ARTICLE III: ON HYPOTHEC (Mortgage)

1036. • Hypothec is a contract by which an immovable thing is bound to the creditor (the mortgagee), so that from it he can pay himself if the debtor (the mortgagor) has not paid.

This is the force of a hypothec, that the legal increase is to be paid each year to the creditor, and the principal at the stated time: but if this is neglected, he will be able to vindicate possession of the thing for himself, or to offer it for sale, with the order of judgment nevertheless observed. - Therefore a hypothec differs from a pledge in this, that by the former an immovable thing is bound to the creditor; by the latter a movable thing: besides, the thing pledged is handed over to the creditor, or, by consent of the parties, to some third party, to be possessed: but possession of the thing hypothecated is not handed over to the creditor, but only the right of vindicating possession, in the case in which the debt is not paid. The hypothec of Roman Law, which we have defined here, is indeed very similar, yet not plainly identical, to that which the English and Our people call "mortgage."

Hypothec is either conventional, or judicial, or legal (which also is called implicit or tacit), according as it exists from the mutual agreement of the parties, or from the sentence of a judge adjudicating the goods of the debtor to the creditor for payment of the debt, or by force of law alone. - Another is general, by which all the goods of the debtor (present and future) are bound; another special, by which some determined goods are bound to the creditor. Yet future goods, insofar as they would be "a mere expectancy on the part of an heir," cannot be objects of conventional hypothec, since they are nothing other than "a naked possibility."

The laws concerning hypothec are various in many of our States. In most of them the debtor has the right of redeeming the thing bound by hypothec if it is sold (right of redemption): if this right is precluded by the sentence of a judge, it is called "foreclosed." See Kent, Lect. LVIII.

A ship is sometimes handed over into hypothec (which contract is called "Bottomry"), money having been accepted by loan by that pact that it is to be repaid with an increase when the voyage has been happily completed; but the debtor is held neither for the money given by loan nor for the increase if it happens that it is sunk, or otherwise perishes. Merchandise with which the ship is loaded is also handed over into hypothec, with a similar condition added ("Respondentia"). A great increase is generally exacted which is called maritime, on account of the peril of the principal undertaken, 12 for 100, or more from the pact of the contracting parties; which clearly is licit, since the right to the principal is lost if anything adverse should happen. "Bottomry is 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 pledges the keel or bottom of the ship (partem pro toto) as a security for the repayment. It is moreover stipulated, that if the ship 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 the 'marine interest,' however this may exceed the legal rate of interest."

"Bottomry is a loan upon the ship, and respondentia upon the goods."¹