G.R. No. L‑5577
EN BANC February 21 1910

FACTS
– William Thein borrowed ₱1,000 from J.W. Meyers and pledged his saloon furniture (located at 124 Calle Real, Intramuros) as security. The pledge (chattel mortgage) was executed 20 June 1908 and duly recorded in the provincial Register of Deeds.
– The premises were owned by Flora Broto, who leased them to Thein. Broto claimed unpaid rent of ₱215 for JuneJuly 1908.
– While Thein still possessed the pledged furniture, the sheriff, at Meyers’ request, removed and sold it for ₱972.30.
– Both Meyers (as pledgee) and Broto (as lessor) sought preferential payment from the sale proceeds.

ISSUE
Whether, in a conflict of preferences, the pledgee‑creditor under a chattel mortgage executed and registered pursuant to Act No. 1508 of the Philippine Commission has priority over the lessor’s rent‑claim under paragraph 7 of Article 1922 of the Civil Code, notwithstanding that the pledged property was not in the pledgee’s actual possession.

RULING
The Court held that registration of a chattel mortgage under Act 1508 constitutes constructive delivery of the pledged property to the creditor, giving the creditor the same preferential right as if he were in actual possession. Thus, the statutory scheme of Act 1508 supplements rather than repeals Article 1922; it extends the creditor’s right to priority even without physical possession, provided the mortgage is recorded.

Accordingly, the trial court’s judgment favoring the lessor was reversed. The proceeds of the sale are to be applied first to satisfy Meyers’ claim as pledgee, with Thein personally liable for the balance of the debt. No special allocation of costs was ordered.

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Key Principle: A chattel mortgage that is registered under Act No. 1508 is deemed to be in the creditor’s possession for purposes of preference, granting the creditor priority over a lessor’s rent‑claim under the Civil Code.