Coins on consignment ?

davewesen · July 12, 2020 5:06PM

I just watched American Greed - The Art of the Steal.

a distressing part was that the man filed bankrupcy (before sentencing to jail) and the paintings that were on consignment were kept as part of the assets to be liquidated to pay creditors.

Would the same thing happen to coins on consignment if a coin dealer/scammer filed bankruptcy? or did the consignees mess up by not filing a claim on the bankruptcy?

MFeld · July 12, 2020 5:17PM

I believe that the consignor could have put himself in a much better position if he’d perfected a security interest in the consigned items, under the U.C.C.. Here”s a link to a discussion and explanation of the process, etc. https://www.crfonline.org/orc/pdf/ref10.pdf

wondercoin · July 12, 2020 9:10PM

Mark. I worked closely with Scott (the author of that article) for a number of years at the same firm, among other things, counseling credit managers on bankruptcy related matters. As I recall, he addressed the issue of a possible sale of goods on consignment as opposed to the typical sale on open account in that article (written after he opened his own firm).

Are you are suggesting here the perfecting of a security interest in coins consigned to an auction house for auction?

If memory serves me right, a study of the “Superior” bankruptcy case sheds light on what happens to coins consigned to an auction house that goes “belly up”.

Wondercoin

cameonut2011 · July 12, 2020 9:25PM

@MFeld said:
I believe that the consignor could have put himself in a much better position if he’d perfected a security interest in the consigned items, under the U.C.C.. Here”s a link to a discussion and explanation of the process, etc. https://www.crfonline.org/orc/pdf/ref10.pdf

Unless done in advance, wouldn’t the security interest constitute an avoidable preference anyway? By time the consignor saw the writing on the wall, it was likely too late.

Elcontador1 · July 12, 2020 9:58PM

Read the auction house terms carefully. My gut tells me that title should remain with the consignor, the auction house acts merely as his agent, until such coins are sold. If the auction terms say that the consignor has in essence surrendered title of the coins in exchange for a creditor lien on auction house assets until the coins are sold, and the auction house goes BK, I think the consignor is SOL; he is a general creditor of the auction house.

Unknown · July 12, 2020 11:55PM

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MFeld · July 13, 2020 3:00AM

@wondercoin said:
Mark. I worked closely with Scott (the author of that article) for a number of years at the same firm, among other things, counseling credit managers on bankruptcy related matters. As I recall, he addressed the issue of a possible sale of goods on consignment as opposed to the typical sale on open account in that article (written after he opened his own firm).

Are you are suggesting here the perfecting of a security interest in coins consigned to an auction house for auction?

If memory serves me right, a study of the “Superior” bankruptcy case sheds light on what happens to coins consigned to an auction house that goes “belly up”.

Wondercoin

Mitch, I’m sure you know far more than I do on this subject. In a related matter, from time to time, I hear of Auction houses and buyers of coins trying to protect themselves, by checking if U.C.C. filings.

MFeld · July 13, 2020 3:06AM

@cameonut2011 said:

@MFeld said:
I believe that the consignor could have put himself in a much better position if he’d perfected a security interest in the consigned items, under the U.C.C.. Here”s a link to a discussion and explanation of the process, etc. https://www.crfonline.org/orc/pdf/ref10.pdf

Unless done in advance, wouldn’t the security interest constitute an avoidable preference anyway? By time the consignor saw the writing on the wall, it was likely too late.

My thought is that if a consignor is going to be extra cautious, he would do so in advance. However, while this might be done from time to time(?), I haven’t actually heard of specific instances.

wondercoin · July 13, 2020 3:17AM

Mark. Putting aside who knows more.. I asked you that question because of this...

“If I were a solvent auction house, and a consignor presented me with some homebrew security agreement, telling me he's planning to notify all my creditors so he can perfect his security interest in his dinky consignment yada yada, I'd probably call all my colleagues and blacklist him faster than a weird eBayer”.

Many times common sense trumps legal knowledge, especially in the coin biz! So, my question to you, in response to your first comment here was sincere in nature.

I’ll never forget the response I got about 20 or so years ago after I retired from law, began working coins full time and received a huge consignment from one of the largest whales in the coin ocean. I presented my volumes of proper legal documents to clearly spell out the terms and conditions of the consignment (mostly for his protection) and, let’s just say, the documents were never signed. 😆

Wondercoin

MFeld · July 13, 2020 3:22AM

@wondercoin said:
Mark. Putting aside who knows more.. I asked you that question because of this...

“If I were a solvent auction house, and a consignor presented me with some homebrew security agreement, telling me he's planning to notify all my creditors so he can perfect his security interest in his dinky consignment yada yada, I'd probably call all my colleagues and blacklist him faster than a weird eBayer”.

Many times common sense trumps legal knowledge, especially in the coin biz! So, my question to you, in response to your first comment here was sincere in nature.

I’ll never forget the response I got about 20 or so years ago after I retired from law, began working coins full time and received a huge consignment from one of the largest whales in the coin ocean. I presented my volumes of proper legal documents to clearly spell out the terms and conditions of the consignment (mostly for his protection) and, let’s just say, the documents were never signed. 😆

Wondercoin

Mitch, based on my experiences with you and your thoroughness and attention to detail, I must ask - how many pages (or pounds) were the legal documents you presented?😉

wondercoin · July 13, 2020 3:28AM

Mark. Let’s just say, it hurt a great deal (physically and mentally) when the pile of documents hit me on the back of the head as I was racing out his office door! 😟 😂

Wondercoin

winesteven · July 13, 2020 4:11AM

Gee, apparently I misread the OP. My initial concern (which after reading through this thread should still be a truly significant concern) are for coins consigned to a DEALER for eventual sale, where that dealer has possession of the coins. It sounds like SOL to the consignor if that dealer files for bankruptcy!

topstuf · July 13, 2020 9:16AM

@winesteven said:
Gee, apparently I misread the OP. My initial concern (which after reading through this thread should still be a truly significant concern) are for coins consigned to a DEALER for eventual sale, where that dealer has possession of the coins. It sounds like SOL to the consignor if that dealer files for bankruptcy!

That's a distinct possiblity.
PAWNBROKER laws in California are very comprehensive.
"Title" is the governing factor.

how-ev-ver....... when a place goes belly up, the least of their concerns is the title of what they can get their hands on.
In just my town, I saw so many violations that it made my head spin.

Good luck with legal avenues on crooked streets.

Unknown · July 13, 2020 12:11PM

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Gazes · July 13, 2020 4:06PM

If the coins were of significant value, it would be prudent to contact a bankruptcy attorney prior to consigning and seek advice on the best way to protect yourself

jmlanzaf · July 13, 2020 5:05PM

@Gazes said:
If the coins were of significant value, it would be prudent to contact a bankruptcy attorney prior to consigning and seek advice on the best way to protect yourself

Is bankruptcy the only issue?

Gazes · July 13, 2020 5:29PM

@jmlanzaf said:

@Gazes said:
If the coins were of significant value, it would be prudent to contact a bankruptcy attorney prior to consigning and seek advice on the best way to protect yourself

Is bankruptcy the only issue?

I only mentioned bankruptcy because that was the focus of the OP. Certainly there could be other issues----theft, fire, etc. I suppose many issues would involve the law of bailment. My hunch is that proof of insurance may cover many of these matters. But when in doubt, retain an attorney.

jmlanzaf · July 13, 2020 5:36PM

@Gazes said:

@jmlanzaf said:

@Gazes said:
If the coins were of significant value, it would be prudent to contact a bankruptcy attorney prior to consigning and seek advice on the best way to protect yourself

Is bankruptcy the only issue?

I only mentioned bankruptcy because that was the focus of the OP. Certainly there could be other issues----theft, fire, etc. I suppose many issues would involve the law of bailment. My hunch is that proof of insurance may cover many of these matters. But when in doubt, retain an attorney.

But not necessarily a bankruptcy attorney.

Idk. I've never given it much thought. I've also never had a million dollar consignment to place.

Coins on consignment ?

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