Beware of Beckett!

[Exhibitman]

Originally Posted by Michael B

Adam,

You have looked at a lot more bankruptcies than I have and defer to your expertise. I do have a thought. For purposes of this Marx was an agent. They took payment to deliver a service. As part of that service they acted as an intermediary between two parties, taking possession of an asset to deliver to one party and do the reverse at a later time. Taking possession was not taking ownership which is completely different. Thus if the agent filed for bankruptcy prior to completing the transaction they defaulted on the agency. I would equate this to UPS, Fed Ex, DHL. They are agents who are paid for a service to deliver a product they do not own. If they filed for bankruptcy I believe it would be hard to argue that packages they still had not delivered nor packages they had delivered within a short period of the filing would be considered property of the said entity. I do not believe the bankruptcy trustee can just start opening packages and selling the items contained therein to satisfy the debt of the agent. Just a thought. Your opinion/perspective would be appreciated.

Actually, with a court order that is exactly what they can do. When the whole Mastro-Legendary thing was under way, we discussed that subject extensively, and the consensus of the attorneys on the board was that a UCC system filing was the only thing that would prevent the cards on consignment from going into the general estate of the debtor. Makes sense, really, since there is no way to differentiate bailment from ownership without a perfected security interest. Think of it this way and it may make more practical sense: when I give you a card to sell for me, you owe me the value of the card. I am your creditor for the value of the card. Now, you put it in your case. How does anyone objectively know who owns the card? This isn't a blockchain, it is simple possession. So, if you file for BK and the card is sitting there, how is anyone going to know that the 1952 Mantle in your case is really someone else's card? Take your word? A deadbeat claiming that the best stuff is really someone else's? That the Baltimore News Ruth belongs to Uncle Adam? Yeah, right. That would allow the debtor to favor one creditor over the others at will, which is anathema to the whole BK purpose, namely, to cut up the debtor's property in a way that is most fair to all the creditors. The creditors with security interests get their secured items' value (well, proceeds at sale actually) because they perfected their security interests. They get 'fed' before everyone else because the whole world was on notice that they had rights in the property the debtor was holding. The law is not perfect but it does create a clear mechanism to alert the world to actual ownership. It is a mechanism that favors the commercial creditors whose lobbyists wrote the law and bribed, er, donated to the legislators who voted it into place, because they know how to use it. But the mechanism itself is there for all of us to use. That's one reason why these discussions are good, so we can share information and experience. I consign a 52 Mantle to an AH, you bet I spend the few minutes online and the few bucks it costs to file a UCC-1 in the AH's state.