Chicago violin shop bankruptcy
I am looking for advice concerning a sad situation concerning a Chicago violin shop. I consigned violins to a dealer for sale and in the last few days received a notice from the dealers lawyer that all my instruments have been sold to a "third party" and I am to receive basically pennies on the dollars for the value of my property.
My email states " Please be advised that xxxxxxxxxxxxxx ceased operations in March of this year and we are preparing to file bankruptcy for the company. The company does have limited funds to make settlements but there are many parties to whom money is owed."
Here we are in June and I have been notified that operations ceased in March. The obvious ethics issue is obvious on so many levels but my reason for posting is to know whether others have gone through this quagmire and if any suggestions would be given. We know the obvious answer of get a lawyer etc but we are looking for other persons experiences.
Why don't you name the shop? I have stuff on consignment in Chicago....
I always thought consignments were on loan until sold; not part of a dealers inventory and that the owner had the option of refusing a deal if less than the asking price. The instrument should have been returned to the owner instead of being sold for pennies on the dollar to a third party in my view. But then, I am no lawyer.
This is surprising, I never thought that an instrument in consignment would be part of the shop's inventory. It belongs to you, and the shop is selling it for you for a commission. You as the owner still have to agree on the selling price. I don't understand how the instrument could be handed over to a third party without your agreement, this doesn't sound right.
How long ago did you consign them, and when did you last check on their status? It could be that your instruments were sold months ago for your asking price, but the shop, in their financial desperation, used the money to cover their own debts at that moment. That would be my first guess. I hope you have some recourse, but I fear that you're out of luck.
It also depends a lot on what your contract/paperwork with them says. You need to get that checked out. And yeah, lawyering-up is the way to go.
If they're out of business and there's no money to get, it really doesn't matter anymore what the contract says.
Which shop are we talking about?
Please name the shop. I have a violin on consignment in Chicago also.
I have instruments in Chicago too, what shop is this?
As others have said, ownership of an instrument on consignment remains with the original owner until said instrument is sold. I agree that this sounds like theft.
I can say only about my experience: i had 2 violins in consignement and the contract stated that 30% of the value was to the dealer. The dealer also went out of business, and the instruments were returned to me. I had to pay about 50 USD/instrument for "administrative fees" (which i didn't question, given the circunstances).
Since a number of players have inquired, the shop is Dixon - Stein.
I happen to be both an attorney and a violinmaker. I work with many fine arts clients, am on the board of the Violin Society of America, and teach art law courses to law students.
Wow. I'm astonished that this happened to you, Davis. I don't have any advice, but I'm very sorry.
Good grief, this is awful. I bought a nice cello from Dixon Stein in 2010; they gave me excellent service. What a terrible turn of events. And a relief, as I have a consignment with Eric Swanson.
Dixon-Stein.... makes this past archived post interesting:
Consider filing a police report in Chicago. Also, contact your instrument insurer. Many policies have exclusions that relate to consignments, but sometimes those don’t apply if there is some kind of fraud or deception. It might also be helpful to point them to recent articles about Dietmar Machold. Finally, keep in mind that bankruptcy law is not intended to shield persons who engage in illegal or fraudulent activities.
In the UK the buyer of stolen property does not have the right to keep it, but is legally obliged to return it to the owner, whether they knew it was stolen or not. What is the law in the USA?
If a violin under consignment is considered an asset of the dealer then once he files for bankruptcy he may be obligated to liquidate it to satisfy other creditors. It may actually be illegal or for him to give it back to you at that point.
Just wondering when any article under consignment would be considered an asset of the dealer? Ownership remains with the owner until it's sold. Isn't that the whole point of consignment?
How can a violin on a consignment be ever considered the property / inventory of the dealer?! What document is produced to prove transfer of ownership from you to the dealer? The dealer is providing a service to you and is paid ONLY after the service is provided -
I've been living in the Chicago area for 52 years and I've never heard of Dixon Stein. -Not surprised they went out of business.
Basically, it appears that the issue the UCC is trying to address by requiring the extra paperwork to be filed is that otherwise, it's really hard to tell what's under consignment and what's not when you are liquidating a warehouse full of goods. The rules were set up for large companies, but they apply to everyone for the sake of uniformity.
Unbelievable! An ethical honorable dealer would return all consigned instruments BEFORE declaring bankruptcy..! This is legalized theft at its best... god love America! I wonder how Canadian Law compares? Any Canadian Lawyer amongst us?
Davis, if you found out who the third party to whom the instruments were sold is, please let us know so that we can "name and shame." The violin world is not so large. It's horrible that this can happen...
Roger St-Pierre, thanks for doing a better job than me in highlighting the ethical point of this issue in such a few words.
"Unbelievable! An ethical honorable dealer would return all consigned instruments BEFORE declaring bankruptcy..!"
I have two violas in consignment with this shop, they are locked in the shop now.... The problem is that I don't have the agreements, they were left there by friend players, I only have emails as evidences of that. I am afraid about the instruments.
Oh damn it! Best of luck!
I am really sorry you are caught up in this crime, Manfio, last thing you need, I'm sure.
I don't know enough about law to know whether a consignment agreement can be written that would prevent instruments from being considered dealer assets in a bankruptcy filing. My guess is that one runs the risk of trying to supersede applicable state laws. The problem we all have, whether as makers or players, is that there are really not that many good alternatives for selling instruments besides "through dealers." Violins are not like used cars. Even Chinese violins with "model numbers" are hard to sell by an individual.
The "Stein" in Dixon Stein is Elizabeth Stein, the Chicago Symphony League's president. She has a corporation of her own, as well as a reputation to protect -- the CSO League is a major fundraising organization in the arts life of the city.
There was an Elizabeth Stein that was the President/Manager of the Chicago Machold shop.
What happened to the last post by Manfio?
This is an absolutely abhorrid occurence. The violin community is a small one, and much of the success of shops is built on trust, reputation over time, and ethical practices for the community at large. Also dealers or musicians may leave large deposits or payments with other dealers, luthiers, or workshops, without safeguards in place. It is too bad to see this kind of thing happening, it sheds a bad light on business, and we see it happening in all sectors of business. There should be no benefit in liquidating others' property if it is a true bankruptcy. Like others said, the responsible thing to do would be to give property back; this seems like a case of irresponsibility, laziness, and malpractice. I hope justice is served and things turn out ok for the consignors.
I've heard tell that the same problem can arise in other similar circumstances, such as when you take your car into a garage for repair or overhaul, and the business goes bust while your car is still on the premises.
Hmmm... I wonder if the fact that cars have titles helps in that case.
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