Hal was a merchant who deposited 2,000 barrels of olive oil in a public warehouse operated by Welcome Warehouse. Hal was issued a warehouse receipt for the 2,000 barrels that by its terms was deliverable "to bearer." Hal had engaged in many other
transactions with Welcome and was in arrears for quite a bit of money to Welcome. Hal duly negotiated the warehouse receipt to Esmeralda Enterprises in payment of cash. Hal's financial affairs continued to deteriorate and Welcome never was paid the debt. When Esmeralda's agent requested the oil and offered to remit the warehouse receipt, Welcome refused to release the oil, claiming a lien on the oil for Hal's debt. Esmeralda sued. Decide the case.
The holder of a negotiable warehouse receipt acquires the direct obligation of the issuer to deliver the goods according to the terms of the warehouse receipt. Esmeralda is unaffected by Hal's debt to Welcome.?
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