66 The CHAIRMAN. A very ordinary practice for people to say that the Supreme Court has decided erroneously?" Mr. NEVILLE. Yes. Mr. STAFFORD. You said in reply to Mr. Calder that the practice really amounted to rebating. I wish you would explain wherein at present it is in the nature of a rebate. Mr. NEVILLE. Well, if a railroad company will issue a bill of lading for goods before it receives those goods, it enables the shipper of that commodity, whatever it may be, to get his money before he is entitled to get it. He has got his merchandise, whatever it may be, in his warehouse, and he is negotiating a bill of lading that is spurious, and he can take the same goods the next day and deliver them to another company and get another bill of lading on them, and use that. Mr. STAFFORD. He is pretending to be selling something in the one case that he has not got by reason of a fraudulent certificate. I can not see any connection, however, between that and rebating. That is fraudulently obtaining money. Mr. NEVILLE. It is putting that man in a position to get money to continue his business unjustly. Mr. WANGER. It is giving him an earlier accommodation? Mr. WANGER. But there may not be any fraud about it. Mr. NEVILLE. There may not be any intent at fraud, Judge. Mr. WANGER. But it may be that he is not in a position to deliver completely? Mr. NEVILLE. Yes, sir. The CHAIRMAN. The use of bills of lading is very common in the shipment of many classes of goods? Mr. NEVILLE. Yes, sir. The CHAIRMAN. Cotton, grain, and live stock? Mr. NEVILLE. Yes; nearly all farm products, Judge. The CHAIRMAN. Do not call me judge. I am not a judge. [Laughter.] Mr. NEVILLE. I beg your pardon. The CHAIRMAN. Would it be practicable to carry on the business of the country to-day without a revolution in business methods if the form known as the order bill of lading was abolished? Mr. NEVILLE. Yes. It is a method that has sprung up as a quick means of identifying property and the ownership of property. The CHAIRMAN. And under the existing system with the order bill of lading the shipper is able often to get his money to complete his purchase? Mr. NEVILLE. Yes; to enable him to continue buying that same commodity in that same market. For instance, take a small shipper, with a capital, say, of $5,000. I can only speak familiarly in regard to my own business. Take a small cotton buyer, with a capital of $5,000. The bank will ordinarily take that $5,000 for the margin for three times that much money. They will pay for him $20,000 worth of cotton, including his $5,000. In other words, they will advance to him $20,000 worth on that $5,000. The CHAIRMAN. Without security? Mr. NEVILLE. With the ordinary ticket; the "dray ticket," as it is called. For instance, a farmer comes in and this man buys his bale of cotton, and suppose he pays 12 cents for it. He will initial that, and the farmer takes it to the bank and gets his money. At the end of the day those tickets are added up, and the banker advises him how many bales they paid for, and the amount paid. That ticket is the bank's security for the money they paid. The CHAIRMAN. Will the bank turn over those tickets to the railroad company or the man without getting the bill of lading? Mr. NEVILLE. The bank will turn those tickets over to the buyer. The CHAIRMAN. Without security? Mr. NEVILLE. As a rule it is done on the confidence they have in the buyer, and some of the bankers exact what they call a trust note. The CHAIRMAN. Without security? Mr. NEVILLE. Without security; but the receipt, the bill of lading, is deposited with the draft that same day. The CHAIRMAN. You have not gotten, to that yet. Mr. NEVILLE. He can not get the bill of lading without he surrenders the ticket to the yard man. The CHAIRMAN. Under the practice and laws of those States that handle cotton, when a bank advances money on this ticket does the bank have any lien on that cotton? Mr. NEVILLE. Yes, sir. The CHAIRMAN. What becomes of the lien that the bank has? What is the nature of the lien? Mr. NEVILLE. The only lien the bank has on that cotton is when the value they pay for is in excess of $5,000. The CHAIRMAN. Is the ticket considered the evidence of the title to the cotton? Mr. NEVILLE. Yes, sir. The CHAIRMAN. And the bank holds that? Mr. NEVILLE. Yes, sir. The CHAIRMAN. Does the bank turn that over to the man again without security? Mr. NEVILLE. I can not tell you whether the bank in any specific case exacts security or not. I can only tell you the general method of operation. The CHAIRMAN. You are assuming a case where a man can not furnish security? Mr. NEVILLE. I am assuming a case where the man is sufficiently well known to the bank, where the bank has sufficient confidence in him, to surrender to him the yard ticket. The CHAIRMAN. Without security? Mr. NEVILLE. Yes, without security; and he takes those yard tickets and gets the bill of lading, and takes the bill of lading to the bank and attaches it to a draft, and it is put to his credit. The CHAIRMAN. Then the bank has confidence in the buyer without security? Mr. NEVILLE. Yes; that is the initial bank. The CHAIRMAN. Is it a custom of the bank to turn the ticket over to the buyer, or to the railroad company? Mr. NEVILLE. Never to the railroad company; to the buyer. The CHAIRMAN. In the case you specified they turned them over to the railroad company? Mr. NEVILLE. No, to the shipper. The agent of the railroad company signed the bill of lading on the strength of those tickets. The CHAIRMAN. I understood you to say that the bank turned the tickets over to the railroad company and received the bill of lading in exchange? Mr. NEVILLE. No, sir. The CHAIRMAN. Under your proposition absolutely the only security that the bank receives is its confidence in the buyer? Mr. NEVILLE. Some banks require a trust note. The CHAIRMAN. What do you mean by that? Mr. NEVILLE. A bank will require from the buyer or shipper receipt stating in effect that yard tickets so-and-so were received in trust by him from the bank in order to secure a bill of lading for the cotton, which bill of lading was to be returned to the bank by the shipper. The CHAIRMAN. That is signed only by the buyer or shipper? Mr. WANGER. The agent signs the bill of lading, which is expected to be handed to the bank when the tickets are given to the buyer? Mr. NEVILLE. The tickets are never asked for until the cotton is gotten ready for shipment by the buyer. The CHAIRMAN. Take a case: Here is a lot of cotton in the cotton yards. The bank has the tickets. The buyer goes to the bank and gets the tickets on the strength of his standing as a man. He takes them to the railroad. It may be several days before he can get cars or can get the cars loaded. Would the bank be willing to wait a couple of days? Mr. NEVILLE. In Texas the railroads are required to issue a bill of lading when the cotton is on the railroad platform waiting to be loaded. They will sign bills of lading when the goods are not in the car. Mr. SIMS. I happen to live in a cotton-growing locality, and there the bank does not trust the buyer except only for that period of time between the time at which they surrender the ticket and the time when they receive back the bill of lading with the draft attached. The CHAIRMAN. That is done now just as a bank assumes to pay money on the basis of confidence, but you propose to destroy that confidence? Mr. NEVILLE. No, you are mistaken, Mr. Chairman, if you think the railroad company is going to issue a bill of lading on tickets unless the cotton is on the platform. The CHAIRMAN. I thought you just told us of a case that was not in that way. Mr. NEVILLE. That case at Belton was a case where the cotton actually was on that railroad platform. I was careful to make that plain. I tried to make it plain. Mr. SIMS. As a rule they do not usually issue bills of lading until the cotton is actually and physically in their possession. Mr. CALDER. Is the ticket issued when there is no cotton? Mr. NEVILLE. I have never heard of that. Mr. TOWNSEND. When the bank receives tickets from the yard, that is a guaranty that the cotton is actually there and delivered? Mr. NEVILLE. I have never heard of a case like that, Mr. Townsend. Mr. TOWNSEND. When the bank has those tickets showing the deposit or the delivery of the cotton, then something happens that disturbs the bank sometimes; the shipper does not ship the cotton when he gets a bill of lading. Is that correct? Mr. NEVILLE. I do not know whether I follow you exactly. Mr. TOWNSEND. I understood your complaint was that when you get your bill of lading you are not always sure that there is cotton back of it; you are not always sure that you are going to get your cotton. I understood that is what you are complaining about. Mr. NEVILLE. Yes; that is what I am complaining about. Mr. TOWNSEND. When this cotton is delivered, and the tickets have been received by the bank, the bank gives up the tickets when the bill of lading is returned? Mr. NEVILLE. No; the bank gives up the tickets before the bill of lading is received. Mr. TOWNSEND. What happens to the cotton in the meanwhile? Mr. NEVILLE. If the agent, as they have done at some competitive points, will give that man a bill of lading, he will say, "Here are the tickets, and I am having the cotton drayed to the station, and it will be all finished this afternoon." Mr. RICHARDSON. And does not do it? Mr. NEVILLE. Yes. In that case it is a bill of lading without receipt of goods, and the man might probably take the cotton and unload it at another railroad station if he was dishonest. But the man who buys the bill of lading, Mr. Townsend, on the strength of the promise to deliver that cotton that afternoon, does not know what has taken place. Mr. RICHARDSON. I understood that a bill of lading, granted for 100 bales of cotton, is carried to the bank and the bank accepts it and advances money on it, and when the cotton covered by it is found to be only 80 or 90 bales, that is one of the conditions you are complaining about? Mr. NEVILLE. Yes. Mr. RICHARDSON. You want this bill of lading to be accepted as absolute and conclusive liability on the part of the railroads? Mr. NEVILLE. Yes, sir. Mr. RICHARDSON. And you are trying to account for that shortage? Mr. NEVILLE. Gentlemen, questions are being put to me on various lines of this matter, and I am trying to answer as best I can. Mr. RICHARDSON. You are answering very promptly and very well, I may say. Mr. NEVILLE. Thank you. Mr. SIMS. Does the bill of lading show the quality of the cotton? Mr. NEVILLE. No, sir. Mr. WANGER. When it goes to the bank there is an indication on the ticket as an indication to the buyer of the value of the cotton? Mr. NEVILLE. Yes, sir. Mr. WANGER. Does the draft indicate the value of the cotton? Mr. NEVILLE. Yes, sir; and the quality. Mr. CALDER. The bank in Texas on the delivery surrenders these receipts to the shipper, and the shipper goes to the railroad company and in exchange for these checks he gets the bill of lading and takes them back to the local bank, and with the draft attached they forward that to the man to whom the cotton is being sent in the North? Mr. NEVILLE. The man on whom the draft is drawn. Mr. CALDER. He pays that draft, and then when he needs the money he takes the bill of lading again and deposits that in his bank in his home place, and borrows money on that? Mr. NEVILLE. Yes, sir. Mr. CALDER. Now, the bank at the point of shipment has received its money as the result of the draft, but the merchant does not get his cotton, and some time later the bank that accepted the bill of lading sues him and recovers from him and the fellow at the point of shipment sues him and does not make good? Mr. NEVILLE. I do not follow the last part of that. Mr. CALDER. I say the draft is forwarded to the point of shipment where the cotton ought to go on the merchant there, and is paid there by him, or by borrowing money from the bank where he gets his money, and the cotton never gets here, and he is responsible to the bank and is not able to recover. Is that right? Mr. NEVILLE. Yes, sir. Mr. STEVENS. If you felt doubtful about the receipt of the cotton on the bill of lading and required the goods to be in your possession before you pay for them, how long would that be, ordinarily, during the business of the cotton season? Mr. NEVILLE. Normally I should say four weeks as the average. That would cover it, although there are times in the rush cotton season where it would be nearer to seven or eight weeks. That is for a period. But taking it on a season through, it would be about four weeks, I should say, dependent, of course, on the distance. Mr. STEVENS. How long does it require for the bill of lading after it is deposited in the post-office, say in Texas, to reach you and be paid in due course of business, with sight draft attached? Mr. NEVILLE. From seventy-two to ninety-six hours. Mr. STEVENS. So that if you required it or if the mercantile world required the goods to be actually delivered, there would be a difference of a month or six weeks in the payment to the buyer? Mr. NEVILLE. Yes, sir. Mr. STEVENS. What difference would that make in moving the cotton crop in the smaller places in the South? Mr. NEVILLE. It would have the effect of eliminating the smaller men. Mr. STEVENS. So that only men of large business ability and business credit could purchase cotton? Mr. NEVILLE. Yes, sir. Mr. SIMS. And would it not have the effect of depressing the price of cotton to the extent of the delay and the disturbance of the free movement? Mr. NEVILLE. Yes. When you limit the buyers, you create that much less demand. Mr. STEVENS. That is all, Mr. Neville. The CHAIRMAN. Who is the next to be heard? Mr. NEVILLE. Mr. Chairman, do you want to have the whole case gone right through again? The CHAIRMAN. We want all the information we can get. |