Short answer. Yes. Article 2095 allows incorporeal rights evidenced by negotiable instruments, bills of lading, shares of stock, bonds, and similar documents to be pledged. The instrument proving the right must be delivered to the creditor, and if it is negotiable, it must also be indorsed.
What the law says
Incorporeal rights, evidenced by negotiable instruments, bills of lading, shares of stock, bonds, warehouse receipts and similar documents may also be pledged.
Civil Code, Article 2095 — Pledge of Incorporeal Rights. Read the full provision →
What the law says
The instrument proving the right pledged shall be delivered to the creditor, and if negotiable, must be indorsed.
Civil Code, Article 2095 — Pledge of Incorporeal Rights. Read the full provision →
Pledges are not limited to physical, tangible objects
A pledge is often pictured as handing over a physical item like jewelry, but Article 2095 extends the concept further. It states that "incorporeal rights, evidenced by negotiable instruments, bills of lading, shares of stock, bonds, warehouse receipts and similar documents may also be pledged." Shares of stock and a bill of lading both fall within this list directly, meaning the underlying right they represent — rather than any single physical object — can serve as the security for your loan.
Delivery of the instrument is required either way
Even though what is actually being pledged is an incorporeal right, the article still requires a physical step: "the instrument proving the right pledged shall be delivered to the creditor." You cannot simply tell your creditor that certain shares or a certain shipment are pledged — the document that evidences your right, whether the stock certificate or the bill of lading, actually has to be handed over to the creditor for the pledge to be properly constituted.
Negotiable instruments need one more step: indorsement
Delivery alone is not always enough. The article adds that the instrument, "if negotiable, must be indorsed." A bill of lading is typically a negotiable instrument, so pledging it generally requires not just physically handing it over but also indorsing it in favor of the creditor, similar to how a negotiable check or promissory note would be indorsed to transfer rights under it. Failing to indorse a negotiable instrument that requires it can leave the pledge incomplete.
What this means for structuring your loan security
If you intend to pledge shares of stock, confirm what documentation your stock certificate requires and whether any additional formalities beyond delivery apply to shares specifically, since corporate shares can carry their own transfer requirements alongside the pledge rules in this article. If you intend to pledge a bill of lading, make sure it is properly indorsed to your creditor in addition to being delivered, since the combination of both steps is what Article 2095 requires for a negotiable document pledged as security.
Cases citing this provision
These Supreme Court decisions cite the provision above. We list them so you can read them yourself; the summaries of what each decided are not ours to give.
- Lim Tay vs. Court of Appeals, et al, G.R. No. 126891, August 5, 1998 — read the decision on LawPhil →