The Aurora/Opinion of the Court

by Joseph Story

Such are the material facts of the case, and the question to be decided is, whether, under all the circumstances, the bottomry bond executed at Calcutta constitutes a valid lien upon the ship.

The law in respect to maritime hypothecations is, in general, well settled. The master of the ship is the confidential servant or agent of the owners, and they are bound to the performance of all lawful contracts made by him, relative to the usual employment of the ship, and the repairs and other necessaries furnished for her use. This rule is established as well upon the implied assent of the owners, as with a view to the convenience of the commercial world. As, therefore, the master may contract for repairs and supplies, and thereby, indirectly, bind the owners to the value of the ship and freight, so, it is held that he may, for the like purposes, expressly pledge and hypothecate the ship and freight, and thereby create a direct lien on the same, for the security of the creditor. But the authority of the master is limited to objects connected with the voyage, and, if he transcend the prescribed limits, his acts become, in legal contemplation, mere nullities. Hence, to make a bottomry bond executed by the master a valid hypothecation of the ship, it must be shown by the creditor that the master acted within the scope of his authority; or, in other words, it must be shown that the advances were made for repairs and supplies necessary for effectuating the objects of the voyage, or the safety and security of the ship; and no presumption should arise, that such repairs and supplies could be procured upon any reasonable terms, with the credit of the owner, independent of such hypothecation. If, therefore, the master have sufficient funds of the owner, within his control, or can procure them upon the general credit of the owner, he is not at liberty to subject the ship to the expensive and disadvantageous lien of an hypothecatory instrument.

Let us now, with these principles in view, proceed to the consideration of the validity of the bottomry bond executed at Port Jackson, which enters so materially into the subsequent one executed at Calcutta. This bond purports, on its face, to have been given for advances, or supplies, furnished for the ship's use, not immediately before its date, but at various times and places; and, from the other evidence in the case, it distinctly appears that the greater part was furnished before and during the voyage of discovery in which she was engaged, under the contract with Messrs. Lord & Williams, and for their immediate benefit. Not the slightest account is given of the earnings of the ship during this long voyage of a year, nor of the terms or stipulations of the charter. This silence would be wholly unaccountable if it were not in proof, that captain Smith was guilty of the most shameful misconduct, and either fraudulently sacrificed, or grossly neglected, the interests of his owner.

The advances made by Messrs. Lord & Williams do not appear to have been originally made upon a stipulation for an hypothecation of the ship. On the contrary, there is the strongest reason to believe that they were originally made upon the general credit of the owner, or master, or both. If there had been a stipulation for an hypothecation, it must have been carried into effect by the parties on the next ensuing voyage; and, as this was not done, there arises an almost irresistible presumption, that Messrs. Lord & Williams looked for their reimbursements out of the freight of the voyage in which the ship was then engaged by them. If, indeed, there had been a stipulation, originally, for an hypothecation, it must be deemed, in point, of law, to have been waived by the omission to have had it attached to the first voyage then next to be prosecuted; and the party who thus waives his right cannot be permitted, at a subsequent time, and under a change of circumstances, to reinstate himself in his former condition to the injury of the owner. It is said that the ship might have been arrested for these advances; and that, in point of fact, the captain was put in jail on account of debts contracted for the ship, and was relieved from imprisonment by Messrs. Lord & Williams. That captain Smith was imprisoned on account of some debts appears in the evidence, but it is by no means clear that these debts were contracted for the use of the ship. The presumption is repelled by the consideration that the necessaries and supplies are expressly stated in the bond to have been furnished by Messrs. Lord & Williams; and the only other creditors who are alleged to have furnished stores, are admitted not to have instituted any suits. It is undoubtedly true, that material men, and others, who furnish supplies to a foreign ship, have a lien on the ship, and may proceed in the admiralty to enforce that right. And it must be admitted that, in such a case, a bona fide creditor, who advances his money to relieve the ship from an actual arrest on account of such debts, may stipulate for a bottomry interest, and the necessity of the occasion will justify the master in giving it, if he have no other sufficient funds, or credit, to redeem the ship from such arrest. But it would be too much to hold, as was contended for by the counsel for the appellants, that a mere threat to arrest the ship, for a pre-existing debt, would be a sufficient necessity to justify the master in giving a bottomry interest, since it might be an idle threat, which the creditor might never enforce; and until enforced the peril would not act upon the ship itself. And even supposing a just debt might, in such a case, be a valid consideration to sustain a bottomry interest in favour of a third person, such an effect never could be attributed to a debt manifestly founded in fraud or injustice. Nor does it by any means follow, because a debt sought to be enforced by an arrest of the ship, might uphold an hypothecation in favour of a third person, that a general creditor would be entitled to acquire a like interest. It would seems against the policy of the law to permit a party, in this manner, to obtain advantages from his contract for which he had not originally stipulated. It would hold out temptations to fraud and imposition, and enable creditors to practise gross oppressions, against which even the vigilance and good faith of an intelligent master might not always be a sufficient safeguard in a foreign country.

These are not the only difficulties which press upon the claim of Messrs. Lord & Williams. The terms of the charter-party, entered into by them on the voyage to Calcutta, as well as on the voyage of discovery, are nowhere explained. It was certainly their duty, in the first instance, to apply the freight in their hands, earned in these voyages, to the discharge of the debt due to them for advances. What was the amount of this freight, and what was the manner in which it was to be paid, and how, in fact, it was paid or appropriated, are inquiries which have never been answered. These inquiries are at all times, and in all cases, important, but are emphatically so in a case where there is but too much reason to suspect that the interests of the owner were wilfully abandoned by the fraud or the folly of the master.

It is incumbent upon the creditor who claims an hypothecation, to prove the actual existence of the necessity of those things which give rise to his demand; and if, from his own showing, or otherwise, it appears that he has had funds of the owners in his possession which might have been applied to the demand, and he has neglected or refused so to do, he must fail in his claim. So, if various demands are mixed up in his bond, some of which would sustain an hypothecation and some not, it is his duty so to exhibit them to the court that they may be separately weighed and considered. And it would be perilous indeed, if a court were called upon to grope its way through the darkness and intricacies of a long account, without a guide, and decide upon the interests of the ship owner by obscure and doubtful lights which here and there might cross the path.

Upon the whole, it is the opinion of the court, that the bottomry bond of Messrs. Lord & Williams cannot be sustained as a valid hypothecation upon the proofs now before the court. It appears to have been founded, to a very large amount, upon advances made by Messrs. Lord & Williams, in previous voyages; and if some portion of the debt might have been immediately applicable to the necessities of the ship at the time of the voyage to Calcutta, that portion is not distinctly shown, and no reason as yet appears why the freight in their hands, if the transactions were bona fide, might not have been applied in discharge of these necessities.

As the bottomry bond of Messrs. Lord & Williams has not been established, the subsequent bottomry bond executed at Calcutta, so far as it includes and covers the sum due on the first bond, cannot be sustained. The plaintiffs, in this respect, can claim only as the virtual assignees of Messrs. Lord & Williams, with the assent of the master, and the same defects which infected the original title pass along with the muniments of that title under the assignment.

And this observation leads to the consideration of the validity of the bottomry bond executed at Calcutta, as to the sum remaining, after deducting the amount of the first bond. Notwithstanding some obscurity in the testimony, it must be taken as true, from the express acknowledgments of captain Smith, that the whole sum expended in repairs and supplies of the ship in Calcutta, including the sum of ten thousand seven hundred and thirteen sicca rupees, paid on account of the first bottomry bond, did not exceed the sum of eighteen thousand sicca rupees. It follows, therefore, that a sum, a little more than six thousand rupees, was expended in these supplies and repairs. By their charter-party with the master, the plaintiffs agreed to pay an advance freight to captain Smith of twelve thousand sicca rupees for the voyage to Philadelphia. There was, therefore, within their own knowledge, an ample fund provided for all the repairs and supplies necessary for the voyage; and this fund absolutely within their own control, if they were disposed to act for the interest of the owners, instead of lending their aid still farther to involve them in difficulty and distress. There is, therefore, but too much reason to believe, that the plaintiffs were not unwilling to derive undue advantages from the intemperance and negligence of the master, whatever might be the sacrifices brought upon the owners. The plaintiffs expressly stipulated, in their charter-party, for the right to appoint a new master for the voyage, obviously from a total want of confidence in captain Smith. They would not even suffer the repairs and loading of the ship to be made, except under a master specially in their own confidence. They retained captain Smith in the nominal command of the ship until all their own purposes were answered, and then discarded him with as little ceremony as any indifferent personage. Yet, at the very moment that they were withdrawing their whole confidence from him, the advanced the whole freight of the voyage, to be applied at his own pleasure to any objects disconnected with the voyage. They could not be ignorant that the master was not about to return to the home of the owner, and that the ship was; and the argument which imputes to them a collusive combination with the master, is certainly not without considerable weight. At all events, here funds are shown to exist sufficient to meet the necessities of the ship, and, consequently, a resort to the extraordinary expedient of an hypothecation was not justified in point of law.

On the whole, it is the opinion of the court, that the decree of the circuit court ought to be affirmed, with costs.

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