PHILIPPINE REFINING COMPANY V. JARQUE FACTS: Plaintiff Philippine Refining Co.

and defendant Jarque executed three mortgages on the motor vessels Pandan and Zargazo. The documents were recorded as transfer and encumbrances of the vessels for the port of Cebu and each was denominated a chattel mortgage. The first two mortgages did not have an affidavit of good faith. A fourth mortgage was executed by Jarque and Ramon Aboitiz over motorship Zaragoza and was entered in the Chattel Mortgage Registry on May 12, 1932, within the period of 30 days prior to the foreclosure/institution of the insolvency proceedings. Jose Curaminas filed with the CFI of Cebu a petition praying that Francisco Jarque be declared an insolvent debtor. This was granted and Jarques properties were then assigned to Curaminas. A problem arose when Judge Jose Hontiveros declined to order the foreclosure of the mortgages, and instead, ruled that they were defective because they did not have affidavits of good faith. ISSUE: 1. Whether or not the mortgages of the vessels are governed by the Chattel Mortgage Law 2. Whether or not an affidavit of good faith is needed to enforce achattel mortgage on a vessel

RULING: Yes. Personal property includes vessels. They are subject to the provisions of the Chattel Mortgage Law. The Chattel Mortgage Law says that a good chattel mortgage includes an affidavit of good faith. The absence of such affidavit makes mortgage unenforceable against creditors and subsequent encumbrances. The judge was correct. Note: A mortgage on a vessel is generally like other chattel mortgages. The only difference between a chattel mortgage of a vessel and a chattel mortgage of other personalty is that the first must be noted in the registry of the register of deeds.

ABOITIZ SHIPPING CORPORATION vs. NEW INDIA ASSURANCE COMPANY, LTD G..R. No. 156978 May 2, 2006 FACTS: Societe Francaise Des Colloides loaded a cargo of textiles and auxiliary chemicals from France on board a vessel owned by Franco-Belgian Services, Inc. The cargo was consigned to General Textile, Inc., in Manila and insured by respondent New India Assurance Company, Ltd. While in Hong Kong, the cargo was transferred to M/V P. Aboitiz for transshipment to Manila. Before departing, the vessel was advised by the Japanese Meteorological Center that it was safe to travel to its destination. But while at sea, the vessel received a report of a typhoon moving within its general path. To avoid the typhoon, the vessel changed its course. However, it was still at the fringe of the typhoon when its hull leaked. On October 31, 1980, the vessel sank, but the captain and his

crew were saved. Both the trial and the appellate courts found that the sinking was not due to the typhoon but to its unseaworthiness. ISSUE: Whether the limited liability doctrine, which limits respondents award of damages to its pro-rata share in the insurance proceeds, applies in this case. HELD: No. x x x An exception to the limited liability doctrine is when the damage is due to the fault of the shipowner or to the concurrent negligence of the shipowner and the captain. In which case, the shipowner shall be liable to the full-extent of the damage. xxx In the present case, petitioner has the burden of showing that it exercised extraordinary diligence in the transport of the goods it had on board in order to invoke the limited liability doctrine. Differently put, to limit its liability to the amount of the insurance proceeds, petitioner has the burden of proving that the unseaworthiness of its vessel was not due to its fault or negligence. Considering the evidence presented and the circumstances obtaining in this case, we find that