Short answer. Only property you actually own and are free to dispose of. Article 2085 requires that the security be constituted to secure a principal obligation, that the pledgor or mortgagor be the absolute owner of the thing, and that he have free disposal of it or be legally authorised to encumber it.

What the law says

That the pledgor or mortgagor be the absolute owner of the thing pledged or mortgaged; (3) That the persons constituting the pledge or mortgage have the free disposal of their property, and in the absence thereof, that they be legally authorized for the purpose.

Civil Code, Article 2085 — Essential Requisites of Pledge and Mortgage. Read the full provision →

Ownership, and the power to part with it

The second and third requisites are not the same test. Ownership asks whose the thing is; free disposal asks whether this owner may presently encumber it. An heir whose inheritance has not been settled, a spouse dealing with property that needs the other's consent, a corporate officer without a board resolution, a guardian handling a ward's land — each may be an owner or represent one and still lack the power to give the security alone. That is why the article adds the alternative: in the absence of free disposal, the person must be legally authorized for the purpose.

Somebody else may put up the collateral for you

The last sentence of Article 2085 is the one borrowers most often need: third persons who are not parties to the principal obligation may secure it by pledging or mortgaging their own property. A parent may mortgage her land for a child's business loan without becoming the borrower. What she risks is the property, and the lender's recourse against her runs to that property rather than to her generally. Anyone being asked to accommodate a relative this way should understand which of the two exposures is being requested, because they are very different things.

Pledge takes movables, and possession

Article 2094 allows all movables within commerce to be pledged, provided they are susceptible of possession, and Article 2095 adds incorporeal rights evidenced by negotiable instruments, bills of lading, shares of stock, bonds and warehouse receipts, with the instrument delivered to the creditor and indorsed if negotiable. Delivery is not optional: Article 2093 requires the thing to be placed in the possession of the creditor or of a third person by common agreement. And under Article 2096 a pledge does not take effect against third persons unless a description of the thing and the date appear in a public instrument.

What the security may cover

There must be a principal obligation, but it need not be a simple matured loan. Article 2091 provides that a pledge or mortgage may secure all kinds of obligations, pure or subject to a suspensive or resolutory condition. Note too what a mere undertaking is worth: Article 2092 says a promise to constitute a pledge or mortgage gives rise only to a personal action between the parties, while making clear that a person who offers as unencumbered a thing he knows is burdened, or who misrepresents himself as owner, may incur criminal responsibility.

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.

Related provisions

Note. Statute text quoted on this page is reproduced from the official enactment and is linked to the full provision. The explanation around it is general legal information from Vivas & Nobles Law Office, not legal advice. Whether it applies to your situation depends on facts only a lawyer reviewing them can assess.