OtornpU Caiu g^ntil library Cornell University Library KF 925.A25 1912 Bills of lading :hearing before the Comm 3 1924 018 739 809 la Cornell University B Library The original of this book is in the Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924018739809 p 62d Congress td Session SENATE f DOCUMENT \ No. 650 BILLS OF LADING HEARINGS BEFORE THE COMMITTEE ON INTERSTATE COMMERCE OF THE UNITED STATES SENATE SIXTY-SECOND CONGRESS, ON S. 4713. A BILL RELATING TO BILLS OF LADING IN COM- MERCE WITH FOREIGN NATIONS AND AMONG THE SEVERAL STATES, AND S. 957, A BILL RELATING TO BILLS OF LADING, FEBRUARY 16 AND 17, MARCH 1, 2, AND 15 AND APRIL 26, 1912 PRESENTED BY MR. CLAPP MAY 8, 1912.— Ordered to be printed Cornell University Law Library. THE GIFT OF \ Daujy^. _Z_, / ?/2- 19 62d Conghess ) ™ H1T u 2d Session f SENATE i^^MilB^ A. BILLS OF LADING HEARINGS BEFORE THE COMMITTEE ON INTERSTATE COMMERCE OF THE UNITED STATES SENATE SIXTY-SECOND CONGRESS, ON S. 4713, A BILL RELATING TO BILLS OF LADING IN COM- MERCE WITH FOREIGN NATIONS AND AMONG THE SEVERAL STATES, AND S. 957, A BILL RELATING TO BILLS OF LADING, FEBRUARY 16 AND 17, MARCH 1, 2, AND 15 AND APRIL 26, 1.912 PRESENTED BY MR. CLAPP MAY 8, 1912.— Ordered to be printed WASHINGTON 1912 3 '37/ U'dllMLL UK'lv'... ■";■ C OCT 8 - 1912 LAW LIBRARY. BILLS OF LADING. friday, february 16, 1912. Committee on Interstate Commerce, United States Senate, Washington, D. C. The committee met at 11.30 o'clock a. m. Present: Senators Clapp (chairman), Crane, Cummins, Brandegee, Oliver, Tillman, Newlands, and Pomerene. The committee had under consideration the bills S. 957 and S. 4713, as follows: ^ [S. 957, Sixty-second Congress, first session.] A BILL Relating to bills of lading. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, ORDER BILL OF LADING DEFINED. That whenever any common carrier, railroad, or transportation company (hereinafter termed "carrier") shall issue a bill of lading for the transportation of property from a place in one State to a place in another State (the word "State" to include any Territory or District of the United States), which bill shall be, or purport to be, drawn to the order of the shipper or other specified person, or which shall contain any state- ment or representation that the property described therein is or may be deliverable upon the order of any person therein mentioned, such bill shall be known as an " order bill of lading" and shall conform to the following requirements: (a) In connection with the name of the person to whose order the property is de- liverable the words "order of" shall prominently appear in print on the face of the bill, thus: "Consigned to order of ." (b) It shall contain on its face the following provision: "The surrender of this original order bill of lading, properly indorsed, shall be required before delivery of the property." (c) It shall not contain the words "Not negotiable" or words of similar import. If such words are placed on an order bill of lading, they shall be void and of no effect. (d) Nothing herein shall be construed to prohibit the insertion in an order bill of lading of other terms or conditions not inconsistent with the provisions of this act or otherwise contrary to law^or public policy. STRAIGHT BILL OF LADING DEFINED. Sec. 2. That whenever a bill of lading is issued by a carrier for the transportation of property from a place in one State to a place in another, in which the property described therein is stated to be consigned or deliverable to a specified person, with- out any statement or representation that such property is consigned or deliverable to the order of any person, such bill shall be known as a "straight bill of lading" and shall contain the following requirements: (a) The bill shall have prominently stamped upon its face the words "Not negotiable." (b) Nothing herein shall re construed to prohibit the insertion in a straight bill of lading of other terms or conditions not inconsistent with the provisions of this act or otherwise contrary to law or public policy. 4 BILLS OF LADING. Sec. 3. That a carrier shall 1 e liable to any person injured thereby for the damage caused by the failure to comply with any of the provisions of sections one and two hereof. But an order or a straight bill of lading, notwithstanding such noncompli- ance, shall be within the provisions of this act. Sec. 4. That every carrier who himself, or by his officer, agent, or servant author- ized to issue tills of lading, shall issue an order bill of lading or a straight bill of lad- ing, as defined by this act, before the whole of the property as described therein shall have been actually received and is afrthe time under the actual control of such earner to be transported, or who shall issue a second or duplicate order bill of lading or straight bill of lading for the same property, in whole or in part, for which a former bill of lading has been issued and remains outstanding and uncanceled, without prominently marking across the face of the same the word "Duplicate," shall be estopped, as against the consignee and every other person who shall acquire any such bill of lad- ing in good faith and for value. In deny the receipt of the property as descril ed therein, or to assert that a former bill of lading has 1 een issued and remains outstanding and uncanceled for the same property, as the ca-e may be; and such issuing carrier shall be liable to the consignee named in a straight bill, or to the holder of an order bill "who has given value in good faith relying on the description therein of the property for damages caused by the nonreceipt by the carrier of all or part of the property, or its failure to correspond with the description thereof in the bill at the time of its issue, or for the failure to mark the word "Duplicate" upon a second or duplicate bill as indicated above: Provided, That where an order or a straight bill of lading is issued for property billed "shipper's load and count," indicating that the goods were loaded by the shipper and the description of them made by him; and if such statement be true the carrier shall not be liable for the nonreceipt or by the mis- description of the goods described in the bill, in which event the estoppel and liability above provided shall not attach. Sec. 5. That every carrier, or officer, agent, or servant of a carrier, who shall deliver the property described in an order 1 ill of lading without requiring surrender and making cancellation of such 1 ill, or, in ea?e of partial delivery, indorsing thereon a statement of the property delivered, shall be estopped, as against all and every per- son or persons who have acquired, or who thereafter shall acquire, in good faith and for value, any such order bill of lading, from asserting that the property as described therein has been delivered or partially delivered; and such carrier shall lie liable to every and any such person for the damages which he or they may have sustained because of reliance upon such bill. Sec. 6. That no carrier shall be liable under the provisions of this act where the property is replevied, or removed from the possession of the carrier by other legal process, or has been lawfully sold to satisfy the carrier's lien, or in case of sale or dis- position of perishable, hazardous, or unclaimed goods, in accordance with law or the terms of the bill of lading. Sec. 7. That any alteration, addition, or erasure in a bill of lading after its issue without authority from the carrier issuing the same, either in writing or noted on the bill of lading, shall be void, but such bill of lading shall be enforceable according to its original tenor. [S. 4713, Sixty-second Congress, second session.] A BILL Relating to bills of lading in commerce with foreign nations and among the several States. Be it enacted by the Sarnie and House of liepresentatires of the I'u itcd States of America in Congress assembled, That bills of lading issued by any common carrier for the transportation of goods from a place in a State to a place in a foreign country or from a place in one State to a place in another State shall be governed by this act. Sec. 2. That every bill must embody within its written or printed terms — (a) The date of its issue; (b) The name of the person from whom the goods have been received; (c) The place where the goods have been received; (d) The place to which the goods are to be transported ; (e) A statement whether the goods received will be delivered to a specified person or to the order of a specified person; (f) A description of the goods or of the packages containing them, which may, however, be in such general terms as are referred to in section twenty-three; and (g) The signature of the carrier. A negotiable bill shall have the words "order of" printed thereon immediately before the name of the person upon whose order the goods received are deliverable. A carrier shall be liable to any person injured thereby for the damage caused by the omission from a negotiable bill of any of the provisions required in this section. BILLS "OF LADING. 5 Sec. 3. That a carrier may insert in a bill issued by him any other terms and con- ditions: Provided, That such terms and conditions shall not — ' (a) Be contrary to law or public policy; or (b) In anywise impair his obligation to exercise at least that degree of care in the transportation and safekeeping of the goods intrusted to him which a reasonably careful man would exercise in regard to similar goods of hia own. Sec. 4. That a bill in which it is stated that the goods are consigned or destined to a specified person is a nonnegotiable or straight bill. Sec 5. That a bill in which it is stated that the goods are consigned or destined to the order of any person named in such bill is a negotiable or order bill. Any pro- vision in such a bill that it is nonnegotiable shall not affect its negotiability within the meaning of this act. Sec 6. That negotiable bills issued in a State for the transportation of goods to any place in the United States on the Continent of North America, except Alaska and Panama, shall not be issued in parts or sets. If so issued, the carrier issuing them shall be liable for failure to deliver the goods described therein to anyone who pur- chases a part for value in good faith, even though the purchase be after the delivery of the goods by the carrier to a holder of one of the other parts: Provided, however, That nothing contained in this section shall be interpreted or construed to forbid the issuing of negotiable bills in parts or sets for such transportation of goods to Alaska, Panama, Porto Rico, the Philippines, Hawaii, or foreign countries, or to impose the liabilities set forth in this section for so doing. Sec 7. That when more than one negotiable bill is issued in a State for the same goods to be transported to any place in the United States on the Continent of North America, except Alaska and Panama, the word "duplicate," or some other word or words indicating that the document is not an original bill, shall be placed plainly upon the face of every such bill except the one first issued. A carrier shall be liable for the damage caused by his failure so to do to anyone who has purchased the bill for value in good faith as an original, even though the purchase be after the delivery of the goods by the carrier to the holder of the original bill: Provided, hoirever, That nothing contained in this section shall in such ra^e for such transportation of goods to Alaska, Panama, Porto Rico, the Philippines, Hawaii, or foreign countries be interpreted or construed so as to require the placing of the word "duplicate " thereon, or to impose the liabilities set forth in this section for failure so to do. Sec. 8. That a nonnegotiable bill shall have placed plainly upon its face by the carrier issuing it "nonnegotiable" or "not negotiable." This section shall not apply, however, to memoranda or acknowledgments of an informal character. Sec 9. That the insertion in a negotiable bill of the name of a person to be notified of the arrival of the goods shall not limit the negotiability of the bill or constitute notice to a purchaser thereof of any rights or equities of such person in the goods. Sec 10. That except as otherwise provided in this act, where a consignor receives a bill and makes no objection to its terms or conditions at the time he receives it, neither the consignor, nor any person who accepts delivery of the goods, nor any person who seeks to enforce any provisions of the bill, shall be allowed to deny that he is bound by such terms and conditions so far as they are not contrary to law or public policy. Sec 11. That a carrier, in the absence of some lawful excuse, is bound to deliver goods upon a demand made either by the consignee named in the bill for the goods, or, if the bill is negotiable, by the holder thereof, if such a demand is accompanied by — (a) An offer in good faith to satisfy the carrier's lawful lien upon the goods; (b) An offer in good faith to surrender, properly indorsed, the bill which was issued for the goods, if the bill is negotiable; and (c) A readiness and willingness to sign, when the goods are delivered, an acknowl- edgment that they have been delivered, if such signature is requested by the carrier. In case the carrier refuses or fails to deliver the goods, in compliance with a demand by the consignee or holder so accompanied, the burden shall be upon the carrier to establish the existence of a lawful excuse for such refusal or failure. Sec 12. That a carrier is justified, subject to the provisions of the three following sections, in delivering goods to one who is — (a) A person lawfully entitled to the possession of the goods, or (b) The consignee named in a nonnegotiable bill for the goods, or (c) A person in possession of a negotiable bill for the goods, by the terms of which the goods are deliverable to his order; or which has been indorsed to him, or in blank by the consignee, or by the mediate or immediate indorsee of the consignee. Sec 13. That where a carrier delivers goods to one who is not lawfully entitled to the possession of them, the carrier shall be liable to anyone having a right of property 6 BILLS OF LADING. or possession in the goods if he delivered the goods otherwise than as authorized by subdivisions (b) and (c) of the preceding section; and, though he delivered the goods as authorized by either of said subdivisions, he shall be so liable if prior to such delivery he — . . (a) Had been requested, by or on behalf of a person having a right of property or possession in the goods, not to make such delivery, or (b) Had information at the time of the delivery that it was to a person not lawfully entitled to the possession of the goods. A request for information, to be effective within the meaning of this section, must be given to an officer or agent of the carrier, the actual or apparent scope of whose duties includes action upon such a request or information, and must be given in time to enable the officer or agent to whom it is given, acting with reasonable diligence, to stop delivery of the goods. Sec. 14. That except as provided in section twenty-seven, and except when com- pelled by legal process, if a carrier delivers goods for which a negotiable bill had been issued, the negotiation of which would transfer the right to the possession of the goods, and fails to take up and cancel the bill, such carrier shall be liable for failure to deliver the goods to anyone who for value and in good faith purchases such bill, whether such purchaser acquired title to the bill before or after the delivery of the goods by the carrier and notwithstanding delivery was made to the person entitled thereto. Sec. 15. That except as provided in section twenty-seven, and except when com- pelled by legal process, if a carrier delivers part of the goods for which a negotiable bill had been issued and fails either — (a) To take up and cancel the bill, or (b) To place plainly upon it a statement that a portion of the goods has been deliv- ered, with a description, which may be in general terms, either of the goods or pack- ages that have been so delivered, or of the goods or packages which still remain in the carrier's possession, he shall be liable for failure to deliver all the goods specified in the bill to anyone who for value and in good faith purchases it, whether such pur- chaser acquired title to it before or after the delivery of any portion of the goods by the carrier, and notwithstanding such delivery was made to the person entitled thereto. Sec. 16. That any alteration, addition, or erasure in a bill after its issue without authority from the carrier issuing the same, either in writing or noted on the bill, shall be void, whatever be the nature and purpose of the change, and the bill shall be enforceable according to its original tenor. Sec. 17. That where a negotiable bill has been lost or destroyed a court of competent jurisdiction may order the delivery of the goods upon satisfactory proof of such loss or destruction; and upon the giving of a bond, with sufficient surety to be approved by the court, to protect the carrier or any person injured by such delivery from any liability or loss incurred by reason of the original bill remaining outstanding, the court may also in its discretion order the payment of the carrier's reasonable costs and counsel fees. The delivery of the goods under an order of the court as provided in this section shall not relieve the carrier from liability to a person to whom the negotiable bill has been or shall be negotiated for value without notice of the proceedings or of the delivery of the goods. Sec. 18. That a bill upon^ the face of which the word ''duplicate'' nr some other word or words, indicating that the document is not an original bill, is placed plainly shall impose upon the carrier issuing the same the liability of one who represents and warrants that such bill is an accurate copy of an original bill properly issued, but no other liability. Sec. 19. That no title to goods or right to their possession, asserted by a carrier for his own benefit, shall excuse him from liability for refusing to deliver the goods according to the terms of a bill issued for them, unless such title or right is derived directly or indirectly from a transfer made by the consignor or consignee after the ship- ment, or from the carrier's lien. Sec. 20. That if more than one person claim the title or possession of goods, the carrier may require all known claimants to interplead, either as a defense to an action brought against him for nondelivery of the goods, or as an original suit, whichever is appropriate. Sec 21. That if some one other than the consignee or the person in possession of the bill has a claim to the title or possession of the goods, and the carrier has information of such claim, the carrier shall be excused from liability for refusing to deliver the goods either to the consignee or person in possession of the bill or to the adverse claim- ant until the carrier has had a reasonable time to ascertain the validity of the adverse claim or to bring legal proceedings to compel all claimants to interplead. BILLS OF LADING. 7 Sec. 22. That except as provided in the two preceding sections and in section twelve no right or title of a third person, unless enforced by legal process, shall be a defense to an action brought by the consignee of a nonnegotiable bill or by the holder of a negotiable bill against the carrier for failure to deliver the goods on demand. Sec. 23. That if a bill of lading has been issued by a carrier or on his behalf by an agent or employee the scope of whose actual or apparent authority includes the issuing of bills of lading, the carrier shall be liable to (a) the consignee named in a nonne- gotiable bill or (b) the holder of a negotiable bill, who has given value in good faith, relying upon the description therein of the goods, for damages caused by the nonre- ceipt by the carrier or a connecting carrier of all or part of the goods or their failure to correspond with the description thereof in the bill at the time of its issue. If, however, the goods are described in a bill merely by a statement of marks or labels upon them or upon packages containing them, or by a statement that the goods are said to be goods of a certain kind or quantity, or in a certain condition, or it is stated in the bill that packages are said to contain goods of a certain kind or quantity or in a certain condition, or that the contents or condition of the contents of packages are unknown, or words of like purport are contained in the bill, such statements, if true, shall not make liable the carrier issuing the bill, although the goods are not of the kind or quantity or in the condition which the marks or labels upon them indicate, or of the kind or quantity or in the condition which the marks or labels upon them indicate, or of the kind or quantity or in the condition they were said to be by the consignor. The carrier may also, by inserting in the bill the words "shipper's load and count " or other words of like purport, indicate that the goods were loaded by the shipper and the description of them made by him; and if such statement be true, the carrier shall not be liable for damages caused by the improper loading or by the non- receipt or by the misdescription of the goods described in the bill. Sec. 24. That if goods are delivered to a carrier by the owner or by a person whose act in conveying the title to them to a purchaser for value in good faith would bind the owner, and a negotiable bill is issued for them, they can not thereafter, while in the possession of the carrier, be attached by garnishment or otherwise or be levied upon under an execution unless the bill be first surrendered to the carrier or its negotiation enjoined. The carrier shall in no such case be compelled to deliver the actual pos- session of the goods until the bill is surrendered to him or impounded by the court. Sec. 25. That a creditor whose debtor is the owner of » negotiable bill shall be entitled to such aid from courts of appropriate jurisdiction by injunction and otherwise in attaching such bill or in satisfying the claim by means thereof as is allowed at law or in equity in regard to property which can not readily be attached or levied upon by ordinary legal process. Sec. 26. That if a negotiable bill is issued the carrier shall have no lien on the goods therein mentioned except for charges on those goods for freight, storage, demurrage and terminal charges, and expenses necessary for the preservation of the goods or incident to their transportation subsequent to the date of the bill, unless the bill expressly enumerates other charges for which a lien is claimed. In such case there shall also be a lien for the charges enumerated so far as they are allowed by law and the contract between the consignor and the carrier. Sec. 27. That after goods have been lawfully sold to satisfy a carrier's lien, or because they have not been claimed, or because they are perishable or hazardous, the carrier shall not thereafter be liable for failure to deliver the goods to the consignee or owner of the goods, or to a holder of the bill given for the goods when they were shipped, even if such bill be negotiable. Sec. 28. That a negotiable bill may be negotiated by delivery where, by the terms of the bill, the carrier undertakes to deliver the goods to the order of a specified person, and such person or a subsequent indorsee of the bill has indorsed it m blank. Sec. 29. That a negotiable bill may be negotiated by the indorsement of the person to whose order the goods are deliverable by the tenor of the bill. Such indorsement may be in blank or to a specified person. If indorsed to a specified person, it may be negotiated again by the indorsement of such person in blank or to another specified person. Subsequent negotiation may be made in like manner. Sec. 30. That a bill may be transferred by the holder by delivery, accompanied with an agreement, express or implied, to transfer the title to the bill or to the goods rep- resented thereby. A nonnegotiable bill can not be negotiated, and the indorsement of such a bill gives the transferee no additional right. Sec. 31. That a negotiable bill may be negotiated by any person m possession of the same, however such possession may have been acquired, if by the terms of the bill the carrier undertakes to deliver the goods to the order of such person, or if at the time of negotiation the bill is in such form that it may be negotiated by delivery. g BILLS OF LADING. Sec. 32. That a person to whom a negotiable bill has been duly negotiated acquires thereby — . . . . (a) Such title to the goods as the person negotiating the bill to him had or had ability to convey to a purchaser in good faith for value, and also such title to the goods as the consignee and consignor had or had power to convey to a purchaser in good faith for value; and . (1>) The direct obligation of the carrier to hold possession ot the goods tor him accord- ing to the terms of the bill as fully as if the carrier had contracted directly with him. Sec. 33. That a person to whom a bill has been transferred but not negotiated acquires therein- as against the transferor the title to the goods, subject to the terms of any agree- ment with the transferor. If the bill is nonnegotiable, such person also acquires the right to notify the carrier of the transfer to him of such bill, and thereby to become the direct obligee of whatever obligations the carrier owed to the transferor of the bill immediately before the notification. Prior to the notification of the carrier by the transferor or transferee of a nonnego- tiable bill the title of the transferee to the goods and the right to acquire the obligation of the carrier may be defeated by garnishment or by attachment or execution upon the goods by a creditor of the transferor, or by a notification to the carrier I >y the transferor or a subsequent purchaser from the transferor of a subsequent sale of the goods by the transferor. A carrier has not received notification within the meaning of this section unless an ollicer or agent of the carrier, the actual or apparent scope of whose duties includes action upon such a notification, has been notified, and no notification shall be effective until the officer or agent to whom it is given has had time, with the exercise of reason- able diligence, to communicate with the agent or agents having actual possession or control of the goods. Sec 34. That where a negotiable bill is transferred for value by delivery, and the indorsement of the transferor is essenl ial for negotiation, flic transferee acquires a right against the transferor to ronqiel him to indorse the bill, unless a contrary intention appears The negotiation shall take effect as of the time when the indorsement is actually made. This obligation may be specifically enforced. Sec. 35. That a person who negotiates or transfers for value a bill by indorsement or delivery, including one who assigns for value a claim secured by a bill, unless a contrary intention appears, warrants — (a) That the bill is genuine. (b) That he has a legal right to transfer it. (O Thathehas knowledge of no fact which would impair the validirvor worth of the bill (d) That he has a right to transfer the title to the goods, and that the goods are mer- chantable or fit for a particular purpose whenever such warranties would have been implied, if the contract of the parties had been to transfer without » bill the goods represented thereby. In the case of an assignment of a claim secured by a bill the lialulii.v of the assignor shall not exceed the amount of the claim. Sec. 3ii. That the indorsement of a bill shall not make the indor.-er liable for any failure on the part of the carrier or previous indorsers of the bill to fulfill their respec- tive obligations. Sec. 37. That a mortgagee or pledgee, or other holder of a bill for security who in good faith demands' or receives payment of the debt for which such bill is security, whether from a party to a draft drawn for such debt or from any other person, shall not be deemed by so doing to represent or warrant the genuineness of such bill or the quantity or quality of the goods therein described. Sec. 38. That the validity of the negotiation of a bill is not impaired by the fact that such negotiation was a breach of duty on the part of the person making the negotiation, or by the fact that the owner of the bill was deprived of the possession of the same by fraud, accident, mistake, duress, or conversion, if the person to whom the bill was negotiated, or a person to whom the bill was subsequently negotiated, gave value therefor, in good faith, without notice of the breach of duty, or fraud, accident, mistake, duress, or conversion. Sec. 39. That where a person, having sold, mortgaged, or pledged goods which are in a carrier's possession and for which a negotiable bill has been issued, or having sold, mortgaged, or pledged the negotiable bill representing such goods, continues in possession of the negotiable bill, the subsequent negotiation thereof by that person under any sale, pledge, or other disposition thereof to any person receiving the same in good faith, for value and without notice of the previous sale, shall have the same effect as if the first purchaser of the goods or bill had expressly authorized the subsequent negotiation. BILLS OF LADING. 9 Sec. 40. That where goods are shipped by the consignor in accordance with a contract or order for their purchase, the form in which the bill is taken by the con- signor shall indicate the transfer or retention of the property or right to the 'possession of the goods, as follows: (a) Where by the bill the gords are deliverable to the buyer or to his agent, or to the order of the buyer or of hi? agent, the consignor thereby transfers the property in the goods to the buyer. (b) Where by the bill the goods are deliverable to the seller or to his agent, or to the order of the seller or of his agent, the seller thereby reserves the property in the goods. But if, except for the form of the bill, the property would have passed to the buyer on shipment of the goods, the seller's property in 'the goods shall be deemed to be only for the purpose of securing performance by the buyer of his obligations under the contract. (c) Where by the bill the goods are deliverable to the order of the buyer or of his agent, but possession of the bill is retained by the seller or his agent, the seller thereby reserves a right to the possession of the goods as against the buyer. (d) Where the seller draws on the buyer for the price and transmits the draft and bill together to the buyer to secure acceptance or payment of the draft, the buyer is bound to return the bill if he does not honor the draft', and if he wrongfully retains the bill he acquires no added right thereby. If however, the bill provides that the goods are deliverable to the buyer, or to the order of the buyer, or is indorsed in blank or to the buyer by the consignee named therein, one who purchases in good faith, for value, the bill or goods from the buyer shall obtain the title to the goods, although the draft has not been honored, if such purchaser has received delivery of the bill, indorsed by the consignee named therein, or of the goods, without notice of the facts making the transfer wrongful. Sec. 41. That where the seller of goods draws on the buyer for the price of the goods and transmits the draft and a bill of lading for the goods, wether directly to the buyer or through a bank or other agency, unless a different intention on the part of the seller appears, the buyer and all other parties interested shall be justified in assuming — (a) If the draft is by its terms or legal effect payable on demand, or presentation, or at sight, or not more than three days thereafter (whether such three days be termed days of grace or not), that the seller intended to require payment of the draft before the buyer should be entitled to receive or retain the bill. (b) If the draft is by its terms payable on time, extending beyond three days after demand, presentation, or sight (whether such three days be termed days of grace or not), that the seller intended to require acceptance, but not payment, of the draft before the buyer should be entitled to receive or retain the bill. The provisions of this, section are applicable whether by the terms of the bill the goods are consigned to the seller or to his order, or to the buyer or to his order, or to a third person or to his order. Sec. 42. That where a negotiable bill has been issued for goods no seller's lien or right of stoppage in transitu shall defeat the rights of any purchaser for value in good faith to whom such bill has been negotiated, whether such negotiation be prior or subsequent to the notification to the carrier who issued such bill of the seller's claim to a lien or right of stoppage in transitu. Nor shall the carrier be obliged to deliver or justified in delivering the goods to an unpaid seller unless such bill is first surrendered for cancellation. Sec. 43. That, except as provided in section forty-two, nothing in this act shall limit the rights and remedies of a mortgagee or lien holder whose mortgage or lien on goods would be valid, apart from this act, as against one who for value and in good faith purchased from the owner, immediately prior to the time of their delivery to the carrier, the goods which are subject to the mortgage or lien and obtained possession of them. Sec. 44. That any officer, agent, or servant of a carrier who, with intent to defraud, issues or aids in issuing a bill knowing that all or any part of the goods for which such bill is issued have not been received by such carrier, or by an agent of such carrier, or by a connecting carrier, or are not under the carrier's control at the time of issuing such bill, shall be guilty of a misdemeanor, and upon conviction shall be punished for each offense by imprisonment not exceeding five years, or by a fine not exceeding five thousand dollars, or by both. Sec. 45. That any officer, agent, or servant of a carrier who, with intent to defraud, issues or aids in issuing a bill for goods knowing that it contains any false statement, shall be guilty of a misdemeanor, and upon conviction shall be punished for each offense by imprisonment not exceeding one year, or by a fine not exceeding one thou- sand dollars, or by both. 10 BILLS OF LADING. Sec. 46. That any officer, agent, or servant of a carrier who, with intent to defraud, Bsues or aids in issuing a duplicate or additional negotiable bill for goods in violation f the provisions of section seven, knowing that a former negotiable bill for the same goods, or any part of them, is outstanding and uncanceled, shall be guilty of a mis- demeanor, and upon conviction shall be punished for each offense by imprisonment not exceeding five years, or by a fine not exceeding five thousand dollars, or by both. Sec. 47. That any person who ships goods to which he has not title, or upon which there is a lien or mortgage, and who takes for such goods a negotiable bill which he afterwards negotiates for value with intent to deceive and without disclosing hie want of title or the existence of the lien or mortgage, shall be guilty of a misdemeanor, and upon conviction shall be punished for each offense by imprisonment not exceed- ing one year, or by a fine not exceeding one thousand dollars, or by both. Sec. 48. That any person who with intent to deceive negotiates or transfers for value a bill, knowing that any or all of the goods which by the terms of such bill appear to have been received for transportation by the carrier which issued the bill are nut; in the possession or control of such carrier or of a connecting carrier, without disclosing this fact, shall be guilty of a misdemeanor, and upon conviction shall be punished for each offense by imprisonment not exceeding five years, or by a fine not exceeding five thousand dollars, or by both. Sec. 49. That any person who with intent to defraud secures the issue by a carrier of a bill, knowing that at the time of such issue any or all of the goods described in such bill as received for transportation have not been received by such carrier or an agent of such carrier or a connecting carrier or are not under the carrier's control, by inducing an officer, agent, or servant of such carrier falsely to believe that such goods have been received by such earner or are under its control, shall be guilty of a misdemeanor, and upon conviction shall be punished for each offense by imprison- ment not exceeding five years, or by a fine not exceeding five thousand dollars, or by both. Sec. 50. That any person who with intent to defraud issues or aids in issuing a nonnegotiable bill without the words "not negotiable" placed plainly upon the face thereof shall be guilty of a misdemeanor, and upon conviction shall be punished for each offense by imprisonment not exceeding five years, or by a fine not exceeding five thousand dollars, or by both. Sec 51. That in any case not provided for in this act the rules of law and equity, including the law merchant, shall govern. Sec. 52. That this act shall as far as practicable be interpreted and construed in harmony with the law of those States which enact an act of similar import to make uniform the laws of the various States on bills of lading. Sec 53. (First) That in this act, unless the context or subject matter otherwise requires — "Action" includes counterclaim, set-off, and suit in equity. "Bill" means bill of lading governed l>v this act. "Consignee" means the person named in the bill as the person to whom delivery of the goods is to be made. "Consignor" means the person named in the bill as the person from whom the goods have been received for shipment. "Goods" means merchandise or chattels in course of transportation, or which have been or are about to be transported. ' ' Holder " of a bill means a person who has both actual possession of such bill and a right of property therein. "Order" means an order by indorsement on the bill. "Owner'' does not include mortgagee or pledgee. "Person" includes a corporation or partnership or two or more persons having a joint or common interest. To "purchase" includes to take as mortgagee and to take as pledgee. "Purchaser" includes mortgagee and pledgee. "State" includes any Territory, District, insular possession, or isthmian possession. "Value" is any consideration sufficient to support a simple contract. An ante- cedent or preexisting obligation, whether for money or not, constitutes value where a bill is taken either in satisfaction thereof or as security therefor. (Second) A thing is done "in good faith" within the meaning of this act when it is in fact done honestly, whether it be done negligently or not. Sec. 54. That the provisions of this act do not apply to bills made and delivered prior to the taking effect thereof. Sec 55. That this act shall take effect on the first day of January, one thousand nine hundred and thirteen. BILLS OF LADING. 11 Senator Pomerene. Before going into this subject, Mr. Chairman, I desire to say that I introduced a bill the other day on this subject winch has been approved by the committee on uniform legislation of the State bar association and shippers' association. I was going to suggest that I did not know that this matter was to be taken up to-day. I have one or two gentlemen whom I would like to have invited to appear before the committee when it comes to a consideration of the matter. The Chairman. They may appear later. STATEMENT OF SAMUEL WILLISTON, LAWYER, AND PROFESSOR OF LAW IN HARVARD UNIVERSITY, REPRESENTING PRI- MARILY THE AMERICAN BANKERS' ASSOCIATION. Mr. Williston. Mr. Chairman, and gentlemen of the committee, I represent primarily the American Bankers' Association, but act also in concert with a number of mercantile associations, members of some of which are here present, and I should like to read, for the purposes of the record, the names of the associations which recommended this bill, Senate bill 957, before the House of Representatives when the same bill was pending, as the Stevens bill, before the House, namely: The New York Cotton Exchange, the New York Board of Trade and Transportation, the American Warehousemen's Association, the ► New York Mercantile Exchange, the Galveston Cotton Exchange and Board of Trade, the New York Produce Exchange, the National Wholesale Grocers' Association, the National Poultry Association, the Merchants' Association, the New York State Bankers' Association, the Michigan Bankers' Association, the New Jersey Bankers' Asso- ciation, the National League of Commission Merchants, and the National Board of Trade. I was asked by the American Bankers' Association to become an advocate of this measure, and, in part, to draw it, because I had been the draftsman of the State bill which has been presented by Senator Pomerene. I am therefore familiar with that bill, and I am familial' with the discussions out of which it arose and the conferences of the various persons interested, which led up to its final recommendation ,,by the conference of commissioners for uniform State laws. I would like to say in regard to that bill that Senate bill 957 con- tains nothing at variance with the more elaborate bill which has b^een presented by Senator Pomerene. It contains certain matters that were deemed most vital in the State bill, so far as congressional action is concerned, but the parties whom I represent would not be dis- pleased to see instead of Senate bill 957 the other Senate bill, in so far as it may be thought that all of the provisions of that bill are consti- tutional for national legislation. I confess that as to part of them I have some doubt. But what the people whom I represent do desire to see is a legislative reform in regard to certain specific evils that have arisen in regard to bills of lading. Bills of lading are used to an enormous extent in the commerce of the country, not only as a basis for loans, but as a basis of purchase and sale and as a basis for sending goods forward on commission. The great staple crops of the country are moved by means of bills of lading. They could not otherwise be easily moved. There are three sorts of difficulties that arise in regard to bills of lading. I say this 12 BILLS OP LADING. because I have found some confusion in the minds of gentlemen in regard to this point. The first sort of evil is in regard to the contract between the shipper and the carrier and depends upon the form of the bill of lading. Now, that evil has been practically eliminated by the uniform bill of lading that has been recommended by the commerce commission. We are not dealing with that matter in the bill before us. There is a second sort of evil that arises in regard to the purchase by outsiders, neither of whom is the carrier of bills of lading or from the lending of money on them. For instance, I have a bill of lading and I borrow money on it. Now, neither I nor the person from whom I borrow is a carrier. Now, one part of the bill recommended by the Commis- sioners of Uniform State Laws applies to that sort of difficulty, and they are very important difficulties, but we have not felt sure that it was within the scope of Congress to cover that sort of difficulty. But there is a third kind of difficulty, and it is at difficulties of that sort that Senate bill 957 is aimed. This difficulty is that some other party than the shipper gets into a dispute with the carrier. This other party may be either the consignee of the bill or he may be a purchaser of the bill, but one party to the dispute is a carrier, and that fact makes it clear, I think, that it is a regulation of commerce to provide for the protection of the consignees and purchasers of bills in this sort of case. This bill, S. 957, is something that the parties whom I represents have been urging for some time. It passed the House of Eepresenta- tives in the last Congress as the Stevens bill. We had a hearing before the Senate committee then on that bill, but the time was very brief, the session was nearly over, as I remember it, and nothing could be done then. The bill has now been again introduced, but it should be remembered that it has the prestige of a favorable report by the House committee and a passage by the House of Representa- tives at the last session of Congress. The bill in substance provides for three things; first, it aims to make carriers liable on interstate bills, even if they have not received the goods. That is the most important provision. It makes carriers liable to consignees of any bill, order or straight, and to purchasers of order bills. The second important thing that the bill aims to do is to make* carriers liable on order bills which they leave outstanding after delivering all or part of the goods. Carriers are also required to mark bills as duplicates, if they are duplicates, and are made liable if they issue, without so marking them, more than one bill for the same shipment. There is also a provision in regard to alteration and a few provisions as to the form of the bill. But the vital question on which discussion has always centered in the past in regard to this bill, and the question, I suppose, on which the chief contention is bound to arise now, is in regard to the proposition of the bill to make the carrier liable even if he does not receive the goods for bills of lading which have been issued by one of the agents of the railroad authorized to issue bills of lading. The law laid down by the Supreme Court of the United States following an early English case, is that under these circumstances a carrier can say that the agent who issued that bill had no authority to issue a bill of ladmg unless he had received the goods. I venture to say, in spite of the authority of the Supreme Court of the United BELLS OF LADING. 13 States, that it seems to me that that was a mistaken view. I should not venture to say that if there were not the authority of many State courts in support of the contrary opinion ; if it were not true that on the continent of Europe, where the same sort of question occurs, the law is uniform that the carrier is liable. But the Supreme Court of the United States, and a majority of the States which have decided the question, do hold the carrier' harmless, and we seek to hold the carrier liable. We say that there is no more reason why a carrier should not be responsible for the act of his agent in this particular than why any man should not be responsible for the act of his agent in the course of his business, and especially is this true because of the way these bills are generally issued. These bills, which may be called false, or fictitious bills, are issued in two ways, as a matter of fact. They are issued, first, as a pure fraud out and out. The railroad agent, generally in conspiracy with a fraudulent shipper,' issues one of these bills on which the fraudulent shipper gets money, which he may or may not divide with the railroad agent. That is one kind of a case, but that is not the common case. The common case of false or fictitious bills involves what we call accommodation bills. The railroad agent issues the bill of lading for a shipment of goods that the shipper intends to ship, and the railroad agent expects to receive, but the bill of lading is issued beforehand in order to oblige or to accommodate the shipper. That sort of thing is done by railroads to get business, and though we are unable to prove in any particular case that the railroad agent is authorized to do it, we do see in many cases railroad agents who have done it keep their jobs. Now, certainly while that sort of thing goes on unchecked, there is every reason for holding the railroad liable. This is no new thing — this proposed legislation. The thing that has seemed to us evil has seemed to others evil, and especially I would like to refer to the act of the Commissioners on Uniform State Laws. They are an entirely impartial body of persons, and at the time I acted as draftsman for them I had no retainer from any interests to draw the bill one way rather than another. I have got my retainer for this biU because of my views, which are expressed in the other bill — in the State bill; and even if I had been prejudiced one way or another in the drafting of the State bill, the commissioners from sev- eral States who presented that bill were no mere dummies. They were able lawj^ers, with opinions of their own. Numerous confer- ences were held in which the views of railroad attorneys, as well as everybody else, were sought and asked, and the result is the bill which, after four or five years of consideration, was presented, and which does impose upon the railroads the sort of liability that we seek in Senate bill 057. This State bill has already been passed in nine States, including some of the great commercial States of the country — Connecticut, Illinois, Iowa" Massachusetts, Maryland, Michigan, New York, Ohio, and Pennsylvania. This State bill, however, is not the only attempt which States have made to remedy the same evils which we seek to remedy by the bill now under consideration. In States which origi- nate shipments, as well as in States which receive shipments, the same effort has been made. In Alabama, for instance, and Louisiana in the South, where ship- ments originate, in Missouri, Pennsylvania, Washington, Minnesota, the same sort of legislation has been attempted. 14 BILLS OF LADING. The State legislation on the subject is open to one great disadvan- tage. A State necessarily only has power to enact rules in regard to bills which are issued in that State. Accordingly, when New York passes or Ohio passes, as each of the States has passed, the bill pre- sented before you by Senator Pomerene, that State law can only govern bills of lading issued in New York or in Ohio, respectively. And as a great quantity of the bills dealt with in New York City have been issued all over the country, that State law in New York is valu- able, but not nearly so valuable as it ought to be. Therefore, we need a law which shall cover the whole United States and cover interstate and foreign bills. Now, in regard to the practical cases that come up, the practical situations which make it necessary for us to seek this legislation, there are other gentlemen present who are engaged in mercantile and in the banking business who are much more familiar with the practical appli- cations of the matter than I am whom I should like to ask to address the committee briefly. The Chairman. Just a minute. Senator Brandegee, do you desire to make any inquiries ? Senator Brandegee. What was the case in the Supreme Court that you alluded to ? Mr. Williston. It is called the Friedlander case — Friedlander v. Texas & Pacific Railroad Co. (130 U. S., 416), decided in the year 1888. There are other cases to the same effect, and the majority of the committee of the House of Representatives in its report summed up the matter as to the existing law as follows : The common-law rule has been followed by the Supreme Court of the United States and by the courts of Massachusetts, Ohio, Louisiana, Minnesota, North Carolina, Mary- land, Alabama, Arkansas, Mississippi, and Washington. Senator Brandegee. Will you make that report a part of your remarks so that it may appear in the record ? Mr. Williston. I will. Senator Brandegee. What committee was it from ? Mr. Williston. It was the Committee on Interstate and Foreign Commerce. Senator Brandegee. What is the date of that report? Mr. Williston. June 1, 1910. Senator Brandegee. Do they discuss there the question of whether the regulation of bills of lading is a regulation of commerce, or is that admitted ? I do not mean in that case, but I mean in the report that you have. Do they discuss that question or is it not in question ? Mr. Williston. They did not discuss it at length, certainly. The minority report, however, discusses it. Senator Brandegee. I would like to have the minority report inserted in the record also, so that we may see the text of each together. Mr. Williston. The whole matter shall be put in the record. The majority and minority reports of the Committee on Interstate and Foreign Commerce of the House of Representatives are as follows: [House Report No. 1428, Sixty-first Congress, second session.) The Committee on Interstate and Foreign Commerce, to whom was referred the bill (H. R. 25335) relating to bills of lading, having considered the same, report thereon with a recommendation that it pass. The provisions of the bill are substantially as follows: Section 1 defines an order bill of lading and prescribes its contents. BILLS OF LADING. 15 Section 2 defines a straight bill of lading and prescribes its contents. Section 3 provides that carrier shall be liable to any person injured or damaged on account of failure to comply with the above provisions as to either an order or straight bill of lading. Section 4 contains the substance of the measure and provides that whenever a carrier, first, shall issue a bill of lading before the whole of the property described therein has been actually received, or, second, shall issue a second or duplicate bill of lading without properly marking it "duplicate," it shall be estopped as against the person holding or the owner of such bill of lading, to deny the receipt of the prop- erty or assert that a former bill of lading remains uncanceled for the same property; and shall be liable to the consignee or owner of the bill of lading for damages caused by its failure to observe the provisions of the section. The proviso to this section relieves the carrier from liability wherever a bill of lading is issued and the goods are loaded and described by the shipper. Section 5 provides that in case a carrier delivers property described in an order bill of lading without requiring its surrender or cancellation, in whole or in part, such carrier shall be liable for damages caused by reliance upon such outstanding bill. Section 6 relieves the carrier from liability wherever property covered by bill of lading is removed from the carrier by process of law or proper disposition of perish- able, hazardous, or unclaimed gocds. Section 7 makes void any alteration of the bill of lading without authority from the carrier, but provides that such bill of lading shall be enforceable according to its original tenor. This measure thus covers four main features, namely: (1) It provides for a lia- bility of the carrier upon bills signed by its agent, although the goods have not been received in whole or in part; (2) it provides for a liability for the negligence of the carrier upon order bills of lading where the goods have been delivered and the bill left outstanding; (3) it provides that altered bills without authority shall be good for their original tenor; and (4) it requires the printing of "order of" on order bills, the omission of the words "not negotiable" from such bills, and the stamping upon straight bills of the words "Not negotiable," and provides a liability in damages to anyone suffering from a violation of these provisions. One of the great dangers and causes of loss in connection with bills of lading has been their issue by authorized agents, either fraudulently or as an accommodation to the shipper, before or without the goods having been received. When the holder for value of the bill has looked to the carrier for the goods he has been met with a statement that the goods have never been received and a denial of liability on the part of the carrier under the rule of the common law that the agent had no author- ity to issue bills where goods are not actually received, and that the carrier was not liable for the unauthorized acts of his agent. The common-law rule has 1: een followed 1 .y the Supreme Court of the United States and by the courts of Massachusetts, Ohio, Louisiana, Minnesota, North Carolina, Maryland, Alabama, Arkansas, Mississippi, and Washington. But in Maryland, Alabama, Arkansas, Louisiana, and Mississippi statutes have been enacted to estab- lish the same rule as in the pending bill. The courts of New York, Pennsylvania, Kansas, Tennessee, Illinois, Nebraska, and possibly Missouri hold that whenever a station agent of a railroad issues b ills of lading for goods never received and the bills come in to the hands of an innocent Purchaser for value the carrier is estopped from denying the receipt of the goods. n Massachusetts, Ohio, and Minnesota, and probably other States, statutes exist making it a crime for an agent to knowingly issue a fictitious b ill. The commissioners on uniform State laws have submitted a uniform b ill-of -lading law which contains provisions similar to this measure , which with slight amendments have been enacted m the States of Michigan, Minnesota, Washington, and Wyoming. The State statutes and rules of law are conflicting, inadequate, and uncertain, which result in injustice and injury to the producing and shipping interests of the country. The total annual transactions under the bills of lading in the United States amount to fully $3,000,000,000, and of this probal ly 90 per cent would be interstate shipments. In section 20 of the act to .regulate railroads, approved June 30, 1900, known as the "Hepburn Act," Congress did legislate upon the liability under interstate bills of lading as between shippers and carriers. This measure extends such legislative recognition of liability of the carrier, for its own wrongful acts, to innocent holders for value of its bills of lading. That the public welfare would be subserved by this legislation is well stated in the opinions of the courts of Kansas and Minnesota. 16 BILLS OF LADING. In Bank e. Railroad (20 Kans., 519) Chief Justice Horton gives a convincing state- ment of the reasons why the commercial holder of a fictitious bill should be protected. He says: "Our State is a great producer of grain, large amounts of which seek markets out- side of its boundaries. The means of its transportation are mainly limited to rail- roads, and commercial transactions by grain dealers extend to millions each year. The great mass of these products, when started to eastern markets, is purchased and paid for through bills of lading. The custom of grain dealers is to buy of the producer his wheat, corn, barley, etc., then deliver the same to a railroad company for shipment to market. The railroad company issues to the shippper its bill of lading. The shipper takes his bill of lading to a bank, draws a draft upon his com- mission merchant or consignee against the shipment, and attaches his bill of lading to the draft. Upon the faith of the bill of lading, and without further inquiry, the bank cashes the draft and the money is thus obtained to pay for the grain pur- chased, or repurchase other shipments. In this way the dealer realizes at once the greater value of his consignment and need not wait for the returns of the sale of his grain to obtain money to make other purchases. In this way the dealer with a small capital may buy and ship extensively; and while having a capital of a few hundred collars only, may buy for cash and ship grain valued at many thousands. "This mode of transacting business is greatly advantageous both to the shipper and the producer. It gives the shipper who is prudent and posted as to the markets almost unlimited opportunities for the purchase and shipment of grain and furnishes a cash market for the producer at his own door. It enables the capitalist and banker to obtain fair rates of interest for the money he has to loan and insures him, in the ways of bills of lading, excellent security. It also furnishes additional business to railroad companies, as it facilitates and increases shipments of produce to the markets. A mode of business so beneficial to many classes ought to receive the favoring recog- nition of the law to aid its continuance." In Ratzer v. Burlington the Supreme Court of Minnesota said: "A vast portion of the produce of this country is moved from the agricultural dis- tricts to the commercial centers and the seaboards by aid of advances made on the security of such bills of lading. A well-established custom has grown up in com- mercial circles by which such bills of lading are treated as the symbols of title to the property in transit; are taken as security for money advanced and indorsed and delivered a«= a transfer of the property This is well understood by the railroad com- panies and everyone else. To allow the railroad companies to ignore this custom would be to destroy the custom itself. This would cause great hardship, revolutionize business methods, and drive all buyers and shippers of small means out of the busi- ness, as they could no longer give ready and available security on commodities in transit, and thereby turn their limited capital sufficiently quickly and often to enable them to do business. "This, in turn, would destroy competition and leave the business in the hands of a few concerns with unlimited capital. Neither have the railroad companies any right to ignore this custom . _ On the contrary, it must be held that these companies have been doing business with reference to this custom as much as the slippers themselves, and the consignees, banks, commission merchants, and others who are continually advancing money on the faith of the security of these bills of lading. The effect of this custom, independent of statute, is to make bills of lading to some extent and for some purposes negotiable, and to give superior rights to innocent transferees in the usual course of business." Many cases have been brought to the attention of your committee where bills of lading have been improvident issued by the carriers either for property partially received or not received at all, or suffered to be taken from the control of the carrier without any attempt by the carrier to properly care for the same or notify the holders of the billsoi lading, or without the surrendering of the original bill of lading or properly marking the duplicate bills of lading. Verv serious losses have occurred, to such extent as to imperil the value of bills of lading for use as collateral security in the movement of crops and commodities. This condition threatens to be so serious as to interfere with the procuring and use of sufficient funds to move crops during the present year; and some such extension of legislation as this may be necessary to compel greater \igilanoe on the part of the carriers to give confidence to merchants and investors and provide the means for pre- venting: congestion of freight at the producing points in the "West and South-. It has been shown to your committee that in some sections and on some railroads a practice has been permitted for some local agents at points of severe competition to issue accom- modation bills of lading where the goods had not been wholly received or brought under the full control of the carriers. This custom is extremely reprehensible, conduces to favoritism and fraud, and results in serious injury to the general public. These BILLS OF LADING. 17 provisions of the bill need not be onerous to the carrier, but should help greatly in pro- viding sufficient facilities to carry on the vast business of the country. The pending bill does not affect foreign or ocean traffic, does not attempt to make bills of lading negotiable instruments, and contains no provisions for criminal penalties, which are and should be cared for by the various States. VIEWS OF THE MINORITY. Being unable to concur with the favorable recommendation accompanying the report of this bill, the undersigned respectfully submit the following suggestions: AN OLD SUBJECT. The subject matter of this bill has been before Congress for several terms. The old bill was lately amended by our committee in several particulars, including the omission of all criminal provisions and all reference to foreign business. After being so amended it was rewritten and reintroduced in its present form. CONSTITUTIONAL PARTS ALREADY PROVIDED FOR. In so far as it is within the power of Congress to enact the provisions of this bill into law, the subject matter is already adequately provided for by existing statute. It will be observed that the bill reverses the usual order of dealing with transportation as the basic fact to be regulated, and treating the bill of lading as only an incident to evidence the fact. This bill deals directly with the incident itself, regardless of the existence or absence of any actual transportation to authorize any bill of lading. That is in marked contrast with existing law in the Hepburn amendment referred to in the majority report. It makes the following requirements: "Any common carrier, railroad, or transportation company receiving property for transportation from a point in one State to a point in another State shall issue a receipt or bill of lading therefor and shall be liable to the lawful holder thereof for any loss, damage, or injury to such property caused by it or by any common carrier, railroad, or transportation company to which such property may be delivered or over whose line or lines such property may pass, and no contract, receipt, rule, or regulation shall exempt such common carrier, railroad, or. transportation company from the liability hereby imposed." It is understood that the carriers have generally adopted a form of bill of lading approved by the commission which is satisfactory to the parties to the shipment, consignor, carrier, and consignee. That uniform bill of lading is also capable of meet- ing all the requirements of shippers and the discounting banks, which are promptly and intelligently adapting this uniform bill of lading to their purposes, as shown by ' the following circular of instructions being sent out by them to shippers: "No loans will be made by this bank secured by bills of lading unless they are on the uniform bill of lading as approved by the Interstate Commerce Commission June 27, 1908, and after it has been verified by the bank located at the point of issue, or acknowledged by the local freight agent before a notary public or commissioner of deeds, or guaranteed by a surety company. Please let us know whether in your opinion it will be practicable for you to get your bills of lading so verified." The reference to a surety company is so ridiculous as to be taken as a joke. Local bankers accepting these bills and drafts can easily protect themselves and all other banks against fraud. Being in the immediate locality with the carrier's agent and the consignor, it would require as little care as is usually exercised in making ordinary loans and discounts. The consignor usually ships the goods for delivery on a sale already made or to be negotiated. For convenience, and to secure prompt payment of his purchase money, he draws a sight draft, attaches it to the bill of lading, and deposits both in the local bank, which transmits them to its correspondent bank at the point of destination, which delivers the bill of lading when the draft is paid. In prospect of collecting the draft, the bank often advances to the consignor money on the faith of the ship- ment. There is no trouble about that if the initial parties are vigilant and the original equities are not altered or disturbed. COMPLAINTS WHICH THE BILL SEEKS TO REMEDY. The banks which make advances on the shipments complain of occasional loss from two causes: First, the carriers deliver to the wrong party, and when the indorsed bill of lading is presented demanding the goods they are not forthcoming; second, sometimes the bill of lading is untrue in its recitals. Although issued m connection 42808°— S. Due. 650, 62-2 2 18 BILLS OF LADING. with actual shipment, the goods had not been completely delivered to the carrier, and the bill was prematurely issued to accommodate the shipper. Sometimes there is no shipment made nor contemplated, but by collusion the agent of the carrier issues to a confederate a paper purporting to be a bill of lading but based on no fact of transportation, no freight having been delivered to the carrier. For these troubles the banks present this bill. As to the delivery at destination, the matter is undoubt- edly within the jurisdiction of Congress, because there is actual transportation, but it is already provided for in the paragraph quoted, requiring delivery to the lawful holder. , , •„ There are already rules and regulations on the subject, and the railroad bill which lately passed the House carries an amendment clothing the Interstate Commerce Commission with jurisdiction over the whole subject of bills of lading. Due dili- gence will in most cases avert mistakes and inconvenience at the point of destination. The change in this bill proposed would involve confusion, delay, questions of demur- rage, storage, and notice. The bill does not sufficiently provide for safeguarding these matters. Under the uniform bill of lading now in use, no delivery is made without production of the bill of lading. The case of the bill of lading issued prematurely, or carelessly, as an accommo- dation, or convenience, pending real delivery into the custody of the carrier of an actual shipment of interstate transportation, is also within the jurisdiction of Con- gress, but it is also fully covered by existing law against discrimination. Such transactions are plain violations of the law for which adequate remedies are provided, both civil and criminal. They should be punished, whether loss results or not. REAL PURPOSE OF BILL. The real purpose of this bill, however, is to find an easy remedy or preventive for loss by the last-described case of discounting a draft attached to a spurious bill of lading issued collusively and fraudulently by an agent of the carrier delivered to a confederate not based upon any actual shipment in custody or in prospect. It pro- vides that when any agent of a carrier, under whatever circumstances or cause or collusion, without receiving any freight for the carrier to transport, shall issue a paper falsely stating that goods have been received, the carrier shall be liable on that paper to any person who may purchase it without notice of its character. Is it right for us to make that provision? In the first place, the agent in issuing that paper is not in the discharge of his duty, has no authority, express or implied, to issue a bill of lading except when he has received freight. It is entirely outside of his usual line of duty, and without any authority to write and issue any paper save a memorandum of the reception of freight. Under the common law, as recognized by the majority report, the reception and custody of the goods constitute the foundation of the contract of affreightment. There could be no valid paper evidence of the foundation fact that never existed. It is' also correctly stated that the Federal courts follow that rule. But there is another insurmountable trouble, which the proponents of this bill have tried to talk around for years, but have never surmounted it nor avoided, evaded, nor explained it. It still stands. Our jurisdiction, conferred by the Constitution, is to regulate interstate commerce. The subject of our jurisdiction is, in this particular, the transportation of commodities from one State to another. If such transportation exists, we can regulate it, and regulate all the evidences and memoranda and tokens about it, but if there is actually no offer of a commodity for transportation there is no instance or basic fact of interstate commerce. If nothing is done but the execution of a false bill of lading by one conspirator and delivered to another, that is not interstate commerce: that is merely local rascality. No such case has ever occurred in this Union, or ever will occur, which can not easily be reached and punished by local authority. When we insisted as one argument against this bill that it attempted to create Federal offenses to be tried and punished in Federal courts contrary to the Constitution, when local authority had exclusive jurisdiction; when our committee, by the consent of the proponents of the bill, struck the criminal features they were reminded that constitutional warrant to deal with a subject does not depend on or differentiate between civil and criminal law. If it is unconstitutional to make that act a Federal crime and punish it as derogatory to inter- state commerce, it is alike unconstitutional to provide as to the liability on the civil side of the court growing out of the transaction. There is no rational line of distinc- tion. We have no authority to legislate about that paper, either civillv or criminally, because no freight being received the execution and uttering of the false paper, bas d on no act or intention or transportation, is merely a local crime for local authority to deal with. If we had jurisdiction to deal with that transaction, we would certainly resist the amendment (made in the old bill) striking out the criminal punishment of the guilty parties, both the agent and his confederate. BILLS OF LADING. 19 To make the carrier liable and at the same time exempt from punishment the guilty- perpetrators, doubtless insolvent, would tend to encourage rather than to deter com- mission of the crime. There is another consideration which can not be ignored. Although nobody appears to take much interest in this fight except the banks on one side and the railroads on the other, yet they are by no means the only people involved or to be considered. The interest of the great public must be conserved. Sound public policy must be upheld. We are compelled to have banking facilities, and ought to have better than we now enjoy; but we have a Committee on Banking and Currency, and measures affecting banking operations ought to profess that purpose honestly and go to the proper committee. Our committee is concerned with the question of transportation. The transportation companies are intended to receive, transport, and deliver passengers and property. We have been trying for years, with only partial success, to hold them up to the performance of those duties. It is now proposed, in order to make it a little easier and more certain for the banks to make their discounts secure, to require the carriers to assume another duty. They must provide their shippers with bankable, negotiable paper, regardless of its effect upon their performance of their proper duties. Their efficiency as carriers might thereby be impaired and the difficulty of regula- tion as such carriers increased to the injury of the shipping public, which is entitled to rely on banks for banking facilities and on common carriers for transportation. BILL WOULD LEGALIZE REBATES. The public is also concerned about the prospect of a fruitful field for rebates, which the provisions of this bill would unquestionably open up and legalize. Honoring false bills of lading would operate as a rebate. Allowing "shippers' load and count" would permit rebates and discrimination, and violate the pet plea of "uniformity.'' WOULD COMPEL PAKTIES TO MAKE CONTRACTS. Although disclaimed by the majority report this bill would compel parties to enter into contracts against their will. Our policy has been to require carriers to perform duties, prohibit them from limiting liability or exempting themselves from duty by statements on bills of lading. We compel them to issue proper evidence of their undertakings and transactions. We have never attempted to compel them to enter into contracts. True, the language of this bill provides that "whenever issued" the bill shall contain certain things, but existing law compels the issue of a bill or receipt as evidence of every shipment. This bill, defining the only two varieties known or possible, declares what they shall contain, thereby directing the compulsion of exist- ing law into compelling the kind of contracts desired. THE USUAL CHIMERICAL PLEA OF UNIFORMITY. There is nothing in the argument about uniformity. The laws, legal principles, and adjudications governing these questions are as well settled, understood, and as nearly uniform as those relating to any other subject. FORGED BILL NOT COMMERCE. The other argument, that we can hold a carrier liable for a forged or fraudulent bill of lading not based on actual shipment, because the Supreme Court said "that com- merce included intercourse," is equally unhappy. If any gentleman will take the pains to read the opinion from which that is quoted, and read the facts on which the opinion is rendered, he will require no argument to convince him that the court had in mind persons going about from State to State in actual interchange of visits and transactions, walking across bridges, riding in vehicles, going from State to State for various purposes, coming legitimately in contact with one another, and not the false and clandestine commission of a crime within one State by two persons, in which they execute and issue a false and fraudulent paper, doubtless a crime under the laws of any State in the Union. BILL ENTIRELY OMITS FOREIGN BUSINESS, WHICH WAS REPRESENTED TO OUR CON- STITUENTS AS IMPORTANT FEATURE. The most peculiar feature about it is this: Most of the people who have written to us have claimed this legislation to be essential to move our crops to Europe; that the export of cotton could not be carried on without this legislation. Recent disclosures 20 BILLS OP LADING. of defalcations about people who have swindled foreign firms through false and fraudu- lent bills of lading have inspired the only demand the people have sent us for this legislation, and yet all foreign business has been omitted from this bill. Whether there is a disposition to hamper the exportation of cotton, to narrow the market, and depress the price, or whether there, is a patriotic disposition to take care of home banks, and skin the foreigner, we are unable to judge, but why the provisions of this bill should be insisted on as to domestic transactions and the provisions of the old bill as to all exports and dealings with foreigners omitted, is utterly incompre- hensible to us, especially when it is sought to influence our action by representing to our constituents and having them write us on the theory that the price of cotton, depending on facility of export, could not be maintained without this legislation. There is no justification for this bill; there is no business necessity for it; there is no danger it seeks to avoid which can not be averted by proper diligence; there is no act aimed at by it that can not be reached and prevented or punished by existing law, either Federal or local. Respectfully submitted. W. C. Adamson. C. L. Bartlett. Mr. Williston. We also submit the opinion of the Hon. Henry W. Taft on the constitutionality of the law, and if the committee feels a doubt as to the constitutionality I should like to say, briefly, a very few words in regard to that. The opinion is as follows: Opinion op Henry W. Taft, of Strong & Cadwalader, New York City. I understand that my opinion is desired upon the following question, viz: Whether, if the bankers procure an act of Congress making carriers responsible in cases where their agents, having general authority to issue bills of lading for merchan- dise received, fraudulently issue such bills for merchandise not received, the courts (particularly the United States Supreme Court, which would be the ultimate author- ity) might not hold the act to be a mere arbitrary attempt on the part of Congress to make one person liable for the unauthorized unlawful act of another, and therefore invalid. The question of the liability of a carrier to an innocent third party upon a false bill of lading has been frequently considered in the courts of England and of this country; but the decisions as to the correct rule of law upon the subject have not been uniform. In England it was held, in 1851, that the carrier was not liable upon a false bill of lading (Grant v. Norway, 2 E. L. & E., 337); and this rule has been adopted by the Supreme Court of the United States and the highest courts of the States of Alabama, Indiana, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, North Carolina, Ohio, and Washington. The contrary doctrine prevails in the States of Illinois, Kansas, Nebraska, New York, and Pennsylvania. In order to settle the law, the States of Louisiana, Alabama, Arkansas, Maryland, Mississippi, and Missouri have enacted statutes with the purpose (not always successful on account of the interpre- tation of the statutes adopted by the courts) of imposing upon the carrier a liability upon false bills of lading. While the effect of these statutes has been considered by the courts in a number of cases, the question of their constitutionality has not been raised or decided. We are not therefore directly aided by the decisions in solving the question under consideration. It is not without some significance, however, that in no decision has a doubt been suggested that the statutes were constitutional. I come, then, to the question of the power of Congress to adopt the proposed legislation. Article 1, section 8, of the Federal Constitution provides as follows, viz: "Congress shall have power * * * to regulate commerce with foreign nations, and among the several States, and with Indian tribes * * * "To make all laws which shall be necessary and proper for carrying into execution the foregoing powers and all other powers vested by this Constitution in the Govern- ment of the United States or in any of the departments or officers thereof." _ An examination of numerous decisions of the Supreme Court leads to the conclu- tion that the general subject of the proposed legislation is clearly within the power of Congress under this clause. A bill of lading" is simply an instrumentality under which an interstate transaction is undertaken. It relates to and is one of the ele- ments of commerce among the States. Such commerce "comprehends * * * intercourse for the purposes of trade in any and all its forms, including transportation, BILLS OF LADING. 21 purchase, sale, and exchange of commodities between citizens of different States, and the power to regulate it embraces all the instruments by which such commerce may be conducted" (Hopkins v. U. S., 171 U. S., 597). "A bill of lading or some written instrument of the same import is necessarily always associated with every shipment of articles of commerce from the ports of one country to those of another. " (Pairbank v. U. S., 181 U. S., 283.) A more serious question remains, however, viz, whether the proposed exercise of the power would be a violation of the fifth amendment of the Federal Constitution, which provides that "no person shall * * * 'be deprived of life, liberty, or prop- erty without due process of law." It would not be a violation of that amendment unless it amounted to an attempt arbitrarily and unreasonably to regulate legal rights. But if the proposed legislation is merely enacted pursuant to the general power wnich every government has to deal with the regulation of personal and property rights in the interests of the public at large and for the welfare of the State, it is hot a violation of the amendment. I am of the opinion that such is the character of the proposed act, and Congress will pass it, if at all, because in its discretion it concludes that the disturbance of common-law rights is less important than that stability should be given to an instrument of commerce of such wide circulation as the bills of lading of com- mon carriers. Acts of a similar character have frequently been upheld. Under an act of Congress, passed 1851, the liability of shipowners for loss or damage to goods was limited. Here was clearly a change of the legal relation between shipper and carrier; but this act was declared within the power of Congress. The following instances of other statutes which have been held to be within the legislative power may also be mentioned, viz: One imposing a liability for damages upon a railroad corporation caused by a failure to fence its railrood (Missouri Pacific Ry. v. Humes, 115 U. S., 512); a statute of Indiana changing the rule of the common and maritime law by imposing a civil liability in favor of the personal representatives of the deceased upon any person causing the death of another (Sherlock v. Ailing, 93 U. S., 99); a statute of Utah imposing upon any person driving a herd of cattle over a public highway on a hill- side a liability for damages whether he was negligent or not (Jones v. Brim, 165 U. S., 180) a statute of Missouri imposing a liability upon railroads for injury of property by fire from locomotives, whether there was negligence or not (St. Louis, etc., Ry. v\ Matthews, 165 U. S., 1); a statute of Nebraska making railroads insurers of passen- gers, the rule being applied in a case where the plaintiff sought to recover^ damages for injuries received in an accident which was due to criminal act of third party (Chicago & R. I. Ry. v. Zernecke, 183 U. S., 582); a statute imposing upon a railroad company an absolute responsibility for damages to the owner of any property injured or destroyed by fire, communicated directly or indirectly by locomotive engines in use upon its railroad, irrespective of the question whether the railroad company or its agents were in the exercise of due care (St. Louis & San Francisco R. R. Co. v. Mat- thews, 165 U. S., 1). In Pierce v. Van Dusen (IS Fed. Rep., 700) Justice Harlan, speaking of a similar act, said that undoubtedly the whole subject of liability of interstate railroad companies for the negligence of those in their service may be cov- ered by national legislation enacted by Congress under its power to regulate com- merce among the States. In Orient Ins. Co. v. Daggs (172 U. S., 553) it was held that a statute which created a conclusive presumption that the amount for which property was insured, less any depreciation since the date of the policy, was the actual value of the property, and prohibiting stipulations in a, policy which would create a different result, was not unconstitutional. I do not think that the proposed legislation would be a more arbitrary or unreason- able exercise of legislative power than that in any of those cases. The right of exemption from liability upon a false bill of lading at most a right based upon a rule of common law, but it was said by Chief Justice Waite, in. the leading case of Munn v. Illinois (94 U. S., 113-134): "But a mere common-law regulation of trade or business may be changed by statute. A person has no property,-no vested interest, in any rule of the common law. That is only one of the forms of municipal law, and is no more sacred than any other. Rights of property which have been created by the common law can not be taken away with- out due process; but the law itself, as a rule of conduct, may be changed at the will, or even at the whim, of the legislature, unless prevented by constitutional limitations. Indeed, the great office of statutes is to remedy defects in the common law as they are developed, and to adopt it to the changes of time and circumstances. ' ' And Judge Bradley, in The Lottawanna, 20 Wallace, 558, at page 571 , said : "It can not be supposed that the framers of the Constitution contemplated that the law should forever remain unalterable. Congress undoubtedly has authority under 22 BILLS OF LADING. the commercial power, if no other, to introduce such changes as are likely to be needed." In The Irrawaddy, 171 U. S. Reports, 187, at page 193, the Supreme Court applied the same rule in applying the provisions of the so-called ''Harter Act," which pre- scribed, among other things, what was to be contained in bills of lading for goods car- ried in ships and changed the law theretofore prevailing in relation to the liability of shipowners under such contracts. (See also The Delaware, 161 U. S., 459.) It is sometimes loosely stated that legislation which interferes with "vested rights" is unconstitutional in that it deprives persons of property without due process of law; but this is not different from saying that an individual is not to be deprived of his property arbitrarily and unreasonably and is therefore covered by what I have already said. (Cooley on Constitutional Limitations, 4th ed., p. 443.) As the courts of States of large commercial importance have not only found the rule proposed for adoption consonant with the principles of the common law, but also practicable and just in its application, it can not be presumed that the Supreme Court will find it so shocking to the sense of justice of the community at large as to be regarded as unreasonable or oppressive. The Supreme Court has itself established rules in similar cases which seem to the ordinary mind, from the standpoint of abstract justice, not essentially different in principle and effect. For instance, the court has held that it could not be shown against the bona fide holder of coupons that the bonds from which they were detached had been fraudulently issued, saying that "when a loss is to be suffered through the misconduct of an agent, it should be borne by those who put it in his power to do the wrong rather than by a stranger. " ( County of Macon v. Shores, 97 U. S.. 272.) In Hoover v. Wise (91 TJ. S., 312) a principal was held liable for the fraudulent acts of a subagent. In Stockwell v. United States (13 Wallace, 531) the other members of a firm were held liable in double damages for the act of a partner in smuggling goods for the firni, although they had no knowledge of the transaction. The proposed law will simply create a new rule of action, and any possible injustice must l>e guarded against by the carrier by the use of greater care in the selection and supervision of its agents. In that respect the company has the means at hand to reduce the risk, while under the rule sought to be superseded the business community has no other way to protect itself. A law which will create in such a large class as those who become holders of bills of lading confidence and stability in commercial trans- actions, even at the cost of increasing the risk on the part of another class, particularly where the latter class is composed ol corporations eneased in interstate trade expressly subject under the Constitution to regulation by Congress, might clearly, I think, appear to < 'engross to be a measure in the interests of the public welfare, and if Congress should act I am of the opinion that the Supreme Court would not revise the legislative discretion. I have not examined the proposed act in order to advise whether it is sufficiently explicit to accomplish the desired purpose, as I suppose your regular legal adviser has satisfied himself upon this point. [Sixtieth Ccragress.jfirst session; before the Committee on Interstate and Foreign Commerce.] Brief as to the Power of Congress Under the Constitution to Enact Section 20( of the Bill H. R. 14934, to Amend an Act Entitled "An Act to Regu- late Commerce," by Henry W. Taft. Section 20i of the proposed bill prohibits the issuance of a bill of lading until the whole of the property described therein shall have been actually received by the carrier. It further provides that 'the issuing carrier shall be liable to any bona fide holder for value of any bill of lading issued by such carrier or his agent in violation of the provisions of this section, who nun' lie injured thereby, for all damages, immedi- ate or consequential, arising therefrom." The question has arisen as to whether these provisions are within the power of Con- gress under Article 1, section 8, of the ( 'onstitution, which provides that Congress "shall have power * * * to regulate commerce with foreign nations, and among the several States and with the Indian tribes." The doubt implied in this question is based upon the suggestion that until the property mentioned in a bill of lading has been delivered to the carrier, interstate commerce can not begin and the entire trans- action will be local and subject onlv to Slate jurisdiction. Two classes of cases may arise in which the proposed section 20 1 would be applicable, lhese are (1) where the agent of the carrier and the shipper enter into a contract of transportation by the delivery and acceptance of a bill of lading describing goods ve not been actually delivered to the carrier, and the which are in existence but have transportation of which the carri . taken in accordance with the conditions of the bill Tfladi'n&'andVsTwhere! forThe *!t°l P °I t ^° n jL whic il h ! 1 Carrier ,?; I ? d tlle , sl }ippw. in good faith expect to be under- BILLS OF LADING. 23 purpose of creating a fraudulent instrument on which to procure credit, a bill of lading is issued by the agent of the carrier to the nominal shipper describing goods which have no existence. If Congress has, under the Constitution, power to deal with either of these classes, it would be justified in enacting Section 20i. 1. Where the carrier and the shipper enter mto a legal contract for the shipment of goods which are in existence although not actually delivered to the carrier, an act has been done preliminary to actual interstate transportation and is one of the steps gen- erally priliminary thereto. While it is true that the goods are not in the physical possession of the carrier, the legal rights of the carrier and the shipper with reference to them have been definitely fixed. The shipper, on the one hand, could compel the carrier to transport the goods or recover damages for its failure so to do; while, on the other hand, the carrier could enforce his right to collect the freight charges. Thus the interstate character of the transaction is dependent not alone upon the intention of the parties, but a step has been taken which usually precedes every shipment across the State line and has a definite legal significance. By the delivery of the bill of lading, the carrier, for the purposes of transportation, has constructive possession of the goods. Interstate commerce is not the mere handling, in the physical sense, of the object delivered to the carrier. "Commerce in its simplest signification means an exchange of goods_; but in the advancement of society, labor, transportation, intelligence, care and various mediums of exchange, become commodities and enter into commerce; the subject, the vehicle, the agent, and their various operations, become the objects of commercial regulations" (Gibbons v. Ogden, 9 Wheat. 229). And in the same case Chief Justice Marshall said that commerce was "intercourse" and "is regulated by prescribed rules for carrying on that intercourse." Furthermore, commerce among the several States is a "unit" (Northern Securities Case, 193 U. S. 336), and "The test of power is not merely the matter regulated, but whether the regulation is directly one of interstate commerce" (Employers' Liability Cases, 207 TJ. S. 463, at p. 495). Acts which are appropriate and necessary although preliminary to actual transporta- tion among the States have always been regarded as being themselves of an interstate character and as within the power of Congress to regulate. This has been held par- ticularly with reference to bills of lading, because they are instrumentalities of the commerce to which they refer and, therefor, subject to regulation by Congress (Almy v. State of California, 24 Howard 169; Fairbank v.'JJ. S., 181 U. S. 283; Hopkins D. TJ. S., 171 U. S. 578; the lottery case, 188 U. S. 321). The power to regulate commerce com- prehends "all the instruments by which such commerce may be conducted" (Hop- kins v. U. S., 171 TJ. S. 597). Congress has already in the Harter Act (Feb. 13, 1893) exercised the power now questioned. That act, among other things, provides that a bill of lading shall be prima facie evidence of the receipt of the goods described therein. It has been several times before the Supreme Court and its constitution- ality has never been questioned. (See Isola di Procida, 124 Fed. Rep. 942.) In Swift & Co. v. United States (122 Fed. Rep. 531), Judge Grosscup said that com- merce included "the intercourse — all the initiatory and intervening acts, instrumen- talities and dealings— that directly bring about the sale or exchange. * * * The whole transaction from initiation to culmination is commerce. * * * B.ut it is not transportation that constitutes the transaction interstate commerce." 2. The question whether the second class of cases, where no transportation takes place or is intended ever to take place, comes within the constitutional power of Con- gress can not be answered without considering (1) the general purpose of the pro- posed legislation, and (2) whether the provisions of section 20j are appropriate to accomplish that purpose and so remotely connected with it as to be merely incidental. Speaking of the power of Congress under the commerce clause of the Constitution, Chief Justice Marshall in M'Culloch v. State of Maryland (4 Wheat, 421) said: "Let the end be legitimate, let it be within the scope of the Constitution, and all means which are appropriate, which are plainly adapted to that end, which are not prohibited, but consist with the letter and spirit of the Constitution, are constitutional." The proposed bill contains a variety of provisions concerning bills of lading, all relat- ing to shipments "from a point in one State to a point in another State * * * and from a point in the United States to any foreign country." (Sees. 20a, 20/.) The obvious purpose is to regulate interstate transportation by defining rights arising under bills of lading which contain the regulations and conditions under which such transportation is undertaken. It would be entirely inadequate to such an end to deal only with those cases where transportation was directly involved and not with those cases where it was indirectly affected . Federal jurisdiction is not to be determined by inquiring whether there has been, in a particular case dealt with by Congress, actual transportation across the State line, but by considering whether interstate commerce as a whole is beneficially regulated. 21 BILLS OF LADING. The riroDosed bill assumes the existence of a carrier engaged in mter-tate traffic and eslabffi mles for he regulation of commerce directly connected with such traffic It does not o 'template particular interstate transactions, but only the whole body of the cornmer, of which such transactions form a part. Congress may well be heve that it .an no adequately regulate that portion of interstate commerce represented by order bi Is of ladbig unless it also prohibits the issuance of similar instruments which purport to rep esenTfu" h transactions, but actually do not. The provisions as to false bills do no Cr" assume an interstate character by virtue alone of the subject matter will which they purport to deal, but also because, m the opinion ot Congress, their Suance mteSwith the adequate regulation of a body of other transactions which do have such interstate character, and with the orderly regulation ot which they are k UpSSSg before the committee the acting chairman asked whether the prin- ciple claimed to be applicable in the present case had ever been applied by the court, where the specific act upon which Federal jurisdiction was based was done wholly within a State. In response to this que-tion it is sufficient to reter to the following ° a in Brennan v Titusville (153 U. S , 289) the Federal jurisdiction wa- based upon the act of a drummer within a State soliciting a person to purchase his goods. In Swift & Co. v. United States (196 U.S., 375) a combination of dealers in meat was held to be an illegal combination within the meaning of the antitrust act. In some cases the prices regulated by the combination were for cattle which had not been brought from another State, and foi meat to be sold and consumed within a State. It is said in the headnote: ' ' It does not matter that a combination of this nature embraces restraint and monopoly of trade within a single State if it also embraces and is directed against commerce among the States." In re Debs (158 U.S., 564), Debs and others, during the strike in Chicago of 1894, committed certain acts within the State contrary to the terms of an injunction forbid- ding all obstructions to interstate commerce or the carrying of the mail. It was held that they obstructed the mails and interstate commerce and were therefore within the Federal jurisdiction. In Montague r. Lowry (193 U. S., 38j an association was foimed by various manu- facturers of tiles whereby the members agreed to make no purchases from manufactur- ers who were not members of the association, and to sell no tiles to any one not a mem- ber except at prices 50 per cent higher than tho e established for members. The plaintiff, a dealer in California, where the association was formed, but who was not a member, was unable on account of the combination to purchase tiles. He brought action under section 7 of the antitrust act to recover treble damages. A judgment in his favor was sustained. Justice Peckham said: " It is urged that the sale of unset tiles provided for in the seventh section of the by- laws is a transaction wholly within the State of California, and is not, in any event, a violation of the act of Congress which applies only to commerce between the States. The provision as to this sale is but a part of the agreement, and it is so united with the rest as to be incapable of separation without at the same time altering the general purpose of the agreement. * * * The whole thing is so bound together that when looked at as a whole, the sale of unset tiles ceases to be a mere transaction in the State of Cali- fornia and becomes part of a purpose which, when carried out, amounts to and is a contract or combination in restraint of interstate trade or commerce." In United States v. Coombs (12 Pet., 72) a Federal act imposing a penalty for thefts of goods belonging to vessels in distress, although such thefts were committed above high- water mark and within State jurisdiction, was held a proper exercise of the power to regulate interstate commerce. In M'Culloch v. State of Maryland (4 Wheat., 316) Chief Justice Marshall held that from the power to "establish post offices and post roads " there was to be implied the power, not only continuously to maintain the post offices and carry mail along post roads, but also to punish those stealing letters from post offices or robbing the mail, on the ground that this construction was ' ' essential to the beneficial exercise of the power. " The physical act of stealing a letter in a post office within a State is, of course, purely local and does not relate directly to an interstate transaction. See for other illustrations: Veazie Bank v. Fenno (8 Wall., 533); United States v. Rio Grande Irrigation Co. (174 U. S., 690); Welton v. State of Missouri (91 U S , 275); Robbms it. Shelby (120 U. S., 489); Addyston Pipe & Steel Co. v. United States (175 U. S., 211). The conclusion which I have reached is not affected bv the principle of the decisions pt the Supreme Court which hold that such instruments as policies of insurance issued in respect of goods which are the subject of transportation from State to State or to BILLS OF LADING. 25 foreign countries do not involve interstate commerce. In Hooper v. California (155 U. S., 648) a contract of marine insurance was involved, and Justice White said that the distinction between that and an instrument of interstate commerce was based upon the fact that the former was one of ' ' the mere incidents which may attend the carrying on of such commerce." Bills of lading, however, representing transportation by a carrier from State to State, are not merely incident to such intercourse, but constitute one of the means by which such intercourse is conducted. Policies of insurance upon goods in course of transportation, on the other hand, are not directly connected with the interstate nature of the transaction. While they usually attend such commerce, they do not constitute a condition upon which it is undertaken . Their connection, therefore, is too remote to be of Federal cognizance (see upon this point Judson on Interstate Commerce, sec. 7). For these reasons, there is no substantial ground to doubt that section 20i of the proposed bill is within the power of Congress. But even if this is not entirely clear and yet in its legislative discretion Congress believes that the general purpose of the proposed legislation can not be effectively or beneficially accomplished without the enactment of the section, it should exercise its power and devolve upon the courts the responsibility of declaring upon the constitutionality of its action. It should not omit to take appropriate action merely because the Federal courts have not adjudicated upon an exactly similar case or because no express provision of the Con- stitution can be pointed out on which to base the exercise of power. As Justice Miller said, in ex parte Yarbrough (110 U. S., 658), Congress should not yield to "the old argument often heard, often repeated, and in this court never assented to, that when a question of the power of Congress arises, the advocate of the power must be able to place his finger on the words which expressly grant it." If there be a real doubt of the power of Congress as to but one of many features of a general scheme of beneficial legislation it should resolve that doubt '•> f >vnr of the theory that power exists. Henry W. Taft. April 25, 1908. It seems to us that in legislation that has already been enacted and approved Congress has committed itself and the courts have com- mitted themselves to the view that such legislation as this is con- stitutional. In the first place, a railroad doing an interstate business is itself an instrument of interstate commerce which Congress has power to regulate and has regulated in numerous ways; has imposed liabilities on the railroads different from the common-law liability. The latest and most striking instance of this perhaps is the law by which there is imposed on the initial carrier the liability for a loss occurring beyond its own lines — a very striking exercise of congres- sional power and far beyond anything that we seek. In the second place, even though the railroad itself which issued the bill were not itself an instrument of interstate commerce, even a fictitious bill of lading is a contract entered into for the carriage, or Surports to be for the carriage, of goods from one State to another, "ow it seems to me clear that Congress has the right to protect genuine interstate commerce by punishing fictitious simulations of it, and the fictitious bill is, of course, a simulation of a genuine con- tract to transport goods. Indeed, it is a genuine contract; even though there were no goods behind it, it is a contract for the trans- portation of goods from one State to another or to a foreign country, though the goods do not exist. I wish to say before closing that at the hearing before the Senate, after the Stevens bill came from the House, the then chairman of this committee asked the proponents of the bill and the railroads who appeared in opposition to get together, if they could, and see if they could not agree upon something. Both parties earnestly and honestly tried to do what they could and certain amendments were agreed on, as I understand it. Yet the railroads themselves are unable to 26 BILLS OF LADING. assent to the fundamental proposition of the bill that the carrier should be liable, and of course the interests which I represent felt unable to yield that. So that this paper which we have had printed shows in italics the changes from the Stevens bill, or from Senate bill 957, which the carriers and the people whom I represent both thought ought properly to be made, and therefore I am to be under- stood, and the people whom I represent are to be understood, as urging the passage of the bill with these italicized amendments. On the other hand, as I understand it, the radroads, while they think the amendments are all right, are to be regarded as opposing the funda- mental proposition in the bill. Senator Brandegee. I am not sufficiently familiar with the trouble which brings about the demand for this legislation, so that my mind at once gives assent to the proposition that a company ought to be liable for something done somebody which exceeds its authority. Mr. Williston. Of course if a bank cashier wrongly certifies a check, although his authority may be said to be only to certify checks where there is money enough in the bank, the bank pays the bill. If it is urged that a check is negotiable paper and that that rule ought to be peculiar to negotiable paper, I should say the same rule is appli- cable to a certificate of stock; that if the officers whose business is to issue certificates of stock issue one which they have no business to issue, under the circumstances, because they have not taken up gen- uine certificates to represent it, the company has got to pay the bill. And the fundamental principle back of it all, it seems to me, is this, that the man who hires an agent to do a certain job must be answer- able for the consequences of that agent's acts in that job, whether he does it well or ill. Therefore, when a railroad emplovs a man to issue bills of lading it must stand behind the bills of lading that that man issues, whether he does it according to orders or whether he does it contrary to orders. Senator Pomerene. Professor, in referring to the bill which bears my name— and I confess to be only the stepfather to that bill, al- though I am in hearty approval of it — you said vou had some question as to the constitutionality of certain provisions. What pro- visions did you have in mind * Mr. Williston. Part 3, and one section of the criminal pro- vision. Senator Pomerene. That is section 3 ? Mr. Williston. Xo; part 3. I beg vour pardon. The bill in the State was divided m to four parts; it is not so divided at it stands before you. Senator Pomerene. I have here a copy of the bill. Mr. Williston. Yes; but that does not state the parts as it did in the other bill. Sections l»s to 43, inclusive, relate to dealings in bills of lading be- tween third parties, neither of whom is the carrier. That is, to the negotiation and transfer _ Senator Po.mkuene. To the negotiation simply of the bills of lad- ing '( Mr. Williston. Yes, sir. And it is that part which troubles me. Senator Pomerene. Xow, state briefly, it you can, what difficul- ties you sec in connection with that matter? BILLS OF LADING. 27 Mr. Williston. The clear ground of supporting Senate bill 957 is that the railroad is an instrument of interstate commerce, and Con- gress has a right to say what bills of lading a railroad shall issue, and what shall be its liabilities on that instrument. Xow suppose that instrument gets into the hands of A, a third person, and A pledges it to a bank in Ohio: Query: Does the fact that that bill was originally issued by a rail- road, an instrument of interstate commerce, give Congress the right to say what is the effect of the pledge by A, an outside holder of the bill, to B, a bank in Ohio ? That is my difficulty. Senator Pomerene. It is still a contract pertaining to interstate commerce % Mr. Williston. Yes, sir. Senator Pomerene. This is simply an offhand suggestion: Would not the holder take it subject to any of its provisions and its liabilities, whatever they might be ? Mr. Williston. The holder would take the rights given by the bill against the railroad, and I think it clear that Congress would have the right to say what B's right shall be against the railroad. But can Congress say what are the relative rights of A and B as against one another ? Senator Pomerene. As between A and B ? Mr. Williston. As between themselves. That is the matter dealt with in these sections that I have alluded to — the rights of A and B as between one another? Senator Pomerene. Your position is that in that respect then the transferee of the bill of lading will be essentially different from that of the original consignor ? Mr. Williston. A bill of lading is both a contract and a symbol of title to the goods. In so far as it is a contract, it is a contract of the railroad company, and B gets the contract rights which the consignor bargains for against the railroad company. But as to the property rights which B gets from A, that depends not on the form of the contract between the railroad company, but on what A owns, in large measure. Senator Pomerene. Have you briefed that proposition ? Mr. Williston. Have I put a brief on that matter? Senator Pomerene. Yes. Mr. Williston. No; I had not anticipated arguing on this State bill to-day. We are prepared to argue and present authorities in regard to the constitutionality of the very limited provisions of Senate bill 957, and that argument which we should present would, in my opinion, uphold the constitutionality of your bill, if I may so call it, except the sections to which I have referred and the criminal section, section 48, which relates also to fraudulent dealings between A and B, outside persons. Senator Pomerene. Have you in mind now any adjudications bearing upon this subject which would shed any light upon the ques- tion of the constitutionality of these provisions about which you have doubt ? Mr. Williston. No; I have not. These sections to which I have referred I do not recall any decision which deals with the broad ques- tion — whether an interstate bill of lading carries stamped upon it 28 BILLS OF LADING. through all its ultimate wanderings the character of an instrument of interstate commerce and whether Congress could affix such qualities as it chooses to it and such rights in the property behind it that would universally follow it in the hands of third persons. It may be that Mr. James, whom I see here, is better prepared to speak to that point than I am. Senator Pomerene. That is all. The Chairman. Who is the next gentleman who desires to appear in advocacy of the bill ? Mr. Williston. There are one or two gentlemen who have come with me whom I should like to speak to the committee with reference to the practical workings of these difficulties. The Chairman. Who is the next one? Mr. Williston. Mr. Harry Dowie. There being no further questions, Mr. Williston was thereupon excused. STATEMENT OF MR. HARRY DOWIE, OF NEW YORK CITY, REPRESENTING DE WINTER & CO. The Chairman. State your name, residence, and occupation for the purposes of the record. Mr. Dowie. Harry Dowie; residence, New York City; connected with the firm of De Winter & Co. I also represent to-day the National Poultry, Butter and Egg Association and the New York Poultry and Game Association. Mr. Chairman and gentlemen of the committee, the products that these associations represent are the largest in values of any products in the United States. Fully 90 per cent of this product is shipped from the country, from the producing sections, either to seaboard or the interior by bills of lading. These bills of lading are largely made out by shippers who gather these products from the farmers or the merchants and who ship them either in carload lots or less than car- load lots with a bill of lading and a sight draft attached. This sight draft reaches us at the seaboard two or three or four davs prior to the goods. We pay this sight draft and await the arrival of the goods. Unless this bill of lading is a uniform bill of lading, made as secure and safe as any other negotiable paper, you can readily see the risks that we take by paying a draft on a bill of lading. The abuses in the past have been many, and the losses have amounted to millions and millions of dollars. These losses have been occasioned by paying fraudulent accommodation bills of lading. It not only is a loss financially, but it has this other effect upon the country: There are many other shippers in this country whose sight draft it is unnecessary for you to look at, but you can pay their drafts when presented regardless of whether they may be over or not. But bills of lading issued by railroad companies and combinations, etc., to shippers who are springing up constantly all over this country, have to be paid with care. It is impossible for a commission man or anyone m I\ew York in the business to keep track of all these shippers who are springing up, and it is necessary to investigate their standing It is necessary for men of limited capital to obtain money on their bills of .lading from the banks in order that they may con- tinue to do business. We have been defrauded so many times by BILLS OF LADING. 29 bills of lading that when we receive a bill of lading from these various people, we scrutinize everything regarding it. If there is the slightest thing which looks doubtful, we will refuse to pay that bill of lading. We will hold it subject to the arrival of the goods, in order that we may see that everything is all right. This holding up of the money of the little man means that he hasn't sufficient money to operate. So that it throws the entire business into larger hands continually. That has been the result and will be the result as long as these bills of lading come as they are coming. I can state to you personally a few distinct cases, but each of them represents a great many to show you how bills of lading have been made. For instance, in one case — and this occurred several times from this same party after the railroad companies were notified — we received a bill of lading for a car which was shipped from Ohio to New York to Dewinter & Co. The bill of lading was properly drawn and signed, and was for 30 barrels of poultry and 140 cases of eggs. When the car arrived in New York with the seal still unbroken there were but 30 barrels of poultry, and no eggs. That particular thing occurred several times, and the heads of the railroads in Chicago were notified what was being done, and still it existed after that. We could attribute it to no other reason than that there were sev- eral roads from that point, and there was great competition in getting business, and the shipper was none too scrupulous to take advantage of it. Then there was a very singular case of a car shipped from Tennessee with 380 cases of eggs. That car when it got as far as Buffalo on its way to us in New York was discovered to be an empty car. They had run the car all the way through to Buffalo, although the bill of lading was all right. The draft was paid on the bill of lading. This bill of lading was made on car so-and-so, and the draft was made on 380 cases of eggs, in car number so-and-so. The only way we could get our eggs was out of that car, and there were no eggs in that car. The railroad company hauled that car all the way from Tennessee to Buffalo before it discovered it was an empty car. . Then there was the case of another heavy shipper from Chicago a few years ago. He would ship from 10 to 20 carloads a week in cer- tain seasons of the year. He shipped to various parties in the East — New York, Philadelphia, and Boston. In no case was there ever a car number on any bill of lading coming from him. The result was that he might ship me a car of creamery butter and I might get a car of store-packed butter, and the creamery butter might go somewhere else. There was absolutely no way to identify in any shape, form, or manner the car. He continued doing busuness in that way for some years, but finally failed. Then there was a receiver appointed, and the receiver came East to find where the property was that this man had shipped. Inasmuch as there had never been any car numbers inserted in the bills of lading, they never could show that any man ever got anything from him; and the man who paid the sight draft on that bill of lading without a car number had no way to identify or trace where the car was. 30 BILLS OF LADING. Then there was the case of the issuing of accommodation bills of lading. A very large shipper in the Southwest shipped regularly. After waiting five days from the time the bill of lading was received a tracer was sent to find where the car was. The reply came back that the car was still on the track empty. The poultry was still flying around in the country to be killed and put into the car. It was discovered that these bills of lading were being issued as accommodations. The result was that we refused to pay any draft until the arrival of the goods. As goods did arrive we paid the sight drafts. But the drafts kept coming into the New York bank, and the New York bank was ordered to hold these drafts for the arrival of the goods. It continued this way for some time, when the man failed. The bank of Xew York held some forty thousand odd dollars of these accommodation bills of lading. The banks in the West undertook to hold De Winter & Co. for this $40,000, but it did not amount to anything in the end. This only shows what is being done in the way of railroad companies issuing bills of lading for goods that do not exist, for the accommoda- tion of the shipper, to the detriment of the consignee, because had we paid these drafts as they came in, we would have been the loser of $40,000. Now, those are only a few cases of what has happened to our firm directly. But there are many other cases that we are perfectly familiar with which show just the same bad management of the rail- roads, and for that reason, as commission men, for the welfare of the country shipper, the responsible shipper, it is absolutely necessarv that bills of lading should be uniform bills of lading, that whatever it represents on its face should be true; so that a man would be per- fectly safe, when a bill of lading was presented to him, to give his check for the amount that was called for in the draft attached to that bill of lading. The Chairman. If you will return here at 2.30 o'clock this after- noon we -will resume your examination. Air. Dowie was thereupon temporally excused. Mr. A. P. Thom. Mr. Chairman, before you adjourn The Chairman. Certainly. Mr. Thom. I am A. P. Thorn, general counsel of the Southern Rail- way Co. The situation in regard to this hearing is somewhat of a surprise to me. I am a member of an advisory committee representing about 100,000 miles of railroad in this country, and we are seeking to find the views of our constituent companies in regard to this measure on a basis submitted to them by myself. That condition grew out of a conference between Mr. Hollister, who is the chairman of the com- mittee of bankers here; Mr. Peyton, who is their counsel; and Mr. Kent, who is one of the vice presidents of the Bankers' Trust Co. in New York, by which we undertook to see whether we could not get together upon some just and wise solution of this question that would subserve the proper interests of all concerned. Mr. Kent presented the suggestions to the bankers and was to get from them their views; I presented them to the various railroads and was to get from them their views. Neither side, as I understand it, has as yet heard from all to whom these questions were presented; BILLS OP LADING. 31 certainly we have not; nor was I advised that the bankers had heard from their constituents in respect to it. In the midst of that negotiation, before any end was reached, a proposition was made to this committee to open these hearings with- out my knowledge and without any conference with me. You can readily understand, therefore, that I am not here to-day prepared to say authoritatively what the attitude of all our constituent com- panies will be. We expect to be able to do that later. We yet hope, in the interests of a wise and just settlement of this matter, that some conference between us and the responsible advocates of this bill may be had which will result in a joint suggestion to this committee as to what is wise under all the circumstances. We wish, in view of this surprise, and in face of the condition which I have described, eventually to ask at the hands of this committee that we may be permitted to be heard at a later date. And I do not understand that Mr. Hollister objects to that. Mr." Hollister. No, sir. Mr. Thom. I suggest that we ask to be heard a couple of weeks from now. It will be more convenient to Mr. Hollister and his friends early in April, and that is perfectly agreeable to me. I simply arise now, as I have an engagement in the Commerce Court this afternoon and will be unable to be present, to ask that some arrangement be made by which we shall be heard at a later date. In the meantime any conference that may be possible will take place between these gentlemen and ourselves. The Chairman. I do not think that the committee would want to defer this until April. Of course, the committee wants to hear both sides, and you will be given an opportunity to be heard. There will be nothing arbitrary in the action of the committee in that respect. I understand that there are others to be heard in favor of the bill, and at the conclusion of their side, if your side is not ready this after- noon, we will make some arrangement as to future hearings. Mr. Thom. As I shall be unable to be present this afternoon, may I rely on having a couple of weeks to get this matter in shape \ The Chairman. This matter has been running for a long time. One bill passed the House the other session. It seems to me that with the amount of work we have — and we have to consider our time somewhat — that two or three weeks will be too long. However, we will arrange that at the conclusion of the hearing in favor of the bill this afternoon. The committee thereupon, at 12.55 p. m., proceeded to the consider- ation of business in executive session, after which a recess was taken until 2.30 o'clock p. m. AFTER RECESS. At the expiration of the recess the committee reassembled. The Chairman. Mr. Dowie, have you finished your statement? Mr. Dowie. Yes, sir. The Chairman. Senator Cummins, do you desire to ask any questions ? Senator Cummins. What you want is a bill of lading which will , warrant you in paying for the property before you receive it 1 32 BILLS OF LADING. Mr. Dowie. Yes, sir; which we have to do under all circumstance Senator Cummins. You are familiar with the bill that is before us Mr. Dowie. Yes, sir. Senator Cummins. Would you pay for a shipment on a bill c lading that was stamped or called "Shipper's load and count"? Mr. Dowie. We have refused that under ordinary circumstances but I understand recently, within two months, I think, there was case of that kind carried to the court in Kansas and decided agains the railroad company. They claimed that the railroad compair was liable on "shipper's load and count." Senator Cummins. Suppose that this bill was passed and a bill o lading came to you upon which those words were written, printed, o stamped ; would you regard that as sufficient security for the advance ment of money '. Mr. Dowie. No, sir. Senator Cummins. What good will this bill do you, then? Mr. Dowie No, sir; I would not under a great many circumstances Senator Cummins. Inasmuch as the railroads always issue undei this proposed act, a bill of lading of that kind if it desires to do it what security would you have that you have not now I Mr. Dowie. We would have no more security unless it be the law as decided by the courts, that they are liable. We personally woulc not pay a draft, shipper's load and count, promiscuously, even if thai was the case, because it might incur a lawsuit — it might incur trouble As business men we have to be very careful regarding these bills ol lading now, especially on certain roads. We have got to be mon particular on some roads than we have on others. Senator Cummins. I do not believe you quite understand mj question. Mr. Williston. If I may, I will reply to the question. Senator Cummins. If the witness will permit you, I am willing. Mr. Williston. I do not understand that the railroad can mart any bill "shipper's load and count." Mr. Sol Wexlek. There are certain commodities that are issued that way, but very few. Senator Cummins. I notice in the bill the following proviso: T'rorkkd. That whore an order or a straight bill of lading is issued for property billet "shipper's load and count," indicating that the goods were loaded by the shipper, ant the description of them made by him; and if such statement be true the carrier seal not be liable for the nonreceipt or by the misdescription of the goods described in th( bill, m which event the estoppel and liability of above proviso shall not attach. Mr. Williston. That is true; but the point I wish to make was that the shipper has a right to demand that the railroad shall load anc count. ^ Sometimes it is convenient for the shipper to load and couni himself, and he may take a load and count bill where he has got ai inferior article. On the other hand, if he chooses, he maydemanc that the earner load and count himself, and then the shipper, undei this provision, could not mark the bills "shipper's load and count,' and thereby escape liability. Senator Cummins. If the shipper wanted an accommodation o: there was a conspiracy to defraud, it is not likely that he would insis u P° n his right that the railroad should load and' count, is it ? Air. Williston. The consignees and the banks understand the perfectly well. It is pretty hard work to get money on a shipper': load and count bill. ' BILLS OP LADING. 33 Senator Cummins. I am just trying to find out where you would be benefited any if they were- all issued in that way. Mr. Williston. The shipper, who is the person who primarily wants financial accommodation, knowing that a shipper's load and count bill will not be accepted by the consignee, or will not be accepted generally as collateral by a bank, will demand that the railroads load and count if the shipper wants to get pecuniary accommodation. Senator Cummins. I am not able quite to see that point. You have said that the evil to be remedied by this legislation is, first, collusion or fraud between the railroad agent and the shipper issuing a fraudu- lent bill of lading, or it might be by the railroad agent alone; second, accommodation bills of lading where the bill was issued before the railroad company actually received the property. Now in each instance — certainly in the last — it requires the cooperation of the shipper to perpetrate the wrong. Mr. Williston. Certainly. Senator Cummins. Now, if the shipper were inclined to perpetrate a wrong of that sort, he would be perfectly willing, would he not, to take a bill of lading of that kind ? Mr. Williston. No, sir; because it would not help him. Such a bill is like a package since the pure food law was passed. It has marked on it that it has poisonous ingredients. Senator Cummins. That is what I ask you, whether he would ad- vance the money upon it. One question more. Suppose the railroad companies refused to issue any other bill of lading than that kind ? Mr. Williston. Our shippers would go to the Interstate Commerce Commission with perfect confidence that the railroad would be com- pelled to issue another kind. They understand that it is the business of a carrier to load and count if demanded. Senator Cummins. I did not know that that was conceded; that is, load, I agree; but count — you say the railroad company must count? Mr. Williston. Senator Faulkner concedes that to be true, as representing the roads. Senator Cummins. We had that up once before. Suppose I bring a box to a railroad company which I say contains a dozen chickens, to be shipped to New York. Do you mean to say that the railroad company has a right to open that box and count the chickens before it takes it? Mr. Williston. The receiver counts the number of chickens. Senator Cummins. Precisely; that is just what I was getting at. Mr. Williston. But that will not be a shipper's load and count bill. Senator Cummins. That would be a shipper's count bill, would it not? Mr. Williston. No, sir; because the bill of lading would be for a hundred boxes said to contain 20 chickens each. Senator Cummins. And you want to hold the railroad company responsible for the actual count in that case ? Mr. Williston. Only for the number of boxes. This proviso, to which your attention has been directed, excludes the liability of the railroad as to the number of chickens in the closed boxes. There must be the right number of boxes said to contain chickens. But if those statements are true, that is the extent of the railroad's liability. 42S08°— S. Doc. 650, 02-2 3 34 BILLS OF LADING. Senator Cummins. In what part of the bill <1<> you find that? Mr. Williston. It is in the copy of the bill containing amend- ments which is now being handed to the committee. Mr. Faulkner. These "amendments that are in that copy just handed to you were the ones that were agreed to at that conference that we had, if you remember, and reported to your committee at the end of the last 'regular sessoin. Senator Cummins. Then it is nut the bill that is now being urged. Mr. Faulkner. That is the bill that the gentlemen on the other side have presented, with the amendments printed in it, so that you will understand clearly what was the agreement to that extent. Senator Cummins. Then I have it all wrong. I assumed that this was the bill that was now being urged. Mr. Faulkner. That is the bill that you have now m your hands that is being urged, except with the amendments which we agreed to and reported to your committee at the end of the last regular session. Senator Cummins. The amendments seem to be very material. Mr. Williston. That proviso on the third page, and running on the fourth page, is material. It is substituted for a briefer proviso that was in section 4. The italicized proviso was taken from the State bill which Senator Pomerene has presented. It is identical with the provision in that bill. Senator Cummins. Is that proviso satisfactory to you, Mr. Faulkner ? Mr. Faulkner. Yes, sir; we asked that as an amendment in our conference, and it was agreed to on the other side, as all those other italicized amendments are. There being no further questions, Mr. Dowie was excused. STATEMENT OF SAMUEL WILLISTON— Kesumed. Senator Cummins. Mr. Williston, I desire to ask you one or two questions. I have not had time to examine this carefully, but tell me, in the proviso, what the words "such statements, if true" refer to ; what statements ? Mr. Williston. I wrote the proviso. This proviso was part of the State bill which Senator Pomerene has presented, and was drawn in conference with railroad attorneys and with the commissioners. The words Senator Cummins. Let me put another question so that my idea may be more clearly defined. I read now from the bill: Provided, That if the property is described in an order or a straight bill of lading merely by a statement of marks or labels upon the property or upon packages contain- ing it, or by a statement that the property is said to be of a certain kind or quantity, or in a certain condition, or it is stated in any such bill of lading that packages are said to contain property of a certain kind or quantity or in a certain condition, or that the contents or condition of the contents of packages are unknown, or words of like purport are contained in any such bill of lading such statements, if true, shall not make liable the carrier issuing the bill of lading, although the property is not of the kind or quantity or in the condition which the marks or labels indicate, or of the kind or quantity or in the condition it was said to be by the consignor. The carrier may, also, by inserting in any such bill of lading the words, ''shipper's load and count, " or other words of like purport, indicate that the property was loaded bv the shipper and the description made by him; and if such statement'be true, the carrier shall not be liable for damages caused by the improper loading or by the nonreceipt or by the misdescription of the property described in the bill of lading. BILLS OF LADING. 35 I wish you would point out -just what statement must be true in order that the carrier should be relieved of liability. Mr. Williston. To begin, then, back in the second line, the marks or labels upon the property must be what is stated in the bill of lading; or, go down in the next line; it must be true that the property was said to be of a certain kind or quantity — that is said by the shipper. Senator Cummins. Pause just there — that somebody said to the agent that the property was of a certain kind and quantity '( Mr. Williston. No; the shipper. Senator Cummins. It does not say the shipper. It says, "or by a statement that the property is said to be of a certain kind or quan- tity." Mr. Williston. That in the bill of lading always means the shipper. "Received of X, 100 boxes, said to contain" — that is the formula commonly in use. That means said by the shipper to contain. Senator Cummins. Now, then, if the shipper made the statement to the agent, if that part of it is true, then the liability would not attach ? Mr. Williston. No liability would attach for failure of the goods to be what they were said to be, and no liability as to the land or quality that they were said to be. One hundred boxes said to con- tain chickens, if they were said to contain chickens, no liability would attach because they were not chickens, but liability would attach if there were not 100 boxes. Senator Cummins. I think I see the general idea that is intended to be conveyed. Mr. Williston. It was worked over very hard by several railroad attorneys and several other attorneys, and we thought we ultimately got a not very simple matter stated so that it meant what we intended . Senator Cummins. You have, then, in every case practically a question of credibility between the railroad agent and the shipper to be determined by a court and jury. Mr. Williston. There may be that question arise. Of course, in many bills that would not arise at all. Senator Cummins. I suppose there are a number of instances in which any troubles that arose would be very few as compared with the whole number of bills of lading issued. Mr. Williston. I mean in many forms of bills of lading it would not arise — if I have sufficiently met the question. Senator Cummins. That is all. I wanted to be sure that I under- stood that part of it. STATEMENT OF SOL WEXLER, OF NEW ORLEANS, LA„ VICE PRESIDENT OF THE WHITNEY CENTRAL NATIONAL BANK. Mr. Wexler. Mr. Chairman and gentlemen, the primary object of this bill is to hold the railroads responsible for the acts of their own agent, whether this act arises from issuing a bill of lading without having received the goods, or issuing a bill of lading for a greater quantity of goods than were actually delivered to^him, or for falsely describing the merchandise that was delivered to him. The necessity for making the railroads liable for this is the fact that the bulk of the commerce of the country to-day, particularly the export commerce of the country, is done upon negotiable bills of lading. To make the matter perfectly clear to you, there are two dis- 36 BILLS OF lading. tinct kinds of bills of lading. One is known as the " to order" bill of la din", which arises when a shipper in the interior sells a certain amount of commodity to a buyer at the port or abroad; he makes out a bill of lading to his own order— "notify"— giving the name then of the person to whom he has sold the commodity, so that the railroad will know who to notifv when it arrives at its destination; and he enters his name on the back <>f the bill of lading, and it thereby becomes negotiable and is handled freely by banks throughout the United States and abroad. The other class of bills of lading is the straight bill of lading, or the bill of lading where the consignee's name is mentioned in the bill of lading— that is, where the. man consign* the goods to a certain firm or individual, and that firm or individual receives the notice direct from the railroad, and can obtain the goods without the surrender of the bill of lading at all. The bulk of the business of the country, I should estimate— that the ratio or volume of one class of business to the other — is probably 75 per cent on "to order, notify" bills of lading in dollars and cents, as against 25 per cent on straight bills. For instance, all the grain that is shipped from the interior to elevators or abroad, all of the cot- ton, the packing house products, all of the steel rails, and nearly all of the agiicultural products of the country are shipped on "to order, notify" bills of lading, because it would be impossible to finance this tremendous volume of business while these articles arc in transit if negotiable instruments were not permitted, upon which money could be had in the interim. Foreign business is entirely done upon "to order, notify" bills of lading, and at the present time those bills of lading are more or less under discussion and under criticism, which makes it imperative that relief be had in the very near future in order that this termendous commerce can continue to be carried on. The attention of the general public was called to this deficiency by cumu- lative frauds that have occurred during the past two or three years, which have created a feeling of unrest abroad, and relief is now being sought for in various rather impracticable ways in this country as well as abroad. The protection, therefore, that I ask is simply that the bill of lading be given the same standing as any other negotiable document ; that is, when it purports to be a receipt for the delivery of a certain quan- tity or kind of merchandise, that the person or firm, or representative of the person or linn, that signs that receipt is called upon to deliver that quantity and kind of merchandise. If the matter continues as at the present time, it is expected that banks abroad will decline to accept drafts drawn against the bills of lading such as are now put forth by the railroads. They hayc endeavored to put in a bureau in the city of New York for the purpose of validating bills of lading. They have endeavored to form insurance companies for insuring the banks against loss that may arise by reason of their having paid out money against bills of lading calling for merchandise receipted for by the authorized agent of a railroad that may never come forward and for which the raihoad declines any liability. I believe that the passage of this bill will do more toward facili- tating the domestic and foreign commerce of the country than any bill that can possibly be passed at the present time. It will not only benefit the large shipper, but particularly benefit the small BILLS OF LADING. 37 shipper who gets his money immediately upon delivering his goods at the railroad station in order to buy more goods and continue to forward them to points where they can be sold. With the attitude at the present time of receivers of merchandise at all central points not to pay out any money upon drafts drawn against bills of lading for which no one is responsible, the bills at the present time have simply become pieces of paper without any responsibility attached to them, unless the receiver or the shipper can prove that the mer- chandise was actually delivered, which is a process that is more or less tedious, and which could only take place after the money had been paid out — it is very much feared that unless legislation of this kind is passed a great number of smaller shippers will be entirely put out of business and that the business will be congested in very much fewer hands. Now, the operation of the business is about as follows, from a banking standpoint: A shipper of cotton at an interior point sells to Europe 100 bales of cotton — we will say to Liverpool. He gets a through bill of lading; that is, the bill of lading from this interior point — we will say Yazoo City, Miss., where Senator Williams lives — to Liver- pool via New Orleans. The Illinois Central Railroad will receipt ft r that 100 bales of cotton and guarantee to deliver it to the order of the person shipping it in Liverpool. The shipper then attaches to that bill of lading his draft for the value of this cotton. He then goes to his local bank and presents it, and this bank buys that bill of exchange if he is engaged in that line of business. If he is not engaged in that line of business, then the cotton merchant there may be compelled to send that bill of exchange to New Orleans or New York or somewhere else, but it takes identi- cally the same course. The bill is usually drawn — that is, the exchange is usually drawn at 90 days, and is drawn upon a bank or upon a spinner in England — we will say in Liverpool. Upon presentation it is accepted by the bank, and the bill of lading detached and held by the accepting bank. It then becomes a negotiable paper in England and can be discounted at the very lowest prevailing rates in that country. The bill of lading is then surrendered by the accepting bank to the buyer of the cotton, who has opened a credit with him, and he waits with his bill of lading until the cotton arrives. If it arrives he pre- sents his bill of lading. The steamship takes it up and delivers his cotton, and the transaction is closed and has turned out entirely satisfactory. But let us presume that the agent at Yazoo has never received that hundred bales of cotton, but that he signed that bill of lading. The bank or cotton merchant holding the bill of lading in Liverpool has absolutely no recourse against the railroad, although he is the innocent holder of a thoroughly negotiable piece of paper. He has no means of knowing whether that cotton was really delivered to the agent or not. It is not for him to look as to whether or not it was delivered. It was simply for him to know whether or not this agent was the authorized agent of that corporation, and if he was, then he should have the right to recover from the principal of that agent. Now the point may be raised that the railroad companies have thousands of agents scattered all over the country in remote sections, and they can not be expected to have such careful supervision of all 38 BILLS OF LADING. these ao-ents. I do not feel that that is a fact. Nearly every agent of every railroad company is under bond to cover such responsibility as he may assume. For instance, in the sale of tickets. If he sells a ticket without having received the money for it, and the money never gets into the pocket of the railroad company, the railroad must honor that ticket just the same. If an agent through carelessness permits a lot of dry goods to be damaged by water or oil, or something of that kind, the railroad com- pany can not deny liability for that damage because they did not hire him to put oil or water on this merchandise. In other words, they are responsible for every act that agents com- mit at the present time except the act which arises from the signing of a bill of lading. . I believe that at the time the common law of England decided that a railroad was not responsible for the acts of its agents, that was at a period when the volume of business done upon bills of lading was very small, and when the business was properly confined to the shipper and the receiver directly, and there was very little of the negotiable or "to order" bill of lading business done. In 1888, when Chief Justice Fuller decided this question, the volume of that class of business in this country was very limited, and bills of lading were not then, as they are now, one of the principal mediums of credit that exist in this country to-day. In our own city, which is insignificant compared to the larger cen- ters, and in our own bank, the Whitney Central National, where we handle over a million dollars a week oi' negotiable documents; that is, we loan on negotiable documents more than SI, 000, 000 a week. What is the result ? If we can not have this protection, if we can not feel that when we loan a man on a bill of lading that somebody is responsible for this commodity, we can not do this business with the degree of safety that it is imperative we should do. A charge would have to be levied for doing this business to cover the serious responsibility which we would be taking. Who is at fault if a bill of lading is signed for and the goods are not delivered ? Is the innocent holder of the document at fault ? By no means. But the railroad company is at fault. If they have hired a man at $40 a month at a point where the responsibility will justify a man at $75 or $100 a month, and that man, perhaps, by reason of his necessities, is tempted to do things he should not do, it is the railroad who should suffer and not the innocent holder of the docu- ment. The safeguarding by the railroad is by no means a difficult task. The railroad can audit the bills of lading of its agents in the same manner that it audits his tickets, his cash accounts, and in the same manner that the express companies and telegraph companies audit for this same agent, who usually acts in these several capacities. They can have negotiable bills of lading engraved if need be on safety paper, can prohibit the present careless use of pencil in writing and sign- ing bills of lading, and what is more important can discharge and blacklist, which is not now done, the agent who dares to sign for articles before they are in his possession. The business has heretofore been conducted very loosely. If these loose methods are eliminated and the same safeguards would sur- round the issuing of the bills of lading as now surround the, sale of BILLS OF LADIXG. 39 Heretofore what happened ? The railroads had quantities of bills of lading lying around their offices. When a man wanted bills of lading he could come into the railroad office and get a bunch of them and take them over to Ms own place, two or three hundred of them, if he saw fit. Then he would come over to the railroad agent, who lived in the same town with him, probably went to the same church with him, the children went to the same school, and he would say: "John, I need this money to-day, and I will have this stuff here to-morrow without fail. Sign this bill of lading up for me so that I can get the money." And Mr. Agent, a good fellow, believing the man would fulfill his promise and deliver the goods, signed the bill of lading; the man got his money; and the innocent holder is the loser for it. That is the general effect upon commerce. I can see no good reason why the agent of a railroad company, the same as the agent of any other corporation, should not be held responsible in exactly the same manner. Now, referring to this "shippers' load and count," about which an inquiry has been made. There are certain commodities which are exclusively handled in that way. For instance, lumber. Where a railroad has a switch track into a sawmill it is customary for that mill to load its own lumber, and those waybills are signed "Ship- pers' load and count." Similarly other commodities are loaded in the same way, and that is perfectly satisfactory to the shipper as well as to the railroad. Those documents are not handled with the same degree of negotia- bility and in the same manner as the full negotiable document is handled. In other words, if we receive a "shipper's load and count docu- ment," we rely to a greater extent upon our knowledge of the indi- vidual who presents it and upon his financial standing than we do on the quantity of the goods covered by the bill of lading, because we know that there can be a variation. But the shippers' load and count is an insignificant part of the general shipping of this country. There is exported from the United States — I can not give you the exact figures, but in cotton alone the exports this year will probably amount to $600,000,000. Bear in mind that every dollar of that $600,000,000 is shipped upon a negotiable bill of lading, and that somebody has to put out the money based upon their belief that that cotton was actually loaded and upon their faith that the general agents of all the railroads are honest, and that the exceptions only are dishonest. Otherwise the business would have come to a. standstill long ago. The profit arising from these transactions, particularly in foreign exchanges, is so small that there is a general reluctance at the present time to take even that very small chance which might arise of loss from the few agents who may be dishonest. As the railroad company derives freight from the time the agent signs the document until the freight is delivered, it seems to me that they should be the ones who should be held entirely responsible. With regard to the "straight" bill of lading for merchandise, which is shipped direct to consignee, the small shipper is affected to a greater extent than " to order notify ' ' bill of lading ; and it is just as important that the railroad should be responsible for these as for the negotiable 40 BILLS OF LADING. bills of lading. The fact that the draft is drawn against the bill of lading does not give the payer of the draft the same security as he would derive from a "to order notify" bill of lading. But he has the evidence in his hand that the goods have been delivered to the rail- road, and that the railroad company's receipt accompanies them. Therefore, based upon that, he pays out his money. If the goods are not delivered, he loses his money. I maintain that the business of the world — not only of the United States, but of the whole world as it is clone to-day — is done largely upon bdls of lading, whether ''to order" or "straight;" that it has become the most important instrument of credit in use in the world to-day of an}- kind, and that it is necessary for the commerce of this country to make that bill of lading fully negotiable, entirely safe, and to make the person who receipts for the goods, whether they have been delivered to him or not, responsible for their delivery. Let us presume that an agent received from a shipper, say, 100 bales of a certain commodity, which might be moss, which is a com- modity that is handled in the South, and the question of what was contained in those bales did not come up between the agent and the shipper at all. But the agent signed these bills of lading for 100 bales of cotton, instead of a hundred bales of nross, and the shipper in his hurry puts this bill of lading with his draft in an envelope, and forwards it to a bank and gets the money on it. Who has been at fault? Both of them to some extent; the shipper in being careless, hut the agent also in being careless. A controversy might verv well arise as to whether or not the agent was not equally culpable in his negligence in receipting for a commodity the contents of which he did not know and did not take the trouble to find out. But vet he stipulated it, and an innocent holder of the bill of lading- is the sufferer from his carelessness. I might give you a receipt for sioo, and have only received s\50, yet the receipt is binding upon me in the hands of an* innocent third party. Ail we are asking of this bill of lading is to protect the innocent holder of the document. We are not asking for any protection whatever for the fraudulent holder of a document. We are not asking for any protection or immunity for the shipper or the agent if there is anv fraud or con- spiracy: but we are asking that if an agent emits over his signature a negotiable instrument which he well knows an innocent third party may suffer from, which he know.-; it can do, a loss arises out of his carelessness or dishonesty, that his principal should be held responsi- ble for it, And that is what is intended to be covered in tins bill. The Chairman. Senator Cummins, you may inquire. Senator Cummins. If bills of lading' were issued under the proviso that I read a few- minutes ago, would the banks be willing to accept Ihem and negotiate them? Air. Wexleiu In some instances; not in all. It would require a better name— a iirm or person in better standing — to obtain monev upon a "shipper's load and count'' bill of lading' than it would upon one in which there wci-e no restrictions. Senator Cummins. I am not referring now to the "shipper's load and count" side of the proviso, but the other part. Mfv ^.'kxt/f.i: Which part is that '( BILLS OF LADING. 41 Senator Cummins (reading) : Provided, That if the property is described in the order or the straight bill of lading merely by a statement of marks or labels upon the property or upon packages con- taining them. I will end there. Mr. Wexler. Yes; end there. Senator Cummins. Would your bank be willing to discount or to pay out money upon a bill of lading that simply described the prop- erty by a statement of marks or labels upon the property or the packages containing it, without knowing anything more ( Mr. Wexler. Yes, they would. I will instance that to you. For instance, suppose a man is in the wholesale grocery business and he has a shipment of a carload of canned goods from Baltimore. We know if that man is in the grocery business, when it is in his line of business, that he may buy canned goods. When he corner to us with the bill of lading for a thousand cases of oysters and that is signed by the railroad, all we want to know is that it is a thousand cases of oysters. We do not inquire, and are not concerned, whether it may be tomatoes or something else, lhat risk every man is willing to take upon his knowledge of the man with whom he is doing business. But if the bill of lading came along without any number of boxes stated on it at all — in other words, a carload of tomatoes, for example — of course it would not be a negotiable document. No one would handle it. But we do not go into the question of whether these boxes are all full boxes or half boxes, or anything of that kind, because we know in a general way the character of the people with whom we do business. Senator Cummins. I have not studied that provision very care- fully. I have seen it for the first time this morning, but it seems to me to return you to about the same condition you are now in. Mr. Wexler. It would not, for this reason, if you will permit me. The greatest difficulty lies not in the fact that a smaller quantity is shipped, but these frauds are usually perpetrated when there is no shipment at all; or else they are perpetrated by the shipper, with the deliberate intent to defraud, who is not called upon at all to give the quantity. For instance, there was a large fraud committed in Memphis about 15 years ago by a cotton house that had •sold abroad good middling cotton, which is one of the higher grades, and they shipped, instead of that, linter's cotton, which is a veiy short cotton which comes from cotton seed and is worth about 20 per cent of what the other is worth: but the bill of lading called for so many hales of cotton, and these drafts were negotiated, and when the man abroad received the cotton it was a cotton which was vastly inferior in grade, of course. lie sold it for what he could get for it, and he had to lose the difference. The railroads, however, were not in any sense responsible there, because they were not in any way in collusion with the shipper. They did not misstate the goods at all. They were not called upon to give the quality of the goods in any sense. Cotton runs in grades all the way from strict low ordinary up to middling fair; that is a variation of about ten different grades, vary- ing in price about 2 cents a pound. No bill of lading for cotton ever stipulates the grade, but it stipulates the number of bales and the weight. There are slight variations in the weight which are not held 42 BILLS OF LADING. against the railroads, because there is a shrinkage in price arising from drying out or a shrinkage in weight arising from absorption. But the number of bales must be there. I maintain that if a railroad signs for 100 bales of cotton through its agent it must deliver 100 bales of cotton, because the whole fabric of credit would fall down if an innocent holder of a negotiable docu- ment could not recover from the person at fault. The whole credit system of the country would fall. There wouldbe nothing left. Xo bank, no individual could do business if a negotiable instrument in which they deal — notes or bills of lading, drafts, etc. — if the person at fault, in the issue of a fraudulent one, can not be held liable to pro- tect the innocent holder. I am not a lawyer, but it appears to me that is a fundamental proposition that an innocent holder is entitled to protection against the man who has permitted it to be committed, whether through dishonesty or carelessness. Senator Coimins. This proviso seems to embrace this proposition, that if the shipper says to a railroad company there are certain things in these packages or that these packages are of a certain weight or in a certain condition that if that statement is tnu — that is, if the ship- per did make this statement — then there is no liability on the part of the railroad. Mr. TVexlek. There would be no liability on the part of the rail- road if the shipper misrepresented the contents of a package which the railroad was unable to discover. For instance, if he brought a coop of chickens and described them to the agent as a coop of geese then the railroad agent has no right to receipt for a coop of geese when he sees the chickens in front of him. But if the shipper delivers a box of dry goods that is nailed up all around and asks the agent to receipt for one case of drv goods, then the railroad agent is held entirely free of all liability if lie delivers that particular case which he receives. It is a common-sense trans- action. Senator Cummins. I do not want to be hypercritical about this. Mr. Wexlkk. I am very glad >ou arc asking these questions, be- cause that is the only way that we can get at the facts. Senator Cummins. But it seems to me, the wav it is drawn, if a shipper brought in a crate -of geese and he said to' the railroad agent that it was a crate of chickens that that would be the end of the thing so far as any liability was concerned. Mr. Wexlei;. It may have been defectively drawn. Mr. YTiLLisTox. If the witness will permit me, I might say that the whole proviso depends on the first line of it, "Provided, That if the property is described in an order of a straight bill." The shipper's statements, except as put in the order or straight bill, do not make the least dilh-rence m the carrier's liability. Everything is dependent on the statements being part of the description in the bill. Senator Cummins. It must be described in some fashion in the bill ol lading ( Mr. Williston. Yes; and that description must be true. The principle of the proviso and of the section on which it depends is just like the principles regarding labels under the pure-food law. You K-'ii 01 t ij- tn Avhat ls state<1 "" the labeL I[ the statement on the bill oi lading is a broad, indefinite one, or appears to be made entirely BILLS OF LADING. 43 on the word of the shipper, then the truth of such indefinite state- ments is all the holder of the document can demand. But no extrinsic statement between the shipper and the carrier has any effect on the matter. Senator Cummins (reading) : Provided, That if the property is described in an order or straight bill of lading — I will omit the first alternative, then [continues reading] — described in an order or straight bill of lading merely by a statement that the property is said to be of a certain kind or quantity. Said by whom to be and where to be ? Mr. "Williston. That in the bill of lading must necessarily mean by the shipper. A bill of lading is required to be in the common form which says: "Received of so and so the following property," and then follow the words of the description, "said to be of a certain kind or quantity." So the bill will read "Keceived of John Jones 100 barrels, said to be of a certain kind." That necessarily means said by the shipper from whom they were received. Senator Cummins. Now, then, if it is true that the shipper said that these barrels were of a certain kind and quantity, then the car- rier would not be liable ? Mr. Williston. The carrier would not be liable if they were not of that kmd or quantity. The question would be whether Mr. Wexler would care to buy a bill of lading or advance money on a bill of lading which was in that form. He would have the option. The document would state on its face just what it was. And all that the advocates of this bill request is that the railroads shall stand behind any state- ments that are made in the bills of lading. If they have made very few statements, then it is a question for those who buy such docu- ments whether the paper is worth buying. Senator Cummins. It would be easy, would it not, to formulate a bill much less lengthy, which would say, for instance, that the railroad company should be answerable for the statements actually made in the bills of lading ? Mr. Wexler. That covers it. That absolutely covers it. Mr. Williston. That would be, it seems to me, true. Senator Cummins. And then if it said: "Received of John Jones 100 barrels; we do not knowwhatisin them or any thing about them" — then, of course, there could be no liability on the part of the railroad. Or if it said, "Received of John Jones 100 bales of cotton; we do not know what kind of cotton or how much they weigh" — that would relieve the railroad, would it not % Mr. Williston. That is true. Only in view of the amount of litigation there has been in this matter, it seems to those who have drawn the bill, and to the railroad people who have criticized it, wiser to put in a little more specific statement, even at the risk of making a somewhat longer one. The Chairman. Supposing the courts had taken that view and simply held the railroad company was liable for the statements, that would have cleared the whole thing ? Mr. Wexler. Absolutely. If this decision in 1888 had never been rendered, we would be doing business in negotiable bills of lading like we are in negotiable notes and other forms of securites, which is what we want to do. 44 BILLS OF LADING. Senator Cummins. This would drive railroads to one thing. They would have to say: "Received such and such thing; contents unknown." Mr Wexler. They do that frequently. Senator Cummings. That would be the bill of lading? Mr. Wexler. Yes, sir. Senator Cummins. That would not help commerce very much? Mr. Wexler. Not at all. They would receipt for grain; so much grain. If it was cotton, they would say, "One hundred bales marked from 1 to 100." Or so many bales of hay, or so many cases of shoes. For instance, 100 cases of shoes, or 100 cases of dry goods. AH that we say is that the railroad should be responsible for what it signs. Thev can put anv restriction they please on what they sign, so as not' to make them liable for anything that is not palpable to their agent. They are entitled to that protection. They ought not to be held responsible for anything that they can not see or count. If the shipper wants to load bis own stuff, it should be "shipper's load and count." Senator Oliver. As I understand the decisions of the courts— I am not entirely familiar with the decisions, but I understand the courts have decided 'that if an agent through collusion with the shipper signs a bill of lading deliverable to order, and that the railroad does not actually receive the goods, the railroad is not liable? Mr. Wexler. That is the idea. Senator Oliver. You want that condition remedied ? ■ Mr. Wexler. I want that condition remedied. The decision, I think, was that an agent is hired to receipt for goods, and that in signing a bill of lading for something which he has not received, it is an act of ultra vires, that he was not hired to do. But if you give your note to me signed in blank and tell me, "Mr. Wexler, I wdl let you have tins note, fill it out for a hundred dollars," and I fill it out for a thousand dollars, you would be liable for the thousand dollars if it were held by an innocent third party. Senator Olivet:. I tliink I ought to be if I would be foolish enough to do a thing of that kind. Mr. Wexler. I tliink the railroads ought to, too. Senator Oliver. This would not protect the banker: even this legislation would not protect the banker in case of the existence of a forged bill of lading I Mr. Wexler. Xo, sir; it would not. Senator Oliver. You still run that risk? Mr. Wexler. Yes, sir; that risk lias to be taken. Senator Oliver. And your theory is that if this present condition continues, it is going to hamper the carrying on of business, because you bankers will either have to decline' to advance money on such bdls of lading or will have to charge for the risk ? Mr. Wexler. Yes, sir. I would like to give you an evidence of that fact here. A cotton merchant of Manchester sent us, through his brother, who is doing business in New Orleans, this document, which was handed in by the London City & Midland Bank, one of the largest banks in Europe, requiring him to have the exchange buyer in this country sign this document before thev would agree to accept bills in London for him. BILLS OF LADING. 45 The clause is as follows : We hereby guarantee to you and to each one of you severally that the said bill of lading is valid and genuine and has been signed by the agent duly authorized by the carriers therein named, and that at the time the bill of lading was issued the cotton therein referred to was in the actual custody or under the control of the issuing carriers. Now, this bank wants to say that unless the buyers of the exchange of this gentleman are willing to sign this document guaranteeing that the cotton was in the custody of the railroad at the time they signed it they will not accept his bills of lading over there. That shows you the attitude of the foreign bankers. I do not entirely blame them, however. They are paying out millions and millions of dollars upon what they believe to be commodities, but which may not be. Senator Oliver. As it stands now, if one of these fictitious bills of lading, or bills of lading based upon no shipment — if you advance the money upon it and send it to a London banker and he accepts it, that relieves you and throws the responsibility upon him ? Mr. Wexler. Yes, sir. Senator Oliver. And his purpose there is to hold you to your responsibility in the case ? Mr. Wexler. Precisely. Senator Oliver. I think he is right. Mr. Wexler. But we won't stand for it. Here is the point: If the draft is made "pay to order" for, say, £5,000 without any reference to the bill of lading, and we bu)* that draft and send it on, we are not responsible. But if it says on it, "against 100 bales of cotton; bill of lading attached," then the courts hold we are responsible, because we have bought it with the stipulation that there are 100 bales of cotton behind it. So that, since we have had all these troubles through the failures of these two large firms in the South, we have eliminated these notations on the draft entirely and the foreign banker really has to bear the brunt of it. There are reasons why he should, but they are not pertinent here. The Chairman. I do not wholely understand the course of the business. If a man comes to his local banker with a bill of lading, the banker gives him credit and issues a draft, does he not '( Mr. Wexler. No; there are several ways of doing it. The Chairman. Let us start first with the shipper. How does he get his money ? Mr. Wexler. The shipper either has sold his cotton abroad or in ' this country. If he has sold it abroad, he gets a through bill of lading to the point at which he has sold it, and he attaches his draft and insurance policy to it, and he sells that bill of exchange outright at the prevailing rate of pounds sterling or francs or marks or what- ever it may be. The Chairman. He sells to the local banker? Mr. Wexler. He sells to the local banker. The Chairman. Now, it becomes the property of the local banker ? Mr. Wexler. Yes, sir. The Chairman. How does the local banker realize on it without escaping the liability on it ? Mr. Wexler. These bills are usually drawn at 90 days' sight; they are not sight drafts. We give credit in America to Europe for cotton, based upon the acceptance of the 90 days bill of exchange by a 4(3 BILLS OF LADING. responsible foreign banker, spinner, or cotton merchant ; our responsi- bility continues until the acceptance is effectuated. It then ceases and the bill of lading becomes the property of the accepting bank for account of his customer or of the accepting cotton merchant or spinner for his own account. If the cotton fails to arrive or if the bill of lading is a forgery the acceptor must stand the loss. The Chairman. And you escape liabdity? Mr. Wexler. I escape liability absolutely. I am through. I have bought that bdl based upon the fact that a credit has been opened in Europe for it. The Chairman. And you have practically sold the bill, have you Mr. Wexler. No, sir; I have not sold it. I still own it. _ I have it accepted now, so I have a good piece of paper. I have indorsed the bill itself, but I have not indorsed the bdl of lading, you under- stand. So what have I got? I have a draft by a firm ha America in favor of himself, by him indorsed, and accepted by a foreign bank that is solvent and indorsed by our bank. That is sold in London to the open discount market and the bill of lading that went behind it is delivered by the accepting bank to the person who opened the credit with them, the mill. The Chairman. And vour indorsement does not carry any liability ? Mr. Wexler. Our indorsement does not carry any liability unless the bank fails that accepted it. Then it comes back on me and I go back on -the man in this country who drew it. That is the method. There being no further questions, Mr. Wexler was thereupon excused. STATEMENT OF PHELAN BEALE, NO. 2 WALL STREET, NEW YORK CITY; LAWYER, REPRESENTING THE GERMAN COTTON EX- CHANGE OF BREMEN, AND CERTAIN MEMBERS OF THE NEW YORK COTTON EXCHANGE. Mr. Beale. Mr. Chairman and gentlemen, Mr. Wexler has presented the argument that I had in mind so ably that I am not going to tres- pass on the good nature of the committee by consuming its time. I shall pass very lightly over the three points that I intend to make and merely spend awhile on point 2. If the committee please, the situation is this : The Supreme Court of the United States in Friedlander v. Texas Railway has decided that a railroad carrier is not liable for cotton — rather cotton in that case, but generally as to all commodities — is not liable on a bill of lading signed by its agent, unless the goods have actually been received by the agent. I, on my part, have no connection whatever with the bankers' committee. I appear solely for the consignees, who are in reality the shippers, because both in reality and figuratively the con- signees pay the freight, in that they buy the draft with the bill of lading attached at the end, which includes the freight charges. As a representative of those interests, I would deem it impertinent if I were to come before the committee and argue that the committee should change a ruling of the Supreme Court of the United States without offering sufficient reason therefor. It is immaterial, in my humble opinion, whether Mr. Dowie has lost $40,000, or 400 cases of BILLS OP LADING. 4Y eggs, or what not, unless those losses bear generally on the situation, because a mere loss, an isolated loss, does not prove that the decision is bad. So I come before the committee and base my earnest request that the committee report this legislation favorably on three general points, the first point being the substantial injustice of the situation as it now stands. The second point is, assuming that the decision is just, the abuse by the railroads has been such that it is the duty of the Senate and of Congress to remedy the evil as it now exists; and the third point is that it is a question of greater importance than whether the railroads dislike or like the proposed legislation; that the third point is that the volume of trade and the facilitation of the commerce of the United States, both within its own borders and with foreign countries, render it imperative that some action be taken to encourage the same by protective legislation. Now, gentlemen, to return to point 1 — the substantial injustice. Ex-Senator Faulkner represents the railroad, and also Col. Thorn, for Whom I have a great esteem and affection, and I am sorry he is not here to reply. I defy Col. Thom or Senator Faulkner to cite a par- ticular instance where a discrimination is made in favor of a corpora- tion or a firm or an individual to the extent that the Supreme Court has discriminated in favor of the railroads in rendering their decision in the case of Friedlander against the Texas Railway. Do you mean to tell me that there is any corporation or firm or individual who employs an agent and holds that agent out as having a general power to issue certain documents and that agent issues a document without receiving the goods — do you suppose that any principal would be absolved from liability? Certainly not. It violates all the rules of reason in the law of agency, as well as, with due deference to the Supreme Court, common sense. In seeking for a motive for the decision of the Supreme Court in the Friedlander case, I ask why do you suppose the Supreme Court reached that conclusion? Frequently the appellate courts, so as to reach a certain conclusion by an orderly reasoning of law, distort a principle of law on the grounds of public policy. We know that the railroads developed the United States. We know that they are deserving of a certain amount of protection. The Supreme Court of the United States undoubtedly thought that a large railway system, maintaining anywhere from 1,000 to 3,000 or 4,000 railway agents, deserved protection; that it would be against public policy to place within the power of a $40 or $50 a month freight agent, a man of small caliber by reason of his unimportant position, to bind the rail- road ; that it would be unfair to retard the development of the United States and to place within the power of that freight agent practically to bankrupt a railroad by collusion with some third party by issuing fictitious bills of lading without first having received the goods discounted. Now, assuming that that was the view of the Supreme Court in order to protect the railroads for the development of the United States, do you suppose that the Supreme Court ever intended or had the remotest idea that the protection which it gave to the railroads by that decision would be turned into a license and privilege — verily turned into a license and privilege by continued and constant abuses on the part of the railroads, so that the railroads now say to their 48 BILLS 01? LADING. agents either expressly or tacitly, "You go right ahead and issue hetitious bills of lading, if you please, just so you get the business from shippers. We are not liable anyhow, and we do not have to pay the bill if anything is wrong; so, for the sake of business, you go ahead and continue that practice." I pass on to point 2, the abuse by railroads of the Supreme Court's decision— and again I regret that Col. Thorn is not here. I would like to ask Senator Faulkner or Col. Thorn whether they deny that the issuing of fictitious bills of lading is the practice of the railroads, and whether they would deny that the protection afforded by the Supreme Court of the United States has not been brutally abused by the railroads. An isolated instance seldom if ever proves the rule; therefore I would like to explain to the committee the general way in which the railroads abuse this privilege. I shall not go into it at great length, but will just mention two instances. Take the cotton, situation., with which I am more familiar. At or about even- -3-mile interval on a railroad line in the cotton section there is a little station. Around that station is clustered plantations of large and small size. As stated, there is a distance of 5 miles between stations. So you practically have a circle with a diameter of 10 miles, composed 'of cotton plantations. The cotton generally is ready for the market in the early fall, ami you have a large amount of it on hand in the months of October and .November. The cotton is ready for shipment. I as a plantation owner go to the railway agent and say, "John," as Mr. Wexlcr says, a boyhood companion, or he knows who I am, "you know that my plantation usually raises about 1,000 bales of cotton a year. You know that in the month of November, thelirst of November, I always have two or three hundred bales for shipment. You have not the cars ready for the cotton; there is so much damage and shrinkage if left exposed on your sta- tion, and you have not the quarters to store it or the facilities to ship the cotton, I am losing the interest on my money. Why not give me a bill of lading, -o that I can take the bill of lading and negotiate it and secure the use of my money now, and I will keep the cotton on my plantation until you are ready for it and thus save a*ou the respon- sibility of looking after the cotton, and when vou get your cars I will deliver the cotton to you for shipment, and then, in the possession of the bill of lading which you will give me, I can go ahead and use my money as of to-day." The railway agent refuses. There is another road 5 or 6 miles away. I promptly respond, and say: "Very well; you refuse a reasonable request. 1 will give my freight patronage to the L. & N. Railway, 5 or 6 miles away." The business falls oil" at John's station. The agent is summoned by the railway authorities to know the reason why. lie can not explain it; or if he does explain it. the natural conclusion is that theysav to him, "You get the business or there will be no necessity for this station continu- ing to exist there, and you will be out of a job." The railway knows it is under no liability. If anything goes wrong by reason of the bills of lading that are issued by the railway agent, John, at my request, let us say, that if he issues a bill of lading and 1 deliver my cotton to another railway and negotiate the former bill of lading, the railroad is not liable. So is it not a reasonable inference that the railroad will say, "You tret BILLS OF LADING. 49 the business"; and John, the railway agent, goes out and says yes, and thereby opens an avenue of fraud. Yet to this committee rushes the railroad companies and say, "We ought not to be liable, in spite of the fact that we have grossly abused the protection which the Supreme Court of the United States confided in us in the decision in the Friedlander case." Just one step further — the warehousemen. In large cities all the railroads — in the city of Montgomery, Ala., I will take as an instance, because I am more familiar with that; it has 10 or 11 railways. Every railroad has a soliciting freight agent. The factor or ware- houseman sells 1,000 or 10,000 bales of cotton to be shipped abroad. He goes to a soliciting freight agent and says: "I have an order for 1,000 bales of cotton, or 10,000 bales, whichever it maj^ be; I have not got it made up but will have it made up in a few days. Give me a bill of lading now, will you, because it takes about 15 or 20 clays for that bill of lading to go across, and I will have the cotton in a few days and deliver it to you." The railway agent replies: "No; I will not assent to a plan like that. You may thereby cause loss and defraud some man who is an innocent purchaser." The soliciting freight agent does not get any business, as the other agents acquiesce in the request. Do you suppose the headquarters of the railway is not going to say to the soliciting freight agent: "Why do you not get the business?" If he explains why, do you think the railway company will say, ' 'No ; do not obey the request, even though we are not liable; do not do it. We would rather lose money than have you do something that would possibly defraud a third party." No, sir; I maintain that it is not ordinary common sense to infer that a railway company is going to act in that fashion, and I do not think ex-Senator Faulkner, the railways' attorney, will assert that the railroads are so charitable as that. I assert that the railways act just to the contrary. I am not going to weary the committee by bringing a lot of data to prove that, but I merefy want to show you as to Col. Thorn's railway exactly how it is worked. There is a firm of H. Hentz & Co., of New York, that I represent. H. Hentz & Co. had an offer by telegraph from people that they had dealt with pre- viously thereto and who had been honest to sell Hentz & Co. some cotton at a certain price. The wire said, "I will sell you 2,000 bales at the market price. Will you take it?" Hentz & Co. wired back, "Ship it; bills of lading to order, notify; attach ladings to sight drafts. We will pay on presentation." The bills of lading with drafts attached came in due course through banking channels and were presented and $135,000 was paid for the drafts on the strength of the bills of lading. The shipments thus represented were divided into four lots — one lot over the Louisville & Nashville Co. from Decatur, Ala. ; one lot over the Southern Railway from Decatur, Ala. — Col. Thorn's road; one lot from Selma, Ala., over the L. & N. Railway; and one lot over the Southern Railroad from Selma, the two points being 300 imles apart, so we have four railway agents in two different towns being concerned. Hentz & Co. wired to the four railway agents — they first wrote a letter and said, "We hold bills of lading signed by you, dated so-and- so, from such-and-such a city, for so many bales of cotton, marked 'P' or 'L,' of a certain weight," as the case was. Could there be any clearer or better identification than that? They addressed four 42808°— S. Doc. 650, 62-2 i 50 BILLS OF LADING. letters to four railway agents. Not getting a reply, Hentz & Co wired and said, "We want to know whether you signed the bills ol lading. What about the cotton?" Those railway agents could hardly have been in collusion at the time because, as I have said, they were 300 miles apart, and yet each one of those railway agents wired— I have the record here or testimony under oath to corroborate my statement should it be questioned by Col. Thorn or Senator Faulkner; I will not offer the record in evidence, but merely state for the sake of brevity what the record shows ; each one of those railway agents wired—" Your cotton went forward to-day via the Potomac Yards." Hentz & Co. were not suspicious. Why should they have been? The replies were from authorized agents of the railroads. They did not know there was "a nigger in the woodpile," about the telegram, It subsequently developed that the cotton was not in possession of any of the railway agents. It was not in the possession of a single railway agent, and when a telegram was sent by each one of them to the effect that the cotton was under way it was an unqualified false- hood. When — in the trial of the case in the civil courts, not against the railroads, because, by virtue of the United States Supreme Court's decision, we had no case against the railroads — the question was put to the agents, "Why did you send that telegram*" "Well, we do not know." Then was asked, "As a matter of fact, you had not received the cotton and it was not under way ? " "No." "Then the telegram that you sent was an unqualified falsehood?" "Yes." Those railroad agents are still in the employ of the railways to-day, which, to my mind, is a significant fact. I merely cite the foregoing as an evidence of the abuse on the part of the railways. I will also cite the L. & N. Railroad case. Mr. Bywater is the general foreign freight agent, a man of authority and superior position. I have here the testimony of a case tried in the South, of a man, John W. Knight, who was indicted by the Govern- ment. The letters of Mr. Bywater offered in the said case show that he authorized and ratified this issuing of the false bills of lading on the part of the railway agents, which caused tremendous losses to innocent parties. Gentlemen, I maintain that the decision of the Supreme Court should be remedied by Congress because of its manifest injustice and its manifest discrimination in favor of railways to the detriment of the commerce of the United States; furthermore, that the railroads have so abused the protection afforded by this decision and turned the protection of the Supreme Court into a license to defraud the consignees in order to procure business and at the expense of the com- merce of the Umted States, and have approved of a plan of dealing which resulted in the perpetration of grave frauds for the purpose of their own profit. It is a mistake to call the fictitious bills of lading accommodation bills of lading; they ought to be called accomodation bills of lading for the profit of the railroads ; that it is presumptuous for the railroads to oppose the passage of a measure to make them answer- able tor then - acts. To proceed to point 3. I maintain, with all due deference to this committee, that it is the duty of the Congress of the United States not to consider any particular interest when it comes to the considera- tion of the commerce of this country— of the marketing of the crops, tides, corn, gram, cotton, and other crops— but it is their duty to BILLS OF LADING. 51 pass legislation that will protect the people in dealing among them- selves and the foreigners who come to us to trade; protect them as soon as possible by passing an act that will at least impose upon the railroads the same legal obligation that an individual and a corpora- tion to-day under the law are compelled to bear. I appear here on behalf particularly of the German cotton mer- chants. As Mr. Wexler has stated, $600,000,000 a year in cotton alone is purchased by foreign merchants, $150,000,000 of which each year goes to Germany. The Germans appear here and they peti- tion and respectfully ask that the Congress of the United States be good enough to pass legislation that will protect them in trading with the United States. They make no threats. It would be idle for them to do so. They have got to come to the United States to get the cotton. They can not get it anywhere else. They petition in the same manner the United States goes to Germany and asks that certain provisions, certain requirements of the potash situation, be remedied so that it will be of some avail to the potash purchasers of the United States. The German merchants come here and peti- tion and pray that at least a reasonable safeguard be thrown around the trade, and that the railway companies be made responsible for the bill of lading signed by then agents. Mr. Chairman and gentlemen of the committee, in conclusion, I merely submit this, that the Stevens bill as it now stands has no ?rovision to protect the foreign purchaser. In the bill that Prof. PHliston and Mr. Peyton presented it has in italics that the pro- vision be extended to any place within the United States or to a foreign country, and in considering the bill I respectfully ask the committee that they be good enough to consider the supplication of the foreign merchants that they be protected to that extent. Just one word more as to a criminal provision in the bill. It is a peculiar situation about the crime involved in forging a bill of lad- ing. Some States protect against such an act by making it a crime, but I think that there ought to be a cri min al provision added that anyone who forges or negotiates, or utters a forged bill of lading knowingly, shall be guilty of crime and punishable by imprisonment and fine. The railways object, I understand, to its being made a criminal penalty if the agent does it, because they maintain that some of the railways in Chicago have such confidence in the house of Marshall Field and other houses there, that they give these so-called accom- modation bills of lading, and if a penalty is imposed it will prevent them from doing this. It is not so necessary that the crime be placed upon the agent, because if you have a civil liability of the radway, then you do not especially care about the criminal liability of the agent, but where you are protected by the criminal liability is in the event of a third party who, without connivance, collusion, or any relation whatsoever with the agent of the railway, a third party forges a bill of lading and negotiates it. The c rimin al provision making such an act punishable by the United States courts will be something of a deterrent to a third person committing such crimes. I do not Know what Prof. Williston may think of my statement of the law, but I ask, in the absence of a special statute, wherein is a crime committed ? If I forge a bill of lading in Alabama to-day and secure $100,000 from a man in Germany, what crime have I 52 BILLS OF LADING. committed? I have not committed forgery in the absence of a statute, because forgery at common law is forging the name of another to his financial detriment. Senator Pomerene. Have they not State statutes covering that proposition % Mr. Faulkner. Yes. Mr. Beale. I beg to differ. All the States do not have that pro- vision. There are an exceptionally few that have it. Mr. Faulkner. I do not know any that have not. Mr. Beale. I am sorry that I have not got them compiled, but just to continue, I am not guilty of forgery. A forgery is the unauthorized writing of one's name to his financial detriment. The agent does not suffer financial detriment. The railroad does not suffer. Wherein is the crime committed? You get the money in Germany and you are in Alabama, and you are not in the venue where the crime has been committed. It is very much like a man standing on a street in one State killing a man in another State. Wherein is the crime committed % In what jurisdiction. So, in the absence of a statute, the criminal escapes. I trust that the committee will consider this criminal amendment when it comes to the consideration of the bill. I am very much obliged to you, gentlemen. Mr. Beale was thereupon excused. STATEMENT OF FKANCIS B. JAMES, OF CINCINNATI, OHIO, AND WASHINGTON, D. C. Mr. James. Mr. Chairman and gentlemen of the Committee on Interstate and Foreign Commerce, a short statement will be sub- mitted in support of thePomerene bill, No. 4713, relating to bills of lad- ing in commerce with foreign nations and among the several States— a bill similar to one that probably interested Senator Pomerene when he was presiding officer of the Ohio senate. The Ohio bill pertaining to bills of lading in intrastate commerce was framed by the commis- sioners on uniform State laws in national conference and is now the law of Illinois, Iowa, Massachusetts, Maryland, Michigan, New York, Ohio, and Pennsylvania, and one other State whose name I do not recall — nine States in all. While the Clapp-Stevens bills meet my hearty commendation as far as they go, yet they do not fully safeguard the use of bills of lading as instruments of national and international commerce, and fail to fully define the rights, duties, and obligations of each and all persons brought into privity with such instruments. Mr. Wexler, in the speech he has iust delivered, has well defined these matters, and the Pomerene bill distinctly covers each of the points dwelt on by Mr. Wexler, while the Clapp-Stevens bills do not. The Pomerene bill is the first comprehensive measure dealing with these instruments of national and international trade and commerce that has yet been brought to the attention of Congress. It deals frankly, openly, squarely, and directly with the problems, calls things by their well- recognized commercial names, and seeks to accomplish its purposes directly by providing, as by way of illustration, for negotiability by calling an order bill negotiable, and not indirectly under the guise of estoppel. BILLS OF LADING. 53 In this connection, attention is called to the annual message of President Taft, on December 6, 1910, to the third session of the Sixty-first Congress, wherein he said (Government Printing Office pamphlet, pp. 83-84) : For the protection of our own people and the preservation of our credit in foreign trade, I urge upon Congress the immediate enactment of a law under which one who, in good faith, advances money or credit upon a bill of lading issued by a common car- rier upon an interstate or foreign shipment can hold the carrier liable for the value of the goods described in the bill,- at the valuation specified in the bill, at least to the extent of the advances made in reliance upon it. Such liability exists under the laws of many of the States. In previous discussions of a former Stevens bill and which did not spertain to foreign commerce, and which did not contain the numerous , upplementary and amendatory matters offered here to-day on behalf of the bankers, counsel for the carriers pointed out that the Stevens bill was defective because of its failure to contain the provisions which are now found in the Pomerene bill and which follow a na- tional and international bill of lading through its various devolutions from its inception to its discharge to its logical conclusion. This in brief is the substantial difference between the Clapp-Stevens bills and the Pomerene bill. It would seem natural that a member of this committee before signing his name to a report on the subject under discussion would ask and answer five questions : To what extent are bills of lading in use ? Do they possess any economic advantage ? Are there any evils to be corrected ? Is the measure constitutional ? Is the remedy a safe and tried one or a mere experiment ? These will be taken up briefly. To what extent are bills of lading used? In a hearing before the Interstate Commerce Commission which t took place about three years ago it was testified that there were annually issued in American commerce bills of lading represent- ing commodities of the value of $25,000,000,000, including both order and straight bills of lading. It was then estimated that $5,000,000,000 in cash were advanced annually by the banks on order bills of lading. Approximately 99 per cent of the tonnage and values of commodities covered by these bills of lading were involved in interstate and for- eign commerce and not over 1 per cent in intrastate commerce.^ This ought to commend bills of lading as a proper subject upon which the national central legislative body — Congress — should exercise com- pletely, exhaustively, definitely, and to its fullest extent the power conferred upon it by the Constitution to regulate interstate and for- eign commerce. What Mr. Wexler testified to from his personal observations is more than corroborated, explained, elucidated, and applied by numer- ous economic writers, a few of which will be referred to. President Hadley, of Yale University, in his classic on Railroad Transportation, has well said (pp. 18-19) : We no longer produce for the home market, but for the world's markets. It is by the world's supply and demand that prices are made. The development of transpor- tation has been the main instrument of this change. It has gone hand in hand with the extension of the credit system ; each has supplemented the other. The bill of lading is made to serve the same purpose as the bill of exchange. 54 BILLS OF LADING. Mr. Albert Strauss, of Messrs. J. & W. Seligman & Co., in a recent address on the currency problem (p. 76), has elucidated the great utility of an order bill of lading accompanying a draft in the export of cotton, as follows : The English buyer arranges with his banker to accept the drafts_ of the American cotton dealer, and notifies the American dealer to draw his 60-day bill on the London bank, with shipping documents attached. The American cotton dealer borrows from his local bank to buy cotton from the farmer, whom he pays in cash. When he has gathered enough cotton for shipment, he ships on, through bills of lading, from his southern home direct to L verpool. These bills of lading he attaches to his 60-day draft on London, and the London draft, with its documents, he attaches to a draft on his New York agent. With this New York draft he repays the local bank. The New York agent, in turn, sells this 60-day bill on London to a New York banker, and with the proceeds meets the cotton dealer's draft on him. On the other hand, the exchange banker sends the 60-day bill to London for discount, and againBt the pro- ceeds draws a demand bill on London. Mr. Logan McPherson, in Railroad Freight Rates in Relation to the Industry and Commerce of the United States, after classifying order bills of lading as commercial paper, says (p. 190) : The [order] bill of lading is' an instrument for facilitating commerce the importance of which is not generally known. It is not only a certificate that merchandise is in transit, but a first lien upon that merchandise; m a way a title to ownership, and, as fulfilling this function, negotiable. For example, a grain dealer buying a carload of wheat at the western field may, and in the vast majority of cases does, deposit the bill of lading covering that car in a bank as security for a loan to its value. If that car goes through to a port where it is sold for export, the loan may not be paid and the bill of lading lifted until the grain is transferred from the car to the vessel. There is a similar procedure in the case of other commodities, with the bills of lading cover- ing raw material to the factory and finished produce from the factory. The [order] bill of lading thus contributes to that fluidity of the circulating medium, that celerity in the transfer of merchandise, which are striking achievements and essential require- ments of current civilization. In Prendergast on Credit and Its Uses [1906], page 42, the problem is thus stated: A merchant having purchased a bill of goods on a, specified term of credit, gives to the seller a bill of exchange, drawn on himself, representing the amount of the invoice. The seller, needing money for his own business, passes this bill of exchange, with his indorsement thereon, to another from whom he has made a purchase, or to whom he may be in debt for any other reason . The third person to whom the bill of exchange is given passes it on again in liquidation of an indebtedness of his own, and so on. In this way that bill of exchange may serve in the effacement of many different accounts and return to the drawer literally covered with indorsements. What is true as to the function of a medium of exchange, which the particular bill referred to has discharged, may be equally true of many other forms of credit instruments which may be called to mind. Promissory notes, drafts, checks, bills of lading, and ware- house receipts are all credit instruments which can be used as mediums of exchange or substitutes for money. In the Life Story of J. P. Morgan, by Carl Hover, just published, at page 41, the same thought as expressed by Mr. Strauss is given, as follows : When we export cotton, a credit is opened with the English buyer, who arranges with his banker to accept drafts of the American dealer, and notifies the American cotton dealer to draw his cO-day bill on the London bank with shipping documents attached. The New York banker buys this bill of the dealer, thus supplying him, without trouble and at a small charge, "the necessary cash to pay the farmer who raised the cotton. _ The dealer in exchange brings together a customer in London, or it may be m tfatavia, Siam, or the coast of Africa, and a seller in the United States. The two practically stand m front of his desk and receive what is justly due them, although they may actually be 10,000 miles apart. BILLS OP LADING. 55 A word might be added as to the standing of these various author- ities : President Hadley gave to the world his book in 1886, one year before the Interstate Commerce Commission was appointed, and it is still a classic on its subject. His sound and sane views were recognized recently when President Taft appointed him a member of the Stock and Bond Commission. Mr. Albert Strauss has an international reputation as an authority on foreign exchange and takes a great interest in public questions. His family has a high repuration for ability and mtegrity and for patriotic public interest, his brother being recently associated with President Hadley on the Stock and Bond Commission. Mr. Logan McPherson, in addition to being the author of the work just quoted, is also the author of "The working of the railroads," "Transportation in Europe," and is now at the head of the economic bureau maintained by all the railroads in the United States. He was at one time lecturer on transportation at the Johns Hopkins University and at one time in the employ of the Southern Radway. Mr. Prendergast is a high authority on credits and is now comp- troller of the city of New York. Mr. J. P. Morgan's name is a household word, and that he is a master banker goes without saying. It should be noted that there is some difference in the marketing abroad of the staple commodity cotton and other staple commodities, such as grain. Cotton moves on a through bill of lading from an interior American point, rail and ocean, to the foreign port of destina- tion, while other staple commodities, such as grain, move to the port usually under an interstate bill of lading, which is there surrendered and an ocean bill of lading issued in lieu thereof. This is a difference, however, of detail and not of substance. As pointed out by Mr. Wexler, as set forth in the economic author- ities cited, and, as contained in the express language of the provisions of the Pomerene bill as actually recognizing actual commercial prac- tice, an order bill of lading, duly indorsed, is usually accompanied by a draft. An order bill of lading is commodity currency and is doubly so when accompanied by a draft — the draft with its dollar mark repre- senting a unit of value and the order bill of lading a unit of quantity. By the use of a negotiable order bill of lading, properly protected by legal sanction, our great staple and other commodities are turned into a part of the asset currency of the country. The use of the order bill of lading has dispensed with the necessity of the large concentration of money to handle and move the staple commodities of the country and enables a man with small capital to participate in the movement of our crops. This may be illustrated by a small grain dealer in Iowa with a small cash capital. With this small amount of cash he buys up grain and concentrates it in his small elevator to the amount of $10,000, which is the cash capital on which he is doing business. He ships this grain to the seaboard on an order bill of lading which he attaches to a draft which he draws on his customer. The bank passes this to his credit and with the proceeds of the draft he again buys up grain and con- tinues this process so that with the $10,000 cash capital he is enabled to do several hundred thousand dollars' worth of business. He thus multiplies the purchasing power of his $10,000 cash capital through 56 BILLS OF LADING. an interstate instrument of credit up to the full margin of commercial safety. This economic advantage which thus enabled the small dealer to command a large credit has been frequently emphasized by- western courts in giving full force and effect to State statutes making order bills of lading negotiable. In other words, the courts have recognized the underlying economic principles which prompted this character of legislation. As you throw legal safeguards about these shipping documents, you facilitate their negotiability and multiply their credit power. What has been said about these instruments of credit as applicable to staple commodities is equally applicable to the products of our industrial plants. Are there any evils to be corrected? The greatest evil to be cor- rected is the uncertainty of the law governing bills of lading and de- fining the rights, duties, and obligations of persons brought into privity therewith. Some of the specific evils sought to be corrected are as follows: Prevention of confusion and a clear demarcation between straight bills of lading and order bills of lading by sections 1, 4, and 5 of the Pomerene bill. Full recognition of the negotiable character of an order bill of lading by sections 31 and sections 24, 2(i, and 53 of the Pomerene bill. Prevention of alterations of a straight bill of lading into an order bill of lading by section 2 of the Pomerene bill. Prevention of a person being misled into taking a straight bill of lading for an order bill of lading by section 8 of the Pomerene bill. The breaking up of the practice of issuing order bills of lading in sets, with a few necessary exceptions, by sections 6, 7, and 8 of the Pomerene bill. A remedy to meet the case of lost or destroyed bills of lading by section 17 of the Pomerene bill. Protection against spent bills of lading by sections 14 and 15 of the Pomerene bill. The restoration of the law of agency so as to make the carrier liable for accommodation and fraudulent bills bv section 23 of the Pomerene bdl. The Pomerene bill s] >ecmeally and in the language of trade and com- merce—the language of the law merchant, the language adopted by the courts— specifically deals with each of these subjects directly and not by indirection. The language used is no experiment, but the precise language of the act to make uniform the laws of the various States made applicable to interstate and foreign commerce. As the provision restoring the law of agency has been the subject of most of the discussion— being section 23 of the Pomerene bill, and section 4 with the amendment suggested this morning to section 4 of the Clapp-Stevens bills— has been the subject of much of the discussion, attention will be called thereto. It 'is probable some of the misapprehensions as to the italicized matter suggested this morn- ing as an amendment and supplement to the Olapp-Stevens bills arises from the fact that this italicized matter is taken from the Pomerene bill, but the context to which it refers in section 2 of the 1 omerene bill is not contained in the Olapp-Stevens bills either in original form or m the form of the suggested amendment BILLS OF LADING. 57 Section 2 of the Pomerene bill provides what must be embodied in a bill of lading, and, as will be seen on page 2, lines 6 to 8, that section 2 provides that the bill shall contain "a description of the goods or of the package containing them, which may, however, be in such general terms as are referred to in section 23." It is then necessary to turn to section 23 for a full elucidation of this subject. In view of what has been said, a fuU discussion of section 23 of the Pomerene bill would be superfluous, but it should be supplemented in part, which may probably throw a new light upon the subject. On February 20, 1851, a mere common pleas court of England in the case of Grant v. Norway (10 Common Bench Reports, 665) de- cided that where the master of a vessel issued a bill of lading without receiving the goods that the principal was not bound. It must be remembered that this case was decided at a time when there were but few railroads in England, its commerce largely by sea, the hauls were short and largely by canal. The court in this case rather dogmati- cally reached its conclusion without a full discussion of the doctrine of agency or without giving any strong reasons for making an exception thereto. Why the case was not carried to the House of Lords will never be known. The litigant may have been without funds, or it may have been compromised, and if the carrier were prudent it could well afford to have compromised and paid 10 times the amount of the claim as a good price for such a decision. The English merchants — that is, the general public — appealed to the English Parliament, and in 1854 secured an act which gave some relief from this decision. One of the other speakers referred to the fact that the Supreme Court of the United States announced the same doctrine in 1886, and that this was the beginning of the trouble. The trouble began before that time, because the Supreme Court of the United States in 1855 in the case of Freeman v. Howard (18 How., 182) blindly fol- lowed the English common pleas court case of Grant v. Norway just referred to. Under the doctrine stare decisis the Supreme Court of the United States has repeated the error which first found its place in American jurisprudence in 1855 in the case of Freeman v. Hoard, just referred to, without entering into any reexamination of the question. Mr. Wexler in his address has said that conditions have changed since 1886. It will be more apt to point out that conditions have materially changed since 1855, the date when the erroneous doctrine of Grant v. Norway found its way into the Federal decisions. In 1855 there were but 18,375 miles of railroad in the United States, while in 1910 there were 242,107 miles. In 1855 the State of Michigan completed an improvement of the Sault Ste. Marie Canal, and as late as 1870 the tonnage amounted to but 540,000 short tons per year, which in 1910 had grown to 62,363,218 short tons for a single year. There is other Great Lakes tonnage from other ports constituting interstate commerce, and a large volume of coastwise trade consti- tuting interstate commerce many hundred times to-dav what it was in 1855. In 1855 the great internal river waterways were unimproved, while to-day the channels have been deepened and they have been locked and dammed and the great seaport harbors deepened and obstructions removed, particularly illustrated bv Hellgate of New York. 58 BILLS OF LADING. If interstate commerce and foreign commerce and the use of order bills of lading were not sufficiently developed in 1885 to warrant the application of the ordinary commercial doctrine of agency to common carriers, conditions have entirely changed in 1912 to pro- tect $25,000,000,000 of bills of lading and this great modern instru- ment of interstate and foreign commerce, this instrument of credit which plays such an important part in our national and interna- tional trade. There has been some discussion indulged in by previous speakers as to the significance of section 23 in the Pomerene bill and section 4 in the Clapp-Stevens bills. It is possible that some light may be thrown on the question by resolving this section into three parts. The first part imposes a liability upon a carrier for the act of an agent within the scope of his authority, in broad language, as follows : IE a bill of lading has been issued by a carrier or on his behalf by an agent or employee the scope of whose actual or apparent authority includes the issuing of bills of lading, the carrier shall be liable to the consignee named in a nonnegotiable bill or the holder of a negotiable bill who has given value in good faith relying upon the description therein of the goods for damages caused by the nonreceipt by the carrier or the con- necting carrier of all or part of the goods or their failure to correspond with the descrip- tion thereon in the bill at the time of its issue. This section then contains a provision under the terms of which, under the collocation of facts enumerated, the carrier is exempted from the liability imposed in the paragraph quoted as follows: If. however, the goods are described in a bill merely by a statement of marks or labels upon them or upon packages containing them or by a statement that the goods are said to be goods of a certain Irind or quality, or in a certain condition, or it is stated in the bill that packages are said to contain goods of a certain kind or quality or in a certain condition, or that the contents or condition of the contents of package are unknown, or words of like purport are contained in the bill, * * * shall not make liable the carrier issuing the bill, although the goods are not of the kind or quality or in the conditions which the marks or labels upon them indicate, or of the kind or quality or in the condition they were said to be by the consignor. The carrier may also, by inserting in the bill the words "shipper's load and count," or other words of like purport, indicate that the goods were loaded by the shipper and the description of them made by him; * * * the carrier shall not be liable for damages caused by the improper loading or by the nonreceipt of by the misdescription of the goods described in the bill. This second paragraph thus exempting the carrier from the lia- bility imposed in the first paragraph is again abrogated bv language in the second paragraph, which reimposes the liability imposed by the first paragraph if the statements contained in the second para- graph are untrue in a bill of lading. This is analagous to the ordinary law of carriers, which in the first place makes the common carrier liable as an insurer for the loss of goods and then exempts the carrier if the loss happens through the act of God, the public enemy, the inherent nature of the goods or the act of the shipper. It then reimposes a liability of insurer if the act of man contributes with the act of God or the act of the pub- he enemy. The statement referred to in this section is not the statement of the shipper to the carrier, but the statement made bv the carrier in the written or printed part of the bill of landing, or stamped thereon by rubber stamp or otherwise. As to who loads a shipment depends upon the tariff filed by the railroad. In less than carloads lots the carrier almost universally HILLS OF LADING. 59 loads; in carload lots the shipper almost universally loads. Where the shipper loads the railroads have an opportunity to make the count. In many cases a car is loaded on a far distant side track, such as a lumber camp, and the shipper loads and the railroad does not count because to count would be an increased cost of carriage which the shipper would ultimately bear. The most glaring specific evil to be rectified in the use of bills of lading is covered by section 23 of the Pomerene bill, but there are many other evils to be corrected of great if not equally great impor- tance, and they have already been briefly referred to. The question has been asked as to the circumstances under which the Pomerene bill was framed. The Commissioners on Uniform State Laws committed the preparation of a bill on this subject to the committee on commercial law of that body and authorized it to employ Prof. Samuel Willistoh, of the Harvard Law School as its draftsman. This committee had this bill under consideration for four years and held public meetings at which representatives of the bankers, the carriers and shippers and receivers of freight appeared — the four classes of persons vitally and directly affected. The trunk-line asso- ciation, which represents all railroads in official classification territory, were represented by able counsel. In all legislation there must be com- promises, and compromises are proper when they rest on sound ethics. This act in that respect does not differ from any other well considered piece of legislation. The American Bankers Association was represented by Mr. Thos. B. Paton, their general counsel. The National Industrial Traffic League spoke through its president, Mr. J. C. Lincoln. The committee on commercial law and Prof. Samuel Williston, its draftsman, sought to stand impartially as between the four interests and to reconcile the same. It is not a measure of expediency, but an impartial set of rules as between four conflicting interests. These seemingly four hopelessly conflicting interests recon- ciled all differences, the last and final hitch being on the word "herein " in the draft of the first section which was changed to "in this sec- tion," and the measure then received the unanimous approval of the representatives of these four interests. The measure was debated, not only in committee but many times debated by the whole Com- mission on Uniform State Laws and finally approved at Detroit, Mich., August 23, 1909. On September 13, 1909, a conference on the whole subject of bills of lading was held at the Auditorium Hotel, Chicago, 111., under the auspices of the American Bankers Association at which all the com- mercial interests of the United States weie represented, and the measure approved without a dissenting vote. In the pamphlet I have here, entitled "American Uniform Commercial Acts" will be found a list taking some five pages on which are enumerated those in attendance. Senator Pomerene. I wish you would leave that list here so we may incorporate it in your remarks. Mr. James. I will. The list referred to is as follows : Charles W. Baker, secretary the Chicago Live Stock Exchange, Union Stock Yards, Chicago, 111. F. L. Bateman, secretary and treasurer Trans-Continental Freight Co., 215 Dearborn Street, Chicago. 60 BILLS OF LADING. Charles J. Bell, commissioner Sioux City Commercial Club, Sioux City, Iowa. 0. F. Bell, National Industrial Traffic League, Chicago; traffic manager Crane Co. Frank W. Blair, bills of lading committee, Michigan Bankers' Association, Detroit! Charles P. Blinn, jr., vice president National Union Bank, Boston, Mass. G. W. Bolton, president Rapides Bank, Alexandria, La.; chairman bills of lading committee, Louisiana Bankers Association. Theodore Brent, Chicago, Rock Island & Pacific Railway, Chicago, 111. John F. Bruton, president First National Bank, Wilson, N. C; chairman bills of lading committee, North Carolina Bankers' Association. A. P. Burguin, assistant counsel Pennsylvania lines. Leslie Butler, president Butler Banking Co., Hood River, Oreg. Edwin Chamberlain, second vice president San Antonio Loan & Trust Co., San Antonio, Tex. G. A. Charters, general eastern manager California Fruit Growers' Exchange of Los Angeles, Chicago, 111. E. L. Copeland, secretary and treasurer the Atchison, Topeka & Santa Fe Railway Co., Topeka, Kans.; Association American Railway Accounting Officers. George H. Crosby, secretary and treasurer Chicago, Rock Island & Pacific Railway, Chicago; Society of Railway Financial Officers. Chas. F. Droste, of Droste & Snyder, New York; chairman traffic committee, New York Mercantile Exchange. W. F. Dudley, assistant general auditor Chicago, Milwaukee & St. Paul Railway, Chicago; member standing treasury committee, the Association of American Railway Accounting Officers. Henry Dunkak, president New York Mercantile Exchange; of Zimmer & Dunkak. Phil. R. Easterday, assistant cashier First National Bank, Lincoln, Nebr. J. M. Elliott, Los Angeles Chamber of Commerce, Los Angeles, Cal. Joseph S. Ford, chairman treasury committee, Association of American Railway Accounting Officers, Chicago. Thomas F. Gallagher, Chicago Butter & Egg Board, Chicago. Albert D. Graham, vice president-cashier Citizens' National Bank, Baltimore, Sid. Cliff W. Gress, cashier Citizens' State Bank, Cannon Falls, Minn.; member bills of lading committee, Minnesota Bankers' Association. Edward Pierce Higgins, auditor disbursements "Big 4," Cincinnati; representing treasury committee, Association American Railway Accounting Officers. W. L. Hinds, president Merchants' Transfer & Storage Co., Des Moines, Iowa; rep- resenting the American Warehousemen's Association. W. M. Hopkins, manager transportation department, Board of Trade, Chicago. T. S. Howland, Chicago, Burlington & Quincv Railroad Co., Chicago; Society of Railway Financial Officers. C. G. Hutcheson, chairman bills of lading committee, Missouri Bankers' Association; cashier First National Bank, Kansas City. George W. Hyde, chairman bills of' lading committee, Massachusetts Bankers' Association; assistant cashier First National Bank, Boston. William Ingle, vice president and cashier Merchants' National Bank, Baltimore, Md.; member bills of lading committee, American Bankers' Association. Francis B. James, president Ohio State Board of Uniform State Laws; chairman committee on commercial law of the Commissioners on Uniform Slate Laws, and chair- man of the committee on commercial law of the American Bar Association, Cincinnati, Ohio. J. Lloyd Jones, president United States Canning Co., Fredonia, N. Y. P. C. Kauffman, chairman bills of lading committee, AVashington Bankers' Asso- ciation; second vice president Fidelity Trust Co., Tacoma, Wash. N. B. Kelly, commissioner of transportation, Chamber of Commerce, Philadelphia, Pa. J. B. Korndorfer, cashier Peoples National Bank, Brooklyn, N. Y.; member bills of lading committee, New York State Bankers' Association. ' William A. Law, vice president Merchants National Bank, Philadelphia, Pa.; mem- ber bills of lading committee, Pennsylvania Bankers' Association. J. A. Lewis, cashier National Bank of Commerce, St. Louis, Mo • member bills of lading committee, American Bankers' Association; member bills of lading committee, Missouri Bankers' Association. J. C Lincoln, president National Industrial Traffic League; commissioner of Mer- chants; Exchange Traffic Bureau, St. Louis, Mo. William Livingstone, president Dime Savings Bank, Detroit, Mich.; member bills of lading committee, American Bankers' Association. Elliott C. McDougal, president Chamber of Commerce, Buffalo, N. Y.; member bills ot lading committee, New York State Bankers' Association. BILLS OF LADING. 61 E. J. McVann, manager traffic bureau, Commercial Club of Omaha, Nebr.; mem- ber uniform bills of lading committee, National Industrial Traffic League. E. F. Madden, president First National Bank, Hays City, Kans. Frank E. Marshall, secretary the Commercial Exchange, Philadelphia, Pa. George F. Mead, Boston Fruit and Produce Exchange, Boston, Mass. George W. Neville, chairman bills of lading committee, New York Cotton Exchange. A. W. Newell, president Fourth National Bank, Boston, Mass. A. R. Paton, Baker- Vawter Co., Chicago, 111. Thomas B. Paton, general counsel American Bankers' Association, New York. Carroll Pierce, vice president Citizens National Bank, Alexandria, Va.; chairman bills of lading committee, Virginia Bankers' Association. Lewis E. Pierson, president Irving National Exchange Bank, New York; president American Bankers' Association; chairman bills of lading committee, American Bank- ers' Association. Julius S. Pomeroy, cashier Security National Bank, Minneapolis, Minn. F. H. Price, president Herbert Bradley Co., New York; member committee Uniform Ocean Bills of Lading Association. W. F. Priebe, Chicago, National Poultry, Butter and Egg Association. Mr. Prince, Rock Island Railroad, Chicago. Jonathan P. Reeves, treasurer Chicago & Eastern Illinois Railroad Co.; represent- ing Society of Railway Financial Officers, bills of lading committee, Chicago. C. L. Robey, cashier Purcellville National Bank, Purcellville, Va. Henry Russel, Detroit, Mich.; general counsel Michigan Central Railroad and coun- sel to Carriers' Bills of Lading Committee. F. W. Sawyer, cashier Souhegan National Bank, Milford, N. H.; chairman bills of lading committee, Northern Bankers' Association. John C. Scales, chairman refrigerator car lines committee, National League of Commission Merchants, Chicago. Francis B. Sears, vice president National Shawmut Bank, Boston, Mass. E. K. Smith, chairman bills of lading committee, Arkansas Bankers' Association, Texarkana, Ark. Hal. H. Smith, attorney Michigan Bankers' Association; member legislative com- mittee, National Industrial Traffic League. C. B. Stafford, commissioner Memphis Grain and Hay Association, Memphis, Tenn. Irvine B. Unger, Old Detroit National Bank, Detroit, Mich; member bills of lading committee, Michigan Bankers' Association. J. D. Whisenand, vice president Central State Bank, Des Moines, Iowa; chairman bills of lading committee, Towa Bankers' Association. W. T. S. White, member National Association Poultry, Butter, and Eggs, Chicago. E. E. Williamson, Receivers and Shippers' Association, Cincinnati, Ohio. Samuel Williston, Harvard Law School, Cambridge, Mass. This measure, therefore, can not be said to be an experiment; can not be said to be a measure that has not been submitted to all con- flicting interests. Senator Cummins. How do you account for the fact that the rail- roads are opposing it here ? Mr. James. I do not find a representative of a northern railroad here. I want to say that we never did have the cooperation of the southern railroads. Senator Cummins. I did not understand the distinction. Mr. Faulkner. So that there may be no doubt about the proposi- tion, I want to say that I stand here representing a number of the northern railroads, as well as the western and southern roads to a large extent; most of the large roads. Senator Cummins (addressing Mr. Faulkner). Do you agree that all your railroads met together in Chicago and consented to this bill ? Mr. Faulkner. No; I shall answer that when we come to present our side. I will admit that the representatives of some of the roads did meet in Chicago, but I do not admit that we agreed that we were in favor of that bill. Mr. James. I can possibly produce the correspondence and tele- grams to show that the railroads represented in the trunk-line associa- g2 BILLS OF LADING. tion did agree; that in Detroit, when this measure was adopted, representatives of the trunk-line association appeared and gave their consent. It is possible that the stenographic notes of that meeting can be found. . At these various committee meetings and conferences, every interest was given as much time as it wanted, and the trunk-line association was represented by F. A. Farnum, of the New York, New Haven & Hartford Railroad; Mr. A. P. Burguin, of the Pennsylvania system, and Mr. Henry Russell, of the New York Central system. At one of the early meetings of the committee on commercial law, Mr. Warfield appeared for the Louisville & Nashville system, but not at the subse- quent meetings. Prof. Samuel Williston, on behalf of the committee of commercial law, had frequent meetings with counsel for railroads in official classification territory, speaking through the trunk-line association. The southern railways have never cooperated as have the northern railroads in the many needed reforms, which can also be illustrated at the time the Interstate Commerce Commission recom- mended a uniform list of conditions limiting carriers' liability to be indorsed on the back of a uniform bill of lading. My friend, Senator Faulkner, says he does not speak merely for the southern roads. Mr. Faulkner. I have said that I represent northern, western, and southern roads. Mr. James. Let me tell an incident along the lines of the attitude of the northern roads — that is to say, the railroads in official-classi- fication territory wherein moves 65 per cent of the entire American tonnage, and wherein the railroads collect as large a per cent of the entire railroad revenue. Senator Pomer'ene can probably corroborate me in part. The Legislature of Ohio, over the senate of which Senator Pomerene presided with his usual grace, had before it this same bill applicable to intrastate commerce, and, of course, in the absence of congressional legislation, to other commerce. The meas- ure was before the judiciary committee of the house, of which Mr. Gebhardt, an able lawyer from Dayton, Ohio, was chairman. Ex- Senator West, counsel for the New York Central system at Cleve- land, appeared with me before this committee; he on behalf of the railroads and I in support of the bill. After the measure was thor- oughly debated for several hours before the committee; ex-Senator West, one of the ablest lawyers who ever sat in the Senate of Ohio, asked the committee to postpone action until he could consult with the general counsel of the New York Central system, of New York. After a consultation ex-Senator West withdrew all opposition to the bill. The next opposition that turned up came from Mr. Hopkins, of Cleveland, as representing the express companies. I met him in Columbus on several occasions and fully discussed the measure with him, and satisfied him of its fairness. After he had discussed the matter with the express company he withdrew all objections and the measure was unanimously reported out of the house committee on the judiciary and unanimously passed the house of representatives. It was then unanimously reported out of the judiciary committee of the senate and unanimously passed by the senate and signed by Gov. Harmon. _ This measure, therefore, had the unanimous indorsement of the legislative and executive branches of the Ohio government, and from conversations with members of the supreme court of Ohio was quite pleasing to the judicial bodv. Ohio has now adopted each BILLS OF LADING. 63 and every uniform commercial act recommended by the Commis- sioners on Uniform State Laws. Is the measure constitutional ? It has been suggested that possibly some of the sections of the Pomerene bill are unconstitutional. The same line of reasoning would make the Clapp-Stevens bills uncon- stitutional. An order bill of lading is not merely a muniment of title ; not merely a symbolical representative of the goods described therein, but is of itself separate and apart and above these things — instrument of inter- state and foreign commerce. Congress has legislated on bills of lading as instruments of interstate and foreign commerce as illustrated by the Harter Act, the Carmack amendment to the Hepburn Act of 1906, and the act of June 18, 1910. Highways are brought into existence by the act of man ; they exist de facto ; railway trains are brought into existence by the act of man ; they exist de facto ; bills of lading were brought into existence by the usage and custom of merchants; they exist de facto ; none of them are commerce, but each and all of them are instruments of commerce ; when they touch commerce that crosses State lines they are instruments of interstate or foreign commerce; such instruments are subject to the sole and exclusive jurisdiction of the United States in Congress assembled. If the Pomerene bill be enacted into law, it seizes this instrument of interstate and foreign commerce, protects it, fosters it, defines its functions, specifies rights, duties, powers, and obligations of all who deal with it; adds legal sanctions, civil and criminal, so that it may preserve and legally enforce the customs and usages of merchants and make it effective as an instrument of national and international trade and commerce freed from diversified and conflicting State regulations. Let us for a moment examine the language of the Constitution. It says, "Congress shall have power to regulate commerce among the States and with foreign nations." None of the following items are commerce: Highways, railroad trains, railroad cars, railroad tracks, sidetracks, locomotives, brakemen, signal lights, authomatic couplers, hours of labor, employers' liability, shipping documents. It is true that at one time it was urged in the Supreme Court of the United States that under the power to regulate commerce that Congress had no power to control the instruments of interstate commerce. But in the great case of Gibbons v. Odgen, Mr. Chief Justice Marshall held that as Congress was given power to regulate commerce and to pass all laws necessary to carry that power into effect, that Congress nad power to regulate all instruments of commerce. Once Congress takes jurisdiction of an instrument of interstate commerce it has full power to fully protect that instrument and to carry this power to its logical sequence. The scope of this power has been recently illustrated, October 30, 1911, in Southern Railway Co. v. United States (222 U. S., 20), the syllabus of which is as foUows: The safety-appliance act of March 2, 1893 (27 Stat., 571, ch. 196), as amended March 2, 1903 (32 Stat., 943, ch. 976), embraces all locomotives, cars, and similar vehicles used on any railway that is a highway of interstate commerce and is not confined exclusively to vehicles engaged in such commerce. The power of Congress under the commerce clause of the Constitution is plenary and competent to protect persons and property moving in interstate commerce from all danger, no matter what the source may be; to that end Congress may require all vehicles moving on highways of interstate commerce to be so equipped as to avoid danger to persons and property moving in interstate commerce. 64 BILLS OF LADING. Mr. Justice Van Devanter, who delivered the opinion of the court, said, at page 26: We come, then, to the question whether these acts are within the power of Congress under the commerce clause of the Constitution, considering that they are not confined to vehicles used in moving intrastate traffic, but embrace vehicles used in moving intrastate traffic. The answer to this question depends upon another, which is, Is there a real or substantial relation or connection between what is required by these acts in respect to vehicles used in moving intrastate traffic and the object which the acts obviously are designed to attain, namely, the safety of interstate commerce and of those who are employed in its movement; or, stating it in another way, Is there such a close or direct relation or connection between the two classes of traffic, when moving over the same railroad, as to make it certain that the safety of the interstate traffic and of those who are employed in its movement will be promoted in a real or substantial sense by applying the requirements of these acts to vehicles used in moving the traffic which is intrastate as well as to those used in moving that which is interstate? If the answer to this question, as doubly stated, be in the affirmative then the principal question must be answered in the same way. And this is so, not because Congress possesses any power to regulate intrastate commerce as such, but because its power to regulate interstate commerce is plenary and competently may be exerted to secure the safety of the persons and property transported therein and of those who are employed in such transportation, no matter what may be the source of the dangers which threaten it. That is to say, it is no objection to such an exer- tion of this power that the dangers intended to be avoided arise in whole or in part out of matters connected with intrastate commerce. It is submitted that following a bill of lading through all of its Tamifications, the Pomerene bill is a measure to insure the safety of those who deal with this instrument of national and international commerce by clearly and explicitly defining it and the rights, duties, and obligations of each person brought in privity therewith. In the case just cited the Supreme Court sustained the constitutionality of a statute protecting one instrument of interstate commerce, to wit, a highway, by safeguarding the safetv of persons and property using the same ; the Pomerene bill seeks likewise to safeguard and protect the safety of those using another instrument of interstate commerce, to wit, a bill of lading. The Clapp-Stevens bills seek to protect one who '; acquires" an order bill of lading for value and in good faith. How it shall be thus "acquired," whether with or without indorse- ment, or what shall constitute value, or what shall be good faith, are left indefinite and uncertain and might be given as many meanings as there are courts before whom such questions might come. Legis- lation at this stage of the measure is cheaper than litigation. What the American business man wants is certainty in advance and not post mortem justice, after the end of years of litigation and heavy court costs and expenses. The Clapp-Stevens bills leave these mat- ters open and the Pomerene bill fixes them with that certainty of language of trade and commerce which has already acquired a defi- nite legal meaning. If Congress had power to regulate an instrument °u na . tl ^ nal anfl international commerce, it has power to safeguard the rights of each and every person brought into privity with it. It we are to have a national act, dealing with a national instrument pi interstate commerce, it should deal with it fully and not merely in part by national law and in part by a diversity of conflicting State laws. Senator Cummins. Will a question interrupt you « Mr. James. Not at all. Senator Cummins. I ask it purely to get your view. You say, very truly, that the bill of lading represents really, or is the evidence BILLS OF LADING. 65 of title to cotton, or to any other commodity that may be in the course of shipment ? Mr. James. I will say this Senator Cummins. Does it make any difference under your view when the transfer takes place ? Mr. James. I do not see how it could. Senator Cummins. Suppose a shipment of cotton was made from the South to Boston. Of course, the shipment itself is commerce; it is a part of commerce. Suppose it is delivered to the person to whom it has been consigned in Boston. I take it that it then ceases to be the subject of interstate commerce ? Mr. James. You mean the goods have been actually delivered — yes. Senator Cummins. Suppose after the shipment had reached its destination that the citizen of Massachusetts should assign his bill of lading to another citizen of Massachusetts, would it still be a matter of interstate commerce ? Mr. James. It — an order bill of lading — was an instrument of interstate commerce, and the Pomerene bill provides that the carrier shall not deliver up the goods without the surrender of the bill. Mr. Faulkner. An order bill. Senator Cummins. I am speaking of a straight bill of lading, because the same thing applies to both. Mr. James. It applies in a different degree, of course. Senator Cummins. The goods are consigned to John Jones, or the shipment is, and the bill of lading is so issued. Now, could that bill of lading be transferred, after the shipment had come into the pos- session of John Jones, and still be controlled or regulated by Congress ? Mr. James. I think it could, for this reason: It having become an instrument of interstate commerce, it should be followed to its logical consequence or conclusion — in other words, until it comes to an end. The bill having been an instrument of commerce, the rights of the parties privy thereto can be safeguarded through all the ramifications. Senator Cummins. You think there is a distinction in such a case between the delivery of the goods and the subsequent transfer of the bill ? Mr. James. That is right. Take this case: A carrier of an inter- state shipment parts with possession of the goods. Say a carrier has a box of books and he wrongfully delivers those books to the wrong person. Why can he not be made liable under an act pertaining to interstate commerce? The law now provides in the case of lost or damaged goods in an interstate shipment, under the Carmack amend- ment, by a connecting carrier, the initial carrier shall be liable. Now he is liable in case the loss or damage occurred within the State or beyond the State. Senator Cummins. Does the liability of the road follow during course of shipment % Mr. James. Yes. You can provide for the transfer of that Federal right. We will say that a straight bill of lading for an interstate shipment is issued to me. That is an instrument of interstate commerce. My rights with reference to that railroad company will be defined by the Pom- erene bill. Congress having regulated that an instrument of inter- state commerce, may define my right to part with that instrument. 42S08"— S. Doc. 650, 62-2 5 66 BILLS OF LADING. It can make it, for example, like it is at common law, nonassignable or may prescribe the manner of transferring it. Senator Cummins. Your idea is that the consignee then could not transfer it in any other way except by indorsement of the bill of lading ? Mr. James. If an order bill of lading, indorsement of the bill of lading if the Pomerene bill becomes a law. Senator Cummins. He could make a bill of sale of it and simply surrender his bill of lading to the railroad company, and that would be an entirely legal transaction ? Mr. James. Yes, sir; entirely. Senator Cummins. But his bill of sale would not be a part of inter- state commerce ? Mr. James No; because in that case he has not pursued the meth- ods of transfer pointed out by the law. What I contend for is this: Once you get the spirit of the national throb — as I believe our ances- tors saw it in founding the Constitution — it is as plain as the sun that under the power to regulate interstate and foreign commerce and the power to pass all laws to carry that power into effect those incidental powers follow right down to the most minute detail. The Chairman. Mr. James, it is evident that you can not get through with your argument this afternoon, and the committee will now take a recess until to-morrow morning. Thereupon, at 5 o'clock and 10 minutes p. m., the committee took a recess until 10 o'clock to-morrow (Saturday) morning, February 17 1912. february 17, 1912. Committee on Interstate Commerce, United States Senate, Washington, D. C. The committee met at 10 o'clock a.m. Present: Senators Clapp (chairman), Crane, Cummins, Brandegee, Townsend, Foster, and Pomerene. STATEMENT OF FRANCIS B. JAMES— Resumed. 1 he Chairman. Mr. James, you may continue your statement. Mr. James. Mr. Chairman and gentlemen, the most recent utter- ance upon the breadth of the power of Congress to deal with even- instrument and every instrumentality of interstate and foreign com- merce to its full logical extent was decided on January 9, 1912, in the case of Northern Pacific Railway Co. v. The State of Washington (222 U S., 370). It appears that the State of Washington had an hours-of-service law. Congress also passed an hours-of-service law to become effective at a future date. Hie prosecution bv the State of Washington against the Northern Pacific Railway Co!" proceeded tor acts done during the interim between the passage of the Federal act and the date of its taking effect. Ihe question presented was whether the Federal act covering the same subject matter as the State act had superseded the State act during the interim. Mr. Chief Justice White held that the Federal act, taking effect in the future, did of itself suspend the State act. The syllabus states: BILLS OF LADING. 67 A train moving and carrying freight between two points in the same State but which is hauling freight between points one of which is within and the other without the State, or hauling it through the State between points both without the State, is engaged in interstate commerce and subject to the laws of Congress enacted in regard thereto. Mr. Chief Justice White said: This transportation was interstate commerce, and the train was an interstate train, despite the fact that it may also have been carrying some local freight. In view of the unity and indivisability of the service of the train crew and the paramount character of the authority of Congress to regulate commerce, the act of Congress was exclusively controlling. This national and international instrument of credit; this national instrument of national and international trade and commerce, arising out of the power to regulate commerce. It is more than a mere document or title. It is more than a mere symbolical representative of the goods. It is itself an instrument, with rights attaching to the instrument itself and embodied in its terms. Once Congress assumes to regulate that instrument of commerce, to fully protect it and the rights of persons dealing with such Federal instrument of interstate commerce, it would have a right to carry such regulation to its logical conclusion. Congress could say whether it should be negotiable or not negotiable; determine the legal effect of the words "to order." This bill of Senator Pomerene goes directly to the meat of the sub- ject; not by indirect language, but by expressly declaring that an instrument "to order" is a negotiable instrument; an instrument not to order is a straight bill of lading and nonnegotiable. The Stevens-Clapp bill, instead of going directly to the point simply states that the carrier shall be estopped, which amounts to the same thing as declaring it negotiable. It has often been in the development of the law the courts pretend to follow the common law rule to reach a subject change it through the form of a fiction and through the form of estoppel. There is no difference in substance if you say the carrier is estopped to deny receipt of goods, or state in direct language that the carrier is responsi- ble for the act of its agent. That powers vested in Congress may be carried to their logical con- clusion is found in other fields of jurisprudence covered by Federal legislation. For example, the Sherman antitrust law. For instance, A and B in a State enter into an agreement with reference to an article of interstate commerce. The mere making of that agreement, although no commerce ever moves or was restrained, constitutes the offense. That mere agreement would precede commerce, precede transporta- tion, and precede intercourse. To use the language of Mr. Justice Marshall, commerce did not mean meie transportation; it meant commercial intercouise and all its instrumentalities. Under the power to coin money Congress has assumed ample power to deal with the creation of paper currency ; to make that currency legal tender in the payment of debts between citizens of a State. In the Post Office Department, under the power to establish post offices and post roads, Congress has power to make all laws to make that power effective. The Government could even trace a letter after it was delivered and safeguard that letter as against a person who had no authority to open it, although there was no power enumerated in the Constitution 68 BILLS OF LADING. so to do, but only the general power to establish post offices and post roads. So with respect to the matter of the white-slave traffic — not per- taining to immoral relationship during the transit — but the intent preceding the transit to be accomplished after the transit was ended. So with the revenue — the power to collect internal revenues and customs duties. What is the remedy '? It is earnestly urged that the remedy is through a comprehensive measure like the Pomerene bill. With all due deference and with the greatest respect and admiration for the American Bankers' Association, it is respectfully submitted that the Clapp-Stevens bills are rather expedients than comprehensive reme- dies. It is suggested that when Congress does take jurisdiction over bills of lading as instruments of interstate and foreign commerce that it should do so in a comprehensive measure which has been demon- strated to thoroughly and impartially settle the rights as between four seemingly hopelessly conflicting interests and not by a measure of expediency which reaches merely the evils from which the bankers may suffer or the evils from which a particular class of shippers may suffer. The suggestion has been made that the railroad companies and the bankers be allowed to get together and submit an agreement which shall be taken as settling the terms of the law. While I know from my personal knowledge that the American Bankers' Association has been one of the usual organizations in this country in supporting the advance movement for uniform commercial legislation, yet I submit that there are four interests which should be consulted. Two of these interests, namely, the shippers and receivers of freight, are divided into many well-defined groups, and no one group should be consulted to the exclusion of numerous groups included within the classes of shippers and receivers of freight. I am quite sure it is the desire of this committee that not merely the interests of the bankers and some shippers should be considered, but all the interests of con- signors and consignees of all classes of merchandise, and that an agreement, if any, should be the result of the conference of bankers, railroads, and each and all of the other groups of shippers and receivers of freight. In concluding I wish to ask permission to attach, as an appendix to what I have said, a review of the Pomerene bill as contained in the Traffic World and Traffic Bulletin, volume 9, Xo. 6, for February 7, 1912, pages 253 and 254, without stopping to read it. It is a brief summary of the Pomerene bill. Senator Cummins. The bill which you have presented specifically provides that a bill of lading issued to the order of any person is a negotiable bill or instrument. What do you understand to be the qualities which that designation gives to such an instrument other thanthe specific provisions, or specific guarantees, that are otherwise provided in your bill? Mr. James. Section 31 specifically defines the qualities of a nego- tiable bill. Section 5 provides — That a bill in which it is stated that the goods are consigned or destined to the ordei of any person named in such bill is a negotiable or order bill. Section 31 then goes on to define the quality of negotiability; that the negotiable bill may be negotiated. You will find that the dis- BILLS OF LADING. 69 tinction is made between the negotiation of a negotiable bill and the transfer of a nonnegotiable bill. Senator Cummins. I am trying to find out what the additional qualities are that you give to order bills when you describe them as negotiable. You, of course, have something in your mind other than mere assignability? Mr. James. Yes; upon being indorsed, the act provides how it shall be negotiated. First of all it provides it shall have indorsement. Having been indorsed, and being in the possession of an innocent purchaser for value, the carrier then has no right to dispute, for example, the agency of the agent within the scope of which apparent authority the bill was signed. It would be absolutely -binding against the carrier. It would protect the holder for value in good faith against a person who had lost the bill, giving him a right as against the goods, the same as a bill of exchange or a draft or a prom- issory note. Senator Cummins. The thing that you first mentioned is specifi- cally provided for, namely, that the railroad company is not per- mitted to deny that it was in possession of the goods described in the bill when the bill was issued. Now, that is one of the things you desire to accomplish, I take it, by this proposed legislation; but I want to know what other qualities of negotiability — as it is generally understood in the law of merchants — you intend to confer upon bills of lading ? Mr. James. No greater than the rights would be under a draft or a promissory note or a bill of exchange. Senator Cummins. Then you do intend, by the use of the word "negotiable," to give to such a system all the characteristics accord- ing to the law of merchants which is given to negotiable bills and notes and acceptances and the like ? Mr. James. That is right. I might state that a great deal of American legislation has been passed in which an attempt to reach this result was made but frustrated by a very narrow construction by the Supreme Court of the United States. The Supreme Court of the United States reached what is now generally conceded to be an erro- neous dec : sion. It arose in this way: Legislation was passed in a number of States saying that bills of lading should be negotiated in the same manner as promissory notes. In the Shaw case the question came up in 1901 in the Supreme Court (Shaw v. Kailroad Co., 101 U. S., 557). The State of Missouri passed a law saying a bill of lading shall be negotiable in the same manner as promissory notes. The State of Pennsylvania passed a law in identically the same terms. A draft was drawn by a merchant in St. Louis against a merchant in Philadelphia with an order bill of lading duly attached. The drawee had a copy of the bill. The bank messenger took the draft over to the office of the drawee and it was handed through the window of the cashier. The clerk took it into the back room and the drawee wrote his acceptance upon the draft, detached the original bill, and reattached the copy. Neither the messenger nor the bank not ced the substitution. The question arose whether the holder for value would be protected. The Supreme Court of the United States held that as the statute of Missouri and the statute of Pennsylvania said a bill of lading should be negotiable in the same manner that that meant only the manner of indorsement and not the effect of the 70 BILLS OP LADING. indorsement, forgetting and not alluding to the statute of Anne of 1704. You will remember, in 1702, in Clerk v. Martin, when an attempt to sue was made by a bona fide purchaser of a note for value, Lord Chief Justice Holt held that the merchants of Lombard Street were trying to set the law of Lombard Street over the law of West- minster Hall, and declared a promissory note was not negotiable. The merchant went to Parliament in 1704 and had a law passed upon the subject. That statute provided that promissory notes should be negotiated in the same manner as bills of exchange. 'ihe courts have for all time since held that this made a promissory note negotiable. Whoever drew the statute on bills of lading in Pennsylvania and Missouri drew it distinctly from the statute of Anne, expecting that the statutes of Missouri and Pennsylvania would be given the same construction that had been given to the statute of Anne. But the Supreme Court evidently did not have its attention called to the language of the statute of Anne from which the Pennsylvania and Missouri statutes had evidently been drawn, and gave them a very narrow construction and defeated the purposes of the legislation. 'lhat was one reason why there has been such particularity of language used in the Pomerene bill, instead of using the phraseology of some of the earlier State statutes. Senator Cummins. That is the very thing I have been trying to bring out. You have prescribed in this bill certain consequences that follow the issuance of a bill of lading to the order of any person? Mr. James. Yes, sir. Senator Cummins. And prescribe the rights of certain persons under or through those bills of lading ? Mr. James. Yes. Senator Cummins. Xow, what I want to know is, do you think the use of the word "negotiable," or the attempt to characterize them as negotiable, gives to those instruments any other privileges, if you please, than those which you specifically describe in the bill? Mr. James. No, sir; I do not. Senator Cummins. Then why do you use the word "negotiable" at all? Mr, James. Because there is that commercial distinction. It is recognizing commercial usage. Senator Cummins. Put out of your mind entirely a draft that may have been drawn with bill of lading attached. Just let us confine our thoughts to the bill of lading itself. Mr. James. That is, the order bill of lading? Senator Cummins. The order bill of lading. It is issued to the order of John Smith, we will say. John Smith indorses it to John Jones. Now, do you intend in this bill, bv the use of the word "nego- tiable, " to fix the liability of John Smith? Mr. James. Yes; but not exactly the same liability as attaches to the indorser of a promissory note. We have an express provision Senator Cummins. I know; but do you intend by characterizing the bill of lading as negotiable to give to the indorsement of the per- son to whom it was originally issued, or to whose order it was issued, any effect that is not specifically described in the bill ? Mr. James. I do not. BILLS OF LADING. 71 Senator Cummins. Then there would be a part of the law relating to negotiable paper that would not apply to the bill of lading, although it is here characterized as negotiable. Mr. James. Yes; and for this reason: That there are certain attri- butes, natural attributes, of a bill of lading representing goods which would not be the attributes of a promissory note. Therefore the distinction is made. Section 32 defines the rights of a holder of a duly indorsed negotiable instrument. Section 35 enumerates the liabilities which are incurred by the indorser. Section 36 SenatorCuMMiNS. You neednotrepeat that, because I have become reasonably familiar with those sections during the night. I simply want to know whether the provision of the bill, which declares in terms that these instruments shall be negotiable instruments, has any effect whatsoever, or do you intend it to have any effect ? Mr. James. It is a proper and appropriate nomenclature to dis- tinguish the two kinds of bills. If you could define the qualities without using the word ''negotiable" it would be just as effective legally, but as you are dealing with two kinds of bill of lading it is necessary to adopt some nomenclature. The nomenclature of both trade and the law is adopted by saying a bill to order is an order bill of lading which shall also be known as a negotiable bill. When that kind of a bill of lading is issued it shall also be known as negotiable paper Senator Cummins. Practically speaking, the proposed legislation would be just as effective for your purposes if that order bill of lading was not described or characterized as a negotiable instrument ? Mr. James. Yes, sir. Senator Cummins. There is no privilege or consequence that you desire, and which you think necessary, that are not provided for in the bid in terms ? Mr. James. That is right; yes, sir. It was intended that it should be Senator Cummins. Now, what are the, if you please, immunities that are given to the "to order" bill of lading in your bill that are not given to the so-called "straight" bill of lading? Mr. James. The order bill of lading protects the bona fide pur- chaser for value. The straight bill of lading does not. One is a negotiable instrument, and the other is a nonnegotiable instrument. Senator Cummins. You mean to say that with the straight bill of lading under this proposed act the railroads would be at liberty to deny the receipt of the goods upon an assignment of the straight bill of lading to a third person w ithout notice for value ? Mr. James. Section 23 covers 1hat case of the straight bill, that the consignee who advances money cm the straight bill is protected. Senator Cummins. If that be true, what is the immunity that you give to your negotiable paper that you do not give to vour straight bill? Mr. James. That is the only feature in which there is an analogy. Senator Cummins. That is the very thing you desire, that if a person, either on a straight bill of lading or a "to order" bill of lad- ing, advances money upon the faith of the statement contained in the bill of lading, namely, the receipt of the goods by the railway company, that that person shall, as against the railway company, have a right to recover, or a right to receive those goods, no matter whether the railway company got them or not. That is the general idea, is it ? 72 BILLS OF LADING. Mr. James. Yes, sir. This protection as to nonreceipt of goods is specifically the same as a straight order. The other features of the bill, and the other abuses which have arisen out of the bill of lading, have arisen largely in the case of the order bill. For example, in the case of an order bill of lading, mistake is guarded against by requiring the word "order" to be printed. By the old practice bills of lading were in but one form — "received to be delivered to" — and then there was a blank space before the name of the consignee. The practice in making an order bill was to take a pencil and write in the word "order." The railroad company would do that. Cases arose where a railroad company would give a man a straight bill of lading, and the consignee would wrongfully write in the word "order." The waybills of a railroad would not indicate that an order bill of lading had been issued, and on a straight bill of lading the carrier has the right by usage, and under the Pomerene bill, to deliver the goods without a surrender of a straight bdl of lading. This danger is provided against hy providing that in the order bill of lading the word "order" shall be printed for the protection of the order bill. That is one of the evils particularly pertaining to the order bdl. The Pomerene bdl also places its disapproval upon the issuance of order bdls in sets. The practice has almost disappeared in the case of our domestic commerce. The other evil is as to spent order bills of lading. A spent bill of lading is one on which the goods have been surrendered by the carrier. The common-law rule is that the carrier was not bound to compel the surrender of the bill and could deliver the goods with- out surrender. If the carrier had delivered goods without the sur- render of the bill of lading, the carrier was protected against the innocent carrier. So this law provides, in the case of an order bill of lading, that the bill of lading must be surrendered before the goods are delivered. The second provision is not only for surrender, but also for cancella- tion. The bona fide holder at common law would not be protected even though these bills were abstracted fraudulently and negotiated There is very little in this bill peculiarly applicable to the straight bill of lading. Another provision is that where there is an order bill of lading the attachment of the iroods is forbidden as long as it is outstanding. There is another provision as to stoppage in transit, and various other provisions amplifying the order bill of lading, making it not only legally but commercially negotiable. Senator Cummin's. Then it is perfectly obvious that you want to do a good deal more than to correct the mistakes which you think the Supreme Court made in ls.VV? Mr. James. Correct other mistakes and cover matters of actual custom and usage of merchants on which the Supreme Court of the United States and other Federal courts have not yet spoken. Senator Cummins. Yes. It is really a new code on bills of lading. It js not confined merely to a change in the law which would hold the railroad companies or transportation companies liable for the act of their agents. You are really laving down a new svstem for bills of lading ? BILLS OF LADING. 73 Mr. James. It is a new code in the sense that it is reducing the custom and usages of merchants to a statute and adding legal sanc- tions thereto, both civil and criminal, enforceable as one unit of Fed- eral law pertaining to national and international instruments of commerce. It is not a new code in the sense that it was evolved by a process of a priori reasoning. It does, however, systematize the usages and customs of merchants as found in judicial decisions on bills of lading and cognat subjects; statutes passed by various States in furtherance of negotiability and well-considered judicial decisions thereon and actual usages and customs of merchants where such customs and usages were in harmony with sound economics and rested on ethical principles at the foundation of all jurisprudence. By a process of a posterori reasoning — by a process of rational induc- tion — these rules were systematized. The Pomerene Act therefore would not properly be called a new system of bills of lading, but would be more correctly called a svsteinatizing of the old law merchant on bills of lading, correcting obviously obsolete or ill-considered judicial decisions and the addition of Federal legal sanctions. There being no Federal common law, it has always been found necessary when Congress has assumed jurisdiction to exercise a power conferred on it by the Constitution to exercise that power in the form of a statute. In that respect the Pomerene bill is not a departure, but in harmony with universal practice and precedent. Senator Cummins. But, as has been stated here, the abuse that is sought to be corrected grows out of the act of an agent issuing a bill of lading either fraudulently to the shipper, or by way of accommoda- tion to the shipper, so that the bill of lading itself does not bind the railroad company to deliver the goods which are described in the bill of lading. Mr. James. Yes, sir. Senator Cummins. Now, if we go that far in a change in the law we would meet the abuse which you and others have so graphically described ? Mr. James. Yes. You would meet one of the abuses, but there are other abuses, though of less magnitude, which are sought to be met also by the Stevens bill, which are recognized as gross abuses. For example, the altered bill. Senator Cummins. Let me ask you this: Suppose you have a bill of lading — consider it now apart from your specific provisions here — an order bill of lading issued to John Jones ; John Jones indorses it to John Smith; John Smith, however, does not get the goods. Would John Jones be held liable under his indorsement, under the law merchant ? Mr. James. No. Senator Cummins. That is simply because the bill is negotiable ? Mr. James. No; because section 36 expressly exempts him from performing the obligation assumed by the railroad company. Senator Cummins. No ; I am speaking now apart from the specific provisions. You say that the bill is negotiable ? Mr. James. Yes. Senator Cummins. You describe it as negotiable, and attempt in that way to engraft upon it all the characteristics and privileges and immunities of negotiable paper. Now if the person to whom the 74 BILLS OF LADING. order which was issued indorses it to another for value, but that other fails to receive the goods ilr. James (interrupting). Through the fault of the railroad? Senator Cummins. Would the indorser be liable to the indorsee? Mr. James. He would not be, because section 36 specifically pro- vides that he shall not. In that case it makes a different rule tnan in the case of promissory notes. Senator Cummins. I am asking you to put that aside. Mr. James. Yes; he would not. Senator Cummins. Because there is some question, I understand, about the constitutionality of that provision 1 Mr. James. No, sir. Senator Cummins. But if it is simply described as a negotiable instrument here, if you attempt to put it in the class of negotiable paper, would then the indorser under the law merchant alone be liable to the indorsee 1 Mr. James. I believe, he would, although in the Shaw case there is some discussion upon that point. Senator Cummins. What process would he have to pass through or go through in order to fasten the liability on the indorser. We know what the holder of a negotiable instrument must do in order to fix the liability of the indorser, but what would the indorsee in this instance have to do ? Mr. James. At common law there were five obligations assumed by the indorser. Four of them are preserved here as to bills of lading; the fifth is not. The fifth one at common law, in regard to promis- sory notes, was merely as to the solvency of the maker. This lia- bility in the case of nonreceipt of the goods does not go to the question of the solvency of the railroad company. So, therefore, I think in classifying bills of lading, for example, into the straight and order bills, in the first place, by providing that the bona fide purchaser for value shall be protected by estoppel, you are adding a quality of negotiability. Now then it is necessary, it seems to me, to supplement that by the specific provisions, because there might be the same doubt which arose in the mind of the Supreme Court in the Shaw case. Senator Cummins. Do you not think, therefore, in order to make a law that will be as plain as possible and afford as little variation in its application as possible, instead of calling the bill negotiable and trying by that general term to give it a certain quality, you had better confine yourself to the specific provisions that you have set forth here and which do fix the rights of all the parties to the bill? Mr. James. I quite agree with vou that there should be provision covering that. Of course, the other question as to whether we should go further in defining the other rights is a question as to whether you take the bold stand that they arc within the constitutional power. Senator Cummins. However, constitutionally speaking, I take it that it would be just as much beyond our power to confer a right through the general term of negotiability as to confer the right by specific provision. Air. James. I think by conferring it by specific provision you would more clearly keep within the Constitution, because you make it absolutely plain what you mean. BILLS OF LADING. 75 Senator Cummins. Precisely; and more than that. If the court should hold that that particular section was unconstitutional, it could be eliminated from the law without danger to the remainder of the act. Mr. James. Yes; I quite agree with you. The subject matters are clearly distinct. I think the court might declare one section un- constitutional without invalidating the balance. Senator Cummins. But if you were to attempt to broaden these specific provisions by general terms of negotiability, you would not be able then, possibly, to eliminate the objectionable features in the same manner or in the same degree? Mr. James. Yes; I quite agree with you. You will find, therefore, that sections 4 and 5 call one negotiable, and the other nonnegotiable ; these are only terms of nomenclature; they do not seek to define. The other sections do seek to define and limit the incident of negotiability; the incident obligations of the indorser; the incidents to the transfer of that bill. Senator Cummins. If we describe what the rights of all the parties are to a bill of this sort, so that they will all be sufficiently protected, it seems to me that it would be wise not to attempt to confuse or to enlarge those specific provisions by using the word "negotiable," which has a definite meaning in the law. Mr. James. That can be done in section 4, without marring the bill in the least. [Reading:] That a bill in which it is stated that the goods are consigned or destined to a specific person is a nonnegotiable or straight bill. Leave out the words "is a nonnegotiable," because those terms are synonomous. Senator Cummins. I can see that. The chief difference between the bill that Senator Pomerene has introduced and the bill that Senator Clapp has introduced lies in this, I take it, that the bill of Senator Clapp simply changes the rule of law as announced by the Supreme Court and estops the railroad company from denying the recitations or statements contained in the bill of lading; whereas your bill or Senator Pomerene's bill does establish a code regulating the rights of all of the parties to these bills with a good deal of elabora- tion, and does a good deal more than to restore the law, which you think was misunderstood by the Supreme Court of the United States. Senator Pomerene's bill does establish a code regulating the rights of all of the parties to these bills with a good deal of elaboration, and does a good deal more than to restore the law, which you think was misunderstood by the Supreme Court of the United States. Mr. James. That is the essential difference. But you will notice that the Clapp bill and the Stevens bill still goes further. To prevent mistakes it is provided that the words "order of " shall be printed in the case of an order bill. It goes on and classifies the straight and the order bill. It prescribes that the straight bill shall have the words "not negotiable." It points out the difference so that a person will not be confused in taking an order bill. It contains a provision similar to this bill, after providing what shall go into the bill — "That nothing herein shall be construed to prohibit the insertion" — you will find that in section 2. 76 BILLS OF LADING. Senator Cummins. I know. But I consider the first section of the Clapp bill is rather immaterial. I think its real purposes are all found in section 4 and throughout the rest of the bill. Mr. James. Of course, section 4 is the one that is aimed at the greatest evil that now exists in the handling of order bills of lading. There is no doubt about that. Just as in the Pomerene bill, section 23 is the vital section as bearing upon that subject, defining it with a little more particularity than section 4, although they are substan- tially the same. Of course, the merit of the Pomerene bill is that it brings the Federal statutes into harmony with the State statutes. Senator Cummins. 1 am not passing any opinion upon the merits of the bill. I simply want to get clearly in my mind and in the record the essential difference between the two. Mr. James. That was simply a suggestion. My query is whether it would be wiser, in view of a broad public policy, once Congress does take up this subject, to pass a bill not only whose thought and purpose were similar, but whose language would be. the same, so that there would be probability of a similar construction. Now in Senator Pomerene's bill there is added a provision so as to preserve the harmo^ of construction — in a sense — a new rule of statutory con- struction. Section 52 : That this act shall as fas as practicable be interpreted and construed in harmony with the law of those States which enact an act of similar import to make uniform the laws of the various States on bills of lading. In other words, the attempt is made here to harmonize, so that if we can not get rid of this hopeless conflict between judicial decisions and statutes of the various States and the Federal Government, that there may be somewhat of a homogeneous whole worked out. That is the reason why I put the query whether it would not be wise Senator Cummins. I think you must doubt very much the wisdom of saying to the Supreme Court or to any subordinate court of the United States that it ought to interpret a law in harmony with the decisions of the States which have similar laws. We can not interfere with the judicial branch of the, Government in that way. Mr. James. The act of 17S9 had a rule of decision fo/the Supreme Court in cases arising by providing that they should follow the law of the State. Senator Cummins. That is a law. Mr. James. The Supreme Court interpreted that Senator Cummins. That is a law. But the act of 1789 did not say that the courts of the United States should interpret the laws of the United States in harmony with the way in which the State courts interpreted those laws. It simply suggested the law; when the Supreme Court had occasion to enforce the laws of the State, that they should be in harmony with the interpretation Mr. James. Of course, the Supreme Court got awav from that statute. Senator Cummins. There was no reference whatever to the inter- pretation of a law of the United States; onlv a law of the States them- selves. Mr. James. That was first probablv illustrated in Swift r. Tvson, in 1S34. bills op lading. 77 The old New York case of Coddington v. Bey held that a pre- existing debt was not a valuable consideration for the transfer of a negotiable instrument. That was the New York law. A transfer similar to the one there decided came before the Supreme Court in Swift v. Tyson, and they refused to follow the law of New York. They held that they would determine for themselves what was the law of New York. It is the legislative policy of the Government that there should be certain rules of interpretation. There are rules of interpretation laid down in many Federal statutes. Senator Cummins. You must see the very great difference between our saying to our Supreme Court, "When you have to apply the law of the State of New York, you shall adopt, as far as practicable, the interpretations given by the courts of New York to that law," and saying to the Supreme Court of the United States, "When you are interpreting a law of the United States, you shall give effect to the manner in which it has been interpreted in the courts of New York." Mr. James. I see the very sharp distinction. All I can say is this: That this probably states in statutory form, which is the ordinary rule anyhow. The ordinary rule is that if one Commonwealth adopts a statute and its court gives it a construction before it is adopted by another Commonwealth that construction shall be implied. This section may state that rule a little stronger than that. This is not laid down as an absolute rule. This section says, "That this act shall, as far as practicable, be interpreted and construed in harmony with the law of those States which enact an act of similar import to make uniform the laws of the various States on bills of lading." That is intended to bring harmony. But leaving section 52 out, the use of the same language would convey the same thought when embodied in a Federal statute, as tending to bring about homogeneity of American jurisprudence upon the same subject. Senator Cummins. Undoubtedly it would be very desirable if there could be harmony. But I doubt the power of the United States in saying to the Supreme Court that in the construction of its statutes it shall interpret them in accordance with the decisions of other courts. Mr. James. Striking out this section 52, my query is whether it is not desirable in reaching these evils that the language of the Federal statutes shall as far as possible harmonize with the State statutes. We never can absolutely do away with conflicting decisions. Senator Cummins. I think nobody can question the desirability of uniformity in the law. Mr. James. My query is whether it would not be a wise pohcy to use the identical language of the uniform state rather than taking new language which might lead the courts to say that a different meaning was intended. Senator Cummins. That is all. Senator Pomerene. On yesterday you stated that this bill had the approval of the commissioners on uniform legislation? Mr. James. Yes, sir. Senator Pomerene. Did they assist in the preparation of the bill ? Mr. James. It was their bill. Senator Pomerene. Now, will you state who those commissioners were ? 78 BILLS OP LADING. Mr. James. In the first place, in 1890, the State of New York passed a statute for the appointment by the governor of commission- ers on uniform State laws, asking the governors of the other States to pass similar laws. All the States, I think, with the exception of one, have passed similar laws. These commissioners meet in national conference and organize with officers and committees. They have a committee on commercial law. I had the pleasure of being a member of that committee for eight years, and served seven years as its chairman. The first act framed was the act on negotiable instruments. Mr, Crawford, of the New York bar, was employed to draft that act. It was drafted one year and adopted the same year, and not thrown open for full public criticism. The result was that errors crept into that act. The committee on commercial law then adopted the policy of full publicity. We employed Prof. Williston as our draftsman. He worked with the committee in the preparation of this act. That act was then thrown open for public discussion, and adopted by a vote of the States. The bill of lading act was before that body directly for four years, and indirectly for many more years, because many of these principles are embodied in the Sales Act, which has a chapter on documents of title. Senator Bbandegee. I notice at the bottom of page 6 of this bill, 4713, in subdivision A of section 13, line 23, that the carrier "shall be liable, if prior to such delivery he (a) had been requested, by or on behalf of a person having a right of property or possession in the goods, not to make such delivery." If the carrier delivers the goods to an indorsee of an order bill of lading, how can he determine the rights of somebody who asserts the right ? Mr. James. In that case, if he delivers the goods and makes a mistake in the delivery, if the person who has the order bill of lading is a bona fide purchaser for value, he is liable, but he can protect himself by an interpleader. He can interplead the parties and thereby be protected. He has a reasonable time. Suppose here are goods to be delivered, and somebody comes claiming the right of possession of the goods, and notifies the carrier. He can deliver them at his risk. He has a reasonable time to make inquiry. At the expiration of a reasonable time if he is not satisfied, or the person claiming the rights has not given a bond, he may interplead the parties. Senator Bbandegee. Suppose the goods are perishable? Mr. James. He will then have power to dispose of them under the bill in the meantime, or the court may dispose of them. Senator Bbandegee. Is not a bill of lading supposed to be an absolute title, or evidence of title of the goods, which would entitle the person holding it to the possession of the goods ? Mr. James. As far as it is possible to make it. There are, of course, exceptions. And this one recognizes exceptions. Senator Bbandegee. How docs the exception come about? How can the title pass, where the bill of lading has been in good faith indorsed, and not forged— how other can the title to those goods pass than by the bill of lading, after the bill of lading has been indorsed? Mr. James. There might be cases where the bill of lading was good, but there would hp no o-nnrla Knclr nf it BILLS OF LADING. 79 Senator Brandegee. I am assuming that there are goods back of it. Mr. James. I mean no title to the goods back of it. For example, I may walk into Woodward & Lothrop's store and steal a box of dry goods and go down to the railroad company and get an order bill of lading, which I indorse over to j r ou. Woodward & Lothrop make discovery before these goods are delivered. They go down and tell the railroad company that that box of dry goods was stolen by James and belongs to them, and they claim it. You come along with your bill of lading, duly indorsed, and they refuse to give them to you unless you give a bond. They say: " vVe do not want to decide this question." A suit will be entered and each of the parties would set up their respective claims, and the court would decide to whom the railroad company should deliver the goods. The railroad company would interplead Woodward & Lothrop and you, Senator Brandegee. Senator Brandegee. I do not understand which of those two bills you prefer. Mr. James. The Pomerene bill. Senator Pomerene. I should like to ask Prof. Willis ton a question or two, if I may be permitted. . The Chairman. Certainly; go ahead. Senator Pomerene. Professor, you did the principal part of the work in drawing both of these bills ? Mr. Williston. Well, I did the original work in drawing the Pomerene bill, and then it was whittled over by the conference. Senator Pomerene. And you have had this matter before you for quite a number of years, investigating the subject? Mr. Williston. That is true. Senator Pomerene. Which one of these bills would you prefer ? Mr. Williston. That obliges me to state my position, perhaps, a little more at length than in a single yes or no to your question. Senator Pomerene. I should like you to state it fully and give your reasons for your position. Mr. Williston. I think the Pomerene bill, as Senator Cummins has said, is a complete code, and it is intended to be a beneficial code covering the subject of bills of lading. I think it would be an advantage to have the same code in regard to interstate and foreign bills that there is in regard to State bills. I think the Pomerene bill covers all the evils included in Senate bill 957, and also covers some more. Were it not, therefore, for two matters, the people whom I represent, and I myself, would have no hesitation in saymg that we prefer the Pomerene bdl. But there are two matters which oblige us to qualify that statement very materially. The first is a possible fear as to the constitutionality of all of the provisions of the Pomerene bill which I have alluded to, and a fear, not only of the actual constitutionality but a fear that the opponents of the measure may have a better handle to argue against the bill, because of real or supposed unconstitutionality, than in the smaller bill, Senate 957. We also have been advised, since I have spoken to you last, Senator Pomerene — we have been advised by certain Members of the House of Representatives interested in the promotion of the Stevens bill, as it then was in the last session, that it would almost certainly be imprac- ticable to get through the committee, which was a somewhat divided 80 BILLS OF LADING. committee— originally on the Stevens committee — to get through the committee and the House of Representatives the longer bill, Senate bill 4713. Therefore, as the safer measure, the one which is likely to give us relief as to the thing we most vitally need, we prefer Senate bill 957. Senator Pomerene. Are vou able to state what the objections are which are urged by the House Members either against bill 957 or against bill 4713? Mr. Williston. I have filed as part of my original argument, the committee report, which contains an elaborate minority report, mostly concerned with questions of constitutionality, but partly also urging the injustice of making railroads liable on negotiable or quasi-negotiable instruments, when their true business, it is said, is only to furry goods for hire. I suppose, 'further, that it is the elaboration, and the greater number of provisions in Senate bill 4713 that make our advisors in the House of Representatives feel that there will be so many points to fight over that the battle is likely to be lost. Senator Pomerene. The constitutional objections which are raised to the two bills are similar in character, as I understand it? Mr. Williston. Senate bill 4713 would certainly be open to any possible constitutional objection that Senate bill 957 is open to. But I fear that it might be open to certain added arguments with reference to the sections to which I have alluded. I feel no certainty that those objections are sound, but I do feel that there is possibility of argument there. Senator Pomerene. The constitutional objections, then, would differ as to numbers rather than as to the character of those objections? Mr. Williston. I think there is a little different kind of objection possible, in regard to the sections of the Pomerene bill that deal with transactions between what I have called A and B, outside persons, a buyer and a seller of a bill of lading. Senator Pomerene. I think that is all. The Chairman. I wish to say to those who are present, that there need be no delicacy about discussing Senate bill 957, because it happens to bear my name. In order to have this subject before the committee in some formal, regular manner, as chairman of the committee, I introduced a bill. Therefore, there need be no delicacy in discussing these bills, simply because one bears Senator Pomerene's name and the other bears my name. Senator Pomerene. I indorse everything that Senator Clapp says. We are all interested in doing the right thing. Senator Braxdegee. I should like to ask this question. I am not familial- with the matter. I notice on page 14, line 17: That a person to whom a bill has been transferred but not negotiated acquires thereby as against the transfer or the title to the £,'Oods, subject to the terms of any agreement with the transferor. Does that contemplate the transfer of a negotiable bill? Mr. Williston. It contemplates two cases: Either the transfer of a nonnegotiable bill or the transfer without indorsement of an order bill. The act distinguishes between negotiation and transfer, Negotiation is the indorsement of an order bill by the person to whom it runs. Transfer is anything else; that is, it is the handing BILLS OF LADING. 81 over, either indorsed or unindorsed, of a straight bill, and it is also the handing over unindorsed of an order bill. Senator Brandegee. That is the point I want to hear you on. Does the title pass by the physical transfer of the bill itself, if it is a negotiable bill, without an indorsement ? Mr. Williston. No; an indorsement is necessary to strict legal title. But the handing over of a document itself entitles the person to whom it is handed over to have the indorsement of the person who hands it over. Mr. James. What is meant by the word "acquire" in your amend- ment? Mr. Williston. Pardon me, but I so not think Senator Brandegee is through. Mr. James. Oh, I beg your pardon. Senator Brandegee. I had finished, if you have. Mr. Williston. If I have made myself clear, that is the explana- tion. Senator Brandegee. I do not care to pursue it, but would the finding of an order bill by a party give the finder a title to the property ? Mr. Williston. Finding an indorsed order bill? Senator Brandegee. No; finding an unindorsed order. Mr. Williston. No; that would not give him any rights. Senator Brandegee. Would that be a transfer under the language of this act ? Mr. Williston. No. I should not say the finding would be a transfer. Senator Brandegee. Is it customary in trade to transfer order bills of lading by handing them over to a person without indorsement ? Mr. Williston. It is not customary, but it sometimes does hap- pen, just as it happens in regard to bills of exchange or certificates of stock. It seemed necessary in what was intended for a complete code of bills of lading, as Senator Cummins justly characterized it, to make a provision for that possibility. A similar provision is made in the negotiable instruments law for a corresponding situation with regard to bills of exchange or promissory notes. Senator Brandegee. That is all. Mr. James. I want to ask you, in connection with the question that Senator Brandegee asked, this: On page 3 of the substitute for Senate bill 957, which says that the carrier "shall be estopped, as against the consignee in case of a straight bill of lading and as against the con- signee and every other person in the case of an order bill of lading, who shall acquire any such bill of lading." There is no definition of "acquire;" as to how the acquirement shall be obtained. Mr. Williston. In good faith and for value. That, to my mind, relegates the question of what those notes mean to the State law gov- erning the question. Mr. James. It would be in the power of the State to abrogate this law by defining some method of acquirement ? Mr. Williston. The State law might say that "acquire" meant one thing in one State and another thing in another State. That is, just as in the bankruptcy law. The national bankruptcy law takes the ownership of property by the bankrupt just as the State law de- fines it. Yet his ownership under the State law is ownership for the purpose of the national bankruptcy law. 42808°— S. Doc. 650, 62-2 6 82 BILLS OF LADING. The Chairman. I think we will proceed now, because in the end the committee, and then afterwards the court, has to construe these words anyway. Who is the next witness ? Mr. Williston. Mr. Home. There beino- no further questions, Mr. James was thereupon excused. The articlelrom the Traffic World and Trafhc Bulletin, referred to by Mr. James in his statement, is as follows: defining bills of lading senator poherene's comprehensive measure cover- ing their use in foreign and interstate commerce. The Traffic Service News Bureau, Washington, D. C, February 9. Two weeks ago Senator Pomerene, from Ohio, introduced the most comprehensive legislation yet brought to the attention of Congress on the subject of "Bills of lading in commerce with foreign nations and among the several States" as expressed in the title to Senate bill 4713. This bill was referred to the committee on interstate com- meres Section 1 provides that bills of lading issued by any common carrier for the trans- portation of goods from a place in a State to a place in a foreign country or from a place in one State to a place in another State shall be governed by the act. The bill recognizes the well-defined usage and custom of business by classifying bills of lading either as "straight" or "order." Section 4 defines a "straight" bill of lading and also defines it as "non-negotiable." Section 5 defines an "order" bill of lading and also defines it as "negotiable." NEGOTIABILITY OF ORDER BILL OF LADING. In harmony with actual and universally recognized_ usage and custom throughout the commercial world, and as has already been recognized by common-law decisions and statutes in many States and by the commercial codes of foreign countries, an order bill of lading is made fully negotiable by section 31. Many other sections enforce the Erinciple of negotiability, such as section 24, which forbids attachment unless the order ill of lading is surrendered or its negotiation enjoined; section 26, freeing the goods from liens against which an order bill of lading is issued except freight, storage, de- murrage, terminal and cooperage charges, unless specified on the face of the bill of lading. Not only is negotiability of the order bill of lading recognized in a legal sense but also in a commercial sense by the provision of section 53 in the definition of "value." Value is there defined as any consideration sufficient to support a simple contract, and it is declared, in harmony with the great and leading case of Swift v. Tyson, that an antecedent or pre-existing obligation, whether for money or not, con- stitutes value where an order bill of lading is taken either in satisfaction thereof or as security therefor, and in the further definition of "good faith," which is defined to mean when, in fact, done honestly, whether it be done negligently or not. The actual commercial usage of an order bill of lading accompanving a draft is set forth in sections 40 and 41. The order bill of lading, being thus made both legally and commercially negotiable, is recognized as an important instrument of interstate and foreign credit and particularly, when accompanied by a draft, becomes "commodity currency," the unit of quantity being represented by the order bill of lading and the unit of value with the dollar mark by the draft. ALTERED BILLS OF LADING. The danger of turning a straight bill of lading into an order bill of lading by inserting the word "order" before the name of the consignee is guarded againstby requiring the words "order of" to be printed as set forth in section 2. The rights of a holder of a bill of lading in good faith is further protected bv section 16, which provides that where a bill of lading has been altered the holder in good faith shall have a right to enforce it according to its original tenor. So that no person shall be misled in taking a straight bill of lading for an order bill of lading, section 8 requires that a straight bill of lading shall have placed thereon the word "nonnegotiable." So that there shall be no misunderstanding, it provides that this section shall not apply to memoranda, which is usually a shipping order. The practice of issuing ordor bills in parts or sets has nearly disappeared in domestic commerce, and section 6 sets its mark of disapproval upon this practice except in BILLS OF LADING. 83 transportation of goods to Alaska, Panama, Fnrf«> Rico, the Philippines, Hawaii, or foreign countries. Section 7 fixes the liability for so doing with the exceptions just noted, and section 18 provides that the word "duplicate" shall mean only that it is a copy. LOST OR DESTROYED BILLS. In the case of a lost or destroyed order bill of lading, section 17 provides a remedy for replacing the same. Spent order bills of lading have been a, menace because of the delivery up of goods by carriers without the surrender of an order bill of lading. Another evil has been that where an order bill of lading has been surrendered, some employee of the railroad has negotiated the same. Both of these evils are guarded against by the provisions of section 14, which require that on delivery of the goods, not only should an order bill of lading be surrendered, but actually canceled. Section 15 covers the case of partial delivery by a carrier on a delivery order by requiring an indorsement of the partial delivery or a surrender and cancellation of the entire bill. ACCOMMODATION AND FRAUDULENT BILLS. Outside of the provisions making the order bill of lading negotiable in both a legal and commercial sense, the provisions of section 23, protecting the innocent purchaser for value of an order bill of lading when issued either for the accommodation of a shipper or fraudulently, are the most important of the bill. It recognizes and restores the ordinary "rule of agency " that a principal is liable for the acts of his agent within the apparent scope of his authority, and that the principal is not excused from lia- bility because of restrictions on that authority. This provision is so important that we repeat it, as follows: "That if a bill of lading has been issued by a carrier or on his behalf by an agent or employee, the scope of whose actual or apparent authority includes the issuing of bills of lading, the carrier shall be liable to (a) the consignee named in a nonnegotiable bill, or (b) the holder of a negotiable bill who has given value in good faith, relying upon the description therein of the goods for damages caused by the nonreceipt by the carrier or a connecting carrier of all or a part of the goods or their failure to correspond with the description thereof in the bill at the time of its issue." This section then safeguards the carrier when marked "contents unknown" and "shipper's load and count." LEGAL INCIDENTS. The bill having seized upon the bill of lading at an "instrument" of interstate and foreign commerce, follows it to its logical consequence by defining the incidental rights and obligations of those who deal with it, as may be found in sections 2, 3, 9, 10, 11, 12, 13, 19, 20, 21, 22, 27, 30, 34, 35, 36, 37, and 39. In view of the fact that a number of States have enacted statutes similar to this bill and may construe the same before the Pomerene bill becomes a law, a new rule of statutory interpretation and construction has been inserted as follows: "This act shall, as far as practicable, be interpreted and construed in harmony with the law of those States which enact an act of similar import to make uniform the laws of the various States on bills of lading." DOES NOT COVER RESTRICTIONS ON COMMON-CARRIER LIABILITY. The bill is, in the true sense, a measure covering bills of lading and does not cover the subjects of limitations on the common-law liability of common carriers. The Pomerene bill must not, therefore, be confounded with the uniform bill of lading or the provisions of the Carmack amendment or the provisions of the Harter act. Five sections of the act provide for criminal actions for its enforcement. It will be noticed that by these sections crime is made personal and the penalties are not visited on the corporations to be ultimately paid for by the shippers, but are imposed upon the shippers who violate the act and upon the officers of the common carriers. STATEMENT OF FRANK A. HORNE, PRESIDENT OF THE MER- CHANTS' REFRIGERATING CO., NEW YORK CITY, N. Y. The Chairman. State your name, residence, and occupation. Mr. Hoene. Frank A. Home, president of the Merchants' Refrig- erating Co.; 161 Chambers Street, New York ; chairman of the cold- storage committee of the American Warehouse Association, and g4 BILLS OF LADING. member of the New York Mercantile Exchange, both of which bodies have expressed an approval by resolution of this legislation. Mr Chairman and gentlemen of the committee, I desire to speak in favor of Senate bill 957, particularly that section which provides liability on the part of the carrier for statements contained in its bills of lading. Our business is the business of cold-storage warehousemen tor lure. Our own company has a capacity of about, seven and one-half million cubic feet of cold space for the purpose of receiving perishable prod- ucts coming from (he Middle West and the coast for account of local dealers and largely for account of western shippers and owners. For the most part our business is with local dealers in the city of New York and vicinity, but they in turn receive these products on consignment— they are commission men mainly- by means of a bill of lading. ft is estimated in the various public cold-storage bouses of the coim- trv that from 5 to 10 per cent only of these products are carred in ware- houses from the period of flush production, carrying the surplus until the time of national scarcity. Therefore, what I shall say with reference to that small proportion of the goods which we as ware- housemen handle refers more largely to the business of the commis- sion man and the receiver. Last rear I figured that we received about 2,000 cars from the West. Most of those cars came to us with bills of lading, and drafts were made. It is our custom to make loans both to the local trade, they having taken up the drafts of bills of lading — they come to us and present a negotiable warehouse receipt as a basis and collateral for such loans — but in the case of the western shippers who ship from the great Central States butter, eggs, poultry, green fruit and dry fruit, we are in the habit of paying sight drafts with bills of lading attached to protect ourselves until such times as the goods arrive. We are able to secure an indorsed negotiable warehouse receipt as security for our advances. Now, as you are doubtless aware, these products, particularly eggs, poultry, and butter, come from a large number of smaller operators in those Western States, and we feel that it is quite necessary for us to be assured in paying these drafts, representing, wo will say, 75 percent of the market value, that the statements contained on those bdls of lading shall be a statement of fact, and that men may rely upon them as protection for further advances and be equally as representative of value as our own negotiable warehouse receipts. In other words, that they shall actually represent in number of packages, at least, the goods represented to have been shipped. I desire to make the point that if the bill of lading be strengthened, and if the handlers of this document, both warehousemen and com- mission merchants — the banks have a stronger security, and thereby the smaller shipper will be encouraged to do business with us. As it is to-day, unless we know somewhat of the responsibility of the shipper, we are prone to decline to pay drafts on bills of lading, and state that we will not make advances until the goods have been actually received, and we state, "You may draw on us with bill of lading attached, payment to be subject to the arrival of the goods." Now, then, the small shipper in the West is unable to wait for that period of time. He wishes — he has not much capital — to secure money on those bills of lading from the local bank to enable him to BILLS OF LADING. 85 transact his business and ship his product so that the draft shall be paid on presentation with bill of lading attached, without delay, he getting his money from the local banks immediately on presentation of the draft and the bill of lading. It seems to me, therefore, Mr. Chairman and gentlemen of the committee, that the passage of this act will enable a larger number of smaller men to do business, and I think also that has a reference to the much-discussed question of the cost of living. I think the more we can multiply the number of shippers and han- dlers of these food products in the West, the more we can encourage them to develop their business and send their products to the East and to the great markets, the more we can have them lay by their surplus stock so that in winter there shall be larger available food supplies and the lower will be the price of these food products, and the chances of control by the larger interests will be thereby lessened because of the multiplicity of the owners of those goods, both in the warehouse and as shippers. I think that has been developed in a number of cases. The gen- tlemen of this committee who represent the Western States know that there are a large number of these men constantly coming up, doing business. The man who may be the manager, if you please, of a larger shipping interest, if he requires a little capital, is very apt to start up. He should be encouraged, because it permits and develops reasonable competition. This line of business he himself is inclined to store and keep and carry it in the warehouse for the winter market, and his goods come in competition with the goods of the large operators, and I am quite sure that the strengthening of this bill of lading would go a great way toward encouraging the situation. Now, in conclusion, I desire to speak of this condition. Under the warehouse receipts act — which I understand has now been adopted as the law of. over 20 of our States — the uniform warehouse receipts act, which, I think, was recommended by the Commission of Uniform State Laws — they, as warehousemen, and the warehousemen of the States who have adopted this law, are held to very strict accounta- bility for their negotiable and nonnegotiable receipts covering the statement of facts. If my storekeeper issues a receipt, we as ware- housemen are held for the statement, although the goods may not have been delivered to him, and we can see no reason why the carriers should not be held to a like accountability, especially in view of the fact that the bill of lading and the negotiable property or the ware- house receipt are both similar in their relationship, and we are bound to consider the bill of lading as the basis of our credit and advances just as we are bound in our business to accept the warehouse receipt as the basis of our loans, and we believe that it would strengthen the free and easy movement of commerce if the two documents were on a parity with regard to their protection to the holder by the ware- housemen, commission merchants, or bankers. That is all I have to say, Mr. Chairman. If there are any questions, I will be pleased to answer them. Senator Cummins. May I inquire just a little further about the rela- tionship between the warehouse receipt and the bill of lading ? When the sight draft is drawn upon the commission man, accompanied by a bill of lading, it of course arrives some time in advance of the goods ? Mr. Horne. Yes, sir. gg i3ILLS OF LADING. Senator Cummins. Do your warehousemen issue warehouse receipts upon the bill of lading or before the arrival of the goods ? Mr. Horne. No, sir; we are not permitted so to do by law, and we do not do it. We only issue the warehouse receipt upon the actual receipt of the goods. But in the interim we have to hold the bill of lading as our security for the advance. Senator Cummins. Then, so far as the warehouse receipt is con- cerned, it plays its part in commerce without any regard to the receipt of the goods ? Mr. Horne. Exactly. Senator Cummins. That is, with regard to the bill of lading, be- cause you do not issue the warehouse receipts until the goods are actually in your warehouse ? Mr. Horne. That is true. Senator Cummins. Is it the custom of you merchants to borrow money at the banks simply upon the bill of lading, or do you borrow on the warehouse receipts ? Mr. Horne. Well, on the warehouse receipts for the most part. I imagine the commission merchants who receive these products may use the bills of lading as collateral. I am quite sure that they do in some cases. In our own case we pay drafts on those bills of lading and carry those loans ourselves until such time as the goods arrive, and we have the papers, the negotiable receipts, indorsed. Senator Cummins. In the warehouse-receipt act, however, there is nothing that authorizes or permits warehouse receipts to be issued before the receipt of the property ? Mr. Horne. No, sir; there is a penalty attached for doing that. Senator Cummixs. That is as I remember it. Mr. Horne. Yes, sir. Senator Brandegee. Are you able to state what percentage of loss 3'ou incur under the existing law by reason of attaching these drafts and not having the goods turn up ? Mr. Horne. Our concern has met with no direct loss; but there have been numerous instances on the part of our customers, the com- mission men. Mr. Dowie, one of our customers, yesterday cited three cases. I know of a number of other similar cases on the part of the commission men who are handling these products. Senator Brandegee. There are instances, and I wondered if any- body was able to state what percentage of loss on the business trans- acted he was subjected to under the present law. Mr. Horne. I can not answer that. It is the doubt that is thrown over the instruments that makes them insecure, as we look at it. Senator Brandegee. But at present the business goes on, does it not ? You do continue to cash the bills of lading, pay in advance, and take the chance of receiving the goods'? Mr. Horne. Yes, sir; but it leads us to scrutinize the strength of the. party with whom we are doing business; and, even so, there is a risk which we feel should be eliminated, if possible. Senator Brandegee. You think that is a very bad thing for the business community to have scrutiny applied to the standing of the parties ? Mi'. Horne. No; it is a good element; but as warehousemen we are advancing on the goods, and we prefer to make our advances on goods and not on credit. We are not bankers, and therefore we want the BILLS OF LADING. 87 Senator Brandegee. Is there any loss except where the bill of lad- ing is issued by the railroad company's agent without the goods hav- ing been received by the railroad ? Mr. Horne. That is the main difficulty. There being no further questions, Mr. Horne was thereupon excused. STATEMENT OF FREDERICK H. PRICE. Mr. Price. Mr. Chairman and gentlemen, I shall occupy but about 10 minutes. The millers of this country do their entire busi- ness on an order bill of lading, with some few exceptions, the mills who, have their own offices in the East, and they must depend abso- lutely upon those bills being perfectly valid, otherwise the whole fabric or their business would be impaired. I shall not consume your time by citing all the instances, but will content myself by suggesting two instances that are indicative of the general situation. In the meantime, I will say that last June at the millers' convention, under the auspices of the federation, the following resolution was adopted after they had discussed the Stevens bill, now No. 957 of the Senate. The resolution is as follows: The Millers' National Federation hereby indorses the bill now before Congress, H. R. 4726, otherwise known as the Stevens bill, or any other bill having for its object the establishment beyond doubt the responsibility of common carriers for the acts of their agents. The whole export business is also done on order bills of lading, and therefore I urge that any bill enacted by Congress shall include in it a provision extending to foreign commerce. I will speak of two instances, one referring to shipper's load and count, which was spoken of yesterday, and the other refeiring to the failure to receive goods upon the issuance of the bill of lading. "Shipper's load and count" is a clause almost universally used in our business. The shippers do load the cars. Their mills are frequently some few hundred yards nw&y from the office of the railway agent. The agent is called upon to furnish an inspector to count the number of sacks or barrels of flour in a car. He does not come, and the car- rier insists on indorsing the bill of lading: "Shipper's load and count.." The case in point was where a shipment on an export bill of lading for 1,000 bags was made, or at least the document was issued for it, and at London only some 300 sacks turned up. The initial carrier said, "We are not responsible." It was shown that he never got all that flour. Senator Pomerexe. "Who never got it? Mr. Price. The initial carrier never got all the flour, although he issued a bill of lading for a thousand bags, and to-day the bill is not paid and my clients are out that much money. That was shipper's load and count. The trouble was the carrier would not check the number of sacks in the car, and there was some labor troubles at the point of shipment, and I do not know how it came about. No one seems to know. Another case was in St. Louis, where a shipment of flour was made to St. John's, Newfoundland. The shipper of the flour ordered an order bill of lading. The same form is used for both, order and straight. The words only indicate the nature of the bill, and by mistake the initial carrier omitted the words "To order of " and made the ship- ment a straight bill of lading. gg BILLS OF LADING. That document was taken to the bank in the usual manner, and no one noticed that it did not contain the words "to order of." The document went to St. Johns, Newfoundland, and so did the flour. When the delivering carrier at St. Johns saw that the document was a straight document, he delivered the flour to the consignee without asking for surrender of the bill of lading, and the consignee did not pay the biU and has not paid it yet. That was over a year ago. That was over $1,000. You will be surprised at the large number of cases that arise in the course of a year of short shipments, where the carrier denies liability chiefly under the shippers' load and count clause. I am therefore pleased to notice that while that condition is taken care of, the words "if true" are inserted. "If true" is a very valuable thing, and I urge in the interests of my clients, the millers, that this bill, S. 957 and H. R. 4726, be adopted by Congress. That is all I care to say, gentlemen. The Chairman. Now, in those two cases that you cite, it' was a fact, was it not, that the carrier did not count ? Take the flour that you first referred to. Mr. Price. No, sir; he did not count. The Chairman. Then you say the important words are "if true." You mean those words, of course, refer to the recital "shippers' load and count" ? Mr. Price. Yes, sir. The Chairman. In the other case you refer to, was there any question but what it was "shippers' load and count" ? Mr. Price. No, sir; the other case I referred to was straight bill of lading. The provision in this bill which defines both kinds of bills of lading is a wise provision. In the first case the shipper called for an inspector to count the number of sacks, and he declined. The Chairman. If the goods were loaded and counted by the carrier would the shipper as a rule receive a bill of lading containing the discrediting words "shippers' load and count" ( Mr. Price. No, sir; but if the shipper loads his car and calls for a count on the part of the carrier he generally gets a document marked "shippers' load and count," just the same. The Chairman. Where the carrier actually counts? Mr. Price. Whether he does count, or whether he was called upon to count and did not turn up. The Chairman. If he were called on to count and did not count, then he would get no other document ? Mr. Price. No, sir. The Chairman. But if the shipper did count, would the carrier accept a bill of lading with the discrediting statement — and of course it does discredit it for value — of "shippers' load and count" l Mr. Price. You mean, do you not, would the shipper accept? The Chairman. That is what I say. Mr. Price. The shipper would have to accept. He always has had to accept that document hi spite of his protests with the one clause "shipper's load and count." I never saw a document marked "shipper's load." The Chairman. No; load and count. Mr. Price. And count. BILLS OP LADING. 89 The Chairman. Yes. Now, you say it is the practice of shippers in accepting a bill of lading marked "shipper's load and count," to count when the carrier has counted ? Mr. Price. Very frequently; yes, sir. The Chairman. Can he use that at a bank under existing conditions as well as he can a bill of lading that does not contain that ? Mr. Price. No, sir. The Chairman. I should suppose not. And yet you say in the course of business now the shipper frequently accepts that, where the carrier has actually loaded and counted ? Mr. Price. No; where the shipper has loaded and the carrier has been called on to count and does not count. The Chairman. Of course that, would be the natural thing, but he would accept it then, would he ? Mr. Price. Yes, sir. The Chairman. Now, what I am getting at is, is it the course of business to-day for shippers to accept a discrediting bill of lading con- taming the recital "shipper's load and count" where in fact the carrier has loaded and counted % Mr. Price. Oh, no, sir; not so far as that. The Chairman. Then, practically, you would hardly have a case where a bill of lading contained the recital "shipper's load and count" where in fact the carrier had clone the loading and counting, would you? Mr. Price. No, sir; we never have that. The Chairman. That is what I supposed, and I have been unable from the start to see the benefit of those words. Mr. Price. Well, they are of benefit to the carrier; but the)' are not much good to us except that we are obliged under circumstances to load our own cars because there is no other waj- of loading them, where we can not get them loaded for us by the carrier. The Chairman. In that case the recital would be true, would it not ? Mr. Price. Yes, sir. The Chairman. Now you say the shipper would not — and I would not suppose a shipper would accept a bill of lading discredited with the recital "shipper's load and count" when the carrier had himself loaded and counted ? Mr. Price. No, sir. The Chairman. So practically, wherever the bill of lading contains that discrediting statement "shipper's load and count" it is true that it is the shipper's load and count ? Mr. Price. Yes, sir; as a rule. Senator Cummins. Mr. Price, if that be true, what good would this bill do you ? Mr. Price. It does all these things; it defines the order bill of lading. Senator Cummins. I mean now as to the case you put before us. You lost some money, or your people lost some money because the goods were not shipped that were supposed to be shipped. If this bill had been in force they would have lost the money just the same. Mr. Price. Yes, sir; but I claim this, that in this particular case, for example, we proved by affidavit and by record that the flour was loaded in the car and the document issued for it was a true document for a thousand barrels. Senator Cummins. But that does not meet the case. If you allow 90 BILLS OF LADING. "shipper's load and count" then the carrier is not liable to the con- signee or to the indorsee of the bill of lading if the goods described in the bill of lading are not delivered. In other words, it does not change the law at all in that respect. Mr. Price. No, sir; the law does not change it, except we hold, by practice, that where we can support the loading by affidavit, and we ask for an inspector to check the load, and he will not come, that we should not have received the document marked "shipper's load and count" which was not true. Senator Cummins. That may be very true, but the bill does not protect you at all in such a case as that? Mr. Price. No, sir; not at all. It goes as far as I think it can go. Senator Cummins. No ; a bill could go far enough to forbid a carrier from issuing any such bill of lading, I suppose, and require the carrier to count, so that he must issue a bill of lading, or it may issue a bill of lading, upon its own responsibility. Mr. Price. Yes, sir; I would like to see that done if it could be done, very much. Senator Cummins. The point that I had in mind is this: You have recited an instance in which your clients were injured, and I assume that this bill was intended to prevent the recurrence of such injury. Now, as I look at it it would not do it at all. Mr. Price. It would not in that particular case, except, as I state, that in the case of a contest we would use the words ' if true," and say it was not true, and that it was a shipper's load and count. Senator Cummins. If the carrier does not count, it is a true state- ment. If the carrier neither loads nor counts, then the statement is true. Mr. Price. Yes; it would be true. Senator Cummins. Even though the carrier ought to have counted and did not ? Mr. Price. Yes, sir; it would be true. Senator Cummins. Then, it does not seem to me the bill helps you a particle — I mean as to that character of transaction. It may help you with regard to those that arc not marked — those bills of lading that are not marked, ' 'Shippers' load and count." Mr. Price. Fortunately the large majority of our shipments are not marked ''Shippers' load and count." It happens frequently enough, however, to create annoyance, but it does not affect the majority of the business. Senator (Ymmins. I thought you said the great majority of your shipments were on bills of lading marked "Shippers' load and count." Mr. Price. No; I meant to say on order bills of lading. If I said that I did not mean it. Senator Cummins. What proportion of your business is transacted upon bills of lading of that kind? Mr. Price. Marked "Shippers' load and count" ? Senator Ccmmins. Yes. Mr. Price. It is hard to say, but only in some cases. I should say, possibly one-third, would be on shippers' load and count. I do not know that positively. It is only a guess. Senator Cummins. You say you never saw a bill of lading marked simply "Shippers' load" I Air. Price. No, sir. Senator Cummins. The two things arc nlwavs combined ? BILLS OF LADING. 91 Mr. Price. Yes, sir. There being no further questions, Mr. Price was thereupon excused. The Chairman. Have you any other gentlemen who desire to be heard by the committee ? Mr. Williston. We have no other witnesses at present, but if at the postponed hearing, when the railroads put in their case, any new facts develop we might like an opportunity to reply. We could have multiplied the number of witnesses, but it seemed to us unnecessary. We think that those who have appeared before the committee have sufficiently shown the character of the evil. I would like to say a single word with regard to the proviso which has given rise to a good deal of discussion and trouble at this hearing. This proviso is, of course, inserted in fairness to the carriers. It is nothing that the people whom I represent want. They would prefer by a great deal to nave a flat obligation on the carrier, turned up with the goods, whatever sort of words may be used in the descrip- tion, or whether the bill would be marked "Shippers' load and count" or not. But in the discussion of this question, both in connection with the State bill and before the committee, when this bill was pend- ing in the House, it became obvious that in many cases it was an unfair hardship on the carrier to require him absolutely to guarantee the delivery of goods when he had not any opportunity to know what the shipment contained, and therefore originally a brief proviso, which is put in brackets at the end of the roman print on page 3 of the paper in your hand, was put in the bill, and later by agreement with the railroad attorneys there was substituted the italicized proviso. Senator Cummins. Mr. Williston, I can very easily see — speaking for myself alone — the necessity for some kind of limitation upon the liability of the carrier. I am not able to fully understand the appli- cation of the proviso, as it is here written, nor do I see that it will accomplish the purpose that you both have in view. Possibly, how- ever, the railroad companies ought to be called upon to explain or elucidate that provision rather than your side. I am willing to take whatever course you deem best in the matter. I am not satined with that provision even though the general bill is found to be what it ought to be. I do not' want to suggest how it shall be done or by whom it shall be done. Possibly Senator Faulkner would be the best man to explain that provision, inasmuch as you are entirely willing that it shall be eliminated. Mr. Williston. Yes. Senator Cummins. I do not think that all the limitations should be eliminated, but I can see cases where there ought to be a limitation. I am not at all satined with the form that has been suggested. Mr. Faulkner. I will try when we come to explain the reasons, the absolute necessity for it. In the business, in order to facilitate the transportation of the commerce of the country, it is absolutely essen- tial that a provision of that character should be included in any bill that is passed, otherwise I will be able to show to you that the business of the country, especially depending upon any order bill of lading, will be delayed from 24 to 48 hours in its whole commerce, depending upon an order bill of lading. Senator Cummins. Do not understand me to say that there ought not to be. I iust said there ought to be some limitation on the 92 BILLS OF LADING. you have hit upon the right limitation or the best way of expressing it. That is my present view. Mr. Faulkner. To be perfectly frank with the committee, I did not examine the language with that care perhaps that I will between now and the hearing of the railroads, but as this section as now incor- porated in this bill by agreement was the exact language followed in the State bill that has been discussed by Mr. James we simply trans- ferred it from the State bill to this bill as it covers generally the proposition that was in difference between us. Senator Cummins. You would prefer to bring the matter up when the railroads are here '( Mr. Faulkner. Yes, sir; when we can discuss it fully. This ques- tion has never been discussed before this committee fully at all — in fact, by either side, until to-day. Senator Cummins. So far as I am concerned, I am perfectly willing that that should be done, because I think really the burden is upon the railroad companies to prepare suggestions with regard to such a limi- tation. ADDITIONAL STATEMENT OF SOL WEXLEE. Mr. Wexlee. Mr. Chairman, will you allow me just one word before you close ? The Chairman. If you desire to discuss any feature of the bill, certainly. Mr. Wexler. I just want to make clear a few tilings that appear to be somewhat cloudy, and that is the relative status of the "to order bill of lading," and the straight bill of lading, and this question of the load and count. Now, from the standpoint of a banker that does business with mer- chants dealing in every line of business, and therefore handles bills of lading covering every class of shipments, I am rather familiar with the practical side of this question. The provision of the shippers' load and count should mean in this act exactly what it says, that if a consignor accepts a bill of lading stipulating shippers' load and count, and there should be a deficiency in the count upon the arrival of the goods, he should not have any claim for such deficiency against the railroad, from my standpoint. If I were the holder of such a docu- ment, and had accepted it as my own count, unless there had been a wreck of this train carrying this merchandise, or some other extraor- dinary condition, I should certainly not feel called upon to go behind the contract which I had accepted and require the delivery in specific quantity of pieces and numbers when I myself had agreed that I had counted the merchandise that had gone in there; and the agent of the railroad had not been any party to that count what- ever. Therefore, the words "if true "as used are intended to mean that if it is a fact that it was the shippers' load and count, the railroad is relieved from liability, but if it was not a fact, but it was a shipper load and count, he is then held liable. But I should think the burden of proof would be largely upon the shipper to prove that it was counted at the time, and I am almost inclined to believe that he should be estopped, because if he is fool enough to accept the bill of lading stating "shipper's load and count," when the agent had counted it, I should think he should be held responsible for his own acts. BILLS OF LADING. 93 I do not believe that it is the intention of any ol the gentlemen advocating this bill to impose upon railroads any extraordinary or onerous conditions such as they are not willing to assume themselves. Now, the straight bill of lading is simply a receipt for the goods, and the gentlemen in the cold-storage business who have spoken here to-day, when they pay their money out against a draft drawn against a straight bill of lading, have simply paid it out because they hold a receipt from the railroad that that quantity of merchandise has been delivered to them. But that is not in any sense a negotiable docu- ment. No banks that I know of will loan 5 cents on a straight bill of lading — not a nickel. No conservative bank will do it, because there is absolute^ no control of the merchandise. It is consigned directly to some one else. That person to whom it is consigned receives the notice from the railroad that the goods have arrived, and that person can go and haul them and sell them, regardless of who may hold the bill of lading. Therefore that bill of lading is not a negotiable instrument and does not enter into the banking channels in any manner whatsoever. But you will readily see the necessity of the railroad company being bound if they give that receipt for the merchandise; otherwise, the person paying out the money against a draft predicated upon the fact that the goods were received by the railroad and having reasonable expectation that if they were received by the railroad they would be ultimately delivered to him, pays his money out on that and is entitled to the delivery of the goods, and the railroad should therefore be held responsible for these bills of lading the same as it would be for an order bill of lading. Now, when we come to the order bill of lading, which is negotiable, and upon which the great commerce of the country is done, it is essential that that bill shall be invested with the highest degree of negotiability, and with the most absolute safety because the holder of that bill is almost invariably a perfectly innocent third party, being no party to the trade between the individuals but is the lender of the money predicated upon the bill, and if trouble arose, due to the carelessness or dishonesty of a carrier, then that carrier should be responsible. That is the whole milk of the proposition, and if whatever bill you may finally decide to approve embodies the essentials that the rail- roads shall be responsible for the acts of their agents as expressed in the bill of lading, you have covered the whole case. The Chairman. If a bill of lading was presented to you, containing the words "shipper's load and count," if you dealt with that at all, if you touched it, it would be upon the theory, and subject to the discredit of the belief in your mind, that it was the shipper's load and count. Mr, Wexler. Absolutely. I should be on notice. The Chairman. Now then, when the shipper ships his goods he knows that a bill of lading containing the words "shipper's load and count" is discredited? Mr. Wexler. Precisely. The Chairman. Each man who deals with it takes it subject to that discredit, whatever it may be ? Mr. Wexler. Precisely. The Chairman. And is it your observation that shippers very often if a r!i=prorliforl Kill nf lfldino- when in fact the carrier did load Q nn£MT\t 94 BILLS OF LADING. Mr. Wexlee. It is only the custom in the shipment of certain lines of merchandise. But the custom is so well established that the shipper is entirely willing to accept it as a convenience to himself as well as to the railroad. The Chairman. No; you do not understand my question at all. Is it the custom of shippers to accept a bill of lading discredited with the recital "shipper's load and count" when in fact the carrier has loaded and counted % Mr. Wexler. No, sir; it is not. I have never heard of a shipper ever accepting a document of that kind — never. The Chairman. Then, if the shipper never, as a rule, does accept it; if the shipper, when he does accept it under those circumstances, knows that it is discredited; if all those who deal with it discredit it more or less, according to the circumstances, with that recital, do you not think it would be introducing an element of uncertainty in legislation here to use the words "if true '." Mr. Wexler. I do; yes, sir. I think it should be eliminated entirely. I think the railroad is entitled to the same protection that we have in that respect. Senator Cummins. I have no further questions, I believe. My doubt has not arisen at ah with regard to the provision you have just mentioned. It is the other provision that 1 am not fully able to understand. Mr. Wexler. What provision is that '*< Senator Cummins. The one that precedes the proviso. Mr. Wexler. I would like very much to explain it if you will just indicate which one it is. Senator Cummins. It is the provision which states as follows: Provided, That if the property is described in an order or a straight bill of lading merely by a statement of marks or labels upon the property or upon packages con- taining it, or by a statement that the property is Baid to be of a certain kind or quantity or in a certain condition, or it is stated in any such bill of lading that packages are said to contain property of a certain kind or quantity or- in a certain condition, or that the contents or condition of the contents of packages are unknown or words of like purport are contained in any such bill of lading, such statements, if true, shall not make liable the carrier issuing the bill of lading, etc. Mr. "Wexler. In that clause I agree with my previous statement. I think the words "if true" should be stricken out. I think if a shipper is so improvident and regardless of his own interest as to accept a bill of lading that does not correctly recite the facts, he should be estopped from any claim at some future date when the facts can not be clearly ascertained. I think the shipper must bear some re- sponsibility in this matter as well. If he comes forward with a quan- tity of merchandise of whatever character and the railroad issues him a bill of lading for it and describes it as something altogether different and he accepts that bill of lading, he is in the same position as a man who owes me $500 and gives me a note for $300 and I take it in payment of the debt. Mr. Williston. How about the bona fide purchaser of such a bill? Mr. Wexler. The bona fide purchaser is governed entirely by what is stated in the bill. He buys it with that notice before him, and he can not come back again and claim that it is contrary to the facts. He is estopped in the same way that he is estopped on any other negotiable instrument. The facts are before him. If he buys a note after maturity he is barred by everything that may have occurred BILLS OF LADING. 95 Senator Faulkner. I would like to ask the witness whether he will not also explain to Senator Cummins the question of the necessity for the bill of lading designating the goods by certain marks, etc. The Chairman. He went into that yesterday with reference to canned goods. Senator Faulkner. That is one of the questions that the Senator asked him. He insisted on the necessity of that as a matter of business. Mr. Wexler. The necessity of marks on certain merchandise is necessary because certain merchandise frequently becomes mixed at stations and can not be identified except by a particular mark. For instance, we will take cotton. There are certain marks that are generally used, for instance, ABC, or ADO, etc. There may be coming into New Orleans or Galveston on a particular day 10,000 or 15,000 bales of cotton. Each bale of cotton has a mark and a number, and that should be stated on the bill of lading. No con- servative merchant or shipper of cotton will accept a bill of lading unless that mark is stipulated, because how could he go and identify and claim his cotton? If he is shipping canned goods, it should state "100 cases of tomatoes." Then, you know, when you go to the station you claim 100 cases of tomatoes. But you should not accept a bill of lading for 100 cases without stating what it is, because then you would not know what to claim. Senator Cummins. The point arises with me, and I may illustrate it. Suppose I should separate this provision so that it contained but a smgle requirement — suppose I read it in this way: Provided, That if the property is described in an order or State bill of lading merely by a stamp that the property is said to be of a certain kind or quantity, such stamp, if true, shall not make liable the carrier. What does that mean ? Mr. Wexler. That is not stated as entirely as it ought to be. That was intended to mean that if the quality of the goods con- tained in the case, or the quantity of small packages contained in the case, was stated in the bill of lading, and the railroad had no means of ascertaining whether that was true or not, and signed for it, that it was said to contain that quality and that quantity of smaller packages, that then the railroad is relieved from responsi- bility as to that quantity of smaller packages or that quality of mer- chandise, which responsibility they should justly be relieved of. Senator Cummins. You do not get the full import of it yet. " Pro- vided, That if the property is described," etc., "in the bill of lading by a stamp that the property is said to be of a certain kind or quan- tity." Now that must refer to what is said by the person who de- livers it to the carrier 1 Mr. Wexler. Yes, sir. Senator Cummins. Now if the statement is true, the carrier is relieved. Do you mean that if the statement made by the shipper to the carrier is true, or do you mean that if it is true that such a statement was made to the carrier that the carrier shall not be liable ? Mr. Wexler. Well, I understand this to mean that the agent. of the railroad accepts the statement of the shipper as being true, you understand, and the agent is subsequently estopped from claiming that any other merchandise from that which he described in his bill of ladin? is the merchandise that was shipped. I think the words 96 BILLS OF LADING. forward and takes a bill of lading describing merchandise altogether different from what it is he must stand by the description, if it is contained in the case which the railroad has no means of knowing the contents of. Senator Cummins. Then what you mean is if the. recital contained in the bill of lading, whatever it may be, is true, the carrier shall not be liable ? Mr. Wexler. Yes, sir. Senator Faulkner. Is there not an almost universal expression in all bills of lading that if the goods are as to quantity, quality, and condition unknown ? Mr. Wexler. Unknown, yes. Senator Faulkner. That" is the usual expression, as I understand it, in all bills of lading. Senator Cummins. We will wait, as far as I am concerned, to hear the railroads upon that proposition. Mr. Wexler. Let me say just one further word. We have been working on this bill for more than five years. It is more necessary that it should pass in the near future than at any time during the past five years because of the robberies committed by two firms in the South, aggregating nearly seven millions of loss, which was inflicted on New York bankers, exchange bankers, foreign bankers, and cot- ton merchants, partly through or largely through their own fault, because they dealt with irresponsible people. Those large losses have attracted the attention of the entire commercial world to this deficiency in our bills of lading and the careless manner in which railroads have signed bills of lading and have authorized their agents to act, knowing that they had no responsibility. We are, therefore, in the position now of having a discredited document, a document which every man doing this line of business is looking around for some extraordinary relief from, and it is essen- tial that something be done in the very near future. Senator Pomerene's bill is an excellent bill. If that bill can be passed it is preferable, but if there is danger of its not being passed, or the House not passing it, it will be infinitely better if we can pass the one which we are more certain to pass, so we will be at least on the right road. The Chairman. Is there anyone else who desires to. address the committee ? Mr. Williston. We have no other witnesses. The Chairman. Two weeks from yesterday, at 10.30 o'clock, the committee will resume the consideration of this subject, and those opposed to the measure are invited to be present. Senator Pomerene. Mr. Chairman, these hearings came on yes- terday without it being generally known that these bills would be taken up, and I am advised that there are some grain dealers in the West who would like to be heard at the time we resume the hearings on this subject. I assume that they will be invited to be present. The Chairman. Certainly. Mr. Wexler. May I ask at the coming meeting, when the railroads are heard, if any rebuttal argument will be heard on the other side? The Chairman. Certainly; we want to hear both sides on this question. The committee thereupon took a recess until Friday, March 1, 1Q19 of in sn «>r.i™L- Q tv. BILLS OF LADING. friday, march 1, 1912. Committee on Interstate Commerce, United States Senate, Washington, D. 0. The committee met at 10.30 o'clock a. m. Present: Senator^ Clapp (chairman), Nixon, Brandegee, Townsend, Foster, Newlands, Clarke, and Pomerene. The Chairman. The following telegram from Edmund J. Clenny, president New Orleans Cotton Exchange, will be inserted in the record : New Orleans, La., February 29, 1912. Senator Moses E. Clapp, Chairman Interstate Commerce Committee, Senate Building, Washington, D. C. The practice by agents of railroads of issuing bills of lading for cotton not in hand and as acts of accommodation to favored shippers conjoined with the denial by said railroads of responsibility for the acts of their agents has been largely instrumental in producing conditions from which great frauds have grown, with resultant loss to indi- viduals and reproach to the American cotton trade. Certain foreign cotton buyers and financial institutions, both at home and abroad, who have recently suffered huge loss through fraudulent lading documents, have made a determined effort to protect them- selves from the consequences of the lax system which has heretofore prevailed. This effort is entirely justified by the facts, but the interests in question have given their effort the wrong application instead of seeking to apply the remedy to causes they are endeavoring to analyze effects instead of demanding that the issuance of bills of lading be safeguarded by placing responsibility therefor upon the carrier which per- forms the office and receives the profits of carriage they urge a cumbersome system of surveillance of bills after they have been issued and launched into the channels of trade. The central validating bureau plan proposed by these insterests, which plan the American cotton trade has indignantly and thus far successfully opposed, would place all American shippers responsible, as well as irresponsible, under the burdensome, gall- ing, and unnecessary compulsion of validating their bills through the central agency referred to, while at the same time confirming the railway carriers in their evasion of just responsibility for the acts of their own agents and encouraging said agents to per- sist in lax, injurious, and potentially fraudulent practices. The logical remedy for the abuses in the through cotton billing system lies not in penalizing reputable and honest shippers, but in compelling the carriers to assume the responsibility, which under every consideration of justice, equity, and fair dealing, they should bear. This consum- mation is of vast importance to the cotton trade, and therefore in this behalf the New Orleans Cotton Exchange respectfully urges the favorable consideration and ultimate enactment into law of the Stevens bill or some similar measure making rail- way carriers responsible for the acts of their agents. Edmund J. Clenny, President New Orleans Cotton Exchange. 97 ■12S0S"— S. Doc. 650, 62-2 7 gg BILLS OF LADING. The Ciiaikmax. The following letter from the American Hominy Co., Indianapolis, Lid., will be inserted in the record: American Hominy Co., Indianapolis, Ind., February 27, 1912. Hon. Moses E Clapp, Chairman Senalr Committee on Interstate Commerce, Washington, D. C. Senate Bill No. 957; House of Representatives No. 472G. Dear Sir: We desire to call your attention to the last paragraph of section 4, which reads as follows: "The carrier may also, by inserting in any such bill of lading, the words "shipper's load and count,' or other words of like purport indicate that the property was loaded by the shipper and the description made by him; and if such statement be true, the carrier shall not be liable for damages caused by the improper loading or by the nonreceipt or by the misdescription of the property in the bill of lading." Under this rule the carrier would not be liable for damage caused by improper loading, or by nonreceipt or misdescription of the property described in the bill of lading. DAMAGE CAUSED BY IMPROPER LOADING. It has been held heretofore, and properly so, that a car sent to a mill for the purpose of receiving and transporting freight should be in such a condition as to carry that class of merchandise in safety. It has been held heretofore, and properly so, that a shipper loading freight into a car does so as the agent of the carrier, and that the carrier is liable for damage to mer- chandise so loaded, if caused by reason of the unfitness of the car. It is true that we use reasonable care and go to some expense in seeing that these cars carry our merchandise to final destination in good order. Nevertheless, it hap- pens frequently enough that damages are caused by the unfitness of the cars in spite of the care we take in loading freight. DAMAGE CAUSED BY NONRECEIPT OF MERCHANDISE. It is more or less a custom in the milling business, and probably in other businesses, for shippers to load and count their shipments into cars, without the supervision of the carrier or carrier's agent. It is nevertheless true that the shipper does in a majority of such cases, and at any rate he may do so, if he does not, call for a corroborating check of the count by the agent of the carriers, which being refused by the agent of the carriers, should not innure to the benefit of the carriers. In other words, the shipper should not be required, and particularly not forced, to accept a bill of lading indorsed "Shipper's load and count," if he has requested the agent of the carriers to check the count and the agent has refused. DAMAGE CAUSED BY MISDESCRIPTION OF THE PROPERTY DESCRIBED IN THE BILL OF LADING. No shipper should object, we think, to this exception. Generally speaking, we do not seek to impose upon the carriers any undue or im- proper burden of liability. If we accept without protest a bill of lading containing this discrediting clause, "Shipper's load and count," or words to that effect, we should not expect to hold the carrier liable for errors and omissions in our loading and counting, but where we go on record as demanding that a car be sent to us properly equipped and fit for the traffic intended, and where we go on record as demanding that our count be verified and corroborated by the carriers, and. either or both of these facilities are denied by the carrier, then the carrier should not be released from his liability for losses and damages, in the event that we can prove by sworn statement or by such other proofs as may be necessary, that our loading and counting were in exact accordance with the description of the property contained in the bill of lading. The carrier should be held liable for losses and damages occurring in transit, even though the bill of lading carries the discrediting clause, ""Shipper's load and count," provided the shippers are able to prove by sworn statement and other necessary evi- dence that their load and count was correct. We wish to enter our protest against the paragraph in question and for your con- sideration would suggest that same be eliminated or, failing in that, an amendment somewhat as follows substituted : "The. carrier may also, by inserting in such bill of lading the words, "Shipper's load and count," or other words of like purport, indicate that the property was loaded by the shipper and description made by him; and if such statement be true, the BILLS OF LADING. 99 carrier shall not be liable for loss caused by nonreceipt or by the misdescription of the property described in the bill of lading: Provided, That if the carrier verifies the shipper's count of property so loaded, or refuses so to do upon demand of shipper, he shall not insert the words, 'Shipper's load and count' in such bill of lading." If you consider our contention in this case reasonable, would like to have your support in protecting our interests. Yours, very truly, American Hominy Co., Per F. L. Sullivan, Traffic Manager. The Chairman. The following letter from Mr. John Crosby, Min- neapolis, Minn., will be inserted in the record: Washburn-Crosby Co., Minneapolis, Minn., February 26, 191$. Hon. Moses E. Clapp, United States Senate, Washington, D. C. My Dear Senator Clapp: In connection with your Senate bill 957, relating to bills of lading, there is one point to which we ought to call your attention. The last clause of section 4 provides that where the goods are billed "Shippers' load and count" the carrier shall not be liable for the nonreceipt or misdescription of the goods described in the bill if the statement that this was shippers' load and count is true. The italics following the above and as a part of section 4 by proposed amendments go further when they state that the carriers shall not be liable for damages caused by the improper loading or by the nonreceipt or misdescription of the property. When the goods are shipped "Shippers' load and count" it is an invitation to the consignee to make claim against the shipper rather than against the carrier and* in- creases what you might call the moral risk of the shipment. If we deliver goods to a carrier at its receiving depot we get the count of the carriers to check our own count and get a clean receipt. If, on the other hand, for reasons of convenience and economy that are persuasive both to the carrier and ourselves we load our goods into cars on tracks adjacent to our mills, we can count and check as carefully as we choose, but if the carrier does not check this count and a shortage "■occurs or a damage in transit, then human nature leads the carrier to say, if the case be a shortage, that our count was short, or if the case be one of damage, that we loaded the goods improperly or into a car that was improperly safeguarded. It occurs to us that the provisions now in section 4 would effectively put a pre- mium on the carrier's refusing to check, inspect, or count the goods after loading into cars. We realize, of course, that all things are not possible to get at one time, but we do feel that our request is entirely feasible at this time, viz, that the emphasis to the carrier be put upon the desirability rather than upon the undesirability of his check- ing the goods when loaded. This is a matter of such importance to us that we anticipate having either Mr. F. F. Henry or Mr. C. H. Cochran be present at the hearing in Washington the last of this week, coming from our plant at Buffalo, N. Y. Very truly, yours, Washburn-Crosby Co., By John Crosby, Treasurer. P. S. — We are sending a letter identical with this to the Hon. Frederick C. Stevens in reference to the same bill, which bears the House number 4726. The Chairman. The telegram of Jeff D. Hardin, president of the New Orleans Board of Trade, will be inserted in the record. New Orleans, La., February 29, 1912. Hon. Moses E. Clapp, Washington, D. C: We permit ourselves to request your committee give favorable consideration Stevens bill either this or some similar bill, making railroads responsible for acts of their agents should be passed by Congress. We believe commercial equity demands that transportation lines should be responsible for acts of their agents. This responsi- bility, fixed where it belongs, would facilitate trade and commerce. It is up to the rail lines to protect themselves against acts of their employees and not throw the burden of this responsibility upon the banking or shipping public. .Tfw T) Hardtv 100 BILLS OF LADING. The Chairman. The letters and statements from the secretary of the Ohio Shippers' Association, Columbus, Ohio, will be placed in the record: February 28, 1912. Hon. Moses E. Clapp, Chairman Senate Committee on Interstate Commerce, Washington, D. C. Dear Sir: I beg to hand you herewith two copies of statement advising your com- mittee of the indorsement by the Ohio Shippers' Association of Senate bilk 4713 and 957 and expressing our desire that the same may receive favorable consideration on the part of the committee and reported out with recommendation for passage. Trusting that you may see fit to call the attention to the members of the committee to the inclosed brief statement, I am, Very respectfully, yours, J. W. McCord. [In the matter of Senate bill No. 4713, a bill relating to bills of lading in commerce with foreign nations and among the several States, and Senate bill No. 9P7, a bill relating to bills of lading.l Gentlemen: The Ohio Shippers' Association, which was organized in 1904, and whose membership consists of a large majority of the shippers m the State of Ohio, would respectfully advise you that this association most earnestly indorses the pro- visions of Senate bill No. 4713. When this same measure was before the General Assembly of Ohio last year under the title: "A bill to make uniform the law of bills of lading," this association, by its representatives, appeared before the House and Senate Committees on Judiciary and cooperated with Mr. Francis B. James in support of the bill, which was reported out favorably by unanimous vote of both committees, passed both branches of the general assembly by unanimous vote, and was signed by the governor. Hon. Samuel H. West, attorney representing the New York Central Lines before the committees, at first objected to some few features of the bill, but finally withdrew all opposition to the same as reported out and passed. We deem it unnecessary that this association should go to the trouble and expense of sending representatives to Washington to appear in person before your committee and submit argument in support of the bill, as Mr. James, in his statement made to you on February 16 and 17, covered the ground more thoroughly than we could hope to do and expressed the views held by this association on the subject. We respectfully ask that due and proper consideration be given by your committee to the wishes of all the shippers of the State of Ohio in connection with all other ship- ping interests throughout the country who are urging the enactment of this bill. We have studied the provisions of Senate bill No. 957, which we understand ynur committee has under consideration in connection with Senate bill No. 4713, and desire to express the indorsement of the same by this association, as it is our understanding that the provisions of the former in no way conflict with the provisions of the latter. Respectfully submitted. Ohio Shippers' Association, By J. W. McCord, Secretary. The Chairman. Are you gentlemen ready to proceed ? Mr. Faulkner. I think we are. Mr. Thorn expected to be here this morning, but he has not yet arrived, and I suggest that Mr. Bond, general counsel of the Baltimore & Ohio Co., make a statement at . this time. STATEMENT OF HUGH I. BOND, GENEKAL COUNSEL BALTIMORE & OHIO RAILEOAD CO. Mr. Bond. Mr. Thorn, if it please the committee, is the real accred- ited representative of the railroads. I am only the representative of a railroad, but am in sympathy, I think, with the majority of the railroads of this country, at any rate of the trunk lines, and I desire to discuss this matter as a practical railroad matter. I have read the testimony that was taken before this committee at the last hearing, and of course I have been more or less familiar •■■;r a- m2 with the hearings at theN^thfe^se^^^of Congress, and must say that I sympathize with the cte sJl^ifla fcKe bankers and of the receivers of goods to have a better bill of lading; I mean by that a bill of lading that is open to fewer questions and doubts as to its validity and as to what it represents. The only point on which I differ, and I do not know that I do exactly differ, as it is only a question of ways and means rather than of principle, is in the method of reaching the result that those gentlemen want, and which I think the broader- minded railroad people want. I do not know that I can make myself clear unless I state how business is transacted to-day. That is really what we have got to build on to start with. I am now going to address myself not at all to the form of the bills, but to the general business, the needs of which are to be met and to what seems to me the practical way of meeting it. To-day I think it is no exaggeration to say that not one bill out of a thousand — and I believe I could say 10,000 — is made out by the agent of the railroad company. The business of this country could not move for a single day if the biUs of lading were not made out by the shippers. It is not merely a question of the number of agents or the size of the platform to hold freight, but it is a question of time. There are not enough hours in the day, and there is not enough space in the streets of any large city adjoining the freight terminals of railroads to accommodate the drays and wagons. The consequence is — and all this was threshed out before the Interstate Commerce Commission when we were dealing with the uniform bill of lading, and what could be done in regard to that as requiring the making of it out by the com- pany's agent — the result is that the ordinary course of business fol- lowed by every merchant who makes more than a very rare shipment, followed by every man who is not illiterate, and followed by every large concern, is to send the goods to the station with a bill of lading made out by the shipper, and attach to it a shipping order. That bill of lading is checked with the goods, if there is time. If there is not time — and in the large cities there has never been time between 2.30 and 4 o'clock in the afternoon — it is checked with the shipping order, and signed and given back to the drayman so he can get away. The main object in life is to get rid of that drayman, because he is blocking the streets and blocking the access of hundreds of other draymen. All the large manufacturing concerns, of course, make out their own bills of lading by preference, and when the suggestion was made at the time of the uniform bill of lading hearing that they might be curtailed, they came down in bodies to protest and explain how it was abso- lutely necessary that that should be, and everybody had to admit that it was necessary. I want to impress that on this committee, because it is no exaggeration to say that if Congress should pass an act that would prevent, or even seriously hamper, the making of the bills of lading by the shippers, it would inflict an expense by way of delay on the business of this country that in one day would exceed any of the losses that have been complained of as occurring from unauthorized bills of lading in the 30 years that I have been the representative of a railroad. Now, that does not mean that we can not meet the needs and the wishes of these gentlemen who want a better bill of lading, but it does mean that we can not meet it by saying that, each and every 102 BILLS OF LADING. bill of lading that is signed l>y any agent of a carrier must import absolute verity as to all these matters, because, as a very intelligent witness who "appeared before this committee at the last hearing said — he was a banker, Mr. Wexler, from New Orleans; he is a busi- ness man of good sound sense, and knew what would be necessary to protect a railroad in issuing bills of lading that would absolutely guarantee that the goods were in its possession and absolutely make them liable — The safeguarding by the railroad is by no means a difficult task. The railroad can audit the bills of lading of its agents in the same manner that it audits his tickets, his cash accounts, and in the same manner that the express companies and telegraph companies audit for this same agent, who usually acts in these several capacities. They can have negotiable bills of lading engraved if need be on safety paper, can prohibit the present careless use of pencil in writing and signing bills of lading, and what is more important can discharge and blacklist, which is not now done, the agent who dares to sign for articles before they are in his possession. The business has heretofore been conducted very loosely ; If these loose methods are eliminated and the same safeguards would surround the issuing of the bills of lad- ing as now surround the sale of tickets, the danger is very small indeed. Heretofore what happened? The railroads had quantities of bills of lading lying around their offices. When a man wanted bills of lading he could come into the railroad office and get a bunch of them and take them over to his own place, two or three hundred of them, if he saw fit. I think it is perfectly self-evident that no railroad company with the ordinal business sense can give a right to every one of its thou- sands of agents to draw drafts on its treasury to an unlimited amount without any means of auditing those drafts or finding out when they are issued and to what amount. Now, that would be the result of this bill or of either of these bills as they are drawn and presented unless the railroad absolutely stopped the making of the bills of lading by shippers, because the railroad company has no record to-day whatever of the bills of lading that are signed by one of its agents. All that it has is the shipping order. All the checking is done on that; all the weighing is entered on that; and where that has been checked with the bill of lading, that is the document on which every- thing is based after the bill of lading has been given to the drayman. Xow, I think you gentlemen must agree with me that if the rail- roads are going to pursue ordinary business methods they must have some way of checking the bills of lading that are issued by an agent, which bind a railroad absolutely, whether there are any goods or not, and make it responsible to an unlimited liability. ' The ques- tion is how to do it without destroying the prompt movement of traffic in this country. You have heard only from the bankers and receivers of goods. 1 think if you had heard from the general shippers of goods and from the railroad traffic men you would be convinced, as I was convinced, and as the Interstate Commerce Commission was con- vinced, and as everybody, I think, has been convinced who went into it carefully, that it is practically absolutely impossible to stop the making of the bills of lading by' the shippers. The business of this country could not move for a dav unless they were permitted to do it. As Mr. Wexler says, these bills of lading are just taken in hundreds. Anybody can come to any railroad office and get as many bills of lading as he chooses. They are printed on paper that is not high grade or expensive. They are, after thev have been signed and BIL.LS OF LADING. 103 traveled about the country a little, about the most disreputable documents that a man can imagine, and to attempt to raise those into the dignity that ought to attach to a document which is carry- ing hundreds of thousands of dollars, is something that I think is impossible, not merely because of the bad paper, but because, as I say, there is no way of checking them; no way of auditing them. The remedy which I have to suggest, and which I believe, after giving this matter thought for a good many years, is the only practical method, is that a provision be made for either attaching to one of these bills of- lading a certificate which will be signed by some responsi- ble agent, specially authorized for that purpose, or by exchanging that bill of lading for a bill of lading issued out of a book, as Mr. Wexler says, consecutively numbered and printed on safety paper if neces- sary, if the railroads think that is necessary, but issued just as a railroad passenger ticket is issued, where the traveling auditor can check it and where he can be called upon to account for what has become of everv one of these documents, just as every warehouse checks its warehouse receipts, and just as every elevator checks its elevator receipts, but let that be the bill of lading with which the banks deal and on which the consignee pays the draft, if he has any doubt as to the credit of his shipper. That is a radical departure, I admit, in railroad practice, but it is the only method in my behef and opinion that is really practicable and which gives the railroad any chance at all to protect itself, or that accomplishes anything that the bankers and these gentlemen who appear before you say they need, and which will raise the bill of lading to the dignity of a quasi negotiable commercial instrument. Now, that means expense to the railroads. It means the assump- tion of a responsibility which has never been put upon them at law, and I think it only fair that in making that provision authority should be given to make a reasonable additional charge for that bill of lading, subject to regulation, of course, and the fixing of what is reasonable by the Interstate Commerce Commission. Xot only will that accomplish what these gentlemen are trying to accomplish for this bill, but it will accomplish a much more important result, and that is to do away with the forged bill of lading. Since I have been counsel for the Baltimore & Ohio Railroad, which is 30 years, we have never had any trouble from the issue of bills of lading by agents without receiving the goods, but we have had a great deal of trouble from forged bills of lading. All the largest frauds in this country have been accomplished through forged bills of lading. These gentlemen here entertain a vain hope when they think that if this form of act were passed they could relax in the slightest degree the vigilance required of them in handling bills of lading. On the contrary, the very fact that the bill of lading was given a sort of com- mercial value, or additional value, would make it an instrument of forgery which would be more sought to be accomplished by the dis- honest. Further than that, the attaching of penalties under the national law to the getting of a bill of lading from an agent when the goods have not been received would make it less dangerous to forge a bill of lading than it would be to persuade an agent to issue one, because the na- tional law is a much more dangerous law to meet in most parts of the 104 BILLS OP LADING. country than the State law, as the State law is, in the absence of statute, somewhat cloudy on the forgery situation, just as was explained to you in the former hearing. So that what I should apprehend would be the case would be not merely that the railroad will be subject to the additional dangers of dishonest men playing on the cupidity and good nature of their rail- road agents, but the number of forged bills of lading will increase, and that if these bankers relax in the slightest degree their vigilance in handling bills of lading, we will get everlastingly stuck. Now, the difficulties in telling a bill of lading, such as is issued to-day, as to whether it is forged or altered, or what has happened to it, are practically insuperable. I have had some experience with several hundred of them. In the case of one of the banks in Baltimore I tried to help the bank out. I have had experience with them in trying to straighten out the cases in which the railroad was involved, where three or four bills of lading appeared for the same goods, and it has been found in my experience absolutely impossible to tell a good bill of lading from a bad one. They are all alike. The paper is such and the signatures by the illiterate men — and these agents are people whom we have to take in the country, anybody who will act as an agent; it is not a question of choice in getting a man, but you have to take whoever you can get — are of the worst, and the forgeries, or the imitations of signatures, are practically indistinguishable. Now, if you had a bill of lading, say, a new bill of lading, or a cer- tificate attached to the bill of lading that is first issued — it does not matter as to the result, although I personally think it ought to be a new bill of lading — you escape not merely from the liability that they are trying to avoid by this act, where the bill of lading may have been issued without the goods, but you have a bill of lading that should be practically very difficult to forge, because the number of agents who issue the certified bill of lading can be, without serious detriment to the movement of business, limited. In the larger cities, of course, there would have to be several. In the smaller cities there need not be more than one or two along the line of the road. It would not be necessary to have one at every station, but in every important station he could serve quite a little territory around it, because the chances are there is not one order bill of lading in a week, and it would be no hardship for them to send their bills of lading up to be exchanged. In that way it would be possible to give the banks the signatures of all the important agents who issue these bills of lad- ing. It would be possible to have these signatures at the main office of the railroad company, so that any banker could come up and com- pare it, if he did not happen to have the signature, and it would be possible to trace these bills of lading and be very difficult for any forger to get out a. series of bills of lading, and that is what is neces- sary in order to carry out these large frauds by forgery. It is not one bill of lading: it is a series of them. Now, further than that, 1 think that proposition, Mr. Chairman, meets a great mauv of the constitutional difficulties that have been raised as to this legislation. You gentlemen are familiar with the fact that the minority of the committee in the House at the last session took the position as to this legislation that it was beyond the power of Congress to regulate commerce because there was no com- merce; there was not any shipper; there was not any consignee; BILLS OF LADING. 105 there were not any goods. It was simply tlie signing of a paper by an agent, a man who had not any right to sign, and if you gentlemen had heard Mr. Adamson argue that question I think you would be impressed with the fact that there are serious doubts about it; but there can not be any doubt that after a man has shipped his goods and has got a bill of lading it is a regulation of commerce to say that he can go to a railroad company and get in exchange for that, if it is a valid bill of lading, and I presume it is if he gets it in exchange, that he is entitled to get a certificate on that as to whether it is a valid bill of lading or not, or he can get an exchange for another bill of lading which shall not be questioned, because that is something that takes place after the shipment, and it simply throws on the railroad company the duty of finding out whether that shipment has taken place or not, and finding it out then. The right is not only to the man who has shipped, of course, but it is the duty of the railroad to find out whether he is the man who has that right or not, and there can not be any question that that is a regulation of commerce. Now, I have not of course attempted to prepare a provision or amendment, or anything of that kind. I think this is a question which can be worked out in the way I have suggested to the satisfac tion of all interests, but it could only be done probably by a confer ence and working over the table, exchanging suggested drafts, and working out the language so that it would be made a practicable thing and at the same time meet the needs of the bankers. I thank you, gentlemen. The Chairman. Waiving for the present the question of the addi- tional trouble and expense, what is there to-day to prevent carrying out the precautionary measures which you suggest, either under the existing law or if either of these laws is enacted ? Mr. Bond. There is nothing to prevent our issuing to-day a cer- tified bill of lading. In fact, as to cotton bills of lading in the South, many of the roads have adopted a system of attaching a certificate to prevent forgery, and that is only additional evidence that that is a practicable thing to do. That has been done, and it is being done to-day without any serious inconvenience to the public. But you have got to consider that these bankers and these business men need a little help in turning down the man who does not get this bill of lading, and if it is a thing established by law they are in much better position to do that than they would be if one or two railroads simply voluntarily did it, and I am prepared to say that I do not know that the railroads want it. I know they do not want to do it, because it is a very serious expense, and it is assuming a responsibility which they have always claimed is one that they ought not to assume. The Chairman. I am not speaking now of the added responsibility. I am speaking now of these preventive measures which you are sug- gesting with reference to a more carefully prepared bill of lading, as to the paper, type, and everything with reference to the issuing of them from books, and their being numbered consecutively, with reference to their being, before they are delivered finally, counter- signed by some one who covers a given area of territory, or exchange or certificate issued. In fact, in the three precautionary measures that you have suggested, is there anything that would prevent the railroad adopting them at the present time? 106 BILLS OF LADING. Mr. Bond. Perhaps no legal objection, but if this bill should become a law it would not be possible to do it, because you could not issue a bill of lading at all except one that would have all of those attributes, and vou would have to stop or check in some way the issue of bills of lading as it is done to-day when they are presented by the shippers. You would have to revamp that whole practice. ' The Chairman. Suppose either of these bills were in effect. What would there be then to prevent the railroads from adopting all of the precautionary measures which you have suggested? Mr. Bond. Simply because you would stop the business of the countiy so that it could not move. The ' Chairman. Would it stop the business of the country any more with the laws in force or enacted than it would if to-day the rail- roads adopted these same precautionary measures which you suggest? Those measures would entail some additional delay before the final bill of lading was issued, which was to be the ultimate proof. It would either have to be countersigned, exchanged, or the certificate issued, and under your suggestion it would entail a certain amount of delay. Mr. Bond. But only as to those shippers who wanted that sort of bill of lading. A shipper who did not expect to go to bank, who was shipping, perhaps, and had been paid in advance for his ship- ments, who was shipping to his agent — his own agent — I was going to say, a majority of all the shipments would not require this sort of a bill of lading at all, but could go on just as they go on to-day. The Chairman. But would 3 ou be safe ? Mr. Bond. Not if this act was pas ed, we would not. We could not let it go on as it is to-day. We would have to stop the whole course of trade m order to accommodate a part of it. That is the trouble. The Chairman. But ah this delay would be incident to the pre- ventive measures which you suggest, whether adopted by the railroad without any express direction or whether directed in a proposed law, would it not % Mr. Bond. No; my proposed law would simply give the shipper who needed that sort of a bill of lading the right to go and get it. Then he would subject himself to the delay. It would involve some little delay, but he would be compensated by the fact that he would get an absolutely marketable bill of lading, but we would not subject all the other shippers who did not want that kind of bill of lading to the same delay. The Chairman. Then your idea is that a great many shippers would not want to go through that process and consequent!}' it would not entail the same delay as might be expected if they all wanted to accept it. Mr. Bond. Absolutely so. It would only be the man with the im- portant shipment who would find it necessary, and that would enable the business to move just as it is now, except that when a man in his business did want to go to the bank with his bill of lading he would have to go to this other agent and exchange the bill of lading that he had made out and gotten signed and exchange that for a formal bill with the consecutive number and certified. The Chairman. Now, one other point which strikes me as not being so easy to clear up : It is claimed now by some that the proposed law BILLS OP LADING. 107 in the form in which it is presented would be unconstitutional, because it would attempt to treat as a matter of interstate commerce some- thing that was not commerce, upon the theory, that inasmuch as no goods have been delivered to the carrier there is no act of commerce and consequently a false statement as to the bill of lading covering goods which were not in fact in transit would not be within the regu- lation of Congress. Would that not apply just the same if the subse- quent steps taken by the agents of the company were also in fact false and fraudulent ? In other words, suppose that in addition to the bill of lading it was provided that where a shipper desired he could have that bill of lading certified to or a duplicate issued by some officer covering a large area and higher in rank. If in fact that was false, would not the same objection apply to it that it was not the regulation of interstate commerce because in fact there was no com- merce under that ? Mr. Bond. No; I do not think so. The Chairman. In other words, if it applied to one case would it not apply to others ? Mr. Bond. I do not think so. The Chairman. Personally, I do not think it applies at all. >,tr. ond. he right would be given to a man who was a real bona fide shipper to come and get his bill of lading exchanged for one of these other bills of lading. Xow the only duty you would impose on the railroad company would be the duty of finding out at that time whether in fact he was a bona fide shipper. The Chairman. But supposing in fact that he was not, but a higher officer, equally with the subordinate agent, certifies that he is a bona fide shipper when in fact he is not; would not the same objection, if there is any force in Mr. Adamson's position, apply in the one case as strongly as in the other ? Mr. Bond. Xo; I do not think so. Senator Brandegee. Will you state again very briefly exactly what your proposition was about certified bills of lading ? Mr. Bond. That, instead of trying to stop the whole course of business which is conducted on bills of lading made out by the ship- per, to simply send down by his drayman a shipping order checked by the receiving clerk and signed by the receiving clerk when busi- ness is pressing — every receiving clerk signs dozens of them perhaps at any station — instead of trying to control that which would have to be controlled if the railroad company is going to be absolutely liable, because there is no way of checking any of these bills; there is no way of finding out what "the agent has done. Instead of doing that, to give the right to anybody who did make one of these ship- ments to come and get from a responsible agent of the carrier a dif- ferent form of bill, in some formal form, issued from a book and with a consecutive number — just as a railroad passenger ticket would be issued, which could be checked bv the traveling auditor, and that that formal bill should be made absolutely binding on the railroad and made indisputable. Senator Brandegee. Even as against forgery 1 Mr. Bond. Well, it would hardlv be indisputable as against forgery because it would not be a bill if it was forged. But the possibilities of forging such a bill as that would be very slight. Senator Brandegee. Why? 108 BILLS OF LADING. Mr. Bond. Because the signature of the agent would be well known; because it would be issued with the precautions which are ordinarily taken to prevent forgery, upon a finer class of paper, and all that sort of thing, and the means of forgery would not be at hand. The man who wanted to forge would have to have a large amount of printing and engraving done. As it is now, everybody has the uniform bill of lading of every railroad company, and all he has to do is to put in the marks and entries and copy them from some other bill. Senator Brandegee. But so far as forging the signature is concerned, it is just as easy to forge a well-written or a well-known signature, is it not; that is, make the imitation of it? Mr. Bond. If you have the paper, and all that, to go on, it is. That is true. Senator Brandegee. I did not understand what you meant by the expression you used that it was the custom in these forgery cases for the forger to issue a series of forgeries. Mr. Bond. I mean the large losses have been through a series of forged bills. It has almost always been the case where a man is involved in speculation that he started with vahd bills, and then he has got out his vahd bills and has put in forged bills, and he carries it on through a course of a long series of forgeries. Senator Brandegee. You do not mean a series of different railway officials' names ? Mr. Bond. Oh, yes. Senator Brandegee. A series of the same railroad officials' names, or a series in different parts of the country or purporting to come from the same part of the country. Mr. Bond. Generally from the same part of the country, because that is where he would have to get Lhem from, where he ordinarily deals. Of course, in many cases, the man would issue three or four forged bills of lading at once from the same shipper. He would have a genuine bill of lading. I recollect one case, in Kansas I think it was, where the man forged three duplicates. He forged three bills and he had the genuine and three forgeries, and of course he got the money four times. But ordinarily the losses are due to the man substituting in bank. He is still going on doing business otherwise. He could not dispose of the forgeries, but he substitutes in the bank for a good bill a forged bill, and as he gets more and more involved the forgeries increase and the good bills decrease. That has been the history of it, but it required a series of forgeries to have accomplished his purpose. Senator Brandegee. Did I understand you correctly, to say that in your 30 years' experience on the Baltimore & Ohio Railroad you never had known a single instance where the bill of lading had been issued and where no goods had been deposited against the bill of lading '( I do not know whether I heard you correctly. That is the reason I ask the question. Mr. Bond. I did not say there was no instance. I think we did have, years ago, a man who got out a bill of lading for some cattle that he did not get on board, but that was years ago. Senator Brandegee. Was that a case of fraud — intentional fraud — or accident ? Mr. Bond. No; I think not. It is very hard to say how it hap- pened. Senator Brandegee. Is that the only case that vou can recall? BILLS OF LADING. 109 Mr. Bond. That is the only case that I can recall now. Senator Brandegee. Have you any knowledge about the extent through the country at large in which bills of lading have been issued when no goods were deposited or exchanged ? Mr. Bond. No; I have no general knowledge, but from my general information from other counsel it has not been in trunk-line territory at all a troublesome matter until quite recently. In some of the States where this form of act has been passed, that kind of fraud lias seemed to be on the increase. Senator Bkandegee. Which form of act? Mr. Bond. The form of getting out Senator Bkandegee. Similar to these proposed bills, or these pro- posed laws? Mr. Bond. The law in New York is practically the same as this, yes. That is the only large case that I know of. Senator Brandegee. Has this question been presented to previous Congresses or previous committees ? I am a new man on this com- mittee and I do not know much about it. Mr. Bond. This general question? Senator Bkandegee. Yes. Mr. Bond. Yes; it has been discussed I think for five ^years. Senator Bkandegee. Are the positions of the parties to the contro- versy about the same now as they were originally ? Mr. Bond. No; I do not think they are. Senator Brandegee. In what respect have they changed ? Mr. Bond. I think the railroads with which I am more particularly associated feel that we ought to do everything we reasonably can to- elevate the bill of lading. Senator Brandegee. You mean originally, you did not want to do anything ? Mr. Bond. Yes. Senator Brandegee. And now you think something ought to be done? Mr. Bond. Well, I think everything ought to be done that we can by any safe way do. I think that is the feeling largely because not all issues of unauthorized bills of lading by agents would cause — that is, the recent forgeries — the large losses and discredit which has been cast upon the American bills of lading abroad. Senator Brandegee. During these five years have you made any attempt at conferences with the shippers or consignees or the bankers or boards of trade who are agitating in behalf of this matter to arrive at some agreement with them about legislation in this respect ? Mr. Bond. Yes; the railroad representatives and bank representa- tives have been in conference every session, I think, and they have agreed upon quite a large number of provisions. But my trouble is that if you attach this character, this application, to every bill of lading that is issued, you would absolutely block the business of the country. Senator Brandegee. Has it ever been put into writing in any way — the number of things upon which you have been able to agree ?' Mr. Bond. Yes; they are offered as amendments in the present proceedings. Senator Brandegee. And you are willing that the shippers should take a little more time and trouble to get a good certified bill of lading, 110 BILLS of lading. and have that made absolutely binding on the railroad so it can not be questioned for anj^thing except forgery. Mr. Bond. Speaking for the Baltimore & Ohio Railroad, yes. I think that is the only way I can see we can really reach a practical solution. That business can go along as it is, and at the same time give the banks what they need. Senator Brandegee. I do not want, of course, to make any sug- gestions to you as to how to manage your business, and you need not answer this question if you do not want to — but is there any attempt now going on in the way of negotiations between gentlemen interested in this thing to see if they can not arrive at some common ground ? Mr. Bond. I think they are discussing it every day — certainly every time this committee meets. Senator Foster. Have any States any laws similar to the one under discussion? Mr. Bond. Yes; I think substantially the Pomerene bill has passed in a number of the States Mr. James. In nine- Senator Foster. How does that law operate in those States '( Mr. Bond. Well, they are mostly States where there is pretty dense population, dense shipments — and the agents are high-class men, and with the exception of the experience of the Delaware & Hudson Co., I do not think there has been any very serious losses. Senator Foster. Have there been any serious interference with business in your observation? Mr. Bond. The railroads have not attempted to protect them- selves, but they are operating in a very different country. The con- ditions in the places where such railroads are operating are not ap- plicable all over the United States. Senator Foster. What States have laws similar to this bill? Mr. Bond. New York and Massachusetts, I know. Mr. James. I think I can give you a little light upon that subject, if you would like to have me do so. The States of Connecticut, Illinois, Iowa, Massachusetts, Maryland, Michigan, New York, Ohio, and Pennsylvania — nine. Senator Foster. Does the enforcement of that law in those States interfere seriously with the commerce and the rapid and adequate transportation of freight ? Mr. Bond. Well, thus far the railroads have run the risk and let the thing go right along as it is. I do not believe they will be able to do that permanently. Senator Foster. The railroads complv with the law in those States, do they ? They have not contested it, have they ? Mr. Bond. As far as I know, with the exception of the Delaware & Hudson, there have not been any very serious cases, but I do not think that is a fair criterion of what will happen if Congress should pass a law of this kind. I think that will give a standing to the bill of lading and make it of value in getting money that will lead to crooked men seeking that method of defrauding. The wonder is that there have not been more frauds. It is, as compared with the holding up of taxicabs Senator Brandegee. A safe industry. Mr. Bond. A safe industry, and much more profitable, and the wonder is they have not had intelligence enough to take hold of it. Senator Foster. That is all I care to ask. BILLS OP LADING. HI Senator Townsend. Perhaps they have not thought of these oppor- tunities to commit fraud that you are suggesting, and that is the reason they have not been committed. After they read these hearings they may take advantage of them. Mr. Bond. I am frank to confess that it has been a surprise to me all through my professional career that they have not done more of it, because I see how easy it is. Senator Townsend. What proportion of the bills of lading that are issued are order bills of lading ? Mr. Bond. That I could not say. I tried to find our data which was worked up with the Interstate Commerce Commission, but I was unable to find it. I think it was stated in the last hearing. Senator Faulkner says that in the last communications from the railroads he heard from two of them which put the order bills of lading at a very low percentage, and that a small percentage of them were used in the banks. The number of bills of lading issued are something perfectly enormous, Senator. Senator Townsend. But the order bills of lading are less than 5 per cent ? Mr. Bond. Yes, sir; according to these figures, about 2 per cent. Senator Townsend. Well, if restrictions were placed upon the issuance of such bills of lading, would it materially interfere with traffic ? Mr. Bond. As the law is now, we have to give the man an}- bill of lading he wants. That is, when the shipper makes out his bill of lading he decides whether it is order or not. It is aU on the same form except the words "order of" are written in, and it would not of course be nearly as serious if the law was confined to order bills of lading, but I do not really see where the man who is going to make a straight shipment should not have the right to go and get a certified bill just as well as the other man. Senator Townsend. Are they demanding it ? Mr. Bond. No; I do not think they are, except possibly our egg shipper from New York. He was a straight consignee, I think, in some cases. Senator Townsend. Then, really, the demand that is being made is on the part of those who desire order bills of lading ? Mr. Bond. Yes, sir; those who take the bill of lading intermediate and lend money on it. Senator Townsend. Did I understand you to say that it would be of serious inconvenience to the railroads and interfere with traffic if the order bill of lading was issued according to the provisions laid down in either of these bills 1 Mr. Bond. Well, I could hardly say. Of course it would not be very serious if the order bill of lading is only 5 per cent of the bills. Mr. Thom. May I interrupt you just a moment to say that there is an article in yesterday's Wall Street Journal that has been brought to my attention which states that the banks handle about 20 per cent of all bills of lading which are issued. Senator Townsend. Of the order bills of lading ? Mr. Thom. No, sir; 20 per cent of all, There is about $25,000,- 000,000 of business handled through biUs of lading, and of that $5,000,000,000 is handled by the banks. Mr. Bond. But that is in dollars and not in number of bills. 112 BILLS OF LADING. ."M- . enator Townsend. That is what I was going to ask you. Mr Bond. All those figures are in dollars and not in number of bills. It is the important business that does go through the banks. It is the business that has to be carried and followed, where you have money to earn* it on. Senator Townsend. I will ask you this question. Do the banks deal in anything but the order bill ? Mr. Bond. Not to my knowledge. Senator Town-send. So that whatever the}' are, the banks are only interested in that class of bills of lading? Mr. Bond. So I understand. Senator Town-send. Then if that number is small— and I think you must admit that it would be about 5 per cent, or not more than 5 per cent, of the total number I am talking about — I suppose it takes as much time to issue a straight bill of lading as an order bill, or a bill for a crate of eggs, as it does for a carload of cotton? Mr. Bond. Well, practically the railroad itself, through its agents, issues no bills of lading except those exchanged for elevator certifi- cates, or the receipts of terminal railroads. All the other bills of lading that are used in business are made out by the shippers them- selves. Senator Townsend. lias that always been the custom ? Mr. Bond. It has been a growing custom, as time got to be more important. It is the saving of tmie that leads them to do it. Senator Townsend. Does that custom prevail as much in places where their traffic is not congested as it does in other places ? Mr. Bond. In the cities, yes; of course, in the country districts, perhaps, no. The man there would not probably have a bill of fading forwarded. He would have to go to the station to get it and there he might ask the agent to do it, although even there he gen- erally saves a great deal of time by doing it himself. Sen hi or Townsend. Did you -ver check up th?se at all to find out whether the - , had been properly made out? Mr. Bond. There is no way of checking. Senator Townsend. No way at all. Now, there are three parties to this bill-of-lading controversy, are there not — the shipper, the banker, and the railroads; that is, three parties interested, I mean? Mr. Bond. I do not think the shipper has taken very* much interest in it except in a general way. He would like to have something that the banks will take. That is his interest. Senator Townsend. My experience on this committee has been, and the committee in the House also, that there have been three yen* active parties in this controversy, and once or twice, as I recall it, the matter has been dropped from the consideration of the com- mittee with the understanding that those three parties were going to get together and determine upon something that they could all agree upon and be satisfied with. But you do not recall that the shippers have been yen* active in this matter ? Mr. Bond. I can not state as to that, Senator, because I have not been very active myself — that is the truth of it — in these conferences. I have only a general knowdedge of them. Senator Townsend. And you can not speak from the shippers standpoint on that proposition? BILLS OF LADING. 113 Mr. Bond. No, but I know the shipper wants something that the banks will take. That is one of his interests, and another interest is not to have a law that will seriously impede and delay him in his shipments. Senator Townsend. I think that is all. There are some other ques- tions that I would like to ask Mr. Bond after the others have testi- fied. The Chairman. Mr. Bond will be here. Mr. Bond was thereupon temporarily excused. STATEMENT OF ALFRED P. THOM, COUNSEL FOR THE SOUTH- ERN RAILWAY CO., WASHINGTON, D. C. Mr. Thom. Mr. Chairman and gentlemen, I shall not undertake to discuss the special features of the bills which yon have under considera- tion. I understand that at i^s last meeting the committee was more especially interested in the general features , hat ought to be incor- porated in such legislation than in the provisions of any particular bill, and before approaching the general subject under consideration, I would like an opportunity to explain to the committee what, accord- ing to our experience and observation, the difficulties in respect to bills of lading are. I represent especially here the Southern Railway Co., although I likewise represent the majority sentiment of about 100,000 miles of railroad, which in turn is represented by an advisory committee, of which I am a member. The Southern Railway Co. operates lines about 7,000 miles in length, running from the Potomac River to the Gulf, and from the Atlantic to the Mississippi River. According to my experience, there has never in my memory been any difficulty growing out of a, bill of lading issued by an agent of the company for which no goods had been received. We have had most unfortunate experience in respect to the forgery of bills of lading. It was in con- nection with our road and the Louisville and Nashville Railroad especially that the great Knight-Yancey frauds were committed within the last two years. I would like to explain to the committee the system that was adopted in that case, so that they can understand the dangers which have been — according to our experience in our territory — .especially confronting the business in this country. Knight-Yancey & Co. were large operators in cotton at several points in the South, and especially at Decatur, Ala. Decatur is not a large place, but it is a large shipping place for cotton. Knight- Yancey & Co. got into the habit of using this method in dealing with bills of lading: They would forge bills of lading for cotton of certain quantities and of certain marks. They would attach these forged bills of lading to their drafts and put them in the bank and let them go forward, the drafts being for the most part drawn on Liverpool, but some were drawn on New York. Then within 30 days, or some other time, they would deliver to the carrier the quantity of cotton called for by the bill of lading (the forged bill of lading), with the marks on it that were called for by the forged bill of lading, and would take out from the carrier a bona fide bill of lading for the cotton so delivered. Then they would destroy the bona fide bill of 42808°— S. Doc. 650, 62-2 8 114 BILLS OF LADING. lading and let the cotton go on and be delivered on the fraudulent bill of lading. That was in the early stages of their necessities, but the committee will understand that shortly a system of fraudulent transactions such as that would grow, and in a little while, as their necessities increased, they would not only leave outstanding the fraudulent bill of lading, but they would negotiate the bona fide bill of lading. Senator Townsend. A duplicate % Mr. Thom. There were no duplicates. One had been issued a month before the other. But they would have one delivery of cotton, and have outstanding against that a forged bill of lading issued a month ago, for instance, and a bona fide bill of lading issued to-day, when the cotton was delivered. So that when they could not carry on this business of getting the accommodation by having the credit a month ahead of the time they were entitled to, they would get the credit on the fraudulent bill of lading at the time it was forged, and then would likewise negotiate the bona fide bill of lading, which before they were in the habit of keeping or destroying. So that they would have outstanding against 100 bales of cotton, for example, a forged bill of lading issued some time in the past, and a bona fide bill of lading issued when the cotton was delivered to the carrier. Well, of course, the time came when that system must be exposed, and it was exposed, and the collapse came. Now, out of that transaction grew losses, running up to about $6,000,000, as I remember the figures. The Liverpool cotton dealers, the New York cotton dealers, and a committee of the American Bank- ing Association had a conference with the authorized railroads — the executive officers and the chief legal advisers of the principal railroads in the South — with respect to this situation. I was present and par- ticipated in those meetings. It was recognized by the bankers that the situation with which they were confronted in dealing with those bills of lading was not the danger of a bill of lading issued by an agent of the railroad for which no goods were received, but was the danger of forgeries growing out of the transaction from which they were them- selves suffering, and by which they sustained losses amounting to some $6,000,000, and an effort was made by joint action between the railroads and these bankers and these representatives of cotton buyers to devise a means by which that great avenue of loss might be closed, and a means was devised and is now in operation. That means was this: The railroads took this position: That the buyers of cotton, the banks, the dealers in their bills of lading, had a right under existing law to every safeguard that could be reasonably devised for the purpose of indicating the genuineness of the paper which purported to bear their names. But that under existing con- ditions of the law there was no justice in the suggestion that a larger responsibility should be placed upon the railroads with respect to bills of lading it actually issued than existed to-day. Then those lines of railroad said to the bankers and to those other gentlemen, "We are willing to cooperate with you to the fullest extent for the purpose of devising ways and means to protect the gen- uineness of, and bona fides of, the transactions which are said to bear our names." With those lines marking the limits of the negotiations which were to occur, the matter was taken up and, as I say, a method was devised. The method was this: That the railroad should issue BILLS OF LADING. 115 to its agents at all important designated points a book as carefully prepared and as carefully audited as the series of passenger tickets; that there should be in that book a stub — what we call a signature- validation certificate — and a duplicate of the signature-validation certificate ; that that certificate should be attached — the original of that validation-signature certificate should be attached — to every order- notify bill of lading for foreign account; that it should be printed on prepared paper; that it should be attached in such a way that a stamp should go through it, and the bill of lading to which it was attached, and that it should be signed by some person other than the person of the railroad company signing the bill of lading; that it should certify that the signature of the agent to the bill of lading was the true and bona fide signature of that agent; that the duplicate of that signature-validation certificate should be at once sent by the agent to the principal accounting offices of the company, and should be preserved by him and carefully checked against the bills of lading; that if any one of those certificates were destroyed or defaced or in any way rendered incapable of use, it should be sent back to the audit- ing department that issued it with as scrupulous care as if it were a canceled passenger ticket. In addition to that I will say that the bankers themselves, or some agency other than the railroad, undertook to establish, in the city of New York, what is known as a central bureau, to which bureau the railroads undertook to send promptly a copy of each bill of lading that had been issued by them. So that a bank interested, when a draft was presented with a bill of lading attached, could send to this central bureau and see whether there was anything at the bureau to indicate that such a bill of lading had been issued. Now that is in operation to-day in the whole southeastern territory, east of the Mississippi River and south of the Potomac and Ohio Rivers, in respect to cotton. I do not mean to say that it is entirely satisfactory to all of the bankers. The thing that is not satisfactory to the bankers is this central bureau in New York. The bankers in other parts of the country deemed that that has a tendency to concentrate the business to-day in New York away from other ports of the country, and, as a consequence, there have been large controversies between the bankers in respect to the central bureau in New York. The chances are, however, that they will be reconciled between themselves. Now, that is the difficulty that we have had to deal with. That is the avenue through which harm comes to the business world in respect to bills of lading in our territories. There is no harm, within my expe- rience in charge of affairs of this railroad company, in any single case whieh has come from a bill of lading which has been issued by an agent without the corresponding delivery to the carrier of the goods purporting to be issued. I do not wish to be understood, Mr. Chairman and gentlemen, that there is no such difficulty in any part of this country. I have heard statements here before this committee which indicate that in some sections of the country there does exist that difficulty, but I mean to say that as far as our experience goes the difficulties that the shipping public and the banking public have are not with the bills of lading which have been issued by the company for which no goods have been received, but from forgeries which have been committed and which this legislation is not intended to meet. HQ BILLS OF LADING. Of course no legislation could meet the difficulties growing out of a forgery No legislation could undertake to make the railroad com- pany liable on a bill of lading that it did not issue and to which its name was forged. That is a matter that can only be managed through some such plan as is now in operation in the territory to which I have alluded. I come now, therefore, to address myself to what can be done by this legislation and what is sought to be done, and m discussing that question I want to call the particular attention of this committee to the present law on the subject, not that every member of this com- mittee does not know it, but in my experience it always helps lawyers to find out the exact statement of the law which they must have in view in any legislation which they propose of a remedial character. The law on this subject in respect to interstate commerce is now set out in the case of Friedlander v. The Texas Pacific Railroad Co. in 130 United States, 416. That case was this: It arose m Texas. It involved 200 bales of cotton. It was where a railroad company's agent had issued its bill of lading for 200 bales of cotton in fraudulent collusion with the shipper. There was no cotton delivered to the railroad company, but for the purpose of fraud and gain a conspiracy was entered into between the railroad company's agent and the ship- per by which the railroad's credit should be pledged for 200 bales of cotton which the railroad had never received. That bill of lading was attached to a draft and the draft was taken up by a bona fide purchaser who had no knowledge of this fraud. The suit was by this bona fide purchaser. The opinion of the court was delivered by Chief Justice Fuller, and was the unanimous opinion of the court. Senator Bkandegee. In what year was that 1 Mr. Thom. That was in 1888. I read from page 423. Mr. Justice Fuller stated the facts of the case as follows : The agreed statement of facts sets forth "that, in point of fact, said bill of lading of November 6, 1883, was executed by said E. D. Easton, fraudulently and by collusion with said Lahnstein and without receiving any cotton for transportation, such as is represented in said bill of lading, and without the expectation on the part of the said Easton of receiving any such cotton," and it is further said that Easton and Lahn- stein had fraudulently combined in another case, whereby Easton signed and deliv- ered to Lahnstein a similar bill of lading for cotton "which had hot been received, and which the said Easton had no expectation of receiving," and also "that, except that the cotton was not received nor expected to be received by said agent when said bill of lading was by him executed as aforesaid, the transaction was, from first to last, customary." In view of this language, the words "for transportation, such as is rep- resented in said bill of lading " can not be held to operate as a limitation. The infer- ence to be drawn from the statement is that no cotton whatever was delivered for transportation to the agent at Sherman station. The question arises, then, whether the agent of a railroad company at one of its stations can bind the company by the execution of a bill of lading for goods not actually placed in his possession, and its delivery to a person fraudulently pretending in collusion with such agent that he had shipped such goods, in favor of a party without notice, with whom, in furtherance of a fraud, the pretended shipper negotiates a draft, with a false bill of lading attached. Bills of exchange and promissory notes are representatives of money, circulating in the commercial world as such, and it is essential, to enable them to per- form their particular functions, that he who purchases them should not be bound to look beyond the instrument, and that his right to enforce them should not be defeated by anything short of bad faith on his part. But bills of lading answer a different pur- pose and perform different functions. They are regarded as so much cotton, grain, iron, or other articles of merchandise in that they are symbols of ownership of the goods they cover. And as no sale of goods lost or stolen, thought to be a bona fide purchase for value, can divest the ownership of the person who lost them or from whom they were stolen, BILLS OF LADING. 117 so the sale of the symbol or mere representative of the goods can have no such effect, although it sometimes happens that the true owner, by negligence, has so put it into the power of another to occupy his position ostensibly, and to estop him from asserting his right as a purchaser, who has been misled to his hurt by reason of such negligence. (Shaw v. Railroad Co., 101 U. S., 557, 563; Pollard v. Vinton, 105 U. S., 7, 8; Gurney ji. Behrend, 3 El. & Bl., 622, 633, 634.) It is true while not negotiable as commercial paper is, bills of lading are commonly used as securities and advances; but it is only as evidence of ownership, special or general, of the property mentioned in them, and of the right to receive such property at the place of delivery. Such being the character of a bill of lading, can a recovery be had against a common carrier for goods never actually in its possession for transportation, because one of its agents, having authority to sign bills of lading, by collusion with another person, issues a document in the absence of any goods at all? It has been frequently held by this court that the master of a vessel has no authority to sign a bill of lading for goods not actually put on board the vessel, and, if he does so, his act does not bind the owner of the ship even in favor of an innocent purchaser. (The Freeman v. Buckingham, 18 How., 182, 191; The Lady Franklin, 8 Wall., 325; Pollard v. Vinton, 105 II. S., 7.) And this agrees with the rule laid down by the English courts. (Lickbarrow v. Mason, 2 T. R., 77; Grant v. Norway, 10 C. B., 665; Cox v. Bruce, 18 Q. B. D., 147.) "The receipt of the goods," said Mr. Justice Miller, in Pollard v. Vinton, supra, "lies at the foundation of the contract to carry and deliver. If no goods are actually received, there can be no valid contract to carry or to deliver." "And the doctrine is applicable to transportation contracts made in that form by railway companies and other carriers by land, as well as carriers by sea," as was said by Mr. Justice Matthews in Iron Mountain Railway v. Knight (122 U. S., 79, 87), he adding also: "If Potter (the agent) had never delivered to the plaintiff in error any cotton at all to make good the 525 bales called for by the bills of lading, it is clear that the plaintiff in error would not be liable for the deficiency. This is well estab- lished by the cases of the schooner Freeman v. Buckingham (18 How., 182) and Pollard v. Vinton (105 IT. S., 7)." It is a familiar principle of law that where one of two innocent parties must surfer by the fraud of another, the law should fall upon him who enabled such third person to commit the fraud; but nothing that the railroad company did or omitted to do can be properly said to have enabled Lahnstein to impose upon Friedlander & Co. The company not only did not authorize Easton to sign fictitious bills of lading, but it did not assume authority itself to issue such documents except upon the delivery of the merchandise. Easton was not the company's agent in the transaction, for there was nothing upon which the agency could act. Railroad companies are not dealers in bills of exchange, nor in bills of lading ; they are carriers only, and held to rigid responsibility assuch. Easton, disregarding the object for which he was employed, and not intending by his act to execute it, but wholly for a purpose of his own and of Lahnstein, became particeps criminis with the latter in the commission of the fraud upon Freidlander & Co., and it would be going too far to hold the company, under such circumstances, estopped from denying that it had clothed this agent with apparent authority to do an act so utterly outside the scope of his employment and of its own business. And held that the company was not liable. Now, that is the law under which the carriers of this country are carrying on their business of transportation to-day. That is the limit of the liability imposed upon them by law, in respect to the commerce which they carry. Senator Clarke. Do you not think that decision was wrong, and do you not think it has caused the commerce of this country more injury than the value of the cotton crop ? Should not the railroad company evolve the things which would not make it responsible? If the court had said : "You are responsible for these things. You employed that agent, and you put him m office and then you gave him a rubber stamp and printed paper and enabled Mm to put out a document which Friedlander could not have detected from a genuine one, no matter what diligence he displayed." By making that a rule of action the railroad companies would evolve something of help to the country instead of making it the business of every crooked fellow they got, knowing that the railroad company, which was near Hg BILLS OF LADING. at hand, would not be liable for it 1 Do you not think that was an erroneous decision ? Mr Thom. I do not, Senator, and I am going to give you my reasons, if you will be patient and hear me. This is a necessary proposition' under the conditions which do not recognize the risk involved and do not pay for it. Take the company that I represent. As I have said, we represent a territory of about 7,000 miles. We are located in all kinds of communities, and we are obliged to get what agents we can for the money we can pay them. We have 1,500 or 2,000 of those agents. They are men of varying intelligence, and of varying character. Some are good men, utterly beyond the power of corruption. . Senator Clarke. You think the moral hazard involved in dis- honesty or inefficiency of an agent should be a tax on the shippers and not on the railroad ? Mr. Thom. I am coming to that if you will let me. Some are weak men who can be corrupted. Now, what is it that these men have in their hands ? Is it a trifling responsibility ? Is it a small matter that is suggested to make the railroad company responsible not only as a carrier, but as a banker? Each one of these agents would have m his power, if the railroad was responsible for goods which it did not receive, to pledge the whole credit of the railroad in collusion with a dishonest shipper in a dishon- est transaction. Now, that is a proposition so startling that it chal- lenges the calm consideration of every statesman who is called upon by his duties to deal with it. The railroad credit of this country is not a matter for them alone. It is not a matter in which in its larger sense they are especially interested. Under existing systems the whole sys- tem of transportation is involved, and the public is more largely inter- ested in it than even the railroads are. If there is one thing that must be preserved, whatever else fails in this country, it is that some effi- cient and adequate means shall be maintained at all times by which the producing industry of this country can have its products carried to the markets of the world, and in order to preserve m their integrity and in their full usefulness these transportation systems a fair and honest and just method must be devised by which they shall not be subjected to ruinous risks which at any moment may bring them down and prevent them from expanding as commerce needs them to expand and of performing the duties which commerce demands that they shall perform. Now, whether that decision be right or wrong, Senator, we must all admit this, that on that measure of liability the rates of the railroad company have been fixed as they exist to-day. The services of the railroad companies to-day are performed with that limitation on them. The rates which are paid to them are paid for that service with that limitation on them, and that is entirely without reference to whether the decision be right or wrong. But I am told that the requirements of business have advanced; that the business of this country can no longer be done according to the methods now in vogue on the prin- ciple announced in this decision. I can see strong reason for that proposition. I can see that telegraphs, telephones, and quick trans- portation facilities have made time of immense value in financial transactions. I can see that it is of the utmost importance to a ship- per to be able to utilize his shipment from the moment that it is BILLS OF LADING. 119 shipped, and not have to wait for his financial returns to go into other transactions until that shipment can arrive at its destination and he can receive the proceeds of it by the slow method in vogue 50 years ago. But that is a necessity, Mr. Chairman, when we come to analyze the situation that has been created by the banks and by the business men. That is an evolution growing out of improved methods, for which they have credit and for which they have responsibility. It is not a thing for the enlightened managers of railroads to stand in the way of. It is a condition which enlightened managers of rail- roads ought to appreciate and to cooperate with as far as is just and reasonable. It is not for the railroads, if they are managed in an enlightened and a broad way, to try to put an obstacle in the way of improved methods in business, but it should welcome them and should cooperate with them to the full extent that is just and right. Therefore it is, Mr. Chairman, that I do not come here to antago- nize the proposition that improved methods in respect to bills of lading should be adopted. I do not believe these bankers have come here and simply without reason attempted to put a hardship on the railroads. I think they believe that the necessities of their business require that there should be these improved facilities, and I for one do not propose to stand in their way, but I propose to ask at the hands of this committee and of Congress a just recognition of what ought to be done when that change is made. Is there a substantially dif- ferent service as to these railroad companies under the proposition of these bills over what they now perform ? That is the first ques- tion which you gentlemen will have to determine. Are we asking of these railroad companies something of the same service that they Eerform now, or are they asking a different and enlarged service? et me refer to what I said a moment ago in connection with that question. The present proposition is that a railroad company is a carrier alone; that neither his duties nor obligations begin until the goods are received. He is just a simple carrier of goods after he receives them, and it is for that service of carriage alone that he is paid in the rates that are fixed. Now it is proposed not only that he shall per- form the duties of a carrier, but that he shall go beyond that and become the guarantor of a bankable piece of paper. He was not that before. Right or wrong, these gentlemen come here and ask at your hands that he shall be made that now. What they ask involves at the hands of railroads, with 1,500 or 2,000 employees of all grades in all kinds of communities, the right to pledge the whole responsibility of the railroad company by his simple signature. Sup- Eose in this Knight, Yancey & Co. case that such a law as is proposed ad been in existence, and suppose that instead of the honest agent that we happen to have had at Decatur, Ala., there had been a man open to the corrupting influences of the big shipper who wished to use the railroad credit for the purpose of kiting transactions for his own benefit and the benefit of the agent. Instead of a forgery of $6,000,000 at that point there might have been bills of lading issued by the railroad agent for $6,000,000 without any cotton being received. Would that indicate that there is no additional service expected of the railroads under this proposition from that which exists now? Is there a banker who would assume that large responsibility, plac- ing his whole credit in the hands of men who must be more or less 120 BILLS OF LADING. irresponsible; who must be, on account of the way they are scattered through the country, more or less be3^ond the power of successful and adequate supervision, putting the whole credit of his bank in the hands of such an irresponsible party without charging for it? Is it not a principle of finance, and a just and right principle of finance, that the credit— that the risk that a man takes must be paid for? Now, what I propose to ask at the hands of this committee of Con- gress is that they will recognize this proposition, which I submit to to them is just, that they shall provide in any legislation which is favored that there should be two bills of lading, one with the existing responsibilities and the existing service, and the other a guaranty bill of lading; that there shall be the responsibility of the railroad behind it, and that the act shall provide that for this additional service the railroad company shall be allowed to charge a reasonable compensa- tion, to be fixed in the first instance by itself but to be subject to the control of the Interstate Commerce Commission just as the other roads are subject to such control. The bankers, I think, have a right to better protection in respect to bills of lading; but there can be no just difference in respect to the proposition that what is asked in that regard is a large additional service involving a large additional respon- sibility. All that we ask is that if this committee shall think that a different piece of paper, with different responsibilities, with increased obligations and therefore increased service, should be demanded of these carriers that there should be a reasonable difference made in the charges for the two services. I do not ask that the railroad company shall be allowed to fix that difference arbitrarily. I know that the time has gone by when that is the policy of this country, and I believe it has happily gone by. So that I think that that charge of a railroad company should be subject to the supervising authority of the Inter- state Commerce Commission just as any other of its charges are. So, for the railroads that I represent here, we ask that there shall be a'recognition in the terms of this act of the difference in the service between that which is performed under the existing conditions of lia- bility and that which will be performed under the increased condition of liability; that that difference shall be made reasonable, subject to the control of the Interstate Commerce Commission. There is one other thing that I would suggest to the committee. I think that there ought to be a penalty imposed upon the railroad agent and upon the shipper who dishonestly issues such a bill of lading. I know that will have to be carefully guarded so as to meet with the requirements of commerce. For example, a great many of the trunk lines of this country receive their shipments not on their own lines, but on some belt lines, or on some terminal line. It would be a serious inconvenience to commerce if no bill of lading could be issued until the goods reached the trunk line. There should be a permission by which the trunk line should regard the belt line, or the terminal line, or the elevator, or the warehouse, as its agent for receiv- ing these goods, and that it should not be a crime to issue a bill of lading when the goods have been delivered either to the elevator, or to the warehouse, or to the belt line, or to the terminal line, and the agent of the trunk line issues its bill of lading upon the receipt of that first organization. v BILLS OP LADING. 121 A great deal of the opposition which has grown out of this idea of making the agent and the shipper criminally responsible has been caused by such conditions as I have stated, but it seems to me that those conditions can be covered by defining on the face of the act what may be legitimately considered a receipt by the company of the goods. Now, you gentlemen perhaps are not more fully aware than I would be, except for some special experience that I have had in respect to it, of the pressure that there comes upon the railroad from a shipper to get his bill of lading at once. We bad, for example, in the first stages of this arrangement that I have referred to, in the South, a provision that we should not issue bills of lading on warehouse receipts. We adhered to that during the whole of the cotton season previous to this, because it was not a system thac was accommodating the special methods of business adopted at Memphis, Tenn. We lost 30,000 bdes of cotton that year, which went to our competitors, some or whom did not feel bound by it and did not adhere to it, because they did issue bills of lading on warehouse receipts and we did not. The shipper felt that the minute he got his cotton into the first agency that led to transportation that he must be able to get the money for that in his bank. He could do that if the railroads would recognize the warehouse receipts and issue their bills of lading upon them. He could not do that in the case of the railroads that would not recognize the warehouse receipts, and would noi: issue the bills of lading until the cotton actually reached that railroad. Now, I believe, from the experience that we had in that connec- tion, that that is a necessity of business. I believe that we have got to permit the railroad companies to recognize the receipt of the warehouse and compress companies and elevators and belt lines and terminal hnes as a receipt by them. We are able to bond the com- pressors, we are able to bond the warehouses, and I believe that is a necessity of modern business, and that that will indicate the care with which this committee in dealing with any subject of this sort has to go into the needs, the reasonable and intelligent needs, of modern business, and be sure not to incorporate anything that will be obstructive instead of helpful. Now, with these suggestions, gentlemen, first, that there should be a recognition of the difference in service; that that difference in service is a substantial and valuable thing; that for it there ought to be, in justice, a reasonable compensation for the great additional risk mvolved; and, second, that there ought to be penalties on the agent, on the shipper, and if need be on the dishonest banker who negotiates the bill of lading knowing it to be a forgery, but anything and every- thing, gentlemen, that will protect the integrity of the business of this country. Those are the suggestions that I wish to submit to the committee. Senator Brandegee. If a cashier of a bank certifies or over- certifies a draft or a check, is the bank liable ? Mr. Thom. If the cashier of the bank does it, yes. Senator Brandegee. The bank is liable ? Mr. Thom. Yes. Senator Brandegee. If the agent of the railroad company certifies that the railroad company has received the goods, why should not the railroad company be liable ? 122 BILLS OF LADING. Mr. Thom. Because there is a vast difference between the cashier of a bank and the railroad company's agent at distant points. While the cashier of a bank is liable, it means where the cashier issues such a certificate as a negotiable certificate he is liable. The bank is not liable if the teller at the window enters in the bank book a deposit which is not made. The bank is not liable. Now, the cashier is a man chosen because of his intelligence and because of his integrity and because of his responsibility, and he is one man. He is right under the direction and control of the board of directors and of the president all the time. He is a man chosen because of his power to do those things, and because of his character and ability, is selected as a safeguard against it. Now, that is a very different situation in practice from where a railroad company has from 1,500 to 2,000 agents scattered all over the country at low rates of pay — the best that can be given being low. The} T are men of different character, men in respect of whom there can not be supervision, whose trans- actions are not subject to every-day inspection, but where days must elapse before the manager of a railroad company can come in contact with what they are doing and become conversant with it. Senator Beandegee. I appreciate thoroughly the difference in the physical situation, and in the circumstances that surround the two hinds of business, but where is the difference in principle as to the principal being bound by the unauthorized act of an agent or an agent acting without the scope of his power ? Mr. Thom. The difference in principle has been created by the difference in condition, and whatever I will say in addition, in reply to that, whatever may be the soundness of the distinction that you suggest, nevertheless the just distinction exists, and the present rate of pay is on the theory that he is not responsible. Now, you propose to make the railroad company responsible — or at least I mean this bill does — make the railroad company responsible. I am not object- ing to that. I am not objecting to that principle that you have just referred to about the bank cashier being applied to transactions with the railroad, provided that the difference in condition is recognized, and the difference in compensation is allowed to compensate for the additional risk. Senator Brandegee. I appreciate your position thoroughly. Has this suit in the case in 130 United States ever been modified at all? Mr. Thom. No, sir. Senator Beandegee. It has never been confirmed ? Mr. Thom. I think it has been confirmed. Senator Claeke. Yes; that is accepted. Senator Fatjlknee. There are eight decisions confirming it. Senator Beandegee. What is the situation in one of these nine States that have adopted bills-of-lading laws similar to those pro- posed here (which, of course, have no force outside the limits of the State which has adopted them), where the railroad runs from the State, which has adopted the law into another State which has adopted no law, and where I suppose the principle laid down in this suit prevails — what is the situation there as to the railroad's liability? Mr. Thom. I do not think that the question has ever been pre- sented to the Supreme Court of the United States whether that is a regulation of interstate commerce or not. That is in the twilight zone, as you will readily see, and it may be very readily considered as BILLS OF LADIKG. 123 within the power of a State to regulate a contract made in it, and also to be performed elsewhere. This question, though, has not been settled, as far as I am aware. Senator Brandegee. Are you clear as to the constitutionality of the provision that you say you would like to have incorporated in such legislation as is framed here, imposing a penalty upon the agent of the company who, in collusion with a shipper, issues a fraudulent bill of lading ? Mr. Thom. If Congress has power. Senator Foster. I would like to have you answer at the same time what your opinion is as to the power of Congress to pass legislation of this character. Mr. Thom. I am a very strong federalist. I believe in the power of Congress over interstate commerce to the fullest extent. I believe Congress has the power to regulate the whole system of interstate commerce, in all respects, State as well as interstate. I therefore believe that it has the power to regulate the receipt, or evidence of the receipt, and the transmission of goods in interstate commerce. I feel clear that there is nothing that is beyond interstate commerce in the whole transaction. It has been suggested that if this be applied to railroads and not to other carriers, it will be class legislation. In other words, that it will come under the prohibition of the fifth amendment instead of under the provisions of the commerce clause. Without having examined the decision on that subject, I will say that my impression is that the Supreme Court of the United States has never committed itself to the doctrine that the fifth amendment is as broad as the fourteenth amendment, but it has never said, although it has reserved the question, whether or not due process of law which is required by the fifth amendment also includes the equal protection of the law. If there is nothing in the fifth amendment, therefore, as the decision shall hereafter be made to control this question, I feel absolutely certain that this legislation is constitutional. I think it is a legitimate regulation of interstate commerce. That being so, I am equally clear in my own mind that Congress has the right to impose penalties for the purpose of protecting interstate commerce against fraud; that it has a right to impose upon the agents and upon the business man who attempts to corrupt interstate com- merce a penalty for attempting to do that. Senator Clarke. You would not have to be much of a federalist to think that. Mr. Thom. Well, I guess I am more of a federalist than that calls for. Senator Brandegee. When you say that the railroad rates as exist- ing at present are fixed in view of the present service performed by the railroads and the liability under which they act, and that this would be a new liability imposed upon you, and therefore ought to be rewarded, is it so that in the determination of what is a reasonable rate by the Interstate Commerce Commission that they considered this question as one of the elements ? Mr. Thom. Of risk? Senator Brandegee. Yes. Mr. Thom. Always. That is one of the things that has always devel- oped before the Interstate Commerce Commission, the amount of risk that is involved in shipments. Senator Brandegee. Have statistics been laid before them in the trial of cases as to whether the rates were reasonable or not showing 124 BILLS OF LADING. the amount of losses that you incurred under the present bill of lading system and those that would be estimated for Mr. Thom. I do not think that question has ever come up before the Interstate Commerce Commission, but there is a question that came up before the commission that the proper rate on boots and shoes from Boston to Atlanta has been elaborately considered, and one of the ele- ments that was greatly relied on as to what that rate ought to be, was the special risk in the transportation of boots and shoes — their liability to loss by theft. That has been elaborately developed in the evidence and elaborately dwelt on in the argument. Senator Brandegee. I can see that it might be one of the elements. Mr. Thom. It is considered so. Senator Brandegee. But you say that the rates at present were fixed in view of the present liability under existing law ? Mr. Thom. Yes. Senator Brandegee. I did not know whether that had been spe- cifically considered. Mr. Thom. You know no rates have ever been fixed by the Inter- state Commerce Commission. The rates of the country have not yet all been fixed by the Interstate Commerce Comm i ssion. Senator Brandegee. Yes; but I did not know what the situation was with respect to some railroads. Mr. Thom. But the risk is always considered a legitimate and sub- stantial element to justify a charge. Senator Brandegee. The risk generally of business ? Mr. Thom. Yes, sir. Senator Brandegee. Do you insure against these liabilities incurred by bills of lading ? Mr. Thom. The only way we do is to bond our agents to a limited extent, but you can readily understand that those bonds are small, and must be small, and that any fraud that is committed is apt to be immense. Senator Brandegee. Plow long ago was it that this $6, 000, 000 cotton fraud was committed in bills of lading ? Mr. Thom. I think that was about the year 1910. Senator Brandegee. Did I understand you to say that in the cotton bill of lading your agents specified the quality of the cotton which they received ? Mr. Thom. No, sir; the marks. Senator Brandegee. I understood you to say the quality of the cotton — of a certain character or quality. Mr. Thom. No, sir; I did not say that. Senator Brandegee. It would be impossible, would it not, for a company to ascertain that ? Mr. Thom. That would be impossible. One of the amendments that has been agreed upon between the bankers and the railroads is the protection of that very point. Senator Brandegee. Is there anything peculiar about the trans- portation of cotton under these bills of lading as distinguished from other commodities ? Mr. Thom. Only that the cotton crop is a great factor in the com- merce of the world, and that it has gotten to be transported as a cash article absolutely. Now, with reference to almost every other com- modity, some of it goes in as a cash article and some of it does not, BILLS OP LADING. 125 but cotton is considered money from the time it goes into the hands of the railroad company. Senator Brandegee. The reason I asked that was with a view of seeing whether the precaution that you adopted as to the transporta- tion of cotton and the prevention of fraudulent and forged bills of lading to your central bureau in New York City, of which you spoke, was to inquire whether it would be feasible to adopt a similar line of precaution in relation to any other staple commodity — such as wheat, for instance. Mr. Thom. I think it would be absolutely possible to adopt the signature validation certificate in respect to bills of lading as to any commodity. Of course it will be a very large undertaking to have central bureaus anyway in respect to all possible commodities, but so far as the signature validation certificate is concerned there is no more impediment in respect to any other commodity than there is cotton, and I will say that in our judgment that is acting admirably. Senator Bkandegee. That is all. Senator Townsend. Did I understand you to say that you have no cases of bills of lading being issued where the goods had not been de- livered on your road ? Mr. Thom. I can not recall a single one. Senator Townsend. Did you read the testimony here recently, a week ago, or such a matter, by Mr. Beale ? Mr. Thom. I read part of it, and am very sorry that Mr. Beale is not here. Mr. Richter, his representative, is here. Mr. Robert M. Richter. The testimony on page 50 of this record, concerning which Col. Thom spoke to me, I believe, is a para- phrase of Mr. Bywater's actual testimony in the criminal case against Knight, together with certain evidence as brought out in other cases. I have here the printed record in the case, on appeal to the Circuit Court of Appeals, of Lovell v. Hentz, where it shows that Mr. Hunter testified that the telegram and messages relative to this cotton, in which he said that the cotton had been forwarded via the Potomac yard, had been sent on April 13. He said the cotton had not been sent until April 14, according to his records, but that the telegram had been sent by his office — I have not the exact wording of the testi- mony, and have only these piecemeal suggestions. Mr. Thom. I have been trying to find the basis of what Mr. Beale said so far as the SouthemJRailway is concerned. Mr. Richter. Let me call your attention Mr. Thom. Let me make an explanation about that. I wanted to do that while I was on my feet. Senator Brandegee. Go on. Mr. Thom. I will be very glad to postpone what I have to say if you desire. Senator Brandegee. No; go ahead. Mr. Thom. What I wanted to say with respect to that is that I have been seeking to find where there was any evidence of our agents that would justify that comment by Mr. Beale. I have the evidence here, and I have had it examined by our counsel who was in the case, and he telegraphed me as follows in respect to it: Am sending you by United States mail to-day evidence in Henry Hentz & Co. as transcribed by the court reporter. You will find the matter we talked about in evidence of witness J. N. Hunter, pages 8 to 17, inclusive. We have had no such con- ference as was mentioned to you. 126 BILLS OF LADING. Now, I have not been able to examine this myself, but I have asked the representative of Mr. Beale, who is here, to show me a suggestion to justify that, and his statement is such as you have just heard, and it is not satisfactory to me, in so far as the agent of the Southern Railway is concerned. Now that transaction was this, as I told you in the beginning: Here was a fraudulent bill of lading issued, which got mto the hands of Henry Hentz & Co . , for certain cotton . There was no cotton at that time delivered. There was cotton afterwards with the same marks and of the same quantity delivered to the railroad company and a bona fide bill of lading taken out. Now, Henry Hentz & Co. had their suspicions aroused, as I understand it, after the bona fide bill of lading had been taken out, and the cotton actually delivered, and when they asked the agency as to whether that cotton had been received and gone forward, the agent's mind went to the bona fide transaction of the receipt by him of the cotton, and of the bona fide bill of lading which he had issued, and his answer was in reference to that, while Mr. Hentz's inquiry was with reference to what he held, which was a fraudulent one. Senator Townsend. What did you do, or your agent who issued the fraudulent one? Mr. Thom. He did not issue it. It was a forgery. Senator Townsend. Let me read what he said. Perhaps it will ake it clear. I read from page 49 of this record. He says: I am not going to weary the committee by; bringing a lot of data to prove that, but 1 merely want to show you as to Col . Thorn 's railway exactly how it is worked. There is a firm of H. Hentz & Co., of New York, that I represent. H. Hentz & Co. had an offer by telegraph from people that they had dealt with previously thereto and who had been honest to sell Hentz & Co. some cotton at a certain price. The wire said, "I will sell you 2,000 bales at the market price. "Will you take it?" Hentz & Co. wired back, " Ship it; bills of lading to order, notify; attach ladings to sight drafts. We will pay on presentation." The bills of lading with drafts attached came in due course through banking channels and were presented and §135,000 was paid for the drafts on the strength of the bills of lading. The shipments thus represented were divided into four lots — one lot over ihe Louisville & Nashville Co. from Decatur, Ala.; one lot over the Southern Railway from Decatur, Ala. — Col. Thorn's road; one lot from Selma, Ala., over the L. & N. Railway; and one lot over the Southern Railroad from Selma, the two points being 300 miles apart, so we have four railway agents in two different towns being concerned. Hentz & Co. wired to the four railway agents — they first wrote a letter and said, "We hold bills of lading signed by you, dated so-and-so, from such-and-such a city, for so many bales of cotton, marked ' P' or ' L, ' of a certain weight, " as the case was. Could there be any clearer or better identification than that? They addressed four letters to four railway agents. Not getting a reply, Hentz & Co. wired and said, "We want to know whether you signed the bills of lading. What about the cotton?" Those rail- way agents could hardly have been in collusion at the time, because, as I have said, they were 300 miles apart, and j r et each one of those railway agents wired — I have the record here of testimony under oath to corroborate my statement should it be ques- tioned by Col. Thom or Senator Faulkner; 1 will not offer the record in evidence, but merely state for the sake of brevity what the record shows; each one of those railway agents wired — "Your cotton went forward to-day via the Potomac Yards." Hentz & Co. were not suspicious. Why should they have been? The replies were from author- ized agents of the railroads. They did not know there was a "nigger in the woodpile, " about the telegram. It subsequently developed that the cotton was not in possession of any of the railway agents. It was not in the possession of a single railway agent, and when a telegram was sent by each one of them to the effect that the cotton was under way it was an unqualified falsehood. When — in the trial of the case in the civil courts not against the railroads, because, by virtue of the United States Supreme Court's de- cision, we had no case against the railroads — the question was put to the agents, "Why did you send that telegram?" "Well, we do not know." Then was asked, "As a matter of fact, you had not received the cotton and it was not under way?" "No. "Then the telegram that you sent was an unqualified falsehood?" "Yes." BILLS OF LADING. 127 Those railroad agents are still in the employ of the railways to-day, which, to my mind, is a significant fact. Mr. Thom. Now, I would like the representative of Mr. Beale to point out where that evidence is in the record. Mr. Richter. Mr. Chairman, Mr. Beale in making that statement, I believe, paraphrased the testimony. I do not think the words he used were the exact words in the testimony. He referred to the case of Lovell v. Hentz, the record of which I have here, and he referred also to the criminal case brought against John W. Knight, and I think he paraphrased the testimony in both cases, showing just exactly the situation that Mr. Hunter Senator Townsend. Who is he ? Mr. Eiohtee. The agent of the Southern Railway in Selma, Ala. I might say in this connection that Mr. Knight testified that he had made an arrangement with Mr. Hunter whereby bills were to be signed and issued by Mr. Knight and then subsequently Mr. Hunter would come into Mr. Knight's office and issue original and genuine bills of lading after the cotton had been delivered to the Southern Railway. That arrangement was testified to by Mr. Knight. It seems that Hentz & Co. wrote on April 8 to the general freight agent of the Southern Railroad at Selma, Ala., as follows: New York, April 8, 1910. General Freight Agent, Southern Railroad, Selma, Ala. Dear Sir: We hold bill of lading dated Selma, Ala., for the following cotton, shipped to us by Messrs. Knight, Yancey & Co., to order notify us: March 29, POL 200 bales; March 31, FAT 200 bales; March 31, AIP 100 bales. Kindly inform us how this cotton is routed and where it is located at the present time, and oblige Yours, truly, H. Hentz & Co. The witness, Mr. James W. Hunter, the agent at Selma, then proceeded : I never saw that letter personally until two weeks ago. The record shows that this letter came to my office. I am pretty sure that I was not at my office when this letter arrived. I was away all that week, I think, except the 15th and 16th. I had some- body there in my office who attended in part to my business when I was absent. He isdesignated as "chief clerk." My record doesn't show a reply to that letter between April 8 and 13. My record shows a telegram received from H. Hentz & Co., but I don't know what date it came in on. I have the telegram here and hand it to defend- ants' counsel. And defendants then offered said telegram in evidence and read it to the jury. The same was in words and figures, to wit: April 13, 1910. To General Freight Agent, Southern Railway, Selma, Ala.: Have no reply to our letter of 8th, also want some information about shipments eight PIG 100, SAP 200, RAG 200, SIX 200. H. Hentz & Co. The witness proceeded : I was not in Selma on April 13. My office received a letter from Henry Hentz & Co., dated April 14, 1910. I hand said letter to defendant's counsel. Defendants then offered said letter in evidence and read it to the jury. It was in words and fig- ures as follows: New York, April U, 1910. J. W. Hunter, Esq., Agent Southern Railroad, Selma, Ala. Dear Sir: We wrote you on the 8th instant, stating that we hold bill of lading dated Selma, Ala., for the following cotton, shipped to us by Messrs. Knight, Yancey & Co., of Decatur, Ala., to order notify us: March 29, POL 200 bales; March 31, FAT ^28 BILLS OF LADING. 200 bales, and March 31, AIP 100 bales, and we ask you to kindly inform us how this cotton was routed and where it was located. Having received no reply to said letter, we wired you yesterday afternoon as fol- lows- "Have no reply to our letter of 8th— also want some information about ship- ments 8th PIG 100 bales, SAP 200, RAG 200, and SIZ 200," and we thank you for vour reply received this morning, saying the cotton was forwarded for New York via Potomac yard, account Knight, Yancey & Co. We presume this applies to the whole 1,200 bales mentioned above. ' Yours, truly, H - Hbntz & Co - Now this letter from Henry Hentz recites having sent the two tele- grams to the Selma agent and having received absolutely no reply. When that is taken in connection with Mr. Knight's testimony m his criminal case that he had the arrangement with Mr. Hunter that these bills of lading could be issued by Mr. Knight, it seems to me that it is a significant fact that Mr. Hunter does not reply to this request, even though sent by telegram, until April 13, when he says: Selma, Ala., April 13, 1910. H. Hentz & Co., New York, N. Y.: Your wire date cotton forwarded for New York via Potomac yard account Knight, Yancey & Co. „ J. W. Hunter. The witness proceeded: The record doesn't show that the Southern Railway Co. had received the 200 bales of cotton marked POL on April 13, when the message was sent. I did not send it; my office sent it. The record shows that the said railway company had not received said cotton when the message was sent. Mr. Beale in his remarks, to which Col. Thorn takes exception, for the sake of brevity did not give the testimony in the exact word- ing for each of the four points involved. He merely paraphrased all the evidence which was brought out in all of the cases. This testimony was in general and substantially similar to Mr. Beale's remarks. At this point the committee took a recess until 2 p. m. AFTER RECESS. At the expiration of the recess the committee reassembled. STATEMENT OF ALFRED P. THOM— Resumed. The Chairman. Mr. Thorn, had you finished your statement? Mr. Thom. I had not, Mr. Chairman. Senator Townsend had asked me a question and I had not replied to it. He is not present, but I will say that the committee has heard the explanations made by Mr. Eichter, representing Mr. Beale. I know Mr. Beale personally, and I am quite confident he would have made no statement he did not believe justified by the record. You have heard what his represent- ative has said and how he has pieced out the testimony of the witness and the testimony of the man who was accused of forgery. At the same time I do think it just to say that this deposition that is produced here bears the interpretation that a telegram was sent on the 13th of April saying that cotton would go forward by the Potomac yards, which was received on the 14th of April. Now, when we come, however, to examine that transaction, and if it bears the interpretation that has been put upon it by Mr. Beale, it is a mere illustration of what I have been trying to present to this BILLS OF LADING. 129 committee. Suppose, as Mr. Beale thinks, that between this subor- dinate of the railroad agent and Knight, Yancey & Co. there was a fraudulent conspiracy to use the railroad's name as a basis for credit on that 200 bales of cotton. It simply shows the additional and the heavy risk that may be put upon the railroads by collusion between the shipper and the agent. I would like also to say to the committee that this idea of having an additional charge for additional risk is nothing new. It exists throughout the present systems of the railroads. For example, take the live-stock bill of lading. There is one rate for one valuation of live stock and another rate for another valuation of live stock, the difference being not in the physical act of carrying the live stock, but in the difference in risk between the value of the live stock shipped under the two different conditions. The same thing applies as between a released and unreleased bill of lading. There are certain released bills of lading that have been in operation and in effect on the railroad for which there is one rate. There is an unreleased bill of lading that carries a larger liability than another rate. Now, the suggestion that I am making is that this additional risk is put upon the railroads in order to accommodate the requirements of commerce, but there should be an additional compensation for it. Senator Townsend. Your road would not suffer anyway under these circumstances, according to your statement, because you do not ship goods or issue bills of lading where you do not have the goods. Mr. Thom. They are our orders that it shall not be done. Senator Townsend. Therefore, you would not suffer from this if your business continued in the future as it has in the past ? Mr. Thom. Yes; we would if the agent disobeyed our orders. I want to call attention to this difference in the condition that would be produced by it. Mr. Bond alluded to it in his argument this morning. Here we have a situation now where there is no induce- ment, or a comparatively small inducement, to get the railroad's signature, or the railroad agent's, to the bill of lading because it does not carry any responsibility with it. But, now, suppose you change the law so as to make the responsibility of the railroad cor- respond to the acknowledgments of its agents. You then put it into the power of the agent to hold out the temptation to the dis- honest agent and the dishonest shipper to evade all that credit furnished by law, and therefore make a great inducement to enter into these transactions. Senator Townsend. That leads up to this question: A. number of the States have these laws, and the States with which I am familiar that are doing a large business, like New York and Pennsylvania, are not governed by the decision that you quoted here in the Fried- lander case, but they hold in those States that the carrier is responsible for the acts of his agents. Does this condition of increasing fraud maintain in those States that you have mentioned ? Mr. Thom. I understand there is a very conspicuous instance where it does in the present litigation of the Delaware & Hudson Railroad. Counsel was here in the room this morning, and I expect he will be back. Mr. James. That • arose before the New York act was passed entirely. The New York act was not passed until last August. Mr. Thom. I do not understand that to be the case. 42808°— S. Doc. 650, 62-2 9 130 BILLS OF LADING. Mr. Bond. It is the New York interpretation of the act that Mr. Thorn speaks of. Mr. Thom. There is a different ruling in a number of the States — by the highest courts of a number of States — from that given by the Supreme Court of the United States, and under the New York ruling the same principle applies there that is now established by statute, and the contention there is that the responsibility of the railroad is behind the act of its agents in this Delaware & Hudson litigation. Senator Townsend. That is m}' understanding of the practice in those States. Mr. Thom. If you will just let me read into the record for the con- venience of you gentlemen the authorities, in addition to the case I referred to this morning in the Supreme Court of the United States, governing this matter, I will do so. It is as follows: The schooner Freeman v. Buckingham (18 Howard, 189); the Lady Franklin (8 Wal- lace, 325); the Delaware (14 Wall., 601, 602;; Pollard v. Vinton (105 U. S.); Mountain R. R. Co. v. Knight (122 TJ. S., 79); Friedlander v. T. & P. (103 U. S., 416); Mis- souri Pacific Railway v. McFadden (154 U. S., 155). Senator Townsend. Now, in connection with that, I think the car- rier ought not to be responsible for the acts of its agent. If I recall the testimony which has come before the committees of Congress heretofore, there has been quite a custom among railroads and the agents of railroads to get business — to struggle for business — and where one railroad docs not act unconscionably toward a shipper another road would in order to get that business. Now, it occurs to me that this freedom from responsibility or liability on the part of the railroad would rather tend to encourage that kind of business. If it could be held that the carrier was not responsible for the act of its agent, it could be held as the irresponsible act of an agent and not the act of the carrier itself. That has occurred to me a good many times. Mr. Thom. I think there is substantial ground for your idea, Sen- ator. I think there is no objection whatever to stopping it. I think, perhaps, the interests of business would be promoted by it; but we can not lose sight of the fact that the charges of the railroad companies have been based upon that degree of risk. Now, if you increase it, I think there ought to be recognized in the law that does it — because that is the only way the carrier will ever get it— the righteousness of a reasonable charge to cover the difference in con- ditions under which business is done. Senator Townsend. Do you think, if you had an extra charge, or were permitted to make an extra charge for carrving freight under bills of lading issued according to these biffs, or the proposition sug- gested, that you would be better able to protect yourself against the fraud of your agent ? Mr. Thom. I do ; if you couple that with the penalty. Senator Townsend. Suppose we had the penalty without the other; if you could do it at one time you could at another time, could you not ? Mr. Thom. So far as protecting ourselves is concerned, we could protect ourselves in one condition as well as the other; but we could not get rid of the risk in any event, and for that reason, if we could not get rid of it, we ought to be paid. There being no further questions, Mr. Thom was excused. BILLS OF LADING. 131 STATEMENT OF W. A. COLSTON, COMMERCE ATTORNEY, LOUIS- VILLE & NASHVILLE RAILROAD CO., LOUISVILLE, KY. Mr. Colston. Mr. Chairman and gentlemen, there is very little that can be added to what Mr. Thorn has stated, except that, while the illustrations he has given sustain our contention that there is no necessity for this regulation, he appears to acquiesce in the fact that some regulation may be needed of this sort. The Louisville & Nash- ville Railroad Co. does not obstruct and will not oppose any act of this nature or of a similar nature which is necessary. We realize, of course, that the law must keep pace with business. If business requirements are such that you have to change the law, well and good; but the law should follow and should not blaze out the way of business in matters of such serious import as this. I do not believe that there is any commercial necessity for so radical a change of the law of responsibility as is contemplated by either the bill intro- duced by Senator Clapp or the bill introduced by Senator Pomerene. Both of those bills, or course, seek to make the railroad or the car- rier responsible for what they never have been responsible under the the common law of England or under the law as it applies in the Federal courts. While there have been States in which the contrary principle lias been applied, as far as the Federal courts are concerned and as far as interstate commerce is concerned, these acts seek to change radically the liability of the carrier. They seek to give the force of a negotiable instrument and apply the rules of the law mer- chant to a mere receipt which has always been interpreted under the strict rules of common law. Now, I say that there is no commercial necessity for such a change in the doctrine of liability. The representative of the Baltimore & Ohio Railroad has told you this morning that in his long experience with his company he knows of no serious losses which have resulted from the issue of a genuine bill of lading by goods not being received. Mr. Thom has told you the same with respect to the Southern Railway. I would like to read a paragraph from a letter written by Mr. Milton H. Smith, president of the Louisville & Nashville Railroad Co., to Mr. Alfred H. Brandeis, general solicitor of that company, on February 23 of this year with respect to this question. He writes as follows : Nevertheless, is it a matter of practical importance? In my long experience I do not now recall but one instance coming to my knowledge where an agent issued bills of lading for property that had not been received. I think about 30 or 35 years ago an agent at, I believe, McLeods Station, on what is known as the Guthrie branch of the Memphis Line, who was also buying and selling wheat, issued bills of lading for several carloads of wheat which were not shipped. Some litigation ensued, but I do not now recall the result. And if we go through the list of cases or instances that were pre- sented by those who have previously spoken before the committee with respect to these bills, you will be convinced, I believe, that the change of liability sought by these bills which pertain to genuine bills of lading is not of any consequence. The whole trouble is that the gen- tlemen who are proponents of these bills, who are advocating them — I speak now of those representing the banking interests — have the wrong sow by the ear. The act does not reach the real evil at all. The real evil is, as Mr. Thom has so forcibly pointed out, not the issue of genuine bills of 132 BILLS OP LADING. lading bv agents of railroad companies for property not received, but the evil "is the issue of forged bills of lading by those who have never been authorized to issue them. All of the troubles in the South with respect to cotton shipments were cases of forged bills of lading. They were not cases where the agents of railroad companies had issued bills of lading for shipments not" received. They were not cases where the railroad agents in an effort to secure business — as was hinted at by those who have spoken on the other side of this measure — by an improper act issued a bill of lading for goods that they did not receive. We agree with them that bills of lading should not be issued for property which has not been received by the railroad agent; and I believe, as Mr. Thom has said, that the railroad agent, or the officer of a railroad company and the shipper — the ostensible shipper— who receives such a bill of lading should be punished for the issue of a bill of lading for property not received. I think it should be made a criminal offense. But the Knight and Yancey trouble and most of these troubles that the gentlemen have presented to you, as the record in that case, previously taken, shows, would not be obviated in any respect by the passage of these bills. These bills relate to genuine bills of lading for property not received. The trouble comes not from forged bills of lading for property which may never be received, but which in the principal case which we have before us was for the greater part afterwards turned over to the railroad company and genuine bills of lading issued therefor. Now, I say, gentlemen, that addressing ourselves to the change in the liability covered by these bills — the change in the principle of the law which would hold the carrier responsible, and that alone — there is no necessity for such a radical change in the law. No losses have been shown which would justify it ; no loss of confidence ; no demand of foreign bankers that would justify that particular change in the law. Foreign bankers, foreign brokers, purchasers of cotton do de- mand a bill of lading upon winch they can rely, and their demand in that connection arise s not from the issue by railroad agents of bills of lading for cotton not received, but by the forging of bills of lading by those who had no authority, express, implied, actual, or apparent, to sign such bills of lading in any event. So I say, in the first place, that there is no commercial necessity for these acts, and I say, secondly, that as these acts relate only to genuine bills of lading they do not reach the real evil, which is the issue of forged bills of lading by those who wish to defraud the railroad companies and others. There is not a word in these acts that will go to_ prevent the issue of forged bills of lading. On the contrary, I think it is the third point against the bills, that they would encourage the very evil which we are seeking to correct. I shall not reiterate what Mr. Thom has said at any length, but it is plain to any of you that if the issue of a bill of lading is to have the effect of a piece of quasi negotiable paper, and it is easy to raise money upon that bill of lading, you are putting a premium upon crime. Heretofore there has been no incentive, no great incentive, to the forging of these bills of lading if there was a proper check by the bank by which the paper supported by these bills was first negotiated, but if you pass these acts and make these papers worth more on their face you are going to have more cases of forged bills of lading, and I say that BILLS OF LADING. 133 these acts instead of remedying the trouble provide no remedy for all this trouble that has been caused for all this lack of confidence abroad. If everything that has been presented in favor of these bills — I say that all these evils that have been advanced as reasons for these bills will be intensified and in no wise remedied by the bills. Now, there are other things that are especially apparent in the State bill or the Pomerene bill, and in the bills throughout, and that is that not only are the bankers, as proponents of these bills, seeking to make a bill of lading mean more, seeking to put our commerce on a firmer footing, but they are seeking to throw all of the responsibility on the carriers and escape any responsibility on their own part. I may refer specifically to sections 35, 36, and 37 of the Pomerene bill. Section 35 takes care enough that the person ''who negotiates or transfers for value a bill by indorsement or delivery, including one who assigns for value a claim secured by a bill," shall warrant that the bill is genu- ine. But then, when the first banker comes in, that warranty stops. Section 36 provides — That the indorsement of a bill shall not make the indorser liable for any failure on the part of the carrier or previous indorsers of the bill to fulfill their respective obliga- tions. Section 37 provides — That a mortgagee or pledgee, or other holder of a bill for security who in good faith demands or receives payment of the debt for which such bill is security, whether from a party to a draft drawn for such debt or for any other person, shall not be deemed by so doing to represent or wan-ant the genuineness of such bill or the quan- tity or quality of the goods therein described. In other words, gentlemen, the bankers will act as mere bailees. They propose that these bills of lading shall come into their hands; that the carriers shall be absolutely accountable, absolutely respon- sible; shall warrant everything that they clo; that the shipper shall warrant that the bill of lading is genuine, but the first banker who negotiates a piece of paper that the shipper gives may take that bill as mere security — may take it as a pledge and escape the liabihty as to any warranty of the genuineness of that bill. Now, what would be the practical effect of that ? If an agent in the northwestern grain fields, of which there are hundreds, issues a bill of lading, order notify, for a carload of wheat, or any other kind of grain, consigned to, say, a grain user in the city of Birmingham, Ala., or to the order of some one, notify, a person in Birmingham, Ala., the agent of the Louisville. & Nashville Eailroad Co., or the Southern Railway Co., or of the Frisco Line, or of the Central Georgia — or whatever other line may handle the business into Birmingham — must determine at his peril whether or not that bill of lading is a genuine or a forged instrument. If the shipper has secured a genuine bill of lading, and then issues a forged bill of lading, or if some one who ascertains that that shipment has been made issues a forged bill of lading, that person by going to the bank at the point of shipment can draw against Birmingham and attach that bill of lading — that forged bill of lading — as security. The bank at the point of shipment does not warrant in any way the genuine- ness of that bill of lading. No intermediate bank warrants the genu- ineness of that bill of lading. The bank at Birmingham does not warrant the genuineness of that bill of lading, and the consignee or 134 BILLS OF LADING. the final holder of that bill of lading will not know that it is a forged bill of lading. The result is that the consignee or the final holder ol that bill of lading will pay the draft and the railroad company, whose agent can not know the signature of every agent in the country, will almost cer- tainly deliver that shipment on that forged bill of lading provided it gets there before the real bill of lading arrives. The real bill of lading arrives, and who is responsible ? The carrier is responsible, and lie can not look to any bank or banker in the chain from the point of origin to destination for a warranty that such bill of lading is genuine. I say that if it is necessary to make any law to protect our bills of lad- ing we certainly should cut out sections 36 and 37, or should prefer- ably make them read the other way. We would say that a mortgagee or pledgee, or other holder of a bill for security who demands or re- ceived payment of the debt for which such bill is security, whether from a party to a draft drawn for such debt or from any other person shall be deem.ed by so doing to represent or warrant the genuineness of such bill or the quantity or the quality of the goods therein described. There certainly will be no hindrance to commerce resulting from increasing the care that bankers will take in transmitting bills of lad- ing as security for negotiable paper, and those two sections would simply mean that the banker would be without any responsibility whatever to anyone; could take a forged bill of lading or any other fraudulent bill of lading, and the banker would not take the pains to inquire at all what the circumstances under which that bill of lading was executed. Instead of bettering things, gentlemen, it seems to me that those two sections especially, and the spirit of the act as a whole as it is drawn, tend to make the bankers careless, tend to cause more trouble than now exists, and do not in anywise correct any of the evils that have been brought to your attention. I believe Mr. Thorn has covered the other points that I intended to bring to your attention. I wish merely to emphasize what he has said with respect to the necessity for compensation, if it is desired, if it is necessary, that the common-law rule as to receipts which now apply to bills of lading, shall be changed so as to make the rule of the law merchant apply, and shall make carriers subordinate the business of transportation, which is their special business, to the business of banking, in which they are not concerned. If the interests of com- merce demand that, unquestionably the carriers should receive some compensation. I thank you, gentlemen. Senator Brandegee. I notice on page 83 of these hearings on this bill that Mr. Frank A. Home, president of the Merchants' Refrigerating Co., of New York City, testified the other day, and I inquired of him, as will appear on page 86, as follows: Senator Brandegee. Are you able to state what percentage of loss you incur under trie existing law by reason of attaching these drafts and not having the goods turn up? Mr. Horne. Our concern has met with no direct loss; but there have been numer- ous instances on the part of our customers, the commission men. At the top of page 87 I asked him this question: Senator Brandegee. Is there any loss except where the bill of lading is issued by the railroad company's agent without the goods having been received by the railroad? Mr. Horne. That is the main difficulty. BILLS OF LADING. 135 Is there any way of ascertaining in the case of any particular rail- road, or are there any statistics in existence that you know of which would show in the case of all the railroads what the percentage of loss is, as compared with the amount of business done, by reason of the bill of lading being issued and the goods not delivered to the railroad company ? Mr. Colston. I do not believe that can be ascertained from any statistics in the possession of the railroads. Senator Beandegee. You stated that so far as your railroad — the Louisville & Nashville — is concerned, you did not know of any instances. Mr. Colston. I do not know of any, and I say our president, who has had many years' experience, and is the Nestor of railroading in the South, says he knows of only one instance. He does not know what the result was of the litigation that was had in that case. Senator Beandegee. That was contained in the letter that you read? Mr. Colston. Yes, sir. Senator Beandegee. And the attorney of the Southern Railway, as I remember it, says that he knows of no such instance. Mr. Colston. And also the general counsel of the Baltimore & Ohio Railroad, I believe, so stated before the committee this morning. Senator Beandegee. What did you say your official position was ? Mr. Colston. Commerce attorney. Senator Beandegee. Do you meet similar officers of other roads 1 Mr. Colston. I do. Senator Beandegee. Do you know anything about the feeling among them as to this particular question, or their knowledge on this subject, as to the percentage of losses that now occur ? Mr. Colston. No; I have not discussed this with the attorneys of other roads except within the last daj r or two, and, as I say, I know that it will be impossible for them to say what would be the percentage of losses, for the reason that under the rule announced in the Fried- lander case there would be no losses falling upon the railroad com- panies for that reason. Senator Beandegee. I do not mean financial losses in the shape of judgments which the railroads had to pay in suits; I mean the amount of goods lost — the amount of loss incurred by the consignee by having to pay the draft that was made upon him hj the consignor without getting the goods. Mr. Colston. There is no record in the railroad company, or kept by the railroad company, that would show that. Of course, they have no record of the consignees' losses. Senator Townsend. I was interested in your statement in refer- ence to what you claim was the lack of liability on the part of the banker. My attention has been called to section 35 of the bill, which states : That a person who negotiates or transfers for value a bill by indorsement or delivery, including one who assigns for value a claim secured by a bill, unless a contrary inten- tion appears, warrants — (a) That the bill is genuine. (b) That he has a legal right to transfer it. (c) That he has knowledge of no fact which would impair the validity or worth of the bill. 136 BILLS OP LADING. Mr. Colston. Yes. That would not , I believe, hold the bankers, in view of section 37. Section 35 would hold the shipper who assigned his claim against the consignee or against the buyer, but if the shipper should draw his draft on the buyer and should negotiate it with the bank at the point of shipment, anil should simply give the bill of lading as security, the bank would take it as a pledgee. Senator Townsexd. Hut the bank would be held, would it not, except as against the wrongs of a carrier ^ The bill provides: That the indorsement of a bill shall not make the indorser liable for any failure on the part of the carrier or prcvi< ms iit a bill and leave it with the committee, so that we can look over r Mr. Neville. I can send it to you. The Acting Chairman. That is what he means. Senator Townsend. That is what I mean. Mr. Neville. It may be from a business man's point of view. Senator Townsend. That is all right. BILLS OF LADING. 175 Senator Pomerene. It will give us your thoughts at least. Senator Townsend. We have made that request of various wit- nesses who have appeared here, so that we could get in a concrete form what their views were. Mr. Neville. I will do so with pleasure. The Acting Chairman. Anything further ? There being no further questions, Mr. Neville was thereupon ex- cused. The Acting Chairman. Now, Senator Faulkner, who is your next witness ? Mr. Faulkner. I am. STATEMENT OF HON. CHARLES J. FAULKNER, WHO APPEARED IN BEHALF OF A NUMBER OF SOUTHERN, EASTERN, AND WESTERN RAILROADS. Mr. Faulkner. Mr. Chairman and gentlemen of the committee, it is unfortunate that I must attempt to make an argument before the committee upon the question now pending before it, as I have been suffering for three days with a very severe cold, finally resulting in a bad sore throat, which seems to have increased daily. Realizing that the committee can wait on no one, and that whatever is to be said must be said now, I will ask the indulgence of the committee and express the hope that it will bear with me as best it can while I pre- sent arguments which may to some extent show the reasons upon which rest the law as it exists to-day, and present such facts to the committee of the action of the carriers in their attempt to meet the reasonable demands of the public. In closing I shall urge the commit- tee, the bankers, the consignees, and the shippers to be as fair, just, and liberal to the carrier as they have been to those interests in the effort to meet their demands. If this legislation is to pass, we hope that they will be willing to share the burden that otherwise would be thrown upon the carrier alone by such legislation. Mr. Chairman, the railroads carry an immense volume of commerce annually. The facts stated by Mr. James two weeks ago that there was transported twenty-five thousand million dollars in value of commerce in this country annually, of course, does not apply exclu- sively to the railroads. A part of it was carried on our navigable streams, part of it through our lakes, and a part of it by the coast- wise trade. At the same time we must realize that the great bulk of this immense commerce was carried by the rail carriers. When we consider the number of bills of lading that must have been issued as an incident to the carrying of that immense commerce by the railroads, and the further fact of the insignificant number of losses occurring either to the railroads, to the consignee, or to the holders of bills of lading, it shows that this vast business has been transacted by agencies of intelligence, integrity, and honesty, fully equal, if not superior, in all those elements than can be shown by any other business of a similar character within the limits of the country. Our friends came here session after session, and they pressed the question before every committee, that unless this bill was passed the movement of the great staple crops of this country would be 176 BILLS OF LADING. seriously affected and, further, that it would be impossible to finance the movement of those crops. What has been the result of a failure to pass this bill, as tested by experience of the last three years 1 We find that the crops have moved as promptly, as regularly, and with as little inconvenience as they have ever moved. During the last year of the movement of the great cotton crops, from the 1st day of September to the 15th day of February of this year, 7,440,668 bales of cotton were moved, almost double the volume moved in 1909, and at least one-third greater than that in 1910. I congratulate the country and I congratulate our friends that they were mistaken in their predictions. While I call attention to these facts, Mr. Chairman, it is not with the purpose to oppose just and responsible legislation with reference to this subject. A majority of the railroads which I represent assume the position that although this legislation, perhaps, is not necessary, it would not be advisable to oppose it, if satisfied that an intelligent public sentiment believes that the commercial interests of the country demand its passage bv Congress. If such legislation is formulated by this committee, the carriers will seek and urge at the hands of the committee that every safeguard that is possible shall be thrown around such legisla- tion for the protection of the carriers under the liabilities which will be imposed upon them; that its provisions shall recognize their right to a fair compensation for the insurance which they make of the guaranteed bills that will be just to the carrier, to the shipper, and to the public. If that burden is to be imposed, Mr. Chairman, in behalf of the great commercial interests of the country, to carry out what you believe to be a wise public, policy, with the purpose of stimulating the develop- ment of its business and commercial mterests, then the country should assist in bearing a portion of the burden incident to that legis- lation. The whole burden should not be thrown on one class or on one industry, but it should be distributed fairly and justly between all benefited by the new rule of conduct. Mr. Chairman, I want to present to this committee the reason for the rule of law announced by the Supreme Court in IS Howard, 187, and subsequent decision that the carrier is not liable on a bill of lading signed bv an agent when the goods have not been delivered. I have been partially induced to do this by a question of the distinguished Senator sitting at my left, who asked Mr. Thorn 3-esterday whether he thought the decision in 130 United States was a fortunate or an unfortunate decision. If I had been asked that question by that distinguished Senator, for whom I have the very highest admiration, I would have answered and said: "The decision, whether fortunate or unfortunate, was bound to have been made as it was announced by the court or the courts would have assumed to change a ride of conduct which alone is within the power of Congress." In giving such an answer I admit the burden is upon me to show to the Senator and to the committee that any other decision than that rendered would have been opposed to those principles of law controlling this question known to the English-speaking nations from their earliest history. I will ask the committee to bear with me while I shall endeavor to sustain this statement. BILLS OF LADING. 177 Mr. Chairman, I think I may safely say that there has been no change in law as announced in 130 United States (the Freelander case), either in English jurisdiction or in the Federal jurisdiction upon this question. The principle of the law on which that decision is based rests upon three distinct principles of agency and two distinct prin- ciples affecting the right of common carriers: First. An agent of a carrier executing a bill of lading on behalf of his principal, without the receipt of the goods for immediate trans- portation, is acting in violation of his instructions and without authority. Second. That the agent is not clothed in the execution of such a paper with even an apparent authority to " do an act so utterly outside of the scope of his employment and the carriers' own business." Third. The law presumes this want of authority on the part of the agent is known to the business world. Fourth. That the rule of law is well settled that the liability of a common carrier does not attach until the delivery of the goods for immediate transportation. Fifth. A bill of lading is of two parts, the receipt for the goods described and the contract to safely cany and deliver. As a receipt, it is like all receipts of every description, open to explanation and rebuttal of the facts stated therein. Now, Mr. Chairman, these are all well-known principles, and no one is more familiar with them than the members of this committee. A decision that refused to apply those principles without the authority of legislative enactment, where the} 7 had been applied and had controlled the rights and liabilities under this particular paper for centuries, would have been legislation upon the part of the courts, and if it is within the power of Congress to change this rule, it is in the exercise of its legislative power alone that this law can be modified or rejected. The courts can only declare what is the law; the legislative body must make the rule of conduct. Mr. Chairman, I do not propose to read all of the decisions which I shall refer to, but I ask to insert them in the record. I shall only briefly call attention to each as I proceed. The first case that came before the Supreme Court involving the question of the liability of a carrier where the goods had not been delivered was the case of the schooner Freeman v. Buckingham and others (18 How., 189). Mr. Justice Curtis, in speaking for the unanimous court, said : The first and most obvious view which presents itself is that the claimant in this case is not personally liable on these bills of lading. The master who signed them was not his agent, and they created no contract between him and the consignor or consignee, or any third person who might become their holder. (Abbot on Shipping, 42 and note, 57 and note.) Mr. James, in his discussion of this case, said that the Supreme Court followed blindly the case of Grant v. Norway, decided in Eng- land, which indorsed the same principle. If you gentlemen will take that case and read the reasoning of the learned judge (Mr. Justice Curtis), you will reach the conclusion that every statement of his opinion of the law applicable to the facts of the case will be approved by your judgment as to their accuracy and correctness; that under these well-settled principles no other con- clusion than announced could have been reached. Nor did he follow 42808°— S. Doc. 650, 62-2 12 178 BILLS OF LADING. blindly anv decision, but rested his conclusions upon the admitted principles "of agency and the character and functions of public carriers. I will ask your indulgence to read this decision found in 18 How- ard, as it is the foundation of all the six other decisions. It is found on pages 190 and 191: There can be no implication that the general owner consented that false pretenses of contracts, having the semblance of bills of lading, should be created as instruments of fraud, or that, if so created, they should in any manner affect him or his property. They do not grow out of any employment of the vessel, and there is as little privity or connection betweeD h ; ™ nr his vessel and such simulated bills of lading as there would be between him and any other fraud or forgery which the master or special owner might commit. Nor can the general owner be estopped from showing the real character of the trans- action by the fact that the libelants advanced money on the faith of the bills of lading, because this change in the libelant's condition was not induced by the act of the claimant, or of any one acting within the Bcope of an authority which the claimant had conferred. Even if the master had been appointed by the claimant, a willful fraud committed on a third person, by signing false bills of lading, would not be within his agency. If the signer of a bill of lading was not the master of the vessel, no one would suppose the vessel bound; and the reason is because the bill is signed by one not in privity with the owner. Note the distinct principle upon which the court rests this decision : But the same reason applies to a signature made by a master out of the course of his employment. The taker assumes the risk, not only of the genuineness of the sig- nature, and of the fact that the signer was master of the vessel, but also of the apparent authority of the master to issue the bill of lading. We say the apparent authority, because any secret instructions by the owner, inconsistent with the authority with which the master appears to be clothed, would not affect third persons. But the master of a vessel has no more an apparent unlimited authority to sign bills of lading than he has to sign bills of sale of the ship. He has an apparent authority, if the ship be a general one, to sign bills of lading for cargo actually shipped; and he has also authority to sign a bill of sale of the ship when, in case of disaster, his power of sale arises. But the authority in each case, arises out of, and depends upon, a particular state of facts. It is not an unlimited authority. No one can deny this to be a correct statement of the law of agency in the one case more than in the other; and his act in either case does not bind the owner, even in favor of an innocent purchaser, if the facts upon which his power depended did not exist; and it is incumbent upon those who are about to change their condition, upon the faith of his authority, to ascertain the existence of all the facts upon which his authority depends. Though the law on this point seems to have been considered in Westminister Hall not to have been settled, when the eighth edition of Abbot on Shipping was published, in 1849, (Ab. on Sh., 325) we take it to be settled Dy the cases of Grant v. Norway (2 Eng. Law and Eq., 337); Hubbersty v. Ward (18 ibid., 551); and Coleman v. Kiches (29 ibid., 323). This was not the first time that this question has been passed on in the United States. The decision in this case refers to an earlier deci- sion in the United States, the case of Walter v. Brewer (11 Mass., 99), decided in 1814, or 40 years before the decision in 18 Howard. The case of Lady Franklin (8 Wall., 325) I shall only refer to briefly. In this case the error of the agent was in giving a bill of lading by a particular carrier when the goods were shipped through another carrier. The court, on page 329, uses the following language: In this case the bill of lading acknowledges the receipt of so much flour, and is prima facie evidence of the fact. It is, however, not conclusive on the point, but may be contradicted by oral testimony. BILLS OF LADING. 179 The doctrine that the obligation between ship and cargo is mutual and reciprocal and does not attach until the cargo is on board or in the custody of the master has been so often discussed and so long settled that it would be useless labor to restate it or the principles which lie at its foundation. The case of the Schooner Freeman v. Buck- ingham, decided by this court, is decisive of this case. It is true the bill of lading there was obtained fraudulently, while here it was given by mistake; but the prin- ciple is the same, and the court held in that case that there could be no lien, not- withstanding the bill of lading. The court say there was no cargo to which the ship could be bound, and there was no contract for the performance of which the ship could stand as security. In the case of Delaware (14 Wall., 601-602), which arose by reason of the loss in storing the goods on deck instead of under cover, the court enters fully into the discussion of the nature of the bill of lading, sustaining fully the views of the court, as expressed in the schooner Freeman (18 How.), holding that so far as it is a receipt it is merely prima facie evidence of the payment or delivery of the goods, and may be contradicted by oral evidence. Justice Clifford concludes the discussion, on page 602, in the following language: Bills of lading when signed by the master, duly executed in the usual course of business, bind the owners of the vessel if the goods were laden on board or were actu- ally delivered into the custody of the master, but it is well-settled law that the owners are not liable if the party to whom the bill of lading was given had no goods, or the goods described in the bill of lading were never put on board or delivered into the custody of the carrier or his agent. The most interesting and important decision is the case of Pollard v. Vinton (105 U. S., 7). This is a case in which the second John Marshall of the Supreme Court delivered the opinion — I mean Mr. Justice Miller. He discusses every question involved in the decision with clearness of statement and grasp of the fundamental principles underlying the doctrine of agency, and finally fully sustains the views expressed in the case of 18 Howard and the previous decisions in Wallace. Senator Clarkei That is also a boat case, is it not ? Mr. Faulkner. Yes; a boat case. But, Senator, you will remem- ber that the Supreme Court of the United States, speaking through Mr. Justice Matthews, expressly decided that the principles applied to land carriers equally with the steamship and boat carriers. Senator Clarke. Yes; that is one of my complaints of the court, that it does not keep up with the times. Mr. Faulkner. In the case decided by Chief Justice Miller he says, in speaking of the character of a bill of lading : It is an instrument of a twofold character. It is at once a receipt and a contract. In the former character it is an acknowledgment of the receipt of property on board his vessel by the owner of the vessel. In the latter it is a contract to carry safely and deliver. The receipt of the goods lies at the foundation of the contract to carry and deliver. If no goods are actually received, there can be no valid contract to carry or to deliver. On page 9, in discussing the powers of an agent and the functions of a earner, he says : Before the power to make and deliver a bill of lading could arise, some person must have shipped goods on the vessel. Only then could there be a shipper, and only then could there be goods shipped. In saying this we do not mean that the goods must have been actually placed on the deck of the vessel. If they come within the control and custody of the officers of the boat for the purpose of shipment, the contract of carriage had commenced, and the evidence of it in the form of a bill of lading would be. binding. But without such a delivery there was no contract of carrying, and the agents of defendant had no authority to make one. They had no authority to sell cotton and contract for delivery. They had no authority to sell bills of lading. They had no power to execute these instruments 180 BILLS OF LADING. and go out and sell them to purchasers. No man had a right to buy such a bill of lading of them who had not delivered them the goods to be shipped. This is a very brief reference to this case; it merits a careful- reading: . In the case of the Iron Mountain Kailroad Co. v. Knight (122 U. S., 79), Mr. Justice Matthews, in deciding the case fully sustains the case of 18 Howard, and the reasoning in Grant & Norway, using on page 86, the following language, in referring to the English case: The ground of that decision, according to my view, was not merely that the captain has no authority to sign a bill of lading in respect of goods not on board, but that the nature and limitation of the captain's authority are well known among mercantile persons, and that he is only authorized to perform all things usual in the line of busi- ness in which he is employed. On page 87, in speaking of the doctrine announced in the case of the schooner Freeman and Pollard v. Vinton, he said: And the doctrine is applicable to transportation contracts made in that form by railway companies and other carriers by land, as well as carriers by sea. Why should not the carrier on land and water, as to the responsi- bilities and liabilities under a bill of lading, stand on the same footing? We have inherited the principles, the forms, and the liabilities of a bill of lading from the maritime law. It originated under that juris- diction, and as our system of transportation developed the same rules were applied to the same character of business whether the traffic moved by land or water. In the case of Friedlander v. Texas, etc., Railway Co. (130 U. S., 416), the direct question of the rights of a bona fide holder without notice under a bill of lading, where the property was not delivered to the carrier, but the bill signed by its agent, was passed upon by the court in an opinion delivered by Mr. Chief Justice Fuller. In discussing a bill of lading, the court, on pages 423 and 424, uses this language: Bills of exchange and promissory notes are representatives of money, circulating in the commercial world as such, and it is essential, to enable them to perform their pecu- liar functions, that he who purchases them should not be bound to look beyond the instrument, and that his right to enforce them should not be defeated by anything short of bad faith on his part. But bills of lading answer a different purpose and per- form different functions. They are regarded as so much cotton, grain, iron, or other articles of merchandise, in that they are symbols of ownership of the goods they cover. And as no sale of goods lost or stolen, though to a bona fide purchaser for value, can divest the ownership of the person who lost them or from whom they were stolen, so the sale of the symbol or mere representative of the goods can have no such effect, although it sometimes happens that the true owner, by negligence, has so put it into the power of another to occupy his position ostensibly as to estop him from asserting his right as against a purchaser who has been misled to his hurt by reason of such negli- gence. The court, on pages 425 and 426, in giving the reason for this rule, states : It is a familiar principle of law that where one of two innocent parties must suffer by the fraud of another, the loss Bhould fall upon him who enabled such third person to commit the fraud; but nothing that the railroad company did or omitted to do can be properly said to have enabled Lahnstein to impose upon Friedlander & Co. The company not only did not authorize Easton to sign fictitious bills of lading, hut it did not assume authority itself to issue such documents except upon the delivery of the merchandise. Easton was not the company's agent in the transaction, for there was nothing upon which the agency could act. Railroad companies are not dealers in bills of exchange, nor in bills of lading; they are carriers only, and held to rigid responsibility as such. Easton, disregarding the object for which he was employed, and not intending by Mb act to execute it, but wholly for a purpose of his own and of BILLS OF LADING. 181 Lahnstein, became particepa criminis with the latter in the commission of the fraud upon Friedlander & Co., and it would be going too far to hold the company, under such circumstances, estopped from denying that it had clothed this agent with apparent authority to do an act so utterly outside the scope of his employment and of its own business. The defendant can not be held on contract as a common carrier, in the absence of goods, shipment and shipper; nor is the action maintainable on the ground of tort. "The general rule," said Wiles, J., in Barwick v. English Joint Stock Bank, (L. R. 2 Ex., 259, 265) "is that that the master is answerable for every such wrong of the servant or agent as is committed in the course of the service and for the master's benefit, though no express command or privity of the master be proved." (See also Limpus v. London General Omnibus Co., 1 H. & C, 526.) The fraud was in respect to a matter within the scope of Easton's employment or outside of it. It was not within it, for bills of lading could only be issued for merchandise delivered; and being without it, the company, which derived and could derive no benefit from the unau- thorized and fraudulent actg can not be made responsible. (British Mutual Banking Co. v. Charnwood Forest Railway Co., 18 Q. B. D., 714.) The law can punish roguery, but can not always protect a purchaser from loss, and bo fraud perpetrated through the device of a false bill of lading may work injury to an innocent party, which can not be redressed by a change of victim. The case of the Missouri Railway v. McFadden (154 U. S., 165), in which the opinion was delivered by Mr. Justice White, presented a somewhat different question. It was a case in which a shipper had delivered his cotton to the compress company, and while in the pos- session of that company the agent had given a bill of lading with the understanding that when it was compressed it was to be delivered to the railroad company. While in the possession of the compress com- pany the building of the compress company burned down and the cotton was destroyed. The question arose, Who was to suffer the loss ? The railroad company or the party who had received the bill of lading which had been signed by the agent of the railroad company ? The first question to determine was, Had there been a delivery to the rail- road company ? If so, then, of course, the company would have been liable. Mr. Justice White, in discussing the question, on page 160, said: The elementary rule is that the liability of a common carrier depends upon the deliv- ery to him of the goods which he is to carry. This rule is thus stated in the textbooks : "The liability of a carrier begins when the goods are delivered to him or his proper servant authorized to receive them for carriage." (Redfield on Carriers, 80.) The duties and the obligations of the common carrier with respect to the goods commence with their delivery to him, and this delivery must be complete, so as to put upon him the exclusive duty of seeing to their safety. The law will not divide the duty or the obligation between the carrier and the owner of the goods. It must rest entirely upon the one or the other; and until it has become imposed upon the carrier by a delivery and acceptance he can not be held responsible for them. The court then proceeds to state: This doctrine is sanctioned by a unanimous course of English and American decisions. The court then proceeds as to third parties holding the bill of lading without notice and for value, and fully approves the doctrine laid down in Pollard v. Vinton and in case of the Lady Franklin. On page 163 the court closes the discussion with the following statement, referring to the rights of third parties for value without notice: The rule thus stated is the elementary commercial rule. Indeed, in the case last cited (referring to the Lady Franklin case) this court expressed surprise that the ques- tion should be raised. These views coincide with the rulings of the English courts. That is the last of the Supreme Court decisions, covering a period of nearly 60 years, since this doctrine was declared and settled so tar as the Federal courts could determine it. 182 BILLS OF LADING. I shall only refer to two cases decided by the State courts. I refer to one of these because of the views expressed by the court in refer- ence to the importance of following the Federal ruling. In the case of the National Bank of Commerce v. The Chicago, etc., R. R. Co. (44 Minb., 224), Mitchell, J., in delivering the opinion of the court, after defending the soundness of the doctrine itself, advances the following argument in favor of the adopting by the court of the doctrine of the English and Federal courts. He said: It is * * * to be admitted that it requires some temerity to attack either the policy or the soundness of a rule which seems to have stood the test of experience, which has been approved by so many eminent courts, and under which the most successful commercial nation in the world has developed and conducted her vast commerce ever since the inception of carriers' bills of lading. * * * Moreover, omquestions of general commercial law, the Federal courts refuse to follow the decision or the State courts, and determine the law according to their own views of what it is. A recent decision has been made, after a most elaborate review of the authorities, by the Supreme Court of the State of Washington, found in 85 Pacific Reporter, 33, Roy & Roy v. The Northern Pacific Railroad Co. This case was decided in 1906, and it reaches the same conclusion reached by all the Federal courts upon this question. In examining as to what was the condition of the law of England — the nation from which we have drawn most of our laws, except where modified by statute or court decisions — the first case that I have been able to find that passed upon the principle was the case of Lickbarrow v. Mason (2 T. R., 77), decided by Buller, J., in which the court announced the doctrine in accord with the Federal decisions, but held that the party who signed the bill of lading in fraud of the fact that there were no goods on board could be estopped to deny the fact that the goods were not delivered. This is the first decision that I have been able to find bearing upon the question. Subsequently, the case of Grant v. Norway (found in 2 Eng. Law and Equity, 340 and 341) was decided. That case disclosed the doctrine on the same lines as the decisions in the Federal courts. My friend, Mr. James, criticizes that decision very severely in his remarks before this committee. He said it was rendered by a court of inferior jurisdiction; he expressed surprise that the case was not appealed; and he assumed that it must have been because the defeated party was bought off, or some other similar reason for that failure. The sensible and common-sense reason which controlled the counsel from taking an appeal was that this was a court of general jurisdiction, presided over by three of the most intelligent judges of England — Mr. Cresswell, Mr. Williams, and Mr. Jems. The princi- ples upon which they founded their judgments were so well recog- nized as the law of the land that, like any good lawyer who is on the losing side, he felt it would be useless to appeal to Parliament. The reasons for the decision bv this learned court are as follows: It is not contended that the captain had any real authority to sign the bill of 1 unless the goods had been shipped, nor can we discover any 'ground on which a party, taking a bill of lading by indorsement, could be justified in assuming that he had authority to sign such a bill, whether the goods were put on board or not. If, then, from usage and the general practice of shipping masters it is generally known that the master derives no such authority from his position as master," the case must be consid- ered as if the party taking the bill of lading had notice of the express limitation of authority; and in that case, undoubtedly, he could not claim to bind the owner by the hill of larlinp* Tt rpspmhlpq tilt, cooo nf rr^rtrlc. nv mAnn,,., (J- n « ,,-r. U.. tlio nioofor nn BILLS OF LADING. 183 the pretense that they are needed for the ship, when, in fact, they were not; or a bill of exchange accepted or indorsed by procuration when no such agencv existed. Pro- curation gives notice that the agent is acting with a special and limited authority, and therefore the party taking such bill must establish by evidence his authority. The English and Canadian authorities sustaining this view of the law are collected in note 1 to vol. 4, 2 ed., A. & E. E. of Law, 533. The commercial interests at once became active in the matter — the same interest we see here — and they appealed, saying: "We will go to Parliament; we will go to a legislative body whose powers are unlim- ited; we will demand the right to have protection thrown around bills of lading; and will fix the liabilities of the carrier by statute." They appealed to Parliament. When Parliament proceeds to frame a law, the effects of which would be to change a well-recognized right and to annul a principle that had been adhered to for centuries, it acts with great care and caution, as is shown by the one it passed on the demand of the commercial interests of England. Did they pass such a law as you are asked to pass in response to this demand from the commercial interests ? No, gentlemen; they passed the following act: [Chapter 111, 18 and 19 Victoria, enacted on the 14th of August, 1855.] Whereas it frequently happens that the goods in respect of which bills of lading purport to be signed have not been laden on board, and it is proper that such bills of lading in the hands of a bona fide holder for value should not be questioned by the master or other person signing the' same on the ground of the goods not having been laden as aforesaid : Be it therefore enacted by the Queen's most excellent Majesty, by and with the advice and consent of the Lords spiritual and temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows: I. Every consignee of goods named in a bill of lading, and every indorsee of a bill of lading to whom the property in the goods therein mentioned shall pass, upon or by reason of such consignment or indorsement, shall have transferred to and vested in him all rights of suit and be subject to the same liabilities in respect of such goods as if the contract contained in the bill of lading had been made with himself. II. Nothing herein contained shall prejudice or affect any right of stoppage in tran- situ, or any right to claim freight against the original shipper or owner, or any liability of the consignee or indorsee by reason or in consequence of his being such consignee or indorsee, or of his receipt of the goods by reason or in consequence of such consignment or indorsement. III. Every bill of lading in the hands of a consignee or indorsee for valuable consider- ation representing goods to have been shipped on board a vessel, shall be conclusive of such shipment as against the master or other person signing the same, notwithstand- ing that such goods or some part thereof may not have been so shipped, unless such holder of the bill of lading shall have had actual notice at the time of receiving the same that the goods had not been in fact laden on board; provided that the master or other person so signing may exonerate himself in respect of such misrepresentation by show- ing that it was caused without any default on his part, and wholly by the fraud of the shipper, or of tjie holder, or some person under whom the holder claims. The first section of the statute authorized a consignee or indorsee of a bill of lading to institute a suit in his name as though the con- tract had been made with such consignee or indorsee. The second section, which is in direct conflict with the provisions of S. 4713, pro- vided that nothing in this act should prejudice or affect any right of stoppage in transitu, or any right to claim freight against the original shipper or owner. The third section, following the decision of Buller, J., in Lickbarrow v. Mason (2 T. R., 77), provides: "A bill of lading in the hands of a consignee or indorsee for valuable consideration, representing goods to have been shipped on board a vessel, shall be conclusive evidence of such shipment." Now, note the qualification of this doctrine 184 BILLS OF LADING. announced by the statute, not that it should be conclusive against the owner or carrier, but, in the language of the statute, "as against the master or other person signing the same." An examination of the proviso of the third section will convince the committee of the very careful manner of framing the laws on so important a subject as this by the British Parliament. This section gives to the consignee or indorsee for value, without notice that the goods have not been actually delivered to the carrier, a right to recover their value as against the master or the person signing the bill, but it does not stop here, it qualifies that liability in its proviso to the section, by providing that the master, or other person, so signing may exonerate himself in respect to such mis- representation, first, by showing that it was caused without any default on his part, and wholly by the fraud of the shipper, or of the holder, or of some person under whom the holder claims. This last ground of exemption for liability is a very broad one as to third per- sons, and yet it is based upon a true public policy and declares that in this character of transactions the holder stands in the shoes of the shipper under whom he claims, and that the defense against the one should equally be a defense against the others. Another interesting matter of history — if you gentlemen will bear with me for a few moments — is this: I hope to convince the com- mittee that the Supreme Court was constrained by the public policy declared by Congress, if for no other reason, to adhere to the English doctrine. There is not a legislative declaration by the Congress of the United States from the beginning of its history to the present time that does not sustain, approve, and conform to the decisions of the Federal courts on this subject. If the courts have been wrong, Congress has been wrong. No one can deny that when the Harter Act was passed, referred to by Mr. James, that Congress had absolute and untimited jurisdiction over the subject of bills of lading provided for by that act. What did they do? When they passed that act, providing for a bill of lading for maritime purposes, they followed the doctrine as announced by the Supreme Court of the United States. This act is found in the Twenty-seventh Statutes at Large, page 445. I will only quote the part of it which refers to the question that we are discussing : of such merchandise or property delivered to and received by the owner, master, or agent of the vessel for transportation, and such documents shall be prima facie evidence of the receipt of the merchandise therein described. That is the law as declared by the Supreme Court; that is the doc- trine of the Federal courts. It is prima facie evidence, when signed by an agent of the company, that the goods were delivered; but it is a fact which is open— as all other receipts between every other person in the United States is open — to contradiction even by parol evidence. In the case of the Isola Di Procida (124 Fed. Rep., 944) the court, construing this act, which certainly was very plain upon its face, held: The provision of the statute that a bill of lading should be prima facie evidence of that a ship still remains ' What has been the action of Congress under the interstate-com- merce act ? Wherever the question of property and liability of the BILLS OF LADING. 185 carrier is mentioned in that act, it carefully limits the provision to the condition on the receipt of the property — "after receiving the prop- erty." Congress studiously avoided the use of any language that could be construed as seeking to regulate the conduct of the carrier before the actual receipt by the carrier of the property. Congress has always recognized the principle that there must be commerce before regulation; that the functions, duties, and obligations of a carrier begin at the time of the delivery of the property for immediate trans- portation; that its obligations do not attach as a common carrier until the delivery of the property. When Congress passed the Carmack amendment the same policy controlled it. That amendment reads as follows: That any common carrier, railroad, or transportation company receiving property for transportation from a point in one State to a point in another State shall issue a receipt or bill of lading therefor. In this provision the true principle upon which should rest the car- rier's liability is declared — on receipt of property the bill of lading to be issued. Congress was fully aware of the decisions of the Supreme Court that there could not be a liability upon the common carrier until the delivery of the property for transportation had been made, and in all of its legislation that I have been able to trace I find it has adhered strictly to the rule announced by the Federal courts. Senator Pomerene. What is the date of that act to which you refer — the Carmack Act ? Mr. Faulkner. It was after I left the Senate. Senator Clarke. In 1906 ? Mr. Faulkner. There have been two decisions by the Supreme Court on the Carmack amendment. Of course this question was not involved in either, nor did they decide some of the very important questions that we hoped might be passed upon in that case. The court held that where the carrier voluntarily had taken upon himself to transfer goods from a point in one State to a point in another, issu- ing a bill of lading to that effect, by that voluntary act the carrier constituted the connecting carriers his agent, and the initial carrier was liable. The law that the carrier is only liable when the property has been received by it is undisputed in England, is settled in the Federal courts, and in a majority of the States. The reasons which have influenced this rule of conduct have been laid before you. The policy as declared by Congress in the enactment of the acts dealing with this question has been called to your attention. I have not submitted the line of argument for the purpose of antagonizing the passage of a bill upon this subject that in the wisdom of the committee may be deemed fair, just, and equitable to all interests. I have submitted this argument with the hope of convincing you that the carriers have acted upon the belief that this would continue to be the permanent law of the country, resting, as it does, on seven decisions of the Supreme Court; that if in the judgment of Congress there is to be a change of this rule, upon the faith of which rates have been established, the carrier on whom the burden will fall should receive the consideration of this committee in the framing of the law that the burden may be equitably distributed to all and not to a single interest. 186 BILLS OF LADING. Mr. Chairman, I hope to present the action of the carriers to the committee in a more favorahle light than was done by some of the witnesses who have advocated this bill. Gentlemen, you are all aware of the time, study, and labor given to the framing of a uniform bill of lading. The bill of lading — I think they called it the bill of lading of 1904 — became so very objectionable in the way in which the traffic was hauled under it that the commer- cial interests, the bankers and the railroads, all admitted that some- thing must be done to put the movement of commerce under a bill of lading that would be uniform and have some credibility attached to it. The commission felt that they could not go very far in the matter under the authority of the act regulating commerce, but promptly indicated its desire to cooperate with all interests. After some years of negotiation and frequent conferences, what is known as the uni- form bill of lading was approved by all conflicting interests and sanc- tioned by the commission. The order bill of lading is on yellow paper. The shipping order, you see, is on blue paper; the memo- randum is also on blue paper, so as to distinguish these two papers and forms from the original order bill of lading, which carries the lia- bility and which is frequently used as a collateral in obtaining funds by the shipper or others. Gentlemen, even with these distinctive features it has not made the bankers and others taking these order bills of lading careful in accepting such bills. By referring to the hearings of this committee during the last regular session of Congress, Mr. Mullin, a witness, gives a list of a number of order bills of lading that were not signed by the agent, where the banker had accepted order bills of lading on a straight bill of lading form. Errors of this kind were not noticed by the banker who discounted the paper and sent it on for collection. This carelessness became so annoying to the railroads that } t ou will find in Ms evidence that the carriers were compelled to send a public notice to the bankers in the Delaware & Hudson Eailroad Co.'s ter- ritory, appealing to them to be more careful in the acceptance of these bills of lading, and to see that they conformed with the rules of the uniform bill, and thus save any question of the liabilitv of the railroad. The straight bill of lading is on white paper. If I had the time to present to you the orders issued by the carriers, of instructions to their agents upon every question that could arise on these bills, and the efforts made to educate the agents in handling the traffic under them, you would realize that the carriers had done their full duty in this respect. There were six different circulars sent to the agents of the Delaware & Hudson road, with the view of making them familiar with the order bill of lading. Other roads did the same. The order bill was put into effect, I believe, in 1909. That order bill of lading embraces every provision that I recall that is now in this bill except one — the liability of the carrier where there has been no receipt of property. It requires the bill to be made out to the order of; that the goods shall not be surrendered under an order bill of lading without surrender of the bill. If the carrier surrenders the property and leaves outstanding the bill it is responsible to the holder. The provisions as to a straight bill of lading are the same as in the uniform bill of lading. It further conforms with S. 957 in the last section as to alterations. BILLS OF LADING. 187 By consent the carriers have changed the law in that respect. Although the order bill of lading has been altered by the insertion in it of a material fact, yet notwithstanding that fact the carriers consent to be held themselves liable, according to the original tenor and effect of the bill. This is an important concession by the carriers in their efforts to preserve and protect the order bill of lading in the hands of the holder. In the uniform bill the carriers made many other con- cessions. They have consented to further changes, increasing their liability under the condition attached to the bill of lading, both order and straight. These suggestions but illustrate the fact that the carriers have been trying to meet the conditions that confront them in the interest of the shippers and of the public as far as possible. In agreeing to this bill of lading the railroad carriers, with a view of meeting the wishes of the bankers, shippers, and consignees, agreed to many amendments of vital importance to the public m the uniform bill or lading which was not found in the bill of lading pre- viously used. To make this bill binding upon the carrier, they filed it as a part of their tariffs to relieve all questions of doubt as to the power of the commission. The differences between the old bill and the uniform bill may be briefly stated as follows : The order bill of lading is required to be printed upon yellow paper, and no duplicate is to be issued. The word "order" is to be printed or engraved in conspicuous letters upon the face of the bill. Upon its face, it is provided that the goods under an order bill of lading shall only be delivered upon the indorsement and surrender of the bill, and that the word "original" shall be prominently printed on it. The order bill of lading is to be signed by the shipper as well as the carrier. The former bill provided that no carrier should be liable for loss or damage by causes specified, and only impliedly assumed liability for loss or damage from other causes. The present bill provides "the carrier shall be liable for any loss or damage, except as hereinafter provided." The liability for fire from any cause is now assumed until 48 hours after the property has reached its destination ready for delivery. This extends the liability under the former bill of lading. The present bill makes the carrier assume the burden of proof to show freedom from negligence. The carrier is prohibited from diverting freight from specified route, except in cases of physical necessity. The uniform bill of lading requires the carrier to assume liability for damage to property carried in open cars, resulting from fire and other negligence. The limitation as to the amount and time of presentation of claims has been enlarged. The value of the property at the place of shipment determines the measure of damages, and the claims may be presented in four months. As to perishable property, carriers are relieved from responsibility for "a defect or vice in the property," and not for loss growing out ot the inherent nature of the property. 8 188 BILLS OF LADING. These are very valuable concessions, made in the conferences, extending over three years, between all the parties in interest, and the instructions issued to all agents of the carriers, calling their atten- tion to the importance of these amendments to the bills of lading, have been very full and exhaustive. The shipping order and memorandum of the order bill of lading are required to be on blue paper, as distinguished from the original. The straight bill of lading is required to be upon white paper, as well as the shipping order and the memorandum, and on the face of it the words "not negotiable" are to be printed. Mr. Faulkner. There was one bill I wanted simply to put in here, but I do not see it. I want to refer only to Mr. Williston's statement a moment before the committee. The Acting Chairman. Have you lost something, Senator ? Mr. Faulkner. No; but it is not here. The Acting Chairman. You can reserve the right to insert it at any time. Mr. Faulkner. I will state it now so that it can be put in connec- tion with what I have said. I would like to file as a part of my state- ment, and as a part of the history of the period, that which may be of interest in the future to members of the committee in considering this uestion, the form gotten up and adopted by the Southern Eailway ■o. in reference to shipment of cotton during the last two years. I think it will be a matter of interest, and in considering this question it may be useful to the committee. The Acting Chairman. If you will hand it to the stenographer it will be inserted at this point. The paper referred to is as follows: Auditor's Circular No. 210. Circular No. 2649. Southern Railway Company. rules and instructions to govern the issuance of export bills of lading for cotton, and of bill of lading signature certificates in connection therewith. To agents: 1. Agents and other representatives of this company are instructed not to sign export bills of lading for cotton until they have knowledge that the cotton covered thereby is actually in possession of this company, except that such bills of lading may be signed upon loading certificates issued by duly authorized representatives of warehouses or compress companies that have executed usual contract and bond with this company, certifying that cotton is loaded in the cars designated by initials and numbers on the loading certificates; but not otherwise. Export bills of lading for cotton must be signed only by agents of the company or by other representatives of the company who are duly authorized so to do. 2. The data in bills of lading must be inserted with pen and ink or by typewriter, except as to the number of bales and marks in the original bill of lading, which must in each case be written with pen and ink. There shall be no additions, erasures, or changes in bills of lading. 3. Export bills of lading must be issued in serial numbers, beginning with No. 1 at each issuing station on the first of September of each year. All copies of bills of lading must bear the same number as the original. Bills of lading, that is the originals and each copy thereof, must be dated the day the cotton is received for shipment. The inland rail rate, the wharfage and transfer charge at the port, if any, and the ocean rate must be shown separately. BILLS OF LADING. 189 4. Only one original bill of lading must be issued for each shipment, but as many copies as are reasonably required may be issued, provided that the copies are plainly endorsed with pen and ink "Copy, not negotiable." The word "One" must be inserted in the blank space in the last paragraph of bills of lading, referring to the number of copies affirmed to. Two copies of each bill of lading must be forwarded, on the date of issue, to the agent of the water carrier at the port of export in case of direct shipments, or to the port of transshipment in case of indirect shipments. At the same time, two copies must be forwarded to the agent of the rail carrier at the port of export in case of direct shipments, or to agent at the port of transshipment in case of indirect shipments. 5. The shipper is required to accept the conditions of the bill of lading by affixing hiB signature, or the signature of his authorized representative, to the original and one copy. The copy accepted by the shipper will be forwarded to the auditor of freight accounts at Washington, D. C, with duplicate bill of lading signature certificate attached as hereinafter referred to. The acceptance of the shipper as referred to in this rule shall appear on the lower margin of the bill of lading below the signature of the carrier's agent in the following form: "Accepted. " Shipper, as owner or agent for owner." 6. The originals and copies of bills of lading covering cotton consigned to Man- chester, England, must be endorsed as follows: "Canal dues to be paid by consignees." 7. Designated signature certifying agents of this company other than those agents authorized to sign bills of lading, will be furnished with a supply of certificates, Form 402, reading as follows: (To be attached to order bills of lading for export cotton when issued by agents of this company.) SOUTHERN RAILWAY COMPANY. Bill of lading signature certificate No. — . The Southern Railway Company hereby certifies: - That is its regularly appointed agent at and as such is authorized to sign bills of lading in accordance with the regulations of this company, and that the signature on the attached order notify bill of lading No. , dated (place of issue) , (date) , 191 — , covering bales of cotton marked is his signature. (Date) — , 191—. These certificates are issued in book form with original, duplicate, and stub, and numbered consecutively; the signature certifying agent receiving them will be re- quired to account for all such certificates received, issued, and on hand. Signature certifying agents must be keep a full record of each transaction on the stub of each certificate issued. The stub must show reference to the number of the corre- sponding bill of lading. Spoiled certificates must be immediately cancelled and returned to the auditor of freight accounts, with report, and the stub so endorsed. Certificates will be issued to signature certifying agents by the stationer at Richmond, Va., upon whom requisitions must be made for them. They must be accounted for and checked in the same manner as passenger tickets. Signature certifying agents will be furnished an official signature certifying stamp, to be used as provided for in rule 8. 8. When a bill of lading has been properly filled out, and signed by the authorized agent of this company, the signature certifying agent authorized to issue bill of lading signature certificates shall, after satisfying himself that signature of agent appearing on the bill of lading is genuine, fill out and sign a certificate attaching, with mucilage or paste, the original certificate to the original bill of lading and the duplicate certi- ficate to a copy of the bill of lading. He must then place an impression of his official stamp partly; on the certificate and partly on the bill of lading to which the certificate is attached, in such manner that any tampering with, or irregularity, will be readily apparent. On the date of issuance the signature certifying agent must forward to the auditor of freight accounts the copy of the bill of lading (which must be the copy signed by shipper— see rule 5), to which the duplicate certificate is attached. The number of the corresponding bill of lading signature certificate shall be stamped or written at the top of the original and each copy of all bills of lading issued, in the following form: "Bill of lading signature certificate No. — ." 9. Agents must use serial numbers for export cotton engagements separate from the engagements for other export traffic; begin with "Cotton engagement No. 1," Septem- ber 1st of each year. 190 BILLS OF LADING. 10 A new stock of export bills of lading will be issued in due course and will provide proper spaces for inserting the number of the bill of lading signature certificate and the 8 JSoVis a°hsU i the points on this line at which export bills of lading for cotton will be issued, and the names of the agents authorized to issue bill of lading signature certificates: NORTH CAROLINA. Charlotte Goldsboro ... Greensboro.. Raleign JC. V. Plamer. •\W. P. Lester. .J. W. Powell. JG. G. Thompson. ■\W. F. Blair. JJ. H. Andrews. '\J. O. Jones. Charleston Columbia. . Greenville SOUTH CAROLINA. /H. M. Cobb. \H. A. Parker. JD. Cardwell. \L. M. Ansley. /A. E. McBee. IW. R. Taber. Spartanburg. Sumter Athens . Atlanta . Augusta . . . Brunswick Columbus . Elberton . . JB. Z. Ruff. \F. B. Pinson. .J. R. Clack. /Paul Pinkerton. \E. E. Lamkin. B. S. Barker. C. S. Powers. /A. H. Acker. •\R. S. Brown. Georgia — continued. Q , /C. E. Gay. Savannah (j. C. Hext. Toccoa Rush Herndon. ALABAMA. . . , JW. G. Crutchfield. Annlston \Miss Winnie Roberts. „. . , (R. L. Simpson. Birmingham .. j T L Jenn F inga - . JW. E. Young. Decatur \Richard T. Bracken. Demopolis John C. Webb, jr. Greensboro H. C. Childers. Marion T. M. Wallace. ,, , -, JJ. B. Erwin. Mobile \G. E. Kirkland. „ , JM. P. Webb. Selma \T. H.Miller. ^nieid {!:£:£&. Uniontown J. P. Brown. Columbus . -W. J. Mangham. JW. H. Caffey. \B. F. Newman. S. J. Bryan. [Thos. Prince. Eastman \Scott Edwards. „ , . •„ JJ. H. Caldwell. Hawkmsvllle --\E.W. Coney. Rickenbaker. Petit. Macon. Rome. jj."e. : \G. R. JJ. J. Seay. ■\C. D ~ Whitworth. Corinth . MISSISSIPPI. JJ. L. Cox. •\T. A. H. Wood. fM. P. Russell. [A. B. Meador. Meridian (pTt n^v^ 3 ' |L. K. Lowry. TENNESSEE. .. .• fJ. J. Branch. Mem P hls JH. P. Wade. ...... r omt..\ Pinners Point.. \H. P. Friedman. ^'here two signature certifying agents are shown at the same point, the signature certificates and stamps will be charged to the representative first named, who will be held generally responsible for the care of the certificates and stamps and the proper observance of these instructions. In the absence of the signature certifying agent first named the alternate certifying agent will issue the certificates and sign them with the name of the certifying agent first named ' ' per pro " his full name and initials. For example: At Charlotte Mr. Lester will sign Mr. Palmer's name as follows: "0. V. Palmer, Per pro W. P. Lester." Issued August 26, 1910. Effective September 1, 1910. H. H. Laughton, Auditor, Washington, D. C. Randall Clifton, General Freight Agent, Atlanta, Ga. Mr. Faulknee. Mr. Williston frankly stated that there were three evils to be corrected by the passage of this bill. BILLS OF LADING. 191 First. The evil in regard to the contract between the shipper and the carrier, which depends upon the form of the bill of lading. He answers that himself by the following statement: Now, that evil has been practically eliminated by the uniform bill of lading. So that end is cured by the consent of all interests. The second reason assigned by him arises in regard to the purchase by thrid persons not in contractual relation with the carrier. He admits as to this that the uniform bill of lading partially removes this evil, and to go further would perhaps render the act unconsti- tutional in dealing with the rights and interests of third parties. Consequently, he advises the committee very frankly that for that reason he prefers the short bill, S. 957, instead of the State bill. The third difficulty is the one sought to be removed by the fourth section of Senate bill 957, which provides for an estoppel in favor of the consignee or holder for value without notice of the receipt of the property, as well as the estoppel where a duplicate original bill has been issued. It appears that the only question that can on the face of the bill be in dispute is that which is embraced in the fourth section. Shall the carriers be compelled to assume the responsibility of the act of a supposed agent m forging their name — for that is the effect of it in law — to a bill of lading, the agent acting without authority, and not clothed even with an apparent authority to execute the bill, the rule being that only upon the receipt of the property for transportation does the condition exist which authorizes the person to act as agent, and this rule is fully known to the public. Mr. Chairman, I had intended to suggest for your consideration a number of objections to this proposed legislation, but I shall refrain from doing so at this time, as I do not desire to appear in the atti- tude of one opposing a fair and equitable measure. Mr. Chairman, there is one suggestion that I will submit for your consideration, but which I feel no obligation to urge. Congress has the power to regulate, almost without limit, all questions of inter-state commerce. In fact, I do not know of any limitation upon the power of Congress to regulate carriers, except where the act violates some other limitation of power. Its power is plenary, supreme. Without dwelling at length upon a question that has been suggested to my mind, I will submit it for your consideration. We know that under the law, as it exists to-day, a man who signs a bill of lading fraudu- lently is not executing a paper that is of any validity whatever, it having been done without authority. Can you by statute under the commerce clause of the Constitution create a responsible agent for a quasi-public corporation and clothe him with the power to execute a certain paper which, by virtue of the act, shall bind the assets of said corporation ? Having created the agent, there is another step to be taken; you must create a ship- per, or no contract can exist to carry and deliver. You now have all the parties necessary to a bill but the consignee. Why should not the statute create a consignee % Your power is to regulate commerce, which you seek to do by a paper which declares that there is com- merce, but which we know is not true. If there was commerce probably your powers to regulate it would be sustained, but will the courts sanction the claim that you can take jurisdiction of a subject 192 BILLS OF LADING. under the principle of estoppel when the fact of commerce does not exist? Under the decisions of the Supreme Court there must be a deliv- ery to a carrier of the goods for shipment before the regulating power of Congress can apply. In the case of the Philadelphia Cab Co. (192, U. S.), the court reviews all the authorities bearing on this question as to what is commerce, and when commerce is subject to the jurisdiction of Congress. The court illustrates by saying, start- ing a cart or wagon loaded to the depot does not constitute inter- state commerce, although those goods are to be taken to the depot and loaded into a car for an interstate journey; that it is not com- merce until the goods reach the carrier and are delivered to it. It holds the same with reference to floating logs down the river till they reach the point where they are to be shipped as interstate commerce. It is not interstate commerce until they reach the point of shipment. Xon constat, they may sell those logs anywhere within the jurisdiction of the State and never ship them as interstate commerce. The court further illustrates its position by holding that if you claim that carrying a man in a cab from the hotel to the station is interstate commerce, then is it not interstate commerce when the porter brings his trunk down to put on the cab, and is the porter engaged in interstate commerce ^ Xo; the court says, this is not interstate commerce. In view of the decision of the Supreme Court as to when commerce commences over which Congress can exercise the regulating power, I suggest, can you provide regulations under that clause of the Con- stitution when there is no commerce on which the regulations can operate — when there is no commerce to be affected by the rule and regulation that you are making ? When there is no agency in fact, but only in law '( When there is no shipper or no consignee but fic- titious persons ? When, in fact, there is no commerce ? There is one other question, Mr. Chairman, I want to refer to. I have discussed the questions involved in the consideration of this bill. I have shown you the attitude of the carriers and their desire to meet all the reasonable and just demands of the public under the new uniform bill of lading. We find that everything (so far as the carrier is affected), in the opinion of Prof. Willis ton, has been satis- factorily adjusted, except the one as to the carriers' liability for the goods described in the bill of lading when the goods so described have not been received. An examination of the differences between the old and new bill of lading will satisfy any impartial mind that the carriers in agreeing to the form and conditions of that bill surrendered many legal rights and defenses to the shippers and to the merchants of the country. If Congress shall, in addition to these concessions, impose upon the carriers a liability as guarantor of all its bills of lading, is it an unrea- sonable request that they should haA-e some compensation for addi- tional service and risk? I do not only ask this at the hands of the committee, but I ask those who are interested in this bill — shippers, bankers, or others — whether that is not a fair suggestion? The tariff now provides that if the shipper requires the carrier to transport his goods under the rule of common law, the risk being BILI/3 OP LADING. 193 greater, a reasonable advance in rates is legal. This is a part of the tariff filed with the commission. Mr. Thorn told you the practice in reference to stock transportation and other carriage. This has been uniformly the rule. This increased rate would not meet the liability that may result from this legislation, but it may be a partial com- pensation for the responsibilities and obligations which you impose upon them — thus distributing the loss between the several interests affected by the bill. I think, Mr. Chairman, that even our shippers, when they come to consider this suggestion, will feel that it is but equitable, fair, and just. Even they must admit that it is not an unreasonable request and, if it is not, it ought to be embodied in this ac'i. I thank you for your courtesy and attention. The Acting Chairman. Supposing a warehouseman's agent issues a warehouse receipt for goods and the goods are not delivered; is the warehouseman liable now ? Mr. Faulkner. He is under statutes only. But you see, Mr. Chairman, the difference. There you have a warehouse with a super- intendent, a man in authority, just like the condition existing in a bank. The cashier of a bank will be held responsible for his acts within the limit of his authority, which is to certify checks, etc., and to certify other papeis. But suppose that bank officer steps without the door of the bank ;>nd certifies a check that is of no value? The Acting Chairman. What I mean is if an agent of a ware- houseman willfully issues a receipt for goods which in point of fact have not been received, except bv statute, is the warehouseman liable ? Mr. Faulkner. I think not. The Acting Chairman. The receipt can be explained ? Mr. Faulkner. Yes, sir; the receipt can be explained, except under a certain statute. The Acting Chairman. Are you able to give me a reference to the uniform bill of lading statute ? Mr. Faulkner. No; we have no statute; it was an agreement. The Acting Chairman. It was an agreement? Mr. Faulkner. An agreement between all interests represented with the Interstate Commerce Commission. Mr. James. If you will pardon me, you will find that reported in volume 14 of the Interstate Commerce Commission reports. The commission held that thev had no power to prescribe Mr. Faulkner. Not that exactly. They had no power to pre- scribe certain things. Mr. James. Pardon me, but I am giving my recollection. If I am wrong, the report will correct me. The Fourteenth Interstate Com- merce Commission Report contained an opinion by the commission written by Mr. Knapp which contains this very form which is referred to. The Acting Chairman. Senator, let me call your attention to the first line of Senate bill 957 introduced by Senator Clapp. I will read it to you. I do not think you will need to have it. Mr. Faulkner. I have it here now. The Acting Chairman. "That whenever any common carrier, rail- road or transportation company." ', 42808°— H. Doc. 650. 62-2 13 194 BILLS OF LADING. Now, the other bill, 8. 4713, introduced by Senator Pomerene, sim- ply provides: That bills of lading issued by any common carrier for the transportation of goods. In vour opinion, do the words in the Clapp bill, "railroad or trans- portation company," include anything other than a common carrier? Mr. Faulkner." Xo, sir; I think not. The Acting Chairman. Are there no transportation companies that are not common carriers '( Mr. Faulkner. Veil, if they transport poods for hire between points in one State to points in another State they would be included as common carriers under the definition of common carriers. The Acting Chairman. Would anything be detracted from the Clapp bill by striking out the words "railroad or transportation com- pany" '( Mr. Faulkner. I think not. The Acting Chairman. That is all. Senator Clarke, you may inquire. Senator Clauke. In view of the fact that a casual remark of mine made on yesterday has brought before the committee the very learned and full collection of the authorities that support a view contrary to the one I indicated, I believe I will «_• msume about three minutes of the time of the committee stating my position about the matter, and not engage in interrogating Senator Faulkner, to express my view, if I may address the committee. The Acting Chairman. The committee will be very glad to hear you, Senator. Senator Clarke. I object to the doctrine in the Friedlander case (130 U. S.), because it pays too much attention to the rule of stare decisis and too little to the common sense of the age, as it has to be applied to the development in commerce and transportation at the date of its announcement. The first defect I discovered was the fact that it gave to -the rela- tion of agency a significance that it did not possess in that particular case. The agent was not the agent of anybody. He was the vice principal of the company. He was put there, and the only person put there or put anywhere to perform for them, an intangible entity as a corporation, the substantive acts for which the corporation was created, to wit, the receipt of freight for transportation. All those other matters are merely incidental. That is the primary object of creating a transportation corporation; that is, the primary object of creating a transportation corporation is to transport freight and passengers. He represented the company, and nobody else did. The president of the company never does such work as that, and the shipper can not look around and find him. He delivers his commodity to the railroad to be transported, and he deals with the only person he finds there, and he finds him in his capacity as principal, and not as agent. The rule of agency was attenuated in that case until they did not leave enough of it to do justice. My next criticism of the action of the courts consisted in the fact that they applied rules that were well enough applied in the case where they were originally developed, but they related to con- ditions that had no possible similarity to the conditions with which they dealt. BILLS OF LADING. 195 The first steamboat case came up in 1814, when the steamboat business was in its infancy. They took no notice of the fact of the development of the railway and the immense systems in it, which had to consolidate itself by the progress of events and the laxity of the laws. So that a steamboat case did not justify any such rules, for the reason that in the days when these cases were decided, and in the days when any steamboat case would probably be decided, the same evils were not to be guarded against. There were no ex- press trains then to carry the bills of lading and the draft attached to it, which would fall into the hands of the banker. He must pay it within three days — the grace allowed by law — or they would be protested. The goods would then get to the point of destination as quickly as the bill of lading. No such conditions obtain now. A shipment going from Texas to Liverpool probably requires 30 days. I\ either do 1 think the English cases apply, because in that country the average, haul is 24 miles, and the bill of lading and the goods can get to the point of destination as quickly as the bill of lading can get there, and an inquiry within the three days will discover whether they are there or not, and the banker will not likely be called upon to make the payment before he has had an opportunity to protect himself by inquiry. The defect in the rule is that the railroad could protect itself by diligence, because they are not compelled to issue bills of lading until they are satisfied that they arc issuing them properly and hon- estly. l\o haste about it. Xo complication. Only a little diligence upon their part will remove that in every instance. Whereas the consignee can not protect himself, because he can not make the inquiry under the customs of business. In order to keep up with his competitors he has to pay the bills that arc drawn upon him. In this country the average haul is 250 miles, so that in every instance the bill of lading and the draft attached to it will get to the Eoint of destination before the goods would get there, or before he as any right to inquire of the carrier whether they will come or not. Mr. James J. Hill says that the average freight in this country moves at the rate of 2 4 'miles a day. So that even the average haul and in cotton it is 1,000 miles or 1,500 miles, and that is a commodity that suffers most from this condition — 10 days must elapse after it is put on the car and the car started before it can reach the destina- tion of 260 miles. I think, therefore, that the court in attempting to apply, as it always does, ready-made reasoning that has been developed in con- nection with situations that do fit perfectly and do justice, no doubt, did not give expression of their judicial expression of the rule that was necessary to do justice in this particular case. If that decision had been otherwise, the ingenuity of the railroad company would have protected themselves within a few hours, because they would have been a little more careful about the forms of the bill of lading, they would have been a little more careful about the character of the paper, and they would have been a little more careful about allowing people to obtain blank bills of lading. And every similar organization would have protected them. Then the fundamental objection is that in modern commerce the bill of lading is just as essential as the negotiable instrument. They go together. Many a man draws a bill who has no personal acquaint- 196 BILLS OF LADING. ance with the man on whom it is drawn. There needs to be an assurance given formally by the carrier that a certain commodity has been received and transported. Then the person on whom the draft is drawn will feel safe, knowing that if the railroad has certi- fied, the quantity is true, and he trusts the commodity rather than the person who draws the draft. The fact is the business of selling cotton could not be conducted on any other basis. Very few businesses engaged in the buying of cotton locally have enough money to buy it for cash and sell it out for cash. So that it is not a hardship upon the railroads to make them do honestly what they have to do at all. They say that they are in the transportation business, and they are not in the business of issuing bills of lading except for that purpose. That is true. But they ought to be in the business of issuing bills of lading when they issue honest bills of lading, and they are allowed to take ample time and employ ample, agencies to see to it that when a bill of lading leaves the office, signed by those authorized to sign genuine bills, that it is what it purports to be. It is simply the question of adjusting a liability so as to put it upon a person who has an opportunity to pro- tect himself, in preference to one who has no opportunity at all. I have no disposition whatever to create a liability against the railroad companies that is not just, and if this was a considerable one, there might be room for more cause than this objection calls for. You heard Mr. Bond say that he had been connected with the Baltimore & Ohio Railroad for 30 or 35 years, and in his entire experience with that road he never knew an agent issuing a bill of lading without the commodity being delivered. I believe Mr. Thorn made the same statement about the Southern Railway Co., although he did not indi- cate the length of time which he had been in service in that company. So you will see that, notwithstanding these gentlemen say it is difficult to get intelligent and honest depot agents, they are hardly generous to that splendid body of employees that they have assembled because their statement of facts does not correspond' with the opinion that they express. I think it is a remarkable tribute to that body of employees that in that system, represented by these two big com- panies, extending probably 20,000 miles, that in 30 years no such thing has happened as they now say will wreck the entire railway business, and think they ought to be allowed to charge an insurance rate simply because they are expected to do it. The evii of the business is that they penalize commerce because it throws suspicion on every bill of lading — because now and then once in 10 or 15 years some bill of lading turns up to be issued without the commodity having been delivered to the carrier. If the case against Friedlandcr had been decided against the rail- roads it would have involved the loss of $10,000 — 200 bales of cotton. In a week's time the business would have absorbed that liability and provided against it, and provided against its repetition, or if it did not provide against its repetition, would make it the same with an instrument solemnly put out by a corporation. Now, I think the easy flow of commerce is promoted by its certainty and its honesty, and when any institution gives a paper over the sig- nature of a person authorized to receipt for it that a certain state of fact exists, and they know at the time that certificate is issued that a person is going to act on it, and if it should turn out that the party BILLS OF LADING. 197 who does act upon it will sustain a loss, then they ought to make careful inquiry in advance and know what they are doing, and if they do not do it they ought to bear the responsibility. That is my view of it. I had a memorandum of a few little things that I desire to say, but I think I have sufficiently stated the view I hold about that particu- lar matter. I believe it was a misfortune for the railroads, because it has raised an agitation that has caused a division among shippers and transportation companies that is not justified by the actual losses that would result from the reverse of the rule. The Chairman. Unless there is some objection, I will ask the reporter to insert in the record this uniform bill of lading which has been referred to. There being no objection, the paper is incorporated in the record, and is in the words and figures following : In the Matter op Bills op Lading. [Vol. 14, 1. C. C. E., pp. 346-365. June 27, 1908.] The subject of bills of lading considered and a uniform bill of lading recommended . Knapp, Chairman: This is a proceeding of investigation and inquiry institute 1 by the commission on November 21, 1904. Shortly before that date numerous petitions were received from the Illinois Manufacturers' Association and other commercial organizations in official classification territory complaining of the proposed adoption by railroad companies operating in that territory of certain changes in the so-called uniform bill of lading then generally used in the transportation of freight over their respective lines. To inform itself concerning the controversy brought to its attention by these peti- tions, the commission ordered an investigation, and the first hearing was had on the 5th and 6th days of December, 1904. It appeared at that time that the matters in question were the proper subject for negotiation and settlement between the various conflicting interests, and upon the suggestion of the commission a joint committee of shippers and carriers was appointed to formulate a suitable bill of lading and report the same to the commission. During the year 1906 and the first months of 1907 this com- mittee held numerous conferences and gave the subject most careful attention. On June 14, 1907, they made a report to the commission and submitted a bill of lading which appears to have been agreed upon and consented to bv the original petitioners and by substantially all carriers in official classification territory. The commission was thereupon asked to approve this bill and direct its adoption. In order that the matter might be more fully considered and other shippers and carriers have opportunity to be heard before taking action, the commission on July 8, 1907, made a supplemental order, reciting the proceedings up to that time, providing for a further hearing on the 15th of October following, and requiring carriers to whom it was sent to show cause on that day why the proposed bill of lading should not be approved and prescribed bv the commission to be used on and after January 1, 1908. A copy of this order, with'copies of the proposed bill of lading and of the petition of the Illinois Manufacturers' Association (the other petitions being similar thereto), was thereupon mailed to all railroad companies subject to the act to regulate commerce, so far as they were known, and they were directed, if they desired to object to the adoption of this bill of lading, to file their objections in writing with the commission on or before the 16th day of September, 1907. On the 15th of October, the date named for the second hearing, there was a large attendance and the matter was discussed at length by representatives of various interests. While the fundamental features of the bill were not the subject of much dispute, there was considerable conflict of views and demands respecting certain provisions of more or less importance. Some concessions were virtually made during the progress of the hearing and other points of disagreement were reserved for further consideration. Since this public hearing, and from time to time down to almost the present, there have been informal conferences with representatives of various interests, and an extensive correspondence has been conducted, all with the view of reducing diner- 198 BILLS OF LADING. ences to a minimum and securing the widest possible assent to a bill of lading which the commission might approve. It seems quite unnecessary to mention the different questions which have been raised or to review the arguments by which divergent opinions have been supported. While the efforts of the committee have resulted in close approach lo agreement, at least so far as concerns miscellaneous freight and general merchandise, there are a few points upon which complete accord has not been secured. < >f these, the principal one relates to the construction of the so-called Carmack amendment, included in the enactment of 1906, and that question will doubtless remain unsettled until finally determined by the courts There are also some sperial interests which are not altogether satisfied with the bill in its present form. Nevertheless, the degree of unanimity attained in regard to this matter is proof of the earnest endeavor of the committee to reach a common understanding, and amply justifies their appointment. The commission has been measurably relieved from a task of great difficulty, because the bill as now submitted represents in most, if not all, of its principal features a virtual agreement between shippers and carriers. In its general scope as well as its detailed provisions this bill does not differ mate- rially from the one assented to and proposed to the commission in June, 1907, as above stated. Such changes as have been made, and they are quite numerous, have all been in the direction of greater simplicity and are all believed to be in the interest of the shipping public. Aside from these modifications of the bill as submitted a year ago, another change has been made which is regarded of great practical value. This change consists in the provision of two forms or kinds of bills of lading in place of the single form now and heretofore in use; one to be used for "order consignments" and the other for "straight consignments," as those terms are understood in com- mercial dealings. These two forms will be distinguished by different colors and each will contain provisions suited to its separate purpose. They will differ only on the face side, the conditions printed on the back being the same in both cases. These differences will appear upon inspection, and need not here be enumerated. The main point in this connection is that the "order" bill will possess a certain degree of negotiability, while the "straight" bill will be nonnegotiable and is to be so stamped upon its face. Moreover, and this is a matter of consequence, the order bill of lading will be required to be surrendered upon or before the delivery of the property to the consignee. It is believed that this plan will in large part meet the requirements of the banking concerns of the country which advance vast sums of money upon bills of lading and are entitled to a reasonable measure of protection. This proposed bill of lading — for the two forms may be considered as one in what we have further to say — is submitted for adoption by the carriers and use by the shipping public with considerable confidence. It is not claimed to be perfect, and experience may develop the need of further modifications, but it represents the most intelligent and exhaustive efforts of those who undertook it preparation to agree upon a bill of lading which should be reasonably satisfactory to the railroads and the public. It is, of course, more or less a compromise between opposing interests, because on one hand it imposes obligations of an important character which carriers have not hereto- fore assumed, and on the other retains exemptions to which some shippers may object and perhaps not without substantial reason. As we are advised, it is in some respects less favorable to the shipper than the local laws or regulations of one or more States, but is more favorable to the shipper than the local laws or regulations of most of the States. On the whole, it is believed to be the best adjustment which is now practi- cable of a controversy of long standing which affects the business interests of the entire country. Whatever criticisms or objections may be advanced, this bill of lading is concededly a great improvement, upon the bills now in general use. Its adoption, we are per- suaded, will be a long step toward uniformity, simplicity, and certaintv. It will likewise be a long step in the direction of fair dealing between shipper and carrier, and may be confidently expected to remove much of the confusion which now exists and to measurably avoid in the future the irregularities and injustice which have heretofore occurred. The results of practical operation may disclose defects not at present perceived, and further adjudications by the courts mav require a change in some of its provisions, but we believe it should lie given an honest trial, and are strongly of the opinion that it will be found fairly suited to the practical needs of the business community. If it proves otherwise under the test of experience the commission will exercise its corrective authority as to any matter within its jurisdiction. Ab above suggested, this bill of lading is designed for use in connection with the movement of miscellaneous freight and general merchandise and as a substitute for the bills now in use in the carriage of this description of pre iperty . It is not intended to take the place of special bills of lading which are issued on particular commodities of such a nature or so handled as to require exceptional provisions, such as live stock, for example, and perhaps perishable property. In short, this bill bill is proposed as a uniform or standard bill, so to speak, to be used in connection with freight articles BIliS OP LADING. 199 generally, except such as now are or ought to be carried under special conditions. We are unable from want of knowledge to indicate just what commodities fall within this exception, much less to determine the special provisions suited to any accepted commodity, and therefore do not attempt to go further at this time than to approve of what may be called a standard bill of lading. Nor do we undertake to prescribe this bill of lading and order its adoption, because we are convinced that .such an order would exceed our authority. Moreover, the situation makes no demand for a positive direction. The circumstances under which the work of the joint committee has been conducted and the substantial agreement on most points by the different interests concerned, to say nothing of direct assur- ances from representatives of the carrier*, warrant us in expecting that the assenting roads will adopt the bill upon our recommendation. We therefore assume that the railroads in official classification territory, whose proposed action was the subject of the original investigation, will adopt and use this bill to the extent above indicated from and after the date named for that purpose. We shall alBO expect that railroad carriers subject to the act outside of official clas- sification territory will adopt and use this bill of lading to the same extent and from and after the same date. There may be peculiar conditions in western and southern territory which require some modifications of or additions to this standard bill, but the desirability of uniform usage is so great and the reasons for it so obvious as to justify the expectation that carriers in western and southern territory will adopt the hill in question to the fullest extent practicable without abridging any just privi- leges which their shippers now enjoy. Accordingly the commission hereby gives approval to the bill of lading annexed to this report and made a part thereof, the "order" bill and "straight" bill differing only on the front page, the conditions printed on the back being the same in both cases, and recommends its adoption and use to the extent above named by all car- riers subject to the act to regulate commerce from and after the 1st day of September, 1908. The intervening period is allowed for printing new bills and using those now on hand. As indicated by the ' ' Notes, ' ' there are minor details which will be arranged by the uniform bill of lading committee and should also be adopted. It should be distinctly understood that this approval does not imply acceptance by the commission of any construction of the Carmack amendment at variance with ite apparent purpose and intent, nor will the general recommendation now made pre- clude the commission from passing independent judgment upon any provision in this bill of lading which may be drawn in question in future proceedings. An appropriate order will be entered. Railroad Co. ORDER BILL OF LADING — ORIGINAL. Received, subject to classifications and tariffs in effect on the date of issue of this original bill of lading, at , 190 — , from the property described below, in apparent good order, except as noted (contents and conditions of contents of packages unknown), marked, consigned, and destined as indicated below, which said company agrees to carry to its usual place of delivery at said destination, if on its road, otherwise to deliver to another carrier on the route* to said destination. It is mutually agreed, as to each carrier of all or any of said property over all or any portion of said route to destination, and as to each party at any time interested in all or any of said property, that every service to be performed hereunder shall be subject to all the conditions, whether printed or written, herein contained (including conditions on back hereof) and which are agreed to by the shipper and accepted for himself and his assigns. The surrender of this original order bill of lading properly indorsed shall be required before the delivery of the property. Inspection of property covered by this bill of lading will not be permitted unless provided by law or unless permission is indorsed on this original bill of lading or given in writing by the shipper. Notes.— The foregoing will appear on the front or first page of the bill of lading. In connection with the name of the party to whom the shipment is consigned the words "Order of" shall prominently appear in print, thus: "Consigned to order of ." The bill of lading is to be signed by the shipper and agent of the carrier issuing same, and space shall be provided for this purpose. The detail arrangement respecting other matters that customarily appear on the face of the bill of lading, such as name of destination, car numbers, routing, description of articles, weights, etc., will be prescribed bv the uniform bill of lading committee. The size of the bill of lading shall be 8* inches wide by 11 inches long. _ _ Order bills of lading shall be printed on yellow paper for convenient distinction from bills of lading covering other than 'order " consignments. 200 BILLS OF LADING. Railroad Co. bill of lading — original — not neou'nable . Keren ed subject to classifications and tariffs in effect on the date of issue of this original bill of lading at , 190—, from the property described below, in apparent good order, except as noted (contents and conditions of contents of pack- ages unknown), marked, consigned, and destined as indicated below, which said com- pany agrees to carry to its usual place of delivery at said destination, if on its road, otherwise to deliver to another carrier on the route to said destination. It is mutually agreed, as to each carrier of all or any of said property over all or any portion of said route to destination, and as to each party at any time interested in all or any of said property, that every service to be performed hereunder shall be subject to all the con- ditions, whether printed or written, herein contained (including conditions on back hereof) and which are agreed to by the shipper and accepted for himself and his assigns. Notes. — The foregoing will appear on the front or first page of the bill of lading. The bill of lading is to be signed by the shipper and agent of 1 he carrier issuing same, and space shall be provided for this purpose. The detail arrangement respecting other matters that customarily appear on the face of the bill of lading, such as name of destination, car numbers, routing, description of articles, weights, etc., will be prescribed by the uniform bill of lading committee. The size of the bill oflading shall be S-\ inches wide by 1] inches long. Bills of lading covering what may be termed "straight consignments," being those other than "order consignments," shall be printed on white paper. Bills of lading other than those covering "order consignments" shall be stamped "not negotiable " The following conditions will appear on the back of the bill of lading: CONDITIONS. Section 1. The carrier or party in possession of any of the property herein described shall be liable for any loss thereof or damage thereto, except as hereinafter provided. No carrier or party in possession of an) - of the property herein described shall be liable for any loss thereof or damage thereto or delay caused by the act of God, the public enemy, quarantine, the authority of law, or trie act or default of the shipper or owner, or for differences in the weights nf grain, seed, or other commodities caused by natural shrinkage or discrepancies in elevator weight? l-'or loss, damage, or delay caused by fire occurring after forty-eight hours (exclusive of legal holidays) after notice of the arrival of the property at destination <>r at port of export (if intended for export) has been duly sent or given, the carrier's liability shall be that of warehouseman only. Except in case of negligence of the carrier or party in possession (and the burden to prove freedom from such negligence shall be on the carrier or party in possession), the carrier or party in possession shall not be liable for loss, damage, or delay occurring while the property is stopped and held in transit upon reque.-t of the shipper, owner, or party entitled to make such request or resulting from a delect or vice in the property or from riots or strikes. When in accordance with general custom on account of the nature of the property, or when at the request of the shipper the property is transported in open cars, the carrier or party in possession (except in case of loss or damage by fire, in which case the liability shall be the same as though the property had been carried in closed cars) shall be liable only for negligence, and the burden to prove freedom from such negligence shall be on the carrier cr party in possession. Sec. 2. In issuing this bill of lading this company agrees to transport only over its own line, and except as otherwise provided by law, acts onlv as agent with respect, to the portion of the route beyond its own line. No (•airier shall be liable for loss, damage, or injury not occurring on its own road or its portion of the through route, nor after said property has been delivered to the next carrier, except as such liability is or may be imposed by law, but nothing con- tained in this bill of lading shall be deemed to exempt the initial carrier from any such liability so imposed. Sec. 3. No carrier is bound to transport said property bv unv particular train or vessel, or in time for any particular market or otherwise than with reasonable dis- patch, unless by specific agreement indorsed hereon. Every carrier shall have the right in case of physical necessity to forward said property by anv railroad or route between the point of shipment and the point of destination! but if such diversion shall be from a rail to a water route the liability of the carrier shall be the same as though the entire carriage w r ere by rail. The amount of any loss or damage for which any carrier is liable shall be computed on the basis of the value of the property (being the bono fide invoice price, if any, to BILLS OF LADING. 201 the consignee, including the freight charges, if prepaid) at the place and time of ship- ment under this bill of lading, unless a iower value has been represented in writing by the shipper or has been agreed upon or is determined by the classification or tariffs upon which the rate is based, in any of which events such lower value shall be the maximum amount to govern such computation, whether or not such loss or damage occurs from negligence. Claims for loss, damage, or delay must be made in writing to the carrier at the point of delivery or at the point of origin within four months after delivery of the property, or in case of failure to make delivery, then within four months after a reasonable time for delivery has elapsed. Unless claims are so made the carrier shall not be liable. Any carrier or party liable on account of loss of or damage to any of said property shall have the full benefit of any insurance that may have been effected upon or on account of said property, so far as this shall not avoid the policies or contracts of insurance. Sec 4. All property shall be subject to necessary cooperage and baling at owner's cost. Each carrier over whose route cotton is to be transported hereunder shall have the privilege, at its own cost and risk, of compressing the same for greater convenience in handling or forwarding, and shall not be held responsible for deviation or unavoid- able delays in procuring such compression. Grain in bulk consigned to a point where there is a railroad, public or licensed elevator, may (unless otherwise expressly noted herein, and then if it is not promptly unloaded) be delivered and placed with other grain of the same kind and grade without respect to ownership, and if so delivered shall be subject to a lien for elevator charges in addition to all other charges hereunder. Sec 5. Property not removed by the party entitled to receive it within 48 hours (exclusive of legal holidays) after notice of its arrival has been duly sent or given may be kept in car, depot, or place of delivery of the carrier, or warehouse, subject to a reasonable charge for storage and to carrier's responsibility as warehouseman only, or may be, at the option of the carrier, removed to and stored in a public or licensed warehouse at the cost of the owner and there held at the owner's risk and without lia- bility on the part of the carrier, and subject to a lien for all freight and other lawful charges, including a reasonable charge for storage. The carrier may make a reasonable charge for the detention of any vessel or car, or for the use of tracks after the car has been held 48 hours (exclusive of legal holidays), for loading or unloading, and may add such charge to all other charges hereunder and hold such property subject to a lien therefor. Nothing in this section shall be con- strued as lessening the time allowed by law or as setting aside any local rule affecting car service or storage. Property destined to or taken from a station, wharf, or landing at which there is no regularly appointed agent shall be entirely at risk of owner after unloaded from cars or vessels, or until loaded into cars or vessels, and when received from or delivered on private or other sidings, wharves, or landings shall be at owner's risk until the cars are attached to and after they are detached from trains. Sec 6. No carrier will carry or be liable in any way for any documents, specie, or for any articles of extraordinary value not specifically rated in the published classifi- cation or tariffs, unless a special agreement to do so and a stipulated value of the articles are indorsed hereon. Sec 7. Every party, whether principal or agent, shipping explosive or dangerous goods, without previous full written disclosure to the carrier of their nature, shall be liable for all loss or damage caused thereby, and such goods may be warehoused at owner's risk and expense or destroyed without compensation. Sec 8. The owner or consignee shall pay the freight and all other lawful charges accruing on said property, and, if required, shall pay the same before delivery. If upon inspection it is ascertained that the articles shipped are not those described in this bill of lading, the freight charges must be paid upon the articles actually shipped. Sec 9. Except in case of diversion from rail to water route, which is provided for in section 3 hereof, if all or any part of said property is carried by water oyer any part of said route, such water carriage shall be performed subject to the liabilities, limita- tions, and exemptions provided by statute and to the conditions contained in this bill of lading not inconsistent with such statutes or this section, and subject also to the condition that no carrier or party in possession shall be liable for any loss or damage resulting from the perils of the lakes, sea, or other waters, or from explosion, bursting of boilers, breakage of shafts, or any latent defect in hull, machinery, or appurte- nances; or from collision, stranding, or other accidents of navigation, or from pro- longation of the voyage. And any vessel carrying any or all of the property herein described shall have the liberty to call at intermediate ports, to tow and to be towed, and assist vessels in distress, and to deviate for the purpose of saving life or property. 202 BILLS OF LADING. The term ' ' water carriage ' ' in this section shall not be construed as including lighter- age across rivers or in lake or other harbors, and the liability for such lighterage shall be governed by the other sections of this instrument. Sec. 10. Any alteration, addition, or erasure in this bill of lading which shall be made without an indorsement thereof hereon, signed by the agent of the carrier issuing this bill of lading, shall be without effect, and this bill of lading shall be enforceable according to its original tenor. Senator Pomerene. Mr, Faulkner, fixing freight rates, the Inter- state Commerce Commission, of course, takes into consideration all classes of expenditures and risks which are involved in that business? Mr. Faulkner. Beyond question. Senator Pomerene. Now, then, if the enactment of this bill into a law should increase appreciably the losses of the company, would not the Interstate Commerce Commission have the right to take that fact into consideration in determining whether the rates were reason- able or otherwise ? Mr. Faulkner. Well, I hardly think you would want to make this so that the increase of rate would apply to the entire property carried by the carrier, whether it was under an order-guarantee bill of lading or not. Senator Pomerene. But if the losses to the company by reason of this contemplated law were appreciable, would not the Interstate Commerce Commission be justified in taking that fact into considera- tion in determining the reasonableness or unreasonableness of the freight rates ? Mr. Faulkner. I think they hardly would. For example, you carry all of this freight of similar character on both order and straight bills of lading. They would not allow a raise of rate on that par- ticular carriage that the carrier would not assume an additional responsibility. You do not have a particular rate on this product or that product because of this extra rate. They are put m class rates, most of them. Senator Pomerene. I am assuming now that by the enactment of this bill you are increasing the legal responsibility of the carrier. Now that being so, would nut the Interstate Commerce Commission be justified in taking into consideration that fact in determining the reasonableness or unreasonableness of the rates charged. Mr. Faulkner. How would you do it? Here is a rate on certain given articles. If the thing is not asked to be carried on a guaranty- order bill of lading, why, it is regular rate; but if that particular ship- per wants it carried on order guaranty bill of lading, then put a per- centage above that rate. Senator Pomerene. You are assuming now Senator Clarke. Let me ask you, Senator Pomerene, if I under- stand your question. Your idea is that it is the cost of operation; that if it turned out at the end of the year that they had sustained certain losses, it would be treated as a loss of operation and go' in, as a matter of course ? Senator Pomerene. That is the thought exactly. Air. Faulkner. Would they allow it to be determined on a general question of rates, which I doubt very much? As you say, on the question of cost of operation they might do it. Senator Pomerene. I think I understand your view on that sub- ject. Now, another matter. It has developed here in these hearings that there are perhaps two classes of losses, one of which is due to the positive dishonesty of the freight agent in issuing bills of lading for BILLS OF LADING. 203 goods which he has not received and which he has no intention of receiving by the railroad; the second is that he issues these bills of lading by connivance of his superior officer for the accommodation of the shipper, and for which, of course, if there is a loss, the agent would not be morally responsible. Have you any data which would give us an intelligent statement of the proportion between those two classes of losses 1 Mr. Faulkner. I have not ; and I do not suppose that any of the carriers have. I think that as to the second proposition you made it is covered by the interstate commerce law completely. Senator Pomerene. What provision do you refer to ? Mr. Faulkner. I mean as to discrimination. I think all of the penalties as to discrimination could be enforced against the shipper and the carrier under that provision of the law by the use of accom- modation bill of lading. Senator Pomerene. Let us understand each other fully. When I referred to this second class, one of the shippers said here that the most of losses were at competitive points, where the agent, through the encouragement of his superior, would go out and solicit goods for carriage, and would extend this accommodation to those shippers for the purpose of encouraging them in delivering their goods to this com- pany. Now, can you tell us what amount of Tosses have occurred with your company, of this character ? Mr. Faulkner. No, sir; I want to say in qualifying your statement a little to meet that, I know of no one who has testified to that fact, or stated it of his own knowledge. It has been upon inference, that it was done by an agent with the concurrence of a higher officer. Senator Pomerene. With the knowledge of the higher officers, we will say. Mr. Faulkner. I mean with the knowledge of the higher officers; but all of the witnesses who have appeared here say that it was done by the agent with the hope of showing a larger business at his place in order to help his promotion. But they could never state that it was done with the knowledge of the higher officers, with their consent. But I think the present law covers that completely as to discrimina- tion. Senator Townsend. I think the witness who appeared just before you did state it as Senator Pomerene states it. Mr. Faulkner. He may have stated it, but he never stated it of his own knowledge that it was so, because it can not be so. Senator Pomerene. It does occur to you, from your experience in railroading, that a large portion of the losses — assuming that there are large losses — would occur in this way rather than from a positively dishonest motive on the part of the freight agent ? Mr. Faulkner. I think most of the cases that have occurred, have occurred just in this way; the party has come and shipped his goods and gotten his bill of lading. He comes and says to the agent, "I am going to ship another to-morrow," and the agent, relying upon his integrity — and in all businesses you have to rely upon that — gives him a bill of lading. He may ship it or may not. Then he may ship another, and get another bill of lading from another agent or another road, and in that way defraud the consignee or holder of the bill. But I think that is being pretty well watched now, and pretty closely 204 BILLS OF LADING. watched, and I think most of the practices that have been objection- able — as I think the shippers will all agree — are improving rapidly. Senator Pomerene. Now, to get your view of the law, assuming that the modus operandi that you have described, becomes known to the railroad officials and is proved or at least is not disproved by them Mr. Faulkner. Sanctioned. Senator Pomerene. Sanctioned, in other words; do you think that under this Friedlander case the railroad company would be relieved from liability '( Mr. Faulkner. No; not at all. The Friedlander case does not change the doctrine of agency at all. It simply stands on the doctrine of agency, and if the party holding out, and with knowledge of the principal allows him to do so and so, it binds the other whether he had authority or not. The authority would be presumed. Senator Pomerene. I approve what you have said upon that sub- ject. It seems to me that the railroad people have unconsciously, perhaps, extended the scope of this Friedlander case beyond what the opinion itself justifies, and I want to put into the record here just a paragraph of that, but before doing so I want to say that the opinion of the court in this case was based upon an agreed statement of fact. I read now from the opinion on page 42.3 : The agreed statement of facts set forth "that, in point of fact, said bill of lading of November 6, 1883, was executed by said E. D. Easton, fraudulently and by collusion with said Lahnstein and without receiving any cotton for transportation, such as is represented in said bill of lading, and without the expectation on the part of the said Easton of receh-ing any such cotton;" and it is further said that Easton and Lahnstein had fraudulently combined in another case, whereby Easton signed and delivered to Lahnstein a similar bill of lading for cotton "which had not been received, and which the said Easton had no expectation of receiving;" and also "that, except that the cot- ton was not received nor expected to bo received by said agent when said bill of lading was by him executed as aforesaid, the transaction was, from first to last, customary ' - So that I take it that assuming that the method of business had prevailed of the agent issuing these bills of lading before the goods were in fact received and that mode of business had become known to the railroad company and was approved by the railroad company, or sanctioned by it, that they could not be heard to say that the act of the agent was beyond the scope of his authority? Mr. Faulkner. No; because he gave them the authority to do it. Senator Pomerene. Now, that being so, the only liability which the railroad company would have would be in that class of cases where the freight agent issued a bill of lading when there were no goods in sight and none were intended to be received. In other words, where he had perpetrated a fraud upon the railroad company? Mr. Faulkner. Well, I think it would go a little further than that. Senator Pomerene. To what extent? Mr. Faulkner. If it was not customary and known to the com- pany and its officers that it was the usual custom to issue bills of lading without the receipt of the goods, whether there was a fraudu- lent intent or not, the company would not be liable. But if they did know of this usual custom and sanctioned that usual custom of the agent, then they would be responsible whether the act was fraudulent on the part of the agent or not fraudulent, but done by mistake. Senator Pomerene. Now, assuming that to be so, would not that reduce the losses to the railroad company to a minimum, a negligible quantity, in the event this bill becomes a law as it is now written? BILLS OF LADING. 205 Mr. Faulkner. I would say not. I do not see how any of these acts of agents, whether done by mistake or by fraud, would be, as I do not believe it is a matter of custom approved and sanctioned by the railroads as it exists to-day. Senator Pomeeene. Well, let us take another view of this. Sup- pose that you were, or your railroad companies were, permitted to charge a certain extra amount for a guaranteed bill of lading. Would not the real effect of that be to make the railroad companies more careless in the employment of their freight agents ? Mr. Faulkner. No ; I do not think it would. I do not think that they are careless at all in that. I think they employ good men; as you will notice, in my opening I stated so, but there are certain conditions in small communities where it is very difficult to get an intelligent, active man, who can perform well all the functions that are devolving upon him at that station. Senator Pomerene. In your vast system of railroads, can you point out any such instance ? Mr. Faulkner. Well, I am not brought directly in contact with any of the agencies along the line of the road, and, of course, I am not competent to do it, but I have not any doubt as a matter of common human experience that that is so. I would expect it. That is only an exception, I think, to the rule. Senator Pomerene. When the railroad company or its agent issues these bills of lading for shipment they expect and the country at large expect that full faith and credence shall be given to them ? Mr. Faulkner. No; there is no assumption on the part of the carrier at all that such bills have anj^ of the characteristics of such paper for the purpose of securing the advance of money on them. They know it is a fact, but it is not within the functions of the railroads to issue such negotiable paper unless they have the right by their charters. Senator Pomerene. With all due deference, it seems to me that you are rather evading my question. Mr. Faulkner. No; I will answer it frankly in this way: Is not the carrier absolutely controlled in the exercise of its functions and powers by the terms of its charter of incorporation ? Do you know of any single charter of incorporation within the last 40 years — prior to that there were some — which gave to a radroad company the power to issue any paper that was in any sense negotiable ? Senator Pomerene. Well, we are not speaking about this as negotiable paper now, and I am not looking at it from the stand- point of the law merchant at all; but when I deliver to you as a common carrier a certain consignment of goods, and you issue to me a certain paper receipting for those goods, and guaranteeing the safe carriage of them — not guaranteeing them, but contracting to safely carry them — you expect me, and anyone who may receive that from me, baring accidents, to give full faith to that piece of paper, do you not ? Mr. Faulkner. For what it is worth. Senator Pomerene. For what it is worth. In other words, you have simply given to me a piece of paper which your duty as a com- mon carrier requires you to give to me. That being so, when you defend against that bill of lading, raising the question that the goods were not in fact received by the agent who issued it, are you rather not seeking to shirk a responsibility which belongs to the railroad 206 BILLS OF LADING. company and seeking to shove that responsibility upon the shoulders of the shipper ? In other words, to make myself clear, by this law Congress seeks to make the railroad company bear its responsibility and prevent it from shirking its responsibilitj^, and does not in fact add to the responsibility of the railroad company. Mr. Faulkner. Is that what you want me to answer? Senator Pomerene. Yes; I would like to have you answer. Mr. Faulkner. My answer is simply that there is no release of liability where a supposed agent has signed a bill of lading without authority, as no obligation under the doctrine applicable has attached, and to all other transactions under the doctrine of agency they could not be held responsible for his ait any more than ii it had been a third person who signed it without any knowledge whatever on the part of the company that the party was within a hundred miles of any station of that carrier. Senator Pomerene. In other words, you want the railroad com- pany to be permitted to invoke the old rule, "it is not so nominated in the bond" ' Mr. Faulkner. On the same principle that you would invoke it if a man would sign your name to a note without your authority — exactly the same principle and no other. What is good for the one ought to be good for the other. Senator Pomerene. Well, if I had authorized somebody to sign notes in connection with my business, do you not think that I would be going to the extreme limit, if he would step outside of my office and sign my name to a note, if I would attempt to evade that liability? Mr. Faulkner. If you had given him authority to sign your name to your letters and he had executed that fairly and justly, and inside or outside of your room had signed your name to a note without authority, I would say it would be very unjust to you to even suggest the payment of it. Senator Pomerene. One is a case of criminality and the other is perhaps the case of a little bit of negligence on the part of the railroad company? Mr. Faulkner. Yes; there are cases of negligence. Senator Newlands. Senator Faulkner, I wish to ask you if in your opinion there are very many instances of either mistaken or fraudu- lent issues of bills of lading, during the past five years, involving any large amounts ? Mr. Faulkner. I can only answer that from having heard all the evidence before the committees of Congress by all the shippers and others, that there have been a number of mistakes and errors and losses — not any very large ones, except in one or two instances, when they reached as high as 110,000, I think, in one case. But taken in comparison with the number of bills of lading, the losses, it struck me, speaking absolutely impartially, have been wonderfully small. Senator Newlands. Assuming, then, that you had been obligated to pay the amounts claimed in these various cases and they had been added to the operating expenses of the company as an item in deter- mination, would it have been considerable ? Mr. Faulkner. That, of course, it is impossible to tell. I can only Speak of those that have actually mentioned their losses before com- mittees, which shows that it is very small as compared really to the actual losses that must necessarily occur in such an immense volume of commerce. BILLS OF LADING. 207 Senator Newlands. If we pass this bill that is now pending before us, would you expect those cases to multiply or diminish? Mr. Faulkner. Unless you put a penalty on the parties who are guilty of those acts, I think perhaps it would encourage rather than not do so. Senator Newlands. Your expectation is, then, that it would encourage fraud 1 Mr. Faulkner. For the reason that now the bill of lading is not negotiable; whereas if you pass this bill there would be a stronger inducement to perpetrate a fraud than exists to-day. Senator Newlands. And for that reason you assume that the lia- bilities of the corporation would be increased and that it would really constitute, or might constitute, a serious factor? Mr. Faulkner. I do, indeed. I can not tell, though. It is only a mere guess or opinion. There being no further questions, Mr. Faulkner was thereupon excused. The Acting Chairman. Before taking an adjournment I wdl state that a telegram has come, addressed to the chairman of the com- mittee, from Mr. Phelan Beale, relating to the controversy between himself and the representatives of the Southern and Louisville & Nashville Railways, and I will ask the reporter to insert it in the record, and the representatives of the railroads may look at the telegram before it goes in. The telegram referred to is as follows: New York, N. Y., March 1-2, 1912. Senator Claft, Chairman Interstate Commerce Committal , United States Senate: My representative, Mr. Richter, who is present on the railroad bill of lading measure, has wired me that the railway attorneys have questioned my statement made to your committee two week? ago. I see no room for dispute as to the correctness of my statement unless it be concerning the charge that agents of the Southern and Louis- ville & Nashville Railways in Selma and Decatur, Ala., deliberately falsified in answer to a telegram of inquiry concerning their receipt of cotton for shipment to New York, to the effect that the said cotton was on the way, when in fact it had not been received by them and that such agents were still employed by the said railroads. If this be the point, as well as my claim that Mr. Bywater, foreign freight agent of the Louisville & Nashville Railroad, wrote letters showing his full knowledge of the prac- tice of issuing accommodation bills of lading and his approval therefor, and the point is considered material by your committee, I beg that you name a dale sufficiently far in advance so that during the interim I may get the testimony given by the said railway freight agents and others under oath in the United States courts in Alabama in two cases certified and appear with such certification, together with original tele- grams from said agents and other data to support my statements. I am willing to rest my case on my charges and my ability to prove the same substantially. I respect- fully ask that you read this message to your associates and to the attorneys for the railways present, and that this message be incorporated in the record as a part of the statement which my representative, Mr. Richter, makes for me. Important court engagements here alone prevented me from attending before you to answer the attacks that I anticipated would be made upon my statement by the railroad repre- sentatives. I respectfully apologize to the committee for this informal manner of addressing it and only- resort to this remedy by force of circumstances. Respectfully submitted. Phelan Beale, Attorney for the German Cotton Exchange of Bremen. The committee thereupon, at 1 o'clock and 15 minutes p. m., adjourned until March 15, 1912, at 10.30 o'clock a. m. 208 bills of lading. friday, march 15, 1912. Committee on Interstate Commerce, United States Senate, "Washington, D. G. The committee met at 11.15 a. m. Present: Senators Clapp (chairman), Crane, Cummins, Oliver, Lip- pitt, Townsend, Newlands, Clarke, and Watson. The Chairman. The following letter from Mr. C. F. Oppermann, with newspaper clipping, will be inserted in the record: Galveston, Tex., March 4, 1912. Senate Subcommittee on Interstate Commerce, Washington, I). C. Gentlemen: Referring to attached newspaper clipping, beg to submit a few suggestions on the much-agitated bill of lading question. Our Oriental friend, Li Hung Chang is reputed to have remarked that "Gladstone" and " Bismarck " were two of the world's greatest men, but they talked much and did little. This appears to apply very forcibly to those who have been discussing bill of lading reform. To advance a theory which will bring results the most feasible way is to review the present status of issuing these documents, to wit: The forms are handed out to all shippers or their representatives upon application for same . This is a very lax method , and should be discontinued. This does not apply in all cases, but positively does in cases of forgery. My idea is that the forms should not leave the railroad unless as a receipt and contract for transportation; furthermore, that the commodity to be shipped, or its equivalent to the satisfaction of the railroad's representative, should be produced before his signature should be affixed. If necessary the forms could be copyrighted, thereby protecting them with a legal hedge. They should under no circumstances be left lying loose around the office, but should be guarded by some one designated for that purpose. Of course such an innovation would be objectionable to most of the rail- roads on account of additional expense entailed, results not being considered which at present are not obtained under a great many of the so-called innovations in vogue. Mr. Brandeis is already on record before the public as to a great number of existing conditions. As to the small agencies, their apparent negligence or lack of ability of the agent in charge; I firmly believe that an educator continuously upon the road would be a boon to the railroad and Hie shipping public. Results might at first be slow, but would eventually show up to great economic value to the railroads. Yours, truly, C. F. Oppermann. Present Bill of Lading Practices Denounced. counsel board of baltimore a oho before committee — southern railway attorney testifies for road — calls attention to large forgeries. Washington, March 1. General Counsel Bond, of the Baltimore & Ohio Railroad, declared before the Senate subcommittee on interstate commerce to-day that "as compared with holding up taxicabs, the frauds possible under the present bill of lading practices would be a com- paratively safe industry." Mr. Bund was one of a number of railroad attorneys who testified regarding proposed reforms in lading bill methods, designed to safeguard these documents and to hold rail- roads to strict liability for them. He favored action, but wanted an opportunity first for the counsel in the case to get together and work out detail bv detail a satisfactory adjustment as a legislative basis, conserving at the same time the interests of the banks. General Counsel Thorn, of the Southern Railway, also testified for the railroads, calling attention particularly to cotton bills of lading and to large forgeries that have taken place. Mr. Thorn said that liability of the roads for lading bills made out between the agents and shippers, with all the opportunity for collusion between these two individually, would place the railroads in the position of being not only carriers but bankers. He BILLS OF LADING. 209 said that the Southern Railway system had from 1,500 to 2,000 agents of varying ability, intelligence, and character. He stated that through the southeastern territory, east of the Mississippi and south of the Potomac, the railroads were already cooperating and had established a central bureau at New York, to which the roads forward copies of all lading bills. He said the complaints came from the banks, which felt that a New York bureau of banks con- solidated business at New York to the detriment of other lines. He said the roads wanted to cooperate to the fullest extent, but that they should not be liable. The following telegrams from C. H. Feltman, president Peoria Board of Trade, and C. W. Kimbell, National League Commission Merchants, will be inserted in the record: Peoria, III., March 14, 1912. Hon. Moses E. Clapp, Chairman of Committee on Interstate Commerce, United States Senate: We would most urgently urge your committee to report out favorably the Pomerene bill of lading bill with the changes proposed by the National Industrial Traffic League, and would also urge that no provision be inserted to allow any added compensation to the railroads for an order bill of lading, for the reason the Interstate Commerce Commission now have authority to grant the railroads the added compensation if it can be shown that they are entitled to it. The whole business interests of the country are entitled to a better and safer bill of lading than the roads now furnish. C. H. Feltman, President Peoria Board of Trade. New York, March 13. Hon. Moses E. Clapp, Washington, D. C. Regarding uniform bill lading hearing March 15, I respectfully request that audience be given John C. Scales, Chicago, and George F. Mead, Boston, who will appear before your committee in behalf of National League Commission Merchants. National League Commission Merchants, C. W. Kimball, President. The following letter from Commerce Club, St. Joseph, Mo., will be inserted in the record. St. Joseph, Mo., March 12, 1912. Hon. Moses E. Clapp, Chairman Committee on Interstate Commerce, United States Senate. Sir: Senate bill 4713, Sixty-second Congress, second session, relating to bills of lading in commerce with foreign nations and among the several States is, we under- stand, before your committee for consideration. This organization, representing the extensive shipping interests of this community, respectfully and urgently recommends the adoption of this proposed legislation, excepting, however, we would suggest modification thereof as follows: That section 23, page 11, line 20, be changed by striking out the words 'By the improper loading or," and that there be added to this section on line 22, following the word "bill," these words: "Provided, That if the carrier verifies the shipper s statement of property so loaded or refuses so to do upon demand of shipper, he shall not insert the words 'shipper's load and count' in such bill of lading, or words of like purport." Respectfully, yours, Commerce Club, By H. G. Krake, General Secretary. 42808°— S. Doc. 650, 62-2 14 210 BILLS OF LADING. Tie following letter from J. E. Zahm & Co., Toledo, Ohio, will be inserted in the record. Toledo, Ohio, March IS, 1912. Hon. Moses E. Glapp, Chairman Committee Interstate and Foreign Commerce, United States Senate. Dear Sir: Being large shippers of grain, and meeting much competition and the fact that a carload of wheat at present prices means an investment of over $1,000, and on corn about the same, we are opposed to any bill of lading that calls for a higher rate of freight when the grain is billed to the shipper's order. It is absolutely necessary as a protection to bill the grain to our order attaching bill of lading to the draft, and we don't see why one should be compelled to pay more freight on a shipment so billed. Yours very truly, J. F. Zahm & Co. The following letter from the Paddock Hodge Co., Toledo, Ohio, will be inserted in the record. Toledo, Ohio, March IS, 1912. Hon: Moses E. Clapp, Chairman of the Interstate Commerce Committee, United States Senate. Dear Sir: The grain shippers of the country are probably more vitally interested in the bill of lading hearing than any other class of shippers in the country. Nearly every grain dealer is obliged to use his bills of ladings as collateral at the banks from the time the grain is loaded in Western States until it reaches destination in the East or in the seaboard markets for export, so that the grain shipper and the banks with which he does business, are vitally interested in having the negotiable bill of lading. The railroads charge such high rates and have so few grain losses to pay that we think we are entitled to a negotiable bill of lading on basis of the tariff rates and that no extra charge, such as we understand they propose to make for an "order bill of lading" should be allowed to become a part of the law. We desire to go on record as demanding a negotiable bill of lading based on current tariff rates on grain, and we trust you will lend your influence as chairman of this com- mittee in the United States Senate to bring about such a result and prevent as far as possible legislation being passed in favor of the railroads and other big corporations. It's time the common people had an "even chance " and "a square deal " in all busi- ness pertaining to interstate traffic and commerce of the country. Yours very truly, F. O. Paddock, President. The following letter of Thomas P. Riddle, Lima, Ohio, with reso- lution, will be inserted in the record: Lima, Ohio, March 13, 1912. Hon. Moses E. Clapp, Chairman of Committee on Interstate Commerce, United States Senate Dear Sir: I trau.-.mit herewith a copy of a resolution adopted by a conference of millers and elevator operators of northwestern Ohio, northeastern Iadiana, and south- eastern Michigan, held under the auspices of our association in Fort Wavne, Ind., March 8, 1912, which resolution in effect is an indorsement of Senate bill 4713, rela- tive to bill of lading. We earnestly solicit your consideration. Yours, very truly, Thos. P. Riddle, Secretary. Resolved, That it is the consensus of opinion of this conference of millers and ele- vator operator-, of northwestern Ohio, northeastern Indiana, and southeastern Michi- gan assemMcd in Fort Wayne. Ind., this 8th day of March, 1912, that Senate bill 4713, known as the Pomereue uniform bill of lading, in the form now pending for consideration constitutes a wise, sound, and desiralde form, and that we recommend its adoption. Thos. P. Riddle, 0. W. Mahan, G. B. Neizer, Committee. Unanimously adopted by formal vote of conference. Thos. P. Riddle, Secretary of Conference. BILLS OF LADING. 211 The following letter from the Ohio Grain Dealers' Association will be placed in the record : Columbus, Ohio, March IS, 1912. Mr. Francis B. James, Washington, D. C. My Dear Me. James: I have yours of the 11th and await receipt of the documents in question. I nave given this bill of lading matter a great deal of attention and serious considera- tion during the past 10 years, and it is my opinion that all interests would be best pro- tected and conserved by the enactment of the Pomerene bill without any material I am very much opposed to the change which is being considered involving the pay- ment of an increased rate where the carrier assumes full common-law liability. It means but very little as compared with the status which would exist under the pro- visions of the present Pomerene bill. It would certainly work a hardship on the ship- per who does not have very much financial backing or is not possessed of very much property or credit, as the banks in discounting his drafts would perhaps say to him that he must have a bill of lading attached to the draft carrying the greatest possible security, which of course would carry with it increased cost of transportation. You can readily see how certain branches of business being handled in large volume on order bills of lading would drift into the hands of strong financial concerns and who would be able to have the property transported at the lower rate of freight and carry what little risk would attach under present conditions themselves. The railroads have no right to impose upon the shipper a charge to cover what they might term extra cost in protecting him as far as possible from forgery and manipula- tion of an order bill of lading. They can protect these documents without any mate- rial cost against ordinary causes, forgery, etc., as easily as they protect their passenger transportation, tickets, etc. I think it is fair to assume that they should be required to exhaust all reasonable resources for so protecting their order bills of lading without imposing a charge on the shipper. I am firmly of the opinion that the terms of the Pomerene bill are fair to all interests; and as all interests were practically in accord at one time on all the provisions con- tained in this bill I see no reason at this time for injecting new provisions and conditions . I sincerely hope that the bill as introduced may be reported by the committee with their recommendation for passage. Very respectfully, yours, J. W. McCord, Secretary. The following letter from the Indiana Grain Dealers' Association will be inserted in the record : Indianapolis, Ind., March IS, 1912. Hon. Moses E. Clapp, Chairman Committee on Interstate Commerce. Dear Sir: This association, composed of practically all the grain dealers and millers of the State of Indiana, has for years urged the enactment of such laws as would give us a better bill of lading than obtains at the present time. "We have examined the bill introduced by Senator Pomerene, No. 4713, and believe that it provides for a good bill of lading. I am therefore directed by this association to make our wishes known in this matter and urge the enactment of the bill above referred to into a law, and trust that the same may be accomplished at a very early date. Very respectfully, Chas. B. Riley, Secretary. The following letter from secretary of the Commercial Exchange of Philadelphia will be inserted in the record: Philadelphia, March 15, 1912. Hon. Moses E. Clapp, Chairman Committee on Interstate Commerce, United States Senate. Dear Sir: This exchange has for the past few years used every exertion to forward the passage of proper legislation upon the subject of bills of lading, and has upheld the efforts of the American Bankers' Association in that direction, believing that the interests of the public were well covered in the measures that were approved by mat association and by the National Industrial Traffic League. The board of directors oi this association has instructed me to communicate to you its hope that the bill intro- duced by Senator Pomerene, with the amendments that have been suggested by tne National Industrial Traffic League, shall meet with your approval and that ot your committee, and to say that the Senators from Pennsylvania have been requested to add their support to that measure. 212 BILLS OF LADING. The members of this exchange are most vitally interested in this subject, inasmuch as the great bulk of their trade is transacted through the medium of bills of lading, and, through the use of these bills of lading in their banking operations, the necessity is constantly before them of national legislation to safeguard their transactions and make a bill of lading a readily negotiable and legal document, without doubt as to the liability of the carrier. There is no question before Congress of higher importance than this, as it concerns the entire country so greatly, and we therefore hope most earnestly that something practical will be accomplished during the present session. I am, yours, very truly, Frank E. Marshall, Secretary. The following letter from legislative committee of the Grain Dealers' National Association will be inserted in the record: Crawfordsville, Ind., March 15, 191$. Senator Moses E. Clapp, Chairman of Committee on Interstate Commerce. Sir: I confirm having wired you to-day regarding Senate bill 4713, which bill relates to bills of lading. As stated in my night letter, the country grain shippers' interests are not altogether taken care of by the provisions of this bill. As the matter now stands a shipper loads a car of bulk grain, weighs it very carefully, and asks the railroad company for bill of lading. The bill of lading is issued by the railroad company based on owners' weights. When the car gets to destination the agents of the railroad company weigh the grain, and the shipper is practically com- pelled to accept the weights as given by them. It is not an uncommon occurrence for a car thus handled to fall short 100 buBhels, and we have known of cases of several hundred bushels, and instances of 10, 20, and 50 bushels are of daily occurrence. A claim against the railroad for such shortage is met by all sorts of excuses, and if the shipper is not able to show that actual leakage occurred in transit, his claim is rejected, and in fact large numbers of such claims are rejected. In the present dilapidated state of the railroad companies' equipment, this risk is a very large factor. It is perfectly reasonable and practical for the railroads to furnish weighmasters to weigh all of this grain into the cars, and if they are not willing to do so they should be compelled to accept the shippers' weights as final. As chairman of the legislative committee of the Grain Dealers' National Association, I have had under consideration for some time this subject, and I am thoroughly con- vinced that it is not only feasible but reasonable and practical for the railroad company to weigh all grain that they receive in bulk in carloads for transportation. If there is a likelihood of bill S. 4713 being put on its passage, I should like very much for our committee to be heard in behalf of the country grain shippers. I am in hearty sympathy with the principal part of bill S. 4713, and am a firm believer that a bill of lading can be made a sound commercial document in which shipper, transportation company, and banker can all be alike protected, but I am very sure that bill S. 4713 does not protect all these interests. Most respectfully, yours, A. E. Reynolds, Chairman of the Legislative Committee of the Grain Dealers' National Association. The following letter from Western Grain Dealers' Association will be made a part of the record : Des Moines, Iowa, March 14, 1912. Hon. Moses E. Clapp, Senate Chamber, Washington, D. C. My Dear Sir: The members of the 'Western Grain Dealers' Association are very much interested in legislation relating to bills of lading. As you no doubt appreciate the fact that it is very important to maintain the integrity of' bills of lading in such a manner that shippers may use them as collateral with their bankers, and that if the bill of lading to be thus used by shippers generally should be discredited to any extent whatever, it would materially interfere with commerce and result in a monopoly of the shipping business by the larger corporations. _ We are inclined to favor Senator Pomerene's bill, S. 4713, that is now under con- sideration by your committee, and we desire to ask that you give this matter most careful attention, and work to the end that a law mav be enacted as soon as possible along the lines suggested in this bill. You will perhaps remember me as formerly being a resident of New Richmond, Wis. With kindest personal regards, I am, Yours, respectfully, Geo. A. Wells. BILLS OP LADING. 213 The following letter and draft of resolution from the president of the Board of Trade of Detroit will be placed in the record : Detroit, March IS, 1912. Hon. Moses E. Clapp, Chairman Interstate Commerce Committee, United States Seriate. Dear Sir: Please find inclosed draft of resolution on Senate bill 4713. The position of our board of trade could, of course, be further elaborated, but we desired to be brief and simply to impress upon you that there is a unanimous cry here for safety and fairness in so far as bills of lading are concerned. Soliciting your efforts in that direction on behalf of the organization which I repre- sent, I am, Yours, most respectfully, Arthur S. Dumont, President Board of Trade of the City of Detroit. Resolution Unanimously Passed by the Members of the Detroit Board of Trade in Session March 12, 1912. Whereas it is the business of this exchange to supervise and regulate the handling of grain received from this and virtually all of the surplus-grain-producing States of the Union; and Whereas our members, in consideration of the welfare of the western shipper of grain to this market, are obliged to pay drafts representing virtually face value of such shipments, on presentation, such drafts having only railroad bills of lading attached; and Whereas such bills of lading are positively refused as collateral against loans from local banks, thereby eliminating the element of credit in a manner absolutely unjust and unfair to the middle man; and Whereas the general business of our members is rendered generally and unnecessarily hazardous by the form of bills of lading which are at present furnished by bills of lading covering outgoing shipments: Therefore be it Resolved, That we most heartily and unanimously indorse Senate bill 4713, intro- duced by the Hon. Senator Pomerene, with the following suggestions: Paragraph B of section 3 be eliminated as presenting a loophole for possible unfair advantages by the railroads. That section 23, page 11, line 20, be amended by striking out the words "by the improper loading or," and by the addition on line 22, after the word "bill, " "Provided, That, if the carrier verifies the shipper's statement of property so loaded or refuses so to do upon demand of shipper, he shall not insert the word 'shipper's load and count' in such bill of lading, or words of like purport." The argument on this latter amendment being that the value and importance of grain traffic justifies the same degree of care on the part of the railroad in reference to checking as in the instance of all other classes of commodities, and that it is an evil which has crept into prasent customs for the railroads, after having been availed of the facili- ties of the grain shippers and elevator owners for the weighing and loading of grain, to in turn adopt that very convenience as an argument against their own responsibility in the premises. Most respectfully submitted. Board of Trade of the City of Detroit, Arthur S. Dumont, President, H. B. Simmons, First Vice President. F. W. Blair, Second Vice President. F. W. Deerino, Secretary. The following letter from Mr. George Neville, president New York Cotton Exchange, will be inserted in the record : New York, March 11, 1912. Hon. Moses E. Clapp, Chairman Senate Committee on Interstate Commerce, Washington, D. C. My Dear Sir: I appeared before the Committee on Interstate Commerce on Sat- urday, March 2, in support of the Stevens or the Pomerene bill, regarding bills of lading. In the course of my statement I was asked by Senator Townsend which of the two bills 214 BILLS OF LADING. I favored. I told him I had no choice in the matter; all I wanted was relief; but that I thought an amendment could be drawn, of 15 or 20 lines, that would cover the case, and I was asked by the committee to submit that amendment, which I give you below: An amendment to an act to regulate commerce, to be part of section 20, following line 6, page 29, as per publication of < harles S. Hamlin, Esq., corporation counsel for the Boston Chamber of Commerce, published by Little, Brown & Co., Boston, 1907, being the Carmack amendment: "The common carrier, railroad, or transportation company, shall post, in a conspicu- ous place at each station on its line, the name of its or their accredited agent and [orj employees acting for said accredited agent, authorized to sign bills of lading or receipts issued'for goods delivered to such common carrier, railroad, or transportation company, for shipment over its or their lines. Any bill of lading or receipt signed by their duly accredited agent or employee shall become a lien on such common carrier, railroad, or transportation company, and such common carrier, railroad, or transportation company shall be liable to a consignee named in a nonnegotiable bill of lading or the holder of a negotiable bill of lading, who has given value, in good faith, relying upon the descrip- tion therein of the goods, for damages caused by the nonreceipt by the carrier or a con- necting carrier, of all or part of the goods described in the bill of lading at the time of its issue." Yours, very truly, Ceo. W- Neville, President. The following letter from Daniel H. Hayne, Baltimore, Md., will be inserted, in the record: Baltimore. Md , March 7, 1912. Hon. Moses E. Clapp, Chairman Committee on Interstate Commerce, United States Senate. Dear Sir: I respectfully beg leave to submit a few observations on what is known as the "bankers' 1 ill," relating to the negotiability of the bill of lading, now 1 efore your committee. I have not seen a copy of the 1 ill introduced at this session and did not learn of the hearing before the committee until too late to attend. After a long study of the bill of lading in the actual work of preparing the revised standard bill of lading, now in use south of the Ohio and east of the Mississippi Rivers, and by the coast water lines tributary thereto, I am fully convinced that the carriers are now accepting nine-tenths of the load of responsibility relating to "order-notify" shipments, which are the only shipments involved in the legi-lation before you. The "order" clause in the bill of lading requires the carrier to hold the freight covered by the 1 .ill of lading until its delivery upon the surrender and cancellation of the original "order" 1 ill of lading properly indorsed. This "order" clause is for the convenience of the banks and the shippers, to enable them to finance their trans- action. This ' ' order " clause contained in the bill of lading is not, per se, a part of the work of transportation. It is a growth which has been joined to the transportation by the voluntary act of the carrier for the purpose of assisting the banks and the public in their financial affairs, and with which the carrier, considered purely as a transporter, is not interested; and for which additional service and responsibility it receives no additional compensation whatever. The carriers have been generous in assuming the responsibilities of the "order" clause. The mistakes which occur in the transportation, and related to the "order" clause, are numerous, and the carrier has assumed all the load of that responsibility after the goods have been received . The point involved in the present bill before you is to make the bill of lading fully negotiable so the carrier will be held also for goods which it has not received, and which may be covered by a bill of lading issued beyond the scope of the agent's au- thority, and, indeed, in direct opposition to instructions to him. The mistakes, errors, or losses growing out of this latter element are negligible, when considered in relation to the great responsibilities which the carriers voluntarily accept in the "order" clause now contained in their bills of lading. But it seems that the banking interests are not satisfied, and want the carrier made responsible for all losses which the lender may sustain. The result, in passing the bill before you, will be to transfer what should be the lender's share of the responsibility, in dealing with its patron and borrower, to the shoulders of the carrier now greatly oppressed by the burden of the "order" clause. When a shipment is made to "order," and the carrier has received the goods, it is responsible, under the "order" clause in its bill of lading, for all errors, even those growing out of the laxity of the banks in the failure to inspect the title. Concededly, the lender which trusts its patron and borrower ought to have some responsibility BILLS OF LADING. 215 requiring very careful examination of the patron's or borrower's standing, and the property he offers as collateral, before indorsing such patron or borrower as a man worthy of confidence. The bill is unfair, and upon examination the true inwardness of it will be found to be an effort on the part of the commercial interests to avoid what is required in all business transactions, namely, an inspection of title before credit is given on the faith of the collateral. There is no difference between the bill of lading collateral or any other collateral; and in no instance is it required that collateral should be made negotiable to underlie another negotiable instrument, namely, the note. What you are asked to do is to^ establish two negotiable instruments for the same transaction; one, the note which is now negotiable, and the other, the bill of lading now proposed to be clothed with full negotiability, to accomplish it. You are also asked to strike down the well recognized law announced by the Supreme Court of the United States, namely, that an unauthorized act is a void act, and to establish by statute in the place thereof the principle that an unauthorized act is a valid act, in order to relieve the banks of a very small measure of risk which they ought to prop- erly assume in taking a bill of lading for goods which inquiry would disclose had not been delivered to the carrier. Since the earner has added the "order" clause to the bill of lading to accommodate the banks and the public, and has accepted fully nine-tenths of the responsibility of all the errors that grow out of the ' ' order " bill of lading, the lenders ought to be required to inspect "order" bills of lading which they receive'to establish, first, that the goods have been received by the carrier (just as all titles to property are tested), and also to protect themselves against the forgeries which have been perpetrated on them by their own patrons, and with which the carrier has had absolutely nothing to do. The two prominent illustrations presented to your honorable committee, viz,, the cotton forgeries of the South several years ago, involving millions of dollars, and the recent forgeries of grain bills of lading in Baltimore, do not bear on the bill before you. They were forgeries, pure and simple; that is, bills of lading were manufactured by the patrons of the banks. It would seem to be in the interests of the banks to insist that inquiry be made on an "order" bill of lading to see whether the property is in the hands of the carrier, and it will not aid the banks to let them rest in fancied security that because a bill of lading is made fully negotiable they have no further inquiries to make regarding it. Indeed, the action taken recently by the Baltimore financial interests, shown in the incloBed clipping from the Baltimore American of February 25, 1912, illustrates that effort is being made in the proper direction, namely, inquiry by the banks on a form to the carriers, and you will notice at the end of the clipping that the banks do not anticipate that more than 20 per cent of the shipments will be from remote territory causing any delay. Even this delay would not be considerable. This is as it should be, and if this matter is left to the business judgment of the bank and the carriers it will be solved along proper lines and will not require the revolution in the law as proposed . Taking all the cases which have occurred in the past 20 years, the percentage for which the carriers can now be held will amount, as indicated, to fully nine-tenths of the errors which occur. It is extremely rare that there is any loss due to the issue of a bill of lading before the receipt of the goods, and even as to this responsibility the banks have absolute protection in the method of inquiry indicated in the inclosed clipping. If the banks are required to make these inquiries to protect this small possible risk, it will serve to guard against the very grave forgeries which have occurred in the past, and will also prevent certain laxity in inspection of the borrower and his col- lateral, which has occurred, and which is now occurring. Indeed, so loose has been the inquiry in the past, that straight bills of lading, without the "order" clause, and bills of lading not signed at all, have been accepted as collateral by the lender. I should be very glad to appear before your committee and trace out the history and the development of the bill of lading with reference to commercial credits, if you should desire it. Respectfully submitted. Daniel H. Hayne, Formerly Chairman Subcommittee, Revised Standard Bill of Lading. P. S.— I inclose a copy of the revised standard order bill of lading with the "order" clause marked, showing that so much of the negotiability as may be required, mounts up to cover all the requirements of the "order" clause. What more could a lender require of a carrier which has adopted this bill of lading and included such an "order clause for the benefit of the commercial interests without any extra compensation whatever? 216 BILLS OF LADING. Standard Form — Order Bill of Lading. Arrangement of colors and forma in manifolding, on shipments consigned "to order;" (1) Shipping order (blue); (2) bill of lading (yellow); (3) memorandum (blue). Company. ORDER BILL OF LADING — ORIGINAL. Shippers No. . Agents No. . Received, subject to the classifications and tariffs in effect on the date of issue of this original bill of lading, , at , 19—, from , the property described below, in apparent good order, except as noted (contents and_ condition of contents of packages unknown), marked, consigned, and destined as indicated below, which said company agrees to carry to its usual place of delivery at said destination, if on its , otherwise to deliver to another carrier on the route to said destination. It is mutually agreed, as to each carrier of all or any of said property over all or any portion of said route to destination, and as to each party at any time interested in all or any of said property, that every service to be performed hereunder shall be subject to all the conditions, whether printed or written, herein contained (including conditions on back hereof), and which are agreed to by the shipper and accepted for himself and his assigns. This bill of lading is assignable; it is negotiable only in so far as may be required to carry out the promise of the carrier made in the following surrender clause, and ia enforceable as provided in section 10 of this bill of lading, according to its original tenor and effect. The surrender of this original order bill of lading, properly indorsed, shall be required before the delivery of the property. Inspection of property covered by this bill of lading will not be permitted unless provided by law or unless permission is indorsed on this original bill of lading or given in writing by the shipper. The rate of freight from to is in cents per 100 pounds: as ■£cS c3 rf j^ 7J "£ ja 3 1 *H , page 11, line 20, strike out the words '"by the improper loading or" and then add to this section, on line 22: Pruvidnl, That if the carrier verifier the shipper's statement of property so loaded, or refuses so to do upon demand of shipper, the carrier shall not insert the words "shipper's load and count," i>r words of like purport in such bill of lading. BILLS OF LADING. 233 That is the only change that we would like to have made in the Pomerene bill. We believe that that bill meets the requirements thoroughly. It has been adopted by nine States, practically; and very likely in the uniform adoption by the Stales will finally become a bill of all the States, so that it will cover both intrastate shipments as well as interstate shipments. At the previous hearing, the counsel of the railroads spoke of the necessity for protecting the cotton bills of lading when they go to Eu- rope; he said that cotton was cash. Well, grain is cash to the same extent. We raise in this country approximately 5,000,000,000 of bushels of grain a year, a great proportion of which goes from one State to another, and is covered by order bills of lading, and shipped by men of small means who are compelled to take these bills of lading to their banks in order to keep on buying from the farmers, and we, as grain merchants in the centers, consider these bills of lading carry with them the negotiable feature, and that they will deliver to us the property they call for. Therefore the same argument that holds good for the cotton men will hold good for the grain trade of this country. We must have a bill of lading that is absolutely safe — delivering to us the property that that bill of lading covers. Now the Southern Railroad gives to the cotton shipper — when it goes to Europe — the protection in Ms bill of lading without extra charge, whereby they certify the genuineness of this bill of lading; but when it comes to the domestic consumer of this country they are unwilling to go to that extent, and they make us su.Ter. Now I do not see why they should discriminate. If they can ar- range to protect the cotton shipments to Europe, they certainly can arrange to protect shipments, whether cotton or grain, to the domes- tic consumers of this country, and we are entitled to it. The learned counsel for the railroads the other day stated that crime would be bred all over this country, that everybody would get at the big railroads and issue fraudulent bills of lading on account of this law, and they would lose enormous sums of money. I do not believe that. But supposing they were the targets for these bills of lading. I am willing to go on record that if after a year's trial of a law, as outlined by the Pomerene bill, they can show to the Interstate Com- merce Commission that they have lost enormous sums of money through this law, I am willing to say for the shippers that I represent that we are always willing to be fair, and any just rate that the Inter- state Commerce Commission may decide the railroad companies are entitled to under such law, we are willing to abide by; but we do not want to say that they shall have the privilege of collecting an excessive rate unwarranted by the facts. Now, if they will give the facts to this impartial body Congress has established for this purpose and show them that they will lose this money, we will agree to any rea- sonable rate. It would be unwise probably to enact in this law a guaranteed rate for a guaranteed bill of lading. In other words, it would put into effect two sets of bills of lading. W hat would be the result ? You would have the present bill of lading which you are using and you would have a new guaranteed bill of lading at the high rate. Suppose that rate increase would be arbitrary, say 5 per cent only— although the parties have talked in previous meetings, in conferences that were had between shippers and railroads when we agreed upon this uniform 234 BILLS OF LADING. bill- of lading, that the rate might be 20 per cent increase. Now, the average rate on grain is 20 cents a hundred, and add 5 per cent — add a cent a hundred, which is prohibitory in the grain business, because it is handled on a very close margin — the result would be that the small country shipper who needs protection on the order bill of lad- ing more than the large shipper, his banker would say to him, "You have got to ship these goods under that guaranty bill of lading or I will not discount this bill of lading at the bank for you." He has" got to pay a cent a hundred more. Now, he can not compete with a very- large firm whose credit at the bank is unlimited, and the bank would take those old bills of lading on the standing and the indorsement of the firm Avho made the deposits for those bills of lading attached to drafts. You can readily see the discrimination it would cause in a short time. It would drive out of business the smaller shippers with limited capital. For that reason I am opposed to this law containing any clause that will involve a mandatory order for the railroad com- panies to charge a higher rate without first leaving it to the commis- sion to decide whether such rate will be proper and right. They further state in their testimony that every shipper knows that these railroad agents are not responsible for these bills of lading. I wish to say that in my experience of 35 years in shipping grain and going out in the country and mingling from one end of this country to the other, I have never yet met a man who did not believe that that bill of lading was as good as gold, and for all that was back of it, and that every agent had the authority to sign that bill of lading. Xow, according to the testimony given heretofore, that does not seem to be the fact, but that very few agents are authorized to sign order bills of lading, and it is therefore of some importance that we should have this law so that we should know absolutely that every agent in their employ has the right to sign these bills of lading that come to us. In this way we have no protection whatever. I do not know that I ought to take up the subject any further. I could keep on talking for an hour, probably, and tell youabout differ- ent things from a practical standpoint, but it seems "to me that these few points are the leading ones that we are asking for, that we be pro- tected in the bills of lading at a fair rate, and we are willing to leave it to the Interstate Commerce Commission as to what shall be the just compensation. Senator Clarke. In your 3.") years of experience in the grain busi- ness have _you ever gotten hold of a bill of lading that had been issued by an agent where the grain had not been delivered to the carrier? ilr. Goejiaxx. Xo, sir; my only difference with the railroad com- pany has been that they delivered the property without surrender of the bill of lading, and then they paid me for it because their agree- ment was to pay for it. My dealings are largely with the country agents. That only certifies further the honestyof the country agents. Senator Clarke. Do not most of your troubles grow out of the fact that they reserve in the bill of lading the privilege of milling the product in transit ? Mr. GoE.MAxx. The trouble is mostly at the transit points. In handling grain we are obliged to have transit points — I mean, to operate at a transit point on the Pennsylvania Railroad. Senator Clarke. Has it not also become a custom that confidence grows up between the banks and the railroad people and the grain BILLS OF LADING. 235 dealers by which they take no real notice of the fact as to whether the shipment of grain is covered by an outstanding bill of lading ? Mr. Goemann. The roads are getting more particular on that point. Senator Clarke. Is it not a fact that bankers are pretty generally aware of the fact that the consignee is not observing altogether the identity of the particular shipments of grain and the particular bill of lading which they have in hand, but allow him to ship in and ship out indiscriminately, relying upon the fact that he would have as much grain in the mill at one time as the bill of lading that they hold calls for ? Mr. Goemann. It is the only way, practically, that business can be operated. Senator Clarke. But it is altogether done in opposition to the will and wishes of the local banker who holds the bill of lading ? Mr. Goemann. He understands that the tonnage is covered by the bills of lading. Senator Clarke. But it is not the identical tonnage covered by the bill ? Mr. Goemann. Not the identical tonnage, but the total tonnage covers the same grain. Senator Clarke. That is the difficulty that I have found in our country. Mr. Goemann. Mr. James has suggested that I go a little further in explaining the milling in transit proposition. Of course grain elevators at these terminal points take this grain during its big move- ment from the farms right after harvest, when the farmers sell it from the field, and therefore they are compelled to accumulate at these terminal markets a vast amount of grain and reforward it. Our storage is done in large tanks or bins that will hold anyAvhere from 25 to 50 cars at a time, and that grain is held in storage, dumped into one of these large bins, and reforwarded after it has been cleaned, mixed, or dried or any of the commercial uses necessary to cover the handling of the grain in transit. If a banker has as collateral bills of lading for 25 cars of corn, these 25 cars are m one of these bins, and while the identity of each car is not protected the kind of grain represented on that bill of lading is there. Senator Clarke. The bills of lading identify the corn on which the actual advancement was made by giving a description of the car in which it was shipped, the point from which it was shipped, and the destination, so that the lien the banker has by the acquisition of the bills of lading is on that specific property and no other property ? Mr. Goemann. Which mav be in bin or tank 1 or 5. Senator Clarke. If that specific grain has been milled out, there is sufficient grain in that bin to take care of that particular description ? Mr. Goemann. Yes. sir. Senator Clarke. That is it ? Mr. Goemann. Yes, sir. Mr. James thinks that you have the idea that it is only milling in transit. It is grain also in transit. ^ e forward grain without milling it. Senator Clarke. If the railroad company declines to deliver to the elevator or to the mill that particular grain until you surrendered that particular bill of lading, that would protect themselves ? 236 BILLS OP LADING. Mr. Goemann. Iii the majority of cases they have surrendered them when it comes there. The bankers hold them from the time it is in transit, and when the grain reaches this point, then the bill of lading is taken up from the bank and the warehouse receipt too. Senator Clarke. In every case? Mr. Goemann. In the majority of cases. Of course, I can not tell what the custom is at each and every point; but in the majority of cases the careful railroads will have the bills of lading surrendered before they deliver the propert}-, and then when it comes out they issue a new bill of lading showing it is in transit. Senator Clarke. Is not that care that you have just described the exception and not the one that conforms to the usual rule ? Mr. Goemann. I would not like to say that. But in my own case I surrender it all. I would not want to go on record, because I might make a statement that I might not be able to confirm. But there would be a chance where the railroad company was careless through its agents to have occur what I suggest. Of course, the opportunity is there. Senator Lippitt. I understood you to say that in your 35 years' experience you yourself have never suffered loss from the trouble which this bill is proposed to cure. Mr. Goemann. No, sir; I have not, not on inbound shipments. But we have on outbound shipments where the agent has delivered my property without the surrender of the bill of lading, and in that case we have filed claim against the railroad. Senator Lippitt. These railroads have always protected you in the past? Mr. Goemann. Yes, sir. Senator Lippitt. So that in your experience you have never suffered a loss of any kind through the present situation? Mr. Goemann. No, sir. Senator Lippitt. Is there much loss suffered from the present situation ? Mr. Goemann. Taking the enormous volume of tonnage that is carried and the enormous amount of money involved, it is very small. And that is why I am objecting to any arbitrary rate or two sets of rates made by law, because of the volume of loss compared to the money involved, which is very small. Of course, when they do occur they hurt you so bad that we want to be protected. In the one or two cases where the banks get hurt they draw down on everybody, and everybody suffers. That is the difficulty. It is not the enormous sum so much that the bank suffers, but when they do suffer they draw down on everybody, and we all have to suffer, because our accommodations are curtailed, and we must have the freest inter- change in the discounting of our drafts and bills of lading, because we have, to do so much of our business that way. Senator Lippitt. Has there been any change in the recent practice on the part of the railroads that has aggravated this trouble? Mr. Goemann. This Delaware & Hudson Railroad case has been the most recent one and the most severe in the grain line that I have any recollection of. That was at a transit point. Senator Lippitt. Did that case occasion the introduction of this bill? BILLS OF LADING. 237 Mr. Goemann. I do not think so. The shippers have been asking for a bill of lading for the last 20 years, and we got together — the bankers and the railroads and the shippers — and this order bill of lading that is now in effect is the result of that. There was a com- promise. We could not force anything. We asked the Interstate Commerce Commission to indorse it and requested the railroads to put it in use. At that time the Interstate Commerce Commission had no power over bills of lading, but I understand they have since acquired the power over bills of lading, under the Carmack amend- ment. If this goes through it will meet the requirements of the bankers and the shipping public generally. Senator Lippitt. That is all. The Chairman. That will be all. There being no further questions, the witness was thereupon excused. STATEMENT OF J. W. WARNER, REPRESENTING THE NEW YORK PRODUCE EXCHANGE, NEW YORK CITY, N. Y. The Chairman. State your name, residence, and occupation, for the purpose of the record. Mr. Warner. My name is J. W. "Warner, of New York. I am a grain receiver and exporter, representing the New York Produce Exchange. For fear that you may not realize what an important concern we have, I will simply state that we are incorporated under the laws of the State of New York, a body of business men of about 2,100 members, and our business consists chiefly in dealing in grain, flour, and provisions, and some other products of the soil, raw and manu- factured. We are, of course, continually buying and selling these products, receiving and shipping and merchandising them, the title of which goes from one to the other, from buyer to seller, through the warehouse receipts or bills of lading. I mention that to show that we are interested, because there seems to have gone out from this hearing an impression — or the impression has been deliberately created — that this is a bankers' measure; that nobody else is par- ticularly interested except bankers. I am of that class generally known as receivers and exporters. We are at the jumping-off place. The bills of lading that are issued in the West come through a great many banks and perhaps a number of parties; when they come to us, the last holder, presumably we have paid the drafts attached and we own that bill of lading. If it turns out to be spurious, we are the only one who suffers. If we use those bills of lading subsequently to get loans from the bank, the bank does not stand to lose 1 cent as long as the parties to whom they have loaned remain solvent. So I say that the grain receivers at the seaboard are as interested in this bill, if not more so, than any other class. There is absolutely nothing that the organization can do to add validity to this bill of lading. It has been stated that the bankers at the initial point might, if they would, do something to verify the bills of lading before they accept them. So far as my own belief is con- cerned, I believe that is impracticable. But they should answer that 238 BILLS OF LADING. query. They seem to be pretty able to take care of themselves here. So far as the receivers at the seaboard are concerned we have abso- lutely no opportunity to verify those bills of lading. Generally the first information we have that a rail shipment has been made against any of the purchases we have made in the West is when the bill of lading is handed into our office and payment de- manded against draft attached, or else it goes to protest. We have no opportunity to verify it, and there is no place to which we could go if we had a reasonable opportunity. Of course it takes anywhere from a week to 10 days to verify a bill of lading and that is absolutely useless. If we do, as we sometimes do, take a bill of lading down to the carrier that brings that grain — I am speaking of grain particularly now — if we take it down to the office, the clerk to whom we apply generally turns white, his knees go together, and he stutters and stammers something that is neither illuminating nor convincing. The best he will do is to make an inquiry, and that takes from two days to three weeks. It often happens by the time that we get an answer, the ear about which the inquiry was made is in the delivery yard. In the meantime, if we accept any of those bills of lading we are rest- ing under the feeling all the time that we may have something on our hands that is no good. All our resources are sometimes absolutely invested in those bills of lading. Sometimes more than all our resources are invested, because sometimes if business is running good we borrow from the banks, or other people who have money to lend on these bills of lading. So I do not see how anybody could be more interested than the receivers of this grain and grain products. It has been stated here, I think, by S< nator Faulkner, as I read over the testimony of the last hearing, that the class of employees of the radroad companies are as intelligent and of as high a character as any of those employed by large concerns in a clerical capacity. I am willing to take that statement. I do not believe the railroad companies are assuming any consid- erable risk at all in agreeing to this bill if they would do as" they did in the case of cotton. If they will notify their agents in a way that they will know that it was just what they meant, that they should issue no bills of lading until the goods had'actually been received and in the physical possession of the road, I do not believe that those employees would sign bills of lading after having received those instructions. I do not think the character or the honesty of an employee is measured by the salary he gets, because as a matter of fact it_ is testified here in these hearings by those who know more about it than I do that all the trouble on account of these fraudulent bills of lading have taken place at the larger shipping points and have taken place by agents who have been trying to get business. I dare say that these small agents are continually nagged by their superiors to get more business, and they get the feeling from this continual nagging that the idea of their superior is that they must get business — get it honestly if they can, but get it. And so when they know that the railroad company is not responsible for the issu- ance of these fraudulent bills of lading — perhaps they are not fraudu- lent, because perhaps they are issued in good faith — they go out and issue those bills of lading with the expectation that the shipper with the money he gets from the bank on those bills of lading will go out BILLS OP LADING. 239 and buy the stuff and make good the bills of lading. But I believe that if these instructions were given in good faith, these employees, who are just as honest as any other similar class of employees in any other business, would not issue those bills of lading. So, on behalf of the New York Produce Exchange and of the grain interests generally, I urge the committee here to recommend some legislation that will make these bills of lading good, just what they purport to be, so that we can carry on the business in a fairly safe way, which we can not now do. Just a word more. Many references have been made all through these hearings to these frauds at Albany. We have with us to-day from New York a man who is a victim of those fraudulent issues of bills of lading. He has brought some of the bills of lading down here. They are all of one kind. They are absolutely regular, so far as anything on the face of them is concerned, and if you will allow I should like to have him appear. The Chairman. We will hear him later. There being no further questions, Mr. Warner was thereupon excused. STATEMENT OF HUGH E. WHITE, SECRETARY OF THE MINNE- APOLIS TRAFFIC ASSOCIATION, OF MINNEAPOLIS, MINN. The Chairman. Mr. White, just state your name, residence, and business for the purpose of the record. Mr. White. My name is Hugh E. White, secretary of the Minne- apolis Traffic Association, of Minneapolis, Minn. Mr. Chairman and gentlemen of the committee, I only desire to say a word generally on behalf of the membership of the Minne- apolis Traffic Association and the St. Paul Association of Commerce. Our ideas are represented in the Pomerene bill. I have not given any consideration to the amendments which have been referred to or proposed, rather, by the gentleman who spoke a few minutes ago, but in the main, our ideas, as I say are presented in the Pomerene bill, and we will be very well satisfied with legislation along that line. That is all I care to say. There being no further questions, Mr. White was thereupon excused. The Chairman. I will ask the audience to retire, as we desire to sit in executive session for a few moments. Thereupon at 12.35 o'clock p. m., the committee went into execu- tive session, after which at 12.45 p. m. the committee took a recess until 2 o'clock p. m. AFTER RECESS. The committee reassembled at 2 o'clock p. m. The Chairman. Mr. Magnuson, we will be glad to hear you. STATEMENT OF C. A. MAGNUSON, A GRAIN ELEVATOR OPERA- TOR, OF MINNEAPOLIS, MINN. The Chairman. Give the reporter your name, business, and resi- dence for the record. 240 BILLS OF LADING. Mr. Magnuson. My name is C. A. Magnuson, of Minneapolis, Minn., and my business is operating grain elevators — shipping and receiving. Mr. Chairman and gentlemen of the committee, I appear here before your honorable body individually as a receiver and shipper of grain and grain products and seeds; as manager of a line of country elevators and a terminal elevator doing business through the Chamber of Commerce of Minneapolis, Minn., and in the States of Minnesota, North and South Dakota; also by appointment representing the Chamber of Commerce of Minneapolis, Minn., with its varied receiving and shipping interests, through not only the three States mentioned above, but aU other States tributary and shipping to and receiving grain from Minneapolis; also as a member of the Duluth Board of Trade, and as a member of the National Grain Dealers' Association. In relation to the uniform bill of lading, I wish to say first, that there have been some things brought out here in relation to whether or not any losses have been suffered by reason of the present bills of lading. Losses have been suffered by our own company and also by other companies in the direction of settlements which we have been forced to make with carriers on account of a pretended contract which now appears on the back of the bills of lading, and which a shipper signs practically under duress; iirst, by reason of not acknowledging on the part of the railroads the amount of grain put into the cars by shippers, and also by reason of the stipulation on the back of bills of lading that the basis of settlement in case of the destruction of property should l>e on the date of the issue of the bill of lading. The Ciiailman. The price of the goods on the date of the bill of lading % . Mr. Magnuson. The price of the goods on the date of the bill of lading. The method of that settlement is wrong for the reason that the shipper has only opportunity to buy his grain "hack when he is notified that it is destnryed. As an illustration I will say that if a shipper shipped a thousand bushels of flax on the 2d day of January from a point in North Dakota to Duluth, Minn., which was on the 2d day of January worth $2 per bushel in Duluth, and the shipper would be notified by the carrier that the flax was destroyed on the 20th of January. On the 20th of January the price of flax was .152.50 per bushel in Duluth. In order to preserve or deliver if sold his property the shipper would have to buy 1,000 bushels of flax in Duluth at S2.50 per bushel, and he would present a claim against the railroad company for $2.50 per bushel, the measure of his damages. The railroad company, by reason of an implied contract on the back of their bills of lading, would only pay 12 per bushel, so that he would be out on that shipment S500. The bill of hiding should be so constructed that the measure of damages which the carrier should pay should be the measure of damages sustained by the shipper, and 'that would not be ta the dis- advantage of the railroad company, because in a general average of the claims presented the road would have as many times, perhaps, when the price would be less at the time of the destruction of the property as times when it would be more. The individual shipper might not have but one loss in a lifetime; he might not have more than one car destroyed in his lifetime, and if he sustained a loss on that he would have no way of averaging it up. BILLS OF LADING. 241 The question would naturally arise as to why a carrier should wish to have the time of settlement fixed as to price on the date of the bill of lading rather than at the time when the shipper or consignee has notice of the destruction of the property; and, as an illustration, would say that, on the date of shipment of a carload of flax, the price would be »2 on the date of the bill of lading. At the time of the destruction of this car of a thousand bushels of flax, the price would be $1.50 per bushel. The only interest the shipper would have would be to buy back 100,000 bushels destroyed for him by the carrier. If he only paid $1.50, not knowing the law and that being his loss, it would be natural for him to make his claim for $1.50 per bushel or SI ,500, and the carrier would pay him $1 ,500. He would be satisfied and the carrier would have paid him $500, less than he was actuaUy entitled to by reason of the contract to pay the price on the date of the bill of lading. Whereas, on the other hand, if the price at the time of the destruction of the property was $2.50 per bushel, if the shipper made claim for $2,500, the carrier would then fall back on the fact that, at the time of the date of the bill of lading, the flax was only worth $2 per bushel. Now, in regard to the carriers being responsible for bills of lading, I would sa}- that in Minnesota and the Northwest we have a law whereby if a grain agent issues a grain receipt for grain before it has been delivered into his elevator, he is criminally liable — subject to a term in the State prison for the offense. If a cashier of a bank issues a. certificate of deposit without receiving the money, he is also criminally liable. Why should not the carrier exercise the same care, be under the same restraint to not issue a bill of lading previous to the receipt of the goods, and under the same conditions? In relation to the present bills of lading prepared and submitted to this committee, the elimination of and the addenda thereto has been stated by a previous speaker, so that it is not necessary to refer to it again; and I agree perfectly with the elimination and the addenda offered. Further, I would wish to call the attention of your committee to section 27, page 13, of the Pomerene bill, No. 4713, which I think should be very carefully studied by the committee. The argument for the elimination of section 27 on page 13, lines 1, 2, 3, 4, 5, 6, and 7, is that a carrier may undertake the transportation of a car of goods under that section from one point to another interstate, and the delays in transportation which might injure those goods to an extent that the consignee on reaching its designation would refuse to receive them. Under section 27 it appears that if the consignee did refuse to receive the goods, the consignor being far distant, after a time, and the time might be short, the carrier could appropriate those goods and sell them, and the carrier would not be held liable for anything except the residue that might be left, after the charges for freight and storage, etc., had been taken by the carrier. It would seem as though the carrier in this case should have the responsibility thrust upon him because of the delay in transportation, or at any rate the shipper should be protected in cases of this kind. My principal object in coming down here is to add my mite in the way of asking this committee to eliminate from any bill of lading any possible contract between the shipper and the railroad company that 42808°— S. Doc. 650, 62-2 16 242 BILLS OF LADING. would minimize or remove the common-law liability of the carrier to the shipper or the consignee. That is all. I thank you, Mr. Chairman. There being no further questions, the witness was thereupon excused. The Chairman. Who is the next gentleman to be heard? STATEMENT OF EDWARD D. PAGE, MERCHANT, 78 WORTH STREET, NEW YORK CITY, N. Y„ REPRESENTING THE MER- CHANTS' ASSOCIATION OF NEW YORK. Mr. Page. My name is Edward D. Page, 78 Worth Street, New York. I am a merchant, and I am appearing here representing the Merchants' Association of New York. The Merchants' Association of New York is composed of both ship- pers and receivers, having about 1,800 resident members and about 25,000 nonresident members. The committee on commercial law, of which I am chairman, is composed of representative merchants from the wholesale and retail dry goods, cotton and woolen manu- facturing, tobacco, butter and eggs, wholesale groceries, clothing, boots and shoes, export grain, produce, cotton and banking trades. Its committee meetings are generally well attended, and there is brought to bear upon any subject the combined experience of these trades through a wide range of transactions. This committee has given a study of over four years to the bill of lading question. The present bills under consideration represent an effort to make the receipt issued by the railroad company and signed by its agent conclusive evidence that the property named therein is in existence and has been accepted by the railroad company under a contract for transportation elsewhere. The reason for these biUs is to make the bill of lading a better security or collateral against drafts which are cashed by the banks, in order to facilitate the financing of merchan- dise in its movement from producer to consumer. That these bills should introduce this principle which is not con- sistent with previous law, previous decisions, and previous customs, is due to the fact of the enormous changes in the methods of doing business which have come about in the last 25 or 30 years. I can hardly add anything to the very admirable statement of Senator Clarke relative to the reason why the law should be changed. Both business and transportation have grown beyond the stage where principles of law which were adequate enough under a simpler con- dition, can no longer be applied without detriment to the welfare of the whole community under the more complex conditions that prevail to-day. The divorce of the carrying of merchandise and the carrying of mails and passengers which has come about since the introduction of the railways has brought about a condition of affairs where the docu- ments representing the title to merchandise travel at a much faster rate than the merchandise itself. The number and amount of trans- actions which are involved hi the moving of our great crops has made it impossible for local credit any longer to finance the moving of those crops. They are therefore finance 1 by drafts representing the value of the merchandise attached to bills of lading representing the physical possession of the merchandise. The carrier no longer travels BILLS OF LADING. 243 with his merchandise. He acts through agents and acts over a large territory instead of over a small one. The consequence is that the rules of law which applied to such bills or receipts for merchandise in the days when the merchants went along with the goods have been entirely outgrown, and it needs new legislation in order to adjust the present conditions to the needs of society. The two bills that are before your committee have been studied by the Merchants' Association, and they have to say with reference to Senate bill 957, in the shape in which it was introduced, that the only suggestion they would make would be that in section 6 a proviso should be added : That in any such case — That is to say, in the case of property being replevied or removed from the possession of the carrier — That in any such case due notice be given by the carrier to the consignee or to the party who, according to the terms of the bill of lading, is to be notified of the arrival of the goods at destination. This would seem to be a simple measure of justice in providing that all parties to the transaction should be notified of its breach. Since the introduction of this bill a series of amendments have been drafted, or rather suggested amendments, extending the pur- view of the bill to foreign commerce as well as to domestic com- merce. This brings about a very different application, an applica- tion to customs of trade and laws of merchants entirely different from those prevalent in this country. It seems impossible properly to conduct an export business without bills of lading drawn in sets. Generally speaking, a set of bills consists of three bills, all of them of equal validity, all of them representing the merchandise for purpose of collateral and upon the surrender of any one of which the mer- chandise may be claimed hy the consignee. That custom originates in the perils of the sea. It would not be safe for a merchant invoic- ing goods abroad to rely simply upon a draft and a bill of lading sent by mail in the same steamer in which the goods are carried. The vessel might be lost, and in that instance all trace would be lost of the draft transaction, involving money, and of the merchandise transaction evidenced by the bill of lading. It is therefore custo- mary for bankers' drafts, or rather for bills of exchange and bills of lading to be drawn in sets. Of a set of three drafts, the first draft presented is the one which is accepted, and it then immediately destroys the validity of the other two drafts. It is necessary to have three bdls of lading, therefore, on each of which is stated that the bill is drawn in a set of three and that one being executed the others are void. That would be prohibited by this bill with the proposed amendments drafted by the conference between the counsel of the bankers and the counsel of the railroad companies. The Chairman. Will you pardon an interruption there ? Mr. Page. Certainly. The Chairman. What is the practice now with reference to the drawing of three bdls of exchange and three bdls of lading under the existing conditions — is that done ? Mr. Page. That is done; yes, sir. Oftentimes as many as 10 bdls of lading are drawn for a variety of purposes, and all of them are 244 BILLS OF LADING. delivered to the banker. But some of those are required by custom- house practice. I am not able to say whether in every instance in the large and varied practice that we have in New York it can be possible to mark all but three of those bills duplicate. But the prac- tice works well and is regulated — not by an American custom, but by the custom of the port to which the merchandise is destined. The Chairman. I had supposed you used three. I simply wanted to get it into the record. Mr. Page. Generally three, although it depends somewhat on the market. Therefore, certain amendments have been drafted which I shall leave to Mr. Williston to present covering this point, and which seem adequately to cover the question of foreign bills of lading which should be excepted from some of the provisions here relating to domestic bills of lading which are entirely proper. In this connection I will file with the committee a letter from Messrs. Goldman, Sachs & Co., members of our association, relative to this matter, and ask that it go into the record. The Chairman. It will be inserted in the record. (The letter referred to is as follows :) Goldman, Sachs & Co.. New York, February 29, 191?. Mr. E. D. Page, The Shoreham, Washington, D. C. Dear Sir: Referring to the conversation which you had to-day with our Mr. Harry Sachs, we beg to say that the steamship companies are in the habit of issuing in the ordinary course of business two bills of lading (original and duplicate), upon production of either of which delivery of the respective merchandise can be obtained. The full set of documents is then handed over to the bankers, together with the draft, and for- warded by them to their correspondents on the other side. To guard against loss in interest which may occur either through a breakdown of the steamer or a loss of the letter in the mails, the bankers here take the precaution of separating the papers received by them, forwarding the original draft, together with original bill of lading, insurance certificate, etc., by one steamer and the duplicate draft as well as the relative duplicate papers by a subsequent mail. Whichever set reaches destination first is presented to the drawee and duly honored by him, the outstanding set of documents being surrendered to him upon arrival. Since the railroad companies here have inau- gurated the practice of validating bills of lading, only one original bill of lading is issued to the shipper in the interior, although he may obtain as many nonnegotiable copies as he wishes upon demand. In our experience, two bills of lading (original and nonnego- tiable copy) is the rule, although in the case of shipments to South American countries Au» + ralia, the Far Eastern ports, etc ., the steamship lines at times issue as many as 'for or more negotiable copies for each consignment, each one of these instruments being valid for the purpose of obtaining possession of the property. For your information we quote from a bill of lading before us the concluding paragraph, as follows: "In witness whereof, the master or agent of the said steamship hath affirmed to original and duplicate bills of lading, both of this tenor and date, one of which being accomplished, the other to stand void." Trusting that this information will meet your requirements, we remain, with kindest regards, Very truly, yours, Goldman, Sachs & Co. Mr. Page. Thus far I have confined my remarks to Senate bill 957, which, with these very proper amendments, is indorsed by the Mer- chants' Association of New York. When it comes to the matter of Senate bill 4713, known as the Pomerene bill, our association finds two grounds on which it will be compelled to oppose this bill. The first ground is that of its doubtful constitutionality. There is nothing so bad for business as legal un- certainty. And a bill which will have to be thrashed out in court, a BILLS OF LADING. 245 process involving perhaps three or four years, during all of which time it will be impossible for merchants and bankers to know whether they are acting within the law or whether they are breaking the law, would be regarded by us as a calamity. Otherwise the Pomerene bill, drafted for State purposes exclusively, is a bill which, with the excep- tion of one provision, the Merchants' Association has always upheld. We believe that, with the exception of the definition of "value" contained in that bill, the bill is a good one. Our objections to the definition of "value" are briefly these: The merchants of New York and of the East generally and of the larger cities in the West are en- gaged in the granting of very large credit to their customers in other parts of the country. The granting of those credits has enabled mer- chants in the smaller and distant cities and towns to build up a busi- ness which upon their own capital alone they never could have accomplished. Those credits, extending from 30 days to 9 months, are valuable assets of the enterprising dealers in merchandise all over the United States. The city of New York extends annually not less than $10,000,000,000 of such credit every year. The city of New York, as you know, does probably 60 per cent of the business of the country, as indicated by bank clearings. It is, therefore, the most important factor of any city in the United States in the granting of credit. Anything that would tend in the least to destroy confidence in the validity of these credits would be a misfortune, not only to the city of New York, but to the whole country. Anything that would impede the granting of credit would be a siimlar misfortune. There are at all times outstanding due New York not less than $3,000,000,000 of credit formed by the sale of merchandise on time. The seller relies upon his merchandise in the last analysis to pay his bills. For instance, if a country merchant has $10,000 capital and • a merchant in New York sells him $5,000 of merchandise, accepting a book account for that $5,000 of merchandise, he depends upon the same surplus or assets existing after the sale as before. The sale, in other words, adds $5,000 worth of merchandise to his customer's assets at the same time that it adds $5,000 of liabilities to his cus- tomer's liabilities. It even adds more than $5,000 of assets, because the merchandise can be sold at a profit. All credit that is extended on time for merchandise is based on this consideration, that the merchandise will be sold for a valid con- sideration when it is sold; it will be sold for present consideration; it will be sold for money or the equivalent of money, or valid credits which are the equivalent of money. The definition of "value" proposed by this bill is this: "Value" ia any consideration sufficient to support a simple contract. An ante- cedent or preexisting obligation, whether for money or not, constitutes value where a bill is taken either in satisfaction thereof or as security therefor. This definition of "value" disturbs that balance of assets and lia- bilities upon which the merchant depends for the payment of his accounts. It makes it possible for a purchaser of merchandise to transfer the bill of lading not for cash, not for a valid book account, but for a promise to pay, a debt discharged by bankruptcy, a debt contracted by a minor, a debt barred by the statute of limitations, a promise to perform a trust, an agreement to abide by an award of arbitration, a promise to marry, a promise to give a sum to a third 246 BILLS OF LADING. person, a promise to abstain from business in a certain locality, a promise not to sue, an extension of time — all of those things which do not add to the assets of the merchant, but deplete his assets, imperil the credit which has been extended by the creditor. Worse than that. The words "an antecedent or preexisting obligation, whether for money or not, constitutes value," are equally capable of indefinite extension. That would enable a man to part with the pos- session of his merchandise through the means of a bill of lading, for a note due after death, for a moral obligation, for a promise to abide by an arbitration, for a promise to pay a mistress, for a promise to indemnify, for a promise to support. All of those are justified by cases which will be found in a brief which I wish here to file with the committee, with its permission, covering these points. I will put it in, and simply state that in the matter of the sales act and of the bill of lading act, as passed by the Legislature of New York, this definition was stricken out before the biUs were enacted, as the legislature believed that it was not for the public welfare. That is all I care to say, Mr. Chairman. (The brief referred to is as follows :) In the Matter of Senate Bill No. 4713, Sixty-second Congress, Second Session. The Merchants' Association of New York must earnestly protest against the enact- ment of the proposed definition of value contained in section 53 of the above bill entitled "A bill relating to bills of lading, etc." _ In this section it is stated that " ' Value ' is any consideration sufficient to support a .simple contract. An antecedent or preexisting obligation, whether for money or not, constitutes value where a bill is taken either in satisfaction thereof or as security therefor." This definition is revolutionary, in that it omits all considerations of adequacy and of the contemporaneous or present character of the consideration. It substitutes a purely theoretical idea of value for the practical which has been developed by the law of English-speaking countries. It makes the definition of value identical with that of consideration. Consideration is the most easily established element in our law. It includes any executory promise which is not illegal. The phrase: "Any consideration sufficient to support a single contract" includes the verbal or written promise of another, provided only that it be not to do a thing for- bidden by public policy or the criminal law. It is also in case of a unilateral contract includes any act subject to the same qualifications. It may be a promise to pay a debt discharged by bankruptcy; a debt contracted when a minor; a debt barred by the statute of limitations; a promise to perform a trust; an agreement to abide by the award in an arbitration; a promise to marry; a promise to give a sum to a third person; a promise to abstain from business in a certain locality for a specified time; a promise not to sue; an extension of time; an agreement to indem- nify against loss on some future contingency; a promissory note payable one day after death. The possibilities are infinite under this phrasing. The words "An antecedent or preexisting obligation, whether for money or not, constitutes value" are equally capable of indefinite extension. The wo uld include a long outlawed debt; an unliquidated claim of damages by reason of negligence; a duty to pay alimony; a duty to support an aged parent, children, or wife. An obligation not for money might include a promise to remain in some employ- ment for a fixed period or for life; to purchase goods of a particular dealer or of a par- ticular kind; to remain a member of an association; to obey the rules of an association or laws of a Slate. In one form or the other this definition includes every form of human activity by way of promise or act not forbidden by law. The promise may have been made far in the past or may mature far in the future or after the promissor's death. The obligation may be totally unrelated to commerce and exchange. It is fiat value, not value as gradually developed by the law upon a basis of adequacy and contemporaneous exchange through many centuries, which these acts import. BILLS OF LADING. 247 THE PRACTICAL APPLICATION OF THIS DEFINITION. To embody this definition in our law would be to forgo a weapon to be used by the dishonest against their creditors which would have most unfortunate and widespread results. This definition of value is the pivot upon which will turn the important line of cases in which bona fide creditors attack fraudulent transfers made by dishonest debtors, and the courts will have to determine upon this definition whether the transferee of the dishonest debtor is or is not a holder for value. If property may be readily and safely transferred by the dishonest trader, for the con- structive and wholly theoretical value connoted by this definition, a new field for mercantile fraud will be afforded which may be cultivated in the strict compliance with the innovation thus created in our law. The danger to be apprehended from this definition is not remote in a highly organized commercial community like the State of New York, where the credit system of doing business has its greatest extension. The incorporation of this definition in our law would remove the creditors' most powerful weapon against fraud. Whatever success creditors have heretofore had in setting aside fraudulent transfers has rested on the inability of the transferer to prove that he received value and of the transferee that he gave value and in the inference of mala fides arising from the discrepancy. The definition would tend to upset the entire practice by which merchants in New York State and other States have extended credit to their customers. Merchandise may be sold on credit for the purpose of resale with reasonable safety so long as the original seller can rely with certainty upon the laws which compel his purchaser to transfer that merchandise only for such value given contemporaneously as will approxi- mately enable the purchaser to pay back his original debt. At present extenders of credit are reasonably sure that the purchaser from them will receive from the goods which they lend him approximate adequate value for the liquidation of his debt, or that they will have a legal remedy against the transferee who takes upon a construc- tive consideration or without adequate value. In the absence of this assurance credits would have to be restricted and the volume of business would decrease. In New York State there are annual exchanges amounting in value to about one hundred thousand millions of dollars. Of this it is estimated that in the city of New York alone there are not less than twenty thousand millions annually of credit sales. There are probably outstanding credits at all times in the mercantile community of the State of from one thousand millions to five thousand millions or more. Only by this liberal use of credit are merchants able to do a business larger than their cash capital warrants. The consequences are a stimulation of the entire trade of the country and general business development. This vast economic structure is dependent in large measure upon the seller's confi- dence in final liquidation of his account through resale of the merchandise by the purchaser to others who will pay for it adequate value. If a definition of value be adopted by which inadequate and constructive consider- ation may be accepted for goods bought on credit, with the sanction of the law, the risk of extending credit is many times multiplied and the possibility of defrauding the primary seller many times increased. It is impossible to foresee the extent and limit of economic change which might be worked by this definition. The change would be extensive and disastrous. It would be too heavy a penalty to inflict upon the merchants and business men of this State simply to gratify a desire to experiment with the law. The omission of the definition would not impare the acts. If the definition of value were left out of the acts there would be complete uniformity so far as the rules and customs in the various States obtain, except that value would be worked out by the courts of each State as business exigencies might require modi- fications of the present established rules, and the situation would in this respect be similar to that under the national bankruptcy act, where certain questions, such as the validity of transfers, what constitutes a preference, etc., are primarily dependent upon the existing law of the several States. . . An experiment so full of danger should not be attempted when by the omission of this definition the harm might be avoided without impairing the object sought after by the commission on uniform state laws— that is, uniformity in dealing with sales and bills of lading. ARGUMENTS ADVANCED IX SUPPORT OF THE DEFINITION OF VALUE. . It is claimed that this definition of value is desirable because found in the nego- tiable instruments act. . , , . Bills of lading and documents of title represent actual commodities and chattels in existence upon the ownership and possession of which a trader's right to credit is in part based. A negotiable instrument is not based on specific chattels. It represents 248 BILLS OF LADING. nothing but *, promise to pay and must be considered not a.s representing concrete values, but as representing general credit. In one case chattels are being transferred and in the other case nothing is being transferred except a right to receive money at a future time. There is an historical distinction between negotiable instrument.-, mere orders for the payment of money, and transfers of actual goods and commodities, and the dis- tinction is obvious in business to-day particularly from the point of view of the credit giver. It is claimed by the Commissioners on Uniform State Laws that the definition should be inserted in the bills of lading act and in the sales act because it has appeared in the warehouse receipts act and vice versa. If attack is made on one act it is met by the definition in the others. This argument of the commissioners amounts to an attempt to raise themselves by their boot straps. They say that the definition is desirable because they have previ- ously and in another place said it was desirable. It is said that the supposed cases will rarely arise in actual practice. This possi- bility of fraud may indeed be remote in the library of an educational institution or in an agricultural State where transactions are few in number and simple in character and credit extension is limited, but this remoteness disappears as the transactions multiply and the danger is real and imminent in a busy trading center. Many of the suggested instances have actually arisen and come to the courts for decision. Business men are well able to pass upon this point, because they are in touch with practical and actual conditions. A note due after death. (Saft'ord v. Graves, 56 111., App. 499. i A moral obligation. (Atkins v. Hill, Cowper's Reports, 28S.) A debt barred by bankruptcy. (Trueman v. Fenton, Cowper's Reports, 544.) Promise to abide by an arbitration. (Barlow v. Smith, 4 Vermont, 144.) A promise to pay a mistress. (Turner v. Vaughan, 2 Wilson, 339. A promise to indemnify. (Glass v. Beach, 5 Vt., 172.) A promise to support. (Mills v. Wyman, 3 Pick (Mass.), 207; Cook v. Bradley, 7 Conn., 57.) It may be argued that because Vermont, Iowa, Rhode Island, Maine, New Hamp- shire, Massachusetts, and Connecticut or similar States may have already adopted this definition of value that it is desirable for New York. This is not true because of the comparatively slight volume of mercantile transactions and credit extensions found in these various States as compared with the State of New York. All combined, the seven States mentioned extend about 6 per cent as much credit as is extended in the State of New York. The exchanges of New York amount to about one hundred thousand millions per year; the exchanges of the entire country, including New York, amount to about one hundred and sixty thousand millions per year. Approximately 60 per cent of the entire mercantile business of the country is thus done in the State of New York. The attempt to foist the views of other and smaller States upon the great commercial State of New York is trying to make the tail wag the dog. The argument is made that this definition follows a precedent set in Great Britain. Conditions in Great Britain are entirely different from conditions in New York, par- ticularly as to the extension of credit. Credit on open account, such as forms the basis for our great volume of business is practically unknown in Great Britain, except in retail trade, where goods are sold for consumption and not for resale. Transactions in Great Britain, where goods are sold for resale, are generally closed immediately by draft with bill of lading attached or by note with satisfactory indorsers. The drafts are accepted by bankers and from that time on the seller relies on the bankers' obliga- tions; and the question of whether the pin-chaser of the goods sells them for an adequate consideration or on a constructive theory of value is a matter of no moment to the primary seller. The great shibboleth for the supporters of these bills has been uniformity and sac- rifice for uniformity. This argument is all very well in its place, but has its limit. Uniformity in conformity with bad precedent, and based upon an ignorance of the kind of transactions upon which the greatness of the trade of New York and the pros- perity of the country dependent upon it has been built up, is undesirable. A further argument has been advanced by the supporters of the act, viz, that the definition of value is in accordance with the mercantile idea. We presume that it will be admitted that a representative body of merchants is as competent as anybody else to tell what is and what is not the mercantile view. The Merchants' Association of the City of New York desires to go on record as saying that this definition does not conform to the mercantile view, but that it is utterly subversive of the mercantile view and wholh undesirable and dangerous from the mercantile standpoint. BILLS OF LADING. 249 THE CHARACTER OF THE OPPOSITION TO THE DEFINITION OF VALUE. The opposition to the definition of value represented by this memorandum is that of the Merchants' Association of the City of New York, an association which has some 2 000 members, which more than any other body may be said to have the largest interest in the law merchant. The members of the Commission on Uniform State Laws are themselves not in agree- ment with regard to this definition of value. In the Proceedings of the Twentieth Annual Conference of the Commissioners on Uniform State Laws, a pamphlet published by the commissioners in 1900, on page 101, the following statement is made: "One of our colleagues, a commissioner from New York, believes that he has found a divergence from the original and excellent plan adopted by this conference of put- ting in the form of statutes only those principles of law and certain special subjects that have been crystallized into well-settled principles and have been accepted by a preponderance of authority. He seeB in the definition of value and in the definition that 'a thing is done in good faith when it is done honestly, whether it be done negli- gently or not,' such radical changes in the law as to exhibit not a codification of an existing law, but an endeavor to work a legal reform, and the latter endeavor he deems not only foreign to the purpose of this conference, but dangerous as well." A note at the bottom of the page contains a reference to the Columbia Law Review of February, 1910, page 118. This reference is to an article entitled "A revival of codification," by Prof. Francis M. Burdick, a professor of Columbia University, and author of Burdick on sales, and one of the commissioners from the State of New York. In this article Prof. Burdick reviews the history of the Commission on Uniform State Laws and comments on the desirability of codification which expresses the existing law as opposed to the undesirability of codification, so-called, which is experimental, referring among other things to the definition of value. Respectfully submitted. Merchants' Association of the City of New York, By Edward D. Page, Chairman of the Committee on Commercial Lavs. Abram I. Elktts. Carlisle J. Gleason. Of counsel. The Chairman. You are familiar with the decision of the Supreme Court which relieved the railroads — or at least under which they are exempt from liability on these bills of lading. If Congress should pass a law, the effect of which would be to establish a rule the reverse of that which the court laid down, would not that meet this situation ? Mr. Page. It would seem to be a very simple solution of it, and meet it entirely. The Chairman. That is what has occurred to the chairman of this committee. Mr. Page. That is my impression. The Chairman. I will ask you one further question with reference to foreign shipments. If that was done, von would not require legis- lation with reference to the use of triplicate bills of lading and bill of exchange in your foreign shipments, as you have that already under the existing conditions ? Mr. Page. If the suggestion which you made were carried out there would be no necessity for paying any attention to that. That is all covered by the law of merchants, as it is to-day. Mr. Page was thereupon excused. STATEMENT OF FREDERICK H. PRICE, 3 SOUTH WILLIAMS STREET, NEW YORK, REPRESENTING THE MILLERS' NATIONAL FEDERATION. Mr. Price. Mr. Chairman, I will file this argument that I have hi my hand, instead of further referring to it— in favor of an amend- ment to either the Stevens-Clapp bill or the Pomerene bill, with refer- 250 BILLS OF LADING. enee to shipper's load and count. It is not necessary to argue it now. I will read for the benefit of those who are here what the amendment is. To be added to the end of section 4 of the Stevens-C'lapp bill, or the corresponding section of the Pomeiene bill: But the carriers, when requested and given reasonable opportunity to examine and verify the contents of any car, shall not insert in the bill of lading issued for the goods therein the words "shipper's load and count," or other words of like purport." I will now request that this argument be incorporated in the record. The paper referred to is as follows: STEVENS-CLAPP BILL. New Yohk, March 15, 1912. The Chairman and Members op the .Senate Committee on Interstate Commerce, Washington, D. C. Gentlemen: Speaking for the millers of this country, and particularly for those who are members of the Millers' National Federation, it is my duty to state that they will give every support in their power to the Stevens-Clapp bill, and we earnestly hope that that bill, as originally devised, or some other bill having for its object the same purpose, i. e., to make the carrier liable for the acts of his agent in issuing billB of lading, will become the law of the land. As originally drafted, the Stevens bill was satisfactory in every material respect to our interests, and our interests are perhaps not greatly different from those of other classes of manufacturers and merchants. Since, however, the proposed bill was originally drafted there have been a number of tentative clauses added to it, with one of which at least we are not in sympathy, and which I am instructed to oppose by our organization, the Millers' National Fed- eration, and by other millers not members of the federation who manufacture the products of corn. The portion that we object to is contained in the last paragraph of section 4 of the Stevens-Clapp bill, which, as before stated, was inserted, we understand, by the car- riers to relieve themselves of liability in a manner we believe contrary to the intent of this proposed bill, and reads as follows: ' 'The carrier may also, by inserting in any such bill of lading the words 'shipper's load and count, ' or other words of like purport, indicate that the property was loaded by the shipper and description made by him; and if such statement be true, the car- rier shall not be liable for damages caused by improper loading, or by nonreceipt, or by the misdescription of property described in the bill of lading." The number of millers who for any reason accept bills of lading from carriers bear- ing the disqualifying and discrediting clause ' 'shipper 's load and count' ' is very large and their trade is very extensive. The general conditions which have brought that clause into such large use are that for the purpose of conducting business expeditiously the millers and carriers have agreed upon the necessity of having the shippers load their merchandise into cars rather than have the carriers do the loading. Nevertheless, it has been well maintained that the shippers are acting in this capacity as the agents of the carriers, and they do not lessen the carriers' liability by so doing. Out of that practice arose the added condition of ' 'shipper's count, "which is not a satisfactory condition for very good and satisfactory reasons. The shipper is obliged to discount his draft attached to order bills of lading in order to do business, and it is against him if he should offer a bill of lading to a bank for that purpose with any disqualifying notations on it. Therefore, it has been a requirement of the shipper that the carrier should count the contents of cars loaded by the shipper, but in a great many cases, in fact, in almost all such eases, the carriers have for one reason or another generally declined to count the number of packages so loaded, and have insisted on the shipper accepting a bill of lading indorsed ' 'shipper's load and count." In all such instances the shippers are obliged to accept that document, which they do under a kind of protest — i. e., they object either in writing or verbally. A great many mills are located on one line of railroad only, and in such cases, for instance, the shippers have no other recourse (than to the courts) than to accept the kind of docu- ment the carriers give them. BILLS OF LADING. 251 However, the miller, being usually a citizen of prominence in his community, has been generally able to get his draft attached to order bill of lading discounted by local bankers without much difficulty, even though the bill of lading carries a discrediting clause like "shipper's load and count." The shippers themselves have not in many instances felt the use of this clause to be an intolerable burden, for the reason perhaps that in the absence of legislation to the contrary there have been in existence certain rules drawn up by an association known by some such name as the "Freight Claim Agents' Association," which is composed of the freight claim agents of the majority of the railroads. Under these rules, which are for the adjustment of claims of all kinds, there is pro- vision for the proper adjustment of claims for shortages arising in connection with shipments covered by bills of lading indorsed "Shipper's load and count" by the carriers. The rules, not being available to us, can not be quoted here specifically, but it is generally understood that when we can support the facts of our correct loading and count by record and by affidavit, and the consignee can support by his record and by affidavit the facts of the shortage and/or damage at destination, such claims are pay- able by the carriers, and, in fact, they have been so adjusted as a constant practice hitherto. I said that this practice has obtained with some exceptions. Nevertheless, the adjustment of these claims has been only arranged, as a rule, after a more or less unsatis- factory correspondence, the tendency of the carriers being to deny liability under such conditions. It must be further borne in mind that shipments covered by bills of lading marked "Shipper's load and count" may be transferred in transit, perhaps at lake ports or Mississippi River transfer points and other such points of diversion, and this trans- ferring of the contents of cars is done under the supervision of the carriers alone and in accordance with their arrangements with their connecting lines for transportation. At any of these transfer points losses may, and frequently do, occur. In those cases the cars do not arrive at destination bearing the original shipper's or carrier's seals. These losses at transfer points are due to various causes, such as, for instance, pilfer- ing and errors in reloading into cars. The losses, in fact, are not always exactly recorded or recorded at all. There is nothing in the proposed bill to protect the ship- pers in such circumstances, and under the terms of the clause we are now criticising such losses would either not be paid by the carriers, because of special exemption from liability by Federal law, or the adjustment of such claims would, in our opinion, only be the result of constant and expensive litigation. In this and other matters the shippers do not seek to impose upon the carriers any undue or improper burdens of liability. If a shipper accepts without protest a bill of lading containing the discrediting clause "Shipper's load and count," he should not expect to hold the carriers liable for errors and omissions in his loading and counting. Similarly, the shippers should not seek to hold the carriers liable because of the for- mer's misdescription of the property described in the bill of lading. It is our firm opinion that the moment a law is enacted whereby the carriers are released from liability for loss and for damage, when such a clause is used in the bill of lading, the rules of the carriers hereinbefore referred to will become inoperative or will cease to exist, and the whole burden of the losses which are constantly occurring, under the conditions described above, will fall upon the merchant, who will be with- out recourse. Therefore, for all of these reasons, we urge that the whole of the offending portion of the last paragraph of section 4 be stricken out. If, in your opinion, we are thereby asking too much, we make the further suggestion that it be amended by adding to the proviso at the end of section 4, the following: _ "But the carriers, when requested and given reasonable opportunity to examine and verify the contents of any car, shall not insert in the bill of lading issued for the goods therein the words "shipper's load and count," or other words of like purport. It has been stated by some of the carriers that if they are to be obliged to count the property loaded by shippers into cars, the business of the country will be delayed very materially. It is not our idea that such a statement, if it is made, should be considered as a kind of threat. We do believe that the matter of counting a shipper's load is one of ordi- nary detail, which can be taken care of satisfactorily, and by means perhaps of some readjustment of method, perhaps the employment of additional labor at important points where the traffic is heavy, but we submit that it is far better that this detail of counting shipper's load be adjusted by such readjustment of method than that the general body of shippers should be burdened with a liability which properly applies to the carrier who undertakes to transport merchandise for hire. 252 BILLS OF LADING. This amendment has been devised for us by Prof. Samuel Williston of Harvard and Mr. Thomas B. Paton, counsel for the American Bankers' Association, who have been instrumental in drafting the Stevens-Clapp bill. Another amendment, having the same object, but using different language, was adopted at a meeting in Washington on Thursday, February 29, of shippers and ship- pers' associations, under the auspices of the National Industrial Traffic League, the names of those present having been handed in to your committee on Saturday, March 2, by Mr. J. C. Lincoln. It is believed that this amendment, as now suggested, will be accepted by those interested, in lieu of the one they at that time adopted. Since this matter of the "shipper's load and count clause" has been argued in this connection, it is important to learn that on February 21, 1912, two of the eastern rail- roads issued a notice to their agents to the effect that shippers who_ loaded package freight are entitled to a clean bill of lading (without notice as to shipper's load and count, more or less, etc.) for the number of packages loaded, provided that on com- mencing to load such freight the shippers notified first the company's agent, or his representative, that a clean receipt will be required. I attach copy of such order herewith, as part of this record. Respectfully submitted. F F. H. Price, Export Agent, Millers' National Federation. Athy No. 1714. 300.] [Circular TBF No. 195. Boston & Maine Railroad, Maine Central Railroad Co., Freight Traffic Department, Traffic Bureau, Boston, Mass., February 21, 1912. To Agents: You are hereby notified that shippers who load carload package freight are entitled to a clean bill of lading (without notation as to shippers ' load and count, more or less, etc.) for the number of packages loaded, provided that before commencing to load such freight the shipper notifies this company's agent or his representative that a clean receipt will be required. Be governed accordingly. W. K. Sanderson, General Freight Agent, Maine Central Railroad. C. H. Eaton, General Freight Agent, Boston & Maine Railroad, Boston. Issued by F. S. Davis, Chief of Tariff Bureau, Boston, Mass [H. R. 25333. 61st Congress, 2d session.] [Legislation affecting bills of lading, to wit. the " Stevens bill," with proposed amendments thereto, for consideration by the United States Senate Committee on Interstate and Foreign Commerce, at the present session of Congress. The proposed amendments are italicised.] A BILL Relating to bills of lading. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, order bill of lading defined. That whenever any common carrier, railroad, or transportation company (herein- after termed "carrier") shall issue a bill of lading for the transportation of property from a place in one State to a place in another State (the word "State" to include any Territory or District of the United States), "or from a place in the United States to any foreign country" which bill shall be, or purport to be, drawn to the order of the shipper or other specified person, or which shall contain any statement or representation that the property described therein is or may be deliverable upon the order of any person therein mentioned, such bill shall be known as an "order bill of lading" and shall conform to the following requirements: (a) In connection with the name of the person to whose order the property is deliv- erable, the words "order of" shall prominently appear in print on the face of the bill, thus: "Consigned to the order of . " BILLS OP LADING. 253 (b) It shall contain on its face the following provision: "The surrender of this original order bill of lading, properly indorsed, shall be required before delivery of the property." (c) It shall not contain the words ''Not negotiable" or words of similar import. If such words are placed on an order bill of lading, they shall be void and of no effect. (d) Nothing herein shall be construed to prohibit the insertion in an order bill of lading of other terms or conditions not inconsistent with the provisions of this Act or otherwise contrary to law or public policy. STRAIGHT BILL OP LADING DEFINED. Sec. 2. That whenever a bill of lading is issued by a carrier for the transportation of property from a place in one State to a place in another "or from a place in the United States to any foreign country" in which the property described therein is stated to be consigned or deliverable to a specified person, without any statement or representation that such property is consigned or deliverable to the order of any person, such bill shall be known as a "straight bill of lading" and shall contain the following require- ments: (a) The bill shall have prominently stamped upon its face the words "Not nego- tiable." (b) Nothing herein shall be construed to prohibit the insertion in a straight bill of lading of other terms or conditions not inconsistent with the provisions of this Act or otherwise contrary to law or public policy. Sec. 3. That a carrier shall be liable to any person injured thereby for the damage caused by the failure to comply with any of the provisions of sections one and two hereof. But an order or a straight bill of lading, notwithstanding such noncompliance, shall be within the provisions of this Act. Sec 4 That every carrier who himself, or by his officer, agent, or servant authorized to issue bills of lading, shall issue an order bill of lading or a straight bill of lading, as defined by this Act, before the whole of the property as described therein shall have been actually received and is at the time under the actual control of such carrier to be transported, or who shall issue a second or duplicate order bill of lading or straight bill of lading for the same property, in whole or in part, for which a former bill of lading has been issued and remains outstanding and uncanceled, without prominently mark- ing across the face of the same the word "Duplicate" "or some other word or words indicating that the document is not an original bill" shall be estopped, as against the consignee "in case of a straight bill of lading" and "as against the consignee and" every other person ' 'in the case of an order bill of lading' ' who shall acquire any such bill of lading in good faith and for value, to deny the receipt of the property as described therein, or to assert that a former bill of lading has been issued and remains outstand- ing and uncanceled for the same property, as the case may be; and such issuing carrier shall be liable to the consignee named in a straight bill, or to the holder of an order bill who has given value in good faith relying on the description therein of the prop- erty for damages caused by the nonreceipt by the carrier of all or part of the property, or its failure to, correspond with the description thereof in the bill at the time of its issue, or for the failure to mark the word "Duplicate" or other word or words as herein* before provided' ' upon a second or duplicate bill as indicated above: Provided that if the property is described in an order or a straight bill of lading merely by a statement of marks or labels upon the property or upon packages containing it, or by a statement tliat the property is said to be of a certain kind or quantity, or in a certain con- dition, or it is stated in any such bill of lading that packages are said to contain property of a certain kind or quantity or in a certain condition, or that the contents or condition of the contents of packages are unknown, or words of like purport are contained in any such bill of lading such statements, if true, shall not make liable the carrier issuing the bill of lading although the property is not of the kind or quantity or in the condition which the marks or labels indicate, or of the kind or quantity or in the condition it was said to be by the consignor. The carrier may, also, by inserting in any such bill of lading the words, "shipper's load and count " or other words of like purport indicate that the property was loaded by the shipper and the description made by him; and if such statement be true, the carrier shall not be liable for damages caused by the improper loading or by the non-receipt or by the misdescription of the property described in the bill of lading . Sec 5. That every carrier, or officer, agent, or servant of a carrier, who shall deliver the property described in an order bill of lading without requiring surrender and making cancellation of such bill, or, in case of partial delivery, indorsing thereon a statement of the property delivered, shall be estopped, as against all and every person or persons who have acquired, or who thereafter shall acquire, in good faith and tor value, any such order bill of lading, from asserting that the property as described 254 BILLS OF LADING. therein has been delivered or partially delivered; and such carrier shall be liable to every and any such person for the damages which he or they may have sustained because of reliance upon such bill "according to its original tenor and effect." Sec. 6. That no carrier shall be liable under the provisions of this Act where the property is replevied, or removed from the possession of the carrier by other legal "or governmental" process, "or authority" or has been lawfully sold to satisfy the carrier's lien, or in case of sale or disposition of perishable, hazardous, or unclaimed goods, in accordance with law or the terms of the bill of lading, "or other lawful excuse for such refusal." Sec 7. That any alteration addition, or erasure in a bill of lading after its issue without authority from the carrier issuing the same, either in writing or noted on the bill of lading, shall be void, but such bill of lading shall be enforceable according to to its original tenor. Sec 8. That every carrier, or officer, agent, or servant of a carrier, who shall knowingly issue an order bill of lading or a straight bill of lading, as defined by this Act, before the whole of the property as described therein shall have been actually received to be transported or shall have come under the actual control of such carrier or of a connecting carrier in course of transit to the carrier whose bill is issued, or who shall issue a second or duplicate order bill or straight bill of lading for the same property, in whole or in part, for which a former bill of lading has been issued and remains outstanding and uncanceled, without prominently marking across the face of the same the word "Duplicate," or some other word or words indicating that the document is not an original bill and every person who negotiates or transfers for value a bill of lading known by him to have been issued in viola- tion of this section, shall be guilty of a misdemeanor, and upon conviction shall be pun- ished by fine not exceeding five thousand dollars or imprisonment not exceeding five years, or both. • Sec 9. That any person who with intent to defraud shall forge, sign, counterfeit or falsely alter an order bill of lading or a straight bill of lading as defined by this Act, or shall utter, offer, dispose of or put off as true or shall have in his possession with intent so to utter, offer, dispose of or put off, any paper or writing purporting to be a genuine order bill of lading or a straight bill of lading, knowing the same to be fictitious; and a person who, with intent to defraud, shall sell, negotiate, exchange or deliver or keep or offer for sale, negotiation, exchange or delivery, or receive upon any purchase, negotiation, exchange or delivery, any such bill of lading or purported bill of lading, knowing the same to have been forged, counterfeited or falsely altered, shall be guilty of a misdemeanor and upon con- viction shall be punished by fine not exceeding fire thousand dollars or imprisonment not exceeding five years, or both. Mr. Price. As to the other matter of added freight with added charge, or compensation, the Millers' Federation believe that that should not be allowed in this present bill, but should be governed by the Interstate Commerce Commission under existing law. That is all I care to say, gentlemen. The Chairman. In regard to the statement "Shipper's load and count" we have had some statements with reference to that. Do you think that shippers as a rule would accept a bill of lading bearing the words "Shipper's load and count" if it was not a fact that it was the shipper's load and count ? Mr. Price. They would not accept the bill of lading if the carrier had counted the load. The Chairman. No, you do not understand me. Mr. Price. I beg your pardon. The Chairman. Of course a bill of lading bearing the words "Shipper's load and count" would be discredited as security, would it not % Mr. Price. Yes, sir. The Chairman. The shipper accepting such a bill of lading, conse- quently, if he wanted to use it on the basis of credit, would not accept it unless it were a fact ? Mr. Price. No, sir. The Chairman. That is the point. BILLS OP LADING. 255 Mr. Price. He would not, but the only difficulty we have found is that in many places in this country a shipper asks the carrier to check or verify his account, and the carrier does not do so and he has to accept, and he has accepted, a bill of lading marked "Shipper's load ana count" because it was in fact a shipper's load and count. The Chairman. You think then that the shipper is, in a measure, coerced into accepting the shipper's load and count bill as a fact and as a statement ? Mr. Price. Yes, sir; I do. There being no further questions, Mr. Price was thereupon excused. STATEMENT OF ROBERT M. RICHTER, OF THE FIRM OF PHELAN BEALE, ATTORNEY, OF 2 WALL STREET, NEW YORK CITY, REPRESENTING THE BREMEN COTTON EXCHANGE OF BREMEN, GERMANY, AND CERTAIN MEMBERS OF THE NEW YORK COT- TON EXCHANGE. Mr. Richter. Mr. Chairman and gentlemen of the committee: On the 5th day of January, 1911, the Bremer Baumwollborse, of Bremen, Germany adopted certain preambles and resolutions, the originals of which were forwarded to the President, to the United States in Con- gress assembled, and to the committees of the Senate and of the House of Representatives, whose province it was to deal with legisla- tion concerning interstate and foreign commerce. The resolutions, as adopted, are as follows: Whereas the United States of America, by reason of its natural advantages, supplies the markets of the world with raw cotton, a product that is most necessary and valuable to mankind ; and Whereas under the present method of marketing cotton, consignments are made from remote points in the Southern and Southwestern States of the United States, upon railway bills of lading of common carriers, which said ladings are attached to drafts drawn on the consignees of said cotton; and Whereas the said drafts and bills of lading in due course are presented to the con- signees for acceptance or payment a considerable time before the cotton arrives at its destination; and Whereas by the rule of law as enunciated by the Supreme Court of the United States, a bill of lading, although issued by an agent of a common carrier, is rendered valueless unless the property described therein actually has been delivered into the custody of the carrier; and Whereas prior to the acceptance by the consignee of the drafts, there is no means by which the said consignee may ascertain whether the cotton described in the bills of lading attached to said drafts has been received by the carrier which the bills of lading purport to have received the cotton; and Whereas the consignee is thereby, although an innocent party to the transaction, left without means of protection; and Whereas the recent forgeries of bills of lading of various carriers within the United States have caused enormous financial losses to German citizens, as well as to citizens sf other countries, and such frauds were possible because of the insecurity of bills of lading and of the inability of the consignee to rely upon their genuineness; and _ Whereas the disturbance in the cotton market caused by the feeling of insecurity in bills of lading has affected the transactions in the cotton trade between Germany md the United States, amounting to many millions of dollars each year ; and has Ikewiae affected the money exchange market between the two countries; Now, ierefore, Be it resolved, That His Excellency, the President of the United States of America, •espectfully be invoked to lend his efforts towards the enactment of legislation by the United States in Congress assembled — . (a) That there be imposed upon all carriers in the United States an obligation to afeguard bills of lading issued by such carriers so that a bill of lading may become m instrument having integrity and merit. 256 BILLS OF LADING. (b; That it be a crime against the laws of the United States for an agent of any carrier to sign or issue a bill of lading unless the goods described therein be then in the actual possession of the carrier for which the said agent acts. (c) That it be a crime for any person to forge or utter a forged or spurious bill of lading, thereby so restoring to a normal condition the now troubled state of the cotton trade, that undisturbed business relations between the two nations may be resumed and continued; and Be it further resolved, That one original set of these resolutions be sent to His Excel- lency, the President of the United States, and another to the United StateB in Con- gress assembled. Respectfully submitted. Bremer Baumwollborse, By its President. [seal.] Attested: By its Secretary. The members of the Bremer Baumwollborse, of Bremen, Germany, were perhaps the heaviest individual losers in the Knight- Yancey- Steele-Miller cotton frauds, the amount being in excess of $2,000,000. As the resolutions state, the forgeries of bills of lading of various carriers within the United States have made the trade relations between Germany and the United States a cause of much anxiety to the German trader, and it was for these reasons, as stated in the preambles, that the Bremer Baumwollborse has invoked the Presi- dent and Congress to bring about the enactment of legislation which will first impose upon the carrier a liability upon the bills of lading which it issues and in order that no bills of lading be issued except true ones; they ask that it be a crime against the laws of the United States for any agent of a carrier to issue a bill of lading without having received the goods therefor, and that it be a crime for any person to forge or utter a forged or spurious bill of lading. It is in the inter- est, therefore, of the Bremer Baumwollborse, of Bremen, Germany, and its members, and also in the interest of certain members of the New York Cotton Exchange, that I appear before you as a proponent of the legislation now under your consideration. It is, of course, true that no legislation can be enacted which will make a carrier liable for bills of lading issued by others than the agents of the car- rier, and it is to safeguard against this possibility that the cotton brokers of Germany have asked that it be made a crime against the laws of the United States for anyone to issue such a bill of lading or to negotiate the same. Such a provision will undoubtedly act as a deterrent, and from what I have gathered from the hearings before this committee I do not think that there is much opposition to the enactment of such criminal provision. The rest of the legislation proposed has to deal principally with the liability of the carrier for bills of lading issued by its own agents. What opposition the railroad representatives have developed to the |..)'o]i(iscd legislation now before this committee can be tersely said to 1h' founded on four general principles. First. That the law of the United States is well settled by the Friedlander case that the duty of a carrier does not arise until some consignment is actually in its possession and that a carrier is not liable for the unauthorized yet customary acts of its agent until the receipt of the goods sought to be transported. Second. That there is no necessity for any legislation of this char- acter which they contend so radically changes the law of agent'}' as it i*fr< < t* the liability of the railroads. BILLS OF LADING. 257 Third. That any change in this liability would cause such a change in the present method of issuing and handling bills of lading that there would be an increase of labor to the railroads resulting in the clogging of the wheels of transportation and a serious delay in the commerce of the United States. ' Fourth. That whether the Friedlander case is right or wrong, whether the law as laid down by that decision in the Supreme Court of the United States is right or wrong, the law remains, and the present freight rates as charged by the railroads have been set with the free- dom from liability as established by that case in mind, in that there is no assumption by the carrier of risk of loss due to the issuing of false bills of lading by its agents, and therefore there has beenno charge made for that risk. The railroads state, that should this increased liability attach to them by reason of this legislation, there will be an increased burden, and an increased risk, which perforce must give them the right and authority to ask an increased rate for freight transportation. With ah due respect to the Supreme Court of the United States, I doubt whether the flintlock decision of the Friedlander case would have been handed down by the same court had the question arisen at this time. In 188S, when the population of this country was grouped together in small localities far removed from one another, the few railroads then existing as the connecting links between these localities were undoubtedly the main factor in the growth of prosperity of the United States. Bills of lading were at that time little more than receipts for goods delivered and had few of the incidents of negotiable paper or securities attached to them. Business was not carried on based on these receipts to any large extent. The go<;ds would anive at their destination at the same time as the bill of lading, and with the three days of grace then fairly prevalent, the consignee, the actual pur- chaser would have sufficient opportunity to examine the consign- ment itself and decide whether he cared to pay the draft or not. But this is 191'2. Business has changed. The slow-moving train carrying freight, passengers, and mad has given way to the Twentieth Century Limited, which carries mail for delivery in New York the day after posting in Chicago. The days of grace have disappeared, so that now the consignee must purchase his goods within two days after shipment from Chicago, although, moving by freight, they do not arrive in New York for several days thereafter. Formerly a draft attached to a bdl of lading was paid after the goods arrived and after an examination of the actual consignment itself by the purchaser. In other words, the consignee paid the draft because he had satisfied himself that the goods were woith the money so paid. Now he pays the draft relying solely and completely on the representations made in the bill of lading attached to the same. It is a remarkable tribute to the integrity of the railroad agents that this practice has become so customary and usual. It would never have arisen and grown as it has if at the outset the bills of lading were not in most instances found to be properly issued for goods actually in the hands of the carrier. This instrument, because of change in business, has therefore taken on the incidents of negotiable paper. Just as I cash a check drawn by some one whom I do not know only when it is indorsed by some one of whose financial responsibility there is no question in my mind, so 42808°— S. Doc. 650, 62-2 17 258 BILLS OF LADING. the consignee pays the draft of the consignor because the railroad has effectually indorsed that draft by issuing a bill of lading. The con- signee dors not now, as formerly, buy the consignment itself; he buys instead a slip of yellow paper which he believes is what it purports to be. The Supreme Court of the United States, keeping pace step by step with the growth of business., in the light of these business condi- tions would hardly have rendered the now famous Friedlander de- cision. On June 29, 1906, Congress passed the Carmack amendment to the Hepburn Act, which provided, briefly, that the initial carrier in a con- signment shall be liable to the lawful holder of its bill of lading for any loss, damage, or injury to the consignment, whether caused by it or by any of its connecting carriers. In the case of Atlantic Coast Line v. Riverside Hills (21',) II. S., ISO) this amendment, by a unanimous court, was held to be constitu- tional on the theory that the connecting carriers as a matter of law and fact were the duly authorized and constituted agents of the initial carrier for the purposes of the contract of transportation, and that the initial carrier as principal must be held accountable for all of the acts of its agents, the connecting carriers, in the transportation of this con- signment . It was stated here by Mr. Senator Faulkner that Congress has never yet enacted a law which was contrary to the decisions of the Supreme Court. I desire to take exception to that remark, for the court says, on page 197: The general doctrine accepted by this court in the absence of legislation is that a carrier, unless there be a special contract, is only bound to carry over its own line and then deliver to a connecting carrier. Yet, if the entire opinion is read, it must be noted that in spite of the fact thai the law was otherwise, the court has molded its decision along the lines of custom, public necessity, change in business con- ditions, and good law, and out of these evolved the principle that the initial carrier as principal must be responsible for the acts of its agents. Although the law was otherwise, the opinion says, at page 295: Reduced to the final results, the Congress has said that a receiving carrier, in spite of any stipulation to the eon1.ra.ry, shall be deemed, when it receives property in one Stale to be transp >rted to a point m another, involving the use of a connecting carrier for some part of the way, to have adopted such other carrier as its agent and to incur liability throughout the entire route. And, at page 206: Congress has said to such carriers, "If you are obliged to use the services of inde- pendent carriers in the continuance of the transit you must use them as your own agents." Under this decision it matters not how the loss may occur to the holder of the bill of lading, or on what line, whether by misfeasance or malfeasance, whether through an agent on the line' of the initial carrier or on the line of a connecting carrier, whether by the author- ized or unauthorized act of an agent, the initial carrier, although it may be wholly blameless and may have had no part in or benefit from the loss, is nevertheless held liable for the same. In the face of this opinion, which, as it states, is contrary to the then law of the land, but which is founded on changed conditions in business and customs, is it not fair to presume that the Supreme BILLS OF LADING. 259 Court would to-day render a decision contrary to the one laid down in the Friedlander case ? The second point made by the railroads is that there is no necessity for any legislation of this kind, and they state that in many years they have heard of no case where a bill of lading was issued by the agent of a carrier without the actual receipts of the goods. Aside from what has been shown here I do not know of any case myself, but I do charge as Mr. Beale did in Ms statement made before you, that the practice of forging bills of lading where the shipper himself signed the name of the agent to a bill of lading and negotiated the same is countenanced and abetted by the railroad companies. I have here a part of the record of the criminal proceeding against John W. Knight, of Knight, Yancey & Co., as well as the record on appeal of Lovell v. Hentz. It would encumber the record if I read all of the testimony sup- porting my contentions, suffice it to say that the testimony shows that the railroads were fully aware of the signing by Knight of bills of lading with the name of the agents when no goods had been delivered, and that the agents of the railroads when apprised of the condition of affairs, instead of at once repudiating these bills, actually ratified them by sending false messages to the holders of the bills to the effect that the goods were on their way when as a matter of fact no goods were in the possession of the railroads. Let me tell you the whole story of the cotton frauds as they appear here. This story is based on the records. We must remember that at the trial Knight was a convincing witness and answered all ques- tions as fully as he was able so to do. Many character witnesses testified in his favor and he was subsequently acquitted. The fact that he showed that permission from the railroads had been given him to sign the bills of lading played a most important part in his acquittal. Knight, Yancey & to. started in business in about 1901-2 in the business of buying and selling cotton, that is, buying from the cot- ton planter and selling to cotton brokers. On May 30, 1005, an audit of the books of Knight, Yancey & Co. showed that the said firm had made a profit for the fiscal year of about S.'!Q,Ono. About this time an arrangement had been made between Knight, Yancey & Co. and the L. & N. R. R. Co. by which the railroad allowed the firm of Knight, Yancey & Co. to date back bills of lading. For instance (as Mr. Knight testified), if we would sell 1,000 bales of cotton to a mill in Carolina for December shipment and we got the cotton bought in December and got it en route on cars from the concentrating point and would not be able to get it from the concentrating point in time to ship it in December, we arranged with the L. & N. R. R. Co. to let us date back those bills of lading. At the suggestion of his partners, Mr. Knight went to Europe in the summer of 1905 to see if the foreign business done by the firm could not be increased. When he returned some time in August, he found, after checking over the business with his partners, that there had been lost while he was gone about $180,000, and that the firm owed about $150,000 more than they could pay. There had been no loss by speculation and he never was able to find out the cause of the loss, except that he thought it went into the widen- ing of the market between spot cotton and futures. In September or October, 1905, shortly after his return, a cablegram was received from Havre, France, asking for the whereabouts of some cotton and giving the marks. It seems that about 1,700 bales of cotton had 21)0 BILLS CcF LADIXU. been invoiced and drawn for flutt had never been shipped. Mr. Knight stated that the firm filed it all. In response f<> a question concerning these bills wherein he was asked if anv com])lications arose in his shipments over the L. & N. R. R. Co., Mr. Knight testified: We had called to our attention some bill; <. You mean to sign the railroad agent's name to it? — A. Yes, I suggested it tc him and told him we would lie able to give him additional business, a great deal more than we had been giving him, and he consented to it. We used that system on up through 1906 and I don't think we had any trouble to speak of with any irregularities in the bills of lading, although they would be issued of to-day's date by us and probably the cotton tmt shipped for two months. Referring again to the 1,700 bales of cotton, it seems that Mr Bywater told Mr. Knight that he had instructed the Sena Steamship Line to deliver the cotton regardless of any discrepancies in marks, weights, etc., and had received from the steamship line the bills of lading that Knight had originally issued. He not only told Knight he had received them, but he brought them to Knight's office and showed them to him. Mr. Bywater knew that Knight issued them and Knight never denied that he had issued them, nor did he ever attempt to conceal that fact. This method of doing business con- tinued up through 1907, and by it the number of bales handled was increased because the method saved Knight, Yancey & Co. consider- able money, and helped them to finance their business as well. Mr. Knight said that the percentage of business handled in that way was at least oil per cent and exceeded more than 100,000 bales per year. It seems that after the money had been received on the strength of the false bdls of lading, Knight, Yancey & Co. would then pur- chase cotton ami actually ship the goods, retaining the genuine bills; that is to say, the intent on the part of Knight, Yancey & Co. was to buy the shipment with the consignee's money rather than to fail to make any shipment whatsoever. Mr. Knight testified to other incidents where inquiries were made from other points, notably, Liverpool and Barcelona, Spam, con- cerning cotton bdls of lading which had been received, but where no cotton was found to accompany the said bids. In the case of the BILLS OF LADING. 261 Spanish consignment, it seems Mr. Bywater telephoned to Mr. Knight over the long-distance telephone and stated to Mr. Knight that he (Mr. Bywater) had had an inquiry from the Spanish consul relating to 800 bales of cotton consigned to the Barcelona firm. Mr Bywater, after the conversation, wired the Spanish consul that the cotton had been shipped, when, as a matter of fact, it was not shipped until two weeks afterwards or thereabouts. Bywater inquired from Knight during this interval about the shipment and sent him the following telegram: "I certainly hope you will get this cotton out. If you don't we will both be in a hole." In April, 1910, a cablegram was received by Mr. Knight from Bre- men, Germany, relative to 7,000 bales, the bills of lading for which bad been received, but 4,300 bales of which could not be found. Mr. Knight read the cablegram over the telephone to Mr. Bywater. Mr. Bywater explained to Mr. Knight over the telephone that he had been in New Orleans a day or two prior to that; that he had left his clerk, in charge; that his clerk had inadvertently sent a cablegram to the steamship company that only 2,700 bales of cotton had been shipped. He told Mr. Knight further that he would correct this mistake and cable the company that he had the 7,000 bales. The next day Mi - . Knight received a cablegram from Bremen stating that they had received a cablegram from the steamship company showing that everything was satisfactory. Mr. Knight, in detailing this custom states (reading from the record) : Q. I will ask you if it was your custom or system to go ahead and fill with actual cotton of corresponding marks and weight the bills of lading that you had previously issued without having the cotton. — A. Yes, sir; it was our custom to fill all shipments, filling all bills of lading or all invoiced bills of lading which we had issued ourselves with actual cotton and allow that cotton to go forward, and we kept the bill of lading issued by the railroad agent until such time as we knew the cotton had been delivered on the other side and then destroy it. Q. I will ask you whether the original bills of lading afterwards issued by the rail- road agent were ever used in any way. — A. No, sir; we kept them until we found the cotton was delivered on the other side, then destroyed them. Q. About what was the extent after you discovered this system was inaugurated; what was the extent of bills of lading issued by Knight, Yancey & Co. without the agent's signature that were filled with actual cotton?— A. I should think half a million bales of cotton. Q. Have you any of the bills of lading or duplicate bills for the cotton that was actually filled in?— A. Yes, sir, a whole box full of them over there that I turned over to the trustees. That is not all; there is nearly that many more abroad. Q. These were the actual bills of lading issued by the railroad company for cotton previously issued by you? — A. Yes, sir. Of course, these instances, as shown, are but a few of the steps in the entire transaction, originally starting out with the permission of Bywater, but later distinctly ratified and aided by him. From the mere dating back of a few of their bills of lading, the permission became a license, and Knight, Yancey & Co. in April, 1910, were issuing bills of lading broadcast signed with the agent's name for cotton which was never delivered to the railroad. It must be re- membered, however, that this was done with the permission and con- sent of the railroad company, and that Bywater was the foreign freight agent of the L. & N. R. R. Co. Mr. Knight testified as to this as follows (reading again from the record) : By the Court: Q. What did you mean by bills of lading issued by you?— A. They were issued by my authority. 262 BILLS OF LADIITG. - Q. Without the signature of L. & N. R. R. Co. agent at Decatur?— A. Ye?, sir; at Decatur or wherever it was Q. State whether or not there was any discussion between you and Mr. By water as to any inducement or any consideration to his road for that business. — A. I told Mr. Bywater that if he would allow us to do this wo would give him a great deal more business through the port of Pensacola. We were then shipping about 40 per cent through Pensacola and we increased it to 60 per cent of the total cotton that the L. & N. R. R. handled. Q. What did he say ah out that 1 eing an inducement to ship cotton through Pensa- cola? — A. He said they were trying to 1 uild up the port of Pencacola and owned steamship lines there, etc. Q. What was the authority given you; tell the jury in Bywater's language what authority, if any, he gave you to sign the L. & N.'s name or the agent's name to the bill of lading?— A. lie told me I could »n on and issue hills of lading like the ones we had heen issuing for the dating 1 nek ni cotton previous to 1905, and like these that had 1 een issued that I had just found out and told him about; that we would 1 e allowed to issue 1 ills of lading, fill out the cotton and draw for it, and thus save the interest on it. Q. I understood you to say that is your conversation with Mr. Bywater'' — A. He gave us permission to use it, and various times since then we had talks al out it. I told him ah out how big a percentage one time we handled under that 1 ill of lading. Q. What did you say al out it?— A. It was all right; glad to get the 1 usiness. Q. Hew much cotton did you ship over the L. & N. R. R. under that system? — A. I could not give anything more definite than an estimate. I should sav within one season 200.000 hales. The L. & X. R. R. handled probably 130,000 or 140,000 hales. Q. About what freight would they get out of that? — A. That would have to 1 e ap- proximated. It would he al out 82.50 a 1 ale, from the original point of shipment to Pensacola. Q. In round numbers, what would that amount to?— A. Al out 8330,000 to 8340,000, or something like that. Q. Mr. Knight, what was said, if anything, between you and Mr. Bywater as to whether you should make this thing notorious, or whether you should keep it a secret, and what reason, if any, was assigned? — A. Mr. Bywater cautioned me in Birmingham at the time he came down with these bills of lading that had heen turned over to him from Liverpool, and cautioned me not to say anything about it to the local agents, 1 eeau-e he said it would 1 e up and down the whole sy.-tem in a very short while. Q. State what effect he said it might have on the < ■ther agents of the system'? — A. He said it would get all over the whole L. & N. system and everybody would be wanting to use it. In order to show further that Bywater, who as you will remember, was in sole charge of the foreign freight business of the L. & X. R. R. Co., had given authority to Knight's firm to issue false bills, let me read one letter written by him to Knight, Yancey & Co. It seems that Knight's firm had issued bills of lading on some cotton which, as usual, was not delivered, and that the ocean rate in those bills was different from the rate which would be noted in the genuine bills about to be issued. Mr. Knight telephoned to Mr. Bywater that he wanted him to arrange that when the cotton was billed out on the genuine bills from which would be made up the ship's manifest the rates on both bills would be the same. Air. Bywater's letter is as follows : Louisville & Nashville Railroad Co., Office of Foreign Freight Agent, Louisville, Ky., U. S. A., November 10, 1905. Messrs. Knight, Yancey & Co., Decatur, Ala. Dear Sirs: Your favor of the 9th. In conversing with you over the phone the other night I did not know just what engagement you had in mind, but understood that the inland proportion at which we were billing was at variance with that you had prepaid, and I replied that I could adjust the billing so the inland proportion would agree with the amount you prepaid and the ocean on which you were figuring. I gather now, though, from phone conversation this morning and your letter above referred to that the change you wanted to effect pertained to 500 bales offered us on BILLS OF LADIXG. 263 ron tract B-277 and which we declined on account of that contract having been filled. Mr Jackson explained to you over the phone this morning that you had overshipped contract B-282, 500 bales, and contract B-290, 100 bales, total 600 bales, and that he had applied 500 bales of this overplus on contract B-277, which was for 500 bales, and still open on our books. _ It appears he gave such instructions as would insure cor- rection of all our records, including the ship's manifest, and took the further precaution to have the captain of the vessel understand that the original bills of lading, which would be handed him, beariim contract numbers B-282 and 290, would appear on his manifest under contract B-277. This change in contract numbers should not have been made without arranging to correct the original ladings. However, the matter has now gone too far to permit of rectification, but as full instructions have been given all concerned, I take it, that will not be necessary. As I sa.id before, we can readily arrange at any time to change the inland and ocean proportions to correspond with the basis of your sales. With respect to the 500 bales offered us on contract B-277 and which we declined, we can not now accept these at less than 74 cents from Montgomery. Yours, truly, J. A. Bywater, Foreign Freight Agent. All of these facts are further substantiated in the record of Lovell v. Hentz. In that case it was shown by correspondence that on April 8 Hentz & Co. requested the agents of the L. & N. E. R. Co. at Selma and at Decatur for information as to route and location of the cotton for which they had the bills of lading. No reply was received from the agent at Selma until April 14, when in reply to a wire from Hentz & Co. for information he wired that the cotton had been shipped all rail L. & X. to Cincinnati, unrouted beyond, and that he was tracing for quick time. It took that agent six days to reply as to the whereabouts of 300 bales of cotton for which the inquiry stated he had issued bills of lading. Practically all of the above testimony referred to the arrangement between Mr. Knight and Mr. Bywater, of the L. & N. Road. The Southern Railway Co. was also a paity to an arrangement of this kind, as appears by the testimony of Mr. Knight in the record, as follows : Q. Will you state if there was any conversation of that kind or any transactions of that kind with any agent or official of the Southern Railway Co.— A. Yes, sir. Q. State the position of that gentleman.— A. Division freight agent of the Southern Railway Co., Selma, Ala. Q. What was that?— A. Mr. J. W. Hunter. Q. State what occurred between you and him along this line.— A. It was some two years after we had the arrangement with Mr. Bywater that Mr. Hunter came to me and asked us for business out of Selma and insisted time and time again that we give him as much business outof Selma aswe were giving the h. & N. R. R., and I told him we could not do it. I had known him a long time and explained to him that we could not do it, and he did not understand why at that time, but I think he suspected why. At any rate, he came to me and told me he could do as much for us as the L. & N. R. R. was doing. I told him as nearly as I could what they were doing, to find out it he would be willing to do it himself. Mv recollection of what I said to Mr. Hunter was that the L. & N. R. R. <'„. had been allowing and were then allowing us to issue bills of lading when we wanted cotton dated back for us to do it ourselves by the issuance of those bills of lading, and he said that he could do as much, that is, allow us to issue bills of lading when we wanted to date cotton back; that he could do that much. We issued some of these bills of lading for domestic shipments that is tor shipments to points in this country. For instance, to Carolina mills and to eastern mills when we wanted to date back cotton when we did not have the cotton so we could put our hands on it and our contract was due, we would issue bills ot lading ourselves according to this arrangement with him and sent it on by dralt to me Din and then fill in the cotton a week or 10 days later. That was in the winter of 1907 between January and March that we made this arrangement with him In tne mil of 1907 I called Mr. Hunter over the telephone during September and stated to mm 264 BILLS r-F LADING. thai I had received a cable from Havre, France, saying that 100 bales of the cotton that we had issued bills of lading for through Selma, and ]00 bales we had issued the bills of lading for from Iioeatur wen' being held up by the steamship company in Havre, on account of disorepnncie- in dates of the bills of lading held by the steam- ship company and the date of the bills of lading held by the man to whom we had shipped the cotton. The cotton was there and the steamship company would not deliver it on the bills of lading we had issued, because they suspected they were not right. I asked .Mr. Hunter to please cable the proper parties and have I he cotton delivered. He told me that the proper parties to telogravph to were the steamship agents in Savannah, and that he would telegraph there, and afterwards he called me up and iold me that he had so telegraphed. 1 called up the steamship agents and asked them if Mr. Hunter had done so and the agents said that they had already gone over to Williams & Co., with Mr. Hunter's telegram and arranged the matter satis- factorily ilr. Knight testified to similiar inquiries for cot ion handled over the Southern Railway Co., and subsequent conversations with Mr. Hunter, which he fixed up in the same way concerning shipments from Mobile. Ala., to Greesboro, \. ('., and to Charlotte. X. C., and other shipments. At the last he mug I stated the facts brought out in the e;i. h c of Lovoii v. Hentz, which applied to the Southern Railway and which substantiated Mr. Knight's testimony. I will not burden the record with their repetition. It is a, significant fact that both Byw.-rer and Hunter are still in the employ of the railroads in spite of the above facts further showing a ratification by the railroads of the fraudulent proceedure. Jt is quite interesting, however, at this time to note that in a suit which is being brought by the defrauded consignees of Knight, Yiiicey & Co. against the railroads, that Judge Crubb, of the district court of Alabuna, before whom the case is, has just ruled on the demurrers interposed by the railroads overruling them on the theory, as he announced from the bench, that if the railroads had knowledge that Knight was issuing forged bills of lading and allowed this to eon- tinoe over a term of years, they would be estopped from denying Knight's agency as against innocent third parties who suffered. One of the main lessons from these facts other than the assent to this practice by the railroads, is that the agents who had large depart- ments or territories tinder their control in the business of handling freight — that is, men of responsible positions, were the ones who were most intimately connected with the frauds. Much has been suggested about a plan of validating by a general agent the signatures of the agent issuing the bill. Of what benefit would that be to the holder of a bill when the agent who would probibly validate the bill is the agent who was chiefly responsible on his road for the false bill- ings. The railroads deny the authority of By water and Hunter in the cases against them. How can they consistently do otherwise than to deny the validating agents' authority to validate other than true bills. A little over a year ago when Mr. Be.de was in Germany in confer- ence with Bremer Baumwollborse relative to these southern frauds, and after the validating scheme had been put in operation, one of the members of the exchange there showed Mr. Beale a validated bill of lading originating from some point in Texas, where the bill had been signed and issued by the validating agent and then he had validated his own signature on the bill. If the principle of the Friedlandcr decision is the law to-day, in what better position would that con- BILLS OF LADING. 265 signee be if no goods had been received by the carrier when that agent signed and issued the bill ^ The railroads would have just as vigorously contended that no duty arose in the, carrier because il had received no shipment of cotton upon which to predicate that duty, and that the act of the agent in issuing the bill before the receipt of the goods together with his act in validating his signature, were acts unauthorized by the carrier and as in the Friedlander case, so beyond the scope of his authority that there would be no liability on the part of that carrier. Certified signatures and validating schemes are but makeshifts which do no more than putty the leaks. It would be a far simpler matter for the carrier to be made liable for his agents and employees as it should be, and let the carrier devise what means it can, without conflicting with the commerce of this country, to guard itself against loss and damage by reason of the acts of its agents and employees, just as every prudent and reasonable business man protects his finances from similar depredations. Thirdly, the railroads claim that this legislation if enacted will cai.se ;U"h a necessary change in the issuing and handling of hills of lading bv the carrier as to cause a. resultant delay in the transporta- tion of freight. This contention I shall pass over with but this remark : With the increase in the number of carriers and the consequent increase in < ompetition, some way will be devised by the carrier to overcome lids obstacle in order to increase the volume of freight which it transports. The shipper has and always will demand a speedy handling of his goods and will send his consignments over the lines which will most spcedih deliver them to his consignee. Under those circumstances it is only a natural result that the carrier ■soliciting his business will do all in its power to assist the shipper and move his goods with the same sliced as formerly. The fourth point made by the railroads is a peculiar adaptation of that old proverb "Circumstances alter cases." What a clever anomoly it is. Sincerely and firmly stating that in all of the 3'oars in which each of the representatives has been associated with his company no situation has ever occurred to which this proposed legislation could be applied, that there has been in all of these years no agent of the railroads represented who has to the knowledge of the representative, issued bills of lading without the receipt oi the goods, and that had the railroads in the past been held to the same degree of liability as this legislation proposes to place upon them, there would to their knowledge have been no resulting loss to their respective railroads; in the face of these statements that there has been no loss in the past, the representatives ask that an increased rate for freight transportation be allowed them on the theory that they will then have an increased risk in their business. Although they affirmatively state that there would have been no loss to them even if they were held liable in the manner proposed, yet they ask the shipper to assume the extra expense of guaranteeing against a risk which they themselves contend does not exist. They state that a smaU percentage only of bills of lading issued by the railroads are attached to drafts, which the consignee must pay before he receives the goods but yet they ask for the power to charge for all bills so issued. What a money-making scheme that is. No risk to assume, no loss of any consequence to indimnify, and yet they ask the ship- 266 BILLS OF LADING. per tii pay a premium on his bill of lading. To make the risk even less possible, they ask too that criminal penalties be imposed upon any agent who falsely issues a bill, as a further club to prevent loss to the railroads. I am not opposed to the criminal penalties, but I see no reason why the railroads should be paid for something which they say does not exist. The Carmack amendment placed upon the carrier an added burden, that of liability, even though an innocent party to the holder of a bill of lading, and the further burden of recovering from the carrier actually responsible. Yet there was no resulting increase in rate. The initial carrier, to the use the phraseology of the railroads, now "guarantees" the shipment over its lines and the lines of all its connecting carriers. There is a distinct risk added by legislation, yet Congress has not allowed an increase in rate and the Interstate Commerce Committee has not changed the rate schedule. Congress realized that business conditions demanded a change in the law. This legislation is exactly similar, (dearly stating it to be the duty of every carrier as principal to be responsible for all the acts of its agents within the scope of then authority. That is the law of agency to-day. That would lie the law in this particular situation if it were newly decided to-day. Why, therefore, should the railroads receive extra pay for performing something which is a part of their carrier's duty and lor which they are paid now ? Representing a foreign country and speaking also indirectly for the other cotton exchanges of England and the Continent who are also anxious for the enactment of legislation which will help to make safer their purchases in the United 'States, it is the Pomerene bill now before you which 1 respectfully urge that you consider favorably. The Clapp bill has no provision covering foreign bills, a provision which is found in the Pomerene bill. There is no provision in the Clapp bill making it a crime to issue or negotiate false or forged bills of lading and I do not see how the Clapp bill would prevent the evils under consideration without the criminal amendment as such determent. Germany alone buys Kind, 000, 000 worth of cotton from the United States, all on order notify bills of lading with drafts attached. England and the continent buy $4.~>0,000,000 more in the same way. That is but one commodity. I have no figures to show exactly the amount of the exports handled on order bills but it must be conceded that they would run into many hundreds of million dollars each year. So the foreign cotton men come to you and ask that consideration be given to that vast volume of business and that the same be more securely protected. STATEMENT OF OTTO KETJSCH, GRAIN BROKER, MEMBER OF THE NEW YORK PRODUCE EXCHANGE; 432 PRODUCE EX- CHANGE, NEW YORK. Mr. Keuscii. Mr. Chairman and gentlemen, I am in the grain brokerage business and commission business, and I stand here as a victim of the loss of $100,000 through false bills of lading issued by the Delaware & Hudson Railroad Co. during the period from Decem- ber 1010, to about May, 1911. We have always regarded bills of lading as good as money. They are payable as currency at the banks, and the banks accepted them as such, and we never for one moment BILLS OF LADING. 267 doubted that when a railroad agent put his signature to a hill of lading there would be any trouble about collecting whatever was due on it whether the bills were collected or not. In this case I present you some copies of bills of lading which proved false to a certain extent. For instance, I have one calling for 10 car loads of corn dated January 14, 1910, at Albany, duly signed by their agent, of which only 7 arrived; the other 3 never showed up. I have another one dated January 19 at Albany for 3 carloads of oals, of which only 2 arrived, 1 did not. 1 have another one dated Feb- ruary 9 for 2 carloads of corn which never arrived. I have altogether about 153 carloads of such ladings for grain that never arrived. I advanced in totals to the Durand & Elmore Co. on those bills of lading about half a million of dollars in the course of five months, of which 333 carloads arrived. The balance the railroads put up the contention that they never had received the grain, and in consequence were not liable, as to which they are mistaken, as I have the pleasure to say that in the trial which terminated June 30 in New York, known as the Denike action against the Delaware & Hudson Co., I did recover a judgment for the sum of $94,000, covering just those bills of lading which the railroad is appealing, and it is a pleasure to note that we were fortunate in having a New York State corporation to deal with, which was obliged to agree with and abide by the decision of the courts of the State of New York which bind them conclusively as to their liabilities. The railroad company's contention has been that we were, negli- gent in not looking after this matter, but as to that I wish to point out here that six weeks prior to the failure a letter was written to that railroad company asking them to verify those bills of lading. The railroad company never replied to that letter, but sent two or three representatives to investigate, and they informed the bank that the bills of lading were all right. Three days later I received a tele- phone call from my shippers, Messrs. Durand" & Elmore, who informed me that they had decided, in view of the fact that the banks were getting after the railroads to move the. grain and cancel the billing as the market in New York did not warrant shipping, leaving me wholly in the dark as to whether anything was wrong or not, and they sent me down a check for $50,000 and informed me that I should keep the ladings until the goods arrived. But he changed his mind an hour later and said would I please return those papers. It seems that in the meantime the railroad company got hold of those bills of lading but never notified anybody who held them what had been done, or what had happened. ' They had discharged the agent, and it was found at the trial that this agent left the bills of lading in the office in packages of 100 to 200 already signed, and then went so far as to furnish their rubber stamps — which appears on these bills of lading — to this concern so that they could consecu- tively date these bills of lading to suit. This agent has never been punished although found guilty under the laws of New York. Ho still runs around free, as well as the man who perpetrated the crime, Mr. Gibson Oliver. This punishment is only a matter of a short time. I, for this reason, favor the passing of the Pomerene bill, holding the railroad liable, as well as holding the agent liable for their acts. It is a terrible thing in the commercial world to think that you can come down some morning and find vou have lost all you have got, 268 BILLS OF LADING. and a good deal more besides, without a basis of recovery, and the Pomerene bill will amply potcct us and make business far more easv to protect the people's deposits which are in every bank in the Union, which is really the money they borrow, and ought to be pro- tected. I am strongly in favor* of anything that will hold the rail- roads liable for acts of their agents. I think that is all, Mr. Chairman. The Chaiuman. Under the law in New York, as I understand it— I may be misinformed — a railroad company is liable, is it not? Air. Keusch. Yes, sir; they are. The Chairman. And what is their particular defense, <>r what was it in this rase ? Mr. Keusch. They claimed that we were negligent in not following the matter up in its entirety and finding out this matter sooner, before the crash came. The Chairman. They did not disclaim an original liability under the bill of lading on the ground that they had not received the goods ? .Mr. Keusch. That was one of the specifications — that they had not received the goods. The Chairman'. In the fai e of the law of New York >. Mr. Keusch. Yes, sir; they did not really have any defense at all. They were merely putting up a defense in order to gain something. Tliev had nothing to lose, yon see. Mr. Chairman, I would like to insert in the record a copy of one of the bills of lading to which I have referred. The Ciiaikmax. That wilJ be incorporated in the record. The bill of lading is as follows: [Uniform bill of lading— Standard form of order bill of lading approved by the Interstate Commerce Com- mission by order Xo. rs7 of June 27, 190S.J The Delaware & Hudson - Co. order bill of la1uxg original. Shippers Xo. Ascitis Xo. — Itcceivi (1. subject to the clarifications and tariffs in effect on the date of issue of this original bill of lading, at Albany, X. Y., January 1-1, 1910. from D. & E. Co. the property described In-low, in apparent good order, except as noted (contents and con- dition nf eiintenls of packages unknown), marked, consigned, and destined as indi- cated below, which said company agrees to carry to its usual place of delivery at said destination, if on its road, olherwiso to deliver to another carrier on the route to said destination. It is mutually agreed, as to each carrier of all or any of said property over all or any portion of said route to destination, and as to each party at any time inter, sled in all or any of said property, that every service to be performed hereunder .shall be subject 1o all the conditions, whether printed or written, herein contained (including conditions on back hereof!, and which are agreed to by the shipper and accepted for himself and his assigns. The surrender of this original order bill of lading properly indorsed shall be required before Ihe delivery of the property. Inspection of property covered by this bill of lading will not be permitted unless provided by law or unless permission is indorsed on this original bill of lading or given in writing by the shipper. The rate of freight from to is in cents per 100 pounds. If — times first. If first class. n ; second class If If If fourth fifth class, class (Mail address— Not for purposes of delivery.) r BILLS OF LADING. Consigned to order of Durant & Elmore Co. Destination, New York City. Lighterage free. Notify Otto Kensch. Not graded. At New York City, State of , county of Route, . Car initial, . Car No. 269 No. packages . Description of articles and special marks. Weight (sub- ject to cor- rection). Class or rate. Check column. If charges are to be prepaid , write or stamp here, "To be prepaid." Prepaid. 10 cars corn: 4032 to E 108097 56, 000 do Received S to apply in prepayment of the charges on the property described 83254 83356 do. 82195 do 82020 do... Agent or cashier. 84140 do... 72690 do (The signature here acknowl- edges only the amount paid. Charges advanced: 3 77660 do 74759 (Stamped:) Delivered by Walter B. Pollock, manager. (Stamped:) The D. & H. Co. freight off-e, Jan. 14, 1910, Albany, N. Y. Durant & Elmore Co., shipper. H. R. Palmer, agent. Per B. Per 100. (This bill of lading is to be signed by the shipper and agent of the carrier issuing aame.) (Stamped on back:) Deliver to Otto Kensch. Durant & Elmore Co., JI. A. Bulger. CONDITIONS. Section 1. The carrier or party in possession of any of the property herein described shall be liable for any loss thereof or damage thereto, except as hereinafter provided. No carrier or party in possession of any of the property herein described shall be liable for any loss thereof or damage thereto or delay caused by the act of God, the public enemy, quarantine, the authority of law, or the act or default of the shipper or owner, or for differences in the weights of grain, seed, or other commodities caused by natural shrinkage or discrepancies in elevator weights. For loss, damage, or delay caused by fire occurring after 48 hours (exclusive of legal holidays) after notice of the arrival of the property at destination or at port of export (if intended for export) has been duly sent or given, the carrier's liability shall be that of warehouseman only. Except in case of negligence of the carrier or party in possession (and the burden to prove freedom from such negligence shall be on the carrier or party in possession), the carrier or party in possession shall not be liable for loss, damage, or delay occurring while the property is stopped and held in transit upon request of the shipper, owner, or party entitled to make such request; or resulting from a defect or vice in the prop- erty or from riots or strikes. When in accordance with general custom, on account of the nature of the property or when at the request of the shipper the property is trans- ported in open cars, the carrier or party in possession (except in case of loss or damage by fire, in which case the liability shall be the same as though the property had been carried in closed cars) shall be liable only for negligence, and the burden to prove freedom from such negligence shall be on the carrier or party in possession. Sec 2. In issuing this bill of lading this company agrees to transport only over its own line, and except as otherwise provided by law acts only as agent with r-«pect to the portion of the route beyond its own line. No carrier shall be liable for loss, damage, or injury not occurring on its own road or its portion of the through route, nor after said property has been delivered to the next carrier, except as such liability is or may be imposed by law, but nothing contained in this bill of lading shall be deemed to exempt the initial carrier from any such liabil- ity so imposed. 270 BILLS OF LADING. Sec 3. No carrier is bound (o transport said property by any particular train or vessel, or in time for any particular market, or otherwise than with reasonable dispatch, unless by specific agreement indorsed hereon. Every carrier shall have the right in case of physical necessity to forward said property by any railroad or route between the point of shipment and the point of destination; but if such diversion shall be from a rail to a water route the liability of the carrier shall be the same as though the entire carriage were by rail. The amount of any loss or damage for which any carrier is liable shall be computed on the basis of the value of the property (being the bona fide invoice price, if any, to the consignee, including the freight charges if prepaid) at the place and time of ship- ment under this bill of lading, unless a lower value has been represented in writing by the shipper or has been agreed upon or is determined by the classification or tariffs upon which (he rate is based, in any of which events such lower value shall be the maximum amount to govern such computation whether or not such loss or damage occur- from negligence. Claims for loss, damage, or delay must be made in writing to the carrier at the point of delivery or at the point of origin within four months after delivery of the propertv, or, in case of failure to make delivery then, within four months after a reasonable time for delivery has elapsed. Unless claims are so made the carrier shall not be liable. Any carrier or parly liable on account of loss of or damage to any of said property shall have the full benefit of any insurance that may have been effected upon or on account of &aid property, so far as this shall not avoid the policies or contracts of insur- ance. Sec. 4. All property shall be subject to necessary cooperage and bailing at owner's cost. Each carrier over whose route cotton is to be transported hereunder shall have the privilege, at its own cost and risk, of compressing the same for greater convenience in handling or forwarding, and shall not be held responsible for deviation or unavoid- able delays in procuring such compression. Grain in bulk consigned to a point where there is a railroad, public, or licensed elevator, may (unless otherwise expressly noted herein, and then if not promptly unloaded) be there delivered and placed with other grain of the same kind and grade without respect to ownership, and if so delivered shall be subject to a lien for elevator charges in addition to all other charges hereunder. Sec. 5. Property not removed by the'party entitled to receive it within 48 hours (exclusive of legal holidays) after notice of its arrival has been duly sent or given may be kept in car, depot, or place of delivery of the carrier, or warehouse, subject to a reasonable charge for storage and to carrier's responsibility as warehouseman only, or may be, at the option oE the carrier, removed to and stored in a public or licensed warehouse at the cost of the owner, and there held at the owner's risk and without liability on the part of the carrier, and subject to a lien for all freight and other lawful charges, including a reasonable charge for storage. The carrier may make a reasonable charge for the detention of any vessel or car, or for use of tracks after the car has been held 48 hours (exclusive of legal holidays), for load- ing or unloading, and may add such charge to all other charges hereunder and hold such property subject to a lien therefor. Nothing in this section shall be construed as lessening the time allowed by law or as setting aside any local rule affecting car service or storage. Property destined to or taken from a station, wharf, or landing at which there is no regularly appointed agent shall be entirely at risk of owner after unloaded from cars or vessels, or until loaded into cars or vessels, and when received from or delivered on private or other sidings, wharves, or landings shall be at owner's risk until the cars are attached to and after they are detached from trains. Sec 0. No carrier will carry or be liable in any wav for any documents, specie, or for any articles of extraordinary value not specifically rated in the published classification or tariffs, unless a special agreement to do so and' a stipulated value of the articles are indorsed hereon. Sec 7. Every party, whether principal or agent, shipping explosive or dangerous goods, without previous full writ ten disclosure to the carrier of their nature, shall be liable for all loss or damage caused thereby, and such goods may be warehoused at owner's risk and expense or destroyed without compensation. Sec 8. The owner or consignee shall pav the freight and all other lawful charges accruing on said property, and if required, shall pay the same before delivery. If upon inspection it is ascertained that the articles shipped are not those described in this bill of lading, the freight charges must be paid upon the articles actually shipped. Sec 9. Except in case of diversion from rail to water route which is provided for in section 3 hereof, if all or any part of said property is carried by water over any part of said route, such water carriage shall be performed subject to the liabilities, limitations, and exemptions provided by statute and to the conditions contained in this bill of BILLS OF LADING. 271 lading not inconsistent with such statutes or this section, and subject also to the. condi- tion that no carrier or party in possession shall be liable i'or an\ loss or damage resulting from the perils of the lakes, sea, or other waters; or from explosion, bursting of boilers, breakage of shafts, or any latent defect in hull, machinery, or appurtenances; or from collision, stranding, or other accidents of navigation, or from prolongation of the voyage. And any vessel carrying any and all of the property herein described shall have the liberty to call at intermediate ports, to tow and be tovved, and assist vessels in distress, and to deviate for the purpose of saving life or properly. The term "water carriage" in this section shall not be construed as including light- erage across rivers or in lake or other harbors, and the liability for such lighterage shall be governed by the other sect ions of the instrument. Sec. 10. Any alteration, addition, or erasure in this bill of lading which shall be made without an indorsement, thereof hereon, signed by the agent of the carrier issuing this bill of lading, shall be without effect, and this bill of lading shall be enforceable according to its original tenor. Mr. Keusch was thereupon excused. STATEMENT OF W. M. HOPKINS, REPRESENTING THE CHICAGO BOARD OF TRADE, Mr. Hopkins. If the committee please, I appear here for the Chi- cago Board of Trade to indorse the Pomerene bill as it is proposed to be amended, which amendment will be more full) 7 explained by the attorneys representing the various interests. We believe the Pomerene bill will give us what we require, that is, an instrument of credit and a bill of lading which carries the full lia- bility of the carrier. We believe the effect of that bill will be to make the 'carriers, being responsible fully for the property covered by the bill of lading, more careful in the issuing and handling of bills of lad- ing. It is a notorious fact that the bill of lading has no value now, and the looseness in which bills of lading are issued is most astonishing when you consider the losses to he so small as they are now. For 'illustration, I have before me a bill of lading drawn by a com- mission firm of grain merchants in Minneapolis, made out by them- selves, signed by the agent, bearing the stamp of the Great Northern Railway Co. The bill of lading says that this shipment was recon- signed from Prescott. Prescott is a station in Wisconsin south of Minneapolis. It also says that the shipment originated north of Minneapolis— two conflicting statements in that bill of lading. If the first statement is true, the rate to be applied to that shipment from Minneapolis to Chicago would be 124 cents a hundred pounds. If the second statement is true, the rate to be applied would be 7 h cents per hundred pounds, a difference, of 5 cents a hundred pounds. That illustrates lh<» loose manner in which bills of lading are signed bv agents. I might multiply those illustrations in the hundreds with respect to bills of lading that come to mv notice m the Chicago Board of Trade. ._ . . , The bill of lading that will be framed under this law will be the order bill of lading, which is-as negotiable as a note, and therefore the railroad company being responsible for the property covered by the bill of lading, will be careful in its issuance, and will surround it with all safeguards, as they do their money received at the stations, or the other valuable property that they handle. Now, it has been stated 'here that if this full carrier s liability bill of la ,ing becomes in fact a law, the carriers will be put to very great expense, and therefore should have additional compensation, lo 272 BILLS OF LADING. my mind that is a question which this committee will not .leal with, for the reason that it is already eovere 1 in the interstate act, and the Intei-state Commerce Commission has power to determine the reason- ableness of the lilies, either because of the issuance of a bill of la dng or for any service performe 1 by the carrier. As a matter of fact, we do not believe that any additional expense will be entailed on the part of the carrier, because there has been a law for the. past :>l) years in the State, of Illinois which does impose the obligation upon the, currier of delivering the amount of grain it receives from a country station. The law hi ed'ect provi les this, that it is the duty of the carrier to weigh the gram tendered it for trans- portation. If it neglects to do so then it must accept a statement of the shipper's, suppoitel by an affidavit, as to the quantity of grain contained in that car, but it must deliver a like quantity at destination. That has been in operation, as I have said, for 30 years, and 1 do not know of any hardship that it has ever imposed on the canier. Cut it does this: It relieves the shipping public of the neces- sity of accepting very great losses in transportation of grain, where theie is a di: erence between the country weights and the elevator weights. The practice of transporting grain is to accept the outturn weights upon which to base the freight charges. Where there is a difference between the outturn weights — which qe-e the hopper scale weights — and the country weights, it is a question then as to which weight is cor- rect. Under this Illinois law the obligation rests upon the carrier to show that that grain has not been lost in transit, and, as a matter of fact, a great many claims are adjusted because this responsibility rests upon the carrier that can not be adjusted on shipments from other States for the reason that the bill of lading carries no obligation to deliver anything more than the car contains at destination. In other words, the bill of lading in general use is in effect the shippers load and count bill of lading of grain except as to grain transported wholly within the State of Illinois. V. e have never heard any complaint en the part of the railways as to this Illinois law being a hardship, but it dnos prevent the claim agents of the Illinois companies from denying the right of the consignee to insist upon the amount of the grain that was loaded into the car being delivered, the responsibility for the difference being upon the railroad company. Therefore we believe that the contention of the carricis as to the additional expense involved is not well founded, as the record of a law carrying this liability or forcing the carrier to accept this liability 1 f s not demonstrated such to be the case. One of the Senators this morning asked a question in respect to the use of bills of lading on transit grain. I wish to say a word with refer- ence to the practice of handling transit grain. and the use of bills of lading. Bills of lading on transit grain are handled precisely the same as they are on grain that reaches a final destination. It is the duty of the carrier under the present bill of lading to demand the surrender of the bill of lading before the property is delivered. This is invaiinldy done, and this is true both as to transit and nontransit shipments.. There is annually received in the Chicago market about 250, 000, Of bushels of grain, or approximately 250, 000 carloads, a very substant'f 1 portion of which is transit grain, that is grain that stops in that markc t BILLS OF LADING. 273 to be subsequently forwarded on a through rate. Bills of lading are always taken up on this transit grain whenever the grain leaves the possession of the carrier, and when the transit grain is forwarded a new bill of lading is issued. I believe this is the general practice throughout the country, that in all cases where grain leaves the pos- session of the carrier the bill of lading is first taken up and a new bill of lading issued when a new transaction is begun. So that the misuse of bills of lading is no less or no greater in the case of transit grain or other property than in the case of nontransit shipments. I would like to put into the record also the importance of the validity of a bill of lading to the small dealer. Of the 250,000 carloads of grain that are received annually at Chicago, about 85 per cent of that grain is consigned to be sold, and therefore shipped by the small country dealer. Usually the country dealer is a man of small means and must use this bill of lading as an instrument of credit to continue his busi- ness. To take away from him an instrument which he is using as credit, on which he does his business, would entail a very great hard- ship on him, and that hardship would not apply with equal force to the large dealer because, as the record has shown, the large dealer's credit is based upon his general financial responsibility rather than the particular bill of lading on any particular car. Therefore, we would like to impress upon this committee the import- ance of this measure in protecting the small dealers throughout the country in the handling of the propert}^ in which we are most interested and that is grain. I think that is all I care to say, Mr. Chairman. There being no further questions, Mr. Hopkins was thereupon excused. STATEMENT OF CORNELIUS LYNDE, OF THE FIRM OF CASSO- DAY, BUTLER, LAMB & FOSTER, LAWYERS, CHICAGO, ILL. Mr. Lynde. Mr. Chairman and gentlemen, I appear here as the accredited representative of the Chicago Association of Commerce. I am a member of the legislation committee of that association, which is an incorporated association with a membership of approximately 4,000 members in the city of Chicago, and very many more outside of that city, representing banks and railroads and shippers, and every variety of business interest in that city. I may say that at the meeting at which we considered this legisla- tion a resolution was adopted which I desire to read. There were present representatives of all the different interests which are affected by this legislation. The legislation committee adopted resolutions which were approved by the executive committee of the association, as follows: The legislation committee, owing to the short time which it has had to consider these measures, is not as fullv advised as it would desire to be before reporting on them, which is largely due to the failure of the banking interests to keep us posted as tothe situation; but the committee feels that, in view of the emergency evidently existing, it is proper that it should make the following recommendation, which is put in the form of a resolution: . Be it resolved, That the Chicago Association of Commerce recommend the enactment into law by the Congress of the United State's of the general principles set forth in Senate bill 4713, being the bill introduced by Senator Polnerene, entitled, A bill relating to bills of lading in commerce with foreign nations and among the several States," now being considered 45*41**— S. Doc. 050. 62-2 18 274 BILLS OF LADING. Be it further resolved, That the Chicago Association of Commerce is opposed to any amendment to this measure or any similar measure providing for additional compen- sation to carriers, except in such instances where the issuance of such bills of lading plainly require the rendering of additional services by such common carrier. Be it further resolved, That the Chicago Association of Commerce is in favor, in so far as is practicable, of extending the jurisdiction of the Interstate Commerce Com- mission, if necessary, so that such commission may have express power to determine details as to form or manner of issuance of bills of lading. That is the position of the Chicago Association of Commerce in this matter. We favor the enactment of the Pomerene bill, subject to certain amendments which I intend to take up in detail. Those amendments were the amendments which were agreed upon at the conference referred to at the last hearing — the conference of the shippers' representatives. The first amendment that we desire is the striking out of section 3 of the subsection "b." That section provides at follows: That a carrier may insert in a bill issued by him any other terms and conditions: Provided, That such terms and conditions shall not — (a) be contrary to law or public policy; or (b) in anywise impair his obligation to exercise at least that degree of care in the transporation and safe-keeping of the goods intrusted to him which a reasonably careful man would exercise in regard to similar goods of his own. It is the opinion of the shippers that that section may impinge upon the carrier's liability. It is true that the section is a limitation upon the right of the carrier to limit his liability-, but in view of the Carmack amendment in the interstate commerce act, and in view of the settled law on the subject in the Federal courts, we feel that the enactment of that into the law might cast a doubt upon the existing law upon the subject, and we feel that it would be better to leave that out, paiticularly in view of the fact that subsection "a" of sec- tion 3 provides that the terms and conditions shall not be contrary to law or public policy. The law on this subject in the States is in a very conflicting con- dition. Tliis bill was prepared by the uniform commissioners to be enacted in the various States, and it was obvious that some provision covering this subject should be incorporated in the bill, but as there was no such conflict in the Federal decisions there seems to be no necessity for it, and for that reason we respectfully submit that that should be omitted. The next amendment we want is an amendment to section 2,3 which has already been read. Section 23 is the really important section of the Pomerene bill. It provides specifically the liability of the carrier, particularly for the statements of its ngent. Ihe last part of section 23, which is on page 11 of the Senate ropy of the bill, provides that — the carrier may also, by inserting in (he bill the words "shipper's load and count" or other words of like purport, indicate that the goods were loaded by the shipper and the description of them made by him ; and if such statement be true the carrier shall not be liable for damages caused by the improper loading or by the nonreceipt or by the misdescription of the goods described in the bill. This is the provision under which a "shipper's load and count" bill of lading may be issued. There is nothing in this section nor in any other section in the bill which specifically determines whether the carrier or the shipper has the right to prescribe the form of the bill of lading. Under this law, as it is drafted, the question is open to con- flict as to whether the carrier or the shipper could insist upon a clean BILLS OF LADING. 275 bill of lading, so called. I think probably it would determine that if the shipper complied with the railroad conditions, then the carrier would have to issue the full liability bill of lading. But there is doubt, inasmuch as the law does not have any specific provision of that kind. Furthermore, there are many instances in transportation where the shippers make out the bill of lading. The ordinary loading of a car on team tracks or industry tracks is usually done by the shipper making out the bill of lading, or if that is not the case the shipper loads the car. The amendment which we have suggested adds to the words that I have read the following provision : But if the carrier verifies the statement of property so loaded, or refuses so to do upon demand of the shipper, he shall not insert the words "shipper's load and count" or other words of like purport in such bill of lading. This leaves it to the carrier to determine whether or not he will accept the shipper's statement. The carrier has to have the demand made upon him to issue the full liability bill when the bill of lading is presented, and when the car has presumably been loaded by the shipper. If the carrier chooses to issue that bill of lading without making an investigation or without counting the contents of the car, the carrier has the right to assume that responsibility. On the other hand, if the carrier does not desire so to do, his rights are protected by an opportunity for examination. In other words, the ascertain- ment as to whether the shipper's bill is correct. It seems to me that that provision safeguards the lights of both parties, but makes the law specific in a manner in which it is not now specific. There is a further amendment which we would like to have made to section 27, page 13, of the Senate draft. This section provides: Sec. 27. That after goods have been lawfully sold to satisfy a carrier's lien, or because they have not been claimed, or because they are perishable or hazardous, the carrier shall not thereafter be liable for failure to deliver the goods to the con- signee or owner of the goods, or to a holder of the bill given for the goods when they were shipped, even if such bill be negotiable. This is intended to cover the situation when the carrier has lawfully parted with the possession of the goods and the bill is still outstanding. It is obvious that under certain circumstances the carrier can not maintain possession of the goods if the goods are perishable and the consignee never comes to take up the bill or present the bill. Obvi- ously it is the duty of the carrier to take care of the goods and extract such salvage as he can from the situation. This, it seems to me is probably sufficient on its face, but we think by inserting after the word "goods" on line 4 the word "themselves" the purport or the section would be more specific. In other words, all this would do would be to provide that the carrier should not be liable for failure to deliver the original goods actually described by the bdl of lading under the other circumstances and conditions which are described in the section. I have simply one more thing that I want to lay emphasis upon and that is the suggestion which has been made by the railroad counsel here, that some amendment should be put in this bill, or in any bill that is passed upon this subject, providing for additional compensation in instances where the full liability bul is issued. The interstate commerce act gives to the Interstate Commerce Com- mission, under the provisions of section 1, jurisdiction over the torm 276 BILLS OP LADING. and issuance and substance of bills of lading. The uniform bill of lading, which is the bill generally used, is published in the different classifications, in the official classification territory, and in western classification territory. The terms and provisions of that bill were agreed upon at a time when the Interstate Commerce Commission did not have jurisdiction of this subject matter. The commission caused a conference to be held, and by mutual concessions this bill was adopted as the one, which was the only result that could be ob- tained from that conference. It did not meet the demands of the shippers, and, as has been indicated here, it does not cover all the causes for complaint that have arisen; but it is published in the tariff. In other words, it is subject to the jurisdiction of the Interstate Commerce Commission as the law now stands. That is one thing. Then Congress by adding the Carmack amendment has specified the liabdity of the carrier. The commission has jurisdiction over the subject of rates; full jurisdiction over that subject. There may be instances where the necessity of the carrier to go away from its sta- tion to a sidetrack, for instance, to examine a car which is loaded by a shipper would entail an additional service for which compensation should be bad. In that case it would be perfectly proper for the carrier to insert a provision in the tariff which would cover such service, and that matter would be subject to complaint before the Interstate Commerce Commission, and subject to investigation by that com- mission, and each individual question of fact could be considered by the tribunal which has been especially designed for such purpose. But if Congress inserts in this bill of lading legislation a provision to the effect that the carrier is entitled to additional compensation, it amounts to Congress prejudging the question of fact before it has arisen and before it is presented, and it seems to me that is obviously improper, particularly in view of the policy as indicated by the inter- state-commerce act. The Chairman. You are familiar with the decision of the Supreme Court on this subject, are you not? Mr. Lynde. The Friedlander decision? The Chairman. Yes. Mr. Lynde. Yes, sir. The Chairman. If the court had held there that the companies were liable, as the shippers contended, would or would not that have cured this situation? Mr. Lynde. I do not think that it would have cured a good many of the questions that have arisen. The Chairman. What additional legislation would you want be- yond the declaration that the carrier was liable for the statements of the agent ? Mr. Lynde. In the first place, it seems to me there is this situa- tion: There is no common law in the Federal courts; it is very largely a matter of statute. If this matter is being considered by reason of a contract which is made in a State, then that law may be presumed to have governed, in the absence of Federal legislation, even though the contract covers interstate commerce. But where the laws in the different States are much in conflict, it seems to me that is going to raise questions, and that is going to raise difficulties, some of which have been displayed to this committee. I think, too, that that deci- sion — I am not certain as to the exact date of it, but my recollection EILLS OF LADING. 277 is that it was long prior to this last amendment to the interstate com- merce act, and I think that the interstate commerce act has indi- cated a policy which is inconsistent, with leaving matters of that kind to the courts. It seems to me these questions really go to the Inter- state Commerce Commission. The Chairman. The question of the reasonableness of a rate goes to the Interstate Commerce Commission, but the question of whether the rule in this country should be one of liability or not liability is a purely political question, and settled by Congress, in view of the liability. Mr. Ltnde. What I am trying to indicate is that it seems to me with the opposition to the existing state of things which has caused the application for this legislation goes beyond the mere liability of the carrier for the so-called unauthorized acts of its agents. There are other things that have brought it about. The question of the use of these bills of lading in foreign commerce, for instance, and the agitation as to the terms of the bill of lading. Those are outside the question which was considered by the Supreme Court in that case. If we are going to have legislation on this subject, I think it is better to adopt a complete codification covering the whole thing, which is uniform with the law being enacted in the various States, than simply to adopt a law for the purpose of curing what comes from a mistaken decision. That attitude is the one which we take in this matter. The Chairman. Codification is all right, but the simpler the law could be, of course the better. There has been considerable discus- sion here already as to the possibdity of some constitutional ques- tions being raised here. Now an act of Congress which simply estab- lishes a rule of liability in reverse of that which the court laid down would be free from all questions, free from all difficulty of construc- tion, and unless there is something that would not be reached by that — and that is what I am asking you as to what your views were Mr. Ltnde. It seems to me that the facts which have been pre- sented to this committee show states of fact which might not have been reached by the law suggested, the law simply curing the Fried- lander decision. I think there are other things which have been suggested here. I am not afraid of the constitutional question, in spite of the criticism that has been made on that point. I think that under the decision of the Supreme Court, for instance, in this last second employers' liability case which has recently been handed down, and the other decisions along that line, Congress has the power to completely legislate on anything which is the subject of interstate commerce. That has been very fully determined. I for one am not afraid of that issue in this law. ft seems to me that that is the general view which should have been taken by radroad counsel, as is evidenced, I think, bv Col. Thorn's answer here. The Chairman. I am not prone to magnify constitutional objec- tions. I was just getting your view as to whether if the court had held the reverse of what it held, if that would not have been all sufficient, so far as the question of liability is concerned. There are some questions with reference to uniform form and all of that which have been placed in the hands of the commission, of course. 278 BILLS OF LADING. Mr. Lynde. As I understand it, the commission has not yet exer- cised any authority under that section of the interstate commerce act. I am not sure about that, but I understand that is still a question of construction. The Chairman. That will be all. I simply wanted to get your views. There being no further questions, Mr. Lynde was thereupon excused. STATEMENT OF MR. GEORGE F. MEAD, OF BOSTON, MASS. The Chairman. Mr. Mead, please give your name, residence, and business to the reporter. Mr. Mead. I represent here to-day the Boston Fruit & Produce Exchange, of Boston, having a membership of 800, and the Boston Chamber of Commerce, having a membership of 5,000, the latter being the largest commercial organization in the country. The two latter bodies, Mr. Chairman, have authorized me to specifically indorse the so-called Clapp-Stevens bill, because they are familiar with the provisions of that bill, they having been interested in it since its introduction in the Fifty-ninth Congress, and at different times having passed resolutions favoring the legislation contained therein and sending representatives here to indorse the same. They have indorsed that bill, but with no prejudice to the so-called Pome- rene bill, because not until my reaching Washington two weeks ago was I aware that that bill was under consideration. These two bodies being more familiar with the so-called Clapp- Stevens bill, have given it their indorsement, although at the time that the so-called Pomerene bill was before the Massachusetts Legis- lature for enactment both these bodies appeared in favor of that legislation. I stated we had indorsed the so-called Clapp-Stevens bill. There is, however, one provision in that bill which is very objectionable to us, and that same objection obtains with the Pomerene bill, namely, the "shipper's load and count" provision. That, we feel, is an unfair, unjust, unreasonable, and illogical pro- vision. I have been given to understand that the classification rules require that a shipper must load and unload his cars in order to obtain the benefit of carload rates, and that statement, I think, was confirmed at the last hearing by the railroad representatives; but, as a matter of fact, I think there is only one tariff rate filed whether car is loaded by shipper or the railroad. My special line of business has to do with the shipment of perish- able goods. The railroads invariably stamp such bills of lading "Shipper's load and count." We feel that is an illogical thing to do, because having required us to load and unload our goods in order to get the benefit of the carload rates they sock to punish us for having conformed to their rules and to evade their just liability. We have two amendments to offer, Mr. Chairman, to Senate bill 957, the first relating to the "Shipper's load and count" provision of that bill, to be inserted at the end of section 4. This is the language: But the carrier, when requested and given reasonable opportunity by the shipper to do so at a station where the carrier has an agent, shall examine and count the con- tents of any car and shall not insert in the bill of lading issued for the goods therein the words "Shipper's load and count," or other words of like purport. BILLS OF LADING. 279 Also, by striking out in the last paragraph of section 4 the words "by the improper loading of." In connection with that I would like to have read into the records a copy of a circular issued by the Boston & Maine Railroad, now leased by the New York, New Haven & Hartford Railroad Co., under date of February 21, to this effect: Athy. No. 1714-300.] [Circular T. B. F. No. 195. Boston and Maine Railroad. Maine Central Railroad Co. Freight Traffic Department, Tariff Bureau, Boston, Mass., February 21, 1912^ To Agents: You are hereby notified that shippers who load carload package freight on public- team tracks, at other than flag stations, are entitled to a clear bill of lading (without notation as to "shippers' count," "more or less," etc.) for the number of packages loaded, provided that,_before commencing to load such freight the shipper notifies this company's agent, or his representative, that a clear receipt will be required. Be governed accordingly. W. K. Sanderson, General Freight Agent M. C. JR. R., Portland, Me. G. H. Eaton, General Freight Agent B. & M. R. R., Boston, Mass. Issued by F. S. Davis, Chief of Tariff Bureau, Boston, Mass. That seems to be right in keeping with the spirit of amendment I have just offered, showing that the railroads recognize the justice of a claim of that kind. Mr. Chairman, in view of the fact that whatever testimony I might give further would be simply cumulative; I won't take more of your time, except that we hope this committee will report a bill that will see to it that the "shipper's load and count" provision is cured by some such amendment as I have offered, which amendment we con- sider fair both to the railroads and to the shippers. The Chairman. That is just what I want to discuss with you for a moment. What I say is not in criticism of your intention at all but is simply a desire to get information. You say: But the carrier, when requested and given reasonable opportunity by the shipper to do so at a station where the carrier has an agent, shall examine and count the contents of any car, and shall not insert in the bill of lading issued for the goods therein the words "Shipper's load and count." Now, of course, one object of this is to get a law here, if we get any- thing, that will be just as free from doubt as to what it means and as free from any difficulty of enforcement as possible. Mr. Mead. Yes, sir. The Chairman. If a bill of lading under this amendment should bear the words "shipper's load and count," this would leave it open to an inquiry and investigation by the courts as to whether or not the carrier had been requested and given the opportunity, would it not ? Mr. Mead. It might. The Chairman. Would not that lead to a great deal of litigation that would be difficult ? Mr. Mead. It might. That amendment was adopted after a con- ference with Prof. Williston, Mr. Paton, and Mr. Ives, of the Boston Chamber of Commerce. We were anxious in the preparation of it to be fair to the railroad companies, and only asked them to examine 280 BILLS OP LADING. and count when requested, and a reasonable opportunity given them to do so. We felt it should not apply to a nonagency station or to spur tracks running into fields where cars were loaded. It might be open to the criticism you have suggested. The Chairman. You would contemplate, I take it — at least I ask you that — that under this amendment, if the bill of lading bore the words "Shipper's load and count," that the carrier had been requested and given a reasonable opportunity by the shippers, that then the car- rier should be liable as though the words "Shipper's load and count" were not in the bill of lading? Mr. Mead. You mean that would put the proof upon the shipper that he had given them opportunity to do so ? The Chairman. No. I mean if a bill of lading with this amend- ment in the law was issued bearing the words "Shipper's load and count" and in fact the carrier had been requested and had been given an opportunity to count the contents, that then the carrier would be liable, notwithstanding the words "Shipper's load and count" were in the bill. Mr. Mead. Yes, sir. The Chairman. That would at once throw the door open, would it not, to an interminable amount of litigation, although the bill of lad- ing bore the legend "Shipper's load and count," as to whether or not there had been, in fact, an opportunity given and a request made to the carrier to verify the count? Mr. Mead. It might; yes, sir. The Chairman. Under the existing law as interpreted b} r the Su- preme Court the carrier issues its bill of lading and if, as a matter of fact, the goods were not put in the car, the carrier is not liable. Now to avoid that and to avoid the litigation, it is desired to pass a law which vail fix their liability absolutely, and, of course, one of the objects of that is to render certain the bill of lading which has been put out, so that everybody can rely upon it. Now, does it not seem to } r ou that if it is going to be permitted to put "Shipper's load and count" into a bill of lading where it can only be accepted by the shipper — certainly it would never be inserted if it were not true, because the shipper would want his bill of lading to have the greatest possible credit — that whatever injury might result would be less than that which would result from bringing a new question into litigation as to whether or not back of this recital in the bill of lading was the fact that the shipper had notified the carrier, and the carrier had had an opportunity to verify the count? Mr. Mead. That would depend to a certain extent on the attitude of the railroad and how they were willing to construe the amendment and work in accordance with it. If they wanted to set up a claim under that amendment and have a disputed question whether they had been given an opportunity, it would no doubt make litigation. The Chairman. No, they would not set it up. They would have a bill of lading which on the face of it relieved them by the words "Shipper's loud and count." That would be an uncertain statement, if that is put out, and subject to the same uncertainty as the bill of lading is to-day, because, notwithstanding that assertion, which lessens their liability, the fact might be proved which would increase their liability. BILLS OF LADING. 281 I simply suggest that because, if we do anything, we want to make it certain. . Mr. Mead. You think that might introduce a new uncertainty into it, instead of making it clear ? The Chairman. Yes. But do not understand me as saying that it would not be adopted if we adopted a bill. But one thing we want to do if we do anything is to get a law here that will relieve these uncer- tainties, and I simply suggest that to you. Mr. Mead. We do not want to introduce anything that will in- crease the uncertainties. Personally I wish to indorse the amend- ments offered by Mr. Scales upon behalf of the National League of Commission Merchants. There being no further questions, Mr. Mead was thereupon excused. STATEMENT OF MR. W. N. HOPKINS, MANAGER OF THE TRANS- PORTATION DEPARTMENT OF THE BOARD OF TRADE, CHI- CAGO, ILL. Mr. Hopkins. May I suggest, in answer to your question, Mr- Chairman, that there are certain circumstances where a shipper would desire to accept a bill of lading "Shipper's load and count?" The Chairman. That is what I want to get at. Under what cir- cumstances would a shipper desire a bill of lading that discredited itself as a basis of credit ? Mr. Hopkins. Let us assume that there is a flouring mill located The Chairman. I do not say that there could not be. Mr. Hopkins. I have this illustration in mind. It represents an actual situation. A flouring mill is away from a station about a mile; a country station. There is one agent at that country station. Now, if the miller has to wait until that agent can go down to his mill to check the flour loaded into the car it is going to be a very great inconvenience to him. The Chairman. Yes. Mr. Hopkins. He would rather accept the hazard in that case of a bill of lading "Shipper's load and count" rather than wait for the railroad agent to come down at the time he is ready to load his flour. That will illustrate the case where the shipper would prefer to carry his own hazard as to the accuracy of his count. In the other case, where a clean bill of lading with the carrier's full liability is acquired, it seems to me that no confusion could _ arise as was suggested by your inquiry, from the fact that if the shipper de- sired and demanded a verification of his count, he would not accept any other bill of lading. The Chairman. That is just the point, That is what I have been at since this question first came up some time ago. That no shipper would take a bill of lading bearing the legend " Shipper s load and count" unless it was true that it was the shipper's load and count. Mr. Hopkins. Unless he elected to do so. The Chairman. Then it would be true, of course. Mr. Hopkins. So that it seems to me if this amendment which Mr. Lynde suggested to the Pomerene bill goes into effect pertaining to "Shipper's load and count," that no confusion would ever arise as to 282 BILLS OF LADING. whether or not a demand was made upon a railroad company for a clean bill of lading, because the shipper, as I say, would not accept a bill of lading with that notification on it. The Chairman. Well, then, what application would that amend- ment have ? Mr. Hopkins. The application of that amendment would be to such a shipper as would be willing to accept a "Shipper's load and count" bill of lading. The Chairman. Well, but if he accepted a "Shipper's load and count" legend and as a matter of fact it was the shipper's load and count, then this amendment would have no reference to it ? Mr. Hopkins. Not to that transaction. It would merely give him the right to accept such a bill of lading if he desired to accept, but if he did not desire to accept it, then the law provides that the carrier must give him a clean bill of lading. The Chairman. That is another question. But here is an amend- ment that proposes to put forth a bill of lading with these words, whereas, as a matter of fact, if the gentlemen understood it as I do, back of that legend might be the fact that the shipper had requested and given an opportunity. Mr. Hopkins. Yes; if he has done that, then the obligation rests upon the carrier to furnish that bill of lading. The Chairman. But supposing he still puts it "Shipper's load and count," and that paper goes out into the world backed by that ele- ment of uncertainty ? Mr. Hopkins. That paper would not go out, because the shipper would not accept it. Mr. Faulkner. Then you don't need it? Mr. Hopkins. Yes; we need that law, so that the shipper may get a document that represents the property that he has loaded into the car or which has been loaded into the car and has been checked by the carrier. That represents the precise amount of property that has been delivered to the carrier. He has a right to demand that, and he does demand it, and the carrier must give him that, because he won't accept any other instrument. The Chairman. But supposing that he does, notwithstanding that, for the sake of convenience, accept an instrument bearing this legend. Would that be a conclusive statement against the shipper under this amendment '? Mr. Hopkins. I should say yes. The Chairman*. Then it ought to be made plainer, it seems to me. Mr. Hopkins. It seems to me that that is true, so far as knowing that under the law he can require a clean bill of lading. The Chairman. I think we both have the same idea of the final result. Mr. Lyxde. May I make just one suggestion ? The point that we have in mind in the amendment is simply to give the shipper the right to insist upon a clean bill of lading. There is nothing in section 23 which gives him that right. It is left uncertain, which form of bill of lading he gets. We provide by the amendment that if the carrier is given a reasonable opportunity to examine the shipment, the shipper shall have the lawful right to insist upon a clean bill of lading. Mr. Faulkner. Is not that the law to-day ? Mr. Lynde. I am not sure that it is. BILLS OF LADING. 283 The Chairman. We do not want to get into any argument here. You may complete your statement, Mr. Lynde. Mr. Lynde. I was merely going to reply that as a practical propo- sition, where there is nothing specific in the law, the railroads can prac- tically compel the shipper in many instances to take "the shipper's load and count" bill. I can show the records before the Interstate Commerce Commission in the recent wool-investigation case where that was shown to be the fact. I know of my own personal knowledge that is a fact very frequently, although the law may give the shipper the ostensible right. The Chairman. That should be corrected undoubtedly, but what I was getting at was, once a bill is accepted and goes out, the very pur- pose of all this agitation is to give a certainty to that bill in its recital. Mr. Hopkins. If the shipper accepts the "shipper's load and count" bill Mr. James. I think the situation could be a little fuller met by adding a section to the law wherein the shipper may require the car- rier to make the count. The Chairman. I think that would be the better form. Mr. James. It would be a very short section, because the shipper may still desire to load his own goods, and thus get a less freight rate for the shipment. STATEMENT OF JOHN C. SCALES, OF THE FIRM OF J. C. & C. R. SCALES, COMMISSION MERCHANTS, OF CHICAGO, ILL., CHAIR- MAN REFRIGERATOR CAR LINES COMMITTEE OF THE NA- TIONAL LEAGUE OF COMMISSION MERCHANTS. The Chairman. Give your name, residence, and business, Mr. Scales. Mr. Scales. My name is John C. Scales; I am a member of the firm of J. C. & C. R. Scales, commission merchants in fruits and vegetables, 50 and 52 West South Water Street, Chicago, 111., and I am here representing the National League of Commission Merchants. Mr. Chairman. In order to save time I shall confine myself to a few written remarks; but first I wish to say that whichever of these bills is adopted, the Clapp bill or the Pomerene bill, a provision should be inserted to permit the shipper to accept the notation "Shipper's load and count" upon a bill of lading if he so wishes. I think that is highly necessary. The Chairman. If he does accept that, what is your view as to that being conclusive ? Mr. Scales. That should be conclusive evidence that he loaded and counted the car. The Chairman. Then I think we all understand one another. Mr. Scales. Furthermore, in our investigation of the two bills, which was verv short — in point of fact, we did not know that there was a Pomerene bill until a very short time ago— we have arrived at the conclusion that section 27 should have the greatest consideration of your committee. T Speaking for the National League of Commission_ Merchants, 1 desire to lay before your honorable committee the objections of the aforementioned organization to the shippers' "load and count feature of Senate bill 957 and Senate bill 4713. 284 BILLS OF LADING. As we interpret both bills, the first paragraph of section 23, S. 4713, and all of section 4, S. 957, down to the word "Provided," are clear and explicit as making it obligatory upon the carrier that the goods must be in possession before issuance of bill of lading. The bill once issued, nonreceipt of or nonpossession of the goods does not remove the carrier's liability. This follows strictly the established custom and rule of trade. No merchant could shirk responsibility or escape liability by setting up that although he or his agent had given a receipt for goods that the goods had never been received and con- sequently lie was not liable. The very form of every receipt for goods (and a bill of lading is a form of receipt), "Received of, ' etc., implies unequivocally that the goods have been received into the possession of the receiptor before issuance of the receipt. In every business transaction, however small, how important is it that goods be actually received before issuance of receipt therefor. How transcendently important, then, dues this become when the receipt (the "to order bill of lading") becomes a negotiable paper. Therefore, as the first paragraph of section 23, S. 4713, and that part of S. 957 alluded t<>, both hold the carrier liable for its own default, those parts of both bills are approved. Taking up the second paragraph of the section (23), S. 4713, we see no objection down to the word "consignor" (line 15). To the rest of the paragraph, and to all of section 4, S. 957, from the word "Pro- vided," to the end of the section, we wish most respectfully to enter our objection. Fundamentally we believe it to be the duty of the carrier to load and unload its freight directly into and from cars on sidetracks as it does to and from platforms and warehouses. The latter is always done, the former only occasionally. As a rule, outside of platforms and warehouses the carrier forces the work of loading and stowing upon the shipper, thus evading the loading and stowing cost, and by neglecting or refusing to count the contents of the car seeks to escape all responsibility whatsoever. Now, this part, Mr. Chairman, comes home to the question of shippers' load and count, and the necessity of the shipper being allowed to take such a receipt. We realize fully that there are many exigencies in trade that must be met; that there arc many instances where shippers distant from stations (for example, upon private tracks or upon accommodation sidetracks) would desire the privilege of themselves doing the load- ing. Of course, in such instances the canier would not care to load nor easily have supervision over the count, but even in these instances it should be made obligatory upon the carrier to furnish a checker to check in the number of packages when so requested or demanded by the shipper. If, however, the shipper wished to do the loading and waived his right to have the canier count, then the notation "Ship- pers load and count" would be justifiable and should, upon straight bills, be permitted. It can readily be seen that if negotiable bills of lading are to retain their place in the business world as negotiable instruments that noth- ing must be permitted that would vitiate their integrity. If a to-order bill of lading states 200 packages in a car, then, for the security of the buyer of the bill and all concerned, that number of packages should be there and it should be made the duty of the BILLS OP LADING. 285 carrier to see that that number was loaded or suffer the consequences, [n fine, the carrier should be required in every instance to give a clean bill of lading without the notation "Shippers load and count," except where the shipper willingly, for his own or (if you please) for the accommodation of the carrier, permitted that notation to be put upon the bill. I notice, Mr. Chairman, that most of the testimony to-day has come from dealers in grain. I come here as representing the perish- able food products of the country and consequently view the bill of lading matter from a different standpoint. In my view, as relates to "perishables," the shipper should be permitted to take a bill of lading "Shippers load and count" if he so desires, but not otherwise. As a summary, an analysis of section 23 of S. 4713 leads to the con- clusion that this section (so far as it goes) would adequately meet the requirements of "perishables" under transportation and be equitable and just alike to the carrier and shipper by making the following changes in the section: Insert (line 17) between the words "pur- port" and "indicate" the words " which words, however, shall not be inserted in the bill without consent of the shipper." Strike out (line 20) the words "by the improper loading or." These words should be stricken out for the reason that if the carrier forces the loading upon the shipper, a service which it should itself perform, the carrier should be held liable the same as though the loading had been done by itself and done improperly. There is another and very strong reason why the carrier should not escape liability under cover of "improper loading" by the shipper, and that is that most of the damage to contents of cars is not occasioned by improper loading, but by reckless, wanton, and unnecessary bumping of cars in making up trains and switching. For the information of your honorable committee, the National League of Commission Merchants, for wliich I have the honor to speak, is, as its name implies, a national organization made up of branches located in all the larger and many of the smaller cities of the country. These branches are composed of leading firms in these various cities, and the membership consists of not less than five firms in the smaller cities to over 40 firms in the larger. Those firms are engaged in the shipping, receiving, and distribution of the perishable and semiperishable products of the country. Their business extends over the entire United States and Canada, and many are importers and exporters (especially the latter) to Europe and South America. In fact, they are looking for business wherever American trade can be pushed, and in the interest both of domestic and foreign trade and for the good name of American merchants the world over, these mer- chants pray your honorable committee that it will never let these two acts, either one or the other, relating to bills of lading now under your consideration go out of your hands until the "to-order bill of lading" is so framed for the security of all as to be as good as a United States bond if it is in the power of human ingenuity to make it so. We wish further to state that this organization is closely affiliated with the National Industrial Traffic League, the American Bar Association, the American Bankers Association, the Western Fruit Jobbers Association, and the International Apple Shippers' Asso- ciation, and horticultural and agricultural associations throughout 286 BILLS OF LADING. the country too numerous to mention; and this great number of allied interests is looking to your honorable committee to put the shippers "load and count" feature of whichever bill is finally adopted in such shape as will prevent the carrier from evading a responsibility that is customary and insisted upon in every transac- tion among business men throughout the business world, and what is of more transcendent importance, make the "to order bill lading" what it aims to be and should be — an absolutely reliable and safe negotiable instrument. RESOLUTIONS PRESENTED BY MR. SCALES ON BEHALF OF THE NATIONAL LEAGUE OF COMMISSION MERCHANTS. For brevity confining myself to section 23 of S. 4713 (and the same changes can be made in section 4 of S. 957) I respectfully ask considera- tion of the following amendments: Insert (line 17) between the words "purport and indicate," the words "which words however shall not be inserted in the bill without consent of the shipper." Strike out (line 20) the words "by the improper loading or." There being no further questions, Mr. Scales was excused. STATEMENT OF SAMUEL WILLISTON, LAWYER, PROFESSOR OF LAW IN HARVARD UNIVERSITY, COUNSEL ASSOCIATED WITH THOMAS B. PATON FOR THE AMERICAN BANKERS' ASSOCIA- TION. Prof. Willistox. Mr. Chairman, I shall not attempt to repeat any arguments, and shall speak very briefly in regard to a few matters that have come up in the course of the hearing since I made un- original statement. We have endeavored to come to an agreement, so far as we could, with parties interested to get light from whatever source we could as to what a proposed bill should, in fairness to all interests, contain. It seems to us that the bill should be brief. The longer the bill is the more chance there is for argument that this section or that section is undesirable for one reason or another, or unconstitutional. In regard to the Pomerene bill, different speakers have from time to time attacked several sections. Section 23; section 27 — the defini- tion of value and other matters have been raised which seems to us to make it the part of wisdom to adopt, if possible, as brief a bill as will meet the evil, or the main evil, complained of. We, therefore, advocate the shorter bill, and we believe that the chairman of the committee is right in saying that that bill could probably be shortened to advantage. The first three sections are in the nature _ of definitions and requirements of what a bill of lading shall contain. When this bill was originally drafted and introduced into (he lower House of Congress, the Interstate Commerce Commis- sion had not then recommended the uniform form of bill of lading which has been working so well for the last two or three years. It was therefore regarded as important to state the chief require- ments of a proper bill of lading. That perhaps might go without speaking at the present time. That would make section 4, as to which most of the discussion in these hearings has hinged, practically BILLS OF LADING. 287 the first section of the bill. Some brief definition of order and straight bill would probably be necessary before that. I should be very loath, however, to see the committee do what the chairman inti- mated, merely confine itself to reporting a section which would in effect overrule the Friedlander case. There are other evils, and section 5 strikes at a very important evil which has not elicited much argument because the carriers themselves do not contend that the practice of delivering goods without taking up an order bill of lading is a proper one. But nevertheless, it is done from time to time. The first class of cases that Mr. McDougall testified to was a case of that sort, and when a case of that sort arises in court the carrier never fails to argue that it is not liable because it has delivered the goods to the consignee named in the bill of lading, and sometimes that contention has been upheld. The law is perfectly clear that when an order bill of lading is issued to the order of A, if A has trans- ferred that bill, either as security or by way of sale, prior to the de- livery of the goods by the carrier, the carrier is liable to the endorsee of the biU of lading, if it delivers the goods to the original consignee, or to anybody else. But if the carrier, while the original bill of lading is still in the hands of the consignee, delivers the goods to that con- signee, the person who is at that moment entitled to the goods, the law is not clear that a subsequent transferee of that bill of lading, after the goods have been delivered to the person then the holder of the bill of lading — the law is not clear that the carrier is liable under those circumstances. The Chairman. Although the carrier fails Prof. Williston. To take up the bill of lading. Simply for the record, I will cite two or three cases: Schlesinger v. The West Shore Railroad Co. (88 Illinois Appeals, 273, at page 276) ; The Anchor Mills Co. v. The Burlington Railroad (102 Iowa, 262) ; The National Commercial Bank v. Lackawanna Co. (59 New York Appellate Division, affirmed without opinion, 172 N. Y., 596). The Chairman. Do you mean that they throw doubt upon it ? Prof. Williston. Those cases which I have cited are cases where the railroad was protected. There are more cases where the carrier was held liable, and the weight of authority is distinctly that way. The Chairman. Yes. Prof. Williston. But the matter is open to grave doubt, and in every litigation where the question comes up, it is raised and bitterly fought. Therefore it seems to us that section 5, as drawn here, ought to be in the bill, for very serious frauds have arisen in this way. The Chairman. I had not supposed that question was so much in doubt as you have seemed to indicate. If it is, it certainly should be settled. Mr. Faulkner. How would the uniform bill of lading protect the holder of that original order bill ? Prof. Williston. Substantially as section 5 Mr. Faulkner. In other words it is the same— makes them liable if they deliver the goods without the taking up of the order bill ? Prof. Williston. Exactly. It is sometimes, and frequently, sup- posed by business men generally that a provision in the order bill which expressly provides for the surrender of the document, takes care of this question completely, but the trouble with that is that 288 BILLS OF LADING. the railroad invariably says that is a contract between the shipper and the carrier. It is not a contract negotiable, entitling a purchaser who purchased after the bill of lading has been satisfied by the deliv- ery of the goods to the consignee to make any claim. If section 5 goes in, section 6 ought to go in in fairness to the carriers, for that is a limitation to section 5. Section 7, which relates to alterations, was originally prepared to meet a decision of the highest court of Maryland, which held that a fraudulently altered bill was void. Now this makes the bill a good bill, according to its original tenor. It of course makes the alteration void instead of the bill void. It seems to us that that is a brief and desirable section, and that it sets at rest a question that has at least been doubtful enough to mislead a court of high standing, although I think that decision was a narrow one. There are certain amendments which have been more or less dis- cussed by the various parties interested here. Mr. Page, of the Merchants' Association of New York, asked me to present these amendments. * hie or two of them have been alluded to before. The first two of them relate to the point made by Mr. Page in regard to bills in sets used in foreign commerce. As the Stephens bill came up from the House of Representatives to the Senate, all allusion to foreign commerce was stricken from the act, and in the bill as intro- duced in the Senate by the chairman of this committee the form of the Stephens bill in this respect was followed. The reason was that Mr. Page had raised the same point in the House, and the House com- mittee, not seeing otherwise how to deal with the matter, had stricken out foreign commerce altogether. That is an undesirable thing to do, because many bills from inland points are through bills to foreign points, and those bills are not issued in sets. The cotton bills especiaSy are issued in this way from interior points to foreign ports. It is only what are called port bills that are issued in sets. Now, it seems a pity not to cover in this bill these bills originating in the interior and going to foreign ports. Consequently, these amendments are drawn with a view to making the bill include such bills of lading as I have alluded to, and yet not interfering with the practice of port bills being issued in sets. The amendment that is numbered 3 has already been alluded to, and it seems to me that Mr. James's suggestion that this be made the subject matter of a separate section is a wise one. The object of the provision, of course, is, as previous speakers have pointed out, to give the shipper a right against the carrier to demand a certain form of bill, not to make any provision as to the effect of such bill if nego- tiated after the shipper had improperly marked it "shipper's load and count." The amendment numbered 4 has already been alluded to by another speaker, and therefore it is not necessary for me to say anything in regard to that. I want to say in closing just a brief word about the existing law. There has been such extended argument on the part of the carriers in regard to the Federal law that it would be natural supposition that the Federal law on this point governed an interstate-commerce transaction. That statement was indeed positively made by the attorneys for the Louisville & Nashville Railroad. Nothing can be BILLS OF LADING. 289 further from the truth. The actual situation is that it depends on what court you go into. In Shaw v. The Railroad Company (101 U. S., 557) the Supreme Court referred to and construed State statutes relating to bills of lading and applied them to an interstate transaction. In Pennsylvania Railroad v. Hughes (191 U. S., 477) the court held valid, as to an interstate shipment, a Pennsylvania statute which forbade the limi- tation of liability by agreement in a bill of lading — that is an agreed valuation. _ Mr. Justice Day, on page 491, says: The principle recognized is that in the absence of congressional action upon the subject, a State may require a common carrier, although in the execution of a contract for interstate carriage, to use great care and diligence in the carrying of passengers and transportation of goods, and to be liable for the whole loss resulting from negligence in the discharge of its duties: We can see no difference in the application of the prin- ciple based upon the manner in which the State requires this degree of care and responsibility, whether enacted into a statute or resulting from the rules of law en- forced in the State courts. The situation then as to the Friedlander case is that in a majority of the States where the question is now settled, the law is that the carrier is liable — a very considerable majority, including the States which have imposed that liability by statute. To the States which were alluded to in my original argument, I wish to add that probably Georgia and South Carolina have the same rule. The Louisville & Nashville Railroad v. Pferdmenger (68 South- eastern Reporter, 617) and Thomas v. The Atlantic Coast Line (64 Southeastern Reporter, 22) . The situation is, of course, very unsatisfactory, for not only is there sparring as to removal of causes to Federal courts, as was testified to by Mr. Droste in the case he was interersted in, but also even a court like New York which has the rule of liability for which we contend, may feel bound to apply the law of another State where the shipment takes place, and where the contract was made if that law is different from New York. So very difficult questions of conflict of laws arise, in addition to the lack of uniformity. That is the substance of what I have to say. I would like to have the privilege of inserting at this point this statement of the law. The Chairman. That will be incorporated in the record. The statement is as follows : Responsibility of Carrier on False Bills of Lading Signed bt Agent. Contrary to the doctrine of the Supreme Court of the United States as reported in Friedlander v. Texas & Pacific Railway Co. (130 TJ. S., 416), the courts in New York, Pennsylvania, and other leading commercial States have uniformly held the carrier liable to the bona fide holder of a bill of lading signed by a freight agent without receipt of the goods. It is common knowledge that the railroads have not been injured but have thrived under this rule of responsibility for agents. The decisions from New York, Pennsylvania, and Kansas, cited below, are typical. [New York Court of Appeals. Bank of Batavla, respondent, v. The New York, Lake Erie & Western Railroad Co., appellant (106 N. Y., 195). Decided in 1887.] This action was brought to recover damages alleged to have been sustained by plaintiff bank in consequence of the wrongful issue by defendant railroad, through its local freight agent at Batavia, of two bills of lading. The recital in one was as follows: "Received from F. C. Williams the following articles (contents unknown) 42808°— S. Doc. 650, 62-2 19 290 BILLS OF LADING. in apparent good order, viz., thirty-five barrels of beans.'' The recital in the other was the same, save that the articles described were "thirty barrels of beans." No beans were received, and the bills were false. The bank advanced money to Williams on his draft, secured by the bills of lading. Judgment for plaintiff affirmed. The material facts are stated in the opinion. PRINCIPAL ESTOPPED PROM DENYING TRUTH OF AGENT'S REPRESENTATION. Finch, J. It is a settled doctrine of the law of agency in this State that where the principal has clothed his agent with power to do an act upon the existence of some extrinsic fact necessarily and peculiarly within the knowledge of the agent, and of the existence of which the act of executing the power is itself a representation, a third person dealing with such agent in entire good faith pursuant to the apparent power, may rely upon the representation, and the principal is estopped from denymg its truth to his prejudice. (North River Bank v. Aymar, 3 Hill, 262; Griswold v. Haven, 25 N. Y., 595, 601; N. Y. & N. H. R. R. Co. v. Schuyler, 34 id., 30; Armour v. M. C. R. R. Co., 65 id., 111.) A discussion of that doctrine is no longer needed or permissible in this court, since it has survived an inquiry of the most»exhaustive character, and an assault remarkable for its persistence and vigor. If there be any exception to the rule within our jurisdiction it arises in the case of municipal corporations whose structure and functions are sometimes claimed to justify a more restricted liability. The application of this rule to the case at bar has determined it in favor of the plaintiffs, and we approve of that conclusion. PACTS OF CASE. One Weiss was the local freight agent of the defendant corporation at Batavia, whose duty and authority it was to receive and forward freight over the defendant's road, giving a bill of lading therefor specifying the terms of the shipment, but having no right to issue such bills except upon the actual receipt of the property for transporta- tion. He issued bills of lading for 65 barrels of beans to one Williams, describing them as received to be forwarded to one Comstock, as consignee, but adding with reference to the packages that their contents were unknown. Williams drew a draft on the consignee, and procured the money upon it of the plaintiff by transferring the bills o f lading to secure its ultimate payment. It turned out that no barrels of beans were shipped by Williams, or delivered to the defendant, and the bills of lading were the product of a conspiracy between him and Weiss to defraud the plaintiff or such others as could be induced to advance their money upon the faith of the false bills. NO PRIVITY NEEDED TO MAKE ESTOPPEL AVAILABLE. It is proper to consider only that part of the learned and very able argument of the appellant's counsel which questions the application of the doctrine above stated to the facts presented. So much of it as rests upon the ground that no privity existed between the defendant and the bank may be dismissed with the observation that no privity is needed to make the estoppel available other than that which flows from the wrongful act and the consequent injury. (N. Y. & N. H. R. R. Co. v. Schuyler, supra.) CARRIER KNOWS BILL TRANSFERABLE AND ESTOPPED WITHOUT REFERENCE TO NEGOTIABILITY. While bills of lading are not negotiable in the sense applicable to commercial paper, they are very commonly transferred 'as security for loans and discounts, and carry with them the ownership, either general or special, of the property winch they describe. It is the natural and necessary expectation of the carrier issuing them that they will pass freely from one to another and advances be made upon. their faith, and the carrier has no right to believe, and never does believe, that their office and effect is limited to the person to whom they are first and directly issued. On the contrary, he is bound by law to recognize the validity of transfers and to deliver the property only upon the production and cancellation of the bill of lading. If he desires to limit his responsibility to a delivery to the named consignee alone, he must stamp his bills as ''nonnegotiable;" and where he does not do that he must be understood to intend a possible transfer of the bills and to affect the action of such transferees. In such a case the facts go far beyond the instances cited, in which an estoppel has been denied because the representations were not made to the partv injured. (Mayenborg v. Hayn.es, 50 N. Y., 675; Maguire ii. Selden, 103 N. Y., 642.') BILLS OF LADING. 291 Those were cases in -which the representations were made not intended and could not be expected to influence the persons who relied upon them, and their knowledge of them was described as purely accidental and not anticipated. Here they were of a totally different character. The bills were made for the precise purpose, so far as the agent and Williams were concerned, of deceiving the bank by their representations, and every bill issued not stamped was issued with the expectation of the principal that it would be transferred and used in the ordinary channels of business, and be relied upon as evidence of ownership or security for advances. Those thus trusting to it and affected by it, are not accidentally injured, but have done what they who issued the bill had every reason to expect. Considerations of this character provide the basis of an equitable estoppel, without reference to negotiability or directness of representation. PACT OP RECEIPT OF GOODS PECULIARLY IN KNOWLEDGE OF AGENT AND TRANSFEREE CAN NOT KNOW. It is obvious, also, upon the case as presented, that the fact or condition essential to the authority of the agent to issue the bills of lading was one unknown to the bank and peculiarly within the knowledge of the agent and his principal. If the rule compelled the transferee to incur the peril of the existence or absence of the essential fact, it would practically end the large volume of business founded upon transfers of bills of lading. Of whom shall the lender inquire, and how accertain the fact? Natur- ally he would go to the freight agent, who had already falsely declared in writing that the property had been received. Is he any more authorized to make the verbal representation than the written one? Must the lender get permission to go through the freight house or examine the bookB? If the property is grain, it may not be easy to identify, and the books, if disclosed, are the work of the same freight agent. It seems very clear that the vital fact of the shipment is one peculiarly within the knowledge of the carrier and his agent, and quite certain to be unknown to the trans- feree of the bill of lading, except as he relies upon the representation of the freight agent. The recital in the bills that the contents of the packages were unknown would have left the defendant free from responsibility for a veriance in the actual contents from those described in the bill, but is no defense where nothing is shipped and the bill is wholly false. The carrier can not defend one wrong by presuming that if it had not occurred another might have taken its place. The presumption is the other way; that if an actual shipment had been made the property really delivered would have cor- responded with the description in the bills. The facts of the case bring it, therefore, within the rule of estoppel as it is established in this court and justify the decision made. The judgment should be affirmed, with costs. All concur. Judgment affirmed. (Supreme Court ol Pennsylvania. Brooke v. N. Y., Lake Erie & West. E. B. Co.( 108 Ta., 529).] Sterrett, J Defendant is a common carrier corporation, and, at one of its stations in the State of New York, had in its employ P. J. Weiss as shipping clerk, duly author- ized to issue bills of lading for goods delivered to the company for shipment over its line. Plaintiffs, as commission merchants in Philadelphia, received, over defendant s road, from F. C Williams, of Batavia, N. Y., several consignments of barley, on which, from time to time, they made advances, by accepting and paying drafts drawn on them by the consignor and attached to the bills of lading signed by Weiss for and on behalf of defendant. All the bills of lading except one represented actual consignments ot barley; but that one was fictitious, having been fraudulently issued by Weiss and delivered to Williams for a carload of barley never delivered to defendant nor shipped to plaintiffs. These facts were, of course, well known to both A\ eiss and W Uliams who conspired to commit the fraud of which plaintiffs were wholly ignorant. \\ imams made a draft on plaintiffs and attached it to- the fraudulent bill of lading, the draft was duly presented, and, on the faith of the bill of lading, was paid by plaintiffs; but, of course, the pretended carload of barley never arrived. Plaintiffs who thus became the innocent victims of the fraud to the extent of several hundred dollars, claim that defendant, through whose shipping agent they were defrauded, should make good the 292 BILLS OF LADING. CARRIER ESTOPPED PROM DENTING ASSERTION OP ACCREDITED SHIPPING AGENT. The claim appears to be both reasonable and just; and, notwithstanding the au- thorities cited in support of the opposite view, we are satisfied it is so. Under the cir- cumstances cited in the case stated defendant is estopped from denying what its accredited shipping agent asserted in the bill of lading by which plaintiffs, without any fault on their part, were misled to their injury * * *. PRINCIPAL BOUND BY ACTS OF AGENT WITHIN SCOPE OP AUTHORITY HELD OUT TO WORLD TO POSSESS. It is contended that inasmuch as no authority, real or apparnet, to issue bills of lading without receiving the goods mentioned therein, had actually been given by the railroad company to Weiss, it was not in any manner responsible for his unauthorized act, even as to innocent third parties, who were misled and injured thereby. We can not assent to this proposition. As between principal and third parties, the true limit of the agent's authority to bind the former is the apparent authority with which the agent is invested; but, as between the principal and the agent, the true limit is the express authority or instruction given to the agent: Evans' Agency, 594, 606; Adams Express Co. v. Schlessinger, 25 P. F. Smith, 246. The principal is bound by all the acts of his agent within the scope of the authority which he held him out to the world to possess, notwithstanding the agent acted contrary to instructions; and this is espe- cially the case with officers and agents of corporations. Since a corporation acts only through agents it is bound by its agents' contracts when made ostensibly within the range of their office. One who authorizes another to act for him in a certain class of contracts undertakes for the absence of fraud in the agent acting within the scope of his authority: Whart. Cont. sees. 96, 130, 269. The authority of an agent to act for and bind his principal will be implied from the accustomed preformance by the agent of acts of the same general character for the principal with his knowledge and consent: Evans' Agency, 193, note. These elementary principles are founded on the doctrine that where one of two persons must suffer by the act of a third person, he who has held that person out as worthy of trust and confidence, and as having authority in that matter, should be bound by it: Evans' Agency, 591. It is conceded in this case that the company did not authorize the issuance of bills of lading without receipt of the goods, but it put Weiss in its place to do that class of acts, and it should be answerable for the manner in which he conducted himself within the range of his agency. Public policy, as well as the ultimate good of corporations themselves, requires that this should be the rule. [Supreme Court ot Kansas. Wichita Sav. Bank v. Atchison, Topeka & Santa Fe R. "R. Co. (20 Kan., 519). Decided in 1878.) At the instance of a shipper, the freight agent issued two original order bills of lading for the same shipment of wheat, the shipper stating that he wished the additional bill of lading to file as a record in his office. The shipper negotiated one of the bills of lading for value to W., to whom the wheat was delivered. He borrowed money from plaintiff bank on security of the other bill of lading and then absconded. Held: The railroad company is estopped to deny the receipts of the goods and is liable to the bank. RESPONSIBILITY POR AGENTS A NECESSITY TO SMALL SHIPPER. Horton, C. J. * * * Our State is a great producer of grain, large amounts of which seek markets outBide of its boundaries. The means of its transportation are mainly limited to railroads, and commercial transactions by grain dealers extend to millions each year. The great mass of these products, when started to eastern markets, are purchased and paid for through bills of lading. The custom of grain dealers is to buy of the producer his wheat, corn, barley, etc., then deliver the same to a railroad company for shipment to market. The railroad company issues to the shipper its bill of lading. The shipper takes his bill of lading to a bank, draws a draft upon his com- mission merchant, orconsignee, against the shipment, and attaches his bill of lading to the draft. Upon the faith of the bill of lading, and without further inquiry, the bank cashes the draft and the money is thus obtained to pay for the grain purchased, or repurchase other shipments. In this way the dealer realizes at once the greater value of his consignment and need not wait for the returns of the sale of his grain to obtain money to make other purchases. In this way the dealer with a small capital may buy and ship extensively; and while having a capital of a few hundred dollars only, may BILLS OF LADING. 293 buy_ for cash and ship grain valued at many thousands. This mode of transacting business is greatly advantageous both to the shipper and producer. It gives the ship- per who is prudent and posted as to the markets almost unlimited opportunities for the purchase and shipment of grain, and furnishes a cash market for the producer at his own door. It enables the capitalist and banker to obtain fair rates of interest for the money he has to loan and insures him, in the way of bills of lading, excellent security. It also furnishes additional business to railroad companies, as it facilitates and increases shipments of produce to the markets. A mode of business so beneficial to many classes ought to receive the favoring recognition of the law to aid its continuance. ADDITIONAL STATEMENT OF MR. FRANCIS B. JAMES, OF LIT- TLEFORD, JAMES, BALLARD, FROST & FOSTER, OF WASH- INGTON, D. C, AND CINCINNATI, OHIO. Mr. James. Mr. Chairman, I have been requested to close the dis- cussion on the Pomerene bill by reviewing the whole situation. Mr. Faulkner. Before Mr. James goes on, if he is going to close, I would like to have the right to make some comments, if necessary, and file them with the committee at as early a day as possible, m reference to these amendments that have been suggested. Some of them I think I can concur in, but most of them I can not. The Chairman. Would it not be better, Mr. James, to postpone your presentation until after Senator Faulkner has made his state- ment ? Then you can put in a brief to cover the whole matter. Mr. James. I am going to do that, Mr. Chairman, but there are matters to which I had better call attention orally. Although Prof. Williston drew the Pomerene bill as a uniform State bill as the representative of the Commission on Uniform State Laws in National Conference, yet as counsel for the American Bankers' Association he seeks to cast some doubt on the wisdom of this com- mittee reporting out the Pomerene bill, stating that provisions therein have been criticized. This bill is a perfect measure, and so- called attacks on several of its sections dissolve in thin air when care- fully analyzed. It has been suggested that paragraph (b) of section 3 be omitted. This is no criticism, because paragraph (b) is a mere illustration of paragraph (a), and declaratory of the Federal law as stated by the Interstate Commerce Commission in the matter of released rates (May 14, 1908), 13 I. C. C. P., 550. It is immaterial, therefore, whether paragraph (b) be retained or omitted, and therefore the sug- gestion to strike out paragraph (b) is no criticism of the Pomerene bill. The suggestion is made to add a proviso at the end of section 23. This suggested proviso is in no manner a criticism of the Pomerene bill, but will cover an entirely new subject matter, to wit, the duty of a carrier to count. Being an entirely new subject matter, it should be covered by a supplementary section, in no manner out of harmony with the Pomerene bill. Section 27 is perfectly clear. Under the circumstances mentioned the carrier could not be expected to deliver the specific goods men- tioned in the bill. As stated by Mr. Lynde, the section is perfectly clear, but to meet possible criticism he suggested the insertion of the word "themselves" after the word "goods" in line 4, page 13. Mr. Lynde and I conferred with shippers this morning as to a supposed ambiguity lurking in section 27, and the shippers were satisfied that 294 BILLS OF LADING. the section was all right, but that the insertion of the word " them- selves" would free the section from captious criticism. This section was originally drawn by Prof. Williston for the Commissioners on Uniform State State Laws in National Conference and is in his lan- guage. Mr. Page wants to strike out the definition of the word "value" contained in section 53 of the Pomerene bill, lines 18 to 21, page 24. This is an old complaint of Mr. Page, which he has made of everyuniform law yet proposed. The only commercial organization in the whole United States that ever made criticism of this definition is the one represented by Mr. Page. The criticism is without foundation, and the definition adopted is almost universal throughout the commercial world. This also was drawn by Prof. Williston and is in his exact language. Prof. Williston is not justified in his assertion, and the record in this hearing fails to bear him out. The Pomerene bill is absolutely perfect within itself in the very light of these suggestions, improperly called attacks. The diversified commercial interests which have been heard have absolute confidence in the Pomerene bill because it speaks for all commercial interests, carrier, banker, receiver and shipper, and each and every class of shipper. The principles of the Clapp-Stevens bill are excellent, but the de- tails of the bill are defective and faulty. It bears no resemblance to the bill as introduced, in view of the numerous amendments, offered by the bankers, its propounders, from time to time as the hearing has progressed. It leaves the whole subject with but two provisions covered by Federal legislation and will result in an interstate instru- ment of commerce being governed but slightly by Federal law and largely by State laws in hopeless conflict. Section 4 protects one who " acquires" a bill of lading, but leaves the matter of its acquire- ment to the conflicting laws of 45 States. It speaks of acquiring for "value" but leaves the meaning of value to be defined by the laws of the various States. It speaks of "good faith," but leaves good faith to be governed by the conflicting laws of 45 States. In other words, the bankers' bill creates an instrument of inter- state commerce, a Federal measure in but few particulars, and a State measure in all other particulars to be governed slightly by a national law and largely by divergent State laws in each of the 45 States in which it may be issued, transferred, and dealt in. The Pomerene bill, on the other hand, having protected this instru- ment of national and international commerce, gives to the instrument and to all parties thereto to its logical conclusion, the protec- tion of Federal law, and defines the rights, duties, and obligations of all parties brought in privity therewith, whether carrier, banker, receiver, or shipper in definite language, free from doubt and ambi- guity by distinctly choosing between conflicting decisions. It em- bodies the principle that at this stage legislation is cheaper than litigation, and that one rule clearly defined is better than many rules in many States seeking to govern a national instrument of credit which should be freed from localism of State courts and legislatures. This thought was well expressed on January 15, 1912, by Mr. Justice Van Devanter, in Second Employers' Liability Cases (223 U. S., 1), at page 51, where he said: We are not unmindful that that end was being measurably obtained through the reme- dial legislation of the several States, but that legislation has been far from uniform; BILLS OP LADING. 295 and it undoubtedly rested with Congress to determine whether a national law operat- ing uniformly in all the States upon all carriers by railroads engaged in interstate commerce. (The Lottawanna, 21, Wall., 558, 581-582; Baltimore & Ohio R R « Baugh, 149 U. S., 368, 378-379.) ' ' That the Pomerene bill is far preferable to the Clapp-Stevens bill is well expressed in the Wall Street Journal for February 29, 1912, as follows : REVIEW AND OUTLOOK — WHICH BILL OF LADING? Careful study of the two measures now before the Senate Committee on Interstate Commerce relating to bills of lading shows a striking difference of scope. In the Stevens-Clapp bill the authors seem to have only in mind the decision of the Supreme Copt in Freeman against Howard, made in 1855. Therefore the main pur- pose of the bill seems to be to prevent a carrier company from repudiating the act of its agent, when he gives a bill of lading without having the goods in his custody. This of itself may be a long step in the direction of modern business methods, but it is hardly enough. When it is taken into consideration that the value of bills of lading drawn every year is approximately 125,000,000,000, of which $5,000,000,000 pass through the banks, it is wise to give the instrument all the sanctity the law attaches to commercial paper. Section 6 of Stevens-Clapp bill rightly exempts the carrier from liability when goods are taken from its custody by legal process. But if the instrument is made a negotiable paper, it seems as if the law should go still further. It might protect the holder of the bill by not allowing goods to be taken by legal process with a bill of lading out- standing m hands of third parties. This section might profitably have contained provision of rights and duties of warehousemen, and how the carrier's lien is to be enforced. Section 4 seems to leave many things open for judicial construction, and as such is a breeder of litigation, the last thing the shipper, carrier, or banker wants. The bill introduced by Senator Pomerene, of Ohio, is a comprehensive codification of commercial usuages on this subject, well thought out, clearly stated, and so care- fully prepared that it is a model of good legislation. It seeks not only to do away with the frauds now made possible in bills of lading but to give the instrument all the sanctity of commercial paper, and at the same time protect the rights of carrier, shipper, and banker as far as can be done with justice to all parties. Several years ago the Commissioners on Uniform Laws took up the question of a uni- form bill of lading law in all the States and appointed a committee of some of its ablest members to draft a bill. After four years of work and discussion the form was approved in 1909, since which time it has been enacted into law in nine States, including Massa- chusetts, New York, Pennsylvania, and Ohio. The Pomerene bill is a virtual tran- script of that form. With 48 State legislatures working overtime to turn out conflicting laws, the task of the Commissioners on' Uniform Laws is an uphill one. But they are making pro- gress, and it seems wise to sacrifice the entirely well-intentioned Stevens-Clapp bill in order to pass the greatly more adequate measure introduced by Senator Pomerene. As briefly as is consistent with the importance of the subject, a summary will be made of the various points touched on in the hear- ing under specified hearings as follows : I. CONSTITUTIONALITY. Since the last hearing, there has been printed in official form, the latest utterances of the Supreme Court of the United States on the broad scope of the commercial clause of the Constitution of the United States in the cases entitled "Second Employers Liability Cases" (Jan. 15, 1912), 223 U. S., 1. Two propositions of the sylla- bus appearing at page 2 of the report are as follows : In regulating the relations of employers and employees engaged in interstate com- merce, Congress may regulate the liability of employers to employees for injuries caused by other employees, even though the latter be engaged in intrastate commerce. _ The power of Congress to insure the efficiency of regulations ordained by it is equal to the power to impose the regulations; and prohibiting the making of agreements by those engaged in interstate commerce which in any way limit a liability imposed by 296 BILLS OF LADING. Congress on interstate carriers does not deprive any person of property without due process of law, or abridge liberty of contract in violation of the "fifth amendment." On page 3 a further proposition of the syllabus is as follows: When Congress, in the exertion of a power confided to it by the Constitution, adopts an act, it speaks for all the people and all the States, and thereby establishes a policy for all, and the courts of a State can not refuse to enforce the act on ground that it is not in harmony with the policy of that State. (Claflin v. Houseman, 93 U. S., 130.) Mr. Justice Van Devanter said, at page 47 : 4. This power over commerce among the States, so conferred upon Congress, is com- plete in itself, extends incidentally to every instrument and agent by which such commerce is carried on, may be exerted to its utmost extent over every part of such commerce, and is subject to no limitations save such as are prescribed in the Constitu- tion. But, of course, it does not extend to any matter or thing which does not have a real or substantial relation to some part of such commerce. Mr. Justice Van Devanter also said, at page 51, as follows: We are not unmindful that that end was being measurably attained through the reme- dial legislation of the several States, but that legislation has been far from uniform, and it undoubtedly rested with Congress to determine whether a national law, oper- ating uniformly in all the States upon all carriers by railroad engaged in interstate com- merce, would better subserve the needs of that commerce. (The Lottawanna, 21 Wall., 558, 581-582; Baltimore & Ohio R. R. v. Baugh, 149 U. S., 368, 378-379.) II. CONSTITUTIONALITY CONCEDED. There never yet has been proposed to Congress any progressive legislation in which its constitutionality has not been questioned. In view of the fact that any arguments against the constitutionality of the Pomerene bill are equally applicable to the Clapp-Stevens bills, it comes with poor grace from Prof. Williston to cast a constititional doubt when the railroad lawyers particularly Mr. Thorn concede the constitutionality of the Pomerene bill. This doubly so when we remember that the railroad companies have contested ever} 7 other ?iece of legislation as unconstitutional and now concede that the 'omerene bill is constitutional. III. ENGLISH LEGISLATION. The law merchant as to bills of lading was first embodied in law July 2, 1794, in the great case of Lickbarrow v. Mason (5 Dunford and East Reports, 083), in which the rights of an innocent purchaser for value was protected against stoppage in transitu. In my former testimony I had occasion to refer to the act of 18 and 19 Victoria, of August 14, 1S55. Ex-Senator Faulkner also had occasion to refer to this act at page 183 of the proceeding Ex-Senator Faulkner gave a copy of the act with its purported preamble but omitted part of the preamble. This English statute is reproduced in the sixth edition (1910) Scrut- ton on Charter Parties and Bills of Lading, page 379, and the part of the preamble omitted 1 >y Senator Faulkner is as follows : Whereas, by the custom of merchants, a bill of lading of goods being transferable by indorsement, the property in the goods may therefore pass to the indorsee, but never- theless all rights in respect of the contract contained in the bill of lading continue in the original shipper or owner, and it is expedient that such rights should pass with the property. BILLS OF LADING. 297 It is set forth in Scrutton on Charter Parties and Bills of Lading, at pages 62 and 63, article 21, as follows: In the hands of a consignee or indorsee for value (t) the bill of lading is by statute (u) conclusive evidence that the goods represented (x) by it to be shipped were actually shipped, as against the person signing it (y), unless either (1) the holder took the bill with actual notice that such goods were not on board ; or, (2) the signer shows that the mistake was not occasioned by his default, but was wholly occasioned by the fraud of the shipper, holder, or some person under whom the holder claims (z). In a footnote the author states that it is binding if signed by the owner or signed by a servant. In another footnote the author points out the diminishing power of a master that these documents are signed largely by the clerk or agent of the owner. This statute was further amplified by 24 Victoria, chapter 10, given in Scrutton, at page 380, as follows: 6. The high court of admiralty shall have jurisdiction over any claim by the owner, or consignee or assignee of any bill of lading of any goods carried into any port in England or Wales in any ship, for damage done to the goods or any part thereof by the negligence or misconduct of or for any breach of duty or breach of contract on the part of the owner, master, or crew of the ship, unless it is shown to the satisfaction of the court that at the time of the institution of the cause any owner or part owner of the ship is domiciled in England or Wales: Provided always, That if in any such cause the plaintiff do not recover £20, he shall not be entitled to any costs, charges, or expenses incurred by him therein, unless the judge shall certify that the cause was a fit one to be tried in the said court (d) . It is quite significant that there is no English decision denying the liability of a rail carrier in the cases of fraudulent and accommodation bills of lading. Cases of this kind must have arisen, and it is fair to assume that the railroads never denied liability, otherwise cases could be found. If any such question had arisen as to rail carriers in 1855, when the statute of 18 and 19 Victoria was passed, shippers by railroad would have had little chance for favorable legislation if we take the contemporaneous history of the times as recorded in the Edinburg Review and Herbert Spencer as recorded in Parsons The Railways, The Trusts, and The People, pages 282-285. In 1845 157 members of Parliament each own stock ranging as high as $1,500,000, and it is recorded ' 'The supporters of railway measures openly boasted of the number of votes they could command in the House." Herbert Spencer is quoted as saying: We have but to look back a few years and mark the unanimity with which companies adopted the policy of getting themselves represented in the legislature, to see that the furtherance of their respective interests was the incentive. How well this policy is understood amongst the initiated may be judged from the fact that gentlemen are now in some cases elected on boards simply because they are members of Parliament. Of course this implies that railway legislation is affected by a complicated play of private influences. IV. CERTIFIED BILLS OF LADING. Senator Faulkner has called attention to the fact that the southern railways certify bills of lading as set forth on page 189 of the record: The Southern Railway Co. hereby certifies: That is its regularly appointed • agent at and as such is authorized to sign bills of lading in accordance with the regulations of this company, and that the signature on the attached order notify bill of lading No. — * dated (place of issue) , (date) • , 191—, covering bales of cotton marked is his signature. So far as fraudulent and accommodation bills are concerned, this certificate is worthless because it states that the agent "is authorized to sign bills of lading in accordance with the regulations of this com- pany." All a railroad has to do is to have private instructions em- bodying its regulations that the agent has no authority to sign in the 298 BILLS OF LADING. absence of actual possession of the goods, and every person is then put on notice — constructively — and the railroad escapes liability. In fact the result will be with such a certificate, even in such States as New York, that the rules of liability will be abrogated on the ground of constructive notice of the limitations on the agent's authority. This certificate instead of being an aid of legal and commercial nego- ti ability smirches the instrument. V. WAREHOUSE RECEIPTS. During the course of this hearing the analogy has been drawn be- tween warehouse receipts to order and order bills of lading. The great value of warehouse receipts is set forth in Dondlinger on "The Book of Wheat," published in 1910, at page 245. These general receipts are usually reliable, although at least one gigantic swindle has been perpetrated by means of fraudulent warehouse receipts. From the begin- ning, however, the receipts have been considered as good as the wheat which they represented. In other words, wheat had become a perfect representative commodity. Being a staple article when classified, receipts issued against graded wheat are as current and negotiable as a bank check. They have the same meaning in Liverpool or Antwerp as in Chicago or New York. This greatly facilitates dealing in wheat, for a contract can be fulfilled by delivering a receipt. Under ordinary conditions, such receipts can be purchased in the open market at any time. Section 20 of the act to make uniform warehouse receipts is in substance the same as section 23 of the Pomerene bill, and may be found in American Uniform Commercial Acts, page 195, as follows, to wit: Sec. 20. Liability foe Nonexistence or Misdescription of Goods. — A ware- houseman shall be liable to the holder of a receipt for damages caused by the non- existence of the goods or by the failure of the goods to correspond with the description thereof in the receipt at the time of its issue. If, however, the goods are described in a receipt merely by a statement of marks or labels upon them, or upon packages con- taining them, or by a statement that the goods are said to be goods of a certain kind, or that the packages containing the goods are said to contain goods of a certain kind, or by words of like purport, such statements, if true, shall not make liable the ware- houseman issuing the receipt, although the goods are not of the kind which the marks or labels upon them indicate, or of the kind they were said to be by the depositor. This act is now law in 23 States, Territories, and Districts as follows : California, Colorado, Connecticut, District of Columbia, Illinois, Iowa, Kansas, Louisiana, Maryland, Massachusetts, Michigan, Mis- souri, Nebraska, New Jersey, New Mexico, New York, Ohio, Pennsyl- vania, Rhode Island, Tennessee, Utah, Virginia, and Wisconsin. VI. FINANCING THE MOVEMENT OF GRAIN. The testimony as to financing the movement of staple commodities through order bills of lading, as described by the many witnesses, is graphically pictured in Dondlinger "The Book of Wheat" (1910), pages 227-228, as follows: The large money centers are not as great a factor in the moving of the wheat crop as they were at an earlier date, for to a large extent the rural sections now do their own banking. The banking power has grown much faster than the increasing money re- quirements for moving crops.^ In 1890 the banking power of the chief grain States was to the money power required to move the grain crop as 4 to 6, and a decade later the ratio was 7 to 6. The grain-growing region now has sufficient capital to move the cereals from first hands and to start them well on their way through the commercial channels. A dealer furnishing money for about 175 country elevators in Minnesota and the Dakotas sends out $500 to $1,000 to each elevator, making from $100,000 to BILLS OF LADING. 299 1150,000 sent out the first day. Cars are not obtained on this clay, and perhaps 50 000 to 100,000 bushels are purchased. A sort of paymaster is located in the elevator towns, and these keep the principal informed as to the amount of wheat purchased daily and as to the amount of cash that will be required the next day. Much of this cash must usually be borrowed, but warehouse receipts for grain already in elevators are good security on which an amount of money close to the cash price of the wheat can be borrowed from the country banker. There must lea carload of the same grade of grain before shipment can be made. When the grain does begin to move it takes sev- eral days for it to get to market, and five or six days' receipts are often on hand before cash is realized. As soon as a car is loaded, the elevator man draws a sight draft on the commission house at the primary market for the amount that he 1 orrowed from the country banker, attaches the bill of lading, and deposits the draft in the country ] ank as a cash item. Cables are frequently sent at night to every market of the world in order to sell wheat. What can not be sold must be held, and future sales upon the specula- tive markets can be made as an insurance against loss from price fluctuations. The country banker sends the draft to his correspondent at the market, where collec- tion is made. As soon as the wheat reaches the terminal warehouse, it is again avail- able for a loan closeto its market value. If the terminal factor is an exporter, he also attaches bills of lading to a draft drawn against the shipment, and his 1 anker accepts this draft as cash at current exchange rates, which include interest on the money until the draft is paid. Outside of the money used by the railroads, it requires about $500,000,000 to move the grain crops. If the farmers do not wish to sell their wheat at once, they can place it in the elevator and receive a receipt on which they can borrow 90 per cent of its value from the banks. The importance of bills of lading in interstate and foreign commerce is thus set forth in the Wall Street Journal for February 21, 1212: BILLS OF LADING. There is at last a prospect of a Federal law regulating bills of lading, and the business interests of the country may well congratulate themselves. Following a decision of an English court, the Supreme Court of the United States once decided that if a carrier's agent issued a bill of lading, without having the goods purporting to be covered thereby in his possession, the carrier was not liable therefor, even if the bill were negotiated and held by an innocent third party who had given value for it. Parliament changed the law in England and made the carrier liable; but in the Federal courts the law still stands as here stated. Some State courts followed the Supreme Court, a few others refused to accept the doctrine, while other States changed the statute law to make the carrier liable for the agent's act. A consequence of this confusion is that in some States the negotiation of fraudulent bills of lading is possible, to say nothing of duplicate bills and of "spent" bills that have not been taken up when the goods were delivered; and in many jurisdictions a bank which has advanced money on the bill of lading has no recourse except against the shipper. In a case originating in a State whose courts have changed the law by judicial con- struction, the Federal courts would be obliged to follow the law as laid down by the Supreme Court. In one originating in a State whose statutes changed the law, they would take notice of the statute and decide exactly the reverse, while the State courts would follow the statutes or judicial decisions of their State. The student may work out for himself the variety of different decisions that might be obtained in the different courts on causes of action exactly similar. Mr. Justice Clifford, of the Supreme Court, once said that "commercial law is a system of jurisprudence acknowledged by all maritime nations, and upon no subject is it of more importance that there should be as far as practicable uniformity of decisions throuhgout the world." He was speaking with reference to commercial paper; but the bill of lading has now assumed a world-wide importance and is the necessary collateral of the bill of exchange with which it goes side by side. Our grain and cotton shipments are financed by it in the markets of the world, and in domestic commerce it goes with the raw materials to the factory, and -with the finished product wherever there is a market. ... We are not living unto ourselves alone. We produce for world markets; and bills of lading in State, interstate, and foreign commerce, when attached to a draft on the consignee of commodities, should be construed by the same law that governs the draft, which is its complement. All over the civilized world the law is that no defense can be made to an action on it in the hands of an innocent third party for value. 300 BILLS OF LADING. VIII. TRANSFER BILLING. Ex-Senator Faulkner has sought to set forth that the railroads were deprived of the right of transfer billing in Missouri Pacific Rail- way v. McFadden (154 U. S., 155). Supreme Court of the United States distinguished that case at page 520 in Arthur v. Texas & Pacific Railway Co. (Feb. 25, 1907; 204 U S., 505), the syllabus of which is as follows: Where a railway company has no other place for delivery of cotton than the stores and platform of a compress company, where all cotton transported by it is compressed at its expense and by its order, its acceptance of, and exchange of its own bills of lading for, receipts of the compress company passes to it the constructive possession and absolute control of the cotton represented thereby, and constitutes a complete delivery to it thereof; nor can the railway company thereafter divest itself of respon- sibility for due care by leaving the cotton in the hands of the compress company as that company becomes its agent. Mr. Justice Peckham said (pp. 515-517): The fact that in getting the cotton compressed the railway chose to have it done by an independent contractor, over whose acts it had no control while the cotton was being compressed, and the fact that it would order the compress company after compressing to load the cotton on cars selected by defendant's agent, did not in any way affect the fact that the cotton had been received by the railway company, and that it was there- after subject to its full control. The defendant could not divest itself of the respon- sibility of due care by leaving the cotton to be compressed and loaded by the com- press company. The latter company was, while so acting, the agent of the defendant, chosen by it, and, as such, the defendant was responsible for any lack of proper care of the cotton by the compress company (Bank of Kentucky v. Adams Express Co., 93 U. S., supra.) It is urged that the case cited does not cover the facts herein, because in the reported case the attempt was to secure the immunity of the defendant express company from the consequences of the negligence of the railroad in doing the very thing that the express company had agreed to do, viz, transport the money; while in the case before us the negligence of the compress company (assuming there was such) was not in trans- porting the cotton, which the railway company had agreed to do, but in caring for it while awaiting compression. We see no difference, in fact, which would lead to a different result. The compression was done for the convenience of the railroad company, after the company had received the cotton and before the actual transportation had commenced. In order to enable it the more conveniently to do the work of transportation it can not divest itself of its obligation to exercise due care while the cotton is in the control of the compress company, although the latter is an independent contractor and not under the immediate control of the railway company while doing the work of compression in its behalf. There would be no justice m such holding, and we are clear it would violate the general rule that the carrier, after the freight had been received by it, must be regarded as liable, at least, for the negligence of its own servants, and also for that of the servants of an independent contractor, employed by it to do work upon the freight for its own convenience and at its own cost. It is always in the power of the railway company to make the cotton contrast the agent of the railway company, and to continue the practice of transfer billing, the possession of the cotton com- press company being the possession of the railway company. VIII. SPENT BILLS OF LADING. So much stress has been laid on fraudulent and accommodation bills of lading that spent bills of lading have not been kept con- stantly in mind. Many of the illustrations given have been of frauds perpetrated by outstanding spent bills of lading and is as great a menace to commerce as fraudulent and accommodation bills. On this subject the Pomerene bill takes care of this subject in sec- tions 14 and 15. BILLS OF LADING. 301 IX. STATE LEGISLATION. In many States carriers are liable for fraudulent or accommodation and spent bills of lading and no instance has ever been heard from in which the railroad companies demanded specific additional com- pensation because of such liability. In the nine States which have passed the Pomerene bill no claim was ever made before their legis- latures that there should be an increase of rates by reason thereof and no such claim made since their passage. If the passage of this bill in all the States and by Congress would increase the damage claims against railroads, commerce should bear this burden by an increase in all rates to meet it but there should not be four kinds of bills of lading, to wit, straight bill of lading, guaranteed straight bill of lading, order bill of lading, guaranteed order bill of lading with a separate specific rate attached to each. X. UNIFORM BILL OF LADING AND THE LAW OF CARRIERS. The uniform bill of lading heretofore referred to at page 197 of the record of this hearing must not be confounded with the law of bills of lading. The conditions contained on the uniform bill of lading are contractual limitations on the law of carriers and deal primarily with the law of carriers. They create no Federal rights enforceable in the Federal courts. The Pomerene bill deals primarily with a bill of lading as an instrument of national and international com- merce, and secondarily with the law of carriers, giving, however, Federal sanctions to the rights, duties, and obligations arising there- under ultimately reviewable by the Supreme Court of the United States and thereby giving them a uniform application, which uni- formity will be indestructible by conflicting State decisions. XL SUGGESTION AS TO SECTION 3. A suggestion has been made as to section 3 which will not change its meaning. Section 3 of the Pomerene bill reads as follows, to wit: Sec. 3. That a carrier may insert in a bill issued by him any other terms and con- ditions: Provided, That such terms and conditions shall not — (a) Be contrary to law or public policy; or (b) In anywise impair his obligation to exercise at least that degree of care in the transportation and safekeeping of the goods intrusted to^ him which a reasonably careful man wo uld exercise in regard to similar goods of his own. The suggestion is to strike out paragraph (b) . As paragraph (b) is a mere illustration of paragraph (a) there is no harm in striking out paragraph (b) and to do so is in no sense a change or amendment of the Pomerene bill. Paragraph (a) with its illustration as contained in paragraph (b) is declaratory of the law as stated by the Supreme Court of the United States and fully elucidated in the matter of released rates (May 14, 1908; 13 I. C. C. R., 550), the syllabus of which is as follows : 1. If a rate is conditioned upon the shipper's assuming the risk of loss due to^causes beyond the carrier's control, the condition is valid. _ 2. If a rate is conditioned upon the shipper's assuming the entire risk of loss, the condition is void as against loss due to the carrier's negligence or other misconduct. 3. If a rate is conditioned upon the shipper's agreeing that the carrier s liability shall not exceed a certain specified value, (a) the stipulation is valid when loss occur* through causes beyond the carrier's control; (b) the stipulation is valid, even when. 302 BILLS OF LADING. loss is due to the carrier's negligence, if the shipper has himself declared the value, expressly or by implication, the carrier accepting the same in good faith as_ the real value, and the rate of freight being fixed in accordance therewith; (c) the stipulation is void as against loss due to the carrier's negligence or other misconduct if the specified amount does not purport to be an agreed valuation, but had been fixed arbitrarily by the carrier without reference to the real value; (d) the stipulation is void as against loss due to the carrier's negligence or other misconduct if the specified amount, while purporting to be an agreed valuation, is in fact purely fictitious and represents an attempt to limit the carrier's liability to an arbitrary amount. 4. A carrier may lawfully establish a scale of charges applicable to a specific com- modity and graduated reasonable according to value. These rates must be applied in good faith, regard being had to the actual value of the property offered for shipment. 5. A carrier must not make use of its released rates as a means of escaping liability for the consequences of its negligence, either wholly or in part. 6. It is a mischievous practice for carriers to publish in their tariffs and on their bills of lading rules and regulations which are misleading, unreasonable, or incapable of literal enforcement in a court of law. 7. A stipulation that an additional charge of 20 per cent ehall be collected on prop- erty that is shipped not subject to limited liability is unreasonable. XII. SUGGESTION AS TO SECTION 23. Section 4 of the Stevens bill, as introduced, contains no provisions on shippers' load and count. The bankers have suggested that there be added thereto the provisions of section 23 of the Pomerene bill. It has been suggested to add a proviso to section 4 of the Stevens bill and section 23 of the Pomerene bill requiring the carriers to count, when requested by the shipper, and when so requested, the carrier shall not insert shippers' load and count in the bill of lading. It is therefore quite clear that this suggestion is no criticism of section 23 of the Pomerene bill, but is a suggestion for a positive law upon a new subject. In view of this fact, it is now agreed by everybody that the suggestion should be embodied in a new independent section, which is quite proper, and therefore the suggestion is no criticism of section 23 of the Pomerene bill, which is in the exact language as prepared by Prof. Williston, as the representative of the Commissioners on Uni- form State Laws in National Conference. XIII. SUGGESTION AS TO SECTION 27. Section 27 of the Pomerene bill reads as follows, to wit: Sec. 27. That after goods have been lawfully sold to satisfy a carrier's lien, or because they have not been claimed, or because they are perishable or hazardous, the carrier shall not thereafter be liable for failure to deliver the goods to the consignee or owner of the goods, or to a holder of the bill given for the goods when they were shipped, even if such bill be negotiable. This section is perfectly clear, as has been heretofore pointed out, and the suggestion has merely been made to insert the word "them- selves" after the word "goods" on page 13, line 4, of the Pomerene bill to remove any possible captious criticism. This section is the exact language as prepared by Prof. Williston as the representative of the Commissioners on Uniform State Laws. XIV. SUGGESTION AS TO DEFINITION OF VALUE IN SECTION 53 OF THE POMERENE BILL. Section 53 of the Pomerene bill contains a definition of value as — "Value" is any consideration sufficient to support a simple contract. An ante- cedent or preexisting obligation, whether for money or not, constitutes value where a bill is taken either in satisfaction thereof or as security therefor. BILLS OF LADING. 303 This definition of value has received the universal indorsement of all commercial organizations, with the solitary exception of the Mer- chants' Association of New York, represented by Mr. Page. In 1821 in the case of Coddington v. Bay (5 Johnson Chancery, 54) a New York court unfortunately gave a common law as distinguished from a law merchant definition of value. This was affirmed in 1822 in Bay v. Coddington (20 Johnson, 637). In reference thereto, Daniel states, in volume 1, negotiable instruments, section 831 c, that "to reconcile the New York decision is impossible." In 1842 in Swift v. Tyson (16 Peters, 1),_ the Supreme Court of the United States, in a case arising in New York, repudiated Coddington v. Bay, resulting in two definitions of value in New York, depending whether a matter was litigated in a State or Federal court. In 1907 the legislature of New York repudiated Coddington v. Bay in section 51 of the nego- tiable instruments law of that State, found in volume 3, Birdseye, Currie and Gilbert's Consolidated Law of New York, page 3648. The New York statutory definition of value is now the statutory defini- tion of value in 39 States, Territories, and possessions of the United States. The Legislature of New York again repudiated the definition of value in Coddington v. Bay in its warehouse receipts act, section 142, General Business Laws of New York, contained in volume 3, Birdseye, Currie & Gilbert's Consolidated Laws of New York, page 1838, which is now adopted in 23 States, Territories, and Districts of the United States. The uniform sales act contains the same defini- tion in seven out of eight States, the Merchants Association succeed- ing in having it dropped in New York, but did not succeed in having the definition in Coddington r. Bay substituted therefor. The uni- form bills of lading act (Pomerene act) contains the same definition in eight out of nine States, the Merchants Association succeeding in having it dropped in New York, but did not succeed in having the definition in Coddington v. Bay substituted therefor. This action of the Merchants Association makes doubly impressive the language of Mr. Justice Van Devanter, already referred to, in Second Employers Liability Cases (223 U. S., 1, p. 51), already quoted. The Merchants Association has had its full day in court, as appears in American Uniform Commercial Acts (Jan. 1, 1910), pages 44-59, both inclusive, as follows : The Merchants' Association of New York City, through Mr. Abram Elkus, of Messrs. James, Schell & Elkus, has addressed a communication to the committee criticizing the definition of the word "value" as contained in section 51 of the fourth tentative draft 1 of the bills of lading act. The criticism is divided into two parts, the first relating to the first sentence and the second to the second sentence of the definition. The word "value" appears 14 times in the act, being found in sections 6, 7, 8, 9, 14, 15, 17, 23, 24, 32, 34, 35, 38, 39, 40, 42. The definition of the word "value " contained in section 51 ' would be read into each of these sections. We will consider the criticisms separately: " 'Value is any consideration sufficient to support a simple contract." This in no wise changes the now generally accepted definition of value as to nego- tiable credit instruments and securities. The English bills of exchange act (Chalmers 5th Ed., 1896, p. 80) provides: "Sec. 27. Valuable consideration for a bill may be constituted by (a) any consid- eration sufficient to support a simple contract." The same act (ibid., p. 7) provides: "Sec. 2. Value means valuable consideration." These sections as part of the English Act have been adopted in 45 English Provinces, colonies, and dependencies. ' Sec. 5.1 in the final draft. 304 BILLS OF LADING. The uniform negotiable instruments act (Brannan on Negotiable Instruments Law, p. 9) provides: "Sec. 25. Value is any consideration sufficient to support a simple contract.'' The same act provides (ibid., p. 39): ''Sec. 191. Value means valuable consideration." This act has now been enacted in 38 States and Territories. The sales act (sec. 70) uses the same definition, and this has been enacted in six States and Territories. The warehouse receipts act (sec. 58) useB the same definition. This has been enacted in 18 States and Territories. It may therefore be said that this definition prevails in nearly every English-speak- ing nation, state, colony, territory, insular possession, and dependency. It does not unsettle any general unwritten law because there are but few judicial decisions upon the subject. Williston on Sales (1909, Bee. 620, pp. 1036-1040) contains an excellent discussion of the definition of "value." 1 Mr. Elkus suggests five suppositious cases which would rarely arise in practice, nor would all of them constitute value in the meaning of the definition. 2 Furthermore, transactions must be bona fide tobe sus- tained. In the humble judgment of the committee much of Mr. Elkus's difficulty arises from his failure to distinguish between "value" and "good faith," both of which are required by the act. A successful fraud in the five instances suggested is too remote to be sufficient to modify the definition of value which has now been so universally accepted. "An antecedent or preexisting obligation whether for money or not constitutes value where a bill is taken either in satisfaction thereof or as security therefor." The English bills of exchange act (Chalmers, 5th ed., 1S96, p. 80) provides: "Sec 27. (6) An antecedent debt or liability. Such a debt or liability is deemed valuable consideration whether the bill is payable on demand or at a future time." As heretofore stated, this definition has been adopted in 45 English provinces, colonies, and dependencies. The uniform negotiable instruments act (Brannan, p. 9), provides: "Sec. 25. An antecedent or preexisting debt constitutes value, and is deemed such whether the instrument is payable on demand or at a future time." As before stated, this has now been enacted in 38 States and Territories. The warehouse receipts act provides: "Sec. 58. An antecedent or preexisting obligation, whether for money or not, con- stitutes value where a receipt is taken, either in satisfaction thereof or as security therefor." This has now been enacted in 18 States aud Territories. The uniform sales act provides: "Sec. 76. An antecedent or preexisting claim, whether for money or not, constitutes value where goods or documents of title are taken either in satisfaction or as security therefor." It may likewise be said of the second part of this definition as has been said of the first half, that this definition is now the law of nearly every English-speaking nation, territory, colony, Province, insular possession, and dependency. The criticism may in part be attributed to a radical difference of opinion which has existed between the New York courts on the one hand and the courts of most States and the Federal courts on (he other on this subject. Down to the passage of the nego- tiable instruments law in New York in 1897, the New York State courts adhered to a doctrine different from that embodied in the negotiable instruments act. In 1842, in a case arising in a New York Federal court, by reason of diversity of citizenship (being the ruling, leading, and celebrated case of Swift r. Tyson, 16 Peters, 1), the Supreme Court of the United States claimed the right to determine for itself the rule of the law merchant applicable in New York. Mr. Justice Story adopted the rule now embodied in the negotiable instruments act. He put it expressly upon the ground of producing uniformity of commercial law in the commercial world. When the commissioners on uniform State laws framed the negotiable instruments act (through Mr. Crawford, a New York lawyer) they were forced by reason of this lack of uniformity to adopt one rule or the other and refused to adopt the New York State court rule and adopted the rule laid down by the Supreme Court of the United States in Swift v. Tyson, supra. i For convenience this is printed as Appendix A. 3 The five instances suggested by Mr. Elkus are as follows: 1. The promise of his fiancee to marry him. 2. The promise of a friend to pay him an annuity or support him for a period of time. 3. The promise of another to give a sum to a third person— the wife, child, or relative of the trader. 4. A promise to abstain from a certain business in a specified locality and for a specified time. 5. A promise not to sue. BILLS OF LADING. 305 In deciding Swift v. Tyson, supra, Mr. Justice Story said (pp. 19-20): "The law respecting negotiable instruments may be truly declared m the language of Cicero, adopted by Lord Mansfield in Luke v. Lyde (2 Burr., 883, 887), to be in a great measure not the law of a single country only, but of the commercial world. Non erit alia lex Romae, alia Athenis; alia nunc, alia posthac; sed et apud omnes gentes, et omni tempore una eademque lex obtinebit. * "It becomes necessary for us, therefore, upon the present occasion, to express our own opinion of the true result of the commercial law upon the question now before us. And we have no hesitation in saying, that a preexisting debt does constitute a valuable consideration in the sense of the general rule already slated, as applicable to negotiable instruments. Assuming it to be true (which, however, may well admit of Bome doubt from the generality of the language), that the holder of a negotiable instrument is unaffected with the equities between the antecedent parties, of which he has no notice, only where he receives it in the usual course of trade and business for a valuable consideration, before it becomes due; we are prepared to say that receiv- ing it in payment of, or as security for, a preexisting debt, is according to the known usual course of trade and business. And why, upon principle, should not a pre- existing debt be deemed such a valuable consideration? It is for the benefit and convenience of the commercial world, to give as wide an extent as practicable to the credit and circulation of negotiable paper, that it may pass not only as security for new purchases and advances, made upon the transfer thereof, but also in payment of, and as security for, preexisting debts. The creditor is thereby enabled to realize or to secure his debt, and thus may safely give a prolonged credit, or forbear from taking any legal steps to enforce his rights. The debtor also has the advantage of making his negotiable securities of equivalent value to cash. But establish the opposite conclusion, that negotiable paper can not be applied in payment of, or as, security for, preexisting debts, without letting in all the equities between the original and antecedent parties, and the value and circulation of such securities must be essentially diminished, and the debtor driven to the embarrassment of making a sale thereof, often at a ruinous discount, to some third person, and then, by circuity, to apply the proceeds to the payment of his debts. What, indeed, upon such a doctrine, would become of that large class of cases, where new notes are given by the same or by other parties, by way of renewal or security to banks, in lieu of old securities discounted by them, which have arrived at maturity? Probably, more than one-half of all banks' trans- actions in our country, as well as those of other countries, are of this nature. _ The doctrine would strike a fatal blow at all discounts of negotiable securities for preexisting debts." This was reaffirmed in the case of Brooklyn City and Newtown Railroad Company v. the National Bank of the Republic of New York (1880) 102 U. S. 14. In tnis case Mr. Justice Harlan said (pp. 25-26): "According to the very general concurrence of judicial authority in this country as well as elsewhere, it may be regarded as settled in commercial jurisprudence — there being no statutory regulations to the contrary — that where negotiable paper iB received in payment of an antecedent debt; or where it is transferred, by indorse- ment, as collateral security for a debt created, or a purchase made, at the time of transfer; or the transfer is to secure a debt, not due, under an agreement express or to be clearly implied from the circumstances, that the collection of the principal debt is to be postponed or delayed until the collateral matured; or where time is agreed to be given and is actually given upon a debt overdue, in consideration of the transfer of negotiable paper as collateral security therefor; or where the transferred note takes the place of other paper previously pledged as collateral security for a debt, either at the time such debt was contracted or before it became due— in each of these cases the holder who takes the transferred paper, before its maturity, and without notice, actual or otherwise, of any defense thereto, is held to have received it in due course of business, and, in the sense of the commercial law, becomes a holder for value, entitled to enforce payment, without regard to any equity or defence which exists between prior parties to such paper. "Upon these propositions there seems at this day to be no substantial conflict of authority. But there is such conflict where the note is transferred as collateral security merely, without other circumstances, for a debt previously created. One of the grounds upon which some courts of high authority refuse, in such cases, to apply the rule announced in Swift v. Tyson is that transactions of 'that kind are not in the usual and ordinary course of commercial dealings. But this objection is not sustamed 1 This popular quotation from Cicero's De Re Publica has been compared with the original and the exact language of Uicero is as follows: ' ' Nee erit alia lex Romae, alia Athenis, aha nunc, alia posthac; sea et omnis gentis, et omni tempore, una lex, et sempiterna et immutabilis continebit. (Cicero, uc «.« Publica, 111,28-33: Tauchnitz, Leipzig, 18U5, p. 214.) 42808°— S. Doc. r,r,0, 02-2-^—20 306 BILLS OF LADING. by the recognized usages of the commercial world nor, as we think, by sound reason. The transfer of negotiable paper as security for antecedent debt? constitutes a material and an increasing portion of the commerce of the country. Such transactions have become very common in financial circles. They have grown out of the necessities of business, and, in these days of great commercial activity, they contribute largely to the benefit and convenience both of debtors and creditors." He further said (p. 28): "Our conclusion, therefore, is, that the transfer, before maturity, of negotiable paper, as security for an antecedent debt merelv, without other circumstances, if the paper be so indorsed that the holder becomes a party to the instrument, although the transfer is without express agreement by the creditor for indulgence, is not an improper use of such paper, and is as much in the usual course of commercial business as its transfer in payment of such debt. In either case the bona fide holder is unaffected by equities or defences between prior parties, of which he has no notice. This conclusion is abundantly sustained by authority. A different determination by this court would, we apprehend, great lv surprise both the legal profession and the commercial world." (See Bigelow's Bills and Notes, 502, el seq.; 1 Daniel, Neg. Inst. (2d ed.), c. 25, sees. 820-8:13; Story, Promissory Notes, sees. 186, 195 (7th ed ! by Thorndyke; Parsons, Notes and Bills (2d ed.)', 218, sec. 4, c. 6; and Redfield & Bigelow's Leading Cases upon Bills of Exchange and Promissory Notes, where the authorities are cited by the authors.) Mr. Justice Clifford, in a concurring opinion, said (pp. 32-33) . "Commercial law is a system of jurisprudence acknowledged by all maritime nations, and upon no subject is it of more importance that there should be, as far as practicable, uniformity of decision throughout the world. "Bills of exchange and promissory notes are commercial paper in the strictest sense, and as such must ever be regarded as favored instruments, as well on account of their negotiable quality as their universal convenience in mercantile affairs. Everywhere the rule is that they may be transferred by indorsement, or when indorsed in blank or made payable to bearer they are transferable by mere delivery. International regulations encourage their use as a safe and convenient medium for the balances among mercantile men of different nations, and any course of judicial decision calcu- lated to restrain or impede their full and unembarrassed circulation for the purposes of foreign or domestic trade would be contrary to the soundest principles of public policy." (Goodman v. Simonds. 20 How . 313, 364. ) He further said (pp. 57-58): "Transactions of a commercial character extend throughout the civilized world, and it is well known that the)' are chiefly conducted through the medium of bills of exchange and other negotiable instruments. Uniformity of decision is a matter of great public convenience and univer-al necessity, acknowledged by all commercial nations. Should this court adopt a principle of decision which when carried into effect would establish as many different rules for the determination of commercial controversies as there are States in the I T nion, it would justly be considered a public calamity, as it mu4 necessarily depreciate our negotiable securities in all the foreign markets of the world where our merchants have commercial tons lotions. "Staple and immutable rules are necessary to give confidence to those who receive such securities in the usual course of business, when indorsed in blank, or made pay- able to bearer, so that if such a bill or note is made without consideration, or be lost or stolen, and afterwards be negotiated for value to one having no knowledge of such facts, in the usual course of business, his title shall be good, and he shall be entitled to collect the amount." A full list of authorities may be found in Crawford's Annotated Negotiable Instru- ments Law (3d edition), pages 39^0, note (6) and Brannan Negotiable Instruments Law (1908) pp. 206-207. This definition has been particularly commended by Dean Ames. (See Brannan Negotiable Instruments Law, p. 43.) The only courts which have attempted to construe away this section of the negotia- ble instruments act and destroy uniformity have been a few inferior ones of New York, but a majority of these inferior courts are the other wav. To vield to the criticism would embalm an obsolete rule of law which once prevailed in New York, in the New York State courts prior to the adoption of the negotiable instruments act in 1897, and which some lawyers have succeeded in persuading a very few of the inferior courts of New York to adhere to in the face of the distinct provisions of the negotiable instru- ments act, and destroy the manifest purpose of uniformity of that act. The warehouse receipts act, recognizing the usage of the commercial world, placed warehouse receipts to order or bearer on the basis of negotiable instruments, and there- fore adopted the definition in the negotiable instruments act. Mr. Elkus argued against the definition before the house and senate judiciary committees of New BILLS OF LADING. 307 York, and before Governor Hughes, of New York, and before the American Bar Asso- ciation l and it was overruled in each instance. This definition of the warehouse receipts act has now been adopted in 18 States and Territories. The transfer of stock act, recognizing the usage of the commercial world, places certificates of stock on the basis of negotiable instruments, and therefore adopted the definition in the negotiable instruments act. The bills of lading act likewise preeminently recognizing the usage of the commer- cial world makes bills of lading to order negotiable, and it is peculiarly proper that the definition in the negotiable instruments act should be adopted. This definition is more important in the bills of lading act than in the warehouse receipts act, because order bills of lading usually accompany negotiable drafts, and each should be gov- erned by the same law in this respect. President Hadley (of Yale University) in his classic on Railroad Transportation, has well said (at pp. 18 and 19): "We no longer produce for the home market, but for the world's markets. It is by the world's sup- ply and demand that prices are made. The development of transportation has been the main instrument of this change. It has gone hand in hand with the extension of the credit system, each has supplemented the other. The bill of lading is made to serve the same purpose as the bill of exchange." The bill of lading specified the unit of quantity of a commodity; a bill of exchange (draft) the unit of value; one is the necessary complement of the other. Mr. Albert Strauss, of Messrs. J. & W. Seligman & Co., in a recent address on the currency problem (p. 76), has elucidated the great utility of an order bill of lading accompanying a draft in the export of cotton as follows: "The English buyer arranges with his banker to accept the drafts of the American cotton dealer, and notifies the American dealer to draw hi3 60-day bill on the London bank, with shipping documents attached. The American cotton dealer borrows from his local bank to buy cotton from the farmer, whom he pays in cash; when he has gathered enough cotton for shipment, he ships on, through bills of lading, from his southern home direct to Liverpool; these bills of lading he attaches to his 60-day draft on London, and the London draft, with its documents, he attaches to a draft on his New York agent. With this New York draft he repays the local bank. The New York agent, in turn, sells this 60-day bill on London to a New York banker, and with the proceeds meets the cotton dealer's draft on him. On the other hand, the exchange banker sends the 60-day bill to London for discount, and against the proceeds draws a demand bill on London." Mr. Logan McPherson, in Railroad Freight Rates in Relation to the Industry and Commerce of the United States, just published (May, 1909), after classifying order bills of lading as commercial paper, says (p. 190): "The [order] bill of lading is an instrument for facilitating commerce, the impor- tance of which is not generally known. It is not only a certificate that merchandise is in transit, but a first lien upon that merchandise, in a way a title to ownership, and, as fulfilling this function, negotiable. For example, a grain dealer buying a carload of wheat at the western field may, and in the vast majority of cases does, deposit the bill of lading covering that car in a bank as security for a loan to its value. If that car goes through to a port where it is sold for export the loan may not be paid and the bill of lading lifted until the grain is transferred from the car to the vessel. There is a similar procedure in the case of other commodities, with the bills of lading covering raw material to the factory and finished produce from the factory. The [order] bill of lading thus contributes to that fluidity of the circulating medium, that celerity in the transfer of merchandise, which are striking achievements and essential require- ments of current civilization." In Prendergast on Credit and Its Uses (1906), page 42, the problem is thus stated: "A merchant having purchased a bill of goods on a specified term of credit, gives to the seller a bill of exchange, drawn on himself, representing the amount of the invoice. The seller needing money for his own business, passes this bill of exchange, with his indorsement thereon, to another from whom he has made a purchase, or to whom he may be in debt for any other reason. The third person to whom the bill of exchange is given passes it on again in liquidation of an indebtedness of his own, and so on. In this way that bill of exchange may serve in the effacement of many different accounts and return to the drawer literally covered with indorsements. What is true as to the function of a medium of exchange, which the particular bill referred to has discharged may be equally true of many other forms of credit instruments which may be called to mind. Promissory notes, drafts, checks, bills of lading, and warehouse receipts are all credit instruments which can be used as mediums of exchange or substitutes for money." i See vol. 31, Reports American Bar Association (1907), pp. 55-58. 308 BILLS OF LADING. Our commercial law must rest on sound, economic principles and actual commercial practices. Bills, drafts, notes, checks, and bills of lading are in fact and practice parts of the currency of commerce. Mr. Elkus refers to four possible cases where frauds could be perpetuated. It must not be forgotten that the word "obligation " clearly means a legal obligation. In addi- tion the suppositious cases would rarely arise in practice and the transactions to be sustained must be bona fide. As we have already taken occasion to say, we believe much of Mr. Elkus' difficulty arises from his failure to distinguish between value and "good faith," both of which are required. Successful fraud in the four instances supposed are too remote to be sufficient to modify the rule of "antecedent" liability which has now been so universally accepted. Relief can be had in cases of insolvency under the bankruptcy act, section 60 (Loveland on Bankruptcy— 3d ed., 1907, pp. 1262-1263), which remedy is expressly reserved by section 49 of the bills of lading act. 2 Mr. Elkus says this is all revolutionary. The uniform negotiable instruments act provision as to value was revolutionary in New York as to the New York courts only, but was not revolutionary even in New York in the United States courts sitting in New York. Mr. Elkus has not pointed out a single instance of successful fraud under the definition contained in the negotiable instruments act. We can not agree with Mr. Elkus that there will be any contraction of credits, but on the contrary, to eliminate this definition of value is to diminish mobility of credit. Mr. Elkus says this definition is an experiment. It is contrary to New York courts' definition of "value" down to the time of the adoption of the negotiable instruments act in 1897. However, since 1842, the Federal courts of New York uniformly applied the definition of "value " as contained in the negotiable instruments act. The definition of the word "value," as to negotiable instruments is in harmony with the general commercial understanding and the decisions of the Supreme Court of the United States since 1842, and of mostof the States. The orly strongly conflicting view was that entertained by the New York courts down to the adoption of the negotiable instruments act in 1897, and this local New York view wae never recognized by the Federal courts sitting in New York but repudiated in 1842 in Swift v. Tyson, supra. Your committee does not believe that in New York State there is an overwhelming State sentiment against the definition of value in the bills of lading act. It is abso- lutely essential to New York's international trade in which bills of lading constitute a commodity currency passing freely from hand to hand. "It is a matter of common knowledge that intense competition exists among the cities of Boston, New York, Philadelphia and Baltimore to control, or at least divide, the port international traffic. (Noyes on American Railroad rates, pp. 134-135; Had- ley on Railroads Transportation, pp. 82-99; Meyer on Government Regulation of Rail- way Rates, pp. 191, 220; McPherson on Railroad Freight Rates, 68, 70, 73, and 118- 119; New York Produce Exchange v. Baltimore & O. Rd. Co. et al. (1898), 7 I. C. C. R., 612; and particularly Re Differential Freight Rates (1905) 11 I. C. C. R., 13). It might be that laws which restrict the free currency of bills of lading would be a factor in determining a choice of ports through which to market the great staple com- modities by means of drafts with order bills of lading attached, as. in the regular practice. This is a matter for the careful consideration of the people of the State of New York in the event that the other States in which the above enumerated cities are located adopt the bills of lading act with the generally accepted definition of value. Mr. Elkus in his letter says: ' ' Our clients have found, to their cost, that under the extension of the credit system of doing business, and the loose immigration laws which have turned loose upon this community some of the most unprincipled and brightest minds in Europe trained in every sort of business chicanery, a mercantile class has arisen which is absolutely devoid of business honor, and aided by attorneys of similar antecedents and equal lack of principle, seeks only to keep within the letter of the law and avoid criminal punish- ment." If this be a condition local to New York City, your committee is convinced it does not prevail in the rest of the country. Your committee hopes that the New York Merchants Association and Mr. Elkus upon carefully reexamining the whole subject, will support the present definition of ' ' value " contained in the uniform bills of lading act. i The four (4) instances suggested by Mr. Elkus are as follows : 1. An old and long outlawed debt. 2. A claim for damages by reason of negligence. 3. The duty to pay alimony. 4. The duty to support an aged parent. ' Section 61 ill the final draft. BILLS OF LADING. 309 XV. ATTITUDE OF HOUSE. A suggestion has been made, ostensibly with the purpose of in- fluencing this committee, that the House is now in favor of the Clapp- Stevens as against the Pomerene bill. I do not believe that the members of the House will commit themselves against the Pomerene bill when they come to weigh the relative merits of the two bills, and the further fact that the Pomerene bill has already been enacted in nine States and has had the almost universal indorsement of the com- mercial organizations and numerous classes of shippers. The chair- man of this committee has already announced that he has no pride of opinion as to the bill bearing his name, and from what we all know of Mr. Stevens of the House, we are quite sure that he has no pride of opinion, and that he will give his support to a measure advocated and indorsed by all commercial interests and demanded by all commercial interests, rather than to one merely propounded by one interest affected, to wit, the bankers. The American Bankers Association at one time advocated a short State bill prepared by them substantially the same as the Clapp-Stevens bills, and then withdrew their indorse- ment thereof and unanimously indorsed the Pomerene bill as a State measure. Every speaker before this committee has expressed an opinion that the Pomerene bill is the superior measure with the solitary exception of Mr. Page, whose chief grievance seems to be against the definition of value, because the New York Merchants Association desires to stick to Coddington v. Bay, decided in 1821. A few speakers have ex- pressed indifference as to which bill should be reported out. The Clapp-Stevens bill is distinctly a bankers bill touching but two points of vital importance to the bankers. The Pomerene bill is a compre- hensive measure touching many matters of vital importance to shippers and receivers as well as the bankers, which will be given a single rule of conduct enforcable in the Federal courts, instead of a national and international instrument of commerce, slightly touched by Federal law and ever open to shifting and conflicting views of the courts and legislatures of 45 States. The Pomerene bill has been distinctly indorsed by the following: The Ohio Shippers Association (record, p. 100). The National Industrial Traffic League, representing over 200 organizations, with approximately 20,000 members (record, pp. 164, 169), from some 80 cities as appears at said pages of the record. Peoria Board of Trade, as per telegram March 14, 1912. Commercial Club of St. Joseph, Mo., as per letter March 12, 1912. Hay & Grain Producers & Shippers Association of Northwestern Ohio, as per letter March 13, 1912. Ohio Grain Dealers Association, as per letter of March 13, 1912. Chicago Association of Commerce with over 4,000 members, as per • statement Cornelius Lynde at this day's hearing. Transportation Department of the Board of Trade of Chicago, as per statement Mr. W. N. Hopkins at this day's hearing. Toledo Produce Exchange, as per statement Mr. Henry Ooeman at this day's hearing. . Grain Dealers National Association, with 2,000 dealers m 31 btates and the District of Columbia, as per statement Mr. Henry Goeman at this day's hearing. 310 BILLS OF LADING. Minneapolis Traffic Association, as per statement Mr. Hugh E. White at this day's hearing. St. Paul Association of Commerce, as per statement Mr. Hugh E. White, this day's proceedings. XVI. IN CONCLUSION. The Clapp-Stevens bills are distinctively bankers' bills to reach two evils, specially desired to be remedied by the bankers as affecting their special interests. They are measures of expediency and still leave a national and international instrument of commerce, subject to the conflicting laws of various States. It will be a fruitful source of litigation, leaving as it does undefined the meaning of "acquired," "value," "good faith," etc. The Pomerene bill is nobody's bill, but nils a long-felt want of no special class but of each and every class of shippers, of each and every class of receivers, of the bankers and is a fair measure of justice to the railroads, and its principles and comprehensive nature has already been indorsed by the commissioners on uniform State laws from nearly every State in the Union. The American Bankers' Associa- tion and the American Bar Association, as a good State measure. This committee should give heed to no one's single commercial interests, but to the wishes of all the diversified commercial interests. It should legislate in no hearted way, but comprehensively. This, though, was well expressed bv Senator Newlands, March 7, 1910. (Senate Calendar No. 202, 61st Cong., 2d sess., Report No. 355, Part 3, p. 29), as follows: The States being divested themselves of the power to regulate interstate commerce and having vested it in the Nation, have a right to demand that the Nation should exercise this power in the fullest and most comprehensive way for the general welfare. Thus far the Nation has exercised its power in a lame and halting fashion, and so abuses have sprung up which the States are powerless to control and which the Nation, whose jurisdiction is as broad as interstate commerce itself, can alone correct. Senator Newlands had previously expressed the same views as per same document, page 31, as follows: I believe that this is the time for full and comprehensive legislation. What Senator Newlands said clearly points the way to reporting out the Pomerene bill in preference to the Clapp-Stevens bills. The CiiAiiiMAN. The following letter from ex-Senator Charles J. Faulkner, attorney at law, Washmgton, D. C, will be inserted in the record : Washington, D. C, March 19, 1912. Hon. Moses E. Clapp, United States Senate, Wnshinqlrm, D. C. My Dear Senator: Under authority granted at the meeting of your committee on the 15th instant. I beg leave to submit some objections to amendments offered by the propounders of the bills S. 957 and S. 4713. The amendments offered by Prof. Williston and Mr. Paton are offered to S. 957, which reprint of that bill laid before your committee contains all the amendments which were concurred in and reported to your committee at the end of the last regular session. The first amendment offered by Mr. Paton to S. 957, on page 2, immediately after C, in paragraph 3, inserts, "unless issued for shipment to a foreign country." This is not objectionable, as the first section makes the law apply by amendment to foreign bills of lading for export to foreign countries, but we feel that section B, on page 2, should be amended, as that section prohibits the delivery of the property unless the original order bill of lading, properly indorsed, shall be surrendered. This would not be necessary but for the second amendment suggested by Mr. Paton, and BILLS OF LADING. 3 J J we respectfully protest against its adoption. It requires these export bills of lading to be in sets, which is a technical term meaning original. If this second amendment should be adopted by the committee, however, it would be necessary to put a pro- vision in clause B, on page 2, authorizing the surrender of the property upon the deliv- ery of any one of the originals of the export bills and declare the others canceled. The second amendment proposed by Mr. Paton is to insert after the word "shall," onpage3, line 1, "except where bills of lading for shipment to a foreign country are issued in sets or parts. " This means in commercial language that these sets or parts are all originals, and we object to the insertion of this clause, as it is not necessary. Originally these for- eign bills were issued in sets, all of them being originals. This resulted from the dangers of the sea and the possible loss of the bill of lading by the wrecking of the ship. Conditions have now changed. In moving the cotton crop during the last two years but one original was issued, although a number of duplicates were, of course, used. There was no difficulty in moving these crops under this arrangement, nor was there any objection by foreign bankers. We think it would be unwise without additional provisions protecting these sets of originals to adopt the amendment suggested. He suggests amendments on page 4, at the end of section 4, by adding the follow- ing: "But the carrier, when requested and given reasonable opportunity to examine and verify the contents of any car, shall not insert in a bill of lading issued for the goods therein the words 'shipper's load and count' or other words of like purport." We respectfully request the committee to reject this amendment, as it will neces- sarily lead to dispute and litigation: First, as to whether the carrier was requested; second, whether he had reasonable opportunity to examine and verify the contents of any car. In many instances, even if such a request were made and opportunity given, it would be impossible to verify the count or the contents of a car after it was loaded, it being a physical impossibility. Again, no shipper would accept a bill of lading with that indorsement unless it were true. Again, the object of this bill is to stop litigation, not to increase it, and the commer- cial interest demands, from the standpoint of necessity, the right to load and count its shipments. The responsibility of the road can be easily obtained, and this memoran- dum of the bill of lading omitted by the shipper bringing his goods to a freight station and delivering them to the road, when it must then assume the responsibility for the load and count. These spur tracks, belt lines, and independent lines connecting with the belt lines, are used by shippers to load their cars at their factories to avoid the cost of hauling to the transportation line, and they are additionally compensated for this service by less rates by the carload than by less-than-carload rates. The next amendment suggested by Mr. Paton is to add at the end of section 6, after striking out the words "refusal to deliver," the following: "Provided, That in such case due notice be given to the carrier, to the consignee, or to the party, who, according to the terms of the bill of lading, is to be notified of the arrival of the goods at their destination." We think the word "shall ' ' should be inserted between the words ' ' notice' ' and " be. " We urge no objection to this amendment. The objection urged by Mr. Lynde to the provision that a carrier may insert in a bill of lading issued bv him, "any other terms and conditions" is not well taken. This is an absolutely necessary provision to embrace the conditions found on the back of a bill of lading after the passage of such a measure as this, and the shipper is fully protec- ted by the language of the act which provides that these terms or conditions shall ' ' not be inconsistent with the provisions of this act, or otherwise contrary to law or public policy." It is further suggested that where the shipper makes the load and count, that the carrier should be responsible for improper loading. This is so unjust and inequitable that we shall suggest no further reason for its rejection. Respectfully submitted. „ _ Chas. J. Faulkner. The Chairman. The following letter and memorandum from Col. Alfred P. Thorn, of general counsel, Southern Railway Co., will be inserted in the record: Washington, D. C, March 19, 1912. Hon. Moses E. Clapp, T T nited Stairs Senati. Washington, D. C. Dear Sir- In the hearings in respect to bills of lading had before the Interstate Commerce Committee of the Senate, an effort has been made to put into the record 312 BILLS OF LADING. certain statements from the evidence of one J. W. Knight in which he undertook to say, in an indefinite kind of manner, that he had had some conversation with Mr. J. W. Hunter, division freight agent of the Southern Railway Co., during which Mr. Hunter authorized him to issue hills of lading for cotton and to sign the name of the agent of the company to them. I do not think that the hearings before your com- mittee is an appropriate form in which to try the- merits of an existing and contro- verted lawsuit, and, therefore, I shall not attempt here to go into the details of this matter, nor do I imagine jour committee desire- to encumber its record with an investigation into this case. It is proper for me to say, however, that the committee should bear in mind that the evidence which was read before it from Mr. Knight was aiven by him in the course of a prosecution against him by the United States Government and in an effort to secure his own acquittal of a criminal charge, and for me to say further, that all his statements, so far as they seek to invohe this company, are emphatically denied by Mr. Hunter, with whom he alleges the conversation took place. There has been no opportunity as yet to develop this matter in court on behalf of the Southern Railway Co., but we are entirely conlident that all the allegation-* made by Mr. Knight, as quoted before your committee, will be abundantly disproven when the opportunity offers. I would like also to add, in respect to the evidence quoted before your committee from the suit of W. S. Lovell, trustee, r. Henry Hentz & Co., to which suit Southern Railway Co was not a party, that none of the transactions in respect to this cotton, and none of the telegrams or the letter quoted in the record, came to Mr. Hunter's attention until April 16, 1910 — several days after the telegram of April 13 — the letter of April 8 and the telegrams of April 13, being handled, during Mr. Hunter's absence, by an inexperienced clerk who had been in his employment only about six weeks. As soon as Mr. Hunter learned of the transaction, which was on the 16th of April, 1910, he reported the situation to his superior officers, and immediately an investigation was started and such information given to Henry Hentz & Co. by representatives of the Southern Railway Co. as resulted in the disclosure of the methods of Knight, Yancey & ( 'o. and the failure of that firm on April 20. In other words, the very transactions referred to in the quotations from the testimony in the suit of Lovell, trustee, against Henry Hentz & Co. resulted, through the action of Southern Railway Co., in the disclosure of these serious irregularities of Knight, Yancey & (Jo. Moreover, it is proper for me to state that a large amount of testimony has been taken in the cases to which the Southern Railway Co. is a party, extending over a large area of Europe and in this country, and I think it is universally admitted that not one word has been developed connecting the Southern Railway Co. improperly with auv of these irregularities. Yours, verv trulv, Alfred P. Thom, 67. C. Memorandum by Alfred P Thorn. In connection with the effort now 1 eing made before the Interstate Commerce Committee of the Senate to extend the liability of carriers on 1 ills of lading, I would ask the following to 1 e considered: _ First. There can 1 e no doul t. under the Friedlander ca-e (130 I". S ) and other similar cases that the proposal is to largely increase the pre-ent standard of responsi- bility of carriers on 1 ill-, of lading issued 1 y their local agents. This is not only true as a mailer of law, 1 ut the slightest consideration would convince anyone that it is true also in a very practical sense. The present law does not make the carrier re- spond ' le unless it has actually received the goods. The proposal is to make the car- rier responsible when his agent 4gns the 1 ill of lading, whether the goods have V een received or not. It is manifest from this that the whole credit of the carrier can 1 e pledged 1 y any agent on its many thousands of miles of road who signs and issues a bill of lading. The Hal ilities which may grow out of this are of course immense. It is no answer to say that heretofore, when the agent had no authority to pledge the credit of the company, instances of losses through bills of lading issued by the agent have not occurred on the lines of some of the carriers As the agent could not pledge the credit of (he company, there was in this state of the law small temptation to induce the agent to dishonestly issue such bills of lading, inasmuch as they would be worthless if issued. If, however, the credit of the company is bv law put behind the dishonest acts of such agent, an immense inducement is'held'out for collusion between dishonest shippers and corruptible agents whereby they may collusively trade upon the credit of the carrier. It takes no argument to show that this is a risk BILLS OP LADING. 313 of very serious proportion and which no one would be willing lightly to assume. It would seem to follow, as a matter of natural justice, that a rate which is just as a com- pensation for the carrier's service when this responsibility is not imposed upon it would be too little if this responsibility is now superadded. If the business of the Country demands such a safeguard, then the carrier should receive reasonable compen- sation for the additional facility which it affords. That reasonable compensation should be first fixed by it, as it does its other charges, and should be subject to the control of the Interstate Commerce Commission as the carrier's othsr charges are. Second. The right to a difference in these charges ought to be recognized in the law itself. It will be remembered that it has been shown bafore the committee that about 98 per cent in number of the bills of lading on which commerce moves do not go into bank at all, and that only 2 per cent in number do go into bank. ( )f course the 2 per cent in number constitutes a good deal more than that percentage of the values involved. The 98 per cent of shippers who do not desire to carry their transactions through the bank realize that all they have to do in order to get the full protection of the carrier's responsibility is to actually deliver the goods to the carrier. If they deliver the goods the carrier is as responsible as it could be made under the proposed law for goods not delivered. These 98 per cent, therefore, not desiring any such protection, and realiz- ing that all they have to do to get the carrier's full responsibility is to honestly deliver the goods, should not be charged for the additional responsibility which the con- signees and bankers seem to want in respect to bills of lading that go through the bank. It would seem, therefore, that this very large class of shippers — by far the greatest numerically — should have their rights protected by enabling them to retain the present form of bill of lading at existing rates or rates based upon existing liabil- ities. This should be done in the interest of the shippers. They should not be forced into the same class as shippers who deal through banks and whose consignees and bankers desire a larger measure of responsibility on the carrier as a protection against the dishonesty of their own shippers. It would seem, therefore, that there is no way of protecting the very large number of shippers who do not desire to go into the banks with this bill of lading, except to make two classes of bills of lading, one such as exists now, with the present standards of responsibility, and the other the guaranteed bills of lading which will carry the carrier's responsibility for the act of its agent, whether the goods are received or not. It would be manifestly unfair to give the carrier only the same compensation for the guaranteed bills of lading as it receives for bills of lading which carry only the presently existing responsibilities. It would manifestly be unfair to the great number of shippers who are satisfied with the present system and who do not go into the bank, to elevate their charges to cover the additional risk which it is proposed to put upon the carrier by these bills. In order to adequately recognize the rights and protect the interests of the great mass of shippers, on the one hand, and of the carriers on the other, therefore, it would seem necessary to distinguish between different classes of bills of lading, making them into two classes, and to recognize the fact that there should be a reasonable charge for the guaranteed bill of lading over the unguaranteed, and to protect the public in respect to the amount of this charge by placing it under the control of the Interstate Commerce Commission. If there is but one class of bills of lading permitted, as the advocates of these bills urge, and if the amount of charges of the carrier are left finally to be determined by the Interstate Commerce Commission, that commission must in the nature of things recognize that there is a greater responsi- bility put upon the carrier and must permit a larger charge. If there is but one class of bills of lading the result of this upon the great mass of shippers would be to increase the cost of the service to them beyond what it would naturally and properly be and this for the benefit of the other class of shippers, which desires to utilize its bills of lading in bank. On the other hand, if the carriers are not allowed to get anything for the additional risk imposed on them by law, then a manifest injustice is done to the carriers, because they would be required to assume very seriously increased risks without any increased compensation. This is not only contrary to the usual course of business but is contrary to natural right and justice. (The committee thereupon adjourned.) 314 BILLS OF LADING. ADDITIONAL MATTERS SUBMITTED BY ME. FRANCIS B. JAMES, OF LIT- TLEFORD, JAMES, BALLARD, FROST & FOSTER, OF CINCINNATI, OHIO, AND WASHINGTON, D. C. Pursuant to permission granted at the hearing of the committee March 15, 1912, Mr. Francis B. James submitted the following copy of a letter addressed by him to each member of the Committee on Interstate Commerce of the United States Senate, to wit: Washington, D. C, March 21, 1912. Hon. , United States Senator, Washington, D. ('. My Dear Senator: I have now gone over Senate bill 4713 (Pomerene bill), on bills of lading in interstate and foreign commerce, in light of all the criticisms, and made various amendments therein, indicated in red ink. It will be readily seen that even in the light of these amendments the bill is shown to be absolutely perfect, and will be explained as follows: Page 2, lines 20-24, are omitted because that matter is a mere illustration of the subject matter in line 19, page 2. It is therefore in no sense an amendment of substance. Page 10, insert between lines 15 and 16, new sections 23 and 24. These two new sections are in no sense an amendment of section 25, but rm er an entire new subject matter. Page 11, line 15, insert after the word "also' the words "subject to the provisions of sections 23 and 24." It is not absolutely necessary to insert this language, but it is wise, in view of the insertion <>f the new sections 23 and 24. Page 13, line 4, insert the word "themselves" after the word "goods." This inser- tion is not necessary, but will remove any captious criticisms. Legislation at this atate of the bill is cheaper than litigation thereafter. The striking out of the matter on page 15, line 25, and page 16, line 1; page 16, lines 12-14; page 17, lines 21-25; all of pages 18 and 19; and lines 1-4 on page 20 will satisfy the most captious critics on constitutional grounds. As the matter stricken out ili als with an entirely different subject matter than the body of the bill, they can go out and leave the bill absolutely perfect. Striking out lines 14-17, page 23, meets the suggestion of Senator Cummins that it would be indelicate to indicate to the Supreme Court of the United States that that body should follow State decisions. Nine States have enacted the Pomerene bill as a State measure, and the Pomerene bill as a State measure received the unanimous approval of bankers, carriers, shippers, and receivers Not only the unanimous approval of shippers and receivers but of each and every class of receivers and shippers. It is in no sense class legislation, but absolutely fair to the four interests involved and clearly defines their respective rights, duties, and obligations. The Clapp-Slevens hills were propounded by one special interest, to wit, the bankers, and meets two evils particularly affecting the bankers. The overwhelming testimony before the Committee on Interstate Commerce of the United Slates Senate was in favor of the Pomerene bill. If we are to have legislation on this subject, we should have comprehensive legis- lation, clear, accurate, and defined in the well-chosen language of the law merchant and thereby minimize litigation. If we are to have an instrument of interstate and foreign commerce, it should be so comprehensively legislated on by Congress that all rights, duties, and obligations can be enforceable as a part of the Federal law, and we should not have an instrument covered upon but two points by Federal law and the other multifarious rights, duties, and obligations in reference thereto left to the conflicting decisions and statutes of 45 Slates in the Union. Very respectfully. Francis 13. James. Accompanying said letter was a completed bill embodying the matters refejicd to in said letter as follows, to wit: A BILL Relating to bills of lading in commerce with foreign nations and among the several States. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That bills of lading issued by any common carrier for the trans- portation of goods from a place in a State to a place in a'foreign country or from a place in one State to a place in another State shall be governed by this act. BILLS OF LADING. 315 Sec. 2. That every bill must embody within its written or printed terms (a) The date of issue; (b) The name of the person from whom the goods have been received • (c) The place where the goods have been received; (d) The place to which the goods are to be transported; (e) A statement whether the goods received will be delivered to a specified person or to the order of a specified person; (f) A description of the goods or of the packages containing them which may, how- ever, be in such general terms as are referred to in section twenty-five; and (g) The signature of the carrier. A negotiable bill shall have the words "order of" printed thereon immediately before the name of the person upon whose order the goods received are deliverable. A carrier shall be liable to any person injured thereby for the damage caused by the omission from a negotiable bill of any of the provisions required in thiB section. Sec. 3. That a carrier may insert in a bill issued by him any other terms and condi- tions: Provided, That such terms and conditions shall not be contrary to law or public policy. Sec. 4. That a bill in which it is stated that the goods are consigned or destined to a specified person is a nonnegotiable or straight bill. Sec. 5. That a bill in which it is stated that the goods are consigned or destined to the order of any person named in such bill is a negotiable or order bill. Any provision in such a bill that it is nonnegotiable shall not affect its negotiability within the mean- ing of this act. Sec. 6. That negotiable bills issued in a State for the transportation of goods to any place in the United States on the continent of North America, except Alaska and Panama, shall not be issued in parts or sets. If so issued, the carrier issuing them shall be liable for failure to deliver the goods described therein to anyone who purchases a part for value in good faith, even though the purchase be after the delivery of the goods by the carrier to a holder of one of the other parts: Provided, however, That nothing contained in this section shall be interpreted or construed to forbid the issuing of negotiable bills in parts or sets for such transportation of goods to Alaska, Panama, Porto Rico, the Philippines, Hawaii, or foreign countries, or to impose the liabilities let forth in this section for so doing. Sec. 7. That when more than one negotiable bill is issued in a State for the same goods to be transported to any place in the United States on the continent of North America, except Alaska and Panama, the word "duplicate," or some other word or words indicating that the document is not an original bill, shall be placed plainly upon the face of every such bill except the one first issued. A carrier shall be liable for the damage caused by his failure so to do to anyone who has purchased the bill for value in good faith as an original, even though the purchase be after the delivery of the goods by the carrier to the holder of the original bill: Provided, however, That noth- ing contained in this section shall in such case forsuch transportation of goods to Alaska, Panama, Porto Rico, the Philippines, Hawaii, or foreign countries be interpreted or construed so as to require the placing of the word "duplicate" thereon, or to impose the liabilities set forth in this section for failure so to do. Sec. 8. That a nonnegotiable bill shall have placed plainly upon its face by the carrier issuing it "nonnegotiable" or "not negotiable." This section shall not apply, however, to memoranda or acknowledgements of an informal character. Sec. 9. That the insertion in a negotiable bill of the name of a person to be notified of the arrival of the goods shall not limit the negotiability of the bill or constitute notice to a purchaser thereof of any rights or equities of such person in the goods. Sec. 10. That except as otherwise provided in this act, where a consignor receives a bill and makes no objection to its terms or conditions at the time he receives it, neither the consignor, nor any person who accepts delivery of the goods, nor any per- son who seeks to enforce any provisions of the bill, shall be allowed to deny that he is bound by such terms and conditions so far as they are not contrary to law or public policy. Sec. 11. That a carrier, in the absence of some lawful excuse, is bound to deliver goods upon a demand made either by the consignee named in the bill for the goods or, if the bill is negotiable, by the holder thereof, if such a demand is accompanied by- fa) An offer in good faith 'to satisfy the carrier's lawful lien upon the goods; (b) An offer in good faith to surrender, properly indorsed, the bill which was issued for the goods if the bill is negotiable; and (c) A readiness and willingness to sign, when the goods are delivered, an acknowl- edgment that they have been delivered if such signature is requested by the carrier. 316 BILLS OF LADING. In ease the carrier refuses or fails to deliver the goods, in compliance with a demand by the consignee or holder so accompanied, the burden shall be upon the carrier to establish the existence of a lawful excuse for such refusal or failure. Sec VI. That a carrier is justified, subject to the provisions of the three following sections, in delivering goods to one who is — (a) A person lawfully entitled to the possession of the goods; or (b) The consignee named in a nonnegotiable bill for the goods; or (o A person in possession of a negotiable bill for the goods, by the terms of which the goods arc deliverable to his order, or which has been indorsed to him, or in blank by (he consignee, or by the mediate or immediate indorsee of the consignee. Sec 13. That where a carrier delivers goods lo one who is not lawfully entitled to the possession of them the carrier shall be liable to anyone having a right of property or possession in the goods if lie delivered the goods otherwise than as authorized by subdivisions (b) and (c) of the preceding section; and, though he delivered the good's as authorized by either of said subdivisions, he shall be so liable if prior to such delivery he — (a) Had been requested, by or on behalf of a person having a right of property or possession in the goods, not to make such delivery; or (b) Had information at the time of the delivery that it was to a person not lawfully entitled to the possession of the goods. A request for information, to be effective within the meaning of this section, must be given to an officer or agent of the carrier, the actual or apparent scope of whose duties includes action upon such a request for information, and must be given in time to enable the officer or agent to whom it is given, acting with the reasonable diligence, to stop delivery of the goods. Sec. 14. That except as provided in section twenty-seven, and except when com- pelled by legal process, if a carrier delivers goods for which a negotiable bill had been issued, the negotiation of which would transfer the right to the possession of the goods, and fails to take up and cancel the bill, such carrier shall be liable for failure to deliver the goods to anyone who for value and in good faith purchases such bill, whether such purchaser acquired title to the bill before or after the delivery of the goods by the carrier and notwithstanding delivery was made to the person entitled thereto. Skc 15. That except as provided in section twenty-seven, and except when com- pelled by legal process, if a carrier delivers part of the goods for which a negotiable bill had been issued and fails either — (a) To take up and cancel the bill, or (b) To place plainly upon it a statement that a portion of the goods has been deliv- ered, with a description, which may be in general terms, either of the goods or packages that have been so delivered, or of the goods or packages which still remain in the carrier's possession, he shall be liable for failure to deliver all the goods specified in the bill to anyone who for value and in good faith purchases it, whether such purchaser acquired iitle to it before or after the delivery of any portion of the goods by the carrier, and notwithstanding such delivery was made to the person entitled thereto. Sec. Hi. That any alteration, addition, or erasure in a bill after its issue without authority from the carrier issuing the same, either in writing or noted on the bill, shall be void, whatever lie the nature and purpose of the change, and the bill shall be enforce- able according to its original tenor. Sec. 17. That where a negotiable bill has been lost or destroyed a court of competent jurisdiction may order the delivery of the goods upon satisfactory proof of such loss or destruction; and upon the giving of a bond, with sufficient surety to be approved by the court , to protect the carrier or any person injured by such delivery from any liabil- ity or loss incurred by reason of the original bill remaining outstanding, the court may also in its discretion order the payment of the carrier's reasonable costs and counsel fees. The delivery of the goods under an order of the enurt as provided in this section shall not relieve the carrier from liability to a person to whom the negotiable bill has been or shall be negotiated for value without notice of the proceedings or of the delivery of the goods. Sec. IS. That a bill upon the face of which the word "duplicate" or some other word or words, indicating that the document is not an original bill, is placed plainly shall impose upon the carrier issuing the same the liability of one who represents and warrants that such bill is an accurate copy of an original bill properly issued, but no other liability. Sec. 19. That no title to goods or right to their possession, asserted by a carrier for his < iwn benefit, shall excuse him from liability for refusing to deliver the goods accord- ing to the terms of a bill issued for them, unless such title or right is derived directly or indirectly from a transfer made by the consignor or consignee after the shipment, or from the carrier's lien. BILLS OF LADING. 3X7 Sec. 20. That if more than one person claim the title or possession of goods, the carrier may require all known claimants to interplead, either as a defense to an action brought against him for nondelivery of the goods, or as an original suit, whichever is appropriate. Sec. 21. That if some one other than the consignee or the person in possession of the bill has a claim to the title or possession of the goods, and the carrier has informa- tion of such claim, the carrier shall be excused from liability for refusing to deliver the goods either to the consignee or person in possession of the bill or to the adverse claimant until the carrier has had a reasonable time to ascertain the validity of the adverse claim or to bring legal proceedings to compel all claimants to interplead. Sec. 22. That except as provided in the two preceding sections and in section twelve no right or title of a third person, unless enforced by legal process, shall be a defense to an action brought by the consignee of a nonnegotiable bill or by the holder «f a negotiable bill against the carrier for failure to deliver the goods on demand. Sec 23. When goods are loaded by a carrier, such carrier shall count the packages of goods if package freight and ascertain the kind and quantity if bulk freight, and such carrier shall not, in such cases, insert in the bill of lading "Shipper's load and count," or other words of like purport indicating that the goods were loaded by the shipper and the description of them made by him. If so inserted, contrary to the provisions of this section, said words shall be treated as null and void and as if not inserted therein. Sec. 24. When goods are loaded by a shipper, such carrier shall, on written request of such shipper, count the packages of goods if package freight and ascertain the kind and quantity if bulk freight, within a reasonable time after such written request, and such carrier shall not, in such cases, insert in the bill of lading "Shipper's load and count," or other words of like purport indicating that the goods were loaded by the shipper and the description of them made by him. If so inserted, contrary to the provisions of this section, said words shall be treated as null and void and as if not inserted therein. Sec 25. That if a bill of lading has been issued by a carrier or on his behalf by an agent or employee the scope of whose actual or apparent authority includes the issuing of bills of lading, the carrier shall be liable to (a) the consignee named in a nonnego- tiable bill or (b) the holder of a negotiable bill, who has given value in good faith, relying upon the description therein of the goods, for damages caused by the non- receipt by the carrier or a connecting carrier of all or part of the goods or their failure to correspond with the description thereof in the bill at the time of its issue. If, however, the goods are described in a bill merely by a statement of marks or labels upon them or upon packages containing them, or by a statement that the goods are said to be goods of a certain kind or quantity, or in a certain condition, or it is stated in the bill that packages are said to contain goods of a certain kind or quantity or in a certain condition, or that the contents or condition of the contents of packages are unknown, or words of like purport are contained in the bill, such statements, if true, shall not make liable the carrier issuing the bill, although the goods are not of the kind or quantity or in the condition which the marks or labels upon them indicate, or of the kind or quantity or in the condition which the marks or labels upon them indi- cate, or of the kind or quantity or in the condition they were said to be by the con- signor. The carrier may also, subject to the provisions of sections twenty-three and twenty-four, by inserting in the bill the words "shipper's load and count," or other words of like purport, indicate that the goods were loaded by the shipper and the description of them made by him; and if such statement be true, the carrier shall not be liable for damages caused by the improper loading or by the nonreceipt or t>y the misdescription of the goods described in the bill. Sec. 26. That if goods are delivered to a carrier by the owner or by a person whose act in conveying the title to them to a purchaser for value in good faith would bind the owner, and a negotiable bill is issued for them, they can not thereafter, while in the possession of the carrier, be attached by garnishment or otherwise or be levied upon under an execution unless the bill be first surrendered to the carrier or its nego- tiation enjoined. The carrier shall in no such case be compelled to deliver the actual possession of the goods until the bill is surrendered to him or impounded by the court. Sec. 27. That a creditor whose debtor is the owner of a negotiable bill shall be entitled to such aid from courts of appropriate jurisdiction by injunction and other- wise in attaching such bill or in satisfying the claim by means thereof as is allowed at law or in equity in regard to property which can not readily be attached or levied upon by ordinary legal process. Sec. 28. That if a negotiable bill is issued the carrier shall have no lien on the goods therein mentioned except for charges on those goods for freight, storage, demurrage and terminal charges, and expenses necessary for the preservation of the goods or 318 BILLS OF LADING. incident to their transportation subsequent to the date of the bill, unless the bill expressly enumerates other charges for which a lien is claimed. In such case there shall also be a lien for the charges enumerated so far as they are allowed by law and the contract between the consignor and the carrier. Sec. 29. That after goods have been lawfully sold to satisfy a carrier's lien, or because they have not been claimed, or because thev are perishable or hazardous, the carrier shall not thereafter be liable for failure to deliver the goods themselves to the consignee or owner of the goods, or to a holder of the bill given for the goods when they were shipped, even if such bill be negotiable. Sec. 30. That a negotiable bill may be negotiated by delivery where, by the terms of the bill, the carrier undertakes to deliver the goods to the order of a specified person, and such person or a subsequent indorsee of the bill has indorsed it in blank. Sec 31. That a negotiable bill may be negotiated by the indorsement of the person to whose order the goods are deliverable by the tenor of the bill. Such indorsement may be in blank or to a specified person. If indorsed to a specified person, it may- be negotiated again by the indorsement of such person in blank or to another specified person. Subsequent negotiation may be made in like manner. Sec. 32. That a bill may be transferred by the holder by delivery, accompanied with an agreement, express or implied, to transfer the title to the bill or to the goods represented thereby. A nonnegotiable bill can not be negotiated, and the indorse- ment of such a bill gives the transferee no additional right. Sec 33. That a negotiable bill may be negotiated by any person in possession of the same, however such possession may have been acquired, if by the terms of the bill the carrier undertakes to deliver the goods to the order of such person, or if at the time of negotiation the bill is in such form that it may be negotiated by delivery. Sec 34. That a person to whom a negotiable bill has been duly negotiated acquires thereby — (a) Such title to the goods as the person negotiating the bill to him had or had ability to convey to a purchaser in good faith for value, and also such title to the goods as the consignee and consignor had or had power to convey to a purchaser in good faith for value: and (b) The direct obligation of the carrier to hold possession of the goods for him accord- ing to the terms of the bill as fully as if the carrier had contracted directly with him. Sec 35 That a person to whom a bill has been transferred but not negotiated acquires thereby as against the transferor the title to the goods, subject to the terms of any agreement with the transferor. If the bill is nonnegotiable, such person also acquires the right to notify the carrier of the transfer to him of such bill, and thereby to become the direct obligee of whatever obligations the carrier owed to the transferor of the bill immediately before the notification. Prior to the notification of the carrier by the transferor or transferee of a nonnego- tiable bill the title of the transferee to the goods and the right to acquire the obligation of the carrier may be defeated by garnishment or by attachment or execution upon the goods by a creditor of the transferor, or by a notification to the carrier by the trans- feror or a subsequent purchaser from the transferor of a subsequent sale of the goods by the transferor. A carrier has not received notification within the meaning of this section unlesB an officer or agent of the carrier, the actual or apparent scope of whose duties includes action upon such a notification, has been notified, and no notification shall be effective until the officer or agent to whom it is given has had time, with the exercise of rea- sonable diligence, to communicate with the agent or agents having actual possession or control of the goods. Sec 36. That where a negotiable bill is transferred for value by delivery, and the indorsement of the transferor is essential for negotiation, the transferee acquires a right against the transferor to compel him to indorse the bill, unless a contrary inten- tion appears. The negotiation shall take effect as of the time when the indorsement is actually made. This obligation may be specifically enforced. Sec. 37. That a person who negotiates or transfers for value a bill by indorsement or delivery, unless a contrary intention appears, warrants — (a) That the bill is genuine. (b) That he has a legal right to transfer it. (c) That he has knowledge of no fact which would impair the validity or worth of the bill. (d) That he has a right to transfer the title to the goods, and that the goods are merchantable or fit for a particular purpose whenever such warranties would have been implied, if the contract of the parties had been to transfer without a bill the goods represented thereby. BILLS OF LADING. . 319 Sec. 38. That the indorsement of a bill shall not make the indorser liable for any failure on the part of the carrier or previous indorsers of the bill to fulfill their respec- tive obligations. Sec. 39. That a mortgagee or pledgee, or other holder of a bill for security who in good faith demands or receives payment of the debt for which such bill is security, whether from a party to a draft drawn for such debt or from any other person, shall not be deemed by so doing to represent or warrant the genuineness of such bill or the quantity or quality of the goods therein described. Sec 40. That the validity of the negotiation of a bill is not impaired by the fact that such negotiation was a breach of duty on the part of the person making the negotiation, or by the fact that the owner of the bill was deprived of the possession of the same by fraud, accident, mistake, duress, or conversion, if the person to whom the bill was negotiated, or a person to whom the bill was subsequently negotiated, gave value therefor, in good faith, without notice of the breach of duty, or fraud, accident, mistake, duress, or conversion. Sec 41. That where a person, having sold, mortgaged, or pledged goods which are in a carrier's possession and for which a negotiable bill has been insw>d, or having sold, mortgaged, or pledged the negotiable bill representing such goods, continues in pos- session of the negotiable bill, the subsequent negotiation thereof by that person under any sale, pledge, or other disposition thereof to any person receiving the same in good faith, for value and without notice of the previous sale, shall have "the same effect as if the first purchaser of the goods or bill had expressly authorized the subsequent negotiation. Sec 42. That where a negotiable bill has been issued for goods no seller's lien or right of stoppage in transitu shall defeat the rights of any purchaser for value in good faith to whom such bill has been negotiated, whether such negotiation be prior or subsequent to the notification to the carrier who issued such bill of the seller's claim to a lien oi right of stoppage in transitu. Nor shall the carrier be obliged 1 1 deliver or justified in delivering the goods to an unpaid seller unless such bill is first surrendered for cancellation . Sec 43. That, except as provided in section forty-two, nothing in this act shall limit the rights and remedies of a mortgagee or lien holder whose mortgage or lien on goods would be valid, apart from this act, as against one who for value and in good faith purchased from the owner, immediately prior to the time of their delivery to the carrier, the goods which are subject to the mortgage or lien and obtained possession of them. Sec. 44. That any officer, agent, or servant of a cairier who, with intent to defraud, issues or aids in issuing a bill knowing that all or any part of the goods for which such bill is issued have not been received by such carrier, or by an agent of such carrier, or by a connecting carrier, cr are not under the carrier's control at the time of issuing such bill, shall be guilty of a misdemeanor, and upon conviction shall be punished for each offense by imprisonment not exceeding five years, or by a fine not exceeding five thousand dollars, or by both. Sec 45. That any officer, agent, or servant of a carrier who, with intent to defraud, issues or aids in issuing a bill for goods knowing that it contains any false statement, shall be guilty of a misdemeanor, and upon conviction shall be punished for each offense by imprisonment not exceeding one year, or by a fine not exceeding one thou- sand dollars, or by both. Sec 46. That any officer, agent, or servant of a carrier who, with intent to defraud, issues or aids in issuing a duplicate or additional negotiable bill for goods in violation of the provisions of section seven, knowing that a former negotiable bill for the same goods, or any part of them, is outstanding and uncanceled, shall be guilty of a misde- meanor, and upon conviction shall be punished for each offense by imprisonment not exceeding five years, or by a fine not exceeding five thousand dollars, or by both. Sec 47. That any person who ships goods to which he has not title, or upon which there is a lien or mortgage, and who takes for such goods a negotiable bill which he afterwards negotiates for value with intent to deceive and without disclosing his want of title or the existence of the lien or mortgage, shall be guilty of a misdemeanor and upon conviction shall be punished for each offense by imprisonment not exceeding one year, or by a fine not exceeding one thousand dollars, or by both. Sec. 48. That any person who with intent to deceive negotiates or transfers for value a bill, knowing that any or all of the goods which by the terms of such bill appear to have been received for transportation by the carrier which issued the bill are not in the possession or control of such carrier or of a connecting carrier, without disclosing this fact, shall be guilty of a misdemeanor, and upon conviction shall be punished for each offense by imprisonment not exceeding five years, or by a fine not exceeding five thousand dollars, or by both. 320 BILLS OF LADING. Sec. 49. That any person who with intent to defraud secures the issue by a carrier of a bill, knowing that at the time of such issue any or all of the goods described in such bill as received for transportation have not been received by such carrier or an agent of such carrier or a connecting carrier or are not under the carrier's control, by inducing an officer, agent, or servant of such carrier falsely to believe that such goods have been received by such carrier or are under its control, shall be guilty of a misde- meanor, and upon conviction shall be punished for each offense by imprisonment not exceeding five years, or by a fine not exceeding five thousand dollars, or by both. Sec. 50. That any person who with intent to defraud issues or aids in issuing a non- negotiable bill without the words "not negotiable " placed plainly upon the face there- of shall be guilty of a misdemeanor, and upon conviction shall be punished for each offense by imprisonment not exceeding five years, or by a fine not exceeding five thousand dollars, or by both. Sec. 51. That in any case not provided for in this act the rules of law and equity, including the law merchant, shall govern. Sec. 52. (First) That in this act, unless the context or subject matter otherwise requires — Action " includes counter claim, set-off, and suit in equity. "Bill" means bill of lading governed by this act. "Consignee" means the person named in the bill as the person to whom delivery of the goods is to be made. "Consignor" means the person named in the bill as the person from whom the goods have been received for shipment. "Goods" means merchandise or chattels in course of transportation, or which have been or are about to be transported. "Holder" of a bill means a person who has both actual possession of such bill and a right of property therein. "Order" means an order by indorsement on the bill. "Owner '' does not include mortgagee or pledgee. "Person" includes a corporation or partnership or two or more persons having a joint or common interest. To "purchase" includes to take as mortgagee and to take as pledgee. "Purchaser" includes mortgagee and pledgee. "State" includes any Territory, District, insular possession, or isthmian possession. "Value" is any consideration sufficient to support a simple contract. An ante- cedent or preexisting obligation, whether for money or not, constitutes value where a bill is taken either in satisfaction thereof or as security therefor. (Second) A thing is done "in good faith" within the meaning of this act when it is in fact done honestly, whether it be done negligently or not. Sec. h'i. That the provisions of this act do not apply to bills made and delivered prior to the taking effect thereof. Sec. 51 That this act shall take effect on the first day of January, one thousand nine hundred and thirteen . The Chairman. The following letter from Mr. Colston will be placed in the record: Louisville & Nashville Railroad Co., Louisville, Ky., April 16, 1912. Hon. Moses E. Clapp, Chairman Committee on Interstate Commerce, United States Senate, Washington, D. C. Dear Sir: In response to your letter of April 12, 1912, I have to-day wired you as follows: "Upon my return from an extended trip I find your letter of April 12. Will write to-day . ' ' The written statement which I desired to file on behalf of the Louisville & Nash- ville Railroad Co in connection with the hearings before your committee on Senate bills 4713 and (157, relating to bills of lading, has not been previously forwarded for three reasons: 1. Because it was deemed desirable to look into the record in the case of United States v. John W. Knight, from which Mr. Richter quoted in part; 2. Because of professional engagements which prevented my earlier attention to the matter; and 3. Because of the advice contained in your letter of March 22, 1912, that as our answer does not necessarily go to the main issue there was no hurry about sending it. As was indicated in the last paragraph of your letter of March 22,' 1912, the question directly raised by the statement of Mr. Robert M. Richter before vour committee on BILLS OF LADING. 321 March 15, 1912, does not relate to the matters under consideration in the hearings be- fore your committee with reference to .Senate bills 47 L3 and 957, and I do not believe that your committee is the proper tribunal before which to argue irrelevant questions now elsewhere in litigation. I reply to the statements made by Mr. Richter merely because I am unwilling that the erroneous and irrelevant conclusions stated by him should prejudice our interests in the real controversy with respect to the proposed bill-of-lading legislation. In the first place, the attention of the committee is respectfully directed to the fact that although Mr. Phelan Beale, in his telegram of March 1-2, 1912, which appears at page 20? of the hearings, with respect to bills of lading, requested time in which to obtain certified copies of the testimony in support of conclusions and statements pre- viously made by him, and said that he was willing to rest his case on his charges and his ability to prove the same substantially; his representative, Mr. Richter, in subse- quently making his statement before the committee (record of hearings, p. 255, etseq.), instead of presenting the certified copies of the testimony, again indulged, as Mr. Beale had previously done, in stating his conclusions as to the effect of the testimony. Mr. Richter said (record of hearings, p. 259): "It would encumber the record if I read all of the testimony supporting my con- tentions. Suffice it to say that the testimony shows that the railroads were fully aware of the signing by Knight of bills of lading with the name of the agent when no goods had been delivered, and that the agents of the railroads, when apprised of the condition of affairs, instead of at once repudiating these bills actually ratified them by sending false messages to the holders of the bills to the effect that the goods were on their way, when as a matter of fact no goods were in the possession of the railroad." We assert that the testimony does not fairly admit of any such construction as that stated by Mr. Richter, and submit that as this was the very question with respect to which Mr. Beale 's statements had been challenged, Mr. Richter would have done better if he had introduced the record of the testimony and have permitted the com- mittee to draw their conclusions instead of stating as the effect of the testimony that which was directly controverted. I quote below from the testimony given by Mr. J. A. Bywater and Mr. J. W. Hunter in the criminal trial of Mr. John W. Knight: Extract prom Testimony of Mr. J. A. Bywater, given in the Case of United States v. John W. Knight, in the Circuit Court op the United States por the Northeastern Division op the Northern District op Alabama, at Hunts- ville, Ala., beginning December 6, 1911, before W. I. Grubb, J., and a Jury. [From transcript, pp. 685-688.] "Q. Now, in this conversation you had with Mr. Knight, either at Birmingham or Decatur— both were at Birmingham? — A. The original conversation in respect to this arrangement was at Decatur. "Q. In which he explained the advantage of having cotton dated at Memphis?— A. That is the way he put it to me; he could sell more cotton to Liverpool if he could sell through Conway & Mallory. "Q. In either one of these conversations in Decatur, or the two times you saw him at Birmingham, did he ever suggest to you the idea of you authorizing him to sign the agent's name to the bill of lading without the cotton being delivered to the road?— A. No, sir. "Q. Did he ever propose a thing of that kind to you at any time?— A. JNo, sir. "Q. Did you ever authorize him at any time to do a thing of that kind?— A. No, sir. "Q. Would you have had any such authority as that?— A. No, sir. "Q. When did you learn for the first time that Mr. Knight had signed the name oi your local agent at Selma and at Decatur to bills of lading for which no cotton had been delivered; when did you first learn that?— A. I do not recall the dates exactly. It was somewhere in April, 1910. "Q. Was that about the time of the failure?— A. It was after the failure. "Q. About how long after the failure?— A. It was probably a week or so. the first I knew of it our traffic manager was at Pensacola and met Mr. M J banders ot tne Leland Line, and he notified him that something had occurred and he wired me at Louisville about it and wanted to know if we had issued any bills of lading tor cotton that had not been received, and I did not know exactly what he meant by it and. awaited his return to Louisville. I think it was a few days after that the whole thing came out. _ "Q. You got your first information from whom?— A. 0. is. Compton. "Q. At Pensacola or Mobile?— A. At Louisville. 42808°— S. Doc. 650, 62-2 21 322 BILLS 0.F LADING. "Q. He got his information from what point — did he tell you he got his informa- tion? (Defendant objects to the question. The court sustains the objection.) "Q. That was about how many days before Knight went to the wall? — A. I should say about a week. I have not looked over any records, but that is the best of my recol- lection, about a week. "Q. In the fall of 1905, I will ask you if Mr. Knight at any time during that fall, or any other time, informed you that his partners, or any person connected with his firm, while he was absent in Europe, had issued bills of lading for cotton that had never been delivered to your road amounting to 1,700 bales? — A. No, sir. "Q. Did you ever hear anything of that kind before? — A. No, sir. "Q. Did you ever hear of it before you went on the stand? — A. No, sir. "Q. Now, on the stand is the first time you ever heard of such a thing? — A. The first time I ever heard of it. "Q. Did he ever at any time tell you that his partners or anybody connected with his firm had done a thing of that sort? — A. No, sir." [From transcript, p. 709.] "Q. Now, here is a letter. I will ask you to read that. It is of date November 10, 190[>? — A. Yes, sir; I signed that letter. I do not recall to my memory just what it was. "Q. Did that have anything to do with bills of lading having been issued — were those difficulties occasioned by Knight, Yancey & Co. having issued bills of lading themselves without knowledge of your agent? — A. No, sir. "Q. Altogether a different matter? — A. Yes, sir." [From transcript, p. 71C] "Q. In that conversation about antedating bills was there anything said by you and Mr. Knight over the phone about his signing bills of lading without the cotton being delivered and without the agent of the road knowing anything about it? — A. No, sir; absolutely nothing. "Q. And either at that time or any other time did any such conversation ever take place between you and Mr. Knight? — A. No, sir." Extract from Testimony of Mr. J. W. Hunter, given in the Case of United States v. John W. Knight, in the Circuit Court of the United States for the Northeastern Division of the Northern District of Alabama, at Huntsville, Ala., beginning December 6, 1911, before W. I. Grubb, J., and a Jury. [From transcript, p. 59] "Q. Do you know anything about those bills of lading; where they came from? — A. These? "Q Yes. — A. No, sir. 'Q. Did you ever authorize anybody to sign your name, or to issue them? — A. No, sir. "Q. Do you know of any other employee of the Southern Railway Co. authorizing anything of the kind? — A. No, sir." [From transcript, p. 73, cross-examination.] "Q. Now, Mr. Hunter, as far back as 1906 and 1907, didn't you know that bills of luding had been issued by Knight, Yancey & Co. with your name signed to them? — A. No; I didn't know it." [From transcript, p. 99, on redirect examination.] "Q. You did not issue, or authorize the issuance, of bills of lading for cotton not received? — A. We issued no bills of lading until we had evidence that the cotton was loaded in our cars." [From transcript, pp. 062-603, on rebuttal examination.] "Q. The meeting at Birmingham — when did that occur; about when was that meeting? — A. I haven't the slightest idea. There were some rumored changes there about that time. I either got off the train and came out or went in the L. & N. station to take the train and met Mr. Knight and shook hands with, him, and he said, 'I hear you are coming up here as assistant general freight agent,' and I said 'That is the first I knew of it.' BILLS OF LADING. 323 "Q. Did you have any business conversation with him on that occasion?— A That is every word that was passed. "Q. Is that the only time you met him in Birmingham? — A In recent vears? "Q. Since 1905 or 1906?— A. I am pretty sure it is. "Q. I will ask you if during that meeting or any other meeting that you may have had with him in the city of Birmingham if he told you that he had been authorized by the L. & N. to issue bills of lading himself without cotton actually heing delivered to the road for the bills? — A. I did not catch the first part of your question. "Q. I say, did he ever in a meeting in Birmingham or in any other meeting that you may have had with him in Birmingham, did he ever say to you that he had been authorized by the L. & N. to issue bills of lading himself? — A. As I have just stated, that was the only conversation I had with him since 1906 or 1907. "Q. Did he ever, at Birmingham or anywhere else, until after this failure occurred, say to you that the L. & N. had authorized him to issue bills of lading?— A. He never told me that before or since the failure. "Q. Since the failure I believe he did tell you he had issued some bills of lading?— A. He told me over the telephone that 'we foolishly made them up here.' "Q. He never did tell you that he was authorized by the L. & N. to issue bills of lading himself ? — A. No, sir." The absurdity of the inference which Mr. Richter (record of hearings, pp. 260-263) seeks to torture from Mr. Bywater's letter of November 10, 1905, that authority had been given to Knight's firm to issue false bills of lading, is apparent from a reading of the communication itself. The letter plainly refers to a question of rates, and Knight, Yancey & Co. were informed that with respect to the 500 bales offered on contract B-277 not less than 74 cents from Montgomery would be accepted. But we have Mr. Bywater's definite statement, as quoted above from page 709 of the transcript of the record in the Knight case, that the letter in question did not have anything at all to do with the issuing of bills of lading. I shall not consume the time of the committee in pointing out other errors and incon- sistencies in the conclusions offered as facts by Messrs. Beale and Richter. The com- mittee will, of course, bear in mind that the statements made by Mr. Knight were made by him in an effort to escape conviction on a criminal charge, and Mr. Knight at least admits that he did sign, or cause to be signed, bills of lading for property not delivered to the railroad company. Messrs. Hunter and Bywater were not under trial and gave their testimony as disinterested witnesses. The fact to be impressed upon the committee is this, that the gentlemen who have, in connection with the hearings on Senate bills 4713 and 957, urged the necessity of such legislation because of the southern cotton frauds, are urging an evil which would not be cured, but would, in fact, be aggravated by the legislation proposed, as southern cotton fiauds arose from the issue of forged bills of lading, and were made possible by the carelessness of the banks in dealing with their customers in this regard. The pro- posed legislation with respect to the issue of bills of lading would not in anywise pre- vent the issue of forged bills, but would, in fact, tend to make the banks more carelesB and put a premium upon dishonesty. Leaving now the irrelevant discussion as to the southern cotton forgeries, I would respectfully recapitulate the reasons heretofore urged by me before the committee why the proposed bill-of-lading bills should not be enactedinto law. These reasons are: 1. That there is no necessity for the proposed legislation; 2. That the bills do not reach the real evil, which relates to the issue of forged bills of lading; 3. That the legislation proposed in the bills would, in fact, increase the evil and put a premium upon crime ; 4. That the bills seek to thiow upon carriers a responsibility which should be borne by the bankers; and . ,.,,,-,, „ ■, ^ 5. That the bills do not provide for compensation which should be allowed the carriers if there exists any commercial necessity for the change m the law of responsi- bility as to bills of lading. . i- ii As to the first point, it is sufficient to point out to the committee that practically none of the instances of loss brought to the committee's attention relate to the issue of bills of lading by authorized agents of the carriers in territories where the principle announced in the Friedlander case is observed . The greater part of the losses occurred either in connection with forged bills of lading or in connection with bills of lading for shipments in jurisdictions in which carriers are held responsible for bills of lading issued by their agents where the property has not been received. With respect to the second point, it is submitted that the record shows clearly that whatever distrust may have arisen on the part of foreign bankers or foreign consumers of our products and whatever substantial demand for safeguarding our bills ol lading 324 BILLS OF LADING. may have arisen have been in connection with the issue of forged bills of lading which were not properly scrutinized or safeguarded by the initial banks. As to the third point, it is evident that the proposed legislation would enable an unscrupulous agent to more readily realize upon bills of lading issued by him for the purpose of defrauding his company, and would consequently constitute a premium upon crime. As to the fourth point, it is clear that while the banking interests, which are pro- posing this legislation, insist that they are desirous of making a bill of lading a more valid and substantial thing, they are in fact attempting, at least in the Pomerene bill, to relieve themselves of all responsibility and to discredit the value of a bill of lading accordingly, while section 35 of the Pomerene bill (S. 4713) takes good enough care that the person who negotiates or transfers for value a bill by indorsement or delivery, including one who assigns for value a claim secured by a bill, shall warrant that the bill is genuine, that he has a legal right to transfer it, that he has knowledge of no fact which would impair the validity or worth of the bill, and that he has a right to transfer the title to the goods and that the goods are merchantable or fit for a particu- lar purpose whenever such warranties would have been implied, if the contract with the parties had been to transfer without a bill the goods represented thereby, and thus protects the initial banker in every way. When the first banker comes in the warranty stops and the bankers take the bill of lading merely as a pledge or pignus bailment. The bankers seek to avoid all responsibility and to be treated merely as bailees. If it is desired that a bill of lading be made a more dependable thing, the bankers should be made to bear at least their part of the responsibility and it should be provided that a mortgagee or pledgee, or other holder of a bill for security, who demands or receives payment of the debt for which such bill is security, whether from a party to a draft drawn for such debt or from any other person, shall be deemed by so doing to represent or warrant the genuineness of such bill. There is another matter of responsibility for the southern cotton losses, which apparently has not been drawn to the attention of the committee, and that is in connection with the practice of insur- ance companies to furnish signed blank certificates of insurance. Under such certifi- cates of insurance the insurance companies receive pay for insuring property that has not been shipped, and such action tends to assist in the collection of money on fraudu- lent bills of lading. What is needed is a reform in the methods of bankers, brokers, and insurance companies. Additional legislation affecting the liability of carriers is not necessary. With reference to the fifth point, it seems clear that if there really exist the dangers pointed out by the proponents of this bill-of-lading legislation, and carriers under the decision in the Friedlander case have not been subjected to any of these dangers, and the present-day commercial necessities demand that such responsibility be assumed by the carriers, then the carriers should unquestionably be compensated for their increased liability. If the legislation proposed would not place any additional burden or respon- sibility on the carrii rs, then the legislation is not necessary. If the legislation pro- posed would place additional responsibilities on the carriers, the carriers should be compensated for the added burden. Very respectfully, W.A.Colston, Commerce Attorney. The Chairman. The following letters and telegrams will be placed in the record : [Telegram.] Kansas City, Mo., March 14. Hon. Moses E. Clapp, Washington, D. C: The importance of legislation requiring uniform bills lading wherein the integrity of lading is preserved being of utmost importance, we respectfully request you to give careful consideration to bills introduced. Ed Bigleow, Secretary Board of Trade. [Telegram.] Minneapolis, Minn., March 22, 1912. Hon. Moses E. Clapp, Washington, D. C: We trust that your committee will favor the Stevens-Clapp bill. This will best serve the milling interests of the United States. Washburn-Crosby Co. BILLS OF LADING. 325 [Telegram.] _. „ Minneapolis, Minn., March 19. Hon. Moses E. Clapp, WasJdngton, D. C: We sincerely hope you will favor the Pomerene bill, Senate file 4713, as the fairest measure pending dealing with the status of bills of lading. Minneapolis Steel & Machine Co. „ „ New Yohk, March 21, 1912. Hon. Moses E. Clapp, Chairman Senate Committee on Interstate Commerce, Washington, D. C. Dear Sir: If, as we indirectly understand, your committee is about to decide whether to adopt the so-called Stevens-Clapp bill or Pomerene bill, relating to liability of carrier for the acts of his agent in issuing bills of lading, we take the liberty of urging you to adopt the Stevens-Clapp bill, as, in our opinion, there is no doubt whatever as to the constitutionality of all of the provisions of the Stevens-Clapp bill, while on the other hand, we have doubts as to the constitutionality of some of the provisions of the Pomerene bill. Such a bill as the Stevens-Clapp bill is urgently needed by all of the flour millers whom we represent, most of whom are engaged in interstate and foreign commerce. Without troubling you with the names of the concerns we represent as export agents, we beg to advise that we do represent about 75 per cent of the merchant millers of this country, who do an export business as well as a large domestic business. Yours, faithfully, F. H. Price & Co. Hammond, Ind., April 2, 1912. Hon. Moses Clapp, Chairman Interstate Commerce Committee, United States Senate, Washington, D. C. Dear Sir: We beg to offer the following suggestions relative to the issuance of rail- road bills of lading. It is customary and convenient for shippers to make out their own bills of lading for the railroads to sign. All industries doing business in carlots do this in connection with their regular office manifolding, so that these bills of lading are made out the same time the invoices are. To safeguard bills of lading, we believe that the simplest and best way would be to validate them with a stamp in the same manner that railroad tickets are stamped when purchased. Almost every railroad office has such a stamp and they could, if necessary, use the same one that is used for stamping railroad tickets, which shows the name of the company, the date, and should show the name of the agent. It could be made a misdemeanor to counterfeit such stamps, and as the signature should correspond to the agent's name shown on the stamp, there would he no question as to whether the agent's name was a fictitious one. Now, when we receive a bill of lading from a thousand miles away signed by John Jones, agent, we can not know whether he is the agent or not, or whether it is a counterfeit; but if it is stamped in this manner there will he no question about it. If necessary, the railroad agents could use an embossing seal such as is used by notary publics. It should also be necessary for carriers to insert in the bill of lading the freight rate on all carload shipments at least. On less than carlot shipments the question of the freight rate is not so important as the charges are relatively small. Purchasers of grain and other commodities are often defrauded by the omission of the height rates. We were sufferers in one case where the railroad deliberately misquoted the rate and omitted placing the rate on the bill of lading, and their route's tariff rate actually was 5} cents more than all other routes. We purchased these bills of lading innocently and by this action on the part of the carrier in concealing the true rate, we were forced to pay $200 more freight charges than we could have secured over other routes. Had it been mandatory for the agent to insert the rate, we never would have purchased the bills of lading, but would have rejected them. We believe the above suggestions are so simple and effective that they would amply safeguard bills of lading, and it would not be necessary to enact a law compelling banks, etc., to secure a written statement from the issuing agent as to the validity and 326 BILLS OP LADING. truthfulness of bills of lading before making advances on said documents— this would be a needless and cumbersome method that would stop the wheels of commerce. An order from the commission would be sufficient and a law be unnecessary. Yours, very truly, Chapin & Co., Per Robert W. Chapin, President. The American Bankers' Association, Neiv York, March 20, 1912. Hon. Moses E. Clapp, Chairman Senate Committee on Interstate Commerce, Washington, I). C. My Dear Sir: Bearing in mind your suggestion that the Clapp bill (.IS 957) ought to be shortened and that the main thing which would seem to be necessary is simply a law that would overturn the rule of the Friedlander case, Prof. Williston and myself, acting on behalf of the American Bankers' Association, have prepared a final modified draft of S. 957, copies of which I inclose, asking that same be con- sidered as a suggested form of law that would meet the requirements of the interests we represent as well as remedy the many evils necessary to be corrected by Federal legislation. To briefly describe this modified draft and how it differs from S. 957, would say that, taking the latter as a basis, the following are the material differences: 1. Sections 1, 2, and 3 of S. 957 have been eliminated. These define order and straight bills of lading and provide certain things they must and must not contain. When these provisions were originally drafted, the Interstate Commerce Commission only had power to make recommendations concerning the form of bill, but since the powers of the commission have been increased the matters covered by sections 1, 2, and 3 may properly come within the scope of regulation of the commission and are not really necessary in the proposed law. 2. Section 4 of S. 957 is made section 1 of the modified draft. This has been short- ened by taking out the provisions as to estoppel and simply retaining those as to liability of the carrier, which are sufficient. The proviso limiting liability is the same as that in the State uniform bill of lading act and the Pomerene bill, and is satisfactory to the carriers, with the exception that we have redrafted the "shipper's load and count'' provision, concerning which there was so much discussion. We pro- vide, in effect, that where such words are on the bill the carrier shall not be liable, but we prohibit the carrier from putting such words on the bill without the consent of the shipper in all cases where he has been requested by the shipper and given reasonable opportunity to verify the description of the property. This section 1 of the suggested modified draft therefore overturns the rule of the Friedlander case and provides a general liability of carriers where their agents have issued bills with- out goods, or have issued unmarked duplicates which are in effect the same, and it couples an exemption of the carrier from liability in those cases where it is just that he should be exempted. 3. Section 2 of the modified draft is the same as section 5 of S. 957, except that we shortened same by taking out estoppel, leaving in liability. This relates solely to order bills and makes the carrier liable where he leaves the bill outstanding. This, of course, is a matter not covered by the Friedlander case, but, as explained by Prof. Williston at the last hearing, in view of certain decisions relieving carriers from liability where the goods had been delivered to the holder of the bill without taking it up and the holder afterwards negotiated the bill, this is a danger to those who advance value on bills of lading which requires legislation making trie carrier liable equally as in case of false bills. In other words, the holder for value of a bill of lading ought to be protected where there are no goods behind it, not only where the carrier never received the goods originally, but also where he has parted with the goods and left the bill outstanding. 4. Section 6 of S. 957 is made section 3 of the modified draft. Having by the pre- ceding section made the carrier liable for delivering goods without taking up the bill, this section naturally follows to exempt him from such liability in proper cases as where the goods are taken from him by legal process, or are sold to satisfy his lien and the like. In order, hi >wever, to protect the holder of the bill in such cases, as far as possible, there has been added a provision requiring the carrier to notify the consignee or party accord- ing to the terms of the bill to be notified of arrival that they may protect themselves as far as possible. BILLS OF LADING. 327 5. Section 7 of S. 957 ia made section 4 of the modified draft. It provided in effect that a bill altered without authority should be good for ita original tenor. Thia is to prevent the bona fide holder being injured from the application of the rule of the com- mon law that the alteration of a bill makes it void and of no effect. Decisions exist which make this section important in the interest cf the bona fide holder. 6. A new section has been added to the modified draft, section 5 relating to bills in lets issued by; ocean carriers. It is desirable that this legislation cover not only inter- state but foreign bills of lading and it is made to cover foreign bills by section 1 of the modified draft and would apply to through bills, issued by the railroads of the country for goods shipped to foreign countries. Such railroads do not issue these in sets. But the custom is still in vogue for ocean carriers to issue bills in sets and in view of the criticism and the fear of such ocean carriers that the proposed law prohibiting unmarked duplicates would apply to sets of a bill and make them liable on each one of a set, it has been thought wise to add this section. I trust you will pardon the length of this explanation of the modified draft which I have endeavored to make as brief as possible and accept it as a suggestion from the interests represented by us of the kind of law which is deemed necessary for the pro- tection of all those who advance value on the faith of bills of lading. Copies of this suggested modified draft have been forwarded to ex-Senator Faulkner, representing the railroads, Mr. Francis B. James who appeared in behalf of the Pomerene bill, and Mr. Lynde representing the Chicago Association of Commerce. Very truly, yours, Thomas B. Paton, General Counsel. Final Modified Draft (S. 957 and H. R. 4726) Relating to Bills of Lading. [Suggested on behalf of American Bankers' Association.] That every common carrier, railroad or transportation company (hereinafter termed "carriers"), who himself or by his officer, agent, or servant, authorized to issue bills of lading, shall issue an order bill of lading or a straight bill of lading for the transporta- tion of property from a place in one State to a place in another State (the word ' ' State " to include any Territory or District of the United States), or from a place in the United States to any foreign country before the whole of the property as described therein shall have been actually received and is at the time under the actual control of such carrier to be transported, or who shall issue a second or duplicate order bill of lading or straight bill of lading for the same property, in whole or in part, for which a former bill of lading has been issued and remains outstanding and uncanceled, without prominently mark- ing across the face of the same the word "Duplicate," or some other word or words indicating that the document is not an original bill of lading, shall be liable to the consignee named in a straight bill of lading or to the holder of an order bill of lading who has given value in good faith, relying on the description therein of the property for damages caused bv the nnnreceipt by the carrier of all or part of the property, or its failure to correspond with the description thereof in the bill of lading at the time of its issue, or for the failure to mark the word ' ' Duplical e " or other word i >r words as herein- before provided upon a second or duplicate bill of lading: _ Provided, That if the property is described in an order or a straight bill of lading merely by a statement of marks or labels upon the property or upon packages contain- ing it, or by a statement that the property is said to be of a certain kind, or quantity or in a certain condition, or it is stated in any such bill of lading that packages are said to contain property of a certain kind or quantity or in a certain condition, or that the con- tents or condition of the contents of packages are unknown, or words of like purport are contained in any such bill of lading, such statements, if true, shall not make liable the carrier issuing the bill of lading although the property is not ol the kind or quantity or in the condition which the marks or labels indicate, or of the kind or quantity or in the condition it was said to be bv the consignor. Also, if a bill of lading contains the words, "shipper's load and count" or other words indicating that the property was loaded by the consignor and the description made by him, the carrier shall not be liable for damages caused by the improper loading, nonreceipt by the carrier, or mis- description of the property. But without the consent of the consignor a carrier shal not insert in a bill of ladi'ng the words "shipper's load and count or other words ot like purport, if requested by the consignor and given reasonable opportunity to veui> the description of the property. ,,, rlc> Sec. 2. That every carrier who himself or by his officer, agent, or servant, shall df- liver the property described in an order bill of lading without requiring surrender au'l 328 BILLS OF LADING. making cancellation of such bill, or, in case of partial delivery, indorsing thereon a statement of the property delivered, shall be liable to every person who has acquired, or who thereafter shall acquire, in good faith and for value, any such order bill of lading for the damages which he may have sustained because of reliance upon such bill according to its original tenor and effect. Sec. 3. That no carrier shall be liable under the provisions of this act where the property is replevied or removed from the possession of the carrier by other legal or governmental process or authority, or has been lawfully sold to satisfy the carrier's lien, or in case of sale or disposition of perishable, hazardous, or unclaimed goods, in accordance with law or the terms of the bill of lading, or in case of other lawful excuse lor refusal to deliver: Provided, That in every such case due notice to be given by the carrier to the consignee or to any party who, according to the terms of the bill of lading, is to be notified of the arrival of the goods at their destination. Sec. 4. That any alteration, addition, or erasure in a bill of lading after its issue without authority from the carrier issuing the same, either in writing or noted on the bill of lading, shall be void, but such bill of lading shall be enforceable according to its original tenor. Sec. 5. Nothing herein contained shall be construed as prohibiting the issue of Taills of lading in sets by ocean carriers, or as rendering such carriers liable for delivering the property without requiring the surrender of all parts of a set of bills of lading issued for such property. Boston Fruit and Produce Exchange, Boston, April 15, 1911. Mr. Moses E. Clapp, Chairman Committee on Interstate Commerce, Washington, D. C. Dear Sir: At a meeting of the transportation committee of the Boston Fruit and Produce Exchange, held on April 12, it was unanimously voted to indorse the final modified draft (S. 957 and H. R. 4726) relating to bills of lading. Respectfully, yours, Alton E. Brigqs, Executive Secretary. The Transportation Club op Lima, Lima, Ohio, April 12, 1912. Moses E. Clapp, Chairman Committee on Interstate Commerce, Washington, D. C. Dear Sir: At regular monthly meeting of the Transportation Club of Lima, April 3, 1912, it was the consensus of opinion of this club that the Pomerene bill, S. 4713, be adopted, with the elimination of section 3. Yours, truly. D. L. Rupert, Secretary. FRIDAY, APRIL 26, 1912. United States Senate, Committee ox Interstate Commerce, Washington, D. (J. The committee met at 10.30 o'clock a. m. ^ Present: Senators Clapp (chairman), Nixon, Cummins, Brandegee, Townsend, Foster, Clarke, Gore, Watson, and Pomerene. STATEMENT OF HORACE TURNER, MOBILE, ALA., REPRESENT- ING HORACE TURNER & CO., EXPORT LUMBER, PRESIDENT TURNER-HARTWELL DOCKS CO. Senator Brandegee. Mr. Chairman, Mr. Turner testified before the Committee on Interoceanie Canals a few days ago and spoke of bills of lading, and Senator Townsend and I both'thought it was BILLS OF LADING. 329 important, and I asked him to appear before this committee this morning. Senator Townsend. I thought it would be possible for us to have a meeting here this afternoon and take Mr. Turner's testimony before this committee, when such questions could be asked him as might be desired. Mr. Wheeler. Mr. Chairman, I think a word of explanation is perhaps in order. As Senators Brandegee and Townsend both know, Mr. Turner was very urgently requested to remain over, both by themselves and Senator Johnston and others of the committee who heard his testimony, and owing to Mr. Turner's engagements it was a very great personal sacrifice if lie did remain over, and he hesitated to say so at the time, that is, to accede to the request, but before we left the committee room that day he determined to remain over and at once advised the clerk of your committee to that effect- In view of this fact, I would like very much if, under these cir- cumstances, and inasmuch as he has been very good to remain over, the committee would see its way to giving him a hearing this morning. Senator Cummins. I move that Mr. Turner be immediately heard. The motion was agreed to. The Chairman. State your name, residence, and occupation. Mr. Turner. My name is Horace Turner; residence, Mobile, Ala.; occupation, member of Horace Turner & Co., exporters of lumber, and president of the Turner-Hartwell Docks Co., Mobile, Ala. I wish to speak on the subject of through bills of lading. The cotton crop of the bouth is absolutely, as far as competitive cotton is con- cerned, dependent upon and moves on through bills of lading, which bills of lading practically control the cotton crop and movement by the different ports in the South. Unless you can get a through bill of lading it is impossible to ship and you can not obtain this through bill of lading except by such routes as the railroads select. Xow, at Galveston and New Orleans every steamship line running there gets through bills of lading. The railroads issue those through bills of lading to all of them alike. At Mobile they are taking a differ- ent tack. They have made an exclusive contract with only one line to Europe, and they will not let anyone else land a steamer at then- wharf; and will not'issue such competing lines a through bill of lading. The shipper is, therefore, in this position: He can make a contract to move all the cotton he will generate for three months, say 5,000 bales, and he can contract at a certain rate with some one steamship line of his selection at the port of Mobile. He is unable to ship by this particular steamship line simply because he can not get a through bill of lading to send his cotton via Mobile. The railroads absolutely refuse to let him utilize the competition. They say to him. You can get a through bill of lading, or you ship by that particular line — which, for example, I will call the Elder-Dempster line— through the port of New Orleans, " but we will not give you a through billot lading by the Elder-Dempster line if cotton move via Mobile. W e will give you a through bill of lading by this particular line if their steamer comes to Gulfport," but they absolutely refused to do it through Mobile. ii. ,,1, In other words, they use this bill of lading as a club to compel the routing of this cotton, and this routing, I think, should be left abso- lutely to the discretion and the selection of the shipper. He is the 330 BILLS OF LADING. one man vitally interested in it. The shipper at the interior points is absolutely allowed to route his own domestic shipment by whatever lines of railroad he pleases, and we think the shipper of cotton export- ing goods of that character should be allowed the same privilege — that is, of selecting his own steamers, and those from which he can get the most favorable freight rates and accommodations. The through bill of lading in this cotton movement limits the liability of the carrier to the delivery of the goods to the steamship or the agent of the steam- ship company at the port, and we can not see wherein the railroad is in any wise affected by giving it to everybody. We feel that the minute any man can select the routing of his export goods he will not be put in the position where he will have to permit the railroads to say that he must route the cotton by their particular steamship line and at the rates charged by that particular steamship line, but in- stead that he can route goods by the same railroad and by some other ocean carrier which might give a more favorable contract, and thus enjoy the competition that results from different ocean lines in a port. We have different lines at Mobile. They are struggling there in competition with the one line that has through bills of lading, and they are compelled, you might say, to restrict their operations to local cotton; that is, cotton that is concentrated at the port, and the lumber and logs and naval stores that are picked up at that port, and go together with the cotton to make a load for a steamer. We think these independent steamship lines should have the same privilege of competing as the railroads' specially favored ocean carrier for this interior cotton. It would, help the shipper and it would help the steamship lines to exist and would give us all competition. I also want to say that the port of Mobile generates as many tons of freight as does the port of Galveston, where they have this through bill of lading, and I think it is as essential that we have the through bill of lading as that every line at other ports should have same. The control of the terminals in our port has been used also absolutely to run out competition. We have a steamboat line that was operated by the merchants of Montgomery, between Mobile and Montgomery on the .Vlabama River, upon which river the Government had spent quite a lot of money. That line began to bring shipments from Xew York by the Mallorv Steamship Line to Mobile. This Mallorv Steamship Line landed at the docks of the Southern Railway under an exclusive contract. The railroad company, as soon as it found that this barge line was getting this freight from New York by steamer, immediately notified the Mallorv Line that they must not let this barge line land — not only not along- side of the steamer, but denied barge line a berth at the wharf, after the steamer had gone, to take this freight. So the barge line wa s put in the position that it had to pay wharfage on the goods, and had to dray the goods across town to another wharf, and had to pay still another wharfage in order to take them up the river. On goods that come from the West that were absolutely controlled by the merchants themselves, the railroads permitted the merchants to load those goods over the railroad wharf on to the barge. That was simply because the merchants controlled the routing. Had railroads controlled routing on through bills of lading, they would have had the merchants of Montgonierv at their mercv exactlv the same wav as BILLS OF LADING. 331 in the case of the goods on the Mallory Line, where they controlled the wharf at which the Mallory Line landed. The sum and substance of it is that some months ago this barge line went out of business. We have still another example of how we have suffered from control of the terminals. The United States Shipping Co. of New York put on a service from Mobile to Colon some years ago to carry such goods as pipe and machinery, which passed through southern ports to the canal commission. They made a contract, or an arrangement with the railroad under which they landed at the railroad wharf for a short time. For one or two steamers they received through bills of lading from the railroads, and received every consideration, but all of a sudden the railroads notified steamship people that they would not work with them any longer. Senator Pomerene. What railroad was that? Mr. Turner. The Mobile & Ohio Railroad. They canceled their agreement permitting steamers to land at the railroad wharf and this line struggled along and finally had to go to Gulfport, where they could get some cargo, in the shape of lumber for the commission, and work out a bare, existence between these two ports, Mobile and Gulf- port. In fact they have now practically abandoned the service. They came back to Mobile in June, 1910, and they attempted to revive this agreement. They asked the railroad if they would permit them to land at their wharf and take cargo, and offered this service to Colon. The railroad told them no, that they did not have any facilities that they could let them have, and they did not want to do business with them unless they worked over their railroad terminals, and until they built more wharves they could not give dockage to their steamers. The steamship line said that as other facilities had been built (those that I am interested in) "Could they land down at the new wharves and would railroads deliver their goods alongside their ships at the shipside rates in effect," which shipside rates pro- vided for the payment of terminal charges, at the different ports, on goods that go over both railroad and competing ducks alike. The railroad said, "No; we are going to limit our tariffs to restrict ship- side delivery to only wharves reached by our own roads;"" in other words, "their own wharves," now that new terminals had been constructed. So the steamship line was again in a very embarrassing position. They had a shipment of pipe that was coming from Chattanooga and they tried to get it to Mobile. The Mobile & Ohio notified their con- necting railroad line that they could not reach the boats of the United States Shipping Co. , the reason being, of course, that they would not let them land at their wharf, and therefore they could not reach them. So the Mobile & Ohio had those goods routed in the face of the earnest request and insistence of the shipper, who begged for the Mobile route, and sent via New Orleans to Colon. These continual tactics of course forced out the steamship line so that stopped the business, and now we have no line to Colon from Mobdc. We had exactly the same experience as to business to Cuba, tins same company losing quite a lot of money operating a service to Cuba, being fought in the same way by refusal of through bills of lading and shipside deliveries. This case of the United States Ship- ping Co. was appealed to the Mobile Chamber of Commerce, who appointed a committee and heard both the railroad and steamship 332 BILLS OF LADING. sides of the issue. The chamber of commerce decided there was a most unjust discrimination and the Mobile & Ohio Railroad and Southern Railway were asked to cease discriminating. The rail- roads, who had fust gone before the chamber of commerce to have the case tried, then notified the chamber of commerce that they would fight the case to the Supreme Court, and they are seemingly going that way. It has gotten as far as the Interstate Commerce Commission and briefs in the case have already been filed. Now, there is a remedy, and that is what we want to ask, that we be given the right to demand through bills of lading via any port and with any steamship line of our selection. We also ask that any wharf company, whether it be municipal, private, or public, or railroad owned, be placed absolutely under the control of the Interstate Com- merce Commission; that immediately a wharf is built and used in interstate commerce, that it be absolutely declared a public utility and be opened to all alike. If you do not do this, you have then per- mitted a barrier or gateway to be erected between the channels built by the Federal Government, or the waterways improved by the Federal Government, and the railroads on land, for by simply buy- ing a strip of land across the city, and by utilizing a small part for their own purpose and by refusing to let others build or improve the balance of it, the railroads can absolutely control the destiny of that port. The railroads can control the steamers that land at wharves and the route by which the shipper must ship, and there is absolutely no chance for independence or freedom of competition on the ocean. The matter of terminals has been ably treated, I find, by the Com- missioner of Corporations, Mr. Herbert Knox Smith, in volume 3, and I brought with me the briefs that we have just filed before the Interstate Commerce Commission and will read a few paragraphs which bear along the line upon which I have spoken, that is, the absolute control of terminals by some Federal provision, so that they will not be used as a barrier to commerce. There is, perhaps, in the United States not over 100 miles of water front at the ports that absolutely controls the commerce of this country. Senator Townsknd. I did not catch that. Mr. Turner. I say there is possibly 100 miles of length of water front at the ports in the United States that absolutely controls the destiny of the commerce of America. This frontage is largely to-day owned and controlled by radroads and is used absolutely to impede commerce, as will be shown by the report to which I have referred. Some of the pithy remarks in this report might well be read for your information. I read as follows: That the terminal is weakest link in water system, widely nullifying advantages of cheap transportation . That the greatest obstacle to water terminal advance is the present adverse attitude of rail linen toward independent, water traffic and in exclusive control of frontage. That channels dug by Federal Government absolutely dependent upon terminals — many criticisms aimed at channels when real trouble is 'in terminals. That private control of terminals may destroy public nature of channels. That in case Erie Canal the indications are that railroads' policy has been to suppress traffic by their control of terminals and influence upon floating equipment. That railroads refuse use their piers for freight not passing over their lines and refuse use piers to independent vessels — Philadelphia for example. That at Atlantic ports and Pensacola the terminals controlled by railroads used to hinder development of rival water systems. That New Orleans, of all the Gulf ports, by ownership of river front and belt railroad, stands out prominently as a port properly developed and capable of the highest ■development. BILLS OF LADING. 333 That control of water front and terminals on the Lakes destroys possibility of develop- ment. That at Buffalo, for example, railroads largely control terminals and water front and refuse use to lines competing with railroad-controlled water lines. That large control by railroads and their subsidiary concerns of terminals at nearly all ports and that railroad control works to disadvantage of water traffic That traffic is attracted by ample facilities for storing and for quick handling of freight. 5 That the ownership of terminals should not be adverse to water traffic. Water terminals so affect the public that some decree publie control necessary Here are the general conclusions: General conclusions: Terminals are as important as channels. Harbors have not developed frontage to full capacity. Great influence exercised over water terminals by railroads. Adverse action of rail to water transportation is detrimental to public. That extensive ownership and control of terminals by railroads a serious factor That there is urgent necessity for action which shall prevent railroads or other private ownership of terminals from resulting in unjust discriminations and unneces- sary burdens upon commerce. That the right to build wharves is subject to public right of navigation. That anyone maintaining a dock or wharf is entitled to compensation called dockage or wharfage. Senator Clarke. From what are you reading ? Mr. Turner. That is taken from the report of Herbert Knox Smith, but it was in a brief filed by us before the Interstate Com- merce Commission. Senator Brandegee. When was that report made by Mr. Herbert Knox Smith ? Mr. Turner. It came out, I think, in the fall of 1910. Senator Brandegee. It is in three volumes, you say ? Mr. Turner. There are three volumes, but it is volume 3 on Water Terminals that controls that very situation. Senator Brandegee. I simply wanted to identify it in the record so that we could get it in case we desired to read the whole report. Mr. Turner. I want to make one statement, which is along the line of some of your inquiries of Wednesday, namely, that this water front had a public nature. The State of Alabama absolutely pro- vides in its constitution that you can not erect any wharf or impedi- ment to the channel except expressly authorized by the law of the State, and the law of the State further provides that you can only erect a public wharf for public convenience. The law is quoted in this brief where I have turned down the page, and I will leave it with the committee. Senator Pomerene. Suppose you refer to the pages, so that it can be placed in the record. Mr. Turner. It is page 27 of the reply brief. Senator Pomerene. I suggest, Mr. Chairman, that it be put into the record. The Chairman. Very well. Mr. Turner. I will read it instead of referring to the page: Section 24 of the constitution of the State of Alabama provides: "That all navigable waters shall remain forever public highways, free to the citizens of the State and the United States, without tax, impost, or toll, and that no tax, impost, toll, or wharfage shall be demanded or received from the owner of any merchandise or commodity for the use of the shores or any wharf erected on the shore, or in or over the waters of any- navigable stream, unless the same be expressly authorized by law." 334 BILLS OF LADING. The law then goes on to say, under section 3040 of the Code of Alabama: "Riparian owners upon the navigable and other waters of thiB State, who maintain in good order, for public convenience, erections and ferries upon the banks or shores of such waters, shall be entitled to charge usual and reasonable rates for the use thereof , ■or such rates as are prescribed in the several acts heretofore passed authorizing such erections or ferries, or agreed on by such owners with the corporate authorities of any city, or town, or county in which they are situated ; but no erection or structure, or ferry of any kind shall be permitted injuriously to affect the rights of navigation in such waters." Now, I contend that unless these wharfage facilities used in the movement of interstate commerce are absolutely public in their nature, no matter to whom they belong, they are absolutely a bar- rier and impediment to commerce. They should not be allowed to be called private terminals and be used absolutely to bar out this steamship line or that steamship line as the railroads see fit. The shipper should bo allowed to select his own steamship line, and then should lie allowed to go to any wharf or terminal lie pleases. To accomplish this free movement of export goods one other thing is necessary and that is an absolute separation of the road from the ter- minal charge. This has been done as far as cotton in the South is concerned, but as to no other commodity. As to the matter of rates to ship side on other goods moving, we will say, to Colon or to the West Indies, generally the rates read "to ship side," and in the rate is an amount for the terminal charge. This ter- minal charge, as wed as the road charge, is of course retained by the railroads when the goods pass over the railroad-owned wharves, and it makes no difference to them simply because entire revenue remains in one common treasury. When the goods do not go over the rail- road wharves, and where they do not supply adequate facilities for all the vessels coming to a port, or they refuse absolutely to let vessels come there and load their cargo, these vessels have got to land at other wharves, in which event these other wharves have got to be paid out of that ship-side rate the amount of terminal charges neces- sray for their upkeep and interest on the investment. At Galveston and New Orleans there is no question so far as to this allowance. The wharves have been fairly treated so far; I do not think liberally treated, for there is a case now before the Interstate Commerce Com- mission from Galveston in which that company is seeking to raise its wharfage charges to an amount sufficient to pay them 6 per cent on their investments. This is combated — that is, this increased schedule of wharfage 1 rates — by the railroads, and practically every railroad into GalveMon uses the terminals of the wharf company there, which are very excellent in their construction. Now, at Mobile the Mobile & Ohio and Southern Roads contend that (although terminal charges are included in the rates) Senator Pomerene. Is what? Mr. Turner. Included in the rates, two of the railroads contend that they absolutely will not allow any of those terminal charges to any competing wharf company, and a man shipping over a wharf and via rival steamship lines is put in the position where he must pay the rates to ship side, which, for example, we will say amount to $60 per car, and in addition the terminal charges that are necessary to get goods over any other dock not touched by the rails of theserailroad companies. Here is the situation: If a shipper will let the railroad .route his goods via the ocean line they select and at the rates charged BILLS OF LADING. 335 by the steamship line with which they are operating, he can get his goods to Mobile on board the ship on the basis of $60 a car. If he goes a mile south to the wharves built by any of the other railroads or private concerns, he has got to pay the ship side freight rate or $60 plus, we will say, $5 additional for the terminal charges, or a total of $65. If he goes down to Gulfport, possibly 60 miles farther, he can get his goods on board vessel and shipped from there for $60. If he goes to New Orleans, he can get his goods on board a steamer for $60. If he goes to Galveston, he can get his goods on board for $60, and we are, by the very manipulation of these terminal charges, put at a disadvantage, and this principle established at Mobile can be put into effect at any other port just as fast as it suits the railroads to do so. Now, we contend and ask of your committee that the rates be built up by making the road charge one rate and the terminal charge another rate, both adequate and ample to take care of not only the road but the terminal as well. The terminal is just as essential as the railroad, and if when built you do not protect them and you do not throw proper restrictions around them, there will be no freedom on the sea, because they are needed absolutely for the ship and the shipper. I could talk to you at greater length, but my time is up and I will stop. Senator Townsend. I want to ask you one question that has occurred to me. In this bill of lading, did I understand you to say that it provides that the railroad company is responsible only for the goods to ship side, even though there is a through bill of lading ? Mr. Turner. Absolutely. Senator Townsend. So whatever happens to the goods on the boat the railroad company is not held responsible to the person to whom the railroad issues the bill of lading? Mr. Turner. I have never known a case where there was any question about the goods after they got on board vessels They are shipped by every steamer— tramp or liner— through aU the other ports just on request of the shipper who is using these other ports. The goods go through absolutely all right and they all limit their liability to the delivery to the ocean carrier or the ocean carriers agent at the port. The goods on board ship are always insured under a marine policy. I contend that the railroad responsibility ceases, as it is so stated in their bill of lading, a copy of which I will be glad to send to the committee immediately upon my return to Mobile. „ n ■ ■ I wish to say that we asked the Interstate Commerce Commission in this very case to permit us, in the event they thought the through bill of lading with this restriction in it, relieving the railroad trom responsibility after delivery was made to the ocean carrier, did not absolutely relieve the railroad from all responsibility, to allow shipper to give some form of receipt to the railroad company m lieu ot wnicn shipper would get a through bill of lading; in other words, obtain a piece of paper that would show that shipper was sending some goods from some point in the interior via a steamship line of his selection to a port of Europe. .... ±1 r ■ i „„„„„„ There can be no logical reason for criticizing -the .financial respon- sibility of the steamship line, in my opinion. At Mobile, up to Sep- tember, 1910, the Elder-Dempster Line operated under an exclusive 336 BILLS OP LADING. contract with the railroads, two of them there, the Mobile & Ohio and Southern. They obtained through bihs of lading, dock facilities, and every consideration, and the manager of that line in this very hearing testified that while he personally enjoyed and liked this monopoly very much he was forced to admit that it was not for the good of the public. Now, that steamship line, after September, 111 10, was forced away and a contract was made with a new line — the Leyland-HarrisonLine — of steamers. They enjoy the through bills of lading, the exclusive use of the wharves, and the railroads use every means they can to keep anyone else from shipping this cotton by any rival steamship line. The Elder-Dempster Line is operating principally at the Gulf ports of Mobile, Galveston, and New Orleans. A shipper, we will say, at a point like Selma, Ala., which is a concentration point for cotton, is in this position: He is told, if he wants to ship by the Elder- Dempster Line via a steamship for Liverpool, " We won't give you a through bill of lading from Mobile, because we are only writing for one line (Leyland-Harrison Line), but we will give you a through bill of lading by the Elder-Dempster Line if you will ship via Gulfport, Miss., or New Orleans." Now, again, we find a shipper who has con- tracted with the Elder-Dempster Line to move 5,000 bales of cotton within a period of three months. At the time he engages this freight room he does not know where he is going to buy his cotton. If he should happen to buy it in a territory where he could ship through New Orleans, well and good. If he has to buy cotton at another Eoint, near Mobile, and wants to ship via Mobile, why, he is absolutely arred out. The Elder-] >cmpster Line can only take from Mobile such cotton, lumber, and naval stores as are what we would call local goods — that is, those which come to Mobile on local ladings from near-by points or by the river steamboats. Goods accumulate at Mobile, as, in case of lumber, logs, and material of that kind, which is always accumulated at the port. When it comes to competitive cot- ton from a point one night's run away, the bill of lading does not affect the situation so much. That is, cotton might move on a local bill of lading in one night and next day cotton is delivered and local bill of lading exchanged for an ocean bill of lading and the shipper not be out his money on this cotton very long. I should say that the interest on this cotton is about a cent a bale a day; say 50* cents per carload of 50 bales per day. If you take that on a shipment of a thousand or a few thousand bales of cotton and delay it over periods of 10 clays or 15 days where the railroads are slow in handling the cotton to the ports, it is such an item that the shipper can not afford to go to that expense. Furthermore, a shipper can not finance him- self, because cotton represents such a large amount of money — some- thing like $50 to $75 a bale, according to the market — and the banks can not finance a man shipping that cotton. He has got to have his through hill of lading, and that is marketable and is turned immedi- ately into cash. So a shipper is put in the position where, even though it costs a little more, he has got to ship into Mobile and use the steamship line selected by the railroads so long as he must use these railroads, and a slightly higher rate paid, in order to get a through bill of lading and finance himself and do business. Senator Brandegee. You do not mean that where the railroad owns the steamer and issues a through bill of lading that they at- tempt to limit their liability to what happens on the railroad, do von ? BILLS OF LADING. 337 Mr. Turner. I do not quite understand that question. Senator Brandegee. I say, if the railroad owns the steamship line over which it issues the through bill of lading, you do not mean that the railroad limits its liability to only the railroad and disclaims lia- bility for what happens on the steamship, do you ? Mr. Turner. None of the European traffic is handled by steamers owned by the railroads at all, and I do not know, in case of a bill of lading that they might issue on certain business handled by some of their own steamers, what they would do, but I know the entire cotton crop throughout the South — and a steamer load of cotton will often represent a million dollars — is all handled by these different compet- ing steamship lines and there is the utmost freedom at other ports, with greater competition which results to the benefit of the shipper and commerce. At our port we are restricted by this through bill of lading only to the one route the railroads select, despite the fact that there might be other steamers in that port seeking cargo and at lower rates than other lines and ports offer. Senator Brandegee. What I want to understand is this: Do you know of any particular instance where the railroad, owning its own connecting steamship line, and issuing a through bill of lading, attempts to limit itself to liability for damage for loss to what happens on the railroad, and to disclaim liability for what happens on the water ? Mr. Turner. I am not personally familiar with any case where a railroad owns its own steamers. Senator Brandegee. Now let me ask you this: Will you define, please, what this proceeding was that you intimated was brought by the Mobile Chamber of Commerce against some railroad before the Interstate Commerce Commission — was it ? Mr. Turner. Yes. Senator Brandegee. What was the name of that suit? Mr. Turner. The suit was the Mobile Chamber of Commerce and Horace Turner & Co., complainants, v. The Mobile & Ohio Railroad Co. and Southern Railroad Co. Senator Brandegee. You or your firm were parties to that suit? Mr. Turner. Yes, sir. Senator Brandegee. How was it decided ? Mr. Turner. It is still pending. I will also state, as I did the other day, that after this investigation that we had before the Mobile Chamber of Commerce we were up before the governor of the State of Alabama, Gov. Comer, and he heard both sides of the controversy himself, and then as he was leaving office in the early part of 1911 he sent this recommendation in his message— his farewell message to the legislature : The Merchants' Exchange at Mobile has taken up the question of the right of the State to control and regulate the docks. Complaint was made that the Mobile & Ohio and Southern Railroads did not extend to the independent shippers the same rights that they extended to certain connections shipping into and out of their docks, making it practically impossible for the independent docks, business men, or shippers to com- pete in the trade going out of the port of Mobile. The State was requested to maintain its riparian rights and to regulate the charges, conduct, and terms of the owners ot the docks doing business there. In opposition, the Mobile & Ohio and Southern Kail- roads plead that the docks were theirs; that they built up the export and import business, and that they had the right to make their own rules and regulations, citing what the Louisville & Nashville had done along the same line in Fensacola. 42808°— S. Doc. 650, 62-2 22 338 BILLS OF LADING. This is, in my opinion, a most serious question. The harbor at Mobile, or any part of it, should not belong uncontrolled and unregulated to any railroad or individual what ever. The harbor at Mobile does not belong to the city of Mobile; it does not be- long to Alabama; it does not even belong to the United States. There should be main- tained there a right for every shipper, for every commerce, and this should be to the best interest of every shipper or corporation that constructs a dock, because any differ- ent course would bottle up or throttle the catholic use of the great port of entry. The value of Mobile Harbor to the commerce of Alabama to the United States, to the world, can not be calculated. The Lord has laid from the mouth of the harbor connections to the farthest commerce of the world. The government of Alabama should demand from the Federal Government that the channels into this great port of entry be deep- ened to the depth of any shipping vessel. I will call your attention to the fact that President Taft, in his message to Congress, recommended the passage of a law prohibiting interstate-commerce railroads from owning or controlling ships that carry commerce through the Panama Canal, giving as a reason that such a policy would create a monopoly and destroy competition. If this is a danger, and it is, in the Panama Canal, for the world-wide intercarriage of freight, how much more is it a danger and how much more to be avoided by every legal means Is the control of the Mobile Harbor by the railroads? I can not too strongly recom- mend to the incoming legislature and administration the importance of this proposi- tion and the danger involved. It may look small to-day, but the time will speedily- come when it will be one of the most important questions before the State; one which the railroads should not be allowed to smother, conceal, or control. Senator Brandegee. That is in your brief, is it ? Mr. Turner. Yes, sir. Senator Brandegee. You have already referred to your brief. Senator Townsend. Do you propose to put in the brief ? Senator Brandegee. No; I do not want to incorporate all the proceedings in this suit in the record. I will ask you this: Do you claim that u private wharf of riparian proprietors in Alabama on a navigable stream ought to be compelled to allow everybody to land upon that wharf front ? Mr. Turner. I think if that wharf is a public necessity, or is being used in interstate commerce, and it is wanted to be used by anyone else for interstate commerce, it should be permitted. Senator Brandegee. Do you think under the Constitution of the United States you could accomplish that without compensating the owner ? Mr. Turner. Our State provides, as I read to you, that he is com- pensated by an adequate wharfage charge. If he is dealing in the wharfage business, and is permitting one steamer to land there and pay wharfage on the goods passed over it to that steamer, he should be compelled to let any other steamer, up to the limit of the capacity of that wharf, use that same wharf. Senator Brandegee. I admit that he should be permitted, but do you claim that he should be compelled ? Mr. Turner. He should be compelled to. Senator Brandeuee. Do you think he can be legally compelled to ? Mr. Turner. I do. Senator Brandegee. I do not. Senator Cummins. I do. Mr. Turner. It seems to me that this possibly 100 miles of shore line in the different ports of this country can either make or break commerce, and can either be made a barrier or a channel for commerce, as you might put it, so should be controlled. Senator Brandegee. That is a legal question, and you have answered it. That is all I care to ask. BILLS OF LADING. 339 Senator Gore. What was your reference just now to 100 miles of wharves, or water front at wharves ? Mr. Turner. It was an estimate merely; of course it is a guess as to just about what all the combined water frontage used for terminals at all the ports in the United States would amount to, and I should say 100 miles would cover the entire terminal water front improved at the different ports. Senator Gore. Have you any data as to how that is owned, how much belongs to the public and how much to private individuals or private corporations ? Mr. Turner. I have not any exact data, but will refer you to volume 3 of Mr. Herbert Knox Smith on Water Terminals. It is a study of "the condition at the different ports. It would require quite an effort for anyone to carry those figures in Ids head. Senator Gore. How much front is there at Mobile ? Mr. Turner. The city owns 1,500 feet of wharf front. It is used mainly for up-the-river traffic, and is so congested now that there is only a possibility from time to time of an ocean steamer getting to it and taking some cargo. The city is not in a position financially to get any more river front or to make any more improvements. Senator Gore. What is the total frontage there ? Mr. Turner. I should say, roughly, 15,000 feet of improved wharves. Senator Gore. And the city owns 1,500 feet? Mr. Turner. Yes, sir. Senator Gore. How is the rest owned ? Mr. Turner. Well, I should say the railroads own 60 per cent of it, roughly speaking. Senator Gore. What railroads ? Mr. Turner. The Mobile & Ohio, the Southern Radroad, the L. & N., and the New Orleans, Mobile & Chicago Railroad. Senator Gore. Could you file with your statement the exact amounts owned by each ? Mr. Turner. I could. Water frontage owned by the Mobde & Ohio and the Southern Railroads at Mobile, as testified to by them, amounted to 3,384 feet. It is improved by slips dug into the shore and gives about the follow- ing results : Approximate linear feet improved wharves owned by railroads at Mobile: Mobile & Ohio R. R. and Southern R. R., combined 6,200 Louisville & Nashville R. R b&00 New Orleans, Mobile & Chicago R. R l > 500 Senator Gore. And the other 40 per cent, who owns that ? Mr. Turner. The company represented by myself owns the largest independent public terminal there. Senator Gore. How much is that ? Mr. Turner. We have about 4,000 feet. Senator Gore. Between 20 and 30 per cent of the whole Do you think private companies and private corporations ought to be allowed to own any of it ? _ . , 1 , , , , , Mr. Turner. No; emphatically not. It ought to be owned by the municipality, as is the case in Europe. In Canada, I see that the Canadian Government has taken charge of the harbors and has made improvements thereon and made regulations as to their use. 340 BILLS OF LADING. Senator Gore. The Dominion Government is doing that ? Mr. Turner. Yes, sir. Senator Gore. In this country, do you think the municipality should do it, or the Federal Government, or some joint arrangement between the city and State and the Federal Government ? Mr. Turner. I fear that in this country the system we have been working under has been going on so long, and the railroads have made so much improvement; also some cities have made so much improve- ments and taken charge, that now we must have regulation, and if you can not regulate wharves, then the city, if it can, has got to take frontage, or the State, or lastly, the Federal Government. Other- wise you are going to throttle commerce. Senator Gore. Do you think a system of regulation of that kind could be evolved that would bring relief? Mr. Turner. I hope so. I do not know that it can. For instance, you have been trying to regulate the railroads for a long time, and they have always some particular club. For example, they still have the through bill of lading that they are rapping us over the heads with, and you have not been able to regulate them as yet. Possibly you might not be able to regulate this property. For instance, a railroad can place a man in the position, when they are asked for a berth for a steamer, of waiting while the railroads make excuses, and if you con- sider that it costs from two hundred to five hundred dollars a day for a steamer's time, why an agent for such steamer can not remain and wait for a berth long. A municipality, for example, like New Orleans, is the ideal condition. I think the State board in that State has taken over all the river front. They condemned it all with the exception of a small part which is in the possession of the Illinois Central under lease. They have improved the frontage and made it a most up-to-date terminal. They have used a street back of it as a public belt line, and there is the greatest freedom to shipping. Senator Gore. They made a belt line, did they ? Mr. Turner. Yes, sir; a public belt. Senator Gore. Tbere is one question that I desire to ask further. Do you not think it would be better for the public — no matter whether municipal, State, or National Government — to own the water front and also to provide that any railroad, and every railroad, that wants to approach the water front can have the means of approach? Mr. Turner. Yes, sir; absolutely. Senator Gore. That would prevent private monopolization. Senator Cummins. I will say that Mr. Turner has already elabo- rated on that feature. Mr. Turner. Yes. A railroad can not be built, you might say, into the East or West now, as it would cost too much to get the terminals, and it seems it should be possible, and it ought to be a fact, that the. municipalities should own the terminals and a belt railroad and that any railroad could come to their rear door, so to speak, and connect up by the belt line outside the city and have the joint use of their harbor facilities. In other words, terminals of this kind are a necessity to commerce, and they should be open to all alike. Senator Watson. I understood you to say that there were only 100 miles of water-front wharfage in this country ? Mr. Turner. I said that was my estimate' I have never sat down and figured it up, and I do not know that I could get the exact data. BILLS OF LADING. 341 I tried to get it in my neighboring towns, and they would not answer my inquiries, so that is simply an estimate. I should say, however, that the report of Mr. Smith would cover that. Senator Watson. I think after you consider the matter you will want to retract that statement. Did you ever know a steamer to come to any city, New York, Baltimore, or Mobile, that did not get dockage rights ? Mr. Turner. Yes, sir; at Mobile. Senator Watson. How long had the steamer to wait ? Mr. Turner. Well, do you mean where they actually came in and anchored in the stream and waited ? Senator WatsoN. Yes. Mr. Turner. They never get that far because no agent would dare do such an unbusinesslike thing. He first goes to the railroad and finds out if he can come there, and they tell him, "No, we won't let you land at our wharf; we have an exclusive contract with others and you can not come." So he does not land. Senator Watson. I will put it in another way. Did you ever know a steamer that wanted to come to Mobile and did not come there because they could not get dockage rights ? Mr. Turner. Yes, sir. Senator Watson. In what instance ? Mr. Turner. I should say the United States Shipping Co.'s steamers, for example, were absolutely stopped in their Colon service and were absolutely barred out in their service to Cuba from coming and getting wharf accommodations at the railroad wharf. It came out in the testimony in this case that I have referred to . Senator Pomerene. Did I understand you to say that all of these roads running into Mobile would only ship by way of this one steam- ship line, that is, by a through bill of lading ? Mr. Turner. No; the two principal export carrying roads in there, the Mobile & Ohio and Southern, will not give cotton through bills of lading via any except the one line, and anybody dependent on those two railroads for service at all, at the different stations, have got to do their bidding or ship by another port. The L. & N. use Pensacola as their port and of course they try to influence the cargo over there. The same system has restricted the through bill of lading, forcing cot- ton through Pensacola. They would not give us a through bill of lading via Mobile, and the only road there that does is the New Orleans, Mobile & Chicago, a new road, and one that does not generate much cotton. Senator Watson. Do you know whether there is any particular arrangement between this steamship line and these two railroads that you speak of whereby all their freight will go over that line ? Mr. Turner. Yes, sir; the contract is published m the case we have. Senator Watson. Has that been called to the attention of the Department of Justice ? . Mr. Turner. I think so. Our United States district attorney at Mobile Mr. William H. Armbrecht volunteered his services to the chamber of commerce in this case, and I think he has discussed it with them but I do not know how far they have gone. Mr. Turner was thereupon excused, and at 12 o'clock m. the com- mittee adjourned. 342 BILLS OF LADING. Through Bill of Lading Issued under Agreement with the Liverpool Bill of Lading Conference (1907) Committee and the American Bankers' Asso- ciation. Form 101 B— 8-23-11. Export bill/Series E lading. \No. 30. THE WESTERN RAILWAY OF ALABAMA In connection with other carriers on the route. Contract numbers, R. certificate, series R., No. of A. 11. S. S., S/S 95. Lot No. Signature Dated at Selma, Ala., this 4th day of December, 1911. Received at Selma, Ala., from W. P. Welch & Co. the following property in appar- ent good order, except as noted (contents and condition of contents of packages unknown), marked, numbered, consigned, and destined as indicated below. Consignee and destination, order W. P. Welch & Co., Bremen, Ger. Party to be notified, Lentz & Hirschfeld, Bremen, Germany. Marks and numbers. Articles. (Use pen and ink only in expressing marks and numbers of cotton bales.) Welch. Crav-100. Cilt-LOO. (Use pen and ink only in expressing the number of bales of cotton.) Car numbers. Two hundred (200) bales cotton. Inland freight prepaid to ship side Mobile. RATE. To Mobile 35 Tfr 03 Ocean 40 7* * Shipper's weight, 105,574, subject to correction. (*U. S. law requires agent issuing bill of lading to write either "shipper's" or "carrier's" before "weight.") To be carried to the port (A) of Mobile, Ala., and thence by S. S. Aboulcir to the port (B) Bremen, Germany (or so near thereto as steamer may safely get, with liberty to call at any port or ports in or out of the customary route), and to be there delivered in like good order and condition as above consigned, or to consignee's assigns, or to another carrier on the route to destination if consigned beyond said port (B), upon payment immediately on discharge of the property, of the freight thereon, at the rate from Mobile, Ala., to Bremen, Germany, of cents, inland; forty cents, ocean; forty cents, total, United States gold currency, per one hundred pounds gross weight, and advanced charges ($ ), with all other charges and average, without any allow- ance of credit or discount; settlement to be made on the basis of 4 shillings 2 pence, 4.25 marks, 5.25 francs, 2.50 Dutch guilders, 3.80 kroner to the dollar, United States gold currency; if in other currency than herein provided for, settlement to be made at the rate of $4.80 to the pound sterling, at the current rate of exchange officially quoted on the day the ocean steamer enters the customhouse at its port of discharge, for which banker s short-sight bills on London can be bought; when ocean freight is prepaid, $4.86 United States gold is equivalent to 1 pound sterling. In consideration of the rate of freight herein named it is hereby stipulated that the service to be performed hereunder shall be subject to the conditions, whether printed or written, herein contained, and said conditions are hereby agreed to by the shipper and by him accepted for himself and his assigns as just and reasonable. CONDITIONS. Any alteration, addition, or erasure in this bill of lading which shall be made without the special notation hereon of the agent of the carrier issuing this bill of lading shall be void. Attention of shippers is called to the act of Congress of 1851, which provides that any person or persons shipping oil of vitriol, unslacked lime, inflammable matches, or BILLS OP LADING. 343 gunpowder in a ship or vessel taking cargo for divers persons on freight, without deliv- ering at the time of shipment a note in writing, expressing the nature and character of such merchandise to the master, mate, or officer or person in charge of the loading of the ship or vessel, shall forfeit to the United States $1,000. I. With respect to the service until delivery at the port (A), it is agreed that: 1. No carrier or party in possession of all or any of the property herein described shall be liable for any loss thereof or damage thereto, unless caused by negligence of such carrier, by reason of floods, fire, jettison, ice, collision, delay or quarantine, rob- bers, riots, strikes, or a stoppage of labor; leakage, breakage, chafing, loss of weight, decay, vermin, changes in weather, heat, frost, or wet; country damage on cotton, exposure while being transported upon dock or upon open cars if it be necessary, or if it is usual to carry such property; or any cause beyond the control of the carrier or party. 2. No carrier is bound to carry said property by any particular train or vessel, or in time for any particular market, or otherwise than with as reasonable dispatch as its general business will permit. Every carrier shall have the right, in case of necessity, to forward said property by any carrier between the point of shipment and the point to which the rate is given. 3. No carrier shall be liable for loss or damage not occurring on its portion of the route, nor after said property is ready for delivery to the next carrier. The amount of any loss or damage for which any carrier becomes liable shall be computed at the value of the property at the place and time of shipment under this bill of lading, unless a lower value has been agreed upon or is determined by the classification upon which the rate is based, in either of which events such lower value shall be the maximum price to govern such computation. Claims for loss or damage must be made in writing to the agent of the delivering carrier at ultimate destination promptly after arrival of the property, and if delayed for more than thirty (30) days after such delivery of the property, or after due time for such delivery thereof, no carrier hereunder shall be liable in any event. 4. All property shall be subject to necessary cooperage, baling, and repairs at owner's cost. Each carrier over whose route cotton is to be carried hereunder shall have the privilege of compressing the same, and shall not be held responsible for deviation or unavoidable delays in procuring such compression. No carrier hereunder shall be liable for differences in weights or for shrinkage of any grain or seed carried in bulk . 5. Property not removed by connecting carrier within twenty-four houra after its arrival at the port (A) may be kept in the vessel, car, depot, or place of delivery of the carrier, at the risk of the carrier, as warehouseman only, or may be, at the option of the carrier, removed and otherwise stored in a public warehouse at the owner'B cost, and there held subject to lien for all freight and other charges. Property taken from a station or wharf at which there is no regularly appointed agent, shall be entirely at risk of owner until loaded into car or vessel, and when received from private or other sidings, or wharves, shall be at owner's risk until the cars are attached to train or loaded into vessel. In case the whole or any part of the property specified herein be prevented by any cause from going from said port (A) in the first steamer of the exporting line above stated, leaving after the arrival of such property at said port (A), the carrier hereunder then in possession is at liberty to forward said property by succeeding steamer of said line, or, if deemed necessary, by any other steamer or line. 6. Property taken from a station or wharf at which there is no regularly appointed agent, or when received from private or other sidings or wharves, shall be at owner's risk until cars are attached to train, or until unloaded into vessels. The issue of this bill of lading prior to such actual possession of such property by the carrier shall not be interpreted to vary this stipulation. 7. No carrier hereunder will carry, or be liable in any way for any documents, specie, or for any extraordinary value not specifically rated in the published classi- fications, unless a special agreement to do so, and a stipulated value of the articles are indorsed hereon . 8. Every party, whether principal or agent, shipping inflammable, explosive, or dangerous goods, without previous full written disclosure to the carrier of their nature, shall be liable for all loss or damage caused thereby, and such goods may be warehoused at owner's risk and expense, or destroyed without compensation. 9 If upon inspection it is ascertained that the articles shipped are not those described in this bill of lading, the freight charges must be paid upon the articles actually shipped, and at the tariff rates and under the rules provided for by pub- lished classification. 10 If all or any of said propertv is carried by water, such water carriage shall be performed subject to statutory acts and to all the conditions, whether printed or written contained in this bill of lading, including the condition that no carrier by 344 BILLS OF LADING. water shall be liable for any loss or damage resulting from explosion, accidents to boiler or machinery, or for any latent defects in hull, machinery, or appurtenances existing before, at the time, or after shipment, or sailing on the voyage, or unsea- worthiness, provided the owners have exercised due diligence to make the vessel seaworthy; nor shall negligence be presumed against any carrier. The carrier shall have the liberty to transfer, to tranship, to lighter ; to call at any- port or ports, to tow and to be towed, to deviate, to assist vessels in distress, to navi- gate without pilots, and to load and discharge goods at any time. 11. It is agreed that if any goods are sold short of ultimate destination each carrier that has completed its part of the transportation shall have earned its agreed-upon proportion of the through freight, and the same, with the charges advanced, shall be due and payable out of the proceeds thereof; and for any distance carried each carrier shall, on same basis, have earned and be entitled to freight, with charges advanced, for such part of the transportation as has been accomplished. 12. In case of quarantine the goods may be discharged at the risk and expense of owners into quarantine depot or elsewhere, as required by quarantine regulations, or authorities, or for the carrier's dispatch, or at nearest available point in carrier's judgment, and in any such case carrier's responsibility shall cease when the goods are so discharged, or goods may be returned by carrier's at ownei's risk and expense to shipping point, earning freight both ways. Quarantine expenses of whatever nature or kind upon or in respect to goods shall be borne by the owner of the goods or be a lien thereon. The carrier shall not be liable for loss or damage occasioned by fumigation or disinfection or other acts required by quarantine regulations or authorities, oven though same may have been done by carrier's officers, crew, agents, or employees, nor for detention, loss or damage of any kind occasioned by quaran- tine or the enforcement thereof. 13. This contract is executed and accomplished, and all liability hereunder ter- minates upon delivery of said property to the exporting steamer, her master, agent, or servants, or to the exporting steamship company, or on the pier usually used by the exporting steamer at the said port (A), whether or not the same may be the prop- erty of or used as a warehouse by the iuland carrier also, and the inland freight and all other hereinbefore provided for charges shall be a first lien, due and payable by the exporting steamer or exporting steamship company. 14. The terms and conditions of this bill of lading shall and do supersede and annul all previous agreements with respect to the service herein stipulated to be performed. II. AVith respect to the service after delivery at the port (A) first above mentioned, and until delivery at the port (B) second above mentioned, it is agreed that: 1. The steamer shall have liberty to sail with or without pilots; that the carrier shall have liberty to convey goods in craft and for lighters to and from the steamer at the risk of the owners of the goods; and in case the steamer shall put into a port of refuge or be prevented, from any cause, from proceeding in the ordinary course of her voyage to tranship the goods to their destination by any other steamer; that the carrier shall not be liable for loss or damage occasioned by fire from any cause or wheresoever occurring; by barratry of the master or crew;' by enemies, pirates, or robbers; by arrest or restraint of princes, rulers or people; riots, strikes, or a stoppage of labor; by explosion, bursting of boilers, breakage ot shafts, or any latent defect in hull, machinery, or appurtenances, or unseaworthiness .if the steamer, whether existing at the time of shipment or at the beginning of the voyage, provided the own- ers have exercised due diligence to make the steamer seaworthy; by heating, frost, decay, putrefaction, rust, sweat, change of character, drainage, leakage, breakage' vermin, or by explosion of any of the goods, whether shipped with or without dis- closure of their nature, or any loss or damage arising from the nature of the goods or the insufficiency of packages; nor for inland damage; nor for obliteration" errors, insufficiency or absence of marks, numbers, address, or description; nor for risk of craft, hulk, or transhipment; nor for any loss or damage caused by the prolongation of the voyage, and that the carrier shall not be concluded as to correctness of state- ments herein of quality, quantity, gauge, contents, weight, and value. General average payable according to York-Antwerp rules. If the owner of the steamer shall have exercised due diligence to make said steamer in all respects sea- worthy and properly manned, equipped, and supplied, it is hereby agreed that in case of danger, damage, or disaster resulting from fault or negligence of the pilot master or crew in the navigation or management of the steamer^ or from latent or other defects, or unseaworthiness of the steamer, whether existing at time of ship- ment or at beginning of voyage, but not discoverable by due diligence the consignees or owners of the cargo shall not be exempted from liability for contribution in General average or for any special charges incurred, but, with shipowner, shall contribute in general average and shall pay such special charges, as if such danger, damage or BILLS OF LADING. 345 disaster had not resulted from such fault, negligence, latent, or other defects or unsea- worthiness. 2. That this shipment until delivery at the port (B) second above mentioned is subject to all the terms and provisions of and all the exemptions from liability con- tained in the act of Congress of the United States, approved on the 13th day of Feb- ruary, 1893, and entitled "An act relating to the navigation of vessels, etc." 3. That the value of each package receipted for as above does not exceed the sum of $100, unless otherwise stated herein, on which basis the rate of freight is adjusted. 4. That the carrier shall not be liable for articles specified in section 4281 of the Revised Statutes of the United States unless written notice of the true character and value thereof is given at the time of lading and entered in the bill of lading. 5. That shippers shall be liable for any loss or damage to steamer or cargo caused by inflammable, explosive, or dangerous goods shipped without full disclosure of their nature, whether such shipper be principal or agent, and such goods may be thrown overboard or destroyed at any time without compensation. 6. That the carrier shall have a lien on the goods for all freights, primages, and charges, and also for all fines or damages which the steamer or cargo may incur or suffer by reason of the illegal, incorrect, or insufficient marking, numbering, or address- ing of packages or description of their contents. 7. That in case the steamer shall be prevented from reaching her destination by quarantine, the carrier may discharge the goods into any depot or lazaretto, and such discharge shall be deemed a final delivery under this contract, and all the expenses thereby incurred on the goods shall be a lien thereon. 8. That the steamer may commence discharging immediately on arrival and discharge continuously, any custom of the port to the contrary notwithstanding, the collector of the port being hereby authorized to grant a general order for discharge immediately on arrival, and if the goods be not taken from the steamer by the consignee directly they come to hand in discharging the steamer, the master or steamer 's agent to be at liberty to enter and land the goods, or put them into craft, or store at the owner's risk and ex- pense, when the goods shall be deemed delivered and steamer's responsibility ended, but the steamer and carrier to have a lien on such goods until payment of all costs and charges so incurred. 9. That if on a sale of the goods at destination for freight and charges the proceeds fail to cover said freight and charges, the carrier shall be entitled to recover the dif- ference from the shipper. 10. That full freight is payable on demand or unsound goods; but no freight is due on any increase in bulk or weight caused by the absorption of water during the voyage. 11. That in the event of claims for short delivery when the steamer reaches her destination, the price shall be the market price at the port of destination on the day of the steamer's entry at the custom house, less all charges saved, steamer being respon- sible only for such part of the goods as have been actually delivered to the steamer at the port (A) first above mentioned, and steamer not liable for any loss or damage that may have occurred before such delivery, while agreeing to promptly present to inland carriers for account of owners of goods any claims for shortage or loss or damage that may have occurred before delivery of goods at the port (A) first above mentioned. 12. That merchandise on wharf awaiting shipment or delivery be at shipper's risk of loss or damage not happening through the fault or negligence of the owner, master, agent, or manager of the steamer, any custom of the port to the contrary notwith- standing. 13. That this bill of lading, duly indorsed, be given up to the steamer's consignee in exchange for delivery order. 14. That freight prepaid will not be returned, goods lost or not lost. 15. That parcels for different consignees collected or made up in single packages addressed to one consignee pay full freight on each parcel. 16. That freight payable on weight is to be paid on gross weight landed from ocean steamer, unless otherwise agreed to, or herein otherwise provided, or unless the carrier elects to take the freight on the bill of lading weight, but inland freight and charges paid on wheat, peas, maize, or other grain, or seed, or other bulk articles, from point of shipment to seaboard, shall be paid by consignee at destination on the weight delivered on board ocean steamer. 17. It is stipulated that in case the whole or any part of the articles specified herein be prevented by any cause from going in the first steamer leaving after the arrival of such articles at said port, the carrier is only bound to forward them by succeeding steamers employed in the steamship line, or if deemed necessary by said carrier, it may forward them in other steamers. .,.„„,,..,. 18 That the property covered by this bill of lading is subject to all conditions expressed in the regular forms of bill of lading in use by the steamship company at time 346 BILLS OF LADING. of shipment and to all local rules and regulations at port of destination not expressly provided for by the clauses herein. 19. That if the goods are destined beyond the port (B) second above mentioned, the transshipment to connecting carrier shall be at the risk of the owner of the goods, but at steamer's expense, and that all liability of the steamship company hereunder ter- minates on due delivery to connecting carrier. III. With respect to the service after delivery at the port (B) second above men- tioned, and until delivery at ultimate destination, if destined beyond that port, it is agreed that — 1. In case the regular steamship service to final port of delivery should for any rea- son be suspended or interrupted, the carrier, at the option of the owner or consignee of the goods, or the holder of the bill of lading, may forward the goods to the nearest available port, this to be considered a final delivery; or to store them at the port (B) second above mentioned at the risk and expense of the owner of the goods until regular service to final port of destination is opened again. 2. That the property shall be subject exclusively to all the conditions of the carrier or carriers completing the transit; the duty of notification above provided for shall fall exclusively within the obligation of the carrier completing the transit, and no prior carrier shall be responsible for the fulfillment of that obligation. And finally, in accepting this bill of lading, the shipper, owner, and consignee of the goods, and the holder of the bill of lading, agree to be bound by all of its stipulations, exceptions, and conditions, whether written or printed, as fully as if they were all signed by such shipper, owner, consignee, or holder. In witness whereof, the agent signing on behalf of the said The Western Railway of Alabama, and of the said exporting steamship company or exporting steamer and her owner, severally and not jointly, hath affirmed to only one bill of lading. C. B. Steukey, Agent. (On behalf of carriers severally, but not jointly.) We hereby accept the conditions of the foregoing bill of lading and authorize the Western Railway of Alabama to furnish copy thereof to the central bureau in the city of New York. W. V. Weich & Co., Consignor (shipper). (Stamp on face:) Railroad copy; not negotiable. o