Anyone Understand Bankrupcy Law?

[RachelEllen]

Yes, we are contacting an acutal attorney, but I'm just so aghast at this I'm wondering if anyone has insight.

My mom moved shortly after my father passed away to a much smaller house. At the time, we didn't think we had room for her amazing, Steinway grand piano, and my husband was just starting piano lessons. After being unable to do a private sale, she made an arrangement with a keyboard store to consign the piano. They would tune it, store it, sell it, and keep some percentage of the final cost. Anyhow, it has been almost two years, and she hadn't heard anything. In the mean time, my husband has become very serious in his practice of piano. My mom once again offered the piano to us, as she was about to take it back and donate it. We decided to call the keyboard store and go in and try the piano, and we would make room for it.

So, I just got a call from the piano store. It sold a few months ago. My mom was never contacted because the company is in bankruptcy. My mom may not see a dime.

How can this be legal??? It was not their piano. It wasn't their asset. They were simply holding it for sale. I'm awaiting a copy of the contract to see exactly what rights my mom had over the sale (price approval, notification, etc), but looking at their website, they are selling their used pianos for fire sale prices.

I'm also ticked, honestly, because once I had gotton used to the idea of giving up our living room for a $50,000 piano (We currently own a small spinnet), I was getting pretty excited.

 

[MomToOne]

I found this online, along with reports of various consignment shops going bankrupt and the people who had items with them being screwed

http://extension.missouri.edu/publications/DisplayPub.aspx?P=MP597

Security agreement
Regardless of what the contract says, artisans who fail to take certain steps under the Uniform Commercial Code (UCC) could lose their goods to creditors of the retailer. A lawyer can help with these filings, which are made through the Secretary of State and the County Recorder. This protects the artisan's property in case the retailer should file for bankruptcy or creditors claim the inventory.

I also found
http://community2.business.gov/t5/Business-Law-Advisor/Starting-a-Consignment-Business/ba-p/17541

If you plan to start a consignment shop, make sure you understand the Uniform Commercial Code (UCC). The UCC governs commercial transactions in each state. This set of uniform business laws also protects consignors from consignment abuse and bankruptcy. According to the UCC, consignors have the right to (1) file the UCC-1 form, (2) ask the consignee to post a store sign indicating consignment, and (3) prove to creditors that items are consigned. For example, the UCC-1 form gives the consignors legal claim over their property. In many states, they become a secured creditor when the consignment becomes bankrupt.

Consignment laws do vary between states.


Looks like if the paperwork is not exactly right and your ownership of the item legally recorded, an item CAN be confiscated by creditors.

I'm sorry if this indeed turns out to be the case. I hope the lawyer can offer you some sort of remedy.

 

[RachelEllen]

Ugh, it just seems like it should be criminal. If I hadn't called, who knows when we would have found out. They are continuing to sell of their inventory of consignment pianos, and I'm sure they've notified no one.

 

[bumbershoot]

That's awful, I feel sick for you!

I'd call an attorney, personally....

 

[summerrluvv]

It's unlikely there is anything you can do. Basically your mom is a creditor of them and the BK protects the store from having to give her the money. It's possible she can file a claim with the BK court to get paid back depending on the type of BK they have filed.

 

[RachelEllen]

Well, we went down to the shop to talk to the owner in person. (My husband is a lawyer)

Turns out, he hasn't actually filed bankruptcy. (He was using the term colloquially). He showed us the consignment agreement. He could not produce the date the piano was sold or tell us how much it was sold for. He said that he sold the piano fully intending to pay my mom and before he could cut the check the IRS froze his bank accounts.

Personally, I don't buy it. We're definitely filing civil charges, but, what we get back will just depend on what assets he has. There are also some issues of criminal behavior that we're going to look into.

If he hadn't sold the piano, we might actually be ok. Because the store is well known to consign, the piano doesn't become part of his assets. However, because he sold the piano and just took the assets to pay business expenses, yes, we might be out of luck. But that's where the criminal part comes in.

Oh, and the consignment contract ran out before he sold the piano. He didn't even have the right to sell it when he did even if he had given us the money.

 

[JoiseyMom]

Well if the contract ran out, then it wasn't legally his to sell, so can't you repo it from the person he illegally sold it too? It would stink for them, but legally it is still your mom's property.

 

[RachelEllen]

That was my first thought. I am also highly suspicious about the amount he sold it for (was it more than the minimum specified in the contract?) as that was the one piece of information that he wasn't able to find. But there are issues about whether the buyer bought it in good faith that I don't totally understand.

Oh well, not much we can do until Monday.

 

[carebee21]

"Oh, and the consignment contract ran out before he sold the piano. He didn't even have the right to sell it when he did even if he had given us the money."

This is what would scare me... How long ago did the contract run out? Because many contracts state that if you don't pick the item up or sign a new contract within x amount of days from the contract expiring, the owner can either A) Charge you storage fees or B) Consider the item abandoned and take possesion of the item within x amount of days of you not picking up the item. And how do you know that the contract ran out before the piano was sold if he couldn't tell you when the piano was actually sold?

Otherwise, I would immediately file a police report. State you had something in the consignment shop, that they were not entitled to sell. You came to pick it up and now it's gone. The owner can then either give the police the information on the person who purchased it and go retrieve your property, or the owner can say it's lost or stolen, in which case their business insurance should have to cover the cost of the item.

And, at least the way I understand it in NV(my husband owns a sports card shop, so there's buying, selling and trading and we've had stolen item issues) there are no issues about whether the person bought it in good faith. The only thing that good faith applies to is being criminally charged for buying a stolen item. If the person purchased it, unaware that it was stolen or whatever, their recourse is to go after the seller , the business and/or file fraud charges.

 

[RachelEllen]

The contract was signed just over a year ago. It expired after four months and the owner stated the piano sold "last spring." So, it is an assumption, but it seems likely that it sold after the four month period. Plus, I'll eat the paper it's written on if he actually sold it for more than the minimum price, they have things priced staggeringly low there now.

It also states that after the four month period, my mom had the right to either extend the consignment period (in writing), take back the piano minus storage fees, or sell it to the store. I don't know what happens since none of these were done. I also don't know why she did nothing about the piano for so long, but she's had a lot on her mind.

We are filing a police report. And I'm not the lawyer, my husband is, but he says its very unlikely we can get the piano back from the purchasers. THe criminal activity was not giving the money to my mom, and if there is no money, there may be nothing we can do.