[Answer/discuss the question below, or see 2017 bar exam Mercantile Law Instructions; Also check the other 2017 Mercantile Law Questions:1, 3, 4, 5, 6, 7, 8, 9, 10, 11, and 12; See also 2017 Bar Exam: Information, Discussions, Tips, Questions and Results]
Morgan, a lawyer, received a lot of diving and other water sports equipment as payment of his professional fees by Dennis, his client in a child custody case. Dennis owned a diving and water sports dealership in Anilao, Batangas. Morgan decided to name Dennis as entrustee because he did not have any experience in selling such specialized sports equipment. They executed a trust receipt agreement, with Morgan as entruster and Dennis as entrustee.
Before the sports equipment could be sold, a strong typhoon hit Batangas. Anilao and other parts of Batangas experienced power outage. Taking advantage of the total darkness, unidentified thieves destroyed the padlocks of the establishment of Dennis, and carted off the equipment inside.
Morgan demanded that Dennis pay the value of the stolen equipment, but the latter refused on the ground that he also had suffered from the effects of the typhoon, and insisted that the cause of the loss was a fortuitous event or force majeure.
Is the justification of Dennis warranted? Explain your answer. (4%)
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.
(a) What is a warehouseman’s claim? (3%)
(b) Is Safe’s refusal to surrender the goods to Cyrus, Magnus and Charles legally justified? Explain your answer. (3%)