable if a new document manifests that the other party has no right, or if there was error in the person, or in the object in controversy, or if there was error of some fact from which the title was null, but by no means when this was null from some law which was unknown; or finally if deceit or force intervened. C. I. 1764, 1765, 1772-1777; C. G. 2044-2046, 2052-2058; C. H. 1809 ff.; C. A. 1380 ff. Cf. a. 1387; C. B. 779; C. L. 1710 ff.; L. Non minorem C. de Transact.; C. I. seqq. de Transact.

Note: Although the matter may not be doubtful, nevertheless the owner of the thing can settle in order to end a lawsuit; however, the settlement then is not valid in the forum of conscience except insofar as a donation would be valid. - But how much is to be conceded to each in a settlement must be judged from the greater or lesser probability of each one's right. A settlement which is made with no thing given, retained, or promised is called an amicable composition, C. 7 de Trans. If, by consent of the parties, the controversy is referred to be decided by the judgment of a good man, there is a compromise. Settlement must be made by public act or private writing under penalty of nullity. C. I. 1314. This contract must be reduced to writing. C. G. 2044. Cf. C. H. 1225.

What has been the order of things thus far? - Thus far we have spoken of contracts in particular, and first of gratuitous contracts: of promise, donation, testament, commodatum, deposit, mandate. Then we spoke of onerous contracts: of sale and purchase, census, hiring and leasing, the contract of partnership. In the third place we spoke of aleatory contracts: of wagering, gaming, insurance. Finally we spoke of subsidiary contracts: of suretyship, pledge and mortgage, settlement.