This section of the book is from the "Canadian Banking Practice" book, by John T. P. Knight.
Question 78.— Please consider the following points connected with grain shipments from the interior of Ontario to millers and grain dealers at the centres. As the grain has usually to be paid for with money advanced by the shipper's bank, I shall be glad if you will give your opinion as to the propriety of the modes of business described.
1. The purchaser of the grain sometimes sends a form of receipt to be filled by the railway company, in which he is described as the shipper.
2. (a) Sometimes in addition to the purchaser being named as the shipper, the goods are shipped to the order of his bank. (b) In other cases, where the real shipper's name is given, the grain is shipped to the order of the purchaser's bank. (c) In a third class of cases the purchaser asks that the goods be shipped in his name as shipper, and to his order.
Query 1. Would a bank advancing money to its customer against the lodgment of bills of lading for grain purporting to be shipped by another party, but to the order of the lending bank, get proper security on the grain?
2. What would be its position in the three cases mentioned in the second clause?
3. Would the shipping of the grain in the purchaser's name deprive the true owner of the right of stoppage in transitu ?
Answer.—This question cannot well be answered in any general way. The conditions might differ in almost every case, and an opinion could only be formed on consideration of the exact facts involved.
It may be said generally that if, notwithstanding the form of the receipts, the bank's customer is the true owner of and entitled to control the grain, he can, by proper means, give the bank valid security. The security would not, in any of the cases mentioned, be straight and free from ambiguity, and we think that the bank should not accept such security. As to question No. 3, we do not see how the real owner could control grain in the hands of a carrier, which he has stated to be the property of someone else.
We think the mode of doing business indicated by these questions open to serious objections, unless both the owner of the grain and the bank have a clear understanding with the purchaser of the grain, and with his bank, if the latter is brought into the question.