GR 41506; (March, 1935) (Digest)
G.R. No. 41506; March 25, 1935
PHILIPPINE REFINING CO., INC. vs. FRANCISCO JARQUE, et al.
FACTS
Plaintiff Philippine Refining Co., Inc. executed three mortgages on motor vessels with Francisco Jarque. These were recorded in the customs house record of transfers as “chattel mortgages.” The first two lacked the required affidavit of good faith. The third had an affidavit but was registered within 30 days before Jarque was declared insolvent, and the signatory’s capacity was unclear. A fourth mortgage was also recorded within the critical 30-day period. Insolvency proceedings began on June 2, 1932, and an assignee (Jose Corominas) was appointed. The trial court refused to foreclose the mortgages, holding them fatally defective.
ISSUE
Whether the mortgages on the vessels are valid and enforceable against the insolvent estate, given the absence of the affidavit of good faith required by the Chattel Mortgage Law.
RULING
No. The mortgages are unenforceable against third persons, including the insolvent estate. Vessels are considered personal property under Philippine law (Code of Commerce, art. 585) and are subject to mortgage under the Chattel Mortgage Law (Act No. 1508). A mortgage on a vessel is essentially a chattel mortgage; its record in the customs house (instead of the register of deeds) is a special requirement, but it must still comply with all other requisites of the Chattel Mortgage Law. The affidavit of good faith is a mandatory requirement under Section 5 of the Chattel Mortgage Law. Its absence vitiates the mortgage as against creditors and subsequent encumbrancers. The Court affirmed the trial court’s decision, refusing to enforce the defective mortgages.
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