G.R. No. 18520; September 26, 1922
INVOLUNTARY INSOLVENCY OF PAUL STROCHECKER, appellee, vs. ILDEFONSO RAMIREZ, creditor and appellant.

FACTS

Paul Strochecker was declared an involuntary insolvent. Among his creditors were the Fidelity & Surety Co. and Ildefonso Ramirez, both holding mortgages on Strochecker’s property. The Fidelity & Surety Co.’s mortgage was executed on March 10, 1919, and duly registered. Ramirez’s mortgage was executed on September 22, 1919, and also registered. The lower court held that the mortgage in favor of Fidelity & Surety Co. was entitled to preference over that of Ramirez. Ramirez appealed, arguing his mortgage should be preferred because: (a) the first mortgage was invalid as the property (a half-interest in a drug business) was not capable of being mortgaged and was insufficiently described; and (b) his credit was for a purchase price under Article 1922 of the Civil Code, and his mortgage was a modification of a security given on February 15, 1919 (prior to the first mortgage).

ISSUE

Which mortgage is entitled to preference: that of Fidelity & Surety Co. or that of Ildefonso Ramirez?

RULING

The mortgage of Fidelity & Surety Co. is entitled to preference. The Court held: (1) The half-interest in the drug business is personal property capable of being mortgaged under Act No. 1508 (the Chattel Mortgage Law), as it is not real property under Article 335 of the Civil Code. The description in the mortgage document was sufficient to identify the property as required by law. (2) Article 1922 of the Civil Code (on preferred credits) is inapplicable because neither Ramirez nor the debtor was in possession of the mortgaged property; from registration, the mortgagee (Fidelity) had legal possession. (3) The February 15, 1919, agreement involved personal security, not a mortgage on the specific property, so Ramirez’s mortgage cannot be given retroactive effect. (4) Ramirez’s own mortgage document stated it was subordinate to the mortgage in favor of Fidelity & Surety Co. The lower court’s judgment was affirmed.