emphasized. In addition to the security thus afforded to the seller there are other collateral advantages.

The normal procedure is for the seller to draw a bill of exchange upon the buyer for the price. Sometimes this document is called a "trade acceptance." The negotiable bill of lading, usually drawn to the order of the seller and then indorsed, either specially or in blank, will be attached to the bill of exchange, and both instruments transferred to a bank at the seller's place of business. The bank may merely agree to collect the amount called for by the bill of exchange, or it may be that the bank will discount the bill; that is, the bank will credit the seller with the amount of the bill of exchange, and will allow the seller to check against the credit during the time required to make presentment of the bill to the buyer at the point of destination. Of course, if the bill be dishonored, the credit will be withdrawn. But in the meantime the seller has a bank credit subject to check, and in the usual case no occasion will arise for its withdrawal. The capital represented by the value of the goods is accordingly converted into actual working capital from the moment of discount by the bank. The bank feels safe in extending the credit, because it holds the goods as security for the amount credited to the seller. Were it not for the doctrine that the bill of lading represents the goods, there would be no satisfactory procedure for a seller safely to carry out transactions like these, nor would it be possible for him to keep in his working capital the amount represented by the value of the goods during the time they were in transit or until the period of credit expired.

It should also be noted that the practice of sending goods under a negotiable bill of lading accompanied by a bill of exchange is perfectly proper, and often highly desirable, even where the seller is willing to sell the goods on a prescribed period of credit. In such a case the bill of exchange would not be drawn so as to be payable on demand, but would be drawn payable in thirty, sixty, or ninety days, as the parties might agree. But the bill would be drawn so as to require an immediate acceptance, and the right of the buyer to obtain the bill of lading, without which he could not get the goods, would be conditional upon the buyer's actually accepting the bill of exchange. Here the buyer does lose all hold on the goods after acceptance and delivery of the bill of lading, but the hold given the seller upon the goods by reason of the bill of lading insured his actually obtaining the buyer's acceptance. Had the goods been sent direct to the buyer, and the seller had simply written to the buyer, inclosing a bill of exchange drawn upon him, and required the buyer to accept and return the bill, it would not be certain in many cases that the buyer would comply with the seller's request. When the seller obtains the acceptance of the buyer, he is then in possession of a commercial instrument which is of considerable value. Such a bill may be discounted at the Federal Reserve Banks. It is prime commercial paper. Since

the establishment of the Federal Reserve System, such instruments as have just been described are commonly called "trade acceptances."

There can be no question but what the rules which we are now considering, which fix the rights and liabilities of parties to negotiable documents of title, including bills of lading and warehouse receipts, taken in connection with the rules governing the rights and liabilities of parties to negotiable instruments payable in money, operate as a powerful stimulus to trade and commerce, and a degree of safety to the parties concerned is thereby attained, not possible without such instruments. Especially is this true as regards the export and import business.

In our further discussion of the detailed rules which govern negotiable documents of title in Chapter IV, and in our study of the cases, we shall feel more or less drawn away from our observation of the normal business transaction, because our attitude will be directed to the accidents which now and then occur-the destruction of the goods, the bankruptcy or fraud of some of the parties; but these risks, however rare they may be, must always be taken into account. It is never certain that a particular cargo will be lost, or that a particular business enterprise will be forced into bankruptcy, or that a certain individual will commit a fraudulent act; but it is absolutely certain that all of these things will happen at some time. The important point is that the manner in which the law extracts the parties who unfortunately find themselves in these situations has a great deal to do with the buying and selling policies of commercial establishments.

Returning to the more detailed examination of subsection 4, it is to be noticed that the first sentence states that, if the bill of lading and the bill of exchange are sent direct to the buyer, with the direction to the buyer to return the bill of exchange accepted, or, if drawn for immediate payment, the buyer does not comply with this demand, such buyer acquires no right to the bill of lading or to the goods, as regards the seller; that is, the seller could recover possession of the bill or of the goods by appropriate proceedings, but this right to the seller is of no great value, because the next sentence provides that the buyer thus wrongfully in possession of the bill of lading does have the legal power to pass a good title to an indorsee innocent of the buyer's breach of contract. If a buyer is so deaf to business ethics as to refuse to return the accepted bill or the draft for the price as directed, the probabilities are that he will negotiate the document to an innocent party. It is therefore apparent that the practice of sending the bill of lading and the bill of exchange direct to the buyer, instead of sending them through customary banking channels, is dangerous. Doubtless in many cases the seller may safely do so, but he should be aware of the risk therein involved. The detailed legal aspects of negotiable documents of title is more completely presented in Chapter IV.

CHAPTER III

POWERS OF PERSONS NOT OWNERS OF GOODS TO TRANSFER TITLE TO INNOCENT PURCHASERS

2. Estoppel of the Owner to Deny Custodian's Power to Transfer Title. 3. Sale by One Having a Voidable Title.

4.

Sale by a Seller in Possession of Goods Already Sold.

5. Rights of Creditors Against Goods Sold in Seller's Possession.

6. Rights of Creditors Against Goods Sold in Violation of Bulk Sales Acts.

SECTION 1.-INTRODUCTION

If every one were absolutely honest, and if every one always knew the exact scope and nature of his legal rights, the subjectmatter of the more important parts of this chapter would disappear from the law. As it is, people are sometimes dishonest, but much more often they are merely mistaken as to the scope of their legal rights, with the result that they attempt to do things which prove unfortunate for themselves and for others. In the study of negotiable instruments it appeared that the most difficult case to decide, both as regards matters of legal policy and as regards the application of established policy to specific facts, was the case where a loss had to be thrown upon one of two or more innocent parties. And so we discover the same situation in connection with sales of property. Of course, as long as the machinery of exchange is functioning smoothly, we are not troubled by such questions. But sooner or later some fraudulent party, some one in financial distress, or some careless workman on the road traveled by the goods from producer to consumer, throws the machinery out of gear, and the tremors are heard and felt all along the line. The individual who was thus responsible for the accident should sustain the loss, and in the majority of cases no doubt the law imposes legal liability upon him; that is, ultimately it will be upon him. But this party may be in New York, and the two innocent parties in Portland. A lawsuit is very likely to develop between the two innocent parties, and it must be decided. And, again, it so often happens that the person who was the cause of the loss is now insolvent, so that, even if it were convenient to compel him to repair the damage, the legal right to do so is valueless.

The problem of discovering which of two innocent persons must bear a loss is one which ramifies all through the law. In the law of negotiable instruments we studied a series of rules which experience has shown bring about a result which is about as fair for all concerned as we may expect. So, also, in the law of real property, though this is a branch into which we shall not enter here.

The specific rules are not the same, but they are grounded upon the same fundamental conception of justice. In transactions concerning tangible personal property we have another series of rules, forged from the mills of business experience, which, though differing in many respects from the analogous doctrines of the law of real property and of commercial paper, leads to a fair average of just results.

The problem in this chapter therefore is: Under what circumstances will a person who is not the owner of goods have the power, although not the legal privilege, to transfer title to an innocent purchaser? The following case contains a discussion of the general principles involved, after considering which we may direct our attention to the provisions of the Sales Act, to note how these general principles have there been carried into effect.

SALTUS v. EVERETT,

(Court for the Correction of Errors of New York, 1838. 20 Wend. 267, 32 Am. Dec. 541.)

SENATOR VERPLANCK. * * The main question depends upon and involves the general rule that ought to govern between the conflicting rights of bona fide purchasers of personal property, bought without notice of any opposing claim, and those of the original owner, divested of the possession or control of his property by accident, mistake, fraud, or misplaced confidence. The original owner now claims his lead against purchasers who bought for a fair price, in the usual course of trade, from persons holding the usual evidence of such property (a bill of lading indorsed to them), and in actual possession of the goods. Of these two innocent parties, which of the two is to bear the loss arising from the wrongdoing of the third?

The universal and fundamental principle of our law of personal property is that no man can be divested of his property without his own consent, and consequently that even the honest purchaser under a defective title cannot hold against the true proprietor. That "no one can transfer to another a better title than he has himself" is a maxim, says Chancellor Kent, "alike of the common and the civil law, and a sale, ex vi termini, imports nothing more than that the bona fide purchaser succeeds to the rights of the vendor." The only exception to this rule in the ancient English jurisprudence was that of sales in markets overt, a custom which has not been introduced among us. "It has been frequently held in this country that the English law of markets overt had not been adopted, and consequently, as a general rule, the title of the true owner cannot be lost without his consent." 2 Kent's Comm. 324, and cases there cited.

To whatever and however numerous exceptions this rule of our law may be subject, it is unquestionably the general and regulating principle, modified only by the absolute necessity or the obvious policy of human affairs. The chief justice of the superior court has said, in his opinion on this case, that "it must be conceded that a purchaser for a fair and valuable consideration, in the usual course of trade, without notice of any conflicting claim or any suspicious circumstanc

es to awaken inquiry, or to put him on his guard, will, as a general rule, be protected in his purchase, and unaffected by any latent claim. But there are exceptions to this rule." Now, I cannot agree with the learned justice that this is the general rule. On the contrary, I think it obvious that it is but the broad statement of a large class of exceptions to the operation of a much more general principle, and that statement of exceptions is subject again to many limitations. I have stated the general and governing law; let us now see what are precisely the exceptions to it.

The first and most remarkable class of these exceptions relates to money, cash, bank bills, checks, and notes payable to the bearer or transferable by delivery, and in short whatever comes under the general notion of currency. It was decided by Lord Chief Justice Holt, at an early period of our commercial law, that money and bills payable to bearer, though stolen, could not be recovered after they had passed into currency; and this "by reason of the course of trade which creates a property in the holder." "They pass by delivery only, and are considered as cash, and the possession always carries with it the property." Anon., 1 Salk. 126. A long series of decisions, beginning with Miller v. Race, 1 Burr. 452, has now settled the law that possession of such paper is presumptive proof of property, and that he who received it in the course of trade, for a fair consideration, without any reason for just suspicion, can hold it against the true owner, and recover on it against the drawer, maker, and other parties, even if the paper had been stolen from or lost by the former holder; such former holder retaining all his original rights only against the thief or the finder, or whoever received the paper from them under suspicious circumstances. These decisions have been argued upon as authorities (at least in the way of analogy) both at bar and in opinions of the courts, in cases involving the same question as to goods or other movable property. Hence it was inferred that goods bought or received "in the course of trade stand on the same footing with bank notes or checks so received." But an examination of the cases will show that this part of the law of negotiable paper rests on grounds quite peculiar to itself, for the following reasons:

1. The protection of the bona fide holder of paper, transferable by delivery, extends even to cases where the paper has been lost or stolen. But it has been often decided that loss by accident, theft, or robbery does not divest the title of the owner of goods, nor give a title in them to a fair after purchaser.

2. The rule is put by all the authorities on the express and separate ground of the necessity of sustaining the credit and circulation of the currency. Thus Lord Chief Justice Hardwicke: "No dispute ought to be made with the holder of a cash note, who came fairly by it, for the sake of currency, to which discrediting such notes would be a great disturbance." See, too, the reasoning of Lord Mansfield, in all cases on this head decided before him. Thus, he says, in the case of a stolen note, Peacock v. Rhodes, 2 Doub. 636: "An assignee must take the thing assigned, subject to all the equity to which the original party was subject. If this rule was applied to bills, it would stop their currency." Similar reasons are assigned for the same decision by American judges.

3. The analogy between notes and movables, or goods, is expressly denied in the leading cases on this head. Thus, in reply to an argu