The Birmingham age-herald., 1906-05-23
", P, [, HARDING TALKS ID BANKERS Discusses Value of the Bill of
 Lading COTTON CROP MOVEMENT It Is Shown That the Almost Entire Crop Is Financed Each Year By
 Use of Bills of
 Ladng.

Anniston. May g. @(special.) l.)-Presldent W. P G. Harding of the First National bank of Birmingham addressed the Ala bama Bankers association in this city tonight;
 MT. Harding said:
 By far the greater proportion of the products of the farms. the mines and the factories of the United States find their way to markets more or less distant from their places of origin, and their receipt for shipment by common carrier Is evil denced by document called a bill of lading.
 It is estimated that the value of goods represented by bills of lading in the Uni- ted States during the last year amounted to nearly S19,000000000 It frequently happens that the shipper of a commodity has a contract with the purchaser pro viding that payment shall be made through a bank; the usual course being that drafts are drawn with bills of lad ing attached, which drafts are either dis counted by the receiving bank, the goods represented by the bill of lading being held as security, or the drafts are en- tered for collection, account being made to the shipper after payment is made by the drawee. As we'll as can be ascertained, the total amount of advances made dur ing the year 1905 by the various banks in the United States on drafts secured by bills of lading is not far from $3,0O,- 0OO000. In the state of Alabama, prac- tically the entire cotton crop is financed every year by use of bills of lading Es- timating our average crop at 100000 bales at an average of $50 per bale, it will be seen that the aggregate amounts to $55.- 000 GOO. When cotton seed and other pro- ducts of the soil are taken into consider aton, and the enormous shipments of coal and iron are also taken into account, it will be conceded that $100,0OO000 a year Is not high estimate to place upon the an nual transactions through the banks of the state of Alabama on drafts to which bills of lading are attached.
 It is not my purpose to dwell on the various minor objections to bills of lad Ing as collateral for loan, among which may be mentioned their lack of uniform ity, the ease with which they can be al- tered. the question as to liability of car rier in cases where order notify bills have become functus officii by reason of the delivery of the goods to legal owner with out surrender of the bill of ladingS and, in fact, there are probably a score of op- portunities connected with bills of ladng for litigation or loss. All of this makes them a class of security which should be examined with the utmost care by the banker.
 Dangerous Doctrine.
 But there is another, and comparatively new phase of this question which demands the attention of every banker in the state of Alabama, which is the doctrine that a bank discounting a draft with a bill of lading attached steps into the shoes of the shipper and guarantees his contract, as we'll as the quality and quantity of the goods represented by the bill of lading. This doctrine seems to hold In three states, Mississippi. Alabama and North Carolina, but is distinctly repudiated by the 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 it was held by Chief Justice Brickell in the case of Lehman vs. Young, 63 Ala. 519, that it Is not even the duty of party discounting bill of exchange en inquire into the genuineness of bill of lading accompanying 1t in order to hold another bound by letter of credit which authorizes the bill of exchange to be drawn upon the letter writer, provided it be accompanied by the bill of 1ading, and if the letter writer pay the bill of ex- change and afterwards discovers that the bill of lading is forged, he cannot recover back the money on the ground of mistake of fact. And It has also been held by the courts in various states, and by the su- preme court of the United States, that the aoceptor of bill of exchange discounted by a bank with bill of ladng attached. which the acceptor and the bank regarded as genuine at the time of acceptance, but which was in fact a forgery. is bound to pay the bill of exchange at maturity The understanding of the commercial world for many years as to the legal effect of a bill of lading has been that 1t is the writ ten acknowledgment by the agent of any common carrier that he has received the goods described therein, to be carried upon the terms and delivered to the persons therein specified and that 1t Is at once receipt for the goods, which renders the carrier responsible their custodian. and an express written contract for their transnortation and delivery. I do not be- lieve that it is denied that it Is the sym bolical representative of the goods which if describes and that it's transfer carries with it such rights as the owner or the goods themselves. Banks generally have entertained the view that bank dis counting a draft on the faith and credit of A bill of lading attached thereto. re- oeived thereby a transfer to the title of inc goods described in the bill of lading, hut that the transfer is conditional and limited: that this would hold good only until the acceptance or payment or the draft when the title would pass to the ac- ceptor or payer as his security. the bank having a final ana dennlte tltie 10 tIle goods only In case of refusal of the drawee to honor the draft This view is sustained in the case of Marine Bank vs. Wright. 48 N. Y. T, and in other cases in state and federal courts too pumerous to mention.
 Origin of Doctrine.
 The new doctrine as to guaranty Of contract appears. like the boil weevil, to have had its origin in Texas, in the year 1898 when the famous case of Landa vs Latin was decided by an intermed- late court known as the Texas court of civil appeals It seems that one Joseph Janda. of Texas. agreed to purchase two carloads of wheat from Latin Bros, of Kansas. The wheat was shipped under two bills of lading issued to the ship ners. who endorsed them in blank, at tached them to drafts on Landa for inc purchase price and for full value assigned the bills of ladlng and drafts to the First National Bank of Hutchin- son. Kas. Under the terms of the pur- chase. Landa had to pay the drafts be- fore getting possession of the bills of lad ing or seeing the wheat. which proved to be damaged. After the bank had re- ceived it's pay. the purchaser sued the bank for damages by reason of breach of his contract with Latin Bros. to