Commercial Law, 2017 Bar — Question II-B-b

ESSAY

Safe Warehouse, Inc. (Safe) issued on various dates negotiable warehouse receipts to Peter, Paul and Mary covering certain goods deposited by the latter with the former. Peter, Paul and Mary then negotiated and endorsed the warehouse receipts to Cyrus, Magnus and Charles upon payment by the latter of valuable consideration for the warehouse receipts. Cyrus, Magnus and Charles were not aware of, nor were they parties to any irregularity or infirmity affecting the title or the face of the warehouse receipts. On due dates of the warehouse receipts, Cyrus, Magnus and Charles demanded that Safe surrender the goods to them. Safe refused because its warehouseman's claim must first be paid. Cyrus, Magnus and Charles refused to pay, and insisted that such claim was the liability of Peter, Paul and Mary. Is Safe's refusal to surrender the goods to Cyrus, Magnus and Charles legally justified? Explain your answer.

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