Case Summary (G.R. No. L-3273)
Procedural History and Jurisdiction
– Philippine Refining Co. moved for an en banc hearing on the ground of admiralty jurisdiction.
– The Supreme Court granted the motion but later recognized the error: a mortgage on a vessel is purely a contract affecting personal property and does not invoke admiralty jurisdiction.
Facts and Mortgage Transactions
– Three “chattel mortgages” were executed by Philippine Refining Co. and Francisco Jarque on vessels Pandan and Zaragoza.
• First two mortgages lacked the required affidavit of good faith.
• The third bore an affidavit but was recorded in the Customs House too late—within thirty days before insolvency proceedings. Its co-signatory, M. N. Brink, did not indicate capacity.
– A fourth mortgage on Zaragoza, executed by Jarque and Ramon Aboitiz, was registered in the land chattel mortgage registry on May 12, 1932—also within the thirty-day avoidance period.
– Insolvency proceedings against Jarque commenced on June 2, 1932, resulting in an assignment of his estate to Jose Corominas.
Trial Court Ruling
– Judge Jose M. Hontiveros sustained special defenses alleging fatal defects in all four mortgages and denied foreclosure.
– The trial judge held that defects in form and timing rendered the mortgages unenforceable against creditors and subsequent encumbrancers.
Classification of Vessels and Applicable Law
– Under the Code of Commerce (Art. 585) and common law precedent, vessels are personal property subject to chattel mortgage.
– Act No. 1508 (Chattel Mortgage Law), section 5, mandates an affidavit of good faith appended to and recorded with every chattel mortgage.
– Mortgages on vessels must also be recorded in the Collector of Customs’ registry at the port of entry.
Defects in the Mortgages
– Absence of the affidavit of good faith in the first two mortgages vitiated their enforceability against third persons.
– Late registration of the third mortgage and failure to disclose Brink’s capacity further defeated priority claims.
– The fourth mortgage’s registration within the thirty days preceding insolvency rendered it voidable in favor of Jarque’s creditors.
Appellant’s Contentions and Court’s Response
– The appellant urged the Court to treat the vessel mortgages as
Case Syllabus (G.R. No. L-3273)
Facts
- On varying dates, Philippine Refining Co., Inc. and Francisco Jarque executed three mortgages over the motor vessels Pandan and Zaragoza.
- Each instrument was recorded in the Record of Transfers and Incumbrances of Vessels for the Port of Cebu and labeled “chattel mortgage.”
- The first two mortgages were devoid of the statutorily required affidavit of good faith.
- The third mortgage did contain an affidavit of good faith but was not registered with the Collector of Customs until May 17, 1932—within thirty days prior to the insolvency proceedings against Jarque—and bore the signature of M. N. Brink without indicating his capacity.
- A fourth mortgage, executed by Jarque and Ramon Aboitiz on the motorship Zaragoza, was entered in the chattel mortgage registry of the Register of Deeds on May 12, 1932—also within the thirty-day window before insolvency.
- On June 2, 1932, a petition was filed in the Court of First Instance of Cebu to declare Francisco Jarque insolvent; the petition was granted, and all his properties were assigned to Jose Corominas as assignee.
Procedural History
- The appellant moved for the case to be heard and determined by the Supreme Court sitting in banc, invoking supposed admiralty jurisdiction over a ship mortgage; this motion was initially granted.
- Upon further review, the Court recognized that a mere mortgage of a ship, being a contract unrelated to navigation or perils of the sea, does not confer admiralty jurisdiction (citing Bogart v. Steamboat John Jay, 17 How. 399).
- At the trial level, Judge Jose M. Hontiveros declined to order foreclosure of the mortgages and sustained the respondents’ special defenses predicated on the mortgages’ fatal defects.
- Philippine Refining Co., Inc. appealed, assigning seven errors.
Issues
- Whether a ship mortgage, standing alone, confers admiralty jurisdiction on the Court.
- Whether the chattel mor