Court Opinion

ID: 3622716
Source: CourtListenerOpinion
Date Created: 2016-07-06 00:04:09.457232+00
Date Added: 2024-06-11T13:44:20.485353
License: Public Domain

The main question in this case is, whether the agreement under which the loan was made to the plaintiff was usurious. If usurious, the judgment is right. The polices on which the defendant received the money from the insurance company were assigned, and the bill of sale of the brig was made and delivered to him in pursuance of such agreement as collateral security for the payment of the loans. In judgment of law, from the time the securities were thus received, they were held wrongfully by the defendant; and there is no pretense that his subsequent collection of the money due upon them was by the consent or even knowledge of the plaintiff.
The agreement was in writing, and in substance this: Hoppock, the defendant, was to advance $1,500 on the brig Sophia, loading in New York, and bound for San Francisco; and the plaintiff, Braynard, agreed to pay him for the use of *Page 572 
the money, twelve per cent commission, and interest at seven per cent per annum from date (May 16, 1850), until the said amount was paid to said Hoppock in New York. Braynard further agreed to transfer to Hoppock the policy of insurance on the brig, for $8,000; also the policy of insurance on the freight, and the bills of lading of cargo, together with a bill of sale of the vessel. The brig was to be consigned to Mr. Bidleman, in San Francisco, who was to collect her freight, charging the customary commissions at that place for doing the business. He was to remit to Hoppock from the proceeds of the vessels' account, the amount loaned and twelve per cent commission, and interest added until the funds could be placed in Hoppock's hands in New York, holding the balance subject to the order of Braynard. On receipt of the funds in New York, Hoppock was to return to Braynard the policy of insurance on the vessel and bill of sale. In case of the loss of the vessel, the insurance upon her was to be collected by Hoppock, and after paying himself the principal loaned and interest, and twelve per cent commission as agreed, the balance was to be paid to Braynard. In pursuance of this agreement, the loan of May, 1850, was made; and subsequently a further loan of $366, and Braynard assigned to Hoppock two policies of insurance on the vessel for $2,000 each, and a policy on the freight for $4,000, and also executed and delivered to him a bill of sale of the brig.
The transaction, then, was a loan of money with a charge of a premium for a loan largely in excess of legal interest. It was clearly usurious, unless of such a nature as to take it out of the statute. This is conceded; but it is claimed that the contract under which the loan was made, was in substance a bottomry bond upon the brig Sophia. In this I cannot concur. There is but a single expression to the contrary affording the slightest presumption that the parties themselves intended a bottomry, viz.: the advance is stated to be on the brig Sophia, now loading in New York and bound for San Francisco. But whether they so understood it or not, it is plain that that was not the nature or character of the transaction. Bottomry is a contract by which the owner of a *Page 573 
ship hypothecates or binds the ship as security for the repayment of money advanced for the use of the ship. It is defined by Marshall, to be a contract in the nature of a mortgage of a ship, on which the owner borrows money to enable him to fit out the ship, or to purchase a cargo for a voyage proposed, and he pledges the keel or bottom of the ship pars pro toto, as a security for the repayment; and it is stipulated if the ship should be lost in the course of the voyage, by any of the perils enumerated in the contract, the lender also shall lose his money; but if the ship should arrive in safety, then he shall receive back his principal and also the interest agreed upon, generally called marine interest. (2 Marshall on Insurance, 733.) An essential character of bottomry is, that the money lent is at the risk of the lender during the voyage, and that the repayment thereof depends on the event of the successful termination of the voyage. It is the very essence of the contract that the lender runs the risk of the voyage, and that both principal and interest be at hazard. If the vessel is lost at the time the money becomes payable, the lender cannot recover either principal or interest, and where her arrival in safety entitles him to repayment, he is confined to the security of the ship, and cannot enforce his claim personally against the owner beyond the value of the pledged fund which may come into his hands. It is no bottomry where the money is payable at all events, for the principal and extraordinary interest reserved is not put absolutely at hazard by the perils of the voyage. The lender must run the maritime risk to earn the maritime interest. If, by the terms of the contract, the owner binds himself personally to repay the loan, or there be collateral security for its absolute repayment, it is not a bottomry loan. Repayment does not depend upon the contingency of the safe arrival of the ship, but whether lost or not it is to be made, and there is no risk taken. Judge PETERS, in Fisher v. Conynham (2 Pet. Ad. Rep., 295), in enumerating what is essential to constitute a valid bottomry, says: "the sum loaned must be at a risk, and there must not be a personal responsibility, that is, the money must be advanced on the faith of the ship, and at the sole *Page 574 
risk of her loss or safety. It cannot be given as a double security, running along with a personal responsibility, the one excludes the other; the risk being solely confined to the ship, is the only justification allowed by the law of all commercial countries for the maritime interest.
Now look at this case in the light of these peculiar characteristics of a bottomry transaction. It seems to me there is no ground for considering the agreement a contract in the nature of bottomry, or the loan one on bottomry. The lender took no maritime risk. The principal and interest were never at hazard from any sea risk. The defendant's reimbursement of principal and interest was not dependent upon the hazard of any voyage, or the safe arrival of any vessel at any port. By the terms of the contract, lawful interest in addition to the commission specified was to be paid absolutely, and not upon any contingency, until the principal, interest and commission should be paid to the defendant in the city of New York. In addition to the individual liability of the borrower, and by the terms of the agreement, he assigned to the lender as collateral security for the loan, two policies of insurance on the brig, each for the sum of $2,000, and a policy of insurance on the freight for $4,000, and also gave him a bill of sale of the vessel. It is impossible to say this was a contract for a loan on bottomry, entitling the lender to marine interest. The lender took no risk whatever, and intended to take none.
I think the judgment should be affirmed.