The Philippine National Bank v. Severo Alejano

Summary

This case established the priority of real property mortgages over subsequent chattel mortgages on crops from the same property. Philippine National Bank held a real property mortgage dated March 16, 1922, while F.M. Yap Tico & Co. held a chattel mortgage on crops dated March 18, 1922. When the debtor defaulted, both parties claimed rights to the sugar harvest. The Supreme Court applied Article 1877 of the Civil Code, ruling that a mortgage includes unharvested fruits when the obligation becomes due. Since the debtor was in default from May 30, 1924, the fruits were included in the bank's mortgage. The earlier real property mortgage took priority over the later chattel mortgage, giving the bank superior rights to the sugar harvest. This decision clarified mortgage priority principles and the scope of real property mortgages in Philippine law.