Daniel Zhao of Hosane Auctions controversy.

Discussion in 'Modern Chinese Coins & Medallions' started by Catseye, Aug 7, 2012.

  1. Ryaneod

    Ryaneod New Member

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    Yennus, even if they provided proof they owned it BEFORE you sold it? Because didn't he just accept it and then auction it after being provided proof someone else owned it? What WOULD it take for you to accept someone else's claim in your example if it was just in your "store" and not sold yet?
     
  2. yennus

    yennus Well-Known Member Silver Stacker

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    Hi Ryaneod, a good name is better than silver or gold or a very rare coin.

    However the $200,000-$400,000 question is who really owned it?

    Did the title pass to the American dealer?

    From looking at the facts with my limited understanding:
    The German dealer failed to pass the title to the American dealer, because the German dealer was unable to perform (i.e. You cannot sell a coin which you don't have or lost or cannot deliver).
    The German dealer thus maintained the title when he later found it.
    The German dealer then sold the title to the Chinese dealer.

    Example:
    I try to sell JohnDoe a coin, but before I can deliver the coin I lose it. (Notice: there is no transfer of title to JohnDoe because I couldn't deliver the coin to JohnDoe)
    1-2 years later, I then sell the coin to you.
    But now JohnDoe wants to take your coin, because I originally tried to sell him the coin first.
     
  3. Ryaneod

    Ryaneod New Member

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    Yennus, you are missing my point. Let's take your example, BEFORE you sell the coin to me, lets say you are sending me pictures and NGC info of it and what not and someone else claims to own it and is willing to provide you some proof, be it receipt's, pictures, grading certificate, etc. What do you do then. You keep acting like he had no idea someone else had a claim to it until after he sold it and if so I would agree with you, but in reading everything I have seen on this, it appears everyone and their brother contacted him and he went ahead with the sale.
     
  4. silverfever

    silverfever New Member

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    Furthermore Zhao did not stand to lose anything because the German dealer was willing to double his(Zhao's) money but Zhao was greedy and preferred to auction out the coin to maximize his profit instead.
     
  5. musemellow

    musemellow Member

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    IMO, we shouldn't 100% believe this blog, as it's just one side of the story
    Assuming what Nick wrote on his blog are true

    2010
    1. German dealer sold the coin to the US dealer, the coin was then catalogued in 2010 Champion HongKong
    2. The purchased coin claimed as stolen/missing
    3. Zhao was in attendance
    4. The coin was publicly withdrawn

    2012
    1. US dealer saw the coin in the 2012 Hosane catalog
    2. US dealer tried to contact Zhao to resolve issue
    3. German company's owner tried to repurchase the coin (supposedly to give the coin to the US dealer)
    4. Zhao refused and proceed with the Auction

    Legally, Zhao may have done nothing wrong. but as Low said there are more to coin business than just $$$
    Zhao had chances to do the right thing despite of his legal rights as buyer but he didn't show honesty or good morals on his business decisions
    I think that is the reason why some posters here dislike his actions after reading this blog

    When German dealer tried to sell the coin to him he had 2 choices
    A. Let the US dealer/ Nick know that the missing coin is with the German dealer (Again based on Nick's blog, it seems that Zhao knew that the coin offered by German dealer is the missing coin on 2010 Champion HK)
    B. Buy the coin for 50% value - $$$

    When German dealer & US dealer tried to resolve the situation, he had 3 choices
    A. Ignore the situation and auction the coin - $$$
    B. Return the coin with $100,000 profit - $
    C. Withdraw the coin from the catalog, at least until the conflict is cleared (which I think what he should've done)
     
  6. Ryaneod

    Ryaneod New Member

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    +1
     
  7. dollars

    dollars Active Member Silver Stacker

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  8. jc888888888

    jc888888888 New Member Silver Stacker

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    if i was zhao and everyone was happy letting me make 100k on the coin ,and I come out looking like a good guy,that is a no brainer for me.................:) I dont know Zhao but assuming he is an intellegent person , why wouldnt he have done that?? before we hang the guy you have to a least wonder if there is another side of the story...........
     
  9. comeaux

    comeaux New Member Silver Stacker

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    Nick is the quintessential Chinese coin collector, an awesome numismatist and a credit to our hobby.
     
  10. yennus

    yennus Well-Known Member Silver Stacker

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    Perhaps I am missing your point, but I'm only going by the facts:

    1. You cannot easily establish that the American dealer had a claim on the coin, because it appears that the title never transferred to them, it stayed with the German dealer.
    2. You cannot easily establish that Zhou knew about the American dealer's claim on the coin (EVEN IF the American dealer had a claim) because he was asked to buy it by the German dealer.

    Zhou didn't steal the coin. The German dealer negligently but legitimately transferred the coin and the title to Zhou.

    If I were the American dealer, I would be unhappy towards the German dealer because they lost the coin for over a year, then they found it but didn't recognize it, then they sold it to someone else.
    If I were the American dealer, I would be understanding towards the Chinese dealer because he was sold a coin that I wanted.

    If I were the Chinese dealer, I would try to settle a mutually beneficial deal with the American, because I don't want a train wreck.
    If I were the Chinese dealer, I would be unhappy towards the German dealer for going back on a deal that was settled months ago.

    If I were the German dealer, I would be praying that I don't get sued by the American dealer for breach of contract.
    If I were the German dealer, I would be praying that I don't get sued by the Chinese dealer for breach of contract.
     
  11. yennus

    yennus Well-Known Member Silver Stacker

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    Yep, very true. So far, from what I've read, it was the German dealer's liability all along.

    1. The German dealer attempted to sell the coin to the American dealer but lost it.
    2. The German dealer found the coin but didn't recognize it.
    3. The German dealer offered the coin to the Chinese dealer.
    4. The German dealer undervalued the coin and sold it to the Chinese dealer.

    At each of these stages, from 1-4, the German dealer is responsible.

    5. The German dealer failed to broker a settlement between the American dealer and the Chinese dealer. The liability still rests with the German dealer.

    6. The Chinese dealer auctions off the coin. The German dealer is presumably able to bid on this coin.

    7. The German dealer fails to secure the coin at auction, even though the coin sells $140,000 or more below its estimated market value.
     
  12. yennus

    yennus Well-Known Member Silver Stacker

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    I'm sure Nick is a nice guy. I'm sure Zhou is a nice guy. I'm sure the German dealer is a nice guy.

    I don't know Nick or Zhou or the German dealer, but from what I've read, there is only one party that is factually at fault, and that is the German dealer.
     
  13. Catseye

    Catseye New Member

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    I don't know the "facts" only what I've heard so I will reserve judgement on the legal liabilities.
    What does concern me is it appears that a leader in the emerging MCC business has not abstained from "all appearance of evil" and may have in essence poisoned the well.
     
  14. Pandacollector

    Pandacollector Active Member

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    "1. You cannot easily establish that the American dealer had a claim on the coin, because it appears that the title never transferred to them, it stayed with the German dealer."

    I disagree with this. As I understand it, an invoice (which is a contract) and the transfer of money from buyer to seller transfers title. It is common to pay for an item prior to delivery. Title (I think) changes hands when the payment is cashed by the seller, if not earlier when the agreement is made. If this wasn't true it would lead to chaos. People would continue to shop deals around until final delivery was made. Had somebody come along and offered the German seller MORE for the coin, the dealer still wouldn't have had any right to sell it to that second person because it was no longer his to sell. That coin was sold when an agreement was made between the first buyer and the seller, and the coin paid for.

    BTW, if there is any ambiguity here, I am positive that Nick Brown is not the first buyer, or involved financially in this transaction in any way.

    Best wishes,
    Peter Anthony
    China Pricepedia
    http://www.pandacollector.com
     
  15. Pandacollector

    Pandacollector Active Member

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    Yennus,

    Zhao/Hosane allegedly knowingly auctioned a coin for which the title was contested. Is that not a very, very bad decision - business wise, and perhaps legally? Is Hosane not at fault for exposing their clients to the risk of losing what they won and paid for? What happens if the first buyer prevails in his claim of ownership? Where does that leave the winning bidder?

    Best wishes,
    Peter Anthony
    China Pricepedia
    http://www.pandacollector.com
     
  16. dollars

    dollars Active Member Silver Stacker

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  17. yennus

    yennus Well-Known Member Silver Stacker

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    As a family a Panda fans, I am grateful we can discuss this issue in a friendly, polite and open manner - especially with PandaCollector whose thoughts carry much weight.

    Please note once again, I am not a lawyer.

    PandaCollector: ...As I understand it, an invoice (which is a contract) and the transfer of money from buyer to seller transfers title.
    Yennus: Yes, there was likely a contract between the American dealer and the German dealer. But the German dealer was in breach of contract when he failed to deliver. No title was transferred when no coin was delivered. Title is generally transferred when delivery takes place (E.g. FOB).

    PandaCollector: It is common to pay for an item prior to delivery. Title (I think) changes hands when the payment is cashed by the seller, if not earlier when the agreement is made. If this wasn't true it would lead to chaos. People would continue to shop deals around until final delivery was made.
    Yennus: Nope, chaos would not ensue. Because there is contract between the buyer and seller, both are obligated to perform. The German dealer failed to perform his end of the contract by losing the coin. Because the deal was never completed, no title was ever conferred. The German dealer retained the property title (even when he was in breach of contract), and the German dealer then gave the title to the Chinese dealer 1-2 years later.

    PandaCollector: Had somebody come along and offered the German seller MORE for the coin, the dealer still wouldn't have had any right to sell it to that second person because it was no longer his to sell. That coin was sold when an agreement was made between the first buyer and the seller, and the coin paid for.
    Yennus: Indeed, the German dealer was in breach of contract to the American dealer.

    PandaCollector: Zhao/Hosane allegedly knowingly auctioned a coin for which the title was contested.
    Is that not a very, very bad decision - business wise, and perhaps legally?
    Yennus: Indeed, if the title is being contested, perhaps the wisest decision would be to wait (there might be wiser options).

    PandaCollector: Is Hosane not at fault for exposing their clients to the risk of losing what they won and paid for?
    Yennus: If Hosane did not have the title, and they auctioned/sold it, then they would be in breach of contract with the person that won it at the auction. (This is the position that the German dealer is currently in)

    PandaCollector: What happens if the first buyer prevails in his claim of ownership?
    Yennus: If the American buyer prevails in his claim of ownership, he can sue the German dealer for breach of contract. The American dealer cannot sue the Chinese dealer because there is no contractual obligation between the American dealer and the Chinese dealer.

    PandaCollector: Where does that leave the winning bidder?
    Yennus: It leaves the winning bidder, in my non-legal opinion, safely behind the great wall of BFP (Bon Fide Purchaser) - not just in China, but in Australia and American too.

    Yennus: If the American dealer can demonstrate that title was transferred to him, then I think there is a case to be had. BUT that case would be against the German dealer, and not the Chinese dealer. The American dealer can attempt to sue the German dealer for breach of contract, lost income, lost property, etc.
     
  18. Pandacollector

    Pandacollector Active Member

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    Yennus,

    Thanks for the carefully crafted responses, this is fun. I don't know how Australian or other countries' laws handle this, but USA law does not recognize a BFP, not even 1%. If the first buyer succeeds in establishing his ownership he may legally seize, or confiscate, the property without any obligation whatsoever to compensate the second buyer. The law is meant to discourage the purchase of stolen property by making the argument that you so elegantly offered void. Buyers of second hand merchandise in the USA are very careful to steer clear of potentially stolen, or contested, property. That part of the law is pretty widely known in America, so I'm confident that I have the broad outline correct.

    If someone who knows German law could chime in, that would be helpful. One person told me that German law is similar to American in this regard. As the coin changed hands in Germany it may be German law that decides the matter, at least outside of China.

    So where does Zhao's alleged actions leaves the second buyer? Possibly with a coin that can never be taken to much of the Western world. In short, up the creek.

    Best wishes,
    Peter Anthony
    China Pricepedia
    http://www.pandacollector.com
     
  19. comeaux

    comeaux New Member Silver Stacker

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    Yes this has been a very interesting discussion for sure

    One thing that I can attest to is that Peter is 100% correct about American law regarding ownership of purchased goods.

    This coin may one day be sold in Zimbabwe, Turkmenistan or Kiribati but I can guarantee that in its current status, this particular coin will never be legally sold, purchased or owned in the USA.
     
  20. yennus

    yennus Well-Known Member Silver Stacker

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    PandaCollector: Thanks for the carefully crafted responses, this is fun.
    Yennus: Thanks PandaCollector, indeed, this is very interesting.

    PandaCollector: I don't know how Australian or other countries' laws handle this, but USA law does not recognize a BFP, not even 1%. If the first buyer succeeds in establishing his ownership he may legally seize, or confiscate, the property without any obligation whatsoever to compensate the second buyer. The law is meant to discourage the purchase of stolen property by making the argument that you so elegantly offered void.
    Yennus:
    a) Unfortunately the American dealer cannot succeed in establishing his ownership. He can only sue the German dealer for breach of contract - because the German dealer failed to pass title to him.
    b) Even if, which I don't think is possible from the information currently available, the American dealer succeeds in establishing his ownership of the goods, BFP does still offer protection for the Chinese dealer. BFP does not protect the buyer in cases of "stolen goods". However, from my understanding
    c) This is clearly not a case of stolen goods because:
    i) the German dealer did not hand over the title to the American dealer. = The American dealer has no title claim.
    ii) the German dealer approached the Chinese dealer. = The Chinese dealer is a BFP.
    iii) the German dealer sold the title and coin to the Chinese dealer. = The German dealer passed the title to the Chinese dealer.
    iv) the German dealer is in breach of contract to the American dealer. = The American dealer can sue the German dealer for breach of contract.
     

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