The Montgomery advertiser., 1906-05-23

annual meeting here of the Alabama Bankers Association President ". F of Birmingham, delivered an able ad' dress on Bills of Lading: Can banks IT Alabama use them as collateral?"
 The address of Mir. Harding was giv' en close attention and has caused much comment
 Mir. Harding spoke as follows:
 By far the greater proportion of tne the factories of the United States ,tind their way to markets more or less dlst, ant from their places of origin, and their receipt for shipment by a common carrier is evidenced by doc ufuert called a bill of lading
 Magnitude of Advances on Hills of Lad-
 ing.
 It is estimated that the value or goods represented by bills of lading in the United States during the last year amounted to nearly nineteen piIiions or dollars. It frequently happens that the shipper of a commodity has a contract with the purchaser providing that pay n, ert shall be made through bank; the usual course being that drafts are drawn with bills Of ladinS attacned. which drafts are either discounted oy the receiving bank. the gooas repre- sented by the bill of ladiag being held as security. or the drafts ere entered for collection, account being made 10 the shipper after payment is made by the drawee. As well as can ne ascer- tained. the total amount of advances made during the year 1905 by the va rious banks in the United states on far from three billions Of dollars. In the State of Alabama, practically the entire crop is financed every year by the use of bills of lading, nS ooe 6sssin5lating s5 an average value of $50 per bale. 1t will be seen that the aggregate amounts to S55,000,000. When cotton seed and oth- l. tr e Afs consideration. and the enormous ship rnents of coal and iron are also taken into account, 1t will be conceded that s100, 100000 a year is not high esti- tions through the banks. of the State of Alabama on drafts to which bills of 1ading are attached. rs ~
 It Is not my purpose to dwell on the various minor objections to bills of lad ing as collateral for a loan. among which may be mentioned their lack of uniformity. the ease with which they can be altered. the question as to lia- bility of carrier in cases where order notify bills have become functus officii by reason of the delivery of the goods to legal owner without surrender of the bill of lading. and ip fact. there are s1ected with bills of Iadfng for litiga- ffon or loss All of this makes them class of security which should be ex- amincd with the utnaosts care by the DduktI. New and Dangerous Doctrine fin Ala
 bama
 But there is another. and compara- lively new phase of this question which demands the attention of every banker in the State of Alabama, which Is the doctrine that bank discounting a draft with a bill of lading attached steps into the shoes of the shipper and guarantees his contract, as well as the quality and quantity of the goods rep resented by the bill of lading. This doctrine seems to hold in three States, Mississippi. Alabama and North Caro- courts of the United States. as well as by the courts of all other States of the Union where the issue has been made. Years ago 1t was held by Chiei Justice Brickell. in the case of Lehman vs. Young, 63 Ala. 519, that it is mol even the duty of party dfscountfng bill of exchange to enquire into tho genuineness of a bill of lading accom- bound by letter of credit which author izes the bill Of exchange to be drawI upon the letter writer, provided it b' accompanied by the bill of lading.. anC if the letter writer pay the bill of ex' change and afterwards discovers tha' the bill of ladfng is forged. he cannot recover back the money on the grounc of mistake of fact. And 1t has alsC been held by the courts in various States and by the Supreme Court oi the United States, that the acceptor o' a bill of exchange discounted by 2 bank with bill of lading attached which the acceptor and the bank re- garded as genuine at the time of ac- ceptance but which was in fact tors- cry. is bound to pay the bill of ex- change at maturity. The understand ing of the commercial world for many wears as to tho legal effect of a bill of lading has been that 1t is the writ ten aeknowledgment by the agent of any common carrier that he has re- ceived the goods described therein, to be carried upon the terms, and deliv- cred to the persons therein specified and that it is at once receipt for the goods which renders the carrier respon- sible as their custodian, and an express written contract for their transporta' tion and delivery. do not believe that it is denied that it is the synlbolical scrIbes, and that It's transfer carries with 1t such rights as the owner of the goods could convey by actual bodily transfer of the. goods themselves Banks generally have entertained tht view that bank discounting a draf on the faith and credit of bill of lad ing attached thereto, received there ny a transfer to the title of the goods de scribed in the bill of lading. but tha the transfer is conditional and limited that this would hold good only unti the acceptance or payment or the draft when the title would pass 10 the accei having a final and deGnite title to th' goods only in case Of refusal of tn drawee to honor the drs.ft. This view is sustained in the ease Of Mar.rl ne Banl vs Wright, 43 N. Y. 1, and in othe cases in State and Federal Courts to- numerus to mention.
 Origin of Doctrine of Bnnh's Gunr
 anty.
 The new doctrine as to guaranty O contract appears. like the boil weevil to have had its origin in Texas, in tn year 1898, when the famous Landa vs I,attin was decided by an intermediate court known as the Texas Court O Civil Appeals. It seems that one Jo seph Landa of Texas, agreed to pur chase two car loads of wheat from Lat tin Brothers, of Kansas. The whea was shipped under two bills of ladins issued to the shippers who endorsed them in. blank, attached them to draft on Landa for the purchase price ant for full value assigned the bills of lad ing and drafts to the First Nationa Bank of Hutchinson, Kas. Under thu terms of the purchase, Landa had tC pay the drafts before getting posses sion of the bills of lading or seeing th' wheat, which proved to be damaged After the bank had received its pay the purchaser sued the bank for dam ages by reason of breach of his con tract with Latin Brothers to deliver