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Difference Between Pledge and Mortgage
Difference Between Pledge and Mortgage
Both Pledge and Chattel Mortgage is constituted to secure the fulfillment of a principal
obligation. However, it differs as to the following:
Perfection - Pledge is a real contract which required the delivery of the thing pledged to be
perfected. Whereas a Chattel Mortgage is a consensual contract.
Appropriation - The pledgee may appropriate the property if not sold in two (2) public auctions.
Whereas, in CM the mortgagee cannot appropriate.
Perfection - Pledge is a real contract which required the delivery of the thing pledged to be
perfected. Whereas a REM is a consensual contract.
Security - The object used as security in a Pledge is movable whereas for REM is immovable.
Recovery of deficiency - It is not allowed under Pledge but allowed for REM.
A Chattel Mortgage is a contract which purports to be, and in form is, a sale of movable
or personal property, intended as security for the payment of a debt. Whereas, a Real Estate
Mortgage is a contract where immovable property is used as security for the payment of a debt.
In Chattel Mortgage there is only equity of redemption whereas in REM there is equity of
redemption and right of redemption.
Judicial Foreclosure is governed under the Rules of Court and is made by bringing an action in
the proper court which has jurisdiction over the area wherein the real property involved is
situated. Whereas, the Extrajudicial Foreclosure is governed by Act No. 3135 and does need
bringing an action to the court.
For example:
Mr. A borrowed P1Million from B and used his House and Lot as collateral. After several
demands, Mr. A was unable to pay the amount due.
Under Judicial Foreclosure - to satisfy the unpaid obligation of Mr. A he shall file an action to
the court for its foreclosure.
Under Extrajudicial Foreclosure - to satisfy the unpaid obligation, B can sell the property at a
public auction without the need of filing an action in the court.