Case Digest: Philippine Refining Co. vs. Francisco Jarque, G.R. No. L-41506

 

Philippine Refining Co. vs. Francisco Jarque, 61 Phil. 229, G.R. No. L-41506, March 25, 1935

Subject: Transportation Law

FACTS

Philippine Refining Co., Inc., and Francisco Jarque executed three mortgages on the motor vessels Pandan and Zaragoza. These documents were recorded in the record of transfers and incumbrances of vessels for the port of Cebu and each was therein denominated a "chattel mortgage".

Neither of the first two mortgages had appended an affidavit of good faith. The third mortgage contained such an affidavit, but this mortgage was not registered in the customs house or within the period of thirty days prior to the commencement of insolvency proceedings against Francisco Jarque; also, while the last-mentioned mortgage was subscribed by Francisco Jarque and M. N. Brink, there was nothing to disclose in what capacity the said M. N. Brink signed.

A fourth mortgage was executed by Francisco Jarque and Ramon Aboitiz on the motorship Zaragoza and was entered in the chattel mortgage registry of the register of deeds on May 12, 1932, or again within the thirty-day period before the institution of insolvency proceedings.

A petition was filed with the Court of First Instance of Cebu in which it was prayed that Francisco Jarque be declared an insolvent debtor, which soon thereafter was granted, with the result that an assignment of all the properties of the insolvent was executed in favor of Jose Corominas.

Judge Jose M. Hontiveros declined to order the foreclosure of the mortgages, but on the contrary, sustained the special defenses of fatal defectiveness of the mortgages. In so doing we believe that the trial judge acted advisedly.

ISSUE

Whether or not the mortgages are defective.

RULING

Yes, they are defective.

Under Article 585 of the Code of Commerce, for all purposes of law not modified or restricted by the provisions of this Code, vessels shall continue to be considered as personal property.

In this case, article 585 of the Code of Commerce is in force. Vessels are considered personal property under the civil law. A mortgage on a vessel is in nature a chattel mortgage. The only difference between a chattel mortgage of a vessel is that a record of documents affecting the title to a vessel must be entered in the record of the Collector of Customs at the port of entry. Section 5 of the Chattel Mortgage Law provides that a good chattel mortgage includes the requirement of an affidavit of good faith appended to the mortgage and recorded therewith. A chattel mortgage of a vessel that lacks the affidavit of good faith is unenforceable against third persons.