‘Bottomry’ in California

In California’s Harbors and Navigation Code, Division 3, Chapter 2 deals with civil actions and liens involving vessels. Chapter 1 deals with bottomry. Section 450 defines “bottomry” as a contract by which a vessel or its freightage is hypothecated as security for a loan, which is to be repaid only if the vessel survives a particular risk, voyage, or period.

Section 451 states that the owner of a vessel may hypothecate it or its freightage, upon bottomry, for any lawful purpose, and at any time and place.

Section 452 provides that the master of a vessel may hypothecate it upon bottomry only for the purpose of procuring repairs or supplies which are necessary for accomplishing the objects of the voyage, or for securing the safety of the vessel.

Section 453 specifies that the master of a vessel can hypothecate it upon bottomry only when he cannot otherwise relieve the necessities of the vessel, and is unable to reach adequate funds of the owner, or to obtain any funds upon the personal credit of the owner, and when previous communication with the owner is precluded by the urgent necessity of the case.

Section 454 says that the master of a vessel may hypothecate freightage upon bottomry, under the same circumstances as those which authorize an hypothecation of the vessel by him.

Section 455 provides that, upon a contract of bottomry, the parties may lawfully stipulate for a rate of interest higher than that allowed by the law upon other contracts.

Section 456 states that a lender upon a contract of bottomry, made by the master of a vessel, may enforce the contract, though the circumstances necessary to authorize the master to hypothecate the vessel did not in fact exist, if, after due diligence and inquiry, the lender had reasonable grounds to believe, and did in good faith believe, in the existence of such circumstances.

Section 457 says a stipulation in a contract of bottomry, imposing any liability for the loan independent of the maritime risks, is void.

Section 458 provides that, if there is a total loss of the thing hypothecated, from a risk to which the loan was subject, the lender upon bottomry can recover nothing; if a partial loss, he can recover only to the extent of the net value to the owner of the part saved.

Section 459 specifies that a bottomry loan becomes due immediately upon the termination of the risk, although a term of credit is specified in the contract.

Section 460 states that a bottomry lien is independent of possession, and is lost by omission to enforce it within a reasonable time.

Section 461 explains that a bottomry lien, if created out of a real or apparent necessity, in good faith, is preferred to every other lien or claim upon the same thing, excepting only a lien for seamen’s wages.

Section 462 provides that, of two or more bottomry liens on the same subject, the latter in date has preference, if created out of necessity.