FORGED BILLS OF LADING.—One final risk in regard to bills of lading is that the bill of lading may be forged or altered, and this has in practice proved the most serious risk of all. There have been, in times past, several sets of frauds created by forged bills of lading. One of the largest is known as the Knight-Yancey frauds which originated in Alabama. A cotton firm named Knight, Yancey & Co. forged a quantity of bills of lading and obtained a very large amount of money from banks. A circumstance that renders forgery easier in the case of bills of lading than in the case of any other valuable document, such as a check or a stock certificate, is the carelessness with which bills of lading have been made out. It is really incredible, the carelessness with which this has been done. Documents which represent a value of many thousands of dollars are scribbled hastily, in pencil sometimes, on forms that are accessible to anybody. The forgeries that have taken place have called attention to this evil, and at the present time there is more care exercised in making out order bills than was the case a few years ago; but even to-day an order bill of lading is made out with no special precautions against forgery. The forms can be obtained at any railroad station, and it is simply a question of copying writing, no devices of perforating or serial numbers or things of that sort being ordinarily used.
DEVICES TO PREVENT FORGERY.—In order to meet this risk several devices have been suggested. One which has been urged upon Congress is to pay the railroads a special small fee for issuing order bills with the precautions that a stock certificate is issued. The railroad would take the blank from a numbered book and would punch and stamp it in such ways and with such countersigning that it would be very difficult to forge. That method has not found much favor with shippers because they dislike the extra expense. They get their order bills of lading for nothing now, and they want to continue to do so. Another project is to make some sort of central clearing house to which shall be reported all order bills of lading as they are issued, so that it will be known whether there is outstanding a document corresponding to one that is offered to a bank for security. This method is to some extent in use.
ALTERATION OF BILLS OF LADING.—Alteration of a genuine bill may be as damaging as the out and out forgery of a new one. This case occurred in Maryland some years ago: a man who had always been in good repute had a line of credit at the bank, where he kept, as security, bills of lading. He was allowed to change these as he wanted to, putting in sufficient collateral always to cover what he took out. The railroad and steamboat lines with which he did business neglected in some instances to take up the bills of lading which he presented for shipments. They habitually did not take up the straight bills, and that is not required by law, and sometimes they did not take up the order bills. When this man got hard pressed he took some old order bills, which he still had in his possession, and changed the dates; then he took some straight bills which he had in his possession and changed the date of those, and also added the words "or order" to the name of himself as consignee. Then, after indorsing those they looked good. He took those altered bills to his bank and substituted them for genuine bills, and when the fraud was found out the bank found itself with about $100,000 of altered bills of lading. The carrier was held liable on the order bills, even though they had been altered, because it should have taken them up, but on the straight bills, which were a great part of the whole, the bank lost. Of course, they were still legally straight bills, although the holder had written "or order" on them. That fraud led to one protection being made in the uniform bill of lading recommended by the Interstate Commerce Commission. The uniform form of order bill has the words "order of" printed in front of the blank for the consignee's name, so that a straight bill cannot be made into an order bill by adding "or order." Moreover, the difference in color, between order and straight bills now gives a protection as to domestic bills; not as to foreign bills, however. If a bill is altered fraudulently the bill is worth just as much and just as little as it would have been worth if no alteration had been made; that is, the alteration, not the bill itself, is void.
ATTACHMENT OF GOODS IN TRANSIT.—There is one other risk in regard to bills of lading which no longer exists where the Uniform Bills of Lading Act is in force, and that is seizure by attachment for the benefit of some creditor. The bills of lading act provides that when there is an order bill outstanding, against goods shipped by a carrier, there can be neither attachment by a creditor nor stoppage in transit by the seller if unpaid. Where the uniform statute has not been passed, the matter is not so clear. Undoubtedly one who purchased for value or lent money on an order bill would be protected against later attachments by creditors of the former owner of the bill; but if creditors of the former owner had attached the goods prior to the transfer of the bill, the attachment would generally be held good, though the man purchasing or lending money on the bill knew nothing of the attachment.
WAREHOUSE RECEIPTS ARE SIMILAR TO BILLS OF LADING.—To what has been said in regard to bills of lading a few words in regard to warehouse receipts may be added. Warehouse receipts are entirely similar in character to bills of lading, and what has been said in regard to them is, in general, applicable to warehouse receipts. There is a Uniform Warehouse Receipts Act which is similar in its provisions to the Uniform Bills of Lading Act, and the Warehouse Receipts Act has been enacted in a majority of the States. Warehouse receipts may be, in form, order or straight. They are simpler in form, ordinarily, than bills of lading, because they do not have so many special stipulations and conditions, but in other respects they are practically identical. The risks that one who deals in them runs are the same in their nature as in the case of bills of lading. There is one circumstance, however, in regard to warehouse receipts that gives one a better chance to protect himself than in bills of lading. Warehouse receipts are generally used as collateral and for purchase and sale in the city where the goods are stored. It is therefore possible to telephone to the warehouseman or otherwise to assure oneself of the existence of the goods in a way that is not possible under the bill of lading, where the goods are in transit. The warehouse receipt, even less than a bill of lading, has a day of maturity. A bill of lading, as we have seen, has no particular day on which it is evident to a purchaser that it has finished its work, and that is even more true in a warehouse receipt. The fact that a warehouse receipt is pretty old does not necessarily show that the document is not a perfectly good document and that the goods are not there.
OPEN RECEIPTS.—There is one way of doing business with warehouse receipts which is different from anything that takes place with bills of lading, and which has been a subject of criticism, and which deserves criticism; this is the practice of issuing what are called open receipts. In an open receipt the warehouseman acknowledges he has received a certain quantity of things of a certain sort, and will redeliver that quantity of things of that sort; but not necessarily the identical things that were deposited. It is contemplated that the depositor shall have the right to substitute from time to time, for the goods originally deposited, other goods of like kind and quantity; that is, a receipt may be issued for 100 bales of burlap. The depositor who deals in burlap wants to use some of the bales that are in storage. He has pledged his warehouse receipt, which he originally received for the 100 bales of burlap, and he cannot surrender that, but he wants the warehouseman to let him take out 25 bales of the old burlap and put in 25 bales of new, and that is sometimes allowed. It seems a very unsafe practice. It is unsafe, for one who lends on warehouse receipts, to allow the depositor and the warehouseman to agree between themselves as to what shall be a sufficient substitution for goods which are the bank's collateral. Moreover, it is unsafe for the warehouseman, because if the holder of the warehouse receipt has not really consented to the substitution, or unless the form of warehouse receipt clearly shows that substitution is contemplated, the warehouseman would be liable to the holder of the receipt if the substituted goods turn out to be inferior to those which were originally deposited.
WAREHOUSEMAN IS A BAILEE FOR HIRE.—A warehouseman is a bailee for hire, and a bailee for hire is liable for neglect if the goods are destroyed or injured by his negligence. He is not an insurer. The ordinary bailee for hire is not subject to the extraordinary liability to which a carrier is subjected while goods are in transit.
SAFE DEPOSIT COMPANIES ARE BAILEES FOR HIRE.—There is one special kind of bailee, in regard to whom it may be worth while to say a few words particularly, and that is a safe deposit company. It has been questioned whether a safe deposit company is properly a bailee of the goods in the boxes to which the safe deposit company does not have access. It is simply in control of the general premises, and, furthermore, the holder of the boxes cannot have access to what is inside the boxes without the assistance of the safe deposit company. There is, therefore, a sort of joint possession. The safe deposit company and the depositor who hired the box have together the full control of the goods, but neither one of them alone has it. It has been suggested that the safe deposit company is merely a sort of watchman; that it is guarding property of which it is not in possession. But it is doing a little more than guarding, and it is generally held to be a bailee for hire; that means it must take reasonable care of the goods in its possession.
LIABILITY OF SAFE DEPOSIT COMPANIES FOR LOSS OF GOODS.—There are a number of cases, not a great many, but still some, where safe deposit companies have been sued for goods which were missing, or which the depositor swore were missing, from his box. If the court or jury is convinced that the goods have been lost from the box, the burden of explanation as to how it happened would be upon the safe deposit company. The safe deposit company is liable for the acts of its servants and agents. Of course, then, carelessness in regard to duplicate keys of any of the boxes might render a safe deposit company subject to suit if loss occurs thereby.
LIABILITY OF DEPOSITED GOODS TO GARNISHMENT.—One of the most important questions in regard to safe deposit companies is this: Are the goods in the safes subject to legal process? Suppose a safe deposit company is garnisheed (that is served with a trustee writ) in a suit against some one who has a box; can the company answer that it has no funds or goods of the defendant in its possession? Yes, it may; it cannot control the goods and it may answer, no funds. One case, however, must be distinguished, and that is where a bank or a safe deposit company has a separate trunk or box of a depositor in its possession. If it has that separate box, even though it is locked, and the bank has not the key, the bank cannot answer no funds; it must answer that it has a box the contents of which are unknown to it. A box, however, shut up in a safe deposit vault, that is, one of the regular tin safes, cannot be reached by the safe deposit company in the normal course of affairs, unless the depositor unlocks his lock. That is the reason for distinguishing between such a box and an ordinary box or trunk which is not itself enclosed in something, to which the bank or safe deposit company does not have access.