Comment to Article 328. Pledge of things in a pawnshop of the Civil Code of the Republic of Kazakhstan  

A special kind of pawn is the pledge of things in a pawnshop. Having all the signs of a mortgage - the transfer of collateral to the mortgagee, the pledge of things in a pawnshop has a number of features in the form of special legal regulation, the specifics of the registration method, the legislative definition of both persons who are mortgagees and mortgagors, and the list of property used as collateral.

Only short-term loans provided to citizens for personal consumption are secured by pawnshop collateral. Since the issuance of loans (loans) as an entrepreneurial activity is a licensed type of activity, and also due to the fact that only the creditor under the secured obligation can be the mortgagee (see the commentary to art. 299, 325 CC), the pawnshop's mortgagee can only be a specialized organization that provides short-term loans to citizens secured by their personal belongings and has a license for this, a pawnshop.

According to paragraph 6 of the commented article, the rules for lending pawnshops to citizens on the security of things belonging to citizens, as well as the procedure for licensing pawnshops, must be established by legislative acts. To date, the Decree on Banks and Banking Activities and the Decree on Licensing have been the legislative acts regulating the activities of issuing loans and carrying out the activities of pawnshops. Currently, the pawnshops are operating in accordance with subparagraph "m" of paragraph 2 of art. 30 of the Decree on Banks and Banking Activities refers to banking activities and requires, in accordance with Article 11 of the Decree on Licensing, obtaining a license from the National Bank of the Republic of Kazakhstan. There is no special legislative act on the activities of pawnshops, and therefore, temporarily pending the adoption of such an act, it is necessary to recognize the "Regulations on Pawnshops" approved by the Board of the National Bank of the Republic of Kazakhstan on November 16, 1995 as the source of legal regulation of pawnshops.  

Items belonging to citizens and intended for personal consumption may be pledged in a pawnshop. Securities and jewelry can also be used as collateral in a pawnshop. Vehicles cannot be pledged.

Mortgagors can only be individuals who receive a consumer (non-entrepreneurial) loan from a pawnshop.

The basis for the pledge of things in a pawnshop is a contract. A special feature of securing things in a pawnshop is the execution of a contract by issuing a pawn ticket by the pawnshop. At the same time, such issuance of a security ticket is equivalent to making a transaction in writing (see the commentary to art. 307 of the Civil Code).

The valuation of items in a pawnshop should be carried out in accordance with the prices for items of the same kind and quality usually charged in the trade at the time of their acceptance as collateral, that is, the valuation should be as close as possible to the actual one.

When pledging things in a pawnshop, their insurance is established by the pawnshop at its own expense in the full amount of the assessment. In case of non-fulfillment of this obligation or insurance of the pledged property in a smaller amount than indicated, the pawnshop is liable to the pledgor for losses incurred by the latter without receiving full or partial insurance compensation for its lost, lost or damaged property.

The pawnshop does not have the right to use and dispose of the pledged item during the validity of the pawnshop pledge agreement. This rule is imperative and does not allow for any other procedure, even by agreement of the parties.

The pawnshop bears increased responsibility for the loss and damage of mortgaged items, compared with the general rules of liability of the mortgagee when mortgaging (see the commentary to art. 313 of the Civil Code). The pawnshop's guilt for the death, loss or damage of the pledged object, as well as the mortgagee's guilt at the pawn, is assumed and obliges him to compensate the pledgor's losses. He is responsible for the loss, shortage or damage of the mortgaged property, as well as for accidental damage caused to this property. Only damage caused by force majeure releases him from liability.

The article establishes a grace period of one month from the date of the deadline for the fulfillment of the secured obligation and the debtor's failure to fulfill the obligation to repay the loan (loan) issued by the pawnshop until the sale of the pledged property in order for the debtor to fulfill the secured obligation.

Foreclosure by a pawnshop on the subject of a pledge is carried out on the basis of a notary's executive inscription. On general grounds, a pawnshop has the right to apply to the court for the sale of mortgaged property in court, but in practice, due to the indisputability of the pawnshop's monetary claims and the presence of mortgaged movable property in its possession, there is no such need.

By the Law of March 2, 1998, the words "in accordance with the procedure established for the sale of mortgaged property" were deleted from paragraph 5 of Article 328 of the Civil Code. I must say that this change introduces significant confusion into the procedure for the sale of mortgaged property.

At first glance, it seems that now the pawnshop may not comply with the procedure for the sale of mortgaged property, established by art. 318 of the Civil Code, that is, the sale by bidding.  

However, this assumption seems to be incorrect. Article 318 of the Civil Code regarding the sale of mortgaged property by the mortgagee only through bidding (auction) is formulated imperatively. Neither the Civil Code nor other legislative acts can establish a different procedure. Consequently, when selling the mortgaged property, the pawnshop is still obliged to apply the rule of art. 318 of the Civil Code on auctions.  

Termination of the pledge of goods in a pawnshop by compulsory foreclosure on the pledged property entails termination of the main secured obligation in any case, even if the amount received after the sale of the pledged item is insufficient to fully satisfy the pawnshop's requirements for the main secured obligation. This provision is imperative and cannot be changed either by the agreement between the mortgagor and the pawnshop, or by the pawnshop's internal rules on the procedure for issuing short-term loans and accepting citizens' property as collateral.

The rules on the terms of the pawnshop pledge agreement are mandatory and are not subject to change either by agreement of the parties to the agreement, or by legislation or internal rules of pawnshops.

 Constitution Law Code Standard Decree Order Decision Resolution Lawyer Almaty Lawyer Legal service Legal advice Civil Criminal Administrative cases Disputes Defense Arbitration Law Company Kazakhstan Law Firm Court Cases 

The commentary was prepared within the framework of the scientific and practical research program of the Scientific Research Center of Private Law of the Kazakh State Law University.  

Head of the working group on the preparation of the draft Civil Code of the Republic of Kazakhstan, Corresponding Member of the Academy of Sciences of the Republic of Kazakhstan, Professor Suleimenov M.K.

Deputy head Professor Basin Yu.G.