Posted By:
Bob CasmerI haven't read every single entry in this thread so if I missed something, forgive me. As a CPA for about 30 years, I've seen a lot of business sales and transactions. However, I'm not a lawyer so, this is only my opinion based on my years of business experience and thus, in true CYA fashion, I would advise anyone to check with an attorney before preceeding with any specific action in regards to my comments.
Most buyers only want to acquire assets in such a transaction, for several reasons. 1) They don't want the liabilities. 2) By buying the assets, they get to step-up the basis of what they are buying and hopefully depreciate the costs. If they buy the stock (or whatever the form of ownership interest there is) of the seller, they get a higher basis in the stock and the assets don't get any increase in value to depreciate. 3) If the buyer does buy the stock in a company, they take over all the responsibilities of the former owners. In other words, if the company gets audited by the IRS, it is now their problem, not the sellers. (This is why buyers often do very exhaustive Due Diligence before buying another company.) 4) Buying the assets also allows the buyer and seller to determine and allocate the purchase price amongst a companies various assets to take advantage of various tax aspects and attributes.
Based on what I've seen and heard about Mastro's problems, the FBI investigation, and so on, I'm not surprised a buyer wouldn't touch anything but Mastro's assets in a supposed sale/purchase deal.
Now, regarding the transfer of consignments from Mastro to Legendary, something doesn't add up. I saw a posting or two mentioning conversations with Doug about how Mastro still exists and the upcoming auction was in conjunction with Legendary and that the person(s) inquiring should still honor their contract as Mastro was honoring it. Another poster or two correctly brought up the point about how in the consignment contract each consigner had with Mastro, there is probably some fine print allowing for Mastro to assign their consignment contracts to someone else, WITHOUT the consigner's consent. This isn't any different than if you rented a space in a building and the building was sold to a new owner. The rental agreement doesn't terminate as there is generally an assignment clause allowing the owner to do this. All the rights and obligations of the original owner transfer to the new owner, just like they would if Mastro assigned the contracts to Legendary. However, that language generally has to be in the signed agreement for that to happen. Also, there is generally some kind of notice that needs to be given when this occurs. For those of you who have signed consignment contracts with Mastro, pull them out and read through them to find out exactly what your position and rights are.
Now, having said that, if the consignment contracts were legitimately assigned to Legendary, why would Doug tell people Mastro still existed, was running the upcoming auction in conjunction with Mastro, and that they should still honor their contracts? All he would have to say is that they were assigned and to read their contracts. The fact he wouldn't say that can only mean that 1) assignment rights were not necessarily granted without consigner permission and the contracts are not automatically assigned to Legendary, 2) they were granted but, he doesn't want to say that to consigners for some reason (maybe fearing they would think a fast one was being pulled on them or that they can rescind the consignment by notifying Legendary or Mastro) or, 3) he doesn't really know himself and said that to appease the concerned callers (which I would find very hard to believe). For those consigners out there, you might want to really go through your contract to see what it says. You may be surprised.
If there is no assignment right granted in the contracts, the consigners may have every right to request their property back. Even if Doug's contention is that Mastro still exists and the auction is being run in conjunction with Legendary, I'm guessing the contracts call for Mastro handling and publicizing the auction. It probably doesn't mention Legendary Auctions anywhere in the consignement contract so, my question would be, "Why then doesn't all the advertising and publicity for the upcoming auction mention Mastro anywhere?" If Legendary is publicizing it and hasn't truly been assigned the contracts, Mastro could be in technical breach of their contract by not following through with their handling/control of the auction. I was at the Strongsville, OH/Fusco show over this past weekend and Legendary Auctions was there, basically just showing off some of the items in their upcoming auction. Nowhere did it say or mention it was in conjunction with/affiliated with/or had anything to do with Mastro. I didn't think to jot down what items were in the display cases but, I wouldn't be surprised if one or more were originally conisgned to Mastro, not Legendary.
Finally, for those who are concerned about not receiveing monies or property back from Mastro, I still believe it only takes three creditors to file to have someone put into involuntary bankruptcy. Assuming Mastro is a corporation, you could actually check through the Secretary of State's office in the state they were originally incorporated (Illinois?) to see if they've filed for a formal disolution of the company. If they haven't, then Mastro would indeed still exist. Once a compnay is put into bankruptcy, the court takes over control of all assets and generally appoints a receiver to watch over asstes in favor of the creditors. It can even go back and require payments and disbursement of company assets prior to the time of the bankruptcy filing (up to 90 days I believe) to be returned by the recipients. Again, I'm not a lawyer but, I believe that a deal with Legendary could even be in jeopardy if it was found that the creditors/consigners were someghow being cheated by an improper transfer. My guess is that Mastro and Legendary people have had their legal representatives involved in this whole affair from day one. They would likely have advised them to keep people in the dark for as long as possible and to get through this first auction with as little friction and bad publicity as possible. The more time that goes by, the less likelihood that someone can disrupt what they want to accomplish.
This isn't anything new. I had some involvement with a contractor years ago that was going under and sent out all kinds of letters and reassurances to customers and vendors about people being around to answer their questions and concerns in the coming weeks as they were winding up their operations. They mailed the letters and such out on a Friday afternoon as they walked out the doors....and never came back. Whenever they could, they stalled people as long as possible from pursuing any legal remedies, with the thought that as more time went by, more rights for those being damaged by this company's actions would lapse. Anyway, just my 2 cents worth for anyone interested.