On Responsibilities Arising from Coexistence of Guaranty and Hypothecation

When guaranty and hypothecation coexist, there still exist some problems with theory and judicial practice. As to the problem with the division of responsibility between the guarantor and the pledger, the resolution is not theoretically based on the principle that the real right takes precedence over the creditors right, instead, the creditor has the right to require the guarantor and pledger to undertake their responsibility according to the agreed share and the related legal regulations. As for the problem with the internal recovery, the resolution should be based on the principle of fairness. Specifically speaking, when the actual amount of guaranty exceeds the guarantors share calculated on a basis of proportion, the guarantor will have the right to recover the part above his share from the other party. As to the problem with the relief or exemption of guarantors liability, the guarantor can be relieved or exempted from his liability of guaranty within the scope where the creditor renounce his right or within the scope where the creditor is remiss to exercise his real right and causes the depreciation, derogation and loss of the pledge.