bank payable after its date and subsequent to its issue is not a check, but a bill of exchange.2 d. Drafts by one bank upon another bank in another State.It is customary in the transaction of banking business for one bank to issue drafts upon a bank located in another State. In such cases it is often important to ascertain whether such drafts are to be considered as checks or bills of exchange. But few cases have 2. In general.-Treating generally they stand almost alone, the Supreme of an instrument dated on a certain Courts of Rhode Island (Westminster day, and by some form of words made Bank v. Wheaton, 4 R. I. 30) and payable at a day certain thereafter, it perhaps of Tennessee, being, so far as is probable that between the array of we know, the only ones which have opposing authorities, the preponder- adopted similar views. All other ance will be considered to lie in favor courts which have passed upon the of the doctrine that such paper is not question, as well as the text-writers, to be considered as a check, but as an have almost uniformly laid it down inland bill of exchange, and therefore that such an instrument is a bill of entitled to days of grace. Morse on exchange, and that an essential charBanks and Banking, p. 262. acteristic of a check is that it is payForms of drafts declared bills of ex- able on demand. Harrison v. Nicollet change. An instrument addressed to Nat. Bank, 41 Minn. 488, 43 N. W. a bank: "Pay to M. C. J. & Co., or 336, 16 Am. St. Rep. 718, 5 L. R. A. order, five hundred dollars, on 22nd 746. October. sition The following Massachusetts cases may also be cited in favor of the propothat such instruments are Taylor v. Wilson, 11 Metc. 44; Way v. Towle, 155 Mass. 374, 29 N. E. 506. checks: Ivory v. $500. (Signed) E. W. & Co.," dated form: "$199.92. Minneapolis, Minn., Mch. 27, 1888. On April 14th, pay to the order of E. Harrison, One Hundred and ninetynine, and 92-100 dollars. To Citizens Bank, J. T. HARRISON. Minneapolis, Minn." Harrison v. Nicollet Nat. Bank, 41 Minn. 488, 43 N. W. 336, 16 Am. St. Rep. 718, 5 L. R. A. 746. Conflict of authority.- The question as to whether an instrument so dated is a check or a bill of exchange has given rise to considerable discussion and some conflict of opinion. The two principal authorities holding such an instrument a check are Re Brown, 2 Story, 502, Fed. Cas. 1,985 and Champion v. Gordon. 70 Pa. St. 474. Both of these are entitled to great weight, but Bills of exchange and not checks.The following cases are to the effect that such instruments are bills of exchange: 25 U. S. 213, 6 L. Ed. 606; Bank of United States.- Ogden v. Saunders, Washington v. Triplett, 26 U. S. 25, 7 L. Ed. 37; Bell v. First Nat. Bank, 115 U. S. 373, 29 L. Ed. 409. California.- Minturn v. Fisher, 4 Cal. 36. Delaware.- Work V. Tatman, 2 Houst. 304; Bradley v. Delaplaine, 5 Harr. 305. Georgia.- Henderson v. Pope, 39 Ga. 361, reaffd. sub nom. Georgia Nat. Bank v. Henderson, 46 Ga. 496. Illinois. Cutter v. Reynolds, 64 Ill. 321. New York.- Murray v. Judah, 6 Cow. 484; Woodruff v. Merchants' Bank, 25 Wend. 673; Bowen v. Newell, 8 N. Y. 190; Pope v. Bank of Albion, 57 N. Y. 126. Ohio.- Morrison v. Bailey, 5 Ohio St. 13, 64 Am. Dec. 632. Oregon.- Hawley v. Jette, 10 Ore. 31, 45 Am. Rep. 129. arisen where this question has been discussed. The settled opinion seems to be, however, that such drafts are checks and the parties thereto are subject to the same liabilities and possess the same rights as though such drafts were drawn upon a particular bank or banker by an individual.3 § 17. Bills of lading. a. Definition. It is customary to treat bills of lading as commercial paper. They have many of the characteristics of such paper, and many of the general rules and principles affecting the rights and liabilities of parties to such paper are applicable to them. A bill of lading has been defined as an instrument issued by a common carrier to the consignor of goods, consisting of a receipt therefor, and an agreement to carry them from the place of shipment to the place of destination.* A paper signed only by the consignor, stating the shipment, and intrusted to the master of a vessel, is not a bill of lading.5 b. Negotiability.— Bills of lading are sometimes called quasinegotiable because they are transferable by indorsement, although they do not call for the payment of money. 3. A check drawn by a bank in one State on a bank in another, in duplicate, is not a bill of exchange. Merchants' Nat. Bank v. Ritzinger, 118 Ill. 484, 8 N. E. 834. See also Harrison v. Wright, 100 Ind. 515, 58 Am. Rep. 805; Roberts v. Corbin, 26 Iowa, 315, 96 Am. Dec. 146; First Nat. Bank of Cincinnati v. Coates, 3 McCrary, (U. S.), 9; Bull V. First Nat. Bank of Kasson, 123 U. S. 105, 8 Sup. Ct. 62, 31 L. Ed. 97; Morrison v. Farmers & Merchants' Bank, 9 Okl. 697, 60 Pac. 273; Bowen v. Needles Nat. Bank, 87 Fed. 430. 4. Freeman v. Graemer, 63 Minn. 242, 65 N. W. 455. 66 Daniel (Neg. Inst., Vol. 2, § 1728) defines a bill of lading as a written " acknowledgment by the master of a "ship, or the representative of any common carrier, that he has re"ceived the goods therein described "for the voyage or journey stated, to "be carried upon the terms and delivered to the persons therein speci"fied. It is at once a receipt for the goods which renders the carrier responsible as their custodian, and an express written contract for their transportation and delivery." 46 But it is also well 5. Covill v. Hill, 4 Den. (N. Y.) 323, affd. in 6 N. Y. 374; Gage v. Jacqueth, 1 Lans. (N. Y.) 207; Babcock v. Orbison, 25 Ind. 75. Where vendors of corn, with the intention of sending it in their boats to the vendee, executed an instrument containing a recital of the shipment of the corn, its quantity, the freight due upon it, the terms of payment of the purchase money, and the name of the boat by which it was sent, and stating that the corn was to be delivered as addressed, viz., to M., the vendee, care of D. & C., without delay, it was held that this constituted a bill of lading. Dows v. Rush, 28 Barb. (N. Y.) 157. 6. Merchants' Bank v. Union, etc., Co., 69 N. Y. 373. A bill of lading is negotiable to this extent: that it is transferable by assignment or indorsement, and that the transferee takes all the rights against the carrier that it conferred on the consignee, or the person to whose assigns or order the goods are to be delivered. Hunt v. Mississippi Cent. R. R. Co., 29 La. Ann. 446. See also Tison v. Howard, 57 Ga. 410; Robinson v. Stuart, 68 Me. 61; Balt. & Ohio R. R. Co. v. Wilkens, settled that goods shipped by a bill of lading drawn to the order of the shipper may be transferred by delivery of the bill without indorsement." The assignment of a bill of lading passes title to 8 the goods described therein, if made in good faith and for a valuable consideration. The bill is symbolic of the goods described, and when so assigned confers upon the assignee all the rights of the assignor in such goods; and it has also been held that the bona fide transferee for value of a bill of lading, indorsed by the shipper or his consignee, and put into circulation by the authority of the shipper or his consignee, has an absolute title to the goods, freed from the equitable rights of the unpaid vendor to stop in transitu as against the purchaser.10 Generally speaking, however, the quasi-negotiability of such bills does not extend to allowing the possessor thereof to transfer property in the chattels, except by virtue of a title or authority from the true owner.11 The rule that a bona fide purchaser of a lot or stolen bill or note, indorsed in 44 Md. 11, 22 Am. Rep. 26; Chandler v. Belden, 18 Johns. (N. Y.) 157, 9 Am. Dec. 193. 66 7. Merchants' Bank v. Union, etc., Co., 69 N. Y. 373; Emery v. Irving Nat. Bank, 25 Ohio St. 360, 18 Am. Rep. 299, in which last case the court said: By the rules of commercial law, bills of lading are regarded as symbols of the property therein described, and the delivery of such bills by one having an interest in or a right to control the property, is equivalent to a delivery of the prop erty itself. Being symbolical of the property described therein, it may be transferred, like the property itself, by delivery merely, and this is so without regard to the presence or absence of words of negotiability on its face. It is unlike commercial paper in this the assignee cannot acquire a better title to the property thus symbolically delivered, than his assignor had at the time of the assignment." See also Strauss v. Wessel, 30 Ohio St. 211. 8. The Mary Ann Guest, Fed. Cas. 9,197; Newhall v. Central Pac. R. R. Co., 51 Cal. 345; Midland Nat. Bank v. Missouri, K. & T. Ry. Co., 62 Mo. 531; Chandler v. Belden, 18 Johns. (N. Y.) 157, 9 Am. Dec. 193; Dows v. Greene, 24 N. Y. 638; McCants v. Wells, 4 S. C. 381. The delivery of the bill of lading, as between the vendee and third persons, is a delivery of the goods them selves. Lickbarrow v. Mason, 2 Term R. (Eng.) 63, 6 East, 21, 1 Smith's Lead. Cas. 879. 9. Bill of lading as evidence of title. An assignment and delivery of a bill of lading is equivalent in legal force to the sale and delivery of the goods. It is documentary evidence of title in and to the property specified in it, and conclusive as against all the parties to it in the hands of a bona fide holder. Such is the rule of the common law as settled in numerous cases, and recognized since the celebrated case of Lickbarrow v. Mason, 2 Term R. 63, 6 East, 21. Dows v. Greene, 24 N. Y. 638, 644. See Stollenwerck v. Thacher, 115 Mass. 224. 10. Dows v. Greene, 24 N. Y. 638, 641. 11. Barnard v. Campbell, 55 N. Y. 456. And see Hunt v. Mississippi Cent. R. Co., 29 La. Ann. 446. Bona fide purchaser.- The purchase of a bill of lading of one who obtained it through fraud confers upon the purchaser no title to the goods described, though he purchased it in good faith and for a valuable consideration. Blossom v. Champion, 554. See also 37 Barb. (N. Y.) Bank v. Shaw, Fed. Cas. No. 843, affd. in 101 U. S. 557: Winslow v. Morton, 29 Me. 419, 50 Am. Dec. 601. The purchaser of a bill of lading, who has reason to believe that his vendor was not the owner thereof, blank, or payable to bearer, is not bound to look beyond the instrument, has no application to the case of a lost or stolen bill of lading.12 § 18. Letters of credit. a. Definition and nature.- Letters of credit are sometimes called bills of credit. They are to be classed as commercial paper, although they are not negotiable and lack many of the essential characteristics of bills and notes.13 The definition of a letter of credit which is most commonly used is that given by Justice Story, as follows: A letter of credit (sometimes called a bill of credit) is an open letter of request, whereby one person (usually a merchant or a banker) requests some other person or persons to advance moneys, or give credit to a third person named therein, and promises that he will repay the same to the person advancing the same, or accept bills drawn upon himself for a like amount.14 These letters have been introduced for the convenience of travelers and agents, to obviate the trouble and risk of carrying about coin or other money. In such cases, they are generally in the nature of circular notes issued by the banker; these notes are unsigned drafts, to be signed and used by the bearer of the letter of credit in his discretion. A deposit is made by the bearer of the letter with the banker as an indemnity, in which case the bearer may recover the balance to his credit upon the return of the letter and the unused circulating notes. b. Classification.- Letters of credit are either special or general. They are special when they are addressed to a particular individual directing him to advance the sums specified therein to Law (2d ed.), p. 831, which was adopted in the case of Johanessen v. Munroe, 84 Hun, 594, 32 N. Y. Supp. 1144. or that it was held to secure an outstanding draft, is not a bona fide purchaser, nor entitled to hold the merchandise covered by the bill as against the true owner. Shaw v. Merchants' A letter requesting one person to Nat. Bank, 101 U. S. 557, 25 L. Ed. make advances to a third person on the 892. credit of the writer is a letter of 12. Shaw v. Merchants' Nat. Bank, credit. Mechanics' Bank v. N. Y. & 101 U. S. 557, 25 L. Ed. 892. 13. Edwards on Bills and Notes, p. 239. 14. Story on Bills of Exchange, § 459. This definition is substantially the same as that used by Daniel in his work on Negotiable Instruments (4th ed.), § 1790, and is the same as that contained in 18 Am. & Eng. Encyc. of N. H. R. R. Co., 4 Duer (N. Y.), 480, 13 N. Y. 599; Brickhead v. Brown, 5 Hill (N. Y.), 634. Byles defines a letter of credit as an authority, or rather request, by a banker to his foreign correspondent named therein, to discount bills drawn on him by the bearer. Byles on Bills (16th ed.), p. 111. the persons named; they are general when addressed to all persons requesting such advances to the persons named therein.15 c. Effect of letters of credit.—The effect of a letter of credit is to place the issuer under a contract binding probably at law, but certainly so in equity, to pay, even without acceptance, all bills drawn in conformity with the letter of credit; and the holders are not to be prejudiced by any set-off or cross-claim by the drawee against the drawer.16 They sometimes have the effect of guaranties, although a pure letter of credit is an absolute and independent promise which binds the drawer without regard to the failure of any other person.17 They are often promises to honor bills of 15. Characteristics of letter of credit. Marius in his work on Bills, pp. 35, 36, written at the end of the eighteenth century, describes letters of credit in the following language: "Now letters of credit, for the furnishing of moneys by exchange, are of two sorts, the one general, the other special; the general letter of credit is, when I write my open letter directed to all merchants, and others, that shall furnish moneys unto such and such persons, upon this my letter of credit, wherein and whereby I do bind myself, that what moneys shall be by them delivered unto the party, or parties, therein mentioned, within such a time, at such and such rates (or in general terms at the price current), I do hereby bind myself for to be accountable and answerable for the same, to be repaid according to the bill or bills of exchange, which, upon the receipt of the money so furnished, shall be given or delivered for the same. And if any money be furnished upon such, my general letter of credit, and bills of exchange therefor given, and charged, drawn, or directed to me, although, when the bills come to hand, and are presented to me, I should refuse to accept thereof, yet (according to the custom of merchants), I am bound and liable to the payment of those bills of exchange, by virtue and force of such my general letter of credit; because he or they, which do furnish the money, have not so much if any respect unto the sufficiency or ability of the party, which doth take up the money, as unto me, who have given my letter of credit for the same, and upon whose credit, merely, those moneys may be properly said to have been delivered. The special letter of credit is, when a merchant, at the request of any other man, doth write his open letter of credit, directed to his factor, agent or correspondent, giving him order to furnish such or such a man, by name, with such or such a sum of money, at one or more times, and charge it to the account of the merchant that gives the letter of credit, and takes bills of exchange or receipts for the same." Form of letter of credit. The following is a form of a special letter of credit, which was under consideration in the case of Johanessen v. Munroe, 84 Hun (N. Y.), 594, 32 N. Y. Supp. 1144: No. 5,687. OFFICE OF JOHN MUNROE & Co., NEW YORK, Feb. 26, 1892. a GENTLEMEN.- We hereby open credit with you in favor of Captain J. A. Johanessen, SS. "Raylton Dixon," for fifteen thousand francs (Fcs. 15,000), available in bills at ninety days' date; on acceptance of any bill or bills drawn under this credit you are to draw on Corsten Boe, New York, at seventy-five days' date, payable at the current rate of exchange for first-class bankers' bills on Paris on day of maturity. Commission is arranged. Bills under this credit to be drawn at any time prior to May 1, 1892. Truly yours, JOHN MUNROE & Co. 16. Byles on Bills (16th ed.), p. 111. 17. Scribner v. Rutherford, 65 Iowa, 551, 22 N. W. 670. |