CERTAINTY IN COMMERCE AND LAW.
Six RICHARD BxnraLn's promised bill for the consolidation and amendment of the bankruptcy laws opens a wide subject which demands a consideration more deliberate and broader than it has yet received. One most important point to be attained by any effective bill is the complete elimination of fraud in every shape, from the category of bankruptcy and insolvency ; and the first step towards a clear perception of the distinction is a clear idea of fraud itself, and of the uncertainty in which it is left by the present state of the law. Some recent cases are calculated to increase the amount of uncertainty which merchants must feel, and will in- troduce an element of doubt where there ought to be reasonable certainty.
Some two or three years ago a case occurred, which then ex- cited considerable discussion both in the Exchange and the Temple, as to the right of an endorsee of a bill of lading, who had given abona. fide, valuable consideration, but who obtained the bill by endorsement from a party fraudulently possessed. At the trial a verdict passed for the plaintiff, subject to a special case stated in the Court of Exchequer, which, after discussion, ordered the verdict to be entered for the defendant, thereby establishing the right of the bone. fide holder for value. But the Court of Ex- chequer Chamber reversed that finding upon the plaintiff's appeal, and established his right as the real owner of the bill of lading, against an innocent holder for value, whose title came by endorse- ment from a fraudulent possessor. The defendant appealed to the House of Lords, but both he and the plaintiff were so tired of contradictory expositions of " the law " that they constituted themselves a court of appeal, and settled the case upon a mer- cantile adjustment, which, probably, meant that they divided the damages, and each paid his own costs. The "point" is yet a moot one, whether an innocent endorsee for value can maintain his title against the original and real owner, and lawyers are much divided upon the subject. Had the appeal in Kingsford v. Merry been heard, a solemn decision of the law lords would have established only this—which party was to bear the loss.
A few weeks ago a gentleman was tried and acquitted at the Central Criminal Court, under the Fraudulent Trustee Act, for misappropriation of the realized price of a bill of lading. He was willing to pay, but pleaded a set-off arising out of an insufficient delivery in a previous transaction in coals. In mercantile usage nothing can be fairer than a mutual adjustment of accounts. But undoubtedly the broker had been a bailee of the bill of lading, and therefore a trustee for the principals ; consequently a failure to pay over all the proceeds constituted legally an offence within the meaning of the Act. But on the other hand the jury pro- bably felt that the insufficient delivery from the principals to the broker in the first cargo, was morally an offence equally as bad. In fact, the only difference was that one offence was statuably punishable, whilst the other was simply an irregularity to be reached, if at all, by the common law. But the case brings out the discrepancy ; non-delivery after contract and payment the laws calls a tort, and attaches no criminal penalty ; non-payment by a broker the law calls a misdemeanour, and punishes with imprisonment separately : this may be just, but when the two transactions unite in the same persons the result is injustice.
A third case has recently occurred. One Otto Frederick Hor- meyer, a Prussian merchant, forged a bill of lading, which he " sold" to a Mr. Theidemann, of Newcastle-upon-Tyne. The latter accepted bills for two-thirds the apparent value. These bills Hormeyer negotiated with the Berlin Discount Company. He was tried and convicted of issuing the forged document with intent to cheat and defraud Mr. Theidemann, and condemned to penal servitude. It is a rule of law that a prisoner must be held to have intended that which he accomplished, or what became the necessary result of his act. But after his conviction, Mr. Theidemann obtained an injunction against the holder of the bills, although they had Probably value to Hormeyer in due course of mercantile discount. Probably Mr. Theidemann was advised that he had no answer in law, and therefore he made a speculative appeal to equity, which decided that the holders should not pro- ceed to recover the bills, and thereby also decided that the holders were parties to the fraud. But, upon appeal to the Lord Chancel- lor and Lords Justices, the injunction was dissolved—and pro- perly so, for, unless the holders were cognizant of the forgery of the bill of lading (which ought not to be inferred, but proved to the satisfaction of a jury), Mr. Theidemann ought to pay his own acceptances. It is hard upon him to have to pay a considerable sum for a fraudulent scoundrel, but there would be no safety in commerce at all if fraud were traced back to its origin, and its consequences visited upon the last name upon the endorsement.
Yet very much of this uncertainty proceeds from the fact that fraud has never been provided for in our jurisprudence. When it develops itself in a very rough shape, such as forgery or false pretence, we deal with it criminally, and give it the technical names of felony and larceny. In bankruptcy we call it " fraudu- lent preference" or " reckless trading," and punish it by a sus- pension or refusal of a certificate of conformity ; in insolvency we go to the extent of ordering the remand of the prisoner back to prison. At the point where fraud is connected with credit we draw a line, non-existent in morals, and attach civil penalties of imprisonment, only to punish, by one common but undiscrimi- nating doom, the rascal and the unfortunate. In equity we use fraud for the purpose of setting aside the most deliberate and solemn of contracts, and in Mr. Thiedemann's ease we see the Court made an attempt to carry out its maxim of " softening the rigour of the law," by denying to the holders of his acceptances the right to appear in court, to clear themselves of all notice or knowledge of Hormeyer's forgery, and thereby establish their bona fides. No doubt the clear legal head of the Lord Chancellor saw that this equity amounted to a denial of justice, the right to be heard.
The cure for this state of things lies not in the Court, but the Legislature. Probably the wisest way to deal with the growing evil of uncertainty is the boldest. A new crime should be created —fradulent dealing including in that term every species of falsity, pretence, and misrepresentation, verbal and written, which shall be used in commercial transactions. No distinction should be drawn between cases of simple misrepresentation and where property is obtained upon credit, provided the original re- presentation upon which it was obtained was false. There is no moral distinction between the fradulent insolvent trader, and the prisoner in the criminal dock, save that in the first case the tran- saction has merged into a debt with civil remedies, in the latter it is a felony because credit was not obtained. The effect of this alteration would be to classify rogues as such, by giving a re- trospective operation to the appropriate law, and the simply un- fortunate trader would pass into his proper place in public esti- mation.
Nor can it be impossible to provide remedies against such cases as Kingsford and Merry, Mr. Nicoll, and Mr. Theidemann. The attendance of a ship captain before a notarypublic, to sign a bill of lading and obtain the affix of the notarial seal, would destroy the chance of such schemers as Hormeyer. The operations of the swindler in the first case might have been estopped if it had been provided that transfers of bills of lading should be registered, (as are bills of sale,) open to the inspection of parties having interest therein. Where fraud is charged and countercharged, as in the second case, all difficulty might be avoided by payment of the money into Court, and a summary " reference to the Master" by Judges' order, which should stay proceedings on both sides. If endorsers of bills of exchange were compelled to give notice to ac- ceptors of the endorsement, incipient forgery would be detected. One thing the commercial world should. do : dispense with a part of that secrecy which gives swindlers their opportunity. Everything honest loves publicity. Above all, let upright mer- cantile men concur in asking that fraudulent traders may be de- clared, and punished, as common rogues, and misfortune and in- nocence only be known as such to be legally discharged.
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