carriers who are public service companies.—common carriers—that is, railroads, express companies, and other persons or corporations who carry goods for hire and hold themselves out to the public as engaged in the business of carrying goods for anybody for hire—are engaged in a public service. a man who owns a tramp steamer and gets cargoes as he can, is not engaged in a public service—he is not a common carrier or public carrier; but a person who has a line of steamers, or even one steamer, regularly engaged in plying between different places and taking goods as offered for hire, is engaged in public service.

duties of one engaged in public service.—now, being engaged in public service subjects a person or corporation who is so engaged to some special duties. such a person cannot make any bargain he pleases with anybody he pleases, and refuse to make bargains with others, as an ordinary person can. it is the duty of any one engaged in a public service to give reasonable service to all who apply, without discrimination, and for reasonable compensation. of course, carriers are not the only public-service corporations; electric light companies or gas companies or water companies are other illustrations; but common carriers, and especially railroads, are the most prominent public-service corporations.[pg 345]

railroad commissions.—not only is there this common-law duty to serve all without discrimination and at reasonable prices, but both the states and the united states have established commissions to look after railroads and other carriers to see that they properly perform their duties. the railroad or public service commission in most states has a great variety of powers for compelling railroads to give proper service. the chief function of the federal interstate commerce commission originally, was in regard to rates, but its powers have since been enlarged by legislation. the interstate commerce commission has the power concerning interstate commerce to say whether rates and practices are reasonable. a carrier is obliged to file with the interstate commerce commission a schedule of its rates, and regulations concerning rates, and is also required to post these rates publicly in its stations. if anybody objects to the rates they must make complaint before the interstate commerce commission. that is the only form of redress, and sometimes not an easy one for a person who is merely interested in a single shipment, because the expense and delay of proceedings before the interstate commerce commission are such as to be prohibitive, unless the complainant's financial interest in the matter is considerable. it is common, therefore, for shippers' associations to take that sort of question up rather than to leave it for individual shippers. any contract made by a carrier for either more or less than the scheduled rate is illegal and void.[pg 346]

carrier's common-law liability for goods.—a carrier, at common law, when he receives goods for transportation, is subject to a degree of liability beyond that imposed on any other person. an ordinary person who receives goods—a bailee, as he is called in law—is merely liable for the consequences of his negligence. a carrier, however, while goods are in course of transportation is liable, at common law, as an insurer against all kinds of accidents except those caused by act of god or public enemies. for instance, if goods were struck by lightning in transit that would be an act of god, and the carrier would not be liable; but if goods caught fire from any other cause, as from neglect of an outsider or the act of an incendiary, the carrier would be liable. carriers, of course, dislike that and try to contract away their liability. they are allowed by law to do so, except that they are not allowed to contract for exemption from the consequences of their own negligence. it is largely this desire of carriers to free themselves from the extreme liability which the common law imposes on them, that induces them to give bills of lading. bills of lading are often required by law, but carriers are pleased to issue them, as they can in that way contract to exempt themselves from this extreme liability, which lasts while the goods are in transit and until the consignee has had a reasonable time to remove them from the carrier's possession. if the consignee fails to remove them with reasonable promptness the carrier then becomes liable, merely as a warehouseman[pg 347] may, for its own neglect. the extreme liability of the carrier does not extend to damage caused by delay. the carrier is liable for delays in so far as they are caused by its own neglect, but otherwise is not liable. a carrier need not deliver the goods unless freight is paid, as it has a lien for freight charges.

threefold nature of bill of lading.—a bill of lading issued by a carrier for goods has a threefold character. in the first place it is a receipt. the importance of a receipt is as evidence of just what was shipped. it is important to the shipper as proof that the carrier received goods, of such a quantity and of such a description, in good order. it is important to the carrier as proof of the same thing, to prevent the shipper from claiming that he has shipped different kinds or quantities of goods from those described in the bill of lading. the second aspect of a bill of lading is as a contract. it is not only a receipt but a contract between the parties, the shipper and the carrier. it is as a contract that the stipulations it contains for limitation, of liability are important. third, it is an order, when properly indorsed and surrendered, for the delivery of the goods.

carriers can deliver goods only to holders of order bills of lading.—the thing that makes a bill of lading valuable, to buy or lend money on, is the fact that the carrier will hold the goods behind the bill of lading until the bill is itself presented and surrendered. if the carrier were to deliver the goods upon demand to anybody[pg 348] other than the holder of the bill of lading, it is obvious that there would not be much use in holding the bill of lading. the carriers have made a great contest on this question in the past. they have contended that they fulfill their duty if they deliver the goods to the consignee originally named in the bill of lading, whether that consignee continues to hold the documents or not. but that has been decided against them so far as order bills are concerned (that is, bills, which state that the goods are deliverable not simply to a consignee but to the order of a consignee) and these order bills have printed on them the provision that the bill itself must be surrendered before the goods will be delivered.

carriers may deliver to consignee of straight bills of lading.—in a straight or flat bill, however (that is, one without the word "order") the carrier's contention has been upheld and the carrier is allowed to deliver the goods to the consignee, even though the consignee does not present the bill of lading and for all the carrier knows is not the owner of the bill of lading or of the goods.

bills of lading used to enable seller to retain hold on goods.—the ways in which bills of lading may be used, and are used, in the mercantile world, must be understood before the legal questions which arise, concerning them, can be grasped. the primary and original purpose of using bills of lading as symbols of the goods, was doubtless to secure the seller in his hold on the goods until he received the price, and that is still a[pg 349] vital purpose in the use of bills of lading. we have learned, in the case of the sale of goods, that unless credit is given, the delivery of the goods and the payment of the price are concurrent conditions. now, when the parties reside at a distance there is difficulty in working out these concurrent conditions. if the seller ships the goods directly to the buyer, he loses his hold on the goods, and if the buyer does not keep his agreement to pay promptly, the seller will be unable to do anything about it. on the other hand, of course, the buyer does not want to pay in advance. now, by means of bills of lading, the seller is enabled to keep his hold on the goods until he receives the price, and the buyer is enabled to secure possession of the goods as soon as he pays the price.

straight bills to buyer give the seller no hold on goods.—the bill of lading may be used in various ways. suppose, first, the seller when he ships the goods takes a straight bill to the buyer. that will not give the seller any hold, for the carrier will be discharged if without demanding the surrender of the bill of lading, he delivers to the consignee named. so we may cross off that as a possible means of protecting the seller.

straight bills to the seller.—the second possibility is for the seller to take a straight bill, naming himself as consignee as well as consigner. if that is done the buyer cannot get the goods at once. suppose the bill of lading was sent forward, even that would not of itself enable the buyer to get the goods, if the carrier wished to be technical, since in a straight[pg 350] bill the goods are deliverable not to the holder of the bill, but to the consignee named therein. there would have to be attached to the bill of lading an order from the seller, who is named as consignee in the bill, directing the railroad to deliver the goods to the buyer instead of to himself, the consignee named in the bill. that would be a perfectly feasible matter, but this method is not much used, and one reason why it is not much used is because the seller frequently wants to do something else besides keep control of the goods until the buyer pays for them. he oftentimes wants to get money from a bank in the meantime.

use of bills of lading by seller to obtain loans.—when the seller is desirous of borrowing money from a bank, he takes the bill of lading to the bank with a bill of exchange drawn on the buyer, and he asks the bank at his home town to discount the bill of exchange, taking as security the bill of lading. if his home bank does this, it then sends the draft, with bill of lading attached, to its correspondent bank in the buyer's city, where the draft is presented to the drawee, who is the buyer, and if the buyer honors the draft then he is given the bill of lading. now, banks would not do this, ought not to do it (occasionally they have), with a straight bill, even if the bill is drawn naming the seller as consignee, for the bank when it discounts the bill of exchange and gets the bill of lading as security gets no real hold on the goods. the railroad may deliver the goods to the consignee—the seller—without ever seeing the bill of lading, and without the bank, which[pg 351] holds the bill of lading, ever knowing anything about it; or the railroad may deliver to the buyer or some third person on a written order signed by the consignee. in other words, the railroad does not have to hold the goods until the bill of lading, properly indorsed, is presented to it.

straight bills of lading give no security to bank.—the first and fundamental requirement, then, for any bank which may deal with bills of lading is never to have anything to do with straight bills. they give no security. a straight bill is readily distinguishable from an order bill on railroads in most parts of the country, at least, because uniform bills of lading are now in use, and the straight bill is always white and the order bill is always yellow. in foreign bills a greater variety of forms are used, and you may have to examine the terms of the bill before you can feel satisfied that it is of a sort that will give security. the vital words in bills of lading, as in negotiable paper, are the words, "order of" or "or order." if those are in a bill of lading it is all right as far as this matter is concerned. therefore the third and fourth possible ways in which the seller may take the bill of lading to secure himself are the only ones which will enable him to finance the shipment at once.

bills of lading to buyer's order.—the third way which the seller may act in order to fulfill his purpose is to take an order bill of lading to the buyer's order. although the bill of lading runs to the buyer's order, and although, therefore, title to[pg 352] the goods will pass to the buyer on shipment, the buyer cannot get the goods without that bill of lading. therefore, so long as the seller retains the bill of lading nobody can get the goods from the carrier; and though the seller has parted with title to the goods, since he made the bill of lading run to the buyer's order, still he has retained control of them. though it gives a security to the seller, and would give security to the bank, if the bank discounted a bill of exchange drawn on the buyer and took this bill of lading as security, it is not a desirable method for this reason: though the buyer cannot get the goods without the bill of lading, nobody else can get the goods without a lot of trouble, unless he has not only the bill of lading but the buyer's indorsement upon it. the bill of lading is drawn to the buyer's order, and if the buyer fails to pay and repudiates his contract, the bank or the seller will have trouble in getting back the goods. they will have to prove to the railroad that the buyer really has made default and that he no longer has any real interest in the goods.

bills of lading to the seller's order.—accordingly, it is the fourth method which is in general use and which should be exclusively used. the seller takes the bill of lading to his own order and indorses it in blank; then he delivers it to his bank as security for a bill of exchange. if the bill of exchange is paid by the drawee on presentment at his city, he is given the bill of lading at once and he gets what he wants. on the other hand, if the buyer does not pay the draft on presentment, then the bank[pg 353] can realize on the security at once, if it wants to, because it has a bill of lading in its hands indorsed by the consignee to whose order it was drawn. if the bank proceeds against the seller as the drawer of the draft, when the latter pays and takes up the bill of lading he can similarly realize on the security, or get the goods back, because he will have a bill of lading in his possession which runs to his own order.

bills of lading to "order notify."—a slight modification of this form of bill of lading is made in order to let the buyer know when the goods arrive. when goods arrive at their destination it is a customary courtesy of railroads to notify the consignee; but if goods are consigned to the seller's order, the man who is really trying to buy the goods gets no notice, as his name does not appear on the bill of lading. to avoid that difficulty there is generally put on bills of lading, taken out to the seller's order when the goods are shipped in fulfillment of some contract or order, the words, "notify x y," x y being the prospective buyer of the goods. then when the goods arrive the railroad notifies x y; he learns the goods are there and makes his plans accordingly. these bills of lading are often called "bills to order notify." the person who is to be notified is sometimes incorrectly called the consignee of the bill. the consignee is the person to whom the goods are deliverable, not the person who is to be notified necessarily; and where a bill is to the seller's order the goods are, by the terms of the bill of lading, deliverable to the seller and he is the consignee.[pg 354]

crops are moved by use of bills of lading.—the various uses of bills of lading by sellers in order to insure concurrent payment by the buyer, and in order, with the aid of banks, to put themselves in funds while the goods are in transit, is a very important function of bills of lading. it is by such means the great crops of the country are moved, especially the cotton crop, which is moved almost wholly in this manner. the southern banks discount bills of exchange, which are customarily secured by bills of lading. the new york banks rediscount these bills of exchange and draw for a great part of the price of the cotton on english bankers. this use by sellers of bills of lading, however, is not the only mercantile use of bills of lading.

bills of lading to banker's order.—here is another method used, especially common in foreign commerce. a merchant in boston wants to buy a cargo of goods from europe, but he has not the money to do it. the seller in europe does not know him and will not give him credit, so the merchant goes to bankers who have available foreign correspondents and states his case, and if he is in good credit with the bankers they say, "order the goods from the man in germany of whom you were planning to order them, and tell him to make the bill of lading out to us, and draw on us or on our correspondents in berlin or london or paris. on receipt of those bills of lading naming us as consignee we will pay, or cause to be paid, the bills of exchange attached thereto for the price." in this way the goods are shipped directly to[pg 355] the banker. in the cases mentioned before, the banker took an indorsed bill of lading, but in this mode of dealing the banker is himself the consignee, and on the faith of the consignment he pays the price of the goods. then he delivers the bill of lading, indorsed, to the buyer, his customer, on the buyer's making a settlement or giving him security.

surrender of bills of lading for trust receipts.—there is one method of doing business in this connection which causes some risk to the bankers who engage in it. they frequently allow their customer, the buyer, to take the bill of lading, indorsed, for the purpose of entering the goods at the custom house, or warehousing them, or even for the purpose of selling the goods, so that the buyer will be in funds to enable him to discharge his debt to the banker. the banker takes, when he does this, from the buyer to whom he delivers the indorsed bill of lading, what are called "trust receipts." these receipts state that the buyer has taken these bills of lading, that he holds them as a trustee, that they really belong to the banker, and that the buyer holds them simply for a special purpose, such as to enter them at the custom house or to resell them and turn the proceeds over to the banker. if the buyer is honest, well and good; but if he should be financially pressed and dispose of that bill of lading, many courts, at least, would not protect the banker, but would protect the bona fide purchaser. what the banker ought to do is to stamp upon the bill of lading, if he delivers it to the buyer, that a trust receipt has been issued[pg 356] for certain specified purposes. in that case any purchaser of the bill of lading would have notice of the terms of the trust.

change of routing.—an analogous problem also may be supposed. a bank holds a draft for collection with bill of lading attached. it sometimes allows the drawee to take possession of the bill of lading and change the routing of the car. that is done because the buyer sometimes sells the goods before he receives them, and to save additional freight bills, he changes the routing on the original bills of lading. what risk does the bank run if it allows him to have possession of the bill of lading indorsed in blank? it runs the same risk as in case of trust receipts. the fact that the purpose was to change the routing of the goods is apparently immaterial. the change of destination does not do the bank any actual harm, except that the goods will be sent elsewhere, and perhaps to a point some distance from their original destination. the great risk involved is in allowing a man to have possession of a document which in effect is negotiable. if the bank does not get back its bill of lading it is in a bad position. if it did get back its bill of lading it would still have its security, only it would be subject to this difficulty, that the goods instead of coming to a place where the bank could conveniently get at them, have perhaps gone to a distant city, where it would be more trouble. if, however, changing the routing and the reselling involve a surrender of the old bill to the railroad and the issuing of a new bill of lading not only on a new[pg 357] route but with the purchaser from the consignee named as a new consignee, then the bank has thrown away everything, unless it actually obtains possession of the new bill, and even if it does it has only an inferior security.

accommodation bills.—let us now enumerate the risks which a purchaser or a lender runs in dealing with bills of lading, even with order bills, and consider how these risks can be obviated and how far they are inherent in the nature of the business. the first risk is that the bill may have no goods behind it, because it was originally issued without any goods. it has been quite a common practice, at some points where there is competition for freight, to accommodate customers by issuing a bill of lading for goods before the goods were received. suppose a seller in chicago deals with a man in boston; what the seller normally ought to do is to buy goods, and ship them, getting a bill of lading, then take the bill of lading to a bank and get money on the faith of that bill of lading. you will see that that method requires the seller to have had money or credit in the first place, in order to buy those goods to ship. it would be very much more convenient for him if he could reverse the order and get the money from the bank first, then buy the goods and then ship them; and the kindness of the railroad agent frequently has enabled him to do that. the railroad agent, trusting to the seller's word that he will ship goods to-morrow, issues a bill of lading to him for the goods which the seller promises to ship. the seller dashes around to[pg 358] the bank, gets money and then buys the goods and ships them. he may carry on business in that way for a long time; no trouble occurs, nobody knows anything about it until the seller either goes bankrupt or becomes dishonest and fails to ship the goods after he has got the bill of lading, and then somebody finds himself with a bill of lading for which no goods have ever been received. such bills have been called "accommodation" bills of lading, issued by the railroad for the accommodation of the shipper.

fictitious bills of lading.—in some cases the whole transaction is a fraud. in the case we have thus far been supposing, the railroad agent believed the seller was going to ship goods, and the seller intended to do so, only he wanted the bill of lading first; but money is so easily obtained, frequently, on bills of lading, that sometimes a shipper and a railroad agent put their heads together and say, "let's make a few bills of lading," and as a pure fraud the agent writes bills of lading. these may be called fictitious bills. they are not exactly forgeries, you will see, since they are drawn by the regular agent of the railroad on the regular railroad form. one who took such a bill as this, however, would be protected if the carrier were liable. railroads are generally, and other carriers are generally, financially responsible, and therefore the great question that interests the holder of such a bill is, are the railroads liable in damages because no goods are behind the bill of lading? it was held in an english case, seventy-five years ago, that in such a case the carrier was not liable[pg 359] on the ground that the agent who wrote the bill was acting beyond the scope of his authority in signing a bill of lading when no goods had been received. that decision has been much criticized, and justly criticized, because the carrier has put that agent in a position to determine when bills of lading shall be issued and when not. of course, the agent ought to exercise his choice properly, but if the carrier has given him the power it ought to be responsible for the results. nevertheless, in a majority of the states of this country, and in the supreme court of the united states, the english case has been followed; and the carrier would be liable neither on an accommodation bill nor a fictitious bill where no goods were shipped. there have been some attempts to change this rule by statutes, and in some states there is a statute, the uniform bill of lading act, so called, which provides among other things that the carrier shall be liable in the case supposed; but the trouble is that bills of lading dealt with in one state will not generally originate in that state. if a fictitious bill was issued in chicago, although the bill named as a consignee a person in boston, and was bought by a boston bank, the liability of the carrier on that bill of lading would be determined by the law of illinois. so, unless you have a satisfactory law where the bill originates, you will not be protected. fortunately, the same statute has been passed in several states, and it is hoped that it will be in more. this, then, is the first risk, and the only way of obviating it is to have the law in satisfactory shape, passing a statute wherever it is necessary,[pg 360] so as to make the carrier liable for the wrongful act of its agent in issuing a bill of lading when no goods have been received.

goods behind bill of lading inferior in kind or quality.—the second difficulty is somewhat analogous to the first. suppose there are some goods behind the bill of lading but they are not of the quantity, quality or kind that the bill of lading specifies. this is a difficulty that cannot very well be wholly obviated. we may suppose that the goods originally were of defective quality and kind, or that they became so. suppose, first, that a number of barrels of sand are delivered to a railroad and they are marked barrels of sugar, and the carrier issues a bill of lading for so many barrels of sugar. now, the purchaser of the bill of lading finds, when he comes to realize on his security, that he has got barrels of sand with a freight bill against them for more than they are worth. what can he do? of course, he has a right of action against the fraudulent shipper, but perhaps the shipper has run away or is irresponsible. is the carrier liable here? the answer to this is, no. in the first place, the bill of lading says, "contents and condition of contents unknown," so that the carrier has expressly guarded against promising that the barrels really contained sugar. and even aside from this clause, it has been held that the carrier is not liable for such a concealed defect. if, however, it was apparent when the carrier received the goods that they were not of the kind or quality named, then the carrier would be liable if it issued[pg 361] a bill of lading without specifying the difficulty. thus, if the bill of lading called for 100 barrels of sugar and there were 95, the carrier would be liable for the missing five. it has admitted it received 100, and has promised to deliver 100; it must do so or be liable.

shipper's load and count.—there is an exception to this last statement, however, in regard to one class of bills which are very common in some lines of trade; these are "shipper's load and count" bills. in many cases railroads build spur tracks to factories and run empty cars up to the factories, where the shipper loads the cars and himself writes out the bill of lading. an enormous fraction of the business of the country, consisting of the large shipments from factories, at any rate, is done in this way. the railroad agent simply signs a bill of lading as it is presented to him by the shipper who has made out the whole bill except the signature, and has loaded the car, the railroad agent seeing nothing of it. the railroad agent stamps across such a bill of lading, "shipper's load and count." that means, "the shipper loaded this car and counted the contents. we are not responsible, therefore, for the loading or the counting." the second great principle, in regard to lending money on bills of lading, is never to touch a shipper's load and count bill which obviously has not the responsibility of the carrier. you would have to rely wholly on the honesty of the shipper. the railroads, seeing that they are freed from liability on this form of bill, have sometimes, in some parts of the[pg 362] country, thought it would be a good thing to stamp every bill, "shipper's load and count." that is an injury to the shipper, because the banks do not like to take such bills of lading, and yet not infrequently he cannot do much about it. in fruit shipments from california that sort of thing has been very common.

destruction of goods in transit.—so much for defects arising at the time of shipment; but one may also have difficulties which arise after the shipment. suppose the goods are absolutely destroyed in transit by any of a variety of causes. the owner of the bill of lading necessarily loses his security, unless under the bill the carrier is responsible for that particular kind of loss. but it may happen that the carrier is not responsible for that particular kind of loss. one may protect himself here, perhaps, by insurance of some kind. that would be the way to obviate this sort of risk, but if complete protection against this kind of risk is desired, the insurance ought to be not only against fire but against destruction, or really against deterioration in any form. of course, goods which are likely to depreciate in transit are not as good security as goods which are more durable. a cargo of bananas is not as good security as a cargo of grain.

lack of title in shipper.—a third risk, which any one who takes a bill of lading runs, is lack of title to the goods in the shipper. suppose the shipper stole the goods and brought them to the carrier and demanded and received an order bill of lading. that looks like as good a bill of lading as any, and the[pg 363] goods may be all right, but the holder of the bill of lading cannot keep the goods. they still belong to the original owner from whom the shipper stole them.

spent bills.—a fourth risk is that the bill of lading may be a "spent bill," as it is called. a spent bill is one where the goods have been delivered by the carrier at destination, but the bill of lading has not been taken up. a bill of lading is unlike a note in this respect—it has no date of maturity. when you buy a promissory note you can guess whether it has been dishonored or not, by whether the time for performance has come or not; but if a bill of lading for a cargo of goods is offered to you, you have no means of telling whether the cargo arrived the day before or whether the goods have been removed. of course, the carrier ought to take up an order bill of lading when the goods are delivered, and in the uniform bills of lading act that requirement is made, and the carrier is made liable on the bill if it is left outstanding and is purchased by a bona fide purchaser for value, who supposes that the goods are still in transit. this trouble with spent bills is not so likely to arise as a corresponding difficulty with what may be called "partially spent bills." it is not uncommon for partial delivery to be made and the bill of lading still left in the hands of the holder. commonly, when all the goods are delivered, the bill of lading is taken up, but when part is delivered the carrier does not feel justified, and indeed is not justified, in demanding the surrender of the bill. what ought to be done, of course, is to indorse on the bill of lading the fact that part of[pg 364] the goods has been delivered, with a specification of the part. this also is required by the bill of lading statute, and a carrier is made liable for failure to indorse on a bill of lading the fact that part of the goods described therein has been delivered.

lack of title to bills of lading.—a fifth risk, which one who buys or lends money on bills of lading runs, is the chance that the person from whom he takes a bill of lading may not have title to it. this risk is the same that one runs in regard to negotiable paper. if an indorsement is forged, or if for any reason the holder of a bill of lading—or for that matter of a bill of exchange—cannot give a good title to it, one who purchases from him will not get a good title.

meaning of negotiability.—the extent of this risk depends somewhat on the degree of negotiability which is given to bills of lading, and requires an understanding of what negotiability means. ordinarily, one who buys a contract right gets no better right than has the person from whom he buys it. on the other hand, though one who buys chattel property capable of delivery, like a horse or a book, does not get title if the person who sold it to him had no legal title, yet a purchaser does get a good title to such property if he buys, in good faith and for value, from a person who has legal title though not an equitable title. you will see this best by an illustration. if a fraudulent person has a contract right assigned to him by fraud, and then sells the contract right to a bona fide purchaser, the bona fide purchaser[pg 365] gets no greater right than the fraudulent person has; in other words, he cannot collect on the claim which he has obtained. on the other hand, if a fraudulent person has assigned to him, by fraud, a horse or a book, the legal title to which was in the assignor, he has acquired the legal title, and though he is subject to an equity, as the phrase is, and the horse or the book could be taken away from him by the defrauded person, if he could act quickly enough, yet a purchaser for value, without notice of fraud, will get an indefeasible legal and equitable title to the horse or the book.

negotiable paper—like bills of exchange and promissory notes—is subject to the same rule as the horse or book, and is not subject to the same rule as ordinary contract rights; that is, a purchaser in good faith of an order bill of lading from a vendor having legal title thereto, will get title to it and to the goods behind it, in spite of the fact that the person from whom the bill of lading was bought had obtained title by fraud, and could have had the bill of lading, or the goods behind it, taken away from him by the person defrauded.

another feature of negotiability is that the terms of the instrument, on the face and back, are regarded as definitely showing the title. if the instrument is made to a's order, a has power by indorsement to give a good title, whatever may have been the reason the instrument was made payable to a, and even though it was agreed by the original parties that a should be merely an agent and have no title or right[pg 366] to transfer. if the instrument is made out on its face to bearer, or is indorsed in blank by the person to whom it is made out on the face, anyone acting in good faith may treat the holder as the owner and acquire a good title from him, though in fact the holder may not have had a good title. under the uniform bills of lading act, and under some other local statutes, bills of lading running to order are given full negotiability, but in many states they are only partially negotiable.

indorsement of bills of lading.—order bills of lading need, for their negotiation, indorsement by the consignee, just as a promissory note needs indorsement by the payee. but there is one difference between the indorsement of a bill of lading, it may be said in passing, and the indorsement of a promissory note. the indorser of a bill of lading incurs no liability by his indorsement. his indorsement is simply a transfer. if it turns out that the bill of lading is not honored by the carrier, the holder of an indorsed bill of lading cannot come back on the indorser in the way that the holder of a promissory note can come back on the indorser if the maker fails to pay.

forged bills of lading.—one final risk in regard to bills of lading is that the bill of lading may be forged or altered, and this has in practice proved the most serious risk of all. there have been, in times past, several sets of frauds created by forged bills of lading. one of the largest is known as the knight-yancey frauds which originated in alabama. a cotton firm named knight, yancey & co. forged a[pg 367] quantity of bills of lading and obtained a very large amount of money from banks. a circumstance that renders forgery easier in the case of bills of lading than in the case of any other valuable document, such as a check or a stock certificate, is the carelessness with which bills of lading have been made out. it is really incredible, the carelessness with which this has been done. documents which represent a value of many thousands of dollars are scribbled hastily, in pencil sometimes, on forms that are accessible to anybody. the forgeries that have taken place have called attention to this evil, and at the present time there is more care exercised in making out order bills than was the case a few years ago; but even to-day an order bill of lading is made out with no special precautions against forgery. the forms can be obtained at any railroad station, and it is simply a question of copying writing, no devices of perforating or serial numbers or things of that sort being ordinarily used.

devices to prevent forgery.—in order to meet this risk several devices have been suggested. one which has been urged upon congress is to pay the railroads a special small fee for issuing order bills with the precautions that a stock certificate is issued. the railroad would take the blank from a numbered book and would punch and stamp it in such ways and with such countersigning that it would be very difficult to forge. that method has not found much favor with shippers because they dislike the extra expense. they get their order bills of lading for nothing now, and they want to continue to do so.[pg 368] another project is to make some sort of central clearing house to which shall be reported all order bills of lading as they are issued, so that it will be known whether there is outstanding a document corresponding to one that is offered to a bank for security. this method is to some extent in use.

alteration of bills of lading.—alteration of a genuine bill may be as damaging as the out and out forgery of a new one. this case occurred in maryland some years ago: a man who had always been in good repute had a line of credit at the bank, where he kept, as security, bills of lading. he was allowed to change these as he wanted to, putting in sufficient collateral always to cover what he took out. the railroad and steamboat lines with which he did business neglected in some instances to take up the bills of lading which he presented for shipments. they habitually did not take up the straight bills, and that is not required by law, and sometimes they did not take up the order bills. when this man got hard pressed he took some old order bills, which he still had in his possession, and changed the dates; then he took some straight bills which he had in his possession and changed the date of those, and also added the words "or order" to the name of himself as consignee. then, after indorsing those they looked good. he took those altered bills to his bank and substituted them for genuine bills, and when the fraud was found out the bank found itself with about $100,000 of altered bills of lading. the carrier was held liable on the order bills, even though they had been altered,[pg 369] because it should have taken them up, but on the straight bills, which were a great part of the whole, the bank lost. of course, they were still legally straight bills, although the holder had written "or order" on them. that fraud led to one protection being made in the uniform bill of lading recommended by the interstate commerce commission. the uniform form of order bill has the words "order of" printed in front of the blank for the consignee's name, so that a straight bill cannot be made into an order bill by adding "or order." moreover, the difference in color, between order and straight bills now gives a protection as to domestic bills; not as to foreign bills, however. if a bill is altered fraudulently the bill is worth just as much and just as little as it would have been worth if no alteration had been made; that is, the alteration, not the bill itself, is void.

attachment of goods in transit.—there is one other risk in regard to bills of lading which no longer exists where the uniform bills of lading act is in force, and that is seizure by attachment for the benefit of some creditor. the bills of lading act provides that when there is an order bill outstanding, against goods shipped by a carrier, there can be neither attachment by a creditor nor stoppage in transit by the seller if unpaid. where the uniform statute has not been passed, the matter is not so clear. undoubtedly one who purchased for value or lent money on an order bill would be protected against later attachments by creditors of the former owner of the bill; but if creditors of the former owner had[pg 370] attached the goods prior to the transfer of the bill, the attachment would generally be held good, though the man purchasing or lending money on the bill knew nothing of the attachment.

warehouse receipts are similar to bills of lading.—to what has been said in regard to bills of lading a few words in regard to warehouse receipts may be added. warehouse receipts are entirely similar in character to bills of lading, and what has been said in regard to them is, in general, applicable to warehouse receipts. there is a uniform warehouse receipts act which is similar in its provisions to the uniform bills of lading act, and the warehouse receipts act has been enacted in a majority of the states. warehouse receipts may be, in form, order or straight. they are simpler in form, ordinarily, than bills of lading, because they do not have so many special stipulations and conditions, but in other respects they are practically identical. the risks that one who deals in them runs are the same in their nature as in the case of bills of lading. there is one circumstance, however, in regard to warehouse receipts that gives one a better chance to protect himself than in bills of lading. warehouse receipts are generally used as collateral and for purchase and sale in the city where the goods are stored. it is therefore possible to telephone to the warehouseman or otherwise to assure oneself of the existence of the goods in a way that is not possible under the bill of lading, where the goods are in transit. the warehouse receipt, even less than a bill of lading, has a day of maturity.[pg 371] a bill of lading, as we have seen, has no particular day on which it is evident to a purchaser that it has finished its work, and that is even more true in a warehouse receipt. the fact that a warehouse receipt is pretty old does not necessarily show that the document is not a perfectly good document and that the goods are not there.

open receipts.—there is one way of doing business with warehouse receipts which is different from anything that takes place with bills of lading, and which has been a subject of criticism, and which deserves criticism; this is the practice of issuing what are called open receipts. in an open receipt the warehouseman acknowledges he has received a certain quantity of things of a certain sort, and will redeliver that quantity of things of that sort; but not necessarily the identical things that were deposited. it is contemplated that the depositor shall have the right to substitute from time to time, for the goods originally deposited, other goods of like kind and quantity; that is, a receipt may be issued for 100 bales of burlap. the depositor who deals in burlap wants to use some of the bales that are in storage. he has pledged his warehouse receipt, which he originally received for the 100 bales of burlap, and he cannot surrender that, but he wants the warehouseman to let him take out 25 bales of the old burlap and put in 25 bales of new, and that is sometimes allowed. it seems a very unsafe practice. it is unsafe, for one who lends on warehouse receipts, to allow the depositor and the warehouseman to agree between themselves as to[pg 372] what shall be a sufficient substitution for goods which are the bank's collateral. moreover, it is unsafe for the warehouseman, because if the holder of the warehouse receipt has not really consented to the substitution, or unless the form of warehouse receipt clearly shows that substitution is contemplated, the warehouseman would be liable to the holder of the receipt if the substituted goods turn out to be inferior to those which were originally deposited.

warehouseman is a bailee for hire.—a warehouseman is a bailee for hire, and a bailee for hire is liable for neglect if the goods are destroyed or injured by his negligence. he is not an insurer. the ordinary bailee for hire is not subject to the extraordinary liability to which a carrier is subjected while goods are in transit.

safe deposit companies are bailees for hire.—there is one special kind of bailee, in regard to whom it may be worth while to say a few words particularly, and that is a safe deposit company. it has been questioned whether a safe deposit company is properly a bailee of the goods in the boxes to which the safe deposit company does not have access. it is simply in control of the general premises, and, furthermore, the holder of the boxes cannot have access to what is inside the boxes without the assistance of the safe deposit company. there is, therefore, a sort of joint possession. the safe deposit company and the depositor who hired the box have together the full control of the goods, but neither one of them alone has it. it has been suggested that[pg 373] the safe deposit company is merely a sort of watchman; that it is guarding property of which it is not in possession. but it is doing a little more than guarding, and it is generally held to be a bailee for hire; that means it must take reasonable care of the goods in its possession.

liability of safe deposit companies for loss of goods.—there are a number of cases, not a great many, but still some, where safe deposit companies have been sued for goods which were missing, or which the depositor swore were missing, from his box. if the court or jury is convinced that the goods have been lost from the box, the burden of explanation as to how it happened would be upon the safe deposit company. the safe deposit company is liable for the acts of its servants and agents. of course, then, carelessness in regard to duplicate keys of any of the boxes might render a safe deposit company subject to suit if loss occurs thereby.

liability of deposited goods to garnishment.—one of the most important questions in regard to safe deposit companies is this: are the goods in the safes subject to legal process? suppose a safe deposit company is garnisheed (that is served with a trustee writ) in a suit against some one who has a box; can the company answer that it has no funds or goods of the defendant in its possession? yes, it may; it cannot control the goods and it may answer, no funds. one case, however, must be distinguished, and that is where a bank or a safe deposit[pg 374] company has a separate trunk or box of a depositor in its possession. if it has that separate box, even though it is locked, and the bank has not the key, the bank cannot answer no funds; it must answer that it has a box the contents of which are unknown to it. a box, however, shut up in a safe deposit vault, that is, one of the regular tin safes, cannot be reached by the safe deposit company in the normal course of affairs, unless the depositor unlocks his lock. that is the reason for distinguishing between such a box and an ordinary box or trunk which is not itself enclosed in something, to which the bank or safe deposit company does not have access.

liability of deposited goods to attachment.—whether property in a safe deposit company is liable on a writ of attachment in a suit against the owner, is not so clear. it has been held in one case that it is so liable, and that the officer has a right to go in and seize the goods. this will not often be attempted, however, because the officer will not know in what box the debtor might have goods, and the safe deposit company will not tell him. the company is certainly under no obligation to help the officer. the regular way for a creditor to get at the goods of his debtor, concealed in the safe deposit box, is by first making the debtor disclose on examination in court what property he has, and then getting an order from the court that the debtor shall turn over what he has disclosed. this he must do or be imprisoned until he does. there is only one difficulty with this remedy, and that is that the debtor may[pg 375] have an infirm memory—in other words, he may commit perjury; he may have something in the box and not disclose the fact.

search for stolen property.—if stolen property were sought, a search warrant describing the property might be presented to the safe deposit company, and it would have to permit the officer of the law to make the search for the goods described, but only for goods described in the search warrant. there is a case in new york where, on a search warrant for certain articles, the officer of a safe deposit company allowed the officer of the law to make a general examination of goods in its possession, and to remove some bonds which were not specified in the search warrant. the safe deposit company was held liable.

death of depositor.—the question often arises: what is the situation on the death of the owner or renter of a safe? it is the same as in the case of the death of any bailor or depositor. the bailee must recognize the title only of the person who is appointed by law as the successor in interest to the deceased person. the safe deposit company has the right, and should exercise it, to demand proofs and identifications of persons who claim rights as representing deceased persons. sometimes a dispute arises between joint owners of a box. in that case the only safe course for a safe deposit company would be to recognize the right of none until it had been passed on by the court. what is called a bill of interpleader, to determine which one has the right, should be filed[pg 376] in court, unless the conflicting interests can agree or one of them gives a bond to the company to insure its freedom from liability if it delivers the goods to him.

safe deposit company has no lien.—a safe deposit company has no lien on the contents of a box for anything due to it. in that respect it is different from an ordinary warehouseman and a carrier, who have a lien on the goods in their possession for their charges. the reason is that a safe deposit company is not in such possession of the contents of a box as to give it a lien. if the renter of the box does not pay his bills, however, the company has the right to open the box and remove its contents, keeping them safe for the owner.

gift of goods in a safe deposit box.—it was held in a case, decided in the state of illinois, that the gift of the keys of a safe deposit box amounted to a valid gift of property in the box when made with that intention. in order to make a good gift there must be a valid delivery, and it was held that the delivery of the keys amounted to a symbolic delivery of the contents of the box.

right of safe deposit company to sue for goods wrongfully taken.—if goods are wrongfully removed from the box of a depositor, the safe deposit company has a right to reclaim them like any bailee, for it is the law that if goods are taken out of the hands of a carrier, warehouseman or other bailee wrongfully, the bailee may reclaim the goods from the wrongdoer, and bring an action at law for them, not as owner, but because the[pg 377] bailee has the right of possession to them while in his custody, and he may be liable if he lets them get into the hands of any one other than the true owner.

liability of safe deposit companies under inheritance tax laws.—one case in regard to the illinois inheritance tax law indicates an imposition of some burden on the safe deposit company. the company is required to notify the attorney-general ten days before it allows access by the representative of a deceased person to his box, and under certain circumstances the safe deposit company is required to retain, from the contents of the box, a sufficient amount to pay the tax, and is made liable if it fails to do so. this provision was held constitutional by the supreme court of illinois.