CASE PROBLEMS
Home Indemnity, an insurance company, paid one of its insureds after the theft of his car. The car reappeared in another State and was sold to Michael Schrier for $4,300 by a used car dealer. The dealer promised to give Mr. Schrier a certificate of title. One month later the car was seized by the police on behalf of Home Indemnity. Explain who is entitled to possession of the car.
Fred Lane, who sells boats, motors, and trailers, sold a boat, motor, and trailer to John Willis in exchange for a check for $6,285. The check was not honored when Lane attempted to use the funds.
Willis subsequently left the boat, motor, and trailer with John Garrett, who sold the items to Jimmy Honeycutt for $2,500. Considering the boat’s quality, Honeycutt was surprised at how inexpensive it was.
He did not know where Garrett had obtained the boat, but he had dealt with Garrett before and described him as a “sly businessman.” Garrett did not sell boats; normally; he sold fishing tackle and provisions.
Honeycutt also received a forged certificate for the boat, on which he had observed Garrett forge the purported owner’s signature. Can Lane compel Honeycutt to return the boat, motor, and trailer? Explain.
Mike Moses purchased a mobile home, including installation, from Gary Newman. Newman delivered the home to Moses’s lot. Upon inspection of the home, Moses’s fiancee found a broken window and water pipe.Moses also had not received keys to the front door.
Before Newman corrected these problems, a windstorm destroyed the home. Who bears the risk for the loss of the home? Why?
United Road Machinery Company, a dealer in heavy road equipment (including truck scales supplied by Thurman Scale Company), received a telephone call on July 21 from James Durham, an officer of Consolidated Coal Company, seeking to acquire truck scales for his coal mining operation.
United and Consolidated entered into a twenty-four month lease-purchase arrangement. United
then notified Thurman that Consolidated would take possession of the scales directly. United paid for the scales, and Consolidated took possession of them, but the latter never signed or returned the contract papers forwarded to it by United. Consolidated also never made any of the
rental payments ($608/month) due under the lease.
On September 20, Consolidated, through its officer Durham, sold the scales to Kentucky Mobile Homes for $8,500.
Kentucky’s president, Ethard Jasper, checked the county records prior to the purchase and found no lien or encumbrance on the title; likewise, he denied knowledge of the dispute between Consolidated and United.
On September 22, Kentucky sold the scales to Clyde Jasper,individually, for $8,500. His search also failed to disclose any lien on the title to the scales, and he denied knowledge of the dispute between Consolidated and United. Can United recover the scales from Jasper? Explain.
James Norwood bought one hundred ninety heifers in Valentine, Nebraska, and then delivered them to Kevin Asbury in Missouri to care for them. Norwood and Asbury were merchants with regard to cattle. While in Asbury’s care, one hundred fifty of the heifers were delivered to Max Hargrove.
Hargrove in turn sold the heifers to B & W, Inc. Then B & W sold one hundred fifteen of
the heifers to Steve Maulsby, who in turn sold the heifers to Kenneth Nordhues. Explain what Nordhues would have to prove to establish good title to the heifers.
Harrison, a men’s clothing retailer located in Westport, Connecticut, ordered merchandise from Ninth Street East, Ltd., a Los Angeles-based clothing manufacturer. Ninth Street delivered the merchandise to Denver Chicago Trucking Company (Denver) in Los Angeles and then sent four invoices to Harrison that bore the notation “F.O.B. Los Angeles.”
Denver subsequently transferred the merchandise to a connecting carrier, Old Colony Transportation Company, for final delivery to Harrison’s Westport store. When Old Colony tried to deliver the merchandise, Harrison’s wife asked the truck driver to deliver the boxes inside the store, but the driver refused.
The dispute remained unresolved, and the truck departed with Old Colony still in possession of the goods. By letter, Harrison then notified Ninth Street of the nondelivery, but Ninth Street was unable to locate the shipment. Ninth Street then sought to recover the contract purchase price from Harrison.
Harrison refused, contending that risk of loss remained with Ninth Street because of its refusal to deliver the merchandise to Harrison’s place of business.
a. What are the arguments that the risk of loss remained with Ninth Street?
b. What are the arguments that the risk of loss passed to Harrison?
c. What is the appropriate outcome?