Bankruptcy law allows third-party creditors of a consignee to attach consigned property in the consignee's possession when the consignee declares bankruptcy unless a consignor has acted to perfect a security interest in the consigned goods by complying with commercial law requirements. The drafters of the Uniform Commercial Code (UCC) provided for attachment because they wanted to protect third-party creditors from the unwelcome surprise of hidden liens dominating claims to a consignee's property in bankruptcy. Applying this attachment policy overly broadly in the art consignment context creates problems, though, because opportunistic creditors can use the attachment procedure despite having full knowledge of the widespread practice of consignment in the art industry. In 2001, the drafters revised the UCC with the desire to clarify consignment issues as part of the revision. Courts continue to struggle, however, with analyzing issues of consignment in bankruptcy. This Note argues that because art consignment stands apart from other types of consignment, the law should not require art consignor-collectors to follow UCC filing requirements to protect their artwork from attachment by third-party creditors, who are acutely aware of the risk that a consignee art dealership is substantially dealing in consigned artwork. Further, it suggests that courts should presume that art dealerships are generally known to be substantially selling in consigned work. Once consignors show that an art dealership is generally known to be substantially selling in consigned work, courts should exempt consigned artwork from the bankruptcy estate. This Note also proposes extending the statutory protection afforded to consignor-artists to consignor-collectors.
A Picture Imperfect: The Rights of Art Consignor-Collectors When Their Art Dealer Files for Bankruptcy,
58 Duke Law Journal
Available at: http://scholarship.law.duke.edu/dlj/vol58/iss7/27