PHILIPPINE REFINING CO., INC. vs. FRANCISCO JARQUE, JOSE COROMINAS, and ABOITIZ & CO., defendants. JOSE COROMINAS

Doctrine: 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. Otherwise a mortgage on a vessel is generally like other chattel mortgages as to its requisites and validity

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 until the period of thirty days prior to the commencement of insolvency proceedings against Francisco Jarque.

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 within the thirty-day period before the institution of insolvency proceedings. Francisco was declared an insolvent 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.

Issue: Whether or not the mortgages were defective.

Held:

Yes. Vessels are considered personal property under the civil law. Similarly under the common law, vessels are personal property although occasionally referred to as a peculiar kind of personal property. They are subject to mortgage agreeably to the provisions of the Chattel Mortgage Law.

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 in 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. Otherwise a mortgage on a vessel is generally like other chattel mortgages as to its requisites and validity.

In the case, the absence of the affidavit vitiates a mortgage as against creditors and subsequent encumbrancers. 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.