PRC Vs Jarque

G.R. No.
L-41506 March 25, 1935
PHILIPPINE REFINING CO., INC., plaintiff-appellant,

vs.
FRANCISCO JARQUE, JOSE COROMINAS, and ABOITIZ & CO., defendants.
JOSE COROMINAS, in his capacity as assignee of the estate of the insolvent Francisco
Jarque, appellee.
Thos. G. Ingalls, Vicente Pelaez and DeWitt, Perkins and Brady for appellant.
D.G. McVean and Vicente L. Faelnar for appellee.
MALCOLM, J.:
First of all the reason why the case has been decided by the court in banc needs explanation. A
motion was presented by counsel for the appellant in which it was asked that the case be heard and
determined by the court sitting in banc because the admiralty jurisdiction of the court was involved,
and this motion was granted in regular course. On further investigation it appears that this was error.
The mere mortgage of a ship is a contract entered into by the parties to it without reference to
navigation or perils of the sea, and does not, therefore, confer admiralty jurisdiction. (Bogart vs.
Steamboat John Jay [1854], 17 How., 399.)
Coming now to the merits, it appears that on varying dates the 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 until May 17, 1932, 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. These proceedings were begun on June 2, 1932,
when 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.
On these facts, 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.
Vessels are considered personal property under the civil law. (Code of Commerce, article 585.)
Similarly under the common law, vessels are personal property although occasionally referred to as
a peculiar kind of personal property. (Reynolds vs. Nielson [1903], 96 Am. Rep., 1000; Atlantic
Maritime Co vs. City of Gloucester [1917], 117 N. E., 924.) Since the term "personal property"
includes vessels, they are subject to mortgage agreeably to the provisions of the Chattel Mortgage
Law. (Act No. 1508, section 2.) Indeed, it has heretofore been accepted without discussion that a
mortgage on a vessel is in nature a chattel mortgage. (McMicking vs. Banco Espaol-Filipino [1909],
13 Phil., 429; Arroyo vs. Yu de Sane [1930], 54 Phil., 511.) The only difference between a chattel
mortgage of a vessel and a chattel mortgage of other personalty is that it is not now necessary for a
chattel mortgage of a vessel to be noted n the registry of the register of deeds, but it is essential that
a record of documents affecting the title to a vessel be entered in the record of the Collector of
Customs at the port of entry. (Rubiso and Gelito vs. Rivera [1917], 37 Phil., 72; Arroyo vs. Yu de
Sane, supra.) Otherwise a mortgage on a vessel is generally like other chattel mortgages as to its
requisites and validity. (58 C.J., 92.)
The Chattell Mortgage Law in its section 5, in describing what shall be deemed sufficient to
constitute a good chattel mortgage, includes the requirement of an affidavit of good faith appended
to the mortgage and recorded therewith. The absence of the affidavit vitiates a mortgage as against
creditors and subsequent encumbrancers. (Giberson vs. A. N. Jureidini Bros. [1922], 44 Phil., 216;
Benedicto de Tarrosa vs. F. M. Yap Tico & Co. and Provincial Sheriff of Occidental Negros [1923], 46
Phil., 753.) As a consequence a chattel mortgage of a vessel wherein the affidavit of good faith
required by the Chattel Mortgage Law is lacking, is unenforceable against third persons.
In effect appellant asks us to find that the documents appearing in the record do not constitute
chattel mortgages or at least to gloss over the failure to include the affidavit of good faith made a
requisite for a good chattel mortgage by the Chattel Mortgage Law. Counsel would further have us
disregard article 585 of the Code of Commerce, but no reason is shown for holding this article not in
force. Counsel would further have us revise doctrines heretofore announced in a series of cases,
which it is not desirable to do since those principles were confirmed after due liberation and
constitute a part of the commercial law of the Philippines. And finally counsel would have us make
rulings on points entirely foreign to the issues of the case. As neither the facts nor the law remains in
doubt, the seven assigned errors will be overruled.
Judgment affirmed, the costs of this instance to be paid by the appellant.
Avancea, C.J., Street, Villa-Real, Abad Santos, Hull, Vickers, Imperial, Butte, and Goddard, JJ.,
concur.

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G.R. No.

L-41506 March 25, 1935

PHILIPPINE REFINING CO., INC., plaintiff-appellant,

Judgment affirmed, the costs of this instance to be paid by the appellant.

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