Case ID: mass_28/html/0186-01.html
Source: Caselaw Access Project
Author: {"author": "Putnam J", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Israel Thorndike versus Isaac Stone.
    The defendant gave the plaintiff a bond for a sum of money, to run at bottomry on a ship and her freights during the term of three years, at the interest of twelve per cent per annum 3 the defendant was to pay over to the plaintiff, from time . to time, half of the gross earnings of the ship, and to make other payments if he chose, in part satisfaction of the bond, and the interest was to cease immediately on the amount of principal so discharged 3 and the plaintiff was to retain all payments made to him, whether the ship should be lost or not 3 and the ship and freights were to stand hypothecated for only the balance which should at any time remain unpaid 5 and at or before the end of the three years the defendant was to pay the sum remaining due, with the interest, deducting however such sums as the plaintiff would by law have been held to pay for any general average or partial loss which should happen during the three years, as if he had been an insurer, according to a form of policy referred to, for the principal sum due at the time of such loss 3 and in case of a total loss by perils insured against in such a policy, the defendant was to pay to the plaintiff such salvage as he would be entitled to if he had been the insurer in such a policy, and the defendant was to pay to the plaintiff half of the gross earnings not before paid over, deducting from such payments such sums as the plaintiff would be held to pay for general average or partial loss if he had been an insurer as above mentioned 3 and if the defendant fulfilled these conditions, the bond was to be void. The defendant also gave the plaintiff a mortgage of real estate, which was to be void if the defendant performed the conditions of the bond above described. It was held, that the bond was a lawful contract and not usurious 3 for if the ship had been lost at any time during the three years, the plaintiff was to- lose all the money which should be then due upon the bond.
    An attachment of the ship before the expiration of the three years, in a suit brought by the plaintiff upon a debt.due from the defendant having no connexion with the bond, whereby the defendant was prevented from employing the ship, was held, not to excuse the defendant from the performance of the condition, the attachment being occasioned by his fault in not paying the debt.
    Debt for the penalty of a bond. The parties stated a case.
    In November 1826, the plaintiff sold to the defendant the ship Israel for $ 18,000, and executed the usual bill of sale The defendant paid no part of the consideration, but executed the bond on which this action is brought, dated November 17, 1826, in the penal sum of $ 36,000.
    The bond recites, that the defendant has borrowed of the plaintiff $ 18,000 to enable the defendant to despatch the ship Israel to sea, which sum is to run at bottomry on the hull, appurtenances and freights of the ship, at and from Boston to and in any ports and places, during the term of three years from the date of the bond, at the interest and premium of twelve per cent per annum ; that it has been agreed that the áefendant shall from time to time, as the same shall be received by him, pay over to the plaintiff one half of the whole gross freights and other earnings of the ship, in part satisfaction of the $ 18,000, and the interest and premium due thereon, and that the defendant may also, at any time within the three years, make any further payments, and that the premium and interest shall immediately cease on the amount of principal so discharged, and be thereafter computed only on the balance due, and the plaintiff shall thereafter bear the risk of only the amount of principal actually due on the bond, but he shall be entitled to retain all the payments made to him, whether the ship shall be lost or not; and that the ship, her appurtenances and freight shall stand hypothecated to the plaintiff for the balance which shall at any time remain unpaid and the interest and premium thereon. And the condition of the bond is, that if the ship shall pursue during the term, without unreasonable delay, such voyages as are above permitted, the dangers of the seas excepted,'and if the defendant shall pay to the plaintiff one half of all the gross freights and other earnings as they shall be received by the defendant, and shall at or before the expiration of the three years, pay to the plaintiff so much of the $ 18,000 as shall not have been paid, with the interest and premium due thereon ; deducting however from such payments such sums, if any, as the plaintiff would by law have been held to pay for any general average or partial loss which may happen during the three years to the ship and appurtenances, if he had been an insurer thereon for the principal sum due to him, as above mentioned, at the time of such loss, on the terms and conditions of the policies of insurance used at the office of the Salem Marine Insurance Company ; or if the ship shall during the three years be totally lost by the perils usually insured against in policies of that company and the defendant shall pay to the plaintiff such salvage, if any, as the plaintiff would by law be entitled to have if he had been an insurer as above mentioned, on the ship and appurtenances, and the defendant had duly abandoned the same, and also one half of the whole gross freights and earnings which before shall not have been paid over to the plaintiff; deducting however from such payment such sums, if any, as the plaintiff would by law have been held to pay for any general average or partial loss which may happen during the three years, if he had been an insurer as before mentioned, then the bond shall be void ; otherwise, &c.
    
      March 25th,
    
    On the same 17th of November the defendant conveyed certain real estate to the plaintiff in mortgage, which conveyance ivas to be void if the defendant performed the condition of the bond above described.
    The plaintiff, without the knowledge of the defendant, caused $ 10,000 to be insured on the ship for the term of one year from February 3, 1827, at a premium of five and a half per cent. The above sum of $ 10,000 was insured “ for whom it may concern,” and in case of loss was payable to the plaintiff. The defendant caused insurance to be made on the ship, without the knowledge of the plaintiff, for a voyage from Liverpool to Boston.
    The defendant took immediate possession of the ship and employed her in the freighting business ; and between the 26th of June 1827 and the 21st of March 1828, he paid the plaintiff 670Z. sterling out of the ship’s earnings ; and no more of either principal or interest has been paid, except by the transfer of the ship, as hereafter mentioned. The defendant navigated the ship and kept her in repair at his own expense.
    On the 20th of October 1828, the plaintiff attached the ship, then at Boston, on a writ against the defendant, founded on a promissory note .for $ 400, which had no connexion with the bond. She remained under this attachment until some time in 1829, when the plaintiff and defendant entered into an agreement by which the ship was then transferred to the plaintiff at the appraised value of $ 13,000, and in satisfaction of so much of the amount due on the bond ; but without prejudice to the rights of either party.
    If on these facts the defendant had a good defence at law, the plaintiff was to be nonsuited ; otherwise the defendant was to be defaulted.
    jF. Dexter, for the plaintiff
    Sullivan, for the defendant.
    The instrument upon which this action is brought, is not a bottomry bond. In a bottomry bond, .the payment of the money lent depends on the contingency of the ship’s performing a particular voyage. Appleton v. Crowninshield, 3 Mass. R. 443. Possibly there may be a lending on bottomry where the ship is to run on time ; but no case precisely of that sort has been found. Western v. Wildy, Skin. 152; Park on Ins. (7th edit.) 631. It is essential that the whole of the money should be at risk during the whole time. Park on Ins. (7th edit.) 615. Here the interest was to be paid annually, and half of the gross earnings of the ship as they should from time to time be received by the defendant; and by possibility the whole sum secured might be paid within the three years, and afterwards, before the expiration of the term, the ship be lost.
    
      April 2d.
    
    If this was not a bottomry bond, it was a contract at common law, and was void for usury. In addition to the hypothecation of the ship, the payment of the principal, with interest at twelve per cent, is made certain by a mortgage of real estate, by an assignment of the earnings of the vessel, and by personal security.
    But suppose it to be a bottomry bond, the penalty is not forfeited ; for there was an implied condition on the part of the plaintiff, that the defendant should be permitted to employ the ship during the term of three years, which condition the plaintiff has broken by making his attachment, and so has deprived himself of any remedy upon the bond. Beadle’s case, 3 Leon. 159 ; Co. Litt. 206, 207 a ; Chitty on Contr. 274 ; Pringle v. Taylor, 2 Taunt. 150 ; 1 Saund. Pl. and Ev. 129 et seq.
    
   Putnam J

delivered the opinion of the Court. We are all clearly of opinion, that the objections which the defendant’s counsel have made to the plaintiff’s recovery cannot prevail.

It is said that this is not a bottomry bond, but a usurious contract; and the Court are to determine whether it be one or the other, upon the facts which are agreed by the parties.

It is argued that the payment of the money borrowed, is secured in such manner as to make it a certainty that the plaintiff would receive his money, with twelve per cent; that it is secured by a mortgage of real estate, as well as by a mortgage of the ship, and an assignment of half the freight and earnings for the term of the loan ; and it is further objected, that the loan is upon time and not for a voyage, as it is usually made. But the answer to these objections is, that if the ship should be lost within the time of three years, for which the money was lent, the plaintiff was to lose all the money which should be then due upon the bond.

It is the essence of the contract of bottomry and respondentia, that , the lender runs the marine risk, to be entitled to the marine interest. The rate of interest, and the manner of securing the payment of what may become due upon such contract, are to be regulated by the parties. Those considerations are not to be regarded by the Court excepting only to ascertain whether they were colorably put forth to evade the statute against usury. We do not perceive any thing in the facts which would warrant that conclusion. If the ship had been lost immediately after she sailed, it is perfectly clear that the plaintiff would have lost all his money.

There is one provision in this bond which is somewhat peculiar. The plaintiff became an insurer for the defendant, for the average losses which might happen to the ship. This has been urged as being prejudicial to the defendant; but we cannot regard it in that light. By the marine law, the lender upon bottomry becomes an insurer upon the ship in case of total loss, but he has no benefit of salvage. It is obvious that the defendant’s ship, in the course of the three years, might sustain many average losses, and he had a right to protect himself against them, notwithstanding the lender became an. insurer to the amount of the loan if she were totally lost. Besides, the ship might be worth much more than the sum for which she was hypothecated, and the owner and borrower might protect his interest in the surplus. Thorndike undertook to pay the defendant for the average losses, according to the forms of insurance at the office of the Salem Marine Insurance Company; and whatever sums should become due to the defendant on that account, were to be allowed and deducted from the sum loaned. This was a safe and convenient arrangement and evidently beneficial to the defendant.

. It is contended that the plaintiff has put it out of the power of the defendant to use the ship. This objection is raised from the fact, that the plaintiff caused the ship to be attached to secure about $ 400 due to the plaintiff upon a promissory note having no connexion with the matter now in controversy. But the inconvenience which the defendant suffered arose from his not paying his debt, and is not to be ascribed to the plaintiff. It is not analogous to the cases cited, where the lessor ousts his lessee and so deprives him of the estate, and yet would claim his rent. The defendant might have an interest in the ship much greater than the sum for which she was mortgaged, and it would be liable to attachment as any other property would be.

The penalty of the bond is adjudged to be forfeited, and the case will stand for a hearing in chancery. 
      
       See Brig Draco, 2 Sumner, 157; Rucher v. Conyngham, 2 Pet. Adm. Dec 295 and note; Wynne v. Crosthwaite, 4 Carr. & P. 178.