192

RULES OF PROCEDURE.

UNDERWRITERS.

RULE XVII.

"In all suits against the ship or freight, founded upon a mere maritime hypothecation, either express or implied, of the master for moneys taken up in a foreign port, for supplies or repairs, or other necessaries for the voyage, without any claim of marine interest, the libellant may proceed either in rem, or against the master or the owner alone in personam."

The effect of this rule is to prescribe a practice for the usual and ordinary maritime contracts, written or unwritten, to which a lien attaches, sometimes called a tacit hypothec, and not to bottomry bonds as such.

Bonds executed to bottomry a ship, or hypothecate cargo or freight, are not to be construed strictly but liberally, so as to carry into effect the intention of the parties. 3 Story, 465, Pope v. Nickerson.

The validity of a bond will not be affected by fraud practiced by the borrower or his agent, unless the lender also participate in it. 4 Wash. C. C. 662, Atlantic Insurance Company v. Conrad.

If an express contract of bottomry be void for fraud, no recovery can be had upon the footing of an implied. contract and lien. 1 Curt. 340, The Brig Ann C.

Pratt.

Underwriters, to whom an abandonment has been made but not accepted, are not admissible as claimants in a suit in rem, on a bottomry bond. 3 Mason, 255, The Ship Packet. See also Regina del Mare, Eng. Adm. Aug. 2, 1864. S. C. Br. & Lush. 315.

These bonds are said to be of a high and sacred character; and, as they benefit ship-owners and are for the general advantage of commerce, are greatly favored

DEFENSES TO BE PLEADED WITH PRECISION.

in admiralty courts.

193

4 Moore, P. L. 21, The Prince

George; 5 Ch. Rob. 102, The Rebecca; 1 W. Rob. 1, The Vibilia; and see 1 Adm. & Eccl. Rep. 8, The Mary Ann. Courts discountenance the sale of bottomry bonds. 3 Hagg. 394, The Prince of Saxe Coburg.

A strong leaning exists in the admiralty, as is quite observable, to uphold bottomry contracts; and as strong an indisposition to convert simple contracts or other merely collateral securities into bottomry securities by construction. If the master give, for advances, bills of exchange, and verbally agree to pledge and hold the ship therefor, it could not, by judicial construction, be considered to be an instrument of hypothecation. Abbott on Shipping, 120.

By the eighteenth rule, already referred to, provision is made in the United States, for enforcing bottomry contracts, whether on the vessel, freight, or cargo. When, therefore, proper legal proceedings shall have been instituted for the purpose of enforcing such obligations, the matters relied upon in defense should be presented with formal precision.

To this end, the facts should be well investigated, the pleadings carefully drawn, and the defensive allegations sufficiently brief and plain, to exhibit at once the principal objections to be urged against enforcing the

contract.

Several defenses may be set up against the validity of a bottomry bond, when executed by the master, while in a foreign port. Though not clothed generally with authority to execute these maritime securities, at all times or any place, yet the master, virtute offici, and as the owner's accredited agent, may exercise this power, when abroad and in a time of exigency, distress

194

WHEN BOND BY MASTER MAY BE VALID.

or necessity. He cannot generally execute such contracts in the presence of the owners, though he may in their absence; nor at home, though he may abroad; nor when in the possession of funds, though he may when without funds; nor can he, if the owners have funds at the port of distress within his control or command, or personal credit of which he may readily avail himself; nor will mere adyertising for a loan place him in a situation to negotiate for it on bottomry, without communicating with the owner, his agent or consignee, if either be within communicating distance; nor, in fine, unless the loan sought for shall be indispensable to enable the vessel to proceed on, or complete her voy age, and no other mode of raising it shall appear to be feasible.

Beside the restraints just enumerated, which are by law imposed upon the master before he can be justified in exercising discretionary power so vital, the master is, moreover, bound to the strictest honesty and good faith in performing any such official act in foreign ports. The loan, if effected, should be for the ship's and own er's benefit and not for the benefit or accommodation of the master merely. The object and purpose of the loan should be to discharge a liability or debt to be incurred, and not to pay a preëxisting debt; and in no case should there be any fraud or collusive arrangement between the lender and the master.

Any of these requirements may, if disregarded by the master, invalidate a bottomry bond. It is, therefore, imperative upon the lender that he should thoroughly investigate the facts, and, by proper information, be well assured that a necessity exists which may au thorize the master to procure a loan, before any money is advanced upon it to the master.

ON WHAT GROUNDS MAY BE CONTROVERTED.

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The validity of a bond may be controverted upon the ground of either

1. Ignorance of the causes of distress, and necessity or occasion of making an hypothecation.

2. Fraud or collusion between the parties.

3. Neglect of the master to communicate with the owners or to consult with their agents or consignees abroad.

4. The absence of an urgent necessity; or

5. Any irregularity in the course and conduct of a master; and

For other specific grounds, not here particularly enumerated. And, in all cases, the ground of defense, whatever it may be, should be precisely alleged and distinctly presented in the pleadings.

Upon either of the enumerated grounds of defense already indicated, court and counsel might well take into consideration, either an undue assumption of authority, on the part of the master, in negotiating a loan; or, on the part of the lender, a want of prudence and discretion in undertaking to furnish and advance funds, either on a bottomry of the vessel or hypothecation of the cargo, without proper inquiry or information. Any or all of the suggested defenses would lead to controverting the legality of the bond, in its original inception, or as the product and offspring of a dominant, pressing, urgent and controlling maritime necessity. In every aspect of the investigation, the controversy, so arising, could not fail to be interesting, as it would necessarily involve a wide and varied discussion of the character, origin, nature and effect of all bottomry contracts.

Moreover, the terms and form of these maritime and

196 MARINE INTEREST JUSTIFIED BY MARINE RISK.

commercial contracts may afford specific matter and grounds of defense. Thus, a maritime risk is, theoretically, an indispensable ingredient in a bond given to secure a lender; and the presence of that risk only will justify the bondholder in taking from the borrower an exorbitant maritime interest. In case of the loss of the vessel, the lender loses his loan. Having stipulated for repayment at the termination of the voyage, or upon the safe arrival of the ship at her home port, or port of destination, or port of discharge, as the case may be, the lender, in taking his bond, practically stipulates for the vessel's safe arrival. The presence, therefore, of a marine risk should appear affirmatively and expressly in the written instrument. If it do not so appear, it may render the bond fatally defective. The absence or non-appearance of all risk to be run by the lender, would throw suspicion over the whole transaction, and vitiate the bond. In the Atlas, (2 Hagg. 4165), a bond excluding sea-risk, was adjudged void. In the Emancipation (1 W. Rob. 124), it was required that a sea-risk should be expressed in terms, or the bond so formed that a risk might be gathered, by inference, from its language and contents.

If, then, a suit upon a bottomry bond is to be defended upon the ground that the lender run no hazard, did not insure the vessel against loss, capture, or other disaster, by consenting to wait for her safe arrival before demanding payment of loan or marine interest, this ground of objection should be distinctly alleged in the defensive pleading.

So, if a bond were given under duress, proof of actual compulsion would vitiate it. If such a defense were properly pleaded, the bond could not be upheld,