The Impact of Forced Seizure of the Collateral on the Charge Relationship
Abstract
The author examines the impact of forced seizure of property on the rights and obligations of the parties to a pledge (mortgage) agreement, particularly in cases of forced seizure for state and municipal needs, requisition, and confiscation of property. Also he studies other cases of forced seizure of pledged property to satisfy the interests of individuals. The author highlights a number of gaps in current Russian legislation. Specifically he concludes there is no unified private-law institution of forced seizure, and therefore the provisions of Article 235 of the Civil Code of the Russian Federation can only be perceived as a guide for determining the range of situations subject to forced seizure. Drawing on Russian judicial practice, the author identifies conflicts between provisions governing the sale of seized and pledged property. He concludes that, in the absence of clearing the pledged property of encumbrances, the property must be sold in accordance with the rules of pledge law, and not in accordance with public law. The article also provides a comparative legal and historical analysis of the regulation of methods for protecting the rights of the pledgee during the forced seizure of pledged property. The author substantiates the position that a public-law relationship arises between the owner (or other legal holder) and the person in whose favor the property is seized, which cannot be reduced to the relationship arising from a forced sale and purchase agreement. The author concludes the pledgee currently has an extremely limited legal status in the legal relationship involving the forced seizure of pledged property, is significantly vulnerable in determining the terms of such seizure, and is largely dependent on the decisions of the pledger, which affects the resolution of issues related to collateral surrogacy. The article also explores possible models for structuring the legal relationship between the pledgee and the person in whose favor the pledged property is seized, in terms of the emergence of direct and indirect legal relationships.
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