Pledge vs Mortgage: Key Differences in Security Interests
Understanding the Pledge as Security
A pledge involves handing over the secured item to a creditor or third party. This arrangement facilitates the sale of the item if the underlying obligation is not met. Therefore, a pledge necessitates a transfer of possession.
In specific cases allowed by law, this physical transfer (displacement) can be substituted by registration. Examples include:
- Pending fruits and expected crops
- Individual fruits
- Animals
- Machinery and equipment on holdings (as per Art. 54 of the Law of Mortgages and Pledges without Displacement of Possession, December 16, 1954).
Upon receiving possession of the item, the creditor has the right to retain it, or it can be held by a third party designated by mutual agreement (Art. 1866.1 CC)...