Beware of Beckett!

[nolemmings]

A lot of “information” being tossed into these threads, but I am confident that the trustee in the Marx case will not claim that the cards are property of the bankruptcy estate.

As I understand it, this was in the nature of a true bailment, with Marx acting as some sort of service provider intermediary for which it would receive a fee. It never owned the cards, nor was this a consignment– the cards were not going to be sold by Marx after grading. Cards sent to PSA, i.e., those not in Marx’ possession, will not be sought by the trustee. Any cards still held by Marx will be returned to their owners upon proof of ownership. That does not require a filed UCC-1 financing statement, at least in Arizona. In fact, filing such a statement here would be confusing at best, and potentially detrimental. UCC-1s are generally designed to establish one’s status as a secured creditor. Those who sent their cards to Marx Cards were not secured creditors–they were owners. Filing something that suggests you are not an owner but merely a creditor may be construed as an admission that you created a consignment relationship, IMO. This is not to say that you should not have documentation clearly spelling out your ownership interest--I only suggest that a UCC-1 may not be the way to go. These folks did not authorize that their cards be sold. To the extent they are owed a return of their money sent to Marx, they should be treated as unsecured creditors, assuming they get their cards back.

I had a case several years ago in which a bicycle shop filed bankruptcy while in possession of dozens of high-end bikes that were submitted for repairs or modifications. The owners of these bicycles had to prove ownership by means satisfactory to the trustee, but having done so they received their property, once it was determined that the repairs either had not been made or that payment had been received. There was no magic document needed there.

BTW, the trustees indeed are compensated above their standard fee for property recovered and sold on behalf of the estate–on a sliding scale here in AZ. They also leverage their authority to “promote” settlement. I had a case long ago where my local AZ creditor was contacted by a bankruptcy trustee in New Jersey, demanding that he send back a payment he received around 60 days prior to a bankruptcy being filed by the payor. We argued that the debt was for contemporaneous value (goods and services) and not a preference payment of antecedent (old) debt, and that in our course of practice with this debtor over many years we were to be paid net 60 days. The trustee had little to stand on, in my view, yet he filed a preference action knowing that my client would have to hire an attorney and take action in a courtroom 2500 miles away. We “settled” by giving the trustee a healthy chunk of the money back, even though legally he had very little chance of ever prevailing. The things my client had to say about the bankruptcy system made even me blush (a little). I have a similar tactic being taken by a trustee in North Carolina right now. These are not quirky situations that fell on me, but are realties faced by many.